How Boris can beat the RMT

The RMT has once again brought London to a standstill with a 48-hour strike. This is a good example of public choice theory at work, in particular Mancur Olson’s logic of collective action. A small concentrated interest (i.e. the tube drivers) is able to exploit the dispersed population of travellers and taxpayers, who have weak incentives to organise in opposition. 

As a result of their rent-seeking activity tube drivers get paid far more than employees in comparable occupations – around £40,000 per year, almost double the wage of a typical London bus driver. The Underground is also heavily overstaffed, which is one reason why the system requires hefty ongoing subsidies.

Given the incentives at work, the task of tackling the problem of inflated salaries, ineffiency and industrial unrest lies with politicians and London Mayor Boris Johnson in particular.

He can take inspiration from Margaret Thatcher and her battle with the NUM. She prepared for the miners’ strike several years in advance and Boris should take a similar strategic approach.

The first step should be to make London more resilient to strike action on the Tube. This means deregulating the buses to allow new market entrants to boost capacity at peak times. It also involves abandoning anti-car socialism with its unnecessary traffic controls, to ensure the road network is utilised to its full potential.

Liberalising the taxi market – for example by ending licensing and allowing shared taxis and minicabs to pick up passengers at the roadside – would further strengthen the Mayor’s hand, even if it means taking on another powerful rent-seeking interest, the black-cab drivers.

More radically, privatising the Underground could be a particularly effective measure, enabling the network to be broken up and sold off to different companies running different lines. Negotations over pay and conditions would then be decentralised. Perhaps most importantly, firms would be free to recruit low-cost non-unionised labour from overseas to replace strikers – for example, train drivers from central and eastern Europe.

Poorly used outer sections of the Tube system could also be closed down – perhaps converted into connecting busways or even toll roads if it proved profitable. This could make better use of existing resources, while further weakening the stranglehold of the RMT.

11 June 2009, IEA Blog

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