Parmy Olson reported here at Forbes yesterday on Facebook's likely attempt to get into the European money transfer business. The most important question to me about this what, well, why start out in Europe? Why on earth try to work with 28 different countries rather than within just one, as an experiment, like the USA? The answer, as I explained over at Pando Daily, is that for regulatory purposes the US is actually 50 distinct money transfer markets, while the European Union is, while being 28 national markets, actually only the one regulatory regime. Thus it's actually a great deal easier to get regulatory approval to launch over here where I am rather than over there in the US.
However, that's the technical issue: why Facebook is trying this in Europe first. There's a larger economic point that can and should be made though. Which is that we all know that the larger the market then the more efficiently things are going to work. This is derived from Adam Smith at heart, the division and specialisation of labour being one of the things that creates wealth and this is limited only by the size of the market in which labour can be divided and specialised. This has always been seen as one of the great strengths of the US economy, that as the largest economy on the planet without trade barriers it would be more efficient and richer than others.
It's also what has driven the creation of the EU's Single Market over the years: in order for the continent to become richer we need to tear down those barriers to trade and thus to that division and specialisation.
Which brings us to the regulatory regime. This applies to many more things than money transfer programs like Facebook's. It also applies, and it importantly applies, to the qualifications that people have to do certain jobs. Licensure as it is often termed, and this is a hugely important point for the US economy. For it's estimated that some 30% of all jobs in the US require a licence for the worker to be allowed to do them. This might be sensible enough when we're talking about neurosurgeons but does anyone really need to go through 2,000 hours of cosmetology school in order to be a hair braider (as Utah insists)? Or, as one state insists, if you want to set up a house moving company you have to get the agreement of the other house moving companies that there's a need for a new company. These sorts of things are obviously restrictive on people moving, on new companies opening and in people moving not in a geographical sense but also across different lines of work. All of these are detrimental to economic growth, to us all becoming richer.
Which is what brings us to portability, the point that Facebook is using in the EU. Sure, a bit of regulation of those who transfer money is fine. And in the EU there are 28 different regulatory regimes, in the US, 50 (maybe 51, maybe DC has its own as well). But here's the huge difference. In the EU we say that, OK, we have all these different regulatory regimes. But they're all aimed at the same general goals, controlling money laundering, ensuring financial safety and so on. So they're all doing much the same job: therefore you only have to be regulated under one of these regimes. In the US it works the other way around. You've got to be signed up and regulated by every regime where you do business. So, to use the Facebook case, you cannot set up to send money from California to Texas under California law alone: you have to also register under the different Texas system. But in the EU you can set up to send money from Ireland to Spain under Irish law alone. Actually, you can set up to send money from Spain to Portugal under Irish law alone.
Exactly the same thing also applies to the licensure of labour. If you are qualified as a doctor in any one EU country then you are qualified as one in every EU country. A nurse similarly, and if we had licence requirements for hair braiders, which we don't, that would be the same as well: as it is for ski instructors for example.
Your qualifications are portable, your business regulations are portable, that's the point of the whole system over here. And that's what I would recommend for the US system too. It's not as if America doesn't already do this. A marriage that is recognised as legal in any one State is, by law, recognised as legal in all of them. So the suggestion is just an extension of this: if you've managed to get a licence as a hair braider in any one State then you are, by definition, a licenced hair braider in each and every other State. A nurse is a nurse, a doctor a doctor, a licenced money transfer service is a licenced money transfer service and so on. States do not lose the power to regulate as they see fit, no one actually has to change the procedures they currently have, all we need is to make all these qualifications, licences and regulatory regimes portable, just as we have them in Europe.
So far so logical and sensible: but the real joy comes at the end here. For we'll be able to rely on at least one State being willing to have a very easy licencing scheme. Probably not for nurses or doctors (as we don't in Europe) for these are jobs where proof of skill is really rather important. But someone, somewhere, will start offering $25 licences for hair braiding, nail bars, house removal companies and all the rest and thus we shall be free of the shackles that the current absurd regulatory environment places upon the US economy. At which point Hurrah! etc.
