#protectionism
The story of state occupational licensing is the same across most occupations. Insiders want to block outsiders — people they deem less professional — from practicing their occupation. Thus, they lobby state legislators or licensing boards to restrict entry into the occupation.
Licensing advocates will typically argue that requiring a state license is necessary to guarantee quality or to protect public health and safety from unprofessional or dangerous workers. However, advocates lobby vigorously to protect their turf by creating barriers to entry with scant evidence that those barriers will improve quality, public health, or public safety. Once an occupation is licensed, workers are motivated to increase the costs to outsiders by changing requirements to include more hours of education, higher grades to pass exams, or increased fees.
Unlicensed workers operating in the shadow (or informal) economy have a harder time standing up to such threats. Those workers will earn less than they could out in the open. Hiring employees and paying taxes might expose them as unlicensed operators.
Licensing harms consumers by increasing the price of services and decreasing innovation — without ensuring quality. Consumers may purchase fewer services. Consumers who choose to save money by hiring unlicensed practitioners may face fewer legal protections. And people who chose to save money by performing potentially dangerous work themselves, like electrical work, place themselves at a greater risk of harm.
On top of those tradeoffs, consumers still face the costs of finding reputable service providers, despite claims that occupational licensing establishes professionalism and quality. Remember experiences you may have had with a bad haircut, a slow home contractor, an angry nurse, or a painful dental procedure.
Licensing is not a substitute for reputation. Word of mouth is a typical method for finding quality service providers, even in licensed occupations. Today it is easier than ever to find a provider who will best fit your needs. Technology reduces search costs through website reviews from Yelp, Angie’s List, and TripAdvisor, for example, and through crowdsourcing on sites like Facebook and Reddit.
In addition to failing to ensure quality, there is little to no evidence that occupational licensing improves health and safety outcomes for consumers. And consumers do not require occupational licenses to feel safe.
Indian prime minister Narendra Modi has been hailed as an economic liberalizer, but new import duties on more than 40 items threaten to reverse the major gains India has made since economic reforms began in 1991…
When Indian prime minister Narendra Modi came to power in 2014, he was seen as a liberalizer, bearing the slogan, “Minimum government, maximum governance.” He has since sharply criticized rising U.S. protectionism under the Trump administration.
In reality, Modi has expanded the role of government in welfare even while liberalizing the economy incrementally. Most recently, just like President Trump has done in the United States, Modi has promoted measures to protect and support manufacturing jobs in India.
The latest Indian budget — from February 2018 — raised import duties on more than 40 items, ranging from auto parts and toys to candles and furniture, in order to protect uncompetitive small businesses and create jobs in labor-intensive industries. Even before that, India raised import duties on several electronic items, from phone components to TVs and microwave ovens — all done in pursuance of a Phased Manufacturing Program aiming to check massive imports from China and ensure that cellphone assembly and the manufacture of components are done mostly in India. An official task force has also been appointed to look into ways of reducing import dependence.
Modi’s Bharatiya Janata Party (BJP) is not a conventional right-wing party. It rejects both socialism and Western capitalism and seeks a homegrown solution called Integral Humanism. It supports private enterprise but also runs India’s biggest trade union and believes in a wide-ranging welfare state. It has highly protectionist affiliates that have always been wary of multinational corporations and international institutions. It believes in government intervention to create national champions, increase employment, and protect small businesses. The party also contains many liberalizers who succeeded in opening up the economy when the party ruled from 1998 to 2004, overcoming objections from BJP affiliates.
Modi now faces the same global headwinds that Trump does: fear of China, automation, and lack of good jobs. These pressures are driving India’s new protectionism, just as they have done in the United States. Optimists hope the new import tariffs are only temporary. The risk is that the new protectionism will get entrenched and reverse the major gains India has made since economic reforms began in 1991.
