Business

Politicians like to claim credit when the economy is doing well, and have endless scapegoats when it isn't, but the truth is the reverse; the government is the most likely culprit when the economy is struggling and is never the cause of it booming. An economy is the sum of all goods and services produced, governments do not produce goods and services, therefore all growth in an economy must come from private enterprise. This reality is often masked by statistics; the government employing a million people to do nothing would improve economic statistics, but the total amount of goods and services produced would not increase, and in fact would have decreased due to the removal of otherwise productive persons from the economy and the increased taxation required to fund them.

Governments like to claim that although they don't directly create economic growth, they are essential for providing the right conditions and guiding the economy to the optimum result, but centrally planned economies have a very poor track record. Entrepreneurs and workers are motivated by the potential rewards of working hard and innovating, and are constrained by the risks of losing their own wealth if they make wrong choices. Governments are neither motivated nor constrained by anything other than their desire to be elected. Thomas Sowell said it best when he wrote "It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of those who pay no price for being wrong". Private enterprise can make mistakes but will pay for them and will take the most care when evaluating risk and making decisions. Private enterprise also has more to gain from success and is more likely to pursue innovations that improve efficiency or functionality. The more influence a government has over private enterprise, whether through state ownership, regulation, or altering incentives, the more likely the end result will be suboptimal. The role of government should be limited to protecting property rights (including from the government) and maintaining the rule of law, with the economy left to operate free from government influence.

Hybrid Regulation:

The Problem:

There are some benefits to government regulation, such as ensuring that food is safe to eat and buildings are safe to live in, but they also have costs. Some of these costs are obvious, such as filling out forms, hiring compliance officers, completing audits, and being forced to produce products that are of a higher standard than otherwise might have been produced, but many more costs are more indirect and intangible.

Regulations stifle competition by making it more difficult to start up a new business. Before a new business can generate any revenue, they are often required to acquire licences, registrations, certifications, memberships & etc., as well as pass inspections and audits. This discourages many potential entrepreneurs from even trying, and causes many more to fail early, giving an advantage to established businesses that are already at a scale that enables them to bear the costs. This is why many large businesses welcome more government regulation - it is a very effective way of suppressing competition.

Another way in which regulations stifle competition is by discouraging innovation. If a creative new product or process needs government approval before it can be offered to consumers, this will not only delay its introduction to the market, but could prevent it altogether or discourage it from being developed in the first place. As well adding costs, this approval process delays or denies consumers access to products and services that would be cheaper or do a better job.

Government regulation also opens the door to corruption. When regulators have significant power over whether a business succeeds or fails, there is a strong temptation to tip the scales in your favour by befriending or bribing those with this power over you. As well as the cost of the bribes, this can distort the market by giving specific businesses an unfair advantage which can result in a monopoly. Corruption and monopolies are impossible without government regulation, because there is no point bribing someone that has no power over you, and if competitors are allowed to freely enter the market no monopoly will last long.

A common misconception is that when the government creates a minimum standard for a particular product or service, everyone is somehow magically provided with this higher standard of product or service. What actually happens is that those who can't afford the cost of the minimum standard end up with nothing, because the cheaper options are no longer available. Often the government will try to fix the problem it created in the first place by providing welfare or subsidising essential products and services, but this just makes the problem worse because it will lead to higher taxes, which increases the cost of everything, which results in more people being unable to afford essential products and services, which prompts the government to increase welfare and subsidies, which leads to higher taxes - and so on in a spiral of doom.

But above all, the major problem with regulations is that they are immortal and tend to accumulate. Politicians and bureaucrats rarely give up power voluntarily, instead tending to exploit any circumstance that allows them to entrench their power and job security, and the best way for them to do this is by using a relentless flow of new regulations that may sound justifiable individually, but collectively they slowly suffocate the economy. Occasional efforts might be made to reign in this strangulation, but this usually only slows the growth for a while, and genuine resets are rare event usually brought about by war or some other catastrophe.

The Solution:

To solve this, we need something to counterbalance the relentless growth of regulations, removing or altering any regulations that are no longer necessary or have costs that outweigh their benefits.

