Freedom Line Blog

There’s no exercise of government power quite as nauseating when seen up close as a relatively small industry’s attempts to team up with government and either (A) shake down or (B) close down a rival who has built a better mousetrap. In his book “Government’s End: Why Washington Stopped Working” (one of the best political reads of the past few decades, by the way) — a volume dedicated to this trend — Jonathan Rauch describes how Washington D.C. bike messengers, for instance, lobbied heavily against the use of fax machines in the nation’s capital, for no other reason than that they were bad for business (a stand reminiscent of Frederic Bastiat’s famous satirical letter to the French Parliament in which it was claimed that candlemakers were suffering unfair competition from the sun).

This trend is rearing its ugly head again in Washington D.C., where city government is trying to crack down on Uber, one of the great innovations of the smart phone era. Uber is a private car service operating in a handful of major cities that allows you to instantly request a sedan from your smart phone, have it arrive in minutes, and then have all of the billing (including the tip) taken care of straight from your credit card. Uber eliminates all of the inconveniences of the taxi experience (your humble correspondent, for instance, recently waited 45 minutes for a cab in Silicon Valley after being told by dispatchers that it was five minutes away) and usually does so at a cheaper price. And of course, D.C. can’t have that! From the Daily Caller:

Members of the Washington, D.C. City Council haven’t given up on their efforts to bring the efficient and reliable luxury sedan-on-call service, Uber, under the authority of the company’s competitors in the taxicab industry.

Council members previously tried to establish a price floor for the company. More recently, at a July 10 meeting, a number of City Council members voted to bring the sedan service under the authority of the D.C. Taxicab Commission, a regulatory body strongly influenced by the taxi industry.

…

“I was opposed to them not being regulated, period,” councilman and former D.C. Mayor Marion Barry told The Daily Caller. “This was a compromise. I think if it’s not a regulated service, it really has an impact on the D.C. taxi industry.”

Of course it has an impact! That’s generally what happens when someone decides to build a company that can deliver a better product at a lower price.

Let’s hope Uber can resist the legislative strong-arming. At least they have this going for them: there are few inadvertent blessings as sweet as having Marion Barry be your chief antagonist.

The Los Angeles Times — that bastion of journalistic daring do — has discovered that recessions cause job losses. Don’t laugh — they will probably submit this to the Pulitzer people.

What really steams the Times’ clams, however, is that manual labor is being replaced by mechanical automation. Writing in this morning’s edition of the paper, reporter Alana Semuels notes:

Forced to cut costs during the recession, employers across the country are looking at ways to avoid hiring. They’ve accelerated use of computers and technology, replacing administrative assistants with software, cashiers with self-service kiosks and laborers with machines.

These structural changes mean some jobs that disappeared during the recession may never come back. Productivity gains are good for company profits and help the economy grow over the long run. But in the short term, the shift is exacerbating America’s jobless recovery.

Kudos to Semuels for at least noting the importance of productivity gains, but there’s a still something of a misdirect here. It’s probably an overstatement to say that employers “are looking at ways to avoid hiring” (my money is on the fact that most employers would love to be in a financial position to consider new employees). While there are many instances where shifting to automation is inherently superior to relying on labor, the scales are tilted by government intervention. Consider this passage from elsewhere in the article:

“Labor is so expensive,” said [farmer Mike] Young, whose great-grandfather started farming row crops in Kern County in 1910. “There’s their wages, truck, insurance, workers’ comp and the safety regulations. We went to a high-value crop that needed less labor input.”

Notice a trend? With the single exemption of trucks (and even that’s debatable given California’s automotive taxes), these are all factors created or exacerbated by government. California has one of the highest minimum wages in the nation, a heavily regulated insurance sector, and excessive workers’ comp and safety regulations. Technology may have an inherent economic appeal, but the challenge it presents to labor is only compounded by state government’s attempts to “help” the working man.

Apart from government distortions of the market, however, there is a bigger point to be made here. Technology’s displacements of the labor force may be jarring, but they lead to a stronger economy (the capital savings can be directed towards more productive investments) and an infinitely better life for all Americans. After all, we could have attempted to protect the horse-drawn carriage industry by suppressing the development of the automobile, subsidized makers of candlesticks and gas lamps by impeding the development of the light bulb, and employed many more bank tellers by standing athwart the ATM. But we’d live in a society that had made decisively less progress from 100 years ago than the one we currently inhabit.

This principle was captured brilliantly by the French political economist Frederic Bastiat in a satirical letter that he wrote to the French Parliament under the aegis of seeking “protection” for his nation’s candlestick makers:

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.

When you’re 150 years behind the French on economics, you know you’re in trouble. Or that you work for the Los Angeles Times.

The first time I read Frederic Bastiat’s The Law (pdf), I thought the Frenchman was a bit over the top when he described taxation as legalized plunder.  After all, the only things certain in life are death and taxes, right?  Then again, at the time I was in school and not responsible for my income.  Drawing a paycheck changes a man’s perspective.  So too will being denied a tax refund from a government that plunder’s a paycheck.

My mind turned to Bastiat’s classic when I read USA Today’s report that several states are considering delaying tax refunds to citizens who are owed the money because the government just can’t spare the coins.  Apparently, no one asked if taxpayers were in better shape than their governments.  Unlike laws allowing a state to tax income, in most cases there is no legal ability for states to withhold money to which they are not entitled.  They just do it.  Perhaps the Tea Party movement will adopt the slogan “Victims of Lawful Plunder” at an upcoming rally.  It sure would help frame the issue.