What’s “Bad For Business” and What’s Not

Conservatives have embraced the truism that businesses are hurt by government regulation.  Ideologically, they argue, rules infringe on individual freedom, but they have also persuaded themselves that they are actually bad for the bottom line.

They are a drag on productivity, they claim, because they take so much time and so many resources to implement.  Moreover, they inhibit creativity and discourage innovation.  The U.S. Chamber of Commerce has said that small businesses “pay the price in higher costs, whether it is fuel or health care or whether it’s being able to find access to capital.”   As a result, the argument goes, regulations end up being bad for consumers too.

So it was something of a surprise to see a survey, conducted by the McClatchy Newspapers, indicating that small business owners don’t actually think that way.  (See, “Regulations, Taxes Aren’t Killing Small Business, Owners Say.”)

“None of the business owners complained about regulation in their particular industries, and most seemed to welcome it.”  Moreover, like many of the rest of us, “Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.”

Also, like many of the rest of us, they see the unfair advantages that many large business gain from tax loopholes.  Small businesses are not able to lobby as the large ones do or make contributions to the election campaigns of legislators in return for special favors.

According to the report, many small business owners actually thought governmental regulation is constructive.  “An executive in the hospitality business notes:  ‘The health and safety of our guests depend on regulations.’”

That isn’t to say they don’t face a lot of problems stemming from external requirements.  As one put it, “You cannot go into business, any business — small business or large business — unless you can afford insurance.”  Some complained in particular about workers’ compensation claims.

Another complained about the Internet. One said: “Everybody thinks the Internet is this great thing that is happening to the world, but it is really, I think, killing a lot of small business. People that we talk to that are no longer in business say the same thing exactly.”

In general, they are afraid of the shape of the economy:  “I think the business climate is so shaky that I would not want to undergo any expansion or outlay capital,” said the owner off an automobile repair shop.  He’s thinking about hiring one more mechanic.

For many of them, jobs are the key.  People not only need jobs to be able to buy from the smaller firms, but they need to have confidence that their jobs are secure. And large businesses, better able to manage the risk, are not hiring.

One builder of homes in California said, “It starts with jobs. … There’s an awful lot of people sitting on the fence; they’re waiting for a sign.”  If consumers are depressed or irrationally cautious, as Ben Bernanke suggested the other day, and not spending — along with businesses and banks – what kind of a sign would it take?