Human beings have survived on earth for thousands of years. Why? Because of their intelligence they were able to adapt to a constantly changing environment. Weather, disease, food shortages, predators, and common enemies were unable to extinguish the human spirit. Business has also adapted in much the same way. Here in Bozeman, we have several companies that have stayed in business over 100 years.

They have survived wars, recessions, a depression, and a host of competitors and economic conditions.

Currently, we find ourselves in the tenth recession over the past 60 years. Since November of 2007, we have passed the $14 trillion dollar debt mark. Our government is running a $1.4 trillion dollar deficit. Unemployment has been at or above 9% for over two years. Gas is flirting with $4.00 a gallon, housing values are dropping, and Congress is borrowing $4 billion dollars a day to cover all the entitlements, while widespread inflation is waiting in the wings. So businesses have no choice … adapt or perish.

It’s official. As of April 1, American companies are now paying the highest corporate taxes in the world, as we finally pass Japan. There was a point in time when companies only needed to produce enough products to sell to American consumers. As technology and business systems improved business had to become more global and open new markets. This led many companies to move some, or all, of their operations overseas to open new markets.

At one time 18 of the 20 largest corporations in the world were headquartered in the US. Today it’s in single digits.
American corporations found themselves competing dollar for dollar against foreign companies that enjoyed lower employment costs, didn’t allow unions, had no wage and hour laws, no bonuses, no environmental restrictions, no OSHA regulations, no overtime pay, no pension or retirement plans, no social security, no workman’s comp, and no medical, dental, vision or vacation benefits.

In many cases, foreign workers have shown they are better at math and science, than their American counterparts. It was hardly a level playing field. Add the conversion rates for currencies and American goods were monetarily out of reach for most foreign consumers.

With the collapse of the Euro in Greece, and other European countries, and the weakening dollar, American goods became more affordable in Europe and China. Apple now sells more iPads in Europe than they do in the US. GM sells more cars in China than they do here. Not only can American companies open offices in Egypt, they can own the land their buildings rest on.
Currently American businesses that realize profits overseas pay no taxes in the United States as long as those profits stay overseas. They are subject to whatever tax structure exists where they are located. But in most cases, the reason for relocation is not employment costs, as many people think, its less regulation and lower taxes, which is music to the ears of stockholders. This encourages investors, who might otherwise buy stock in American companies, to move their investment dollars to foreign exchanges for the possibility of a greater return from new emerging markets.
In 2009, 47% of all monies earned by the 500 largest US companies came from overseas. While our GDP grew at an anemic 2.9%, China and India grew at 9.6% and 6.9% respectively. If all these things weren’t bad enough, the IRS allows companies, who do decide to close up shop in the US, and relocate overseas, to deduct the costs of closing and moving their companies from their taxable income.

Unfortunately, the folks writing the rulebook in Washington have never played the game. America is no longer an isolated nation in the global business world. China, India, Africa are all going to be major markets in the future and will be in strong competition with America.

Current conditions are a two edged sword. On one side, there has never been a better time to start a business, in my opinion. More customers than ever are looking for new products and services. On the other hand, unless we make some drastic changes in our tax law regulations and become more conscious of the challenges small businesses face, we are going to be a second-class nation in the years ahead.

Tom Egelhoff, www.smalltownmarketing.com, is the author of, “How to Market, Advertise and Promote Your Business or Service in Your Own Backyard.” Listen to Tom’s weekly radio show, “Open for Business, 11-2 PM Mountain Time every Saturday at http://kmmsam.com. Click “Listen Live.” Also, check out Tom on Twitter, Facebook and LinkedIn.