Micro businesses, like micro-lending and micro-finance, offer vitality and depth to our economy. Regulation, allegedly to protect the consumer, has dogged all of these industries. I wrote a while back about the threat of regulation to, of all things, small batch children's toys makers : the Consumer Product Safety Improvement Act (CPSIA) was passed hastily in response to the lead-in-Chinese-toys fiasco, mandating stringent testing procedures to prevent such a reoccurence. Savvy analysts noted that the most immediate result would be that small toy producers unable to afford such commercial testing would be forced out of business, leaving behind only the mega-toy companies (ironically, in China) to compete.
Etsy has been a vocal and important advocate for the handmade toy community. Small crafting community organizations have scored minor wins, such as exempting fabric from the law, as well as losses, such as failing to convince the commision to exempt rhinestones. A guest Etsy post from the Handmade Toy Alliance spells out well the challenges of this piecemeal approach. Artists are now fighting for their livelihood rather than focusing on creating the original and valuable pieces that so many consumers love and prefer.
This is what Umair Haque terms unconstructive capitalism -- government regulations are squashing vitality and p2p connections that people love, instead favoring the big toy companies or the big banks that can meet the requirements. I would trust a handmade toy from Etsy over a Chinese manufactured toy from Mattell any day: the engaged Etsy community is a stronger enforcement mechanism than the threat of government recall.
Flickr credit: Merwing