Taking Your Business Elsewhere

This post by Mike Gibson is part of Secession Week 2010: Economic Secession

Competition is the freedom to act differently from others. It’s also the opportunity to offer higher quality goods and services at lower cost.  The socially desirable gains from open markets and competition are legion, yet when it comes to regulatory or tax regimes, many nations express condemnation at the thought of competition. What Adam Smith said about cartels in businesses–that they rarely meet without conspiring against the public–could also be said of the G20 and their attempts to stifle tax havens.

You can lampoon “Going Galt” all you like, but hardly anyone waxes morally indignant when people take their business elsewhere. And this isn’t just over the choice between the iPhone or Droid. Righteous boycotts are a perennial rage. The perceived moral repugnance of a person or a firm or even the state of Arizona is reason enough to drop them. I just heard today that sales at BP gas stations is down 20 percent because people, irrationally or not, feel they ought to rebuke BP by filling up elsewhere. Such is their prerogative. We’re all economic secessionists now.

What many people express about BP, Thoreau applied to governance:

If a thousand men were not to pay their tax bills this year, that would not be a violent and bloody measure, as it would be to pay them, and enable the State to commit violence and shed innocent blood. This is, in fact, the definition of a peaceable revolution, if any such is possible. If the tax-gatherer, or any other public officer, asks me, as one has done, “But what shall I do?” my answer is, “If you really wish to do anything, resign your office.” When the subject has refused allegiance, and the officer has resigned from office, then the revolution is accomplished.

Indeed, before Obama’s inauguration, many on the left were against the war in Afghanistan and Iraq. Afterwards Hopenchange and Captain Charisma turned out to be more of the same. Jon Stewart recently satirized the civil liberty destroying shenanigans of O’s Bush doctrine. Yes, businessmen may lie, but not inveterately like this. The market disciplines. Politicians, on the other hand…well, you can’t take your business elsewhere, so what do you expect? Instead you must accept that you are morally implicated in the wrongs conducted at the state level. You forfeit your autonomy on the wish of a vote.

It doesn’t have to be that way. The law is a product for which people and firms can shop, irrespective of geography. This also has beneficial, pro-growth consequences. (Here’s one interesting introduction to the topic. Here is another.) You can embrace tax havens, tax competition and jurisdictional arbitrage. Let the market discipline the state. Let people chose the laws that serve them best. You can boycott the state by taking your business elsewhere. As I said in the introductory post this morning, if you can’t count on elected officials, learn to starve the beast yourself.

The Cato Institute’s Dan Mitchell excels at explaining the beneficial economic consequences of tax havens. His blog is a great resource on tax-related news and data. He also offers a number of accessible videos Here is but one: