Only consumers should decide who succeeds in business

Should a government bureaucrat have the power to arbitrarily decide who’s allowed to start a business and who isn’t? Most readers of this website — and most Americans — have a ready answer to that question: No.

But in many cities and states, government officials have the power to do just that.

Consider the case of Julie Crowe.

A veteran of the Marine Corps now in her 50s, Julie worked for years as a shuttle van driver in her hometown of Bloomington, Illinois, taking Illinois State University students to and from downtown bars at night. She liked the work, and her customers liked her — especially young women who preferred a female driver who would make sure they got home safely in their inebriated state after nights on the town. Her customers also preferred riding in her relatively small van to riding in what many of the other vehicle services in town offer: giant “party buses” where fights, vomiting and overcrowding are the norm.

Last year, Julie, like so many entrepreneurial Americans before her, decided she would like to go into business for herself and be her own boss rather than work for somebody else. So she applied for a certificate to operate a vehicle-for-hire service, as a city ordinance required. Julie expected the application process to be a simple formality, but it turned out to be no such thing; instead, it was a deliberate, insurmountable obstacle to pursuing her dream.

Under local law, the city was required to hold a hearing on Julie’s application — at which owners of existing vehicle services would be invited to offer their opinions on whether a newcomer should be allowed to enter the field. So at Julie’s hearing, her would-be competitors showed up and predictably insisted that, no, the city doesn’t need any new competition in this business because there are “enough” vehicles licensed already. They offered no evidence to support their claims, and Julie wasn’t given an opportunity to cross-examine them or offer evidence of her own in rebuttal.

City law allows the city manager to deny a vehicle-for-hire application if he doesn’t find an additional business “desirable” — in other words, he can arbitrarily deny any application on a whim. Apparently he didn’t find Julie’s business “desirable” because the city denied the application, saying that it saw no need for additional vehicles and that Julie hadn’t shown that her business would have enough cash flow to succeed. (Never mind that the city never asked her about her projected cash flow.)

The city’s justification for its decision makes no economic sense. How can city planners know the “right” number of vehicles to serve the community? They can’t possibly know that, any more than they can know the right number of supermarkets or the right number of restaurants. The only way to know how much of a service is needed and what form that service should take is to let entrepreneurs freely enter the market and see who succeeds and who fails.