The Birth of a Campaign Against Rights

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I am not a prophet, seer, or tarot card reader. I do not possess any kind of psychic ability. But I can predict the future, for I possess the power of principles. Principles allow us to project the consequences of our actions, and predict the actions of others.

About 10 days ago, police officers in Houston were called to a group home. They shot and killed a mentally ill man who threatened them with a pen. Community activists are up in arms over the incident, demanding an investigation and otherwise engaging in their normal publicity stunts. At the same time, the local media is starting, what I predict will be, a campaign to regulate the city’s group homes.

The campaign started over the weekend, with one newspaper columnist pointing out that these group homes are operating under the “government radar.” Without saying it, the columnist implies that individuals should not be allowed to do anything without government scrutiny.

Campaigns of this sort usually involve a number of reports regarding an alleged problem. In this case, we’ll likely hear many stories about violence at group homes. I suspect that the local paper will do an investigative report, dragging out stories of deviancy and abuse. We’ll be subjected to ambiguous and meaningless statistics. And through it all, we’ll be told that government must do something.

For the most part, the public won’t pay any attention to this. But the activists and the group home owners who think they can profit will push for government controls. The squeaky slime will get the government grease. And then, the problems will really begin, though few will trace it to this particular government intervention.

As is the case with all government regulations, the innocent will be punished. Operators who do not abuse or violate the rights of their clients will be forced to jump through hoops, and those hoops will grow smaller and smaller in time. Many will be forced out of business, and those that remain will have additional costs and paperwork. Those would have lived in group homes will find themselves on the streets, and a new group of activists will demand that  government do something.

Instead of imposing regulations on the entire industry, the city should prosecute those who actually violate the rights of other individuals. Until an individual violates the rights of another, their actions are not the government’s business.

The Protection Racket of Occupational Licensing

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Across the nation, millions of entrepreneurial Americans seek to create jobs, pursue their passion, or simply make a few extra dollars by starting their own business. But often, they are forced to abandon their dreams, not because they lack talent or capital, but because they do not have the government’s permission.

New Jersey resident Ernie Arias is one example. His business installs home entertainment equipment and he decided to add security systems to his list of services. However, the state of New Jersey requires more than three years of classes and experience before it will grant an occupational license to locksmiths and security installers. Arias abandoned the idea, saying, “There’s no way I could put in all that time and spend probably $2,000 on classes. You can build a house in New Jersey quicker and easier than it takes to get the license you need to put locks on the house.”

Benta Diaw, a native of Senegal, learned the art of African hairbraiding from her grandmother. After building a successful business in Seattle, the state of Washington demanded that she take 1,600 hours of courses on such services as pedicures and nose-hair trimming, but none on hairbraiding, in order to receive a state license.

Mercedes Clemens dreamed of opening a service offering horse massages (a therapy used to increase range of motion and to promote healing from injury). But Clemens—who is a licensed human-massage therapist and certified in equine massage—lives in Maryland. And Maryland law mandates four years of veterinary school for anyone who wishes to massage horses, despite the fact that veterinary schools do not teach how to massage horses.

These individuals, and many more like them, saw a need in the market and decided to meet it. However, their respective states prohibited them from doing so. They did not want to peddle child pornography, or sell counterfeit goods, or engage in some other rights-violating activity, but rather, they wanted to offer legitimate services to willing customers.

This may seem like some kind of Orwellian nightmare, but it is a situation faced by millions of Americans. Across the nation, more than eight hundred different occupations require some form of government licensing. Consider some of the professions that require a license: manure applicators in Iowa, upholsterers in Utah, and rainmakers in Arizona. If you want to put new fabric on a chair in Salt Lake City or spread cow dung in Des Moines, you have to take approved courses and pay the state the appropriate fees, or you will be a criminal. So, how did these bizarre laws come about?

Occupational licensing laws are enacted with the stated intention of protecting consumers from incompetent practitioners. But study after study has found that licensing boards do little to discipline incompetents. For example, Public Citizen, a consumer advocacy organization, reports:

Of 10,672 physicians listed in the NPDB [National Practitioner Data Bank] for having clinical privileges revoked or restricted by hospitals, just 45 percent of them also had one or more licensing actions taken against them by state medical boards. That means 55 percent of them – 5,887 doctors – escaped any licensing action by the state.

