Breaking the Poop Cartel
Today I listened to an interesting Planet Money podcast, about poop cartels in Senegal. In Planet-Money-speak, a "cartel" is a group of organizations (in this case poop-collectors) who agree not to compete with each other, thus raising prices for consumers and destroying economic efficiency.
Here's the story, as related by the podcast. In Senegal there is no municipal plumbing, so people use septic tanks. Unfortunately, septic tanks fill up and need to be emptied. The classy way to do this is to hire a toilet sucking truck, which will suck up all the sewage from your septic tank and take it to a waste treatment plant. To do this you go to a big parking lot and ask a trucker for a price. Then you accept that price, because there is no point in going to any other trucker -- they will all give you the same price, and they will not negotiate. It is a hefty price, too: $40 to $60 USD, which is a month's salary for many people.
So many people turn to the illegal, but cheaper option: they hire people with shovels to dig up the sewage from their septic tanks. But these operators don't take the sewage to waste treatment plants. Instead they dig holes in the street and transfer the sewage there. It is unpleasant and the neighbours complain, and the Senegalese government has made this illegal. But for people who cannot afford to hire a truck, it is the cheaper option.
Enter nonprofit groups and university-trained economists from America! They knew there was a lot of supply of truckers, so the price to hire a truck ought to have been lower. So they set up a text-messaging system where individual truckers could bid on jobs, and the lowest bid would win. The truckers were skeptical at first. Wouