“Rickshaws continue to grow in numbers thanks to trade unions” (Dhaka Tribune, 4 November 2017)
30 years before Uber entered the Bangladesh market, rickshaws were ‘disrupting’ Dhaka’s transportation industry by making transport more accessible and creating work for the marginalized, in a city that has long been under-served by public transport. Rent-seeking associations – under the cynical guise of being ‘trade unions’ – have not emerged overnight but have grown in the vacuum created by a combination of over-regulation, under-enforcement, judicial gridlock and regulatory capture.
In discussions regarding regulatory design, it is common to speak of how the law delegates regulatory powers to ‘gatekeepers’. Doctors and pharmacists are responsible for preventing potential drug abuse among patients and customers and more recently, ISPs are responsible for filtering illegal content. They monitor behaviour in a manner that regulators cannot. What this vacuum does is effectively position these associations – and I imagine Uber and its likes in the future as well – as de facto gatekeepers. They monitor and control who can ply our roads but unlike de jure gatekeepers, they have no accountability and little incentive to close the gates.
The ‘safety valve’ for giving de jure private gatekeepers some authority is that they can be held liable if they break certain terms. Some of those terms are codified in hard law, others in ‘soft’ law (like industry best practices that are self-regulated), the idea being that hard law will always be playing catch-up while soft-law is better at keeping up with more ‘creative’ practices that might harm the public interest. Of course, this system is not perfect but in the case of de facto gatekeepers like the ones I mention above, they carry out certain functions that they have not been formally authorized to do. Trade associations have a coterie that can profit handsomely from issuing illegal licenses and can extort poor rickshaw-pullers that have no/limited alternate employment options.
Some de facto gatekeepers can become de jure gatekeepers. See how Air BnB is being regulated in several cities, where they underwent just such a transformation. In Amsterdam, a property will be automatically removed from the platform if it has been rented-out for more than 60 days in a year.