The reason that capitalism has lifted more people out of poverty and created more wealth over the last 100 years than ever before is because when practiced correctly entrepreneurs are free to create products and services that solve problems. Then in the marketplace of ideas customers vote with their wallets. This creates jobs and wealth for the founder, investors and employees. It’s the old line “if you build a better mousetrap, people will come.”
This concept is captured in the idea of Permissionless Innovation. Permissionless Innovation can be summarized with the statement “Innovation should be allowed by default”. Freedom to Innovate should always be given the benefit of the doubt, it should be assumed that something is legal rather than the other way around.
This sounds like a no brainer but we see examples everyday where government at all levels doesn’t allow for the freedom to innovate. Two of the most successful examples would be Uber and AirBnb which have succeeded in spite of the myriad of road blocks that varying governments have put in their way. Which begs the question “what is governments role regarding business innovation?” In what areas should they have to give permission? When should the government step in?
I believe that the government should step in only when someone’s rights are violated or if there is a proven danger to life or liberty. It is important to point out that rights does not mean livelihood. Too often governments are stepping in because the new entrant is threatening the livelihood of a company or group that has managed to use to government to protect themselves.
Local and state governments around the country interfere with regulations governing things like nail salons, hair stylists, interior decorators and even food trucks. In San Antonio, if you operate a food truck within 300 ft of any establishment serving food (including convenience and grocery stores) you are subject to a $2000 a day fine. Even if you are on private property. Another example is the fact that in many states Tesla can not sell a car directly to the customer, they need to work through a dealer network. How is the customer harmed in this transaction? Who is the government really protecting?
The Heritage Foundation (www.heritage.org) does an annual ranking of economic freedom. They rank every country on 10 categories including things like property rights, corruption, trade and investment. One of these categories is Business Freedom. Business freedom covers what it takes to start a business, obtain a license and close a business. It is appalling that the United States which is supposed to be the most free country in the world ranks 12th on the overall rankings and 15th for business freedom.
This is how we turbocharge our economy and deal with income inequality. I am waiting to hear candidates talk it but I am not holding my breath.