This blog, which discusses why weak government is wonderful for business, is really an homage to Mancur Olson.
Olson explains that government can be pictured as a saucer with a depression in the middle and a rising lip around the edge. In the center we have no government or a government that is so weak it resembles anarchy. This environment is often found in parts of Africa where the government is weak and it is also found in war zones where commerce has trouble growing because an investment in businesses isn't worthwhile when it risks being destroyed. Property rights cannot be enforced and there is no stability in the market necessary for expansion of manufacturing. The center of the saucer may have trade but not industrial commerce.
The opposite is true on the lip of the saucer where the government is strong and rigid. It is usually a tyranny which we are familiar with in the former Soviet Union, Cuba, in China under Mao and in North Korea. Any business that begins to succeed will be confiscated and given to the brother of the tyrant. That is the reason businesses do not grow and thrive where the government is too strong.
Now to look at the flat part of the saucer. There are many governments that are close to the anarchy side and many close to the tyranny side. The United States is closest to the anarchy side and that is the reason businesses thrive. We have fairly stable property rights and stable markets. There are many parts of the United States where you can start a business and grow and it will never come under the scrutiny of the government. This is not true in Germany. This is not true in Japan. Two countries that have very efficient and extensive governments.
The reason America has such weak government is because it is unique in the world in having been created from the bottom up. First there were farming settlements then there were urban outcroppings that formed their own governments to supply water and roads. These local governments grew into regional governments that provided schools, fire protection and police. These in turn grew to form state governments and state governments formed the federal government. This did not happen anywhere else on the planet and accounts for the weak government of the United States.
I have watched hundreds of small businesses form. They usually start without thinking about paying any taxes and it is seldom that they register for the permits or dozens of regulatory permissions that are needed for small business. They don’t do this until they are already thriving. That happened in San Francisco in the hippy era. That happens in poor neighborhoods; that happens in areas where governments are ineffective or incompetent. That is necessary for most businesses to get started. That is always necessary for innovative businesses because they would be squashed immediately if the government’s couldn't fit them into existing rows or columns.
Ultimately when a new business is strong enough to hire people it starts filling in the necessary forms and meeting the myriad regulations. It is the weak government that allows businesses to start and thrive in the first place.