In these cases, the hospitals found it necessary to protect patients from incompetent or negligent doctors, but the licensing board did not. If operating on the wrong knee won’t necessarily cause action by the licensing board, what will? Young states that the most common reason for discipline against licensed professionals is activity that violates rules intended to limit competition, such as advertising restrictions. Being a bad doctor is not necessarily a cause for disciplinary action by the medical board; being a good marketer is.

If licensing is not protecting consumers, why do many professions require a license? Jack McHugh, of the Mackinac Center for Public Policy, writes: “The dirty little secret about state licensure is that the people who lobby for it are usually the stronger competitors of those who would be licensed. Their goal is not to protect the public, but instead to raise barriers to new competitors who might cut prices and lower profits.” By erecting barriers to new practitioners, licensing limits competition and increases the wages of those who have managed to jump through the government’s hoops.

In the process, occupational licensing increases the prices that consumers must pay. Licensing tends to create a high quality, high price service that may not fit the needs of all consumers. Because of licensing, highly skilled practitioners are often required to perform routine services that could be performed effectively, safely, and at a lower cost by less skilled individuals. For example, a light fixture can be replaced by a competent handyman, but licensing may require that the task be performed by a licensed electrician. The results of the restrictions imposed by licensing are fewer choices for consumers and higher prices. Many choose to do without the service, or do it themselves, and often with deadly results. Professor S. David Young writes:

The incidence of rabies is higher, for example, where there are strict limits on veterinary practice, and as Sidney Carroll and Robert Gaston documented, rates of electrocution are higher in states with the most restrictive licensing laws for electricians. Apparently, consumers often do their own electrical work in highly restrictive states rather than pay artificially high rates for professionals, with predictably tragic results.

Through higher prices and limited choices, consumers—the alleged beneficiaries of licensing—are also victims of this injustice.

In a free market, individuals can offer the products and services of their choosing, and consumers can accept or reject that offer. Each is free to act on his own judgment in the pursuit of his own values and happiness. The only proper purpose of government is the protection of this right.

Long ago, James Madison recognized the injustice of prohibiting individuals from working as they choose: “That is not a just government, nor is property secure under it, where arbitrary restrictions, exemptions, and monopolies deny to part of its citizens that free use of their faculties, and free choice of their occupations…”

Isn’t this a description of occupational licensing? Licensing creates “arbitrary restrictions, exemptions, and monopolies” within a profession; it denies individuals the freedom to earn a living as they choose. Occupational licensing should be abolished.

Does this mean that consumers would be at the mercy of unscrupulous hacks? Hardly. First, nobody has a right to engage in fraud, that is, intentionally misrepresent his skills, training, or qualifications. Second, in a free market, individuals must take responsibility for their hiring decisions, rather than relying on the false security of licensing. Even with the “protection” afforded by licensing, consumers frequently turn to third parties for information regarding products and service providers. Examples of highly popular third parties include: Good Housekeeping, Consumers Reports, the Better Business Bureau, Angie’s List, and trade associations.

Another alternative to licensing is certification programs, which are offered by trade associations, product manufacturers, and other third parties. These differ from licensing in that they are voluntary. Practitioners are free to obtain certification and the benefits that come with it, such as verification of competency and potentially higher wages, or forgo certification and lessen the chances of obtaining higher wages. Consumers are also free to choose certified professionals and pay higher prices, or employ uncertified, lower priced practitioners. Both producers and consumers are free to act on their judgment—to contract as they choose—according to their needs and values.

If some street thug demanded protection money so that you could operate your shop, you would recognize his demands for what they are—extortion. The principle does not change merely because those making the demands wear a tie and have the backing of government.

Cronyism—From Wall Street to Main Street

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Individuals from across the political spectrum denounce cronyism. Politicians as diverse as Sarah Palin and Barack Obama have decried businessmen who use government favors for economic gain. Groups with diametrically opposing views, such as the Tea Parties and Occupy Wall Street, have attacked the cozy relationship between many businesses and government. Despite the seemingly universal condemnation of cronyism, it remains alive and well. And most likely, it is occurring right in your home town—cronyism exists at every level of government.