Making all industry specific regulations optional would create this counterbalance, which would include removing all requirements for licenses, registrations, certifications, qualifications, memberships, minimum product standards, inspections, or audits. By allowing consumers the option of purchasing unregulated products and services, suppliers would choose whether to be regulated or not based on consumer demand, and the market will determine whether regulations are widely adopted or not. Consumers would continue to have the ability to purchase government regulated products and services if they thought the extra cost was worth it, but would have the additional option of purchasing cheaper, unregulated products and services. If the government creates regulations that are too onerous, costly, or unnecessary, a large number of suppliers and consumers will opt out, providing a clear signal that the government had gone too far and should reevaluate. This would also open the door for private regulators to emerge as competitors of the government regulators, further strengthening the pressure on the government to be reasonable and creating even more choice, with the most appropriate set of regulations for the circumstances being selected from multiple that were on offer.

The basic rule would be that if a willing seller and a willing buyer wish to trade a product or service, the government would not be able to prevent this transaction. The only exceptions to this would be for criminal activity and age limits on the purchase of certain products and services, such as alcohol, tobacco products, tattoos, and age-restricted media content. Fair trading and consumer guarantee laws would remain in effect to deter deceptive behaviour and provide consumers recourse if they fall prey to unscrupulous trading activities.

Animal welfare standards would become voluntary (except to prevent unnecessary cruelty or neglect), with consumers able to choose products that best fit their conscience (accurate labelling would be required). Carbon neutral products would also be subject to consumer demand, and the emissions trading scheme made voluntary.

Fiscal Impact: I estimate the government would save $264 million by reducing regulations, although the savings for businesses and consumers would be much higher.

Free Trade:

Restrictions on international trade to protect local traders are counter-productive, create extra costs for consumers, and only serve to prop up business that are not creating any value. Even if foreign governments are subsidizing industries to grow their market share, this should be taken advantage of, and if the subsidization ever shifts to exploitation, other foreign or local competitors will soon emerge. Tariffs, quotas, and all other restrictions on international trade would be lifted, with the exception of a customs processing fee. The low-value goods GST exemption would be removed, with all imports subject to GST to create a fair playing field with local traders.

Labour Relations:

The best protection from exploitation for employees is a thriving labour market in which they could easily find new employment if they don't like their current conditions. The best protection for employers from employees who don't provide any value is the ability to fire them at will and a thriving labour market in which they could easily find a more suitable employee. The best way to ensure a thriving labour market that benefits both employees and employers is to allow private enterprise to thrive by removing government regulations (Free Trade), and by giving employers the confidence to take a chance on unlikely employees, knowing they could get rid of them if they don't work out.

If a willing employer and a willing employee reach an agreement on an employment contract, the government should not prevent this from occurring. This means that no minimum wage would apply, although the volunteering subsidies would create a de facto minimum (unless the work was so enjoyable the employee was willing to accept a lower rate). Employees would be able to end their employment at any time for any reason, and likewise employers would be able to terminate an employee at any time for any reason (subject to provisions in their employment contract), although a minimum redundancy payment would be required (except in cases of serious misconduct).

Unions have become more like political activists than employee advocates, using their power to advance their own interests and ideologies (including funding political parties) rather than that of workers. Employees would be free to join any organization they wished to including unions, but unions would not be given any special powers, including access to workplaces and exclusive rights to collective bargaining. Union membership would not prevent an employee from being fired, including when they are conducting a strike or other industrial action, and an employer would be entitled to replace unionized workers with non-unionized workers if they are available.

Health and safety standards would not be enforced by government but would be decided by negotiations between employees and employers. Employees not willing to work under the conditions provided by the employer could leave or be fired. To incentivize employers to keep their employees safe, the employer would be liable for any medical bills and loss of income resulting from injury or death caused by business activities (including to non-employees). Employers could obtain insurance to cover this liability, and insurers could require certain health and safety standard be maintained by the employer, but these standards would be set by the market rather than a bureaucrat.

Corporate Welfare:

To limit the government's influence on the economy, and minimize the opportunities for corruption, no subsidies, grants, tax breaks (including R&D tax credits), or any other corporate welfare would be given out by the government. Procurement of services with debatable benefits such as public service advertising and public art and entertainment would also cease or be severely cut back to services with clear public benefit. No funding would pass from government to private businesses without it being in exchange for goods or services that were subject to a competitive open tender process (with low value exceptions).

Fiscal Impact: I estimate savings of $2.9 billion by ending corporate welfare