Why Business Wants and Controls Regulation

McClatchy Newspapers (conservative) did a survey (in Aug. 2011) to find out why business is not doing well. They asked about regulations:

Government regulations are not ‘choking’ our business, the hospitality business. In order to do business in today’s environment, government regulations are necessary and we must deal with them. The health and safety of our guests depend on regulations. It is the government regulations that help keep things in order.” —Bernard Wolfson, president of Hospitality Operations, Miami

McClatchy concluded, “None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis.” (full story)

As to what is a problem, McClatchy found that “For many small businesses, their chief problem is an old one: navigating the bureaucracy of the Small Business Administration to secure government-backed loans.” In other words, it’s too hard to get government handouts.

But why would a business want its industry regulated? Consider China. They have extremely poor regulations, and some companies ship us bad food. Then we buy less food from all Chinese companies. So the good ones all suffer because of the bad ones. So high-quality companies tend to want the industry regulated to punish the bad ones, and prevent them from harming the reputation of the industry. And that’s good for consumers as well.

I’m not saying all regulation is good, but by and large it protects us and rewards the good companies. We need to make it better, not get rid of it. And, as McClatchy said, if regulations have anything to do with recession, the problem was too few regulations (for mortgages), not too many.