An October 1, 2015 editorial in the Ottawa East News titled “Taxi drivers deserve to work” gave me pause stop and think about the fundamental ideas behind the writer’s words, and I was not impressed. Whereas the writer does identify government as a problem, the article is replete with common economic fallacies and falsehoods. In fact, every single problem that currently besets taxi drivers is caused by the intervention of government force in the economy - force that removes freedoms, causes stagnation of business development, raises prices, makes services less accessible and harms social harmony.
The taxi business is a monopoly - a business that is banned by force except for all but the few who are allowed to buy a forcibly limited number of taxi license plates. Those who attempt to run an honest taxi service outside the monopoly are subject to potential threats, fines, seizure, arrest, imprisonment and condemnation. Such a situation is intolerable to advocates of a truly free society but eagerly encouraged by our current political and intellectual leaders.
When a business is under monopoly powers, meaning power backed by the government’s ability to initiate force, the result can only be stagnation and lack of innovation. Monopoly power removes the possibility of competition, removes the requirement for steady innovation and improvement of quality of service that true competition requires. In truth, innovation and experimentation are banned by law in such a situation and this too is intolerable in a free society. Who benefits? The few are granted economic power at the expense of the many.
Under monopoly powers the result must be higher prices than in a free market. It is a basic economic fact that when you limit supply, the price must rise. In many cases, the initial forced limiting of supply causes harm and then there are calls for enforcing price controls, such as is the case in the taxi business. In a free market all prices are subject to competition and eventually the profit margin approaches the average of all other free sectors. If the profit is higher than average, new competition enters and brings profits back down, and vice versa. Under monopoly rule all consumers are deprived of access to a competitive market. Who is harmed the most? Those among us who are poorest. In the case of the current taxi business, the drivers are squeezed between the monopoly on license plates and the price controls. They are victims of government interference also.
Enter Uber - the current free market innovation in the personal transportation business. Uber is simply a creation of free thinking people, provided by free thinking entrepreneurial drivers and used by free-thinking customers, who for the first time in their lives have the choice of using the monopoly service or a free-market alternative, and customers are voting for the free-market service in droves. Too bad few of them fully recognize the principles involved and vote for politicians who advocate for freedom.
Drivers in the monopoly system do not deserve to work - that is an invalid concept because it implies the work must be provided for them. What they deserve is freedom to work, freedom from people, organizations and most especially governments that would stop them from working, so long as they are not violating the rights of others. In fact, government is the agency peaceful people create to protect their rights, not violate them through the imposition of monopolies.
The fact drivers are not rich is of no consequence. The vast majority of people are not rich, so what? In a free market every individual is able to make his own choices, build a business if he is able, and become rich if that business creates phenomenal value for many customers. This appears to be impossible for an individual driving a taxi, but possible if the driver has a good mind for customer value creation and builds a superior taxi business, employing many and servicing a great many at an attractive price for value ratio.
The editorial writer insults human reasoning, ingenuity, perseverance and value creation when the term “Wal-mart-ization” is used as a term of slander. Not a single Wal-Mart employee is forced to work there or forced to accept less money than they earn. Every employee is free to rise as far as his ability and work ethic allows, or is free to leave and find an employer who agrees he is worth more than Wal-Mart is paying him. In a free market, justice prevails and each person receives precisely what he deserves, as determined by his free trade with other like-minded souls. If the taxi business was a free as Wal-Mart, the business would be a thriving, innovative concern, offering an abundant variety of price points and services to everyone.
The correct and moral response by a free citizen to the current taxi imbroglio not to support the striking drivers but is a cry to end the license plate monopoly in the taxi business and all other government intervention in the taxi business. Only thus will justice be served: drivers freed to compete in a free market and customers freed to choose from among the variety of business models a free market offers. A free market is a harmonious society.
Showing posts with label monopoly. Show all posts
Showing posts with label monopoly. Show all posts
Friday, October 2, 2015
Thursday, September 24, 2015
Are we all socialists in practice?
