Business and Growth

A friend emailed me to complain about ANC 6B’s concern that more bars and restaurants in Barracks Row will turn the area into “the next Adams-Morgan.” As he points out, you could just as easily call it “the next Bethesda.” They’ve got lots of restaurants and they brag about it. It’s nice. And I agree—entertainment, broadly construed, is a lot of what modern cities are about and it’s not all Adams-Morgan.

But I think the whole question of urban liquor licenses is an excellent parable about the insane “pro business” discourse we’ve recently been afflicted with here in Washington. The success of businesses, of for-profit firms, is crucial to economic growth and prosperity. But this is overwhelmingly a question of businesses that don’t currently exist. If you call up a bunch of incumbent businessmen and ask them what they want, then any relationship between their pro-business agenda and a growth agenda is going to be pretty coincidental. For example, whatever the merits of restrictive liquor licensing policies, they’re clearly bad for the growth of new businesses in the bar and restaurant sector. But they’re just fine for many incumbent bar and restaurant owners, particularly the less aggressive and less skilled ones.

If you’re concerned about growth you need to be concerned about the ability of people to found new firms, and about the ability of small firms to grow rapidly. Talking to executives at today’s large firms tells you basically nothing about this. You just chatting to a bunch of comfortable rich guys who want to pay lower personal income taxes and to get some firm-specific regulatory favors.