Dear Friends,
It seems to me, what is holding the American economy back, is red tape, regulation and redistribution. These three R’s create an environment that is toxic to small business development. In the economic ecosystem of a country, small businesses must have room to start, grow and compete. Untangling red tape ties up an entrepreneur’s capital, regulation steals the business owner’s time, and redistribution seizes his or her capital. The government and the oligarchy both have a vested interest in creating more red tape, more regulation and more redistribution, because they work to the advantage of the Elite. This paradigm is why it is so dangerous to a person’s finances to start a business. They also teach the people of a country, there is no sense trying to start a business, even if they have a great idea. The government will toss so many road blocks in the way that it is almost certain to fail. We see this play out in everyday life, whenever someone doesn’t start a business due to fear of government, and in the statistic of how many small businesses fail within a year of starting up. We have to get a grip on the three R’s, if we want to have any hope of jump starting the American economy, let alone the European train wreck.
Red tape can be a minor as a town requirement for a license. Especially if that license comes at the suffrage of a town council. The person who is friends with the town fathers will face little difficulty to start any business he or she sees fit. The person who is not a member of the town elite however, will face a long uphill slog, to get even the most basic permits from a town council. This is magnified if the new person is going to compete with an existing business that has the ear of a council member. Politics at city hall decorates small business start ups with red garland.
In a mature economy regulation grows faster than algae in an anaerobic pond. It is in the self interest of the oligarchy, (the legal system), to increase regulation and make it as undecipherable as possible. The entrepreneur who seeks to do business, must hire an attorney, to navigate through the shoals the regulation has piled up. This costs money that otherwise could have been spent improving the business’ capital stock. Every new regulation that is passed, increases the demand for lawyers, and therefore, every lawyer is in favor of more regulation.
Regulation also protects the jobs of entrenched bureaucrats. The bureaucrat must justify his or her well paid job. As more regulation is passed the bureaucrat not only becomes more secure in their job, but with more rules, comes more prestige to the dutiful public servant. As a result they work tirelessly at creating more regulation. Some regulate this and others regulate that. They don’t really communicate and so, the regulation overlaps, is contradictory and grows ever more smothering. Again driving up the need for attorneys to get a small business through the morass.
This all ties up capital and time the entrepreneur could better spend improving their business. Capital spent on an attorney, to protect the business owner from regulatory risks, could be better spent on buying more productive tools for his or her employees to use. This addition to capital stock makes the US more competitive with other nations. But when the money is wasted on regulatory compliance, only the elite benefit… the workers are less productive and our job prospects are more and more limited.
Redistribution through taxation is as pernicious as flesh eating bacteria. This allows the Elite to achieve the epitome of Thrasymachus’ philosophy. They get to appear all caring and virtuous while at the same time being all selfish and corrupt. They use other people’s money to be generous, but as Cicero said, “We must, then, take care that in our generosity, while we do good to our friends, we injure no one. Therefore the transfer of property by Lucius Sulla and Caius Caesar from its rightful owners to those to whom it did not belong ought not to be deemed generous; for nothing is generous that is not at the same time just… There is, too, connected with generosity of this type, in almost every instance, a disposition to seize and appropriate wrongfully the property of other men, in order to furnish means for prodigal giving.” We see from this, it is not by virtue that we seize the property of another to be lavish in our giving, it is in fact a self aggrandizing vice.
The last point to make is that more small business means more demand for labor. As everyone who has even an inkling of sense knows, as demand increases within a limited supply framework, cost goes up. In this case the increase in demand for labor increases the cost of labor. The cost of labor is the paycheck of the working man or woman. Couple this with, better tools make an employee more productive, a productive employee is worth more, and the worker is the primary beneficiary of increasing small businesses and higher productivity. Both are casualties of the three R’s.
Taken in it’s totality, we clearly see the negative incentives the system of red tape, regulation and redistribution, have on our economic ecosystem. These three things empower and enrich the elite in the legal system and government, but come at cost to the working man and woman… as well as the entrepreneur. The profit to the elite is a cost to the rest of society. To change this paradigm is very difficult; but not to change it would be disastrous.
Sincerely,
John Pepin