The following was a comment made in response to a post I wrote about Donald Trump and Bernie Sanders.
Commenter 1: We're all socialists in practice--that's a good thing.
Socialism: A political and economic theory of social organization that advocates that the means of production, distribution and exchange should be owned or regulated by the community as a whole.
In other words:
Social Security
Medicare
Medicaid
Libraries
Museums
Parks
Fire Stations
Garbage Collection
Local, state and national agencies that ensure the public welfare
Cooperatives
Public Utilities and Infrastructure
Public Schools
Public Hospitals
Public Transportation and Roads
Public Airwaves
Public Housing
Agriculture Support (farm subsidies)
Veterans Administration
National Institutes of Health
Environmental Protection Agency
Law Enforcement
Military
-----------------------------------
Naturally, I could not let that stand unchallenged.
My reply: You have equated the existence of many things with the necessity that they be done through coercive action of government. Libraries, museums, parks, fire stations, garbage collection, cooperatives, utilities, infrastructure, schools, hospitals, transportation, media, housing, agriculture and law are properly (morally) the product of people working to improve their lives through creating values and voluntarily exchanging them with others. It is only cooperation in a free society that enables each individual to pursue his own happiness and results in a truly peaceful coexistence. All of the things I mention existed before government monopolies and would continue to exist but be better and more abundant in a society where the protection of individual rights was the basis for government.
Commenter 1: We're all socialists in practice--that's a good thing.
Socialism: A political and economic theory of social organization that advocates that the means of production, distribution and exchange should be owned or regulated by the community as a whole.
In other words:
Social Security
Medicare
Medicaid
Libraries
Museums
Parks
Fire Stations
Garbage Collection
Local, state and national agencies that ensure the public welfare
Cooperatives
Public Utilities and Infrastructure
Public Schools
Public Hospitals
Public Transportation and Roads
Public Airwaves
Public Housing
Agriculture Support (farm subsidies)
Veterans Administration
National Institutes of Health
Environmental Protection Agency
Law Enforcement
Military
-----------------------------------
Naturally, I could not let that stand unchallenged.
My reply: You have equated the existence of many things with the necessity that they be done through coercive action of government. Libraries, museums, parks, fire stations, garbage collection, cooperatives, utilities, infrastructure, schools, hospitals, transportation, media, housing, agriculture and law are properly (morally) the product of people working to improve their lives through creating values and voluntarily exchanging them with others. It is only cooperation in a free society that enables each individual to pursue his own happiness and results in a truly peaceful coexistence. All of the things I mention existed before government monopolies and would continue to exist but be better and more abundant in a society where the protection of individual rights was the basis for government.
You mention cooperatives, as if a the government of a free country would act to prevent cooperation of any kind, when in fact cooperation is the only type of economic exchange permitted under capitalism and coercion is banned.
You mention housing, yet the provision of low cost housing is prohibited or at least severely discouraged by the maze of development, zoning, construction, labor and tax rules that make housing less plentiful and more expensive than it would be in a free market, especially for the poorest.
You mention farm subsidies, as if taking money from people who have produced wealth and giving it to those who have not earned it is a proper role of government. This serves to support high cost providers, prevent innovation and competition and make it more expensive for everyone to buy food, damaging the poor the most. Then, when housing and food are made more expensive by government interventions, there is a call for more subsidies to help the poor, causing a further inefficiency, more unintended consequences, higher prices, and so the damage rolls on.
Interestingly, the only proper roles of government are at the very bottom of your list - the roles that an objective government is required to perform to protect the rights of the citizens who have delegated the very specific power of the retaliatory use of force. A government must protect citizens from criminals through the police, protect a country from outside aggression by the military and provide courts to arbitrate disagreements between citizens.
