Government licensing as an extortion racket and depressor of prosperity
Government has, for thousands of years, refined its methods of extracting wealth from people, perhaps with no greater efficiency than in 20th century America. The Federal Reserve, corporatism, and consumerism proved a winning combination for achieving what is known as The Great Fleecing.
While this brought about the largest transfer of wealth in history from the middle class to the 1 percent, through taxes it has also fueled the growth of an incomprehensible leviathan. The Pentagon alone “spends” (actually borrows from the Fed) $600 billion a year using our tax dollars to perpetuate endless war, and it’s never been audited.
The federal tax code is a nightmare for most ordinary people, but this complexity is for the benefit of government’s corporate partners in extortion. The feds are always fiddling with taxes for the supposed benefit of American citizens—such as “housing stimulus packages” which ultimately benefited the bankers.
The feds and the states join forces to tax every facet of life, for individuals and again for businesses. Sales taxes continually creep up, and new niches in taxation are always explored. When a small, aspiring business wants to hire someone, a double burden is created. Reports must be filed continuously for multiple government agencies, and profit that could stimulate the economy is diverted into feeding the State.
Licensing as Extortion
A favorite of state and local governments is the practice of requiring everyone who wants to provide certain products or services to be “licensed.” These licenses involve paying government to take some sort of test and/or provide documentation of state-approved training, and then paying government every year—at steadily increasing rates—until you quit, retire or die.
The notion of being licensed may sound nice to people looking for a service, and the basic idea of demonstrating knowledge about a trade is good. But mandatory government licensing can be described simply as extortion rackets with no real purpose in making things safer or better.
Take landscaping, for instance. In most places, when someone wants to install ornamental plantings at a person’s private home, he or she must be “licensed” by government. Being licensed is not really a way to demonstrate knowledge of how to successfully landscape a home. It is a test and a lifetime of government fees.
One of the most absurd examples of government licensing is African hairbraiding. In 17 states, people who offer this traditional practice must have a cosmetology license or another special license. The cosmetology license takes thousands of hours of classroom training and costs $5,000-15,000, and is usually unrelated to African hairbraiding.
The Institute for Justice (IJ), along with several activists, has managed to dissolve these ridiculous barriers to prosperity in some places. Eleven states now exempt braiders from the cosmetology licensing requirement.
Others have fought the system and won. Sheila Champion, owner of The Good Earth Burial Ground, wanted to provide inexpensive, environmentally friendly burials with biodegradable caskets. The Alabama Board of Funeral Service would have effectively ended Sheila’s entrepreneurial effort by making her become a licensed funeral director.
However, Sheila championed the idea of freedom by suing the Board for her constitutional right. It soon became clear to authorities that the law was bad, and “the governor signed a bill removing sales of funeral supplies and merchandise from the definition of ‘funeral directing.’”
To put licensing in perspective:
Twenty-nine percent of all American workers must secure a government-issued licensed before they can practice their trade. Unfortunately for would-be entrepreneurs who seek to create jobs for themselves and others, government-imposed licensing has grown significantly. In the 1950s less than five percent of workers were licensed. But the explosion of licensing laws and the shift to a service economy has caused tremendous growth in licensing… Approximately 50 occupations are licensed in all states and about 800 occupations are licensed in at least one state.
Indeed, as IJ explains, it is not about protecting consumers, but protection from competition. Government licensing is a joint effort made possible by “the personal interests of those already practicing the occupations” and the state’s thirst for control—just another part of the corporatocracy.
Occupational practitioners, often through professional associations, use the power of concentrated interests to lobby state legislators for protection from competition though licensing laws. Such anti-competitive motives are typically masked by appeals to protecting public health and safety, no matter how facially absurd. For example, the 2011 legislative session in North Carolina saw efforts to license music therapists. The enabling legislation’s introduction stated: “The North Carolina Music Therapy Practice Act is established to safeguard the public health, safety, and welfare…”
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Another odious example lies in Louisiana, which is the only state that requires florists to be licensed. After years of legal wrangling and resistance from the florist industry, licensing requirements were reduced…but not eliminated.
Such arguments fly in the face of common sense—how do consumers manage in the other 49 states and D.C.?—as well as research demonstrating that Louisiana’s licensing scheme in fact did nothing to improve the quality of floral arranging. Nonetheless, Louisiana remains the only state to license florists, albeit with substantially less burdensome entry requirements.
This collusion of corporate and state interests not only takes away the right of people to do things, but also acts as a throttle to prosperity. Perhaps not coincidentally, this serves the interest of driving people away from individual creativity to instead join the corporate drone workforce.
The legislation recognizes that licensing laws are bad for Minnesota entrepreneurs and consumers. Entrepreneurs are hurt because such laws protect industry insiders from honest competition. Licensing reduces jobs by forcing entrepreneurs to meet expensive and unnecessary requirements before they can start working. In fact, converting licensing laws to certification laws could help create more than 15,000 new jobs in Minnesota.
Moreover, Minnesota’s consumers are worse off because licensing laws reduce the number of providers from which consumers can choose and force them to pay up to $3.6 billion more for services, while reducing economic growth in the state by up to $1.1 billion annually.
Since licensing is shown to have no benefit to consumers or service providers, and is successfully being challenged in court, what remains but an extortion racket?
Government takes away your right to do something just to sell it back to you.
Case law has spelled out quite simply the farce of licensing, such as Murdock v. Pennsylvania, 319 U.S. 105: “No state shall convert a liberty into a license, and charge a fee therefore.”
Another issued a clarion call in the fight for freedom.
If the State converts a right (liberty) into a privilege, the citizen can ignore the license and fee and engage in the right (liberty) with impunity. (Shuttlesworth v. City of Birmingham, Alabama, 373 U.S. 262)
Once these impediments to freedom and prosperity are broken down, will society plunge into a mad max world of people engaging recklessly in such services as braiding hair or landscaping a home?
There are better ways to address the actual issue of consumers wanting to hire reputable service providers.
Certification, especially certification by an independent third party, can give consumers justifiably heightened confidence in a service provider without imposing licensing restrictions that stifle entry into an occupation, which limits competition and drives up prices. What’s more, such voluntary certification can be coupled with online reviews and recommendations to further guide consumers to the best service providers.
In other words, working outside of government and the corporatocracy is more effective at making things better and safer than the sham of licensing.