Inefficient arrangements

Governments around the world are highly pro-business. And if they are not that supportive if private businesses, they’d at least lend some hand to the public corporations. Which means things might be more difficult for the employee, or the common worker.

But small business is also an area the government cares about and surely that is in the right direction? Perhaps so. But programmes for small businesses are hard to administer and corporate welfarism for small businesses in lieu of individuals can still be very inefficient.

Take for example giving enterprises grants to work on the business strategy. It sounds good (particularly for the consultants) but to prevent adverse selection there has to be some kind of bar to make sure the business is legit; and then you have to make sure the consultant is good as well. These sort of checks and balances ends up squandering more resources and results in inefficient allocations more often than not. At the end of the day, the funds goes to people who know how to do the reporting rather than those who would really benefit from it or going to that which would end up benefiting society the most.

That may be seen as a necessary evil in the absence of better alternatives. Maybe the solution is to stop channeling resources this way? Directing these investments into more common infrastructure and general programmes that uplifts more businesses, reduce general business costs might be the best approach to promoting businesses. Enhancing economic efficiency can improve competitiveness – even when it doesn’t give the civil servants as much brownie points with their bosses.