If you love the market, set it free

Can you be pro-markets but not pro-business? Being pro-markets signals that you believe in free competition, property rights, sound money and only the most necessary government regulations. Being pro-business often means supporting government subsidies, competition restricting regulations, protective tariffs, artificially cheap money and other interventions. There are two ways to wealth: the economic way and the political way. Both red and blue tribes often choose the political way.

In Nevada, the Tesla Motors company is heavily involved with government subsidies to gather its market share. But, Tesla is also a victim of crony capitalism. Tesla has a unique marketing program that sells its cars direct to consumers instead of through dealerships. Many dealerships want their cut of Tesla’s action and resent this end run around them.

In a free market, the dealers would be free to out-compete Tesla’s model by doing a better job of satisfying customers. In our heavily politicized environment, it is easier to stop Tesla’s new marketing program by organizing and lobbying a legislature. This is exactly what happened in Republican states like Texas and New Jersey, as dealership lobbying succeeded in laws banning Tesla’s marketing plan. Tesla is coming to Nevada largely because here it is permitted to use direct sales marketing.

Because of government interference in free markets on the behest of entrenched special interests, people in these crony states will not have an economic experience that Nevadans will enjoy.

Did this election signal that people are tired of all this government involvement in markets? Hopefully. But four state initiatives to raise the minimum wage passed. After this election, Democrats in Nevada have as much chance of getting a minimum wage increase out of Carson City as the Ayatollah of Iran has to get a Christmas card from John McCain. But Democrats will likely put a minimum wage initiative on the Nevada ballot in 2016.

Most voters are OK with paying a bit more for a hamburger, but they balk at the jobs lost through minimum wage legislation. So, Democrats deny that mandating a floor on wages will prevent those who most need work from obtaining it. The laws of supply and demand predict when mandated wages and benefits become too high to justify the work, there is no work. This is illustrated neatly by a recent study of the impact of minimum wages law in Los Angeles. Los Angeles mandated higher wages for hotels around Los Angeles International Airport in 2008. Unemployment in those hotels increased by 10 percent. Undaunted, LA wants to increase the minimum wage in the entire city. This means fewer jobs and a degraded experience for consumers because the job cutbacks mean less necessary but nevertheless pleasant services are no longer available.

We often don’t know what we are missing in our lives because of government mandates and prohibitions. We live in a wealthy nation, and most can just shrug that off as the way it is. But there are millions of Americans not so fortunate for whom smaller government would mean a much greater quality of life. Those who favor minimum wage increases must ignore the high unemployment rate in minority and poor white communities today. Do they really believe that making it more expensive to hire poor youth is the best way to address this problem? Or is it simply a way to curry the favor of the left’s biggest political donors, the labor unions? Unions love to piggy back on minimum wage laws to push for higher than market rate wages elsewhere. The political way to wealth pays off for the few, but always hurts the many.