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Sent: 31-03-2009 13:42:02
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When Hedging is Speculation Email Newsletter Business Opportunity - Helen Bairstow Dividends & Consumer Spending The Easiest way to do a Client Newsletter. Small business vs. Government
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Small business vs. Government

Click here to buy - A How To Book of SMSF's by Tony Negline

Tony Negline

A US right wing journalist, Jonah Goldberg, wrote this week about the cozy relationship between big business and big government. Here is his main argument:

"... one needs to remember that the New Deal was not the assault on big business that its fans claim. FDR may have talked a good game about going after "economic royalists," and he did love confiscatory personal income taxes. But he and his Brain Trust also loved cartels, big businesses, and other "big units" of society. The notion that big business and big government are at war with one another is one of the great enduring myths of the 20th century. The truth is that ever since Teddy Roosevelt abandoned his love of trust-busting, progressives have liked big businesses big, really big. The bigger the business, the more reliable the partner for big government.

"That's why any huge corporation that plays ball on health care, or "green jobs," or countless other initiatives, is hailed as a "forward-thinking" or "progressive" company. Companies such as GE, which stands to make billions from Obama's energy proposals, are vital sidekicks in the new era of public-private partnerships. Why is Obama working tirelessly to save Detroit automakers? Because GM is a wonderful poster boy for peddling nationalized health care, and UAW is an indispensable cog in the Democratic Party.

"Hillary Clinton's health-care plan required working with large corporations and other firms. It was little guys for whom she had nothing but contempt. When warned her plan would crush smaller businesses, she shrugged, 'I can't go out and save every undercapitalized entrepreneur in America.'

"Again, this is hardly a new story. Chiefly under the auspices of the National Recovery Administration, the New Dealers sought to create huge cartels and trade associations that could work side by side with economic planners. Small and independent firms, from movie theaters [US spelling] to dry cleaners to poultry distributors, were hounded and harassed by a government determined to 'rationalize' the economy by sweeping away all those pesky-but-innovative competitors. Would Barney Frank [a US Congressman] rather work with one giant Fannie Mae that will always take his phone calls and do his bidding, or a thousand smaller firms that would need to be herded like cats? I think we already know the answer.

"Everyone agrees that we are spending trillions of dollars on firms "too big to fail." Many of these firms got so big because politicians in both parties liked to have important businessmen take their phone calls, do their bidding, and fund their campaigns. And maybe, just maybe, the lesson from the financial crisis isn't to get big business and big government even more involved with each other, but to finally bust the trust between them."

Not everyone is going to agree with Goldberg's argument. Some will no doubt have some serious arguments against his thesis. Some will disagree simply because of his politics.

Personally I think he's about on the mark. Think about the practicality of government regulation in Australia. It's a lot easier to regulate a few large super funds than many thousands of small super funds. The ATO find it easier to deal with 11,000 or so small super fund auditors than the 800,000 or so trustees. It's a lot easier for ASIC to deal with a few thousand financial services licensees than the tens of thousands of authorised representatives.

It is easier to regulate a few hundred buses or trains than thousands of cars or motor cycles.

Anyone with experience of dealing with politicians and government departments will know that they prefer to deal with big business. It would be silly to pretend otherwise.

But sometimes small business can make itself powerful by accident. We're seeing that with small super funds. As a whole they are too large and too numerous to attack. This is good for everyone.

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