When the Mafia Can’t Compete With the Chamber of Commerce

I’ve written frequently on the national regulatory state as a source of monopoly rents to big business. But the true nature of regulation as a naked power grab by incumbent businesses is nowhere more apparent than at the local level. At the lower levels of government, conventional, brick-and-mortar business establishments are heavily involved in using regulatory enforcement to shut down low-cost competition.

For example, American physician Jay Parkinson, having finished his residency, attempted in 2007 to establish a novel practice in Williamsburg (Brooklyn). He ran it out of his home, with a smart phone and a laptop. The main capital outlay was $1500 to set up a website. The patient visited his website to schedule an appointment and describe her symptoms, Parkinson made a house call, and the patient paid via PayPal, with follow-up by email. Because there was no overhead from office rent and staff, he could charge modest prices.

Naturally, this didn’t sit well with Parkinson’s fellow medical practitioners. The New York State Office of Professional Conduct, pursuant to a complaint, ordered Parkinson to hand over his records to prove that he wasn’t running a prescription mill. Although he demonstrated he only wrote prescriptions after examining patients face-to-face, Parkinson was spooked into abandoning his practice.

If a licensed carpenter, plumber or electrician pursued a similar low-overhead model — operating out of a van and buying supplies at the hardware store instead of maintaining a brick-and-mortar office downtown, and charging half the price for labor and overhead — conventional tradesmen would probably take similar action. If nothing else would stick, they’d use the zoning code.

The Institute for Justice, in a recent paper (Streets of Dreams), reported that of America’s fifty largest cities, nineteen allowed mobile vending carts to stay in one spot for only short periods, twenty prohibited setting up near brick-and-mortar businesses selling similar goods, and thirty-three established No Vending Zones in well-travelled areas. And in Atlanta, the city actually set up a corporate street-vending monopoly, forcing former cart vendors to rent kiosks for $20,000 a year. That’s $1,667 a month in additional overhead for a business model that previously had almost none.

What service, exactly, is the company charging $20k in rent for — the “service” of allowing the vendors to do business rather than sending Lefty and Knuckles in to break their legs?

In Kurt Vonnegut’s story “Harrison Bergeron,” a Handicapper-General imposed handicaps on those that were smarter, better looking, or more talented than average so that nobody would feel bad. In this case, the Handicapper-General works for downtown business establishments, imposing a $20k penalty for being more competitive.

Of course it’s the brick-and-mortar restaurants behind this. Local restauranteurs everywhere complain ceaselessly about the mobile food carts on Main Street. It’s not right, they say, for the city to allow such unfair competition, when they’re paying high commercial rents and property taxes and wages for full-time staff.

This is a common pattern at the local level. When state or local government steps in and shuts down low-cost, unconventional businesses for regulatory violations, it’s almost always because they were turned in by their more conventional competitors.

When the state shuts down food-buying clubs, on the grounds that they’re “unlicensed retail establishments,” it’s usually at the behest of conventional grocers. In fact brick-and-mortar grocers often set up entrapment operations to lure buying-club managers into selling food to non-members.

A local woman in my area ran an unlicensed adult daycare facility out of her home, capable of accommodating three clients at a time. The families of her clients were quite pleased with her service, because it was a much cheaper alternative to a nursing home. She was below the threshold to trigger the licensing law, but was turned in (by guess who? A nursing home administrator) for a zoning violation.

From the standpoint of the great feudal barons who own our economy, and who live off monopoly rents stolen from workers and consumers, competition — in the words of Nina Paley — is theft. They have a right to their profits. Ordinary people who can provide comparable goods and services from vending carts, vans, or out of their homes, thereby undercutting the rents going to the lords of creation, are thieves.

Not only would their profits be reduced by competition, but if you could buy the necessities of life without all the markup from their monopoly rents and excessive overhead you might be able to live on fewer hours of wage labor. If you could go into business for yourself with little capital outlay or overhead, you could gradually shift a share of your income from wage-labor to self-employment with virtually no risk.

Such an outcome, to the monopolists and the state through which they exercise their power, would be intolerable.