GOVERNMENT REGULATIONS - GOOD IDEAS - BAD EFFECTS 

A SERIES OF EVENTS AND APPARENT TRENDS APPEARS TO SHOW NOT ONLY A LACK OF CONTROL BY GOVERNMENTS, BUT AN ACTUAL HARMFUL EFFECT FROM THEIR ACTIONS.

ONCE DEMOCRACY REACHES A CERTAIN LEVEL, A REVERSE ACTION MAY SWING INTO PLAY THAT CHANGES INTENDED GOOD ACTIONS INTO HARMFUL ONES.

ACTIONS BASED ON OLD INDUSTRAL AGE THINKING, TAKEN IN A COMMUNI- CATIONS AGE ENVIRONMENT, HAS A REVERSE EFFECT.

EXAMPLE: SEVERAL YEARS AGO CANADA SET QUOTAS ON THE NUMBER OF CARS IMPORTED FROM JAPAN. LETS SAY THAT AT THAT TIME HONDA WAS BRINGING 50,000 CARS A YEAR INTO THIS COUNTRY. AFTER SOME POLITICAL STAGE ACTING JAPAN ACCEPTED THAT QUOTA.

HOWEVER WHEN THEY STARTED SHIPPING CARS BASED ON THE NEXT YEAR'S QUOTA, THEY SWITCHED FROM THE $4,000 HONDA CIVIC AND BROUGHT IN INSTEAD, UNDER THEIR LEGAL QUOTA, A SIMILAR NUMBER OF $10,000 HONDA ACCORDS. FIRST TO BENEFIT WAS NOT THE CANADIAN CONSUMER, BUT THE JAPANESE MANUFACTURER WHO SAW HIS PROFIT INCREASE BY ABOUT 250 PERCENT - THE PRICE DIFFERENCE BETWEEN A $4,000 CIVIC AND A $10,000 ACCORD.

BUT THAT WAS ONLY A SMALL PART OF THE HARMFUL EFFECT FROM WHAT WAS EXPECTED TO BE A BENEFICIAL MOVE TO AID CANADIAN CAR MANUFACTURERS. THE KOREAN HYUNDAI "PONY" MOVED INTO THE VACUUM CREATED BY THE SHORTAGE OF HONDA CIVICS AND SUBSEQUENTLY CORNERED THE LOW-END OF THAT MARKET -- EFFECTIVELY CLOSING THAT MARKET TO DOMESTIC MANUFACTURERS.

BUT THE MOST HARMFUL RESULT WAS STILL TO COME. PREVIOUSLY, DOMESTIC NORTH AMERICAN CAR MANUFACTURERS HAD THE LOCK ON MIDDLE PRICED AUTOS. NOW WITH THE MORE EFFICIENT AND BETTER BUILT HONDA ACCORD MOVING INTO THAT MARKET, THE NORTH AMERICANS QUICKLY LOST THEIR DOMINANT POSITION -- A POSITION THAT CONTAINED FAR MORE PROFITABILITY THAN THE LOW-END CARS ALREADY GIVEN UP TO THE FAR EASTERN MANUFACTURERS. A GOVERNMENT MOVE INTENDED TO PROTECT DOMESTIC MANUFACTURERS HAD REVERSED ITSELF AND DID MORE HARM THAN IF UNRESTRICTED PENETRATION HAD BEEN ALLOWED INTO THE LOW END FIELD BY THESE EFFICIENT OVERSEAS PRODUCERS.

IT APPEARS THAT MOST WESTERN GOVERNMENTS ARE NOT ADEQUATELY AWARE OF THE SHIFTING SANDS IN THE WORLD MARKETPLACE, DO NOT HAVE SUFFICIENT INFORMATION ON THE PRECARIOUS POSITION THEIR COUNTRIES HAVE REACHED, AND HOW VULNERABLE THEY NOW ARE WITH SO FEW DEFENCES AGAINST A RAPID DETERIORATION IN AN ALREADY WEAKENED ECONOMY.

A NUMBER OF BUSINESS EXECUTIVES HAVE COME TO SIMILAR CONCLUSIONS REGARDING ASSOCIATION WITH GOVERNMENT. THE GIST OF THEIR TALK SUGGESTS THAT A COMPANY'S ACCEPTANCE OF A GOVERNMENT GRANT IS TANTAMOUNT TO A KISS OF DEATH. THE PAPER WORK, TIME SPENT IN OBTAINING REQUIRED APPROVALS, AND ADDITIONAL BURDENS AND RESTRICTIONS APPLIED BY GOVERNMENT COSTS MORE IN TIME AND EFFORT THAN THE VALUE OF THE GRANT RECEIVED. IN MANY CASES, BECAUSE OF THE SLOW RESPONSE TIME BY BUREAUCRATIC GOVERNMENTS, THE WINDOW OF OPPORTUNITY THAT BUSINESS SAW WHEN IT APPLIED FOR THE GRANT, HAS SNAPPED SHUT, WELL BEFORE THE HOPED FOR GOVERNMENT GRANT IS RECEIVED.

AND THE FRUSTRATION OF GOING THROUGH SUCH A PROCESS DESTROYS THE INITIATIVE OF MANY SUCCESSFUL ENTREPRENEURS AND ADJUSTS THEIR MENTAL SET SO THEY BECOME ANTIQUATED LIKE LONG-TIME BUREAUCRATS.

YOU MAY NOT AGREE WITH RONALD REAGAN'S METHODS, BUT HE HAS BEEN TRYING TO MINIMIZE THE HARMFUL EFFECT BY GOVERNMENT ON COMPANIES THAT HAVE TO COMPETE IN A WORLDWIDE, VERY COMPETITIVE MARKET PLACE.

MY ADVICE: ENTER NEW INDUSTRIES UNENCUMBERED BY GOVERNMENT RESTRICTIONS. DO NOT ACCEPT GOVERNMENT GRANTS OR ENTER INTO RELATIONSHIPS WHEREIN YOU AND YOUR PRODUCTS ARE SUBJECTED TO EXPENSIVE OVERHEAD BURDENS THAT YOUR WORLDWIDE COMPETITORS ARE NOT ENCOUNTERING. THIS MEANS TURNING DOWN GOVERNMENT CONTRACTS THAT ARE NOT FREE OF SUCH RESTRICTIONS. AND FEW THAT ARE THAT FREE.

* * *

< previous | chapter index | next >
back to Main Chapter Listing
back to Home Page