Government no friend to innovation
Too many rules threat to tech economy
For all the Government’s talk of backing start-ups and new technology, it appears ignorant of today’s rate of change and innovation.
Backward-looking economic plans and regulatory tinkering are worthless when technology leapfrogs planners and regulators.
A classic example was Steven Joyce and Paula Bennett’s recent declaration that New Zealand needs 26 more hotels. New Zealand Trade and Enterprise had literally paid statisticians to predict the future needs of the hotel industry (I’m not making this up).
I wonder if Mr Joyce has heard of AirBnB? The online service, which lets people rent out their rooms or homes short-term, is already taking up the slack during a surge in accommodation demand. AirBnB doesn’t require government forecasts. Its model is based on everyday people responding to supply and demand, made possible by new technology.
Meanwhile, in transport, we’ve seen the Government grapple with Uber. Traditional taxi companies, threatened by competition, complained about how Uber seemed to operate under its own set of rules. Uber’s safety features involve GPS tracking, automatic recording of driver and passenger information, and a two-way rating system – safety features unimaginable when taxi regulations were last reformed (in 1989). Meanwhile, taxi companies have forked out for regulation-standard in-car cameras and costly registration processes.
For 18 months, the Government ignored the issue until embarrassing headlines emerged about police interrogating Uber passengers. In April, the Government hurriedly enacted reforms relaxing outdated regulations for all taxi services, allowing Uber and its competitors to operate openly and legally. By that time, Uber had been here for almost two years.
But even now, obtaining a special licence costs drivers up to $1564 and takes up to 72 days, when Uber could simply conduct a criminal background and driving history check for $50. Even when Government moves in the right direction, it fails to keep up with technology.
A similar battle looms with AirBnB, which also operates in legal grey areas. If the taxi industry is anything to go by, it won’t be long before hoteliers begin lobbying the Government to crack down on the largely unregulated (but perfectly safe) AirBnB.
And this week, the Government finally indicated it may legalise the sale of nicotine e-cigarettes (after three or more years of availability via importation). This safer alternative to smoking, often used as a quitting device, is illegal by default thanks to historic regulations restricting ‘oral tobacco products’. With e-cigarettes being far less dangerous than tobacco, you have to wonder how many people have died due to government dragging the chain on legalising a safer product.
Further, we can only hope that we don’t end up with ongoing Uber-style red tape and conditions. Can politicians resist piling on excise taxes, for example? This would destroy the financial incentive to switch from smoking to e-cigarettes, and thus defeat the original appeal of legalisation.
Whether or not you have sympathy for AirBnB, Uber, or e-cigarette producers, the point is that we could have avoided all this if we’d never passed such prescriptive regulations in the first place. Reform in retrospect is too slow and too messy. Our regulations need to be flexible, simple, and non-prescriptive.
It’s one of the greatest arguments for deregulation: politicians don’t have a crystal ball, they can’t envisage what type of innovations will appear from nowhere, and which will take off in the marketplace. What politicians can do is get out of the way so that innovators can freely test their mettle in the laboratory of the competitive marketplace.