The federal government, vain about its successes running businesses (e.g., Amtrak; oh, well), has recently plunged into “industrial policy.” The government of Clayton County, Georgia, also enjoys economic planning.
To see how bureaucratic economic planning works on the local level, check out Clayton County, Georgia.
Few graduated from beauty school in 2012 and in 2023 opened her own salon. Seeking to relocate, she invested more than $30,000 in renovating and renting a space that had previously been a barbershop. When in May this year she applied for a permit, she assumed approval would be perfunctory.
In July, however, she was denied a permit for two reasons, one unintelligible, the other unconstitutional. The former was that her salon would be incompatible with the county’s vision of “smart growth.” Whatever this vacuous phrase denotes is, the county thinks, compatible with a dry cleaner, a watch repair shop and a pet groomer opening in the same area without needing permits. The county’s unconstitutional reason was that Few’s salon would create “saturation”: There are several other salons within a five-mile radius. This rationale is pure protectionism, a domestic version of a perennial rationale for national tariffs.
Clayton County might seem to be mimicking the Trump administration’s insinuation of the national government into the operations of large corporations (U.S. Steel, Intel, Nvidia, MP Materials, etc.). Perhaps, however, the administration’s “industrial policy” — “smart growth” as envisioned and enforced by supposedly prescient bureaucrats — should be seen as mimicking familiar practices of local governments, but on a grander scale.
Familiar, but incompatible with the Constitution, properly construed. For years, libertarian litigators have been combating domestic protectionism.
For example, a decade ago, such litigators opposed Kentucky’s “certificate of necessity” regulation that said: If you want to start or expand a moving company, you must first prove that existing moving companies are “inadequate,” and that the proposed new service “is or will be required by the present or future public convenience and necessity.”
Litigators argued that this violated the Constitution’s guarantee of equal protection of the law because it is a “competitor’s veto,” favoring existing companies over prospective rivals. And they said crucial terms in the law were unconstitutionally vague. “Required” by what circumstances? How far into the fog of the “future” must you peer?
Besides, in 1932 the U.S. Supreme Court overturned an Oklahoma law requiring any proposed new ice company to prove a “public need for it.” The court said: “The principle is imbedded in our constitutional system that there are certain essentials of liberty” that government can not abridge, including “the opportunity to apply one’s labor and skill in an ordinary occupation.”
Georgia’s Supreme Court has probably made it unnecessary for Few to have recourse to the U.S. Constitution. The court says it has “long recognized” that the state’s constitution “entitles Georgians to pursue a lawful occupation of their choosing free from unreasonable government interference.” (Clayton County never mentioned public health or safety concerns when denying Few a permit.) And the court has said “certain interests are decidedly not sufficient to justify a burden on the ability to practice a lawful profession. These include … protectionism.”
Elsewhere in Georgia, Awa Diagne, an immigrant from Senegal, has defeated protectionist zoning. After her husband died of covid-19, she spent almost $20,000 preparing to move her hair-braiding salon to a storefront near her children’s school. The South Fulton planning and zoning commissions approved, but the City Council voted 4-3 to deny her zoning permit. One councilor said it was “not fair” for a nearby salon to “have to compete.” Another said, “We don’t want any business to suffer any losses due to an oversaturation.” Represented by the Institute for Justice, Diagne won at trial, and the county surrendered.
In August, in the U.S. Court of Appeals for the 7th Circuit, the institute successfully represented a death doula (doulas arrange logistical and other assistance for dying individuals and their families) in a First Amendment challenge to an Indiana law that protected the funeral industry from what it considers competition. The law required doulas to spend thousands of dollars acquiring a funeral home license and a funeral director license, to take irrelevant classes, and to purchase or rent a funeral home.
The Institute for Justice has steady work. The task of protecting Americans from protectionists will never end.