Blocking the Paths Out of Poverty

Blocking the Paths Out of Poverty
By John Stossel
11/30/2011

Have you noticed how often government takes sides against the little guy?

Street vending has been a path out of poverty for Americans. And like other such paths (say, driving a taxi), this one is increasingly difficult to navigate. Why? Because entrenched interests don't like competition. So they lobby their powerful friends to erect high hurdles to upstarts. It's an old story.

Now, growing local governments are crushing street vendors.

The city of Atlanta, for example, has turned all street vending over to a monopoly contractor. In feudalist fashion, all existing vendors were told they must work for the monopoly or not vend at all.

"Vendors who used to paying $250 a year for their vending site must now hand over $500 to $1,600 every month for the privilege of working for the monopoly," wrote Bob Ewing in The Freeman. Ewing works for the Institute for Justice, the libertarian public-interest law firm that defends victims of anticompetitive regulation.

IJ has sued the city on behalf of two popular vendors.

In Hialeah, Fla., if you operate a flower stand too close to a flower store or if you're not constantly moving, you can be arrested.

Institute lawyer Elizabeth Foley says the regulations make "it virtually impossible to be an effective street vendor. You can't be within 300 feet of any place that sells the same or similar merchandise. That's absolutely ridiculous for the government to use its power to enact a law like that. ... These people are just trying to make an honest living, and the city is making it impossible to do so."

The law does seem designed to cripple street vending.

"You have to be in constant motion, which is completely unsafe."

Raul Martinez, the mayor when the law passed, defended the rule.

"You don't want to have everybody in the middle of the streets competing for space on the sidewalk without some sort of regulations. In the city of Hialeah, we're not overregulating anybody."

He says one purpose of the law is simple fairness: Street vendors don't pay property taxes. Brick-and-mortar stores must.

"They also create jobs," Martinez said. "What we did back then is we got all the groups together and we came with an ordinance that was satisfactory to all of the parties at the time."

But they couldn't have gotten "all the groups" together because people who hadn't yet entered the business weren't included. How could they have been? No one knew who they would be. What the mayor did was get the established guys together. Such "fairness" regulation kills job growth and reduces consumer welfare because the entrenched interests write rules that cripple new competition.

Mayor Martinez argued that "you create an unfair advantage when you allow that vendor selling in the front of a flower shop to sell the same flowers that the flower shop sells, and to sell them at a much reduced price. That's unfair competition."

It's a fair point: Why open a brick-and-mortar store and pay property tax if you could save maybe $3,000 a year by selling from a cart?

"These are different types of business models," Foley replied. "A florist can offer professional arrangement. A florist can offer delivery. A florist has a bathroom. Air conditioning. A street vendor is out there on the street, and the way they compete is on price and convenience; you can drive up and get your flowers and go home quickly. There's nothing wrong with having two different types of business models competing near each other. It happens in America all the time.

"It's not legitimate for government to use its incredible power to make one business model have an unfair advantage over another."

As a libertarian, I'd say that the store owners' beef is with the local government that imposes the property tax, not the street vendor struggling to make a better life.

If government destroys all the paths out of poverty, the welfare state will look like the only way to help the poor.

Maybe, in addition to helping entrenched interests, that's the bureaucrats' goal.
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To read another article by John Stossel, click here.