Why crying ‘uncertainty’ is profitable for the business community

at 09:00 AM ET, 05/03/2012

Listening to the opening of Amway Chairman Steve Van Andel’s speech to the U.S. Chamber of Commerce, you might think that American capitalism was under threat from forces at least as massive as last century’s communist revolutions.


The U.S. Chamber of Commerce in Washington, D.C. (Nicholas Kamm - AFP/Getty Images)
When Van Andel’s father co-founded the direct-selling giant in 1959, “it was the year that Castro took over Cuba,” he told a packed ballroom at the Chamber’s D.C. headquarters on Wednesday. “There was an overarching mood in the country that freedom and free enterprise maybe were dying. Socialism was on the rise, and there was a lot of uncertainty — similar sometimes to what we see today,” said Van Andel, who took over the Michigan-based company from his father. Fortunately, he added, “Amway has done well.” The audience broke out in knowing laughter.

Van Andel rehashed the common complaints of corporate America: high taxes, red tape, and burdensome regulations were going to quash the country’s great entrepreneurial spirit. But like most CEOs, Van Andel also has an unwaveringly pragmatic streak. Rather than harp on the threat of a Cuban-style government, he described the single greatest threat in a single, seemingly innocuous, and sometimes maddeningly vague phrase: “uncertainty.”

“There’s a lot of unnecessary red tape. The more hurdles business have to go through, the more uncertain they are about growing, and the more uncertain they are about hiring,” Van Andel explained. But what specific policies would he want to change? I asked him after the speech. Van Andel demurred to single out any changes, instead harkening back to the same theme.

“In general, hurdles on business are hurdles of the unknown,” he said, pointing out Obamacare as one example. “No one knows what it’s going to cost, and it’s going to slow everything down in that arena,” he said. When asked whether he’d like the law to be repealed — or certain parts overhauled — Van Andel again declined to go into further detail.

To a certain extent, the “regulatory uncertainty” argument that’s so popular among defenders of free-enterprise is a valid criticism. Federal regulators, for instance, have taken longer than promised to finalize the new financial regulations for Wall Street, which has led banks to complain that they’re not sure how to plan for the future. And certainly, the biggest reforms under health-care law have never been tested out on a national scale, and employers who provide health care aren’t sure what their own costs will be either.

But “uncertainty” is more than just another way for American business interests to bludgeon the Beltway. It’s also a strategy that helps industry get what it wants. Businesses typically use the phrase to describe regulations that they don’t like. But the implication of “uncertainty” is significantly more neutral: It implies that there simply isn’t sufficient clarity about the rules, so there should be a dialogue between business and Washington hammering out exactly what can — and should — happen going forward. That gets them a seat at the table. If they were just hammering the proposed laws in specific terms, the relevant decisionmakers might refuse to let them in the room.

In the end, “uncertainty” isn’t usually the underlying problem: If the government, for example, decided to impose stringent (and very certain) regulations on businesses, the Chamber wouldn’t be too happy, even though the regulations would be crystal clear. Similarly, the business community has long called for corporate tax reform, which would increase uncertainty as to the future of the tax code, but would perhaps eventually resolve that uncertainty in a way that the business community prefers to the status quo.

Van Andel himself suggested as much in an anecdote that he told during Wednesday’s speech: Yes, it’s important to dialogue with federal regulators, but the real purpose of doing so is to achieve a positive outcome for your business. Amway made early inroads in the Chinese market during the mid-1990s, and the company’s success ushered in a host of imitators — some of whom “said they were all like Amway” but operated fraudulent Ponzi and pyramid schemes, instead, Van Andel recounted. In response, the Chinese government suddenly moved to close down on all direct-selling in the country, threatening Amway’s future in China..

Amway’s response to the obtrusive, new regulations? “Instead of complaining, of pulling out, we worked with the Chinese government to ... help them draft regulations to differentiate between ethical and non-ethical companies,” Van Andel explained. “If we hadn’t been part of the solution, I think they would have shut down the entire industry, and that would have been the end of it.”

 
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