Monday, April 13, 2009

Many big businesses are NOT FOR a free market

Something happens to people after they build a business into a huge corporation. They start to use their money to influence Washington to protect their own dominance of the market. They all have their special little army of lobbyists and deal makers that will hang around the capital building, and attend Wednesday evening parties in the White House ballroom. They are not there to urge that Washington adopts a free market. They are there for one reason. To gain favors for their bosses among the political elites.

This results in a system that protects the interests of big business at the expense of competitors. It ensures that small businesses are less able to compete with these corporate giants who can afford to either evade or absorb the regulatory costs imposed by the elected elite.

Let me give just one small example of a regulation that only the big companies can afford that this administration has recently signed. The Consumer Product Safety Improvement Act (CPSIA) took effect on February 11th. This act is a feel good law that says that any new products produced for children under the age of 12 must undergo testing by a third party lab to make sure that lead levels are within standards. This sounds warm and cozy. Everyone agrees that almost all of these products will pass with flying colors, so it shouldn't be a problem.
But it is.
These third party labs do not perform the tests for free. It can be very expensive in fact. It's a cost that a large corporation can absorb easily, while a small entrepreneur just getting started with a perfectly safe product can't afford. Big business wins again. The rich get richer, and the poor get poorer.


Wouldn't it be better to allow business to opt out of the regulatory system entirely? I don't mean to end regulation. I mean end forced compliance.
Here is what I mean.
Leave all of the regulation in place and all companies that comply with the regulation can have a little symbol on their product, or after their name that will let every consumer know that these companies comply with all Government regulations and are absorbing the costs and fees associated with these regulations.
Then allow companies to opt out of the regulations completely, with the exception maybe of sensible pollution standards because clearly sensible antipollution laws are in the interest of the public.
Let the consumer decide whether they prefer to deal with a regulated company, or an unregulated company.
Some regulated companies might do better than unregulated companies. Local banks for example will attract more savings customers if they have the FDIC insuring their savings. Some unregulated companies might do better than regulated companies.

The consumer makes the choice.

If an unregulated company produces a product that is harmful, they will still pay the price in liability claims and other such lawsuits.

I wonder what would happen.......

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