Killing Enterprise in New York

April 16, 1997 • Commentary
Distributed by Copley News Service.

The Big Apple is a bustling, energetic metropolis that cannot help but fascinate any visitor. Unfortunately, while Mayor Rudolph Giuliani’s emphasis on fighting crime has made the city more livable, Near York remains a tough town for the energetic poor seeking entrepreneurial paths out of poverty.

The problem, reports William (Chip) Mellor, president of the Institute for Justice, is that “in occupation after occupation, obstacles to enterprise often far exceed any legitimate exercise of government’s authority to protect public health and safety.” His study, “Is New York City Killing Entrepreneurship?,” paints a depressing picture of a municipality intent more on enriching special interest groups than encouraging its citizens to prosper. The result is to hinder the kind of economic growth that offers the best hope for the poor.

New York City is not alone, of course, but it symbolizes what has gone so badly wrong in America. Observes Mellor: “No city is more famous for its history of bootstrap capitalism than New York City, where traditionally waves of immigrants joined the native‐​born to create vibrant communities whose pillars were the local merchants, vendors and shop owners.”

But no longer.

“Today, New Yorkers seeking to follow in this tradition of entrepreneurship face a bewildering array of laws and regulations that prevent or stifle honest enterprise.”

The regulations that squash people’s entrepreneurial efforts are many; Mellor focuses on occupational restrictions, which alone fill 73 pages of the city’s Official Directory.

New York City restricts the number of permits for activities, sets cumbersome requirements for receiving an occupational license and creates public monopolies. Writes Mellor: “One needs a license to repair videocassette recorders, to work as an usher or to sell tickes at wrestling matches, to remove and dump snow and ice, to set up a parking lot or a junk shop.” In this way, many jobs, especially those open to people of modest means, have become essentially government privileges.

The most famous permit ceiling —and certainly the most irritating for a visitor—involves taxis. In 1937, the city decided that there should be 13,595 cabs. (The number later decreased through attrition.) Today, a so‐​called taxi medallion costs upward of $175,000. To recoup, drivers naturally focus their attention on the more lucrative routes in the city—lower and mid‐​Manhattan and the airports.

Of course, the lack of a legal supply hasn’t eliminated the demand for transportation elsewhere. Rather, an estimated 30,000 Gypsy cabs simply operate illegally.

New York also has long been known for its street peddlers. But today the city allows only 4000 food vendors and 1,700 sellers of other goods. At least three times as many vendors operate illegally, with their merchandise subject to confiscation. The municipal government allows only 230 new stands citywide. As Mellor puts it, “New York seems to treat vendors as a liability rather than an opportunity, a problem to be managed or contained rather than a wave to be channeled.”

Another means by which entrenched interests protect their privileged positions is occupational licensing. For instance, in New York state, one must take 900 hours of courses to become a hairdresser. The same cosmetology license is necessary for hair‐​braiders, who play an increasingly important role in the African‐​American community. They must learn everything taught to hairdressers, such as how to cut hair.

And the licensing process has nothing to do with public safety— emergency medical technicians, for instance, go through only 116 hours of training. Rather, the requirements, enforced by current practitioners, are designed to restrict competition and thereby enhance incumbent operators’ earnings. As a result, many hair‐​braiders must work informally and illegally.

About 5,000 vans and minivans are thought to ply Near York City’s streets, carrying some 20,000 passengers daily, principally through immigrant and minority neighborhoods Such jitneys operate cheaper than the government bus monopoly; they also are more convenient, stopping wherever passengers desire. In addition, reports Mellor: “The van services have been the route by which their owners, many of whom now employ numerous drivers, have worked their way up the ladder of economic mobility.”

Alas, the city bans any competition with city buses. The power of public officials and benefits of public sector employees are considered to be vastly more important than jobs for minority workers and convenience for minority passengers.

The problems of New York City and other major urban areas are manifold, and there is no panacea. But no reform program will work without deregulation.

As Mellor points out: “The revival of a culture of enterprise, one in which thousands of poor but ambitious people routinely pursue their occupations, aids both those in business for themselves and others whom they may inspire or, ultimately, employ. Such a culture of enterprise is an essential and powerful catalyst for community building.”

But such a culture will flourish only when governments across America get out of people’s way.

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