NC Needs More Competition

by John Hood

Competition is an indispensable tool for promoting efficiency, innovation, and excellence. Its virtues are evident in virtually every field of human endeavor, including commerce, athletics, science, religion, and the arts.

Government may seem to be an exception to the rule. Although we use (somewhat) competitive elections to determine who runs the government, its operations don’t look very competitive. If you live in a city, you buy its water service and obey its police officers. If you live in a state, you accept the jurisdiction of its courts and pay taxes to support its public services.

Even in this case, however, competition isn’t absent. You can “vote with your feet” by moving to other jurisdictions that deliver better value for the tax dollar. And in some cases – I’d like to see that grow to “many cases” – you can choose from among competing providers of services such as education, transportation, and health care.

In the Declaration of Rights in Article 1 of the North Carolina constitution, you will find this sentence: “Perpetuities and monopolies are contrary to the genius of a free state and shall not be allowed.” Over the years, state courts have interpreted this and other provisions as blocking politicians from using the powers of the state to favor one enterprise by excluding others from competing with it.

That didn’t mean the state was enjoined from granting any franchises. During much of the 19th century, private companies routinely got charters to operate ferries, canals, and other infrastructure. Setting aside the merits of this practice, at least it was conceptually different from giving a monopolist the exclusive right to sell shoes, perform tonsillectomies, or confer degrees.

During the 2012 legislative session, the General Assembly actually did confer such an exclusive franchise, by passing a law allowing only the North Carolina Bail Agents Association to train bail bondsmen. The entire purpose of the law was to exclude another private group, the North Carolina Bail Academy, from offering a competing service.

Attorneys for the Bail Academy went to court and alleged the creation of an unconstitutional monopoly. Wake County Superior Court Judge Donald Stephens has just issued an injunction to keep the Bail Academy in business while the case is adjudicated. Stephens found merit in the plaintiffs’ argument that because both groups offering the same service – compliance with the state’s educational requirements for becoming and remaining a bail bondsman – there was no public interest in favoring one competitor over another.

I hope the injunction convinces state lawmakers to repeal the 2012 law. If that doesn’t happen, I hope the plaintiffs go on to win the case. It’s not just about training bail agents. It’s about preserving and strengthening the state constitution’s protections for consumer choice and competition.

Some people are, admittedly, uncomfortable with competition. They observe that if someone must win, someone else must lose. Well, yes, but this is essentially an argument with reality, not with competition. In a fantasy world of inexhaustible resources and unlimited time, competition would be unnecessary and incoherent. But in the real world of scarce resources and limited time, competition is necessary and comes naturally to human beings who value achievement and progress.

Competition, in turn, necessitates comparison by demonstrated merit, not intention or effort. To say Michelangelo’s “David,” for example, is a great work of art is to accept the reality that other works, created by smart and industrious artists, aren’t as good. To say that Apple’s iPhone is a fabulous piece of product engineering is to accept the fundamental reality that other smart phones, while reflecting sound design and leading-edge technology, don’t yet seem as good to choosy consumers.

The critics of competition are also shortsighted. Those who “lose” a particular contest today may learn from their mistakes, improve their performance, and win tomorrow. Competition is a process, not an event. It teaches, it hones, it reveals new information and gives birth to new ideas.

North Carolina needs more competition, not less.

Hood is president of the John Locke Foundation and author of Our Best Foot Forward: An Investment Plan for North Carolina’s Economic Recovery