SAYING YES TO EXTORTION.
We Quebecers aren’t yet formally into an election campaign, but already it’s raining money. On Friday, the ministers of finance and transport announced compensation for taxi drivers who have suffered a loss in the value of their licences because of competition from Uber.
All permit holders will get $1,000, some as much as $45,700, depending where they operate. The government has been analyzing the fall in permit prices since 2014, when competition from Uber started to get serious, and figures that on average the payments will cover about 56 per cent of permit-holders’ loss.
In Montreal, licence prices peaked in 2006 at over $200,000 but have since fallen to less than $100,000. That licences sell for anything at all, let alone $100K, is because of their artificially restricted number. Just as OPEC does for oil, when a coopted government issues only a limited number of licences the restriction in supply raises prices.
What the industry couldn’t do on its own — because easy entry into the business would quash any attempts to raise prices above costs — the government enables. Why is anyone’s guess. Political science suggests taxi owners can organize more easily than taxi consumers, so they get government’s ear, even for a very bad idea.
Many people’s gut reaction to paying off taxi drivers, who for decades have been subjecting taxi riders to what is literally highway robbery, is: “Forget that! You’re in business, you take risks. Losing is always a possibility. Times change. Technology changes. Competition changes. Man up!”
I’ve got a lot of sympathy for that view. Thanks to new technology, the cartel game is over — or at least could be. Tough! Being in business does require a minimum of smarts. In fact, one peculiarity of the justannounced payments is that people who bought their licence after April 1, 2014, split the payment on a pro-rated basis with whomever they bought it from.
Uber went live in San Francisco in 2010. If after 2014 you still thought a taxi licence was a good investment, you deserve what you bought. As a matter of principle, you deserve that no matter when you bought your licence. There was never a guarantee that the number of licences would be severely restricted in perpetuity.
As a practical matter, however, it may well make sense to buy out the taxi drivers. They don’t have the right to rip us off all on their own but they still do have the right to petition and demonstrate, which they have shown every willingness to do, and they have some sympathy in the public at large, whose experience of taxi drivers is that they are often immigrants and seem poor — even if the driver is often not the licence holder.
All credit to passengers that they don’t want to see any operators who are at the bottom of the income distribution take big capital losses. So both to discourage activism by taxi permit owners and to neuter possible objections to reform among the broad, untutored, good-willed public, it may make sense to compensate permit holders, especially those whose licence really is their only asset. But it’s best to do that in a final overall settlement in which licence-holders acknowledge we are paying them for losing the power to keep ripping us off.
By contrast, the Quebec government’s statement explaining why it’s making these payments says quite explicitly that it accepts no responsibility for the decline in the value of permits nor requires recipients of the cheques to renounce any other claims in order to cash them. The government also doesn’t make clear that a system in which Montreal taxi licences cost “only” $95,000 is different only in degree, not in kind, from the existing system. The goal of policy should be taxi licences that cost zero, or only a nominal fee for printing and filing them.
The same considerations should guide governments winding up cap-and-trade systems or supply management, even if the implications won’t always seem fair. Big companies that have been buying Ontario’s pollution permits probably don’t have a lot of public sympathy going for them. So maybe compensation isn’t so crucial politically — even if not paying will have economic costs: “We are the Ontario government. We change our mind frequently. Province risk is a big part of doing business here. Please come!”
That’s not the best investment pitch imaginable. On the other hand, the dairy and poultry farmers who have been ripping us off for 50 years probably do have a big fund of good will with the public. So paying them off probably is necessary.
But whatever the political strategists decide — pay lots or pay little — let’s get on with opening up these industries to competition.
THANKS TO NEW TECHNOLOGY, THE CARTEL GAME IS OVER — OR AT LEAST COULD BE.