by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Europe has tried all sorts of Statist approaches to the PIIGS problems. Today, Europeans are considering “liberalization”:
As the European financial crisis moves into its next phase, there’s a new word to learn: “liberalization,” and it’s likely to be even more unpopular than “austerity.”
Leaders in Europe are promising to “liberalize” their economies in an effort to grow those economies, but they face an enormous wall of vested interests that don’t want anything to change.
Greg Swann talked about cutting regulations a year ago. My comment:
There are close to 400 licensed occupations. Compile a list of half of them, introduce legislation that outlaws states (and Feds) to regulate any of these professions. Repeat each quarter. Within a year, you’ll only have 25 regulated industries. Within two years, the unemployment rate will drop to 6%, and there will be some 2 million new businesses created
Ohmygosh, cut the licensing regulations? Does that mean that someone, who hasn’t taken a 400-hour licensing course, will be charging money for weaving hair in their living room? The horror. How will the public ever be protected from bad hair-weavererers? Reputation management is already happening in the free market. Read Greg’s response:
Check. There’s more that can be done, much of it to the benefit of very small businesses. Consider this: When you’re trying to decide if you should take a chance on a restaurant, who do you trust more, a city inspector who may be on the take or nine fiercely independent Yelpers? The dollar cost of preventing injuries that almost never happen is half of our economy — which is nothing compared to the opportunity costs and interest value of those lost opportunities. We’ve got a dinghy loaded up with admirals and we can’t figure out why it’s slowly sinking.
Who then would stand in the way of “liberalization”? Let’s go back to the CNBC article:
Leaders in Europe are promising to “liberalize” their economies in an effort to grow those economies, but they face an enormous wall of vested interests that don’t want anything to change.
Take the case of Simon Galina, a 38-year-old taxi driver in Rome. His profession is one of many in Italy likely to undergo “liberalization,” and he doesn’t like it one bit. Liberalization is a very big problem. It’s a big problem for him because he took out a $185,000 loan ten years ago to purchase a taxi license and he still has five years of payments left. He’s worried that if the government changes the rules now, it will likely be much more difficult for him to pay it back.
Right now the number of taxis in Italian cities is tightly controlled by the local governments. If liberalization really does occur there will no longer be a cap on the number of cabs, and the cost for a license will fall dramatically, if not to zero. Bottom line, it’s going to be a lot easier to get into the taxi business. (Economists call this lower barriers to entry.)
Regulation of commerce, under the guise of consumer protection, actually turns out to be BAD for the consumer. Continue reading:
That will be good news for Italian consumers: It’s going to be easier to find a cab, and cheaper to boot. But falling fares mean less income for Galina, and there’s that monthly loan payment he will still have to pay regardless.
The government has already begun this process in Athens, Greece, and it has led to tremendous violence as drivers protest the changes. Now imagine this change writ large across an entire society where hundreds and hundreds of professions have the same decades-old pay-to-play fee structure. Italian Prime Minister Silvio Berlusconi and Finance Minister Giulio Tremonti promised to do just that on Friday night. Berlusconi agreed to the measures in exchange for the European Central Bank buying Italian debt on the open market, and acting as a buyer of last resort.
Economists believe liberalization will lead to more jobs, which means higher economic growth and more tax revenue, exactly what countries like Italy need to pay back their debts.
There is absolutely no reason, other than Rotarian Socialism, for the State to “license” any profession, be it a hair weavererer or a physician. Occupational licensing is a conspiracy to defraud consumers, by impeding the price discovery, which competition affords. I just hope we won’t wait until there are people starving in the streets to “liberalize” here.
