Corporate Self-Regulation Is More Efficient Than State Regulation

Often heavy regulatory burdens have a stifling effect on trade and commerce. They slow economic growth and create hurdles for businesses to perform at their best. In a libertarian world, companies would be free to essentially self-regulate, free to choose how they go about their business, and free from government intervention and oversight. To many people, this sounds extreme, and it sounds like chaos would ensue without the watchful eyes of government for protection.

But, reforms in regulatory environments do not have to be extreme. There is a long distance down the road of deregulation with many stops along the way. Even modest deregulation can relieve burdens and open up new potential for economic successes. While libertarianism does prefer a lack of most regulations, it is acceptable that there is a process of deregulation that can take a while. Improvements in the success of businesses and improvement in overall economic circumstances can be demonstrated along the way. It can be demonstrated that deregulation is not such a scary notion.

Understandably, there are many fears regarding removal of regulations. Once the regulatory door is open (and it has been for a very long time), everyone develops his or her pet sets of regulations that address items of personal prejudices and experiences. We didn’t get this way overnight, and we aren’t going to be able to shed enormous regulatory burdens overnight. There are significant fears of whether businesses will act in the best interests of the general public.

To be fair, there is some merit to businesses acting in self-interest rather than altruistic interests and willingness to address the concerns of citizens. That is because businesses are not people.  While corporations may enjoy personhood under the laws of the majority of nations in the world, businesses basically function as animals. They are neither good nor evil. They are amoral, rather than immoral or moral. If a bear attacks a person, we do not consider the bear immoral or evil. The bear is just being a bear. The same goes with a business. Businesses consume profits and must have them to survive. They do so without moral intent, and thus must seek out the most efficient manner to get to those profits without moral considerations. Sometimes their actions line up with our morality, and sometimes they don’t.

So, how do we keep these beasts tamed to act in the best interest of the public? What incentives could a business possibly have to pursue the interests of what people want, when they are merely creatures acting in pursuit of only profits? Fortunately, we already have a few such models in existence that demonstrate an ability to tame the beasts. We are in constant use of them.

One such model is the Better Business Bureau, operating throughout the United States.

The BBB is a voluntary organization that allows businesses to join for their support and input, or not. The BBB allows consumers to file complaints on any business and offers to arbitrate the complaint in order to settle any disputes. The process is entirely voluntary, and it works well. Since its founding in 1912, the endorsement of the BBB has become a mark of a business in good standing and is trusted by the majority of consumers in the US. A clean record with the BBB instills confidence in potential customers, and a bad record of unresolved incidents with the BBB often steers customers away. It operates outside of government legislation, as well as the courts, and its impact on how businesses operate is very significant. Businesses are not legally bound by enforcement of BBB’s rules or arbitration decisions, but they certainly pay attention to them and follow them. Additional voluntary organizations would likely form in the absence of regulations. Such organizations could be approached to even work to the benefit of environmental and employment concerns.

Another, more costly, method is the court system.

Through civil court, people are able to manipulate business behavior – be it prevention of fraud, environmental pollution, aggression against rights, etc. This is not a desirable means of taming the beasts, but it is effective, and provides for an environment typically more conducive to open markets than does government regulation. The effect can be very similar to regulation by restricting business behavior through common law and past judicial opinions, but those opinions can be constantly tested by businesses and the public alike. These litigious actions against businesses cause them to modify their behavior by creating additional costs that cut into profits. As long as both parties in these actions have exposure to risk of loss in losing their case, then litigation can work as a means to control unwanted business behavior. And that is the crucial part – in order to avoid abuse by lawyers and people looking to file nuisance law suits, there must be a financial risk to them when they lose.

Public protests and boycotts are also an effective means of asserting the concerns of the public toward businesses. These also affect relationships with new customers and the potential for decreased revenues. When the food of profits are lost, the creatures that are businesses will do what is necessary to get the food they desire.

There are many means of voluntary actions to tame business actions. Regulations are typically redundant in their effectiveness, and the costs of enforcing those regulations is greater than voluntary means of enforcement. Not all regulations must be removed at once; but every lost regulation represents a new benefit for all. The greater the freedom from government toward business, the greater the freedom of individuals. Relationships between businesses and their customers become more open, as does a business’ relationship with its employees. The cost savings incurred by decreasing regulations find their way into a stronger economy, which benefits all.

This post was written by Danny Chabino.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.

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danny.chabino@beinglibertarian.email'/

Danny Chabino

danny.chabino@beinglibertarian.email'/

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