Free Market and Regulation

"Stop the regulation!" That's what Huffington Post writer Mike Whalen writes in regards to President Obama's claim that he's "approved fewer regulations in the first three years of [his] presidency than [President Bush] did in his" (Whalen, 2012).

In fact, Whalen writes that the Competitive Enterprise Institute found that the president issued 953 regulations in his first three years compared to the previous administration, which only issued 30 (Whalen).

However, Whalen makes the comment that he is not anti-regulation. He says that he "absolutely recognizes its importance in preventing exploitative and dangerous activities..." (Whalen). I agree. The purpose of a regulation should be to prevent corruption, ensuring that businesses do not take advantage of the consumer. But when businesses are required to follow regulations that seem to make no sense, for instance, building and installing a handicap bathroom for disabled employees at a company where disabled workers are restricted from working, a company is coerced to allocate funds for dispensable purposes Also, the strict environmental regulations enforced by the Environmental Protection Agency (EPA) puts the interests of the minority (environmentalists) ahead of the small business owner.

Don't get me wrong. It is important to protect our environment, especially here in the great state of Michigan, where the Great Lakes, forests, and state parks are a big priority. The problem that arises with regulation is that government tends to over reach its boundaries. Although the intentions may be noble, the results are not.

How can our government help small businesses AND protect the environment? For one, a carefully balanced ideology of economic and environmental policies must be emphasized. No economic policies should allow the willful and malicious destruction of our environment. Having said that, any environmental regulations should be measured by the potential strain they place on small businesses.

My explanation may come across as confusing, but it's really not. Simply, the government should not be involved with enforcing environmental regulations. That responsibility lies on the shoulders of private sector companies and organizations to find free-market solutions to any environmental problems. In accordance to this philosophy, the EPA should be eliminated.

As for economic regulations, the sole purpose of federal government interference in the free market is to prevent monopolies. Monopolies destroy the capitalist tradition of competition. Without it, consumers don't have a choice, and always get stuck paying high prices for common items. Competition works best because the market (consumers) will dictate which companies fail and which succeed.

Additionally, excessive regulation of the economy does not bode well for small businesses. Large corporations usually have the money to adhere to federal regulations, whereas small businesses don't. By enforcing redundant regulations, the government unconsciously creates monopolies. Also, when a smaller company cannot comply with certain regulations, penalties occur through fines, taxes, or both.

Since I'm on the topic of government involvement in the economy, there is another, much less publicized means of negatively affecting American industries. It's called a subsidy. A subsidy is a direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like. Many of you may believe there generally is nothing wrong with subsidizing a hurting industry, say, the auto industry. But what many of you may fail to realize is a subsidy is, in essence, the government choosing a specific industry over another. Basically, picking winners and losers. That's why the term "too big to fail" gets tossed around quite a bit in the media. And that's exactly what happened with GM.

The auto bailout was probably one of the largest "subsidies", along with the Wall Street bailout, ever paid out by the government. Essentially, I see a subsidy as a bailout because an industry that needs government support to stay afloat deserves not to. Despite my adamant (un)support of Republican candidate Mitt Romney, he got it right when he said that GM should've gone through a "managed bankruptcy". The free market had spoken. However, the government undermined the market and decided to prop them up.

The reason why GM struggled is due to poor management. The company did nothing to adjust to global competition, continued to fold to UAW demands -- which required higher wages for its employees -- and subsequently, had inflated prices on their vehicles due to inflated wages within the company. I don't know about you, but I don't want to pay $30,000+ for a new truck, when I could get a Toyota for much cheaper. GM should've been allowed to fail, go through bankruptcy, and reorganize and come out stronger because of it.

The same goes for the Wall Street banks. But many argue that there wasn't enough regulation within the banking system causing the near collapse. Maybe so, but yet again, the government intervened and "subsidized" a failing industry. Would it have created an economic collapse? It's possible. But smaller, more viable banks would've picked up the slack, effectively replacing the fallen financial institutions.


Excessive, overbearing and extraneous regulations do nothing but hurt small businesses, while the larger multi-billion dollar corporations and their CEOs continue to rake in profits at their expense. The Congress and the Obama administration need to begin the process of rolling back the regulations that weigh down the American economy so we can start restoring the American dream. Unless we do so, the future prosperity of the United Sates is exceedingly threatened.

REFERENCES:
Whalen, Mike. Stop the Regulation! March 1, 2012. Retrieved Mar 2, 2012 from http://www.huffingtonpost.com/job-creators-alliance/obama-regulations_b_1307849.html