Of course, nobody explicitly argues for cronyism. Instead, these businessmen argue that they need special favors in order to serve the “general welfare” or the “common good.” But no matter the alleged ends they profess, their goal is to use the coercive power of government for their own benefit. They seek to stifle competition through licensing and permitting processes. They use eminent domain to seize property from those who will not voluntarily sell. They use zoning to prevent individuals from using their property as they choose. And sometimes they openly call for when competitors can open for business.

As one example of cronyism, in 2011 Julie Crowe sought to start a taxi service catering to female college students in Bloomington, Illinois. At a hearing before the deputy city manager, competitors testified against her proposal, claiming that the city did not need any more taxi cabs. The deputy city manager denied Crowe’s application for a taxi license, stating that it was not “in the best interest of the city to put another vehicle on the street.”

When Crowe appealed to the city council, one alderman argued that the cash flow would be inadequate to sustain the new business, citing the fact that other cab companies were struggling financially. Perhaps city officials were correct, and the market cannot support another taxi company. But perhaps Crowe is correct, and she has identified a profitable niche.

When innovators are prevented from testing their ideas, city officials do not know if the struggles experienced by the existing companies are because of the market or because of complacency bred by government intervention. Rather than allow the market to determine if Crowe would succeed, politicians and bureaucrats sided with her competitors and denied Crowe the opportunity to even find out. And this is but one example of local cronyism.

The use of eminent domain for the purpose of economic development made news in Kelo v. New London. While many states have since enacted laws to protect property owners, the practice has continued in many locales as the politically connected use local governments to coerce property owners into selling their land.

For example, from 2003 to 2011 the township council in Mount Holly Township, New Jersey, used eminent domain to condemn and demolish the homes of more than two hundred low income families. The township wanted to sell the land to a private developer who planned to build high-end apartments and town homes. After going into debt for more than $17 million, a federal court ordered the township to halt its condemnations.

Earlier this year, when Minnesota legislators considered a law to allow sales of liquor on Sunday, small liquor store owners successfully fought against the proposal. They did not want to open on Sundays, and feared that competitors who did open would take market share.

In July, Bill Meagher, owner of Lakeside Creamery in Oakland, Maryland, received a variance to the local zoning ordinance that would allow him to rent boats at the lake where he operates. Three competing businesses promptly filed a petition to overrule the variance and prevent Meagher from renting boats because they would be “specially and adversely affected.” At a public hearing on the issue, one opponent to the variance said, “I think that it was totally unfair to the existing boat people. You are cutting their throats by just allowing someone to come in and rent boats.” In other words, the “existing boat people” should be protected from further competition by government decree. The case is still pending.

In each of these examples, private businesses have used government to accomplish what they could not do in a free market. Political influence superseded the free and voluntary choices of producers and consumers. These businesses have used a government club to accomplish what they could not achieve by means of their business activities.

While the use of political favors for business gain is often called “crony capitalism,” it is anything but capitalism. Capitalism is the system in which individual rights, including property rights, are respected. Under capitalism, individuals are free to act on their own judgment, so long as they respect the mutual rights of others. In a capitalist system, businessmen and entrepreneurs compete to fulfill the needs and desires of consumers, rather than compete to influence politicians and bureaucrats.

Julie Crowe believed that she had identified a need that existing taxi companies were not meeting. She was willing to invest her time and money to demonstrate the truth of her judgment. If she was correct, her business would thrive. If she was wrong, she would go out of business. But government officials declared her judgment irrelevant, and they used government force to prohibit her from demonstrating whether she was right or wrong.

Similarly, if the owner of a liquor store in Minnesota decides that opening on Sunday is a good idea, he should be free to do so. If other liquor store owners judge it better to close on Sunday, they too should be free to act as they deem best. Consumers will quickly let each know the wisdom of his decision. But Minnesota legislators have declared it illegal for liquor store owners to find out.

These restrictions, and many more like them, are the result of political pressure being applied by those who stood to gain. Rather than compete in a free market, some businessmen find it easier to make campaign donations or assemble a loud gang at City Hall. Why compete when you can simply make a lot of noise about the “public interest”? Why try to provide a better service than Julie Crowe when you can simply get a law passed that makes it illegal for her to compete with you?

It is easy to denounce the bailout of banks or the “green energy” cronies of the current administration. But integrity demands consistency. And consistency demands that those who oppose cronyism on the national level also oppose special government favors on the state and local level. We cannot and will not end cronyism on Wall Street while demanding it on Main Street.