Meet your new partner — Uncle Sam

In the past, many entrepreneurs have worried that the government could regulate their ideas or actions so much that it wouldn’t make sense for them to take the financial and emotional risks to create or build a business.  They were concerned that the government, and its ability to tax, regulate and influence, would became too large an influencer in their entrepreneurial  lives.

Through recession and recovery over the past two years, a lot has changed. Now, the government has taken an even greater role as an influencer of businesses from entrepreneurial start ups to industry leaders. But instead of regulating businesses, the government seems to be growing its influence over capitalism. 

The power of the government has never been greater. Over the next few decades this increased influence will affect Americans in ways we can’t even fathom. 

The federal government now participants in capitalism in four ways.

1. It works with obvious suppliers like defense manufacturers and health care entities (i.e. Medicare providers).  For these types of businesses, the past two years have been more of the same—understand government regulations, lobby for new rules and get government contracts.
2. Then there are the industries where the government has become the largest participant through bail out/takeover of selected companies.  Most often these companies have been branded “too big to fail” by the government and a quasi government/company partnership has been formed until loans are repaid or the business goes into bankruptcy.  Examples include auto manufacturers, banks and financial service giants.
3. Next there are the new stimulus recipients.  These tend to be infrastructure providers, favored by the government because they are well positioned to create “shovel ready” projects. These projects are deemed to contribute to the public good.
4. Finally, there are the businesses and industries that are well positioned to sell goods as part of a new public policy focus by the government.  The energy, technology and health care fields should benefit from these new policies as alternative energy sources are created, and health care policies creep toward nationalization.

Fixing Capitalism

So now, business leaders have to ask themselves if they should partner with the government in ways that they never thought about in order to generate capital to sustain and grow the business.  An example of a company that is doing this is GE.

Increasingly, the government is using fiscal stimulus, tax rewards and public policy decisions to encourage individuals and companies to change how they buy and use energy.   GE, which has been hurt by bad loans from its lending arm, has recently actively focused many of its resources on building its alternative energy business so they can harvest as much money as possible from the federal stimulus money.  According to an article in the November 16 issue of The Wall Street Journal, GE is working on government funded programs to modernize the electric grid, create renewable energy sources, create products which qualify for tax cuts for energy efficiency programs by homeowners, and electrify transportation programs. 

Essentially, GE’s position on the government is – if you can’t beat ‘em, join ’em.

~ Allyn Hughes