On Twitter, the other day, someone tweeted a quote from Will Spencer: "When life gives you lemons, apply for a business license, a food service license, and a sales tax license and make lemonade."
This cynical-but-realistic statement drew a reply in the same vein from Tennessee Sen. Frank Niceley: "Then hire a lobbyist to make lemonade consumption mandatory and subsidize it." Another cynic responded: "You then also need to require government approval to open new lemonade stands." And the final word in this little colloquy was: "Then lobby again for regulations you can handle, but will bury your competition."
Cynical or not, these statements accurately describe why economic progress is so much harder today than it once was. But why is it so much harder? And why are so many politicians coming out against innovative new services such as Uber or Airbnb? The answer, I think, is simple: Those new services offer insufficient opportunities for graft. The old services they compete with hotels or taxi companies offer politicians a better deal, even if the deal they offer for consumers often isn't as good. And politicians back the companies because and be clear about this politicians don't care about you, they care about using their positions to accumulate money, power and prestige.
Just imagine that you're a big-city mayor. If taxi medallions granting the right to run a taxi to a limited number of people sell for six figures, the people who own them are heavily invested. They'll offer lots in the way of money, political support and votes to a politician who will protect their investment from competition. Thus, even though services like Uber (which requires no medallions) are cheaper and offer service in poor neighborhoods where taxis won't go, for a politician, it's a no-brainer: Support your supporters. The result is a host of regulations and taxes designed to protect old businesses from new competition.
Sometimes the new competition wins anyway. Uber has been good at generating a large base of mobile customers, then using them to pressure politicians: When New York City Mayor Bill de Blasio went after Uber, Uber used its app to let its users pressure de Blasio.
Happy Uber customer Kate Upton weighed in, producing more pushback than de Blasio could withstand especially when it turned out he'd gotten over $550,000 in donations from taxicab interests.
Other services aren't so lucky, and the ability to do an end run around regulators, though welcome, isn't universal. And if, on top of setting up your lemonade stand, you need licenses, permits, lobbyists and subsidies to make it, not many new lemonade stands will get started. That's good news for existing lemonade stands, and for the politicians they support, but it's bad news for everyone else.
Even so and here's the key point politicians don't care, except to the extent that we make them care. Whatever they say when they're running for office, their top priority once elected is to build a coalition that will keep them in power, and accumulating money and influence, regardless of whether the interests of that coalition coincide with the public's.
One of the reasons that America enjoyed such tremendous growth over the past century was that technology outran regulators' ability to keep up. Will that remain true over the coming decades? Let's hope so. We can't make it in the 21st century with a 1950s economic model, however appealing that approach might be to politicians.
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