When government instead acts to override the decisions of citizens who are not violating rights, it becomes the worst aggressor - one with the power of force against which, once government has abandoned its role as protector, there is little recourse. For example, consider energy utilities. Private, individual citizens created the industry from nothing. Industrialists brought these ideas to the mass market , brought prices down t affordable levels and built stations, networks, maintenance services, etc. Governments looked at this and saw how important this wealth was, how much value had been created and then seized control of much of the industry. The parts they did not take, they regulated. Now the utilities are in many cases monopolies, facing no competition, bloated by bureaucracy, filled with entrenched unions, lacking innovation and plagued by service complaints. I use the Hydro utility in Ontario as my prime example of this.
Yet, there is not a single aspect of running a hydro utility that can be done more efficiently by a government agency than a free market. Consumers have lost the ability to choose, lost the crucial economic signals provided by a free market, lost the price mechanism that so effectively drives capital investments and service focus, lost the innovations that inevitably come from competition and the quest for efficiencies. Creative and productive individuals who would go into the business if they were allowed to build and own their own businesses are forbidden by the monopoly. The hiring of executives is done more by nepotism and political pull than by merit and ability. In short, a service that is properly run by freely acting citizens that is instead run by government force results in the destruction of human potential and reduces our quality of life. And we never get to see the advances that are blocked, the innovations prevented, the progress made that is stifled. How much better off would Ontario be if we had freedom in energy production instead of a stale and stagnant monopoly? We may never know. I recommend reading 'Economics in One Lesson" by Henry Hazlitt - about 70 years old but still spot on.
You mention housing, yet the provision of low cost housing is prohibited or at least severely discouraged by the maze of development, zoning, construction, labor and tax rules that make housing less plentiful and more expensive than it would be in a free market, especially for the poorest.
You mention farm subsidies, as if taking money from people who have produced wealth and giving it to those who have not earned it is a proper role of government. This serves to support high cost providers, prevent innovation and competition and make it more expensive for everyone to buy food, damaging the poor the most. Then, when housing and food are made more expensive by government interventions, there is a call for more subsidies to help the poor, causing a further inefficiency, more unintended consequences, higher prices, and so the damage rolls on.
Interestingly, the only proper roles of government are at the very bottom of your list - the roles that an objective government is required to perform to protect the rights of the citizens who have delegated the very specific power of the retaliatory use of force. A government must protect citizens from criminals through the police, protect a country from outside aggression by the military and provide courts to arbitrate disagreements between citizens.
When government instead acts to override the decisions of citizens who are not violating rights, it becomes the worst aggressor - one with the power of force against which, once government has abandoned its role as protector, there is little recourse. For example, consider energy utilities. Private, individual citizens created the industry from nothing. Industrialists brought these ideas to the mass market , brought prices down t affordable levels and built stations, networks, maintenance services, etc. Governments looked at this and saw how important this wealth was, how much value had been created and then seized control of much of the industry. The parts they did not take, they regulated. Now the utilities are in many cases monopolies, facing no competition, bloated by bureaucracy, filled with entrenched unions, lacking innovation and plagued by service complaints. I use the Hydro utility in Ontario as my prime example of this.
Yet, there is not a single aspect of running a hydro utility that can be done more efficiently by a government agency than a free market. Consumers have lost the ability to choose, lost the crucial economic signals provided by a free market, lost the price mechanism that so effectively drives capital investments and service focus, lost the innovations that inevitably come from competition and the quest for efficiencies. Creative and productive individuals who would go into the business if they were allowed to build and own their own businesses are forbidden by the monopoly. The hiring of executives is done more by nepotism and political pull than by merit and ability. In short, a service that is properly run by freely acting citizens that is instead run by government force results in the destruction of human potential and reduces our quality of life. And we never get to see the advances that are blocked, the innovations prevented, the progress made that is stifled. How much better off would Ontario be if we had freedom in energy production instead of a stale and stagnant monopoly? We may never know. I recommend reading 'Economics in One Lesson" by Henry Hazlitt - about 70 years old but still spot on.
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