John Stossel has an interesting column this morning, Keeping Business Honest. The theme of his column is that “business” desire for profits is a good thing.
Instinctively, we look for people’s motives. We need to know whom we can trust and whom we can’t. We’re especially skeptical of business because we know business wants our money.
It took me too long to understand that business’s desire for profit is a good thing. To get our money, businesses — if they can’t look to the government for favors — need to give us what we want. Then they must make continuous improvements and do it better than the competition does.That competition is enough to protect consumers. But that’s not intuitive. It’s intuitive to assume that competition isn’t really consumer protection and that experts at the FDA, FTC, DEA, FCC, CPSC, OSHA and so on must protect us. These experts consult “responsible” businessmen for advice on creating rules to make sure businesses meets minimum “standards.” — Washington Examiner.
The down side is that regulations, created by local, state and federal agencies, intended to “level the playing field” stifle innovation. Under the camouflage of consumer protectionism, licensing and other business restrictions have a tendency to make innovation, business startups and competition difficult. The result is protectionism. the question is, what is being protected. Stossel provides some examples.
Las Vegas regulators require anyone who wants to start a limousine business to prove his new business is needed and, worse, will not “adversely affect other carriers.” But every new business intends to beat its competitors. That’s the point. Competition is good for us. Las Vegas’ anticompetitive licensing rules mean limo customers pay more.
In Nashville, Tenn., regulators ruled it illegal for a limo to charge less than $45 a ride. One entrepreneur had won customers by charging half that, but the new regulations mean the established car service businesses no longer have to worry about him.
Perhaps Nashville’s and Vegas’ regulators really believe “this is an area where the free market doesn’t work,” as the manager of the Nevada Transportation Services Authority put it. But it’s fishy that charging big fees for licenses just happens to be a very effective shakedown operation. Vegas cab and limousine businesses give “substantial” donations to Vegas-area political candidates, according to the Las Vegas Sun. — Washington Examiner.
Stossel makes an interesting point in that last paragraph. It has parallels locally.
Up until a month or so ago, my home town had a tax on businesses. It was a one time tax on new businesses who constructed a building for their business or expanded their existing place of business. Supposedly the tax was to pay for increased use…at that location…of city resources such as street maintenance, water, sewer and power usage. Basically, infrastructure costs. The tax was not levied if a business moved into an existing structure and did not alter the building beyond the usual interior make-over. No, it was targeted towards new or growing businesses.
The tax created a reluctance of new businesses to come to our city. From the statement of a former councilman, who was not re-elected to the council after saying, “We don’t need more burger-flipping jobs here.”
I was present when that statement was made. Shortly thereafter the council repealed the tax.
Was the purpose of the tax to discourage businesses, business startups without the capitalization of a large company, from doing business here? “We want good jobs!” was one reasoning. I would submit that to one without a job, ANY job is a good one, burger-flipping or not. Perhaps the exposure of one purpose of the tax was sufficient to overcome the reluctance of other members on the council who had previously supported the business tax.
That local tax was repealed just before our local city elections. Since then we’ve already seen fruit of the repeal. Our local Micky-Ds has renovated their building. Did it add new jobs? Probably not. Would the tax have applied to the renovation if it had still existed? I don’t know. But we have other evidence that the lack of the tax is bringing new jobs to town. Next week we’ll have a ground-breaking on a new Steak ‘n Shake. The tax would have applied to them because they are building a new presence on an empty lot.
Yep, a new business and a half-dozen or more new jobs. Minimum wage? Probably, but to someone without a job, minimum wage is attractive. Remember the original purpose of minimum wage: a starting wage to gain experience to allow the worker to build skills useful for acquiring a better job. It may be those skills are simply coming to work on-time, every-time, and putting in a full-shift. You’d be amazed how many job-seekers lack those basic skills.
So let’s ask ourselves, what is the purpose of these regulations, these taxes? Are they for consumer protection? Are they to preserve city resources? Or, are they to protect favored cronies or simply to make doing business more difficult?
The economic recovery of our country…post Obama, will be difficult enough without our adding to those difficulties through the imposition of anti-business taxes and regulations. Remember, juvenile unemployment is above 50% in some areas. We need to be pro-business, especially to startups. That is where jobs are created. And burger-flipping frequently is an eye-opener to our young folks just starting or approaching adult life. They need jobs and experience, too.
I wasn’t around at the time, but I’m told, by various sources, that when FDR began implementing his various alphabet programs, he turned to CEOs of companies like GE and GM to develop business regulations for the programs.
Strangely, the regulations tended to favor large multinational corporations with resources to implement the regulations, at the expense of small businesses that could not afford to comply and thus either sold out to large businesses or went out of business altogether.
History has a way of repeating…