The video can be found at http://www.youtube.com/watch?v=_gIGpzoZxuA
In this video, “Max Borders on Our Compulsive Urge to Regulate” Max Borders explains his attempt at a failed business venture to sell homemade barbeque sauce at a local farmers’ market. He attributes his failure to the regulatory standards put in place by local and federal governments. He states that he needed his kitchen certified by health inspectors and he needed a business license and business insurance. These startup costs made it impossible for the business to get off the ground.
His position is that these regulatory practices hurt entrepreneurs and small business. This argument is pretty substantial, but imagine a country without regulations. What would happen if meatpacking plants did not have health inspections? Would every company have the integrity to maintain its facilities without supervision? Perhaps the country would be revert to the ways of Upton Sinclair’s The Jungle where the meatpacking industry had no inspections and severed fingers were, often, ground with beef to make hamburger meat. This is an extreme, but it clearly illustrates the need for certain regulations, especially in the food industry.
As far as the author’s mentioning business licenses and business insurance, this is mainly to protect the business. If the business comes under some kind of lawsuit, a small business would, likely, not have the capital to pay a settlement. Therefore, it is imperative for the owner, to avoid complete business and personal ruin, to have business insurance. This insurance would benefit the consumers of the product, as well, making a more stable society in general.
Max Borders’s response to the “regulatory state” is to take the government out of business except for the courts. This is not an acceptable solution. America
Perhaps one solution to help small business would be to graduate the regulatory fees and subsidize the cost of business licenses insurance. This would allow small businesses a chance in a competitive market where it seems that only the most affluent have a fighting chance. In conclusion, though the regulatory system makes it tough for entrepreneurs and small businesses to thrive, it is necessary to protect the community of consumers and the country in general.
Your solution sounds pretty reasonable. Without a solution, it's such a difficult, catch 22 position. As a small business owner, they would need extra money in order to start up their production in order to get their license and insurance, right? However, if you eliminate these requirements, then you are putting the consumer at risk by not having health certification., and like you said, it's a bit too late once people begin to get effected. Such a strange predicament.
ReplyDelete-Nick
Capital is a challenge for any start-up and particularly so in the food services, where the requirements of a "certified" kitchen can often overwhelm a home based operation that isn't able to invest in the necessary hard costs. That said, blaming failure on the rules of the game is a cop out.
ReplyDeleteYour points on scaled license fees are valid and can play a role in terms of incentive or early assistance. In addition there are a variety of resources available to a start-up to assist in navigating some of the pitfalls. For food service industry these include shared commercial kitchens, places where start-ups can have access to approved kitchens without some of the licensing fees and hard equipment costs. Additionally there are regional resources for business planning, often at community colleges, that can help start-ups understand what they'll have to have in place to get off the ground.
The point is that you have to do your homework and be prepared. There are too many successful start-ups out there to say that the game is rigged and plenty of them start without much in the way of financial resources.
LWH
Mmm! Is that finger I taste? After watching "Food Inc." I'd venture a guess that a human finger or two in an industry-wide cross section of ground beef is the least of consumers' worries.
ReplyDeleteMy perception is that regulations in the American food industry are there to keep the hot dog vendor on the street from storing his underwear in the same pot where he cooks his product. Well, at least deter him from making that his regular practice... D:
This reminds me of that delicious finger I found in my chili at Wendy's...Tasty! After experiencing a year of law school under my belt, it would be a lawyers nightmare/fantasy to have a society without regulations. Just think about it. COMPLETE CHAOS!!!! But at the same time it makes you feel bad for the small guy trying to make something out of a good idea.
ReplyDeleteThere is a show on TV now (can't remember the name) in which "loaded" business moguls help fund small entrepreneurs with their invention ideas. It is incredible the kind of capital you need to start with just to get your idea off the ground. Between licenses, marketing, insurance etc... the cost is astronomical. There are regulations for everything!!! No wonder such a high percentage of small businesses fail. Its not like it use to be!
Mike
As the owner of a small business in NJ, I am loathe to say anything positive about regulation. However, I believe that in some industries, such as the food industry, regulation is a neccessary evil. People need to be sure that their food supply is safe. It is when government creates regulation soley to create new sources of revenue that government ceases to act for the common good.
ReplyDeleteIt seems to me that Max Borders has not a problem with regulation, but has a problem with initiative. He admits that when it got hard, he and his wife just gave up. There is a reason they call it work. You have to work at it. He could have sought out assistance form various agencies, public and private.
He does, however, have a point about big business being able to stifle competition. But that has always been the way it is and is not likely to change. Small entrepeneurs have always found a way to succeed, so that is not really an excuse.
Maybe he was just meant to be an author and not a BBQ sauce magnate.
I guess its a matter of balance. Too much regulation may unnecessarily burden business start-ups, too little can put the public at risk. As they say, "the devil's in the details." I like the idea of of graduated fees or the availability of some subsidy, perhaps in the form of loans.
ReplyDeleteThis comment was sent to me by Richard Wright via email:
ReplyDeleteMost would agree, as you argue, that some regulation is necessary to protect consumers and the public and to provide a set of rules within which business should operate. Most would also agree that these regulations often become onerous and costly and lead to unnecessary burdens on business, especially small ones. As has often been said "the devil is in the details" and that leads to a case by case cost/benefit analysis which would seem to be beyond the scope of this particular blog. RW