Government Kills… Businesses, Anyway

by Warner Todd Huston | October 16, 2011 10:00 am

A small business named Nice Cream found that government wasn’t very nice to its bottom line. In fact, due to its heavy hand, government froze the company into nonexistence. So much for everyone loving ice cream!

The other day, while discussing the failures of government unions and their pliant, paid-for, lapdog politicians, one of my Publius commenters said that government should “stick to its guns” and turn a blind eye to the needs of the business sector. This commenter wanted government to continue sticking it to the business sector and maintained that business would simply stand there and take it because of the “value they receive” from government. I said that business did react to a bad business climate fostered by government regulations, taxation, and interference. He didn’t think so.

Well, here is a story[1] of how one small business was crushed, not by the market but by government. It was crushed because of government “sticking to its guns” and slamming it with idiotic regulations and rules made for multi-billion dollar corporations that did not make sense for small business.

The company is — or rather was — called Nice Cream[2] and was started in the kitchen of her own home not long ago by Chicago-based entrepreneur Kris Swanberg.

Starting with a small ice cream making machine she got for a gift, her own ideas for what the ideal ice cream might taste like, and a dream of serving her concoctions to friends and family, Swanberg began experimenting with flavors and processes until she came up with Nice Cream. And due to her hard work the resulting products based on own recipes have found a niche market in the Logan Square neighborhood of Chicago.

It seems like a true American success story.

But as Swanberg’s business expanded and she began to see her product demanded by more local stores, the attention of the state was drawn to her little operation. It was an unwelcome gaze, indeed, for Swanberg suddenly found herself beset with government lackeys intent on shutting her down over “violations” of rules and regulations she didn’t even know existed.

One of the rules Swanberg discovered, for instance, pretty much eliminates her ability to make her strawberry ice cream. The state informed Swanberg she was not allowed to use actual strawberries for her strawberry ice cream. The state, it appears, thought she should use processed extracts of some type for fear of “bacteria” in her product.

The state then said that if Swanberg wanted to continue to make her ice cream in compliance with state rules and without spending hundreds of thousands of dollars for special equipments that meets government standards, then she’d have to use pre-made ice cream mixes that have been approved by the state.

That sort of eliminates the whole reason Nice Cream has been successful: Swanberg’s homemade recipes.

The state told Swanberg that if she got an industrial pasteurizing machine, then she’d be in compliance. The cost of the machine? $40,000.

Such a cash outlay is far too burdensome for her little startup business to withstand.

So, Swanberg will have to shut her business down until she can figure out what to do to satisfy these government rules and regulations. This makes the business woman unhappy, o course. It also makes her customers unhappy[3].

Worse, her plight has scarred other Chicago-area small businessmen who are now worried that they will be the next target of the iron boot heel of government regulators. Some are contemplating shutting down before the government gets to them and begins fining them or attempting other legal actions.

There was once a day when an American could start a company with just a dream and the tools and facilities at hand. Now that dream has been killed by government. Now, no matter what you do, you need millions of dollars to set up industrial facilities, high priced lawyers to help you navigate the endless stream of government regulations, and a retinue of employees whose sole job is to make sure you are compliant with government rules and regulations. All this must be done before you make your first product or serve your first customer.

No wonder small businesses can’t compete. Government has rigged the system against them and made sure only the largest of corporations can afford to make it.

Americans still dream, of course, but the American dream has been suffocated and buried under a million regulations, rules that never stop streaming out of the maws of government, rules that are the non-productive, bread-and-butter of government placemen and penny-ante officials who got their jobs because they are buddies with an alderman or some other politician.

This isn’t just a local problem, either. It is a problem from the Obama administration in Washington to every last city, town, and burg across this dying nation.