In February it was announced that Deutsche Boerse had agreed in principle to purchase the New York Stock Exchange (Euronext) for $10 billion. With the purchase, the German company would become the largest exchange operator in the world. Politicians and the financial community lauded the proposed deal as one of great opportunity for expanding markets. In response Nasdaq OMX Group Inc. joined with Intercontinental Exchange Inc. to offer a competing bid for the NYSE. While the New York entity was considering the offers…one from Germany and the other primarily U.S. based…the federal government sprang into action.
Even though the final offer from the domestic Nasdaq group was sweeter than the original offer of the German concern, the NYSE rejected the proposal from the American suitors. Although they stated a primary reason was that the prospect of being a part of the largest exchange in the world intrigued them, concern was also expressed about the monopoly aspects of a merger with the other U.S. company. In other words, there were reservations about whether or not the United States’ Federal Government would initiate anti-trust action against the merger. Government regulations and the potential for heavy-handed litigation were influential in the final decision to sell the NYSE to a foreign entity. This little scenario is emblematic of the legal and regulatory environment in our country today and may be a significant indicator for the reasons some companies may choose to relocate their headquarters offshore.
The NYSE-Nasdaq kabuki dance is a reminder of the effect that government power has on businesses. Just the threat of government action may alter the decision-making process for a company. That could be a good thing if the corporation were intending to engage in harmful or radically unsafe practices. The other side is that subjective or arbitrary regulating may lead companies to become timid or frustrated. We can see evidence of that in the distribution of waivers for “Obamacare.” Friends, contributors and supporters receive favorable treatment while the remainder of the nation is expected to comply with the thousands of arcane rules and mandates. Big government holds the power to subjectively enforce its many rules. For a serious business operation this milieu may be intolerable because it is nearly impossible to successfully forecast and plan when the rules are implemented in a whimsical fashion.
Even if government were to enforce a given law uniformly, the businesses involved will always suspect that, at some point, the rules will change or enforcement would be unevenly practiced. The weakness of big government regulatory mechanisms should be readily apparent. In many countries and cultures bribery and corruption are the best method for companies to avoid getting lost in the regulatory maze. It is possible for smaller government to be corrupt, but because of its limited influence on the marketplace, the corruption may not have much of an impact in the marketplace. Most people and businesses seek stability. They may prefer consistent corruption to an unevenly enforced regulatory environment.
The proliferation of new rules, laws and regulations have generated a marketplace that finds its workers treading on eggshells. Government enforcers at every level appear to be constantly prowling for violations, real and imagined. Laws and regulations are unevenly enforced from sector to sector, business to business, and region to region. Bureaucrats have assumed the power (or it has been given to them) to transform vaguely-worded, over-arching legislation and molding the result into an unending series of nitpicking, nonsensical requirements. Despite the insanity of the rules, business must comply or be fined………………or relocate. Now add unrealistic union workplace rules to the bureaucratic morass and one wonders why any businesses remain here.
Fear is often as lethal as force. Fear is a prime motivator for behavior modification. In other words, fear of punishment or fear of retribution may cause you or a business to act in ways that are not in your best interests. In a democratic republic the people should not fear the government, but the government should fear the people (credit and kudos to Thomas Jefferson and “V for Vendetta”). When we fear the government more than it fears us, it is time for reordering our priorities….time to restructure the way things are.
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