What are the major challenges facing Australia’s small to medium enterprises right now?
According to a study from the University of Newcastle, one-third of start-ups fail in the first year; on a cumulative basis, by year three 62% have failed and by year five 74%.
One of the major problems driving small business to extinction in Australia is the overwhelming red tape thrown at us from Federal Government, State Government and Local Government.
The cost of compliance in terms of the hours spent on useless documentation is anathema to the new generation of forward-thinking risk-taking entrepreneurs.
These people are hard working, but they want to retain focus on productivity and building a business rather than an avalanche of form filling.
Every newly elected Federal, State and Local Government promises to ‘ease the bureaucratic burden on businesses’ but they never do.
Regulation only services and favours the regulators, and the regulators have completely captured the process at all levels of government.
To understand the size of the problem one has first to look inside the minds of the ‘regulators’.
Why do the worst get to the top?
This question was answered by one of our favourite economists, F.A. Hayek, in his book The Road to Surfdom when he illustrated the mentality of the people who had come to occupy the positions at the top of government hierarchies’ in a centrally planned economy.
Hayek showed how normally tolerant and productive individuals are never attracted to such work and showed that it was for this reason that in any economy drifting towards socialism, ‘the worst get on top’.
More recently Geoffrey Brennan and James M Buchanan in their book The Reason of Rules stated, “If institutions are such as to permit a selected number of persons to exercise discretionary power over others, what sort of persons should be predicted to occupy these positions?” … page 64.
Brennan and Buchanan explain why we should expect that the people most willing to work hard to attain political office, will be those who expect to gain the most from holding such office.
So what causes me to be writing in such a negative fashion on such a fine Spring day in Perth?
Our Mannkal Foundation has just opened a stock-broker account and I’ve added up all the time and effort required to complete what used to be a very simple procedure.
Now, after being forced to obtained certified I.D.’s of all our Board Members and completing all the formal documentation three times (on the first two sets of documents couriered, some of the small print requirements were over-looked), we are finally in a position where we can ‘transact business’.
Our estimated cost of completing this documentation is $1,500. This could have been obtained a few years ago with a simple phone call.
Similarly, with opening a bank account, it is now necessary to take half a day off, from productive work, visit your bank and complete the ‘100 point assessment test’.
No wonder so many people are exercising their freedom of choice and ‘transacting less’.
Our country and economy is much poorer and less vibrant when things are made ‘too hard’.
Some other examples? At a time when Western Australia is desperately short of land for new homes our new government is intent on unnecessarily jeopardizing the development of large tracts of ready-to-go subdividable land and the results are ever escalating costs for new building blocks.
However, I shouldn’t be surprised at all this. After all, Western Australia must be one of the few remaining outposts of bureaucratic bungling as it still clings to the anachronistic Potato Board, again intent on driving up the price of potatoes.
Anyone else in favour of declaring ‘open season on bureaucrats‘?