PROEM:
First published in the August 17 edition of the Providence Journal.

It’s a suspicious thing for a legislature’s press release to use the word “unscrupulous.”
“Unscrupulous” is a word for activists and marketers. When a representative body uses it to describe some of its constituents — in this case, building contractors — one suspects that it bubbled up as a talking point from the dark places of the statehouse, where laws are sold and bought. It’s an adjective that novelists use to label minor businessman-type characters as “very bad.”
This is not to say that there are no unscrupulous contractors in Rhode Island, but the specificity with which the General Assembly has targeted those in the construction industry and its notions about what actions will remedy the supposed problem give the impression that somebody behind the scenes stands to gain from the measures taken. It is telling that the 2007 anti-unscrupulosity bill (H6511Aaa) creates, as one of its provisions, seats for two builders’ associations on the Contractors’ Registration and Licensing Board. And it is not surprising that the law’s matron in the House of Representatives, Charlene Lima, is the very same woman who tagged an after-your-bedtime amendment onto the state’s budget seeking to thwart privatization of government jobs.
Call her the Champion of the Established Player.
Suppose that a carpenter discerns several ways in which to meet clients’ needs more efficiently and inexpensively — and with more scruples— than contractors for whom he’s worked. After years of the legislature’s “protecting consumers,” if he intends to undertake projects costing above the piddling amount of $1,000 (labor and materials), that well-meaning carpenter will have to register as a contractor (for $200), take up the lawyerly art of contract writing (including research of the various items that must be included in the language of each contract), acquire insurance for half a million dollars, and figure out what, exactly, will fulfill the requirement for “continuing education” (followed by paying for and participating in applicable courses). All of this before so much as handing out business cards, under threat of a devastating $5,000 fine ($10,000 for subsequent offenses, although one would hope that the first batch of cards counts only as one).
It would be exaggerating to call any of these requirements barriers, but even hurdles create disincentive, particularly in an industry populated by workers who picture concrete, not cursive, when they hear of “forms.” An obstacle course of regulatory hoops would seem less apt to trip up schemers who require just the sort of advantage that paper shields can provide in the marketplace than craftsmen who merely wish to ply their trade.
This dynamic applies more broadly than just to the trades, of course. For all the astonishment at the disproportionate remuneration of CEOs, the lack of consequences for such mammoth waste is too often treated as inexplicable. That a national CEO for UnitedHealthcare, for example, could in one year earn 150% of the combined salaries of the 2,000 employees of RI’s St. Joseph Health Services (including two hospitals and an assisted-living facility) suggests that something more than mutual insider backwashing is thwarting competition.
Healthcare is a heavily regulated industry, to be sure, but regulations and restrictions provide a safety cushion for incumbents generally. Registration/licensure, continuing education, industry-specific, and even minimum wage requirements all dam the flow of competition, while doing little more than adding administrative costs for corporations, category killers, and Big Box stores. Established players can pass on those costs to customers with an ease of inverse proportion to the difficulty that upstarts and up-and-comers have addressing the same necessities. Moreover, in a world of rapid transportation and instantaneous communication, the capability of moving facilities overseas makes larger companies the ones that benefit from the possibility of excising regulatory baggage.
Notwithstanding the good intentions of those who would wield the law to protect the little guy, nothing is so much to his advantage as freedom. That includes the freedom to make bad choices, as well as the freedom to profit from others’. Immoral and unfair business practices can be prosecuted; complaints can be filed and posted for the public. More importantly, businesses can leverage the poor behavior of their competition. If the goal is to stop wrongdoers, their deeds can be judged when done. Instead, the General Assembly has sought to “give consumers some assurance” in advance and encourage potential contractors to hedge, rather than strive, lest they stumble on “a rule or regulation promulgated by the board.”
Just as one cannot deny that some contractors are crooks, one must acknowledged that not all of those who would wield the law have good intentions. Who will protect Rhode Islanders from unscrupulous legislators, and what assurance is available that those we elect are aware of their own responsibilities to us?