As Leopold Khor observed in his important book, The Breakdown of Nations, large organizations have a tendency to become too bureaucratic and rigidified to retain the resilience necessary to make adaptations to changes in their world. In the business world, instead of changing or downsizing, large corporations lean on the power of government to prop them up by implementing laws which grant them advantages over their smaller competition. The most recent case of corporations using government power to maintain a failing monopoly is taking place in the Massachusetts taxi service.
Because of the much more efficient ideas of Uber and Lyft and the novel design of their platforms, the archaic taxi industry is in decline. Instead of adapting to the changing climate of smartphone-based systems, taxi unions are doing what monopolies do best — having the government stifle their competition to legislate themselves an advantage.
This government mandated advantage for the taxi industry is in the form of a tax. Massachusetts’ ‘small government’ Republican Governor Charlie Baker signed into law this month a $.05 tax on ride-sharing companies such as Uber and Lyft.
This tax will not go to the state to build better amenities for the people. Five cents per ride will go directly to the taxi companies.
“I don’t think we should be in the business of subsidizing potential competitors,” said Kirill Evdakov, the chief executive of Fasten, a ride service that launched in Boston last year and also operates in Austin, Texas, as reported by Reuters.
The law says the money will help taxi businesses adopt “new technologies and advanced service, safety and operational capabilities” and will support workforce development. However, in typical government logic, they ignore the fact that it stifles the far more efficient and easier workforce development in the ride-sharing market.
Of course, the taxi unions aren’t satisfied with the government acting as their personal Robin Hood, and they want the law to go further.
Unions want to ban ride-sharing altogether unless these drivers submit to inspections by police and other needless government regulations.
“They’ve been breaking the laws that are on the books, that we’ve been following for many years,” said Larry Meister, manager of the Boston area’s Independent Taxi Operator’s Association.
According to the report in Reuters:
Regulations for how the fee will be collected and a plan for how it will be spent still need to be drawn up, said Mark Sternman, a spokesman for the state’s MassDevelopment agency, which will be in charge of the money.
Riders and drivers will not see the fee because the law bars companies from charging them. Instead, companies themselves will pay the state, although Evdakov said it will be passed on to riders or drivers one way or another.
While Uber and Lyft will certainly be able to foot the cost of this new government mandated extortion racket, the smaller companies who are just starting out could be heavily affected.
Instead of taxis becoming more efficient on their own, the government chose to protect them at the expense of others. Sadly, this corporate welfare is present in every industry from automobiles to agriculture. It is also the reason for so much pain and suffering, as the state pays no attention to the horrifying ripples in the market created by artificial abundance.
In the Land of Opportunity, the government robs efficiency to prop up incompetence and people still somehow manage to call this a Free Market.