How Regulations Destroy Small and Medium Businesses

regulationsPeople generally assume regulations are a burden on all businesses in general but the reality is that large and enterprise companies are far less affected because of their greater resources. Thus, small and medium sized businesses are the only ones hurt. As if the small competitor didn’t have enough trouble already. It’s my opinion a great number of regulations are working exactly as planned, to benefit political allies.

You have to remember who pays the bills. Enterprise businesses bribe, I mean to say contribute, to politicians on a much larger scale than is possible for smaller businesses. When new regulations come down the pipeline they force all companies to perform a great deal of documentation to prove they are doing things correctly. Bigger companies can handle these costs much more readily and thus small producers are forced to sell their business. It’s an accelerating trend that has created carnage in the once influential small business world. I won’t get too deeply into statistics but since the 1980s small businesses have contributed less and less to the total economy of the United States.

An article I recently read about the 5,000 plus regulations that apply to apple farmers is case in point. There are regulations on scanning the entire orchard for mouse dropping before the start of the work day. Shoe to ladder to hand. While the Trump administration has reduced some regulations, they’ve also vastly increased regulations in regards to foreign workers so help does not appear to be on the horizon.

The reality of regulations is they drive out small players and aid enterprise business. Even if you support many of the regulations it is impossible to deny the evidence of their affect.

Another quite interesting factor in all of this is the standards applied by wholesalers often outstrip those applied by the government. If you want to have Whole Foods sell your produce, they require a lot of assurances about quality and safety. This means a double burden in which not only must government regulations be followed and thoroughly documented, but a second set of rules must be adhered to in order to make it to market. This, again, is to the advantage of larger operations.

I question the necessity of many government regulations at all. Let’s take the mouse droppings rule as an example. It’s certainly possible mouse droppings might make their way from the ground to a ladder to the hand of a worker and hence to an apple. The regulation requires workers walk the entire orchard each day before harvest looking for mouse droppings. This is obviously unreasonable, even for large operations. This regulation is doing nothing to prevent mouse droppings from migrating to your apple simply because it is an impossible rule to follow.

I’m not entirely against various regulations, I think there needs to be far fewer of them and they need be better written. The bottom line in the case of apples is to ensure those going to market aren’t going to make people sick. The simplest way to do this is test a random apple or two from various batches for salmonella or whatever else might cause disease. I admit this is not a perfect solution as the stray disease-causing apple will slip through the net, but that is no different than with current regulations. Citizens of the United States are sickened by food on a fairly regular basis.

Nor am I arguing against the executives of enterprise business, they have every right to conduct their companies as they choose. The problem is the majority of regulations, well-intentioned or not, basically work against smaller operations.
We want a business to succeed because they do something well, not because they are aided by the government against competition. Fewer, smarter, and better regulations is a winning recipe for the smart business owner and the consumer.

Tom Liberman

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