Government Policy and Small Business

When we first started our small business research, the role of government policy did not come up much in our interviews or surveys.  

It was years ago, the economy was doing well and most of the small business owners, managers and experts we interviewed or surveyed focused on other issues. 

When government was mentioned, the discussion was on the need for less government, lower taxes, and fewer regulations.  Almost no one wanted or suggested more government intervention in the small business sector. 

Things have changed. 

With the recession hitting all sectors of the economy - and the economic stimulus package the focus of the media - we now consistently hear about the importance of government policies.  And small business owners and managers regularly tell us about the need for small businesses to benefit from government stimulus spending.

There is also a clear, short term shift towards more government involvement in the U.S. and global economies. 

For these reasons we've been covering small business related government policy in more detail.

We even added a "government policy" tag to our category listings - something we didn't see the need for prior to the recession.

And while we don't think this changes the long term, global trend towards market capitalism, the impact of government policies on small businesses will be a key research area for us for at least the next couple of years. 

Comments

[Timothy]

Oh boy. I'm a fan of small governments. Governments can't do anything to help during a recession. They try, and try again. And fail. Sometimes it just hurts the economy.

The economy, at least in the US, goes in cycles. About every 20 or so years it dips and we enter a recession. Which is actually normal and can be considered healthy. When this happens everyone panics and wants the government to intervene. First of all, why is it the government's responsibility? In my mind most people do not truly understand the role of the government. Anyway, people demand action, so the government acts. Stimuluses go out, business regulations are enacted. Etc, etc.

Then, the economy boosts back up (by itself). And people eventually forget about the recession. Then, with all of the left-over policies, businesses are held back and can't act as a normal free market. So they demand action. Again. And the government listens and slowly removes such policies.

This tends to cause the economy to do really well. The economy does the best when the government does not hinder business transactions. Eventually, though, some people take risky actions. This is pretty normal considering that the economy is doing really well and they consider the risk much smaller than it actually is. And when their transactions fail and the consequences build we enter the next recession.

Long story short, when the government intervenes more harm is caused than good. There is no stopping recessions. And it is crazy to assume that the government can fix all of our problems.

This may sound like a long rant, but it is actually rooted in empirical evidence. Governments are necessary, but not for these reasons. We need armies to protect us. We need (certain, not all) laws to protect us. We need lighthouses, street lights, and other goods and services that nobody would be willing to pay for otherwise.