What Do Taxi Drivers in Greece and DC Have in Common?

Whereas Greece is liberalizing its taxi market, the District of Columbia is making it harder for individual drivers to compete.

In Greece, taxi drivers are protesting liberalization efforts the government is forced to enact in order to qualify for international financial support. In Washington DC, they are protesting too — but to keep the relatively free market they have.

For years, Greek taxi drivers have had to buy special permits to do their work. The permits were expensive, acquiring one was a bureaucratic nightmare and usually, taxi drivers had to chip in a bit of cash to persuade the government official on the other side of the desk to consider their request.

As Greece is forced to cut back on public spending and privatizing parts of its hugely inefficient economy, the taxi permits are on their way out. Naturally, taxi drivers who, sometimes even after many years of work, haven’t recouped their investment yet, are furious. They’ll have to swallow a loss and learn to make a living in a competitive market all of a sudden.

Washington DC cab drivers are used to operating in a fairly competitive market. Although they have to be licensed too, the process isn’t burdensome. Not yet anyway for the district is considering legislation that would require every taxi driver in town to buy a special permit called a “medallion.” The total number of medallions would be capped at roughly 4,000. Estimates are that between 6- and 10,000 taxis are currently operating in the city.

Proponents of the measure claim that there are too many taxis in Washington. If that’s the case, every economist will tell you that it’s only a matter of time before their number declines. If taxi drivers can’t make a living in DC, they’ll move or seek a different profession. Some taxi drivers don’t want to wait for that to happen though and are lobbying for the medallion system.

It gets worse. The first set of medallions would be offered for sale to drivers who have worked and lived in Washington for at least five years, thus discriminating against young and innovative entrepreneurs who make the market dynamic. The city admits that it has no idea how many taxi drivers would initially qualify.

New York City has a similar medallion system. Last year, medaillions traded for up to $620,000 a piece there. Not surprisingly, there aren’t many private cab drivers left in New York. Rather the market is dominated by investment companies who lease medallions to individual taxi drivers, driving up the cost for the customer because now two people have to profit off him.

Just ask the Greeks how that worked out.