It is implicitly accepted -- especially among readers of this magazine -- that among the most guaranteed of rights in America is the individual's right to attempt to earn a living in his or her chosen field of endeavor. In fact, claims Clint Bolick, director of litigation for the Institute for Justice, a public-interest law firm based in Washington, D.C., that litigates cases relating to economic liberty, "of all the rights Americans think we have, there's no question that economic liberty is the least protected." There is no constitutional right assuring individuals that they may pursue their chosen calling.
A landmark 19th-century Supreme Court ruling -- made 122 years ago -- specifically allows states the leeway to grant monopolies, thereby restricting market entry. That ruling effectively gutted the "privileges or immunities" clause of the Fourteenth Amendment, which Congress had specifically ratified during Reconstruction to ensure that emancipated slaves could fully realize their newly won freedom. That was in response to a patchwork of post-Civil War laws passed by many southern states to bar blacks from a range of trades and thereby turn them back to indentured servitude on the plantations from which they had presumably been liberated. The result is a modern-day economic landscape far more strewed with barriers to entry -- especially for minorities and immigrants struggling to enter the mainstream economy through manual trades -- than most people realize.
One of Bolick's clients was Ego Brown, a former federal employee who got sick of working for the government and wanted to go into business for himself. He walked out on the street and observed that people were generally well dressed but that their shoes look scuffed. He set up a shoeshine stand on the streets of Washington, D.C., only to be picked up by the police for violating an 82-year-old city ordinance excluding blacks from a number of occupations. After two years of fighting the law in court, Brown was allowed to retain his business.
Another client, Taalib-Din Abdul Uqdah, and his wife, Pamela Ferrell, started a hair-braiding business in a Washington, D.C., storefront in 1980 with $500, only to be shut down by the city government for violating laws written in 1938 and enforced by the city's Board of Cosmetology. Those laws, upheld by established practitioners, mandated that Uqdah's employees have extensive schooling in hair treatments using chemicals and techniques that had not been used for at least 30 years. Thus Uqdah began a 10-year struggle with the city government to pursue his business.
Uqdah, who first went into business with $200 in 1974, selling cider, flowers, and firewood, says there's no way he could replicate that start today, because the D.C. government requires that street vendors pay it $1,500 before they go into business. In recent years he has spent time counseling young people in his inner-city neighborhood, something he wishes he could have done more. "One thing that angers me is that during those 10 years fighting this case I could have been working with young people, teaching them how to get started and how to turn their lives around. Think of all the positive energy I could have been using instead of this negative energy."
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Regulated Monopolies
Or Why Four Denver Cabbies Can't Go into Business for Themselves
A classic protected monopoly in many U.S. cities is the taxicab business. It typifies the exclusionary practices one sees within otherwise easy-to-enter businesses. Consider New York City, where taxis were first regulated in 1935. That year 13,500 medallions, or individual licenses, were issued. Today there are only 11,800 outstanding. That is why a medallion now costs $140,000 -- even though there are still parts of the city where taxi service is spotty. A 1984 Federal Trade Commission report found that New York City is by no means anomalous. The commission found the industry regulated in 87% of large U.S. cities, and it calculated the added cost to U.S. consumers due to that regulation at $800 million a year (in 1992 dollars).
Consider Denver, where a new license to operate a taxicab company has not been granted since 1947. Denver has all of three cab companies. One of them is embroiled in bankruptcy proceedings, and the other is on the verge of bankruptcy.
Logic would imply that Denver's taxi market is ripe for entry. That's what Ani Ebong, Leroy Jones, Girma Molalegne, and Rowland Nwankwo figured when they set out, three years ago, to start Quick Pick Cabs. With 30 years of experience among them, the four men seemed qualified. They sought to differentiate their company by focusing on the underserved central city and offering their drivers a higher payout and more equity and autonomy than they could enjoy at rival companies.
In the past decade Denver has seen the steady deregulation of various transportation services, including limousines, couriers, household movers, and tour-bus operators. Taxis, however, remain a bastion of regulated privilege. In the past 10 years there have been no fewer than five bills introduced to deregulate the industry and open up the market. All have died a quick death in the state legislature, in part because of the work of Isaac Kaiser, a lawyer who spearheads challenges to new license applications before the state's Public Utilities Commission (PUC), and Freda Poundstone, a lobbyist employed by two of Denver's three cab companies.
