Cabs and Cupidity
MINNEAPOLIS -- The campaign to deny Luis Paucar his right to economic liberty illustrates the ingenuity people will invest in concocting perverse arguments for novel entitlements. This city's taxi cartel is offering an audacious new rationalization for corporate welfare, asserting a right -- a constitutional right, in perpetuity-- to revenue it would have received if the Minneapolis City Council had not ended the cartel that never should have existed.
Paucar, 37, embodies the best qualities of American immigrants. He is a splendidly self-sufficient entrepreneur. And he is wielding American principles against some Americans who, in their decadent addiction to government assistance, are trying to litigate themselves to prosperity at the expense of Paucar and the public.
Seventeen years ago Paucar came to America from Ecuador and for five years drove a taxi in New York. Because that city has long been liberalism's laboratory, many taxi drivers there are akin to, as an economist has said, "modern urban sharecroppers."
In 1937, New York, full of liberalism's itch to regulate everything, knew, just knew, how many taxicab permits there should be. For 70 years the number (about 12,000) has not been significantly changed, so rising prices have been powerless to create new suppliers of taxi services. Under this government-created scarcity, a permit ("medallion") now costs about $500,000. Most people wealthy enough to buy medallions do not drive cabs, any more than plantation owners picked cotton. They lease their medallions at exorbitant rates to people such as Paucar who drive, often for less than $15 an hour, for long days.
Attracted by Minneapolis-St. Paul's vibrant Hispanic community, now 130,000 strong, Paucar moved here, assuming that economic liberty would be more spacious than in New York. Unfortunately, Minnesota has a "progressive," meaning statist, tradition that can impede the progress of people like Paucar but who lack his knack for fighting back.
The regulatory impulse came to the Upper Midwest with immigrants from Northern Europe, many of whom carried the too-much-government traditions of "social democracy." In the 1940s, under a mayor who was soon to take his New Deal liberalism to Washington -- Hubert Humphrey -- the city capped entry into the taxi business.
By the time Paucar got here in 1999, 343 taxis were permitted. He wanted to launch a fleet of 15. That would have required him to find 15 incumbent license-holders willing to sell their licenses for up to $25,000 apiece.
As a byproduct of government intervention, a secondary market arose in which government-conferred benefits were traded by the cartel. In 2006, Minneapolis had only one cab for every 1,000 residents (compared with three times as many in St. Louis and Boston), which was especially punishing to the poor who lack cars.
That fact -- and Paucar's determination and, eventually, litigiousness; he is a real American -- helped persuade the City Council members, liberals all (12 members of the Democratic Farmer-Labor Party, one member of the Green Party), to vote to allow 45 new cabs per year until 2010, at which point the cap will disappear. In response, the cartel is asking a federal court to say that its constitutional rights have been violated. It says the cap -- a barrier to entry into the taxi business -- constituted an entitlement to profits that now are being "taken" by government action.
The Constitution's Fifth Amendment says no property shall be "taken" without just compensation. The concept of an injury through "regulatory taking" is familiar and defensible: Such an injury occurs when a government regulation reduces the value of property by restricting its use. But the taxi cartel is claiming a deregulatory taking: It wants compensation because it now faces unanticipated competition.
When the incumbent taxi industry inveigled the city government into creating the cartel, this was a textbook example of rent-seeking -- getting government to confer advantages on an economic faction in order to disadvantage actual or potential competitors. If the cartel's argument about a "deregulatory taking" were to prevail, modern government -- the regulatory state -- would be controlled by a leftward-clicking ratchet: Governments could never deregulate, never undo the damage that they enable rent-seekers to do.
By challenging his adopted country to honor its principles of economic liberty and limited government, Paucar, assisted by the local chapter of the libertarian Institute for Justice, is giving a timely demonstration of this fact: Some immigrants, with their acute understanding of why America beckons, refresh our national vigor. It would be wonderful if every time someone like Paucar comes to America, a native-born American rent-seeker who has been corrupted by today's entitlement mentality would leave.