The Government's Business

Hello there,

It’s been a while since this mid-week newsletters came in as we changed it from being a weekly publication to a monthly one.

As earlier mentioned, the format of this differs slightly from our Saturday newsletter. It’s longer, more personal, and opinionated.

And as always, if you disagree or have a complementary opinion, please send it as a reply to this email or comment on the web version of this post. I’d be happy to learn more.

The reason we lock our doors at night or wind up the glasses of our cars is that we don’t trust others. We don’t trust that they won’t misuse their freedom. So we limit our freedom and their freedom in order for us to thrive. As ironic as it sounds, freedom requires the presence of restrictions for it to be worthwhile. Many times we don’t notice these restrictions until it affects us. 

In Lessons from History, Will & Ariel Durant say: 

Since men love freedom, and the freedom of individuals in society requires some regulation of conduct, the first condition of freedom is its limitation; make it absolute and it dies in chaos. So the prime task of government is to establish order; organized central force is the sole alternative to incalculable and disruptive force in private hands.

A major theme I’ve noticed in the past month has been Government activities to get the economy working again. The government which has many responsibilities -- ensuring the social welfare of the citizens -- is also responsible for how vibrant the economy is. But to do this, the government needs to function first. Since the pandemic has led to the decline of government funds, there’s been a drive to increase revenue by creating new revenue streams (new levies), while also making it easier to do business, but it’s been more of the former than the latter. 

In Lagos, for example, there’s been cases of new tax levies on the ride-hailing, logistics and even Lottery operators.

In some other cases, the government has had to take measures that‘d lead to a decline in funds in the short term in order to avoid a bigger loss. In South Africa, for example, Alcohol was banned by the government in order to prevent people from spreading the virus in gatherings and to free up hospital beds from alcohol-related trauma injuries, despite the fact that Liquor sales and taxes typically account for about 3% of South Africa’s $351 billion economy and 10% of its total tax revenue.

Notably, Some South African’s had an ingenious response to this ban. 

After the alcohol ban was reinstated, many producers skirted the laws. Vineyards in the picturesque wine lands outside Cape Town transformed into bootleggers and restaurants across the country into speakeasies, serving rosé out of teacups and Pinot Noir from coffee mugs...To stay afloat, some vineyards sold clandestinely through agents over Facebook Inc.’s messaging platform WhatsApp, while some restaurants in Johannesburg served wine out of teapots to lure customers to businesses also hit hard by the lockdown. Other eateries located off main thoroughfares served wine in stemmed glasses but recorded the sales on their receipts as items like “specialty cakes.”

I have to give it to them, smart move there. No matter how hard the government pushes, businesses would always find a way around regulations.

In all this, the major question I’ve been battling with has been: How much restriction is too much? It’s a tough call but a simple answer is anything that interferes with the profit-making ability of companies.

The conflict between businesses and government stems from the fact that they have different goals. The goal of the government is to provide social value to the citizens of the country while profit motive drives companies. And the truth is that not everything that is profitable is of social value and not everything of social value is profitable.

In the words of Henry Mintzberg, “Business is essential – in its place. So is the government, in its place. The place of business is in the competitive marketplace, to supply us with goods and services. The place of government, aside from protecting us from threats, is to help keep that marketplace competitive and responsible.” 

The government must not forget this in its bid to regulate activities or fund itself.

Thank you for reading. Have a great day 💙