Any number of people will offer you their opinions on why economic growth seems to have flatlined in recent decades as compared to those glory days after WWII. Some of these opinions might even have more than a grain of truth to them, others not so much. But it's possible to use the case of Uber as a guide to at least one of our underlying problems.
Let's get the things it's probably not our of the way first: the decline of unionism, lower tax rates, increasing inequality, increased globalisation, the list du jour of the left in both my native UK and the US. They all affect society, certainly, but inequality aside they're all things that would be expected to increase, not decrease, the rate of economic growth.
Other ideas that have more than a grain of truth to them are that outside the US pretty much the whole developed world was rubble in 1945. And we know that catch up growth is easier than growth at the technological frontier. We also know that being the only place with factories left standing as people rebuild is pretty good for growth.
Then there's more complex reasoning: Tyler Cowen has publicised this one. The 1930s were a period of huge productivity advance: yet there was little to no economic growth over the decade. Some to much of what happened after 1945 was therefore catching up, the exploitation of those productivity advances.
And now we can turn to Uber and their travails and what this tells us about slow growth now. The basic story is that Uber is private limo hire that you order up over your smartphone. Your iPhone or the like has GPS in it so a GPS equipped limo system can work out where you are pretty well. Your account already has your credit card on it and so you're picked up, delivered, the bill is paid and everyone is happy.
Except, of course, all the cab and taxi drivers. And that's where Uber is having problems: in getting the licences and permits (or not breaching the rules, even if not all of those rules are exactly written into the law) to enable them to operate. At which point it's this line which explains some of our lack of growth:
The default in a free society is that you can start most kinds of business, and charge whatever rate the market will bear for your services, without the approval of some municipal bureaucrat.
That's really rather not true in our current economic structures. Uber is finding it almost impossible to comply (or find a way through the thicket of) the current rules. One that I'm coming up against is that it appears that I've got to pay the European Union some €70,000 to register products under REACH, the chemicals safety regulations. I'm not making anything new, just as a small company trying to provide a new source of these materials. And this isn't anything at all about how I'm producing, about the process or the safety of the process. These are fees I have to pay so that I've got the right to market tin oxide, or tungsten. I pay them just for a bureaucrat to read the paperwork.
And that's at least part of why we've got lower economic growth now than we might have. Capitalism's genius is the creative destruction: the creative side is just great too. But it needs to be possible for that creative side to deploy and thus destroy the older, less efficient, methods of doing things. And that's pretty much what current capitalism constrains. It constrains the new entry of suppliers and thus prevents that destruction. Cabs, metals suppliers, the FDA standing athwart medical advances, the same scenarios are being played out right across the advanced economies.
Capitalism isn't working as well as it could be cause we're not allowing capitalism to work as well as it could. We're restraining the competition, preventing the destruction too much. Less regulation, more free markets red in tooth and claw are what's needed.
