Growth and Regulation
It’s axiomatic with free market extremists that government regulation inhibits economic growth, presumably because the money that companies spend on regulatory compliance would otherwise go to pay for expansion, dividends, product development or some other kind of discretionary activity. In fact, regulation can be stimulative of economic growth, as I can personally attest.
I do business with several large, household-name technology companies. Since 2000, things have been kind of slow in that sector, as people may have noticed. Yesterday I attended a briefing at one of these companies where it was noted in passing that regulatory action is one of the leading drivers of information technology (IT) spending in 2003 and 2004. In fact, it surpasses practically all other business reasons for IT investment right now, with the exception of consolidation (usually a cost-cutting measure).
Regulations around the auditing of financial transactions resulting from the recent corporate scandals, plus new HIPAA regulations in public health and of course national security and anti-terrorism measures are succeeding in loosening corporate spending at a time when practically nothing else is. The threat of government enforcement and costly lawsuits tips the economic balance in favor of investment and penetrates the fog of uncertainty surrounding return on investment in IT. Companies turn conservative in tough economic times. Sometime risk avoidance is the only logic left to stimulate demand, and sometimes it takes government action to create the risk.
Far from opposing these regulations, my clients – from the Fortune 50 global players down to the regional and niche companies developing network firewalls and biometric security technologies – are jumping for joy. Mandatory spending is painting a green swath of prosperity through a very gray and ugly economic landscape, and that money is “trickling down” in classic Laffer-curve style to a hungry labor pool of employees, freelance developers and consultants, who then spread the love around the community. My client is happy, I’m happy, my Audi dealer is happy, right down the line. And all because of government regulation. Imagine that.
10:52:03 AM 
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