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Government Stifles Business – No Surprise


How does bigger government stifle the economy? One cannot count all the ways. The June 24th issue of Time Magazine tells us of several. The article “Caveat Sharer” is how innovations based on information sharing technology is under attack either by government or from competitors through government.

Readers are told of new car rental service at San Francisco International Airport which through the mobile web, connects car owners and renters. SFO, being left out of the loop, took to the courts for their share. The upstart, FlightCar, uses no airport facilities, rents no space, has no kiosk, parks no cars, yet because it offers competition to the conventional car rental services, who pay a fee (it sounds like a strong arm situation to me) for the right to use airport land. The fee is exorbitant at $25 per vehicle, but that is what SFO wants to collect from FlightCar even though FlightCar doesn’t use anything the airport owns. The airport, being an agency of government, goes to the courts, another agency of government, to stifle innovation and competition. At least one judge agrees. There is no surprise there. Judges are generally part of the Ruling Class (see Codevilla) and so rule in favor of same.

There are other instances and so the point is made again and again: new uses of internet information technology is frowned upon by those who have established a niche in the market and they will use government to maintain that niche. There are various ways this is done. Perhaps some regulation has been written concerning the conventional business. The new business doesn’t fit that model and so doesn’t collect or pay the taxes which might have been collected. Before going to the Accurate Franchising site and starting a new franchise or business, know that the new business is charged with tax avoidance. Perhaps there is some license which is required of the established business. The new business, not fitting the definition requiring the license, doesn’t get a license, but is sued for competing without a license.

Perhaps it is just new competition where none had existed.  The old, established business will still sue to try and get government to maintain the lack of competition. In every case government is used to stifle innovation. A defender of government might say that is not the purpose of the regulations. Maybe not, but maybe so.

In North Carolina car manufacturers are not allowed to sell directly to the public without using a dealership. Tesla’s business model is not welcome here. Why? What public good is this law protecting? I know Bruton Smith, father of Cash For Clunkers, and friends. What about the effort to stop entrepreneurs from operating teeth whitening kiosks in malls? How about licenses to cut hair or operate tanning booths? Who do they protect? The list, as I said, is too long to count.

The fact is, as government grows the private economy doesn’t. It becomes relatively smaller for various reasons, not all of which are taxes.

If one looks at the growth rate of the US economy over the past 30 years, one can see this in numbers. The government grows ever larger, the private economy grows at a smaller and smaller rate, until the past 5 years have seen very little growth, even while government has grown to be larger than ever. To repeat the point, larger government stifles the private economy. It does so by taxing the people and stifling innovation and start-up companies. So, if you don’t have a job, or know people who don’t have a job, thank someone in government. That someone will have a job, expect to be paid well, demand raises and protest like Greeks (see Moral Monday) if they stand to lose a dime.

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