Thursday, November 4, 2010

Regulations Help Business

Oddly enough, businesses benefit more from a strict regulatory environment than consumers do. Businesses face an evolutionary dilemma. Lack of regulations allow companies to cut corners and costs and to cheat a little bit here and there. This drives up short-term profits and gives a business an advantage against its competitors. But as consumers lose trust in the marketplace, they stop buying - except for the bare necessities.  This may actually be healthier in the long run for consumers, but it is devastating to the economy. Take  mad-cow disease for example. Lack of regulation allowed the beef industry to use recycled beef products including material from the brains and spinal cords of sick animals, in their feed.  There was little or no enforcement of regulations prohibiting diseased beef from the market place.This lowered feed costs and allowed greater profit. But when consumers began to get sick from the disease, they stopped buying beef. The market for American beef dropped overseas and at home and everyone in the industry suffered losses.
It probably helped the average American consumer because they ate less beef which was good for them, in the long run. Of course the people who died of mad cow disease paid the cost for all of us. A dog eat dog economic environment ends up producing a lot of dead dogs.

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