Recently there has been a rash of business closures. These businesses have not closed due to lack of business but were forced to close by the government. No I am not talking about the new Boeing factory in South Carolina or the Gibson guitar factory in Tennessee, although they too are victims of the same mentality, the businesses in question are lemonade stands. Children and parents have been forced to close and even threatened with arrest for daring even to open this archetypical example of early entrepreneurship. To illustrate the absurdity of the current state of affairs John Stossel tried to open up his own stand. At 65 days and counting he gave up on meeting all the regs.
The lemonade stand closures and similar attacks on things like selling Girl Scout cookies across the country are absurd examples of regulation run amuck and why economic freedom is so important.
There is no other better predictor of the long term economic potential of a country then its level of economic freedom. When a lemonade stand closes it is sad state of affairs for the family and maybe the neighborhood. When a factory is closed it is tragedy for the area. When power plants are forced to close it can be devastating for a state or even whole regions. The attitude behind all of these is crippling to a country’s economy. The proof of this comes in a simple graph of economic freedom verses real average wages. The video below put out by economic freedom.org shows how important economic freedom is to the citizens of a country.
This is not rocket science but simple common sense. Economics is nothing more then the study of how people go about satisfying each others needs. It should not be surprising that the easier this is the better people live. The business of business is to serve the needs and wants of society. The easier it is to do the more needs and wants are satisfied and the more people there are at work satisfying those needs and wants. Make it hard to do and less people can or will do it.
This is something President Obama is yet to learn as shown by the actions of the agencies directly under his control like the Justice Department, the EPA and the NRLB as well as others that are putting a regulatory squeeze on American businesses. He has also signed bills like Dodd-Frank that create whole new bureaucracies to control the activities of the marketplace, costing businesses billions. The fact is there is a push to reduce economic freedom in ways not seen since the Great Depression. This is costing Americans jobs and delaying the recovery just as similar efforts did in the Great Depression. Examples like lemonade stands and the South Carolina Boeing factory are symptomatic of what is happening across America. American businesses are being smothered by regulations
This is not to say regulation is bad: speed limits, passing zones, stop signs etc all are forms of road regulations as are toll booths and detours. One kind of regulation encourages travel by making it safe and predictable while the other discourages travel. Knowing the difference between good regulations and bad ones is essential to keeping an economy strong. This is a lesson the Obama administration needs to learn, lets hope they learn it quickly for all of our sakes.