Home News Articles The state giveth, the state taketh away

The state giveth, the state taketh away

By | National Post on Dec 21 2015

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Photo Courtesy of Canadian Pacific under CC 2.0

There’s one simple but important trick to reaping the rewards of free markets: the markets have to actually be free. Yet, judging by the actions of many politicians, this is not as obvious as it might seem. In Ontario, the government says it will legalize marijuana, but suggests the drug be sold exclusively through government-controlled LCBO stores; and then it says it is looking at making wine available in grocery stores, but suggests reserving space therein for Ontario wines to help spur and protect the domestic industry.

Meanwhile, in the United States, Seattle’s city council has voted to allow drivers of ridesharing services such as Uber and Lyft to unionize. A program policy associate at the New America Foundation’s Open Policy Institute praised the move in an interview with the Christian Science Monitor: “When it comes to the ability to unionize I think that’s actually very powerful and has the ability to make these freelancers and contractors a lot more secure in their jobs.”

The wish to control a mind-altering substance, the attempt to boost and improve local jobs — these are all understandable impulses for lawmakers to have. But the expectation that these goals can be simply piled onto emancipating policy changes, such as ending taxi monopolies and black markets in marijuana, without destroying the very freedom the changes were to provide — that is clumsy thinking.

It is also a legal mess. How can Seattle give independent contractors the ability to unionize without violating federal U.S. labour and anti-trust laws? That’s the question that Uber and Lyft are asking. And given that Canada is a signatory to North American and European free trade agreements, how can it possibly privilege the sale of Ontario wines over those from other jurisdictions without engaging in trade violations? In terms of marijuana, surely taking the profit out of the illicit drug trade will not be achieved if obtaining the drug legally means paying through the nose at a limited number of government-run stores that have a monopoly on the market.

Ontario and Seattle – among many other jurisdictions – make clear what optimistic voters and policy analysts should have known all along: when government gets rid of a barrier to freedom, the positive impact can be measured by the time it takes for a new barrier to take its place.

Uber and Lyft work because they strip away the annoyances and inefficiencies that became endemic in taxi industries, thanks to government-granted monopolies. Force Uber and Lyft to provide the government with a list of their drivers, as Seattle is doing to permit unionization, and there goes the beauty of the companies’ model: drivers and riders connecting with no middle man getting in the way. For drivers, that means not having rides doled out to you by a dispatcher who plays favourites. For riders, that means choosing drivers based on how others have rated their services.

As Brian Doherty writes on Reason magazine’s Hit and Run blog: “Imagine, Uber or Lyft customer, being forced to prove before some union committee that your possibly job-restricting negative reaction to the driver is unfair or not properly substantiated.

“Your opinion and judgment on your experience now has real effects on his or her potential employment status. It’s not at all clear how union job protection policies can jibe with a community-rating economy.”

So would the best-case scenario in taxis — as well as in marijuana and wine — be guaranteed job security combined with free consumer choice, easy entry into professions and unfettered trade? Perhaps it would, but who cares? The combination is pure fantasy and can never happen.

This is not only the case with these particular industries, but with all businesses, because the heavy hand of government creates graceless barriers and perverse incentives, even when it is meant to help. It has certainly failed miserably in the realm of drug prohibition, creating more violence and ruining more lives than the dangerous substances could ever have done on their own. And it is to blame for facilitating the exploitation of taxi drivers with unwieldy medallion systems.

The principle of “free commerce” — so attractive to government now that voters have grown sick and tired of the absurdities visited upon them by excessive state control — is now being used to win elections and inspire support, but when push comes to shove, most governments are not really ready to honour the “free” part of the deal. That’s their prerogative. But let’s hope they recognize the resulting failures for what they will be: failures of government to let go, rather than failures of open trade and free contract.

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