Testimony of Brenda French

Before the Joint Economic Committee

June 12, 1995

Mr. Chairman, Members of the Committee, thank you for the opportunity to join you today. I commend you for holding this hearing to address the changing role of the government as we move away from he Industrial Age into the Knowledge Age.

I am Brenda French, founder and designer of French Rags, a wholly vertical manufacturing operation offering a collection of knitwear separates for women. French Rags' success can be primarily attributed to the ability to adjust and adapt to the changing needs of our customers. What we are today is totally different than how we started out or even what we were just six years ago. It is this very evolution of French Rags that I want to share with you today, for I see a parallel with the issue we are addressing today -- changes needed as government transitions into a new age.

I am a modern example of the old fashioned American Dream. As an immigrant from England, I can to this country in 1962 with $80. After 15 years in the fashion business in New York, I moved to Los Angeles in 1978 and started French Rags. The business was born out of necessity. Finding myself divorced and the sole provider for my young so, I resorted to tapping my knitting skills learnt as a young child at home in wartime England. With $500 in hand, I started a fledgling knitting business which mushroomed rapidly from knitting scarves at home with sales o $165,00 in the first year to opening a factory in Los Angeles with an added sweater line, the second year, with sales of $1.5 million. The early to mid '80s, saw my business bloom into a $10 million business, selling to retail giants such as Neiman Marcus, Bloomingdales, Lord & Taylor, Robinsons, among others. But it started to unravel almost as quickly as it rose. After ten years of success, sales were dropping everywhere and merchandise returns were escalating. By 1988, as the recession was creeping in, the retail marketplace was in trouble and so was my business. The retailer was failing to follow the customer's needs; the buyers were not listening and continued to dictate taste; as money got tighter, the customer wanted value for the dollar; working women's shopping time became more limited; and they wanted choice, choice, choice. Change was in the air.

Customization seems to be a buzz word of our time and government would do well in "customizing" its efforts to support business and thus ensure new and small firms to have the opportunity to develop and enhance their value in the marketplace without interference from unfair practices and inappropriate barriers. Most of today's government policies apply to all businesses regardless of size -- a climate that regrettably favors big business. From a policy perspective, it should matte whether they optimize the capacity of the national economy to generate and assist small business as well as entrepreneurs. And I do differentiate the two. Entrepreneurs are the visionaries, the innovators, while small businesses could be franchises. Still, customizing policies by size is warranted and should be consideration. Therefore it matters how small business is categorized. For example, the SBA defines "small business" as one with fewer than 500 employees --a range too large to be on target as to needs. Companies with 10 employees deserve different considerations than those with 20, 50 or 100, and certainly, 500 employees.

In approaching the Knowledge Age, laws that worked in the Industrial Age may no longer work and therefore are in need of review, revision or outright deletion. New ones will need to be written, to be more compatible with the new realities of the business climate. For instance, laws and regulations that make working in the home either illegal or at the very least, complicated and difficult to comply with, would be out of sync with the growing popularity of cottage industries, as well as with working mothers who need to earn that second income while caring for small children at home. Antiquated laws that were once written to protect, may now prove burdensome and unproductive in the new socio-economic climate we're in.

The entrepreneurial spirit has always been a strong American trait. Historically it was the entrepreneurs of the likes of Ford, that built this country. Somewhere along that track, the interests of big business overtook us. But, according to a recent Inc. magazine article, "nothing is as important to the health of the U.S. economy as the rate at which entrepreneurs create new companies." They create the opportunities for new jobs, often create new markets, and venture onto new ground that has not yet been sown. Government action can be effective in promoting their growth by acting as a catalyst, finding new ways to manage their needs, reaching out with incentive programs that promote raining grounds, minimize fees and, in short, listen and flex with innovative programs customized accordingly.

But to do so, there has to be moral accountability. What is the goal here? To fight City Hall or to have City Hall on the same side? Government does have to re-engineer itself to accommodate the changes. It is not an easy task, but together it can be done. The government must have an integrated, coherent approach in setting up communication channels that delve deeply into business communities nationally, ensuring a successful transition into the new realities of our society.

The key is to listen and adapt to the ensuing changes. There is nowhere else to turn.