Everyone talks about the need for a good economy, but few people stop to contemplate what that really means.
On this week’s episode of my “Hawaii Together” program on ThinkTech Hawaii, I talked to Connor Boyack, president of the Libertas Institute in Utah, and recently named one of the most politically influential people in Utah by The Salt Lake Tribune. Boyack was able to get right to the heart of what it means to have a healthy economy.
When we want to gauge how well an economy is doing, he said, we shouldn’t look to the Bill Gates‘ of the world.
“We should be looking at how small businesses and local entrepreneurs are doing. The economy is really about the guy down at the local coffee shop or the food truck on the side of the road,” he said. “If we don’t have the right policies in place that allow them to provide their products and services to others, then we don’t really have a thriving economy.”
In order to help that little guy, he said, we need to look at the ways laws and regulations make it difficult to enter the marketplace. Restricted access is always going to be harder on microbusinesses and start-ups.
As Boyack pointed out, “Economics is not about helping Elon Musk get richer.” Rather, it’s about creating a system of opportunity that lets someone increase their family income, succeed and provide for themselves.
As Hawaii struggles to recover from the COVID-19 crisis and lockdown, it is tempting to blame our economic woes entirely on the pandemic. But if we look at how other states are faring, some are doing quite well, partly because of the policies they had in place before this coronavirus crisis emerged.
In many ways, Hawaii’s economy was already suffering from “preexisting conditions” when the pandemic hit, making us especially susceptible to an economic downturn and a complicated recovery. In order to turn things around, we need to be honest about the many ways that Hawaii’s high taxes and extensive regulations stifle entrepreneurship and innovation.
Unfortunately, Hawaii’s policymakers seem to be focusing on obtaining more relief money from the federal government and trying to “diversify” the state’s economy so we won’t be so dependent on tourism — which has been virtually wiped out since the state went into lockdown mode nine months ago.
There is nothing wrong with wanting to diversify the economy, but attempts to do so via government action amount to little more than central planning. It’s giving public officials the power to pick winners and losers — via tax breaks and other incentives — and those choices rarely work out.
“Typically when economies are centrally planned, there are a lot of unintended consequences that people who are well-intentioned, sitting in a conference room, cannot anticipate,” said Boyack. “We always see more success with healthy, robust economies — diversified economies — when it’s the entrepreneurs who are empowered, and in some cases encouraged, to solve the problems themselves.”
In Hawaii, policymakers could encourage entrepreneurs — and diversification — by removing regulatory barriers to innovation. If immediate repeal of certain regulations is too radical, they could consider “regulatory sandboxes” — a safe-harbor program wherein a legislature recognizes that some innovative business models are stymied by existing laws and regulations that were never intended to apply to them.
In the “sandbox,” these new industries are shielded from these regulations for a year or two while regulators analyze the safety of the new industries and report on them. It’s an incubator for businesses and innovation that keeps things safe while allowing for the growth of new industries and ideas.
Such a regulatory experiment would go well with the many policy options outlined in the Grassroot Institute’s “Road map to prosperity,” which we released way back in May to help Hawaii’s economy recover and even excel after the coronavirus lockdowns.
I’m not saying there is nothing the government can do to help. The key is to clear away the barriers that limit opportunity and discourage or prevent innovation. Let Hawaii’s entrepreneurs and businesses do what they do best, which is pursue opportunities as they see them to create a strong, healthy, diversified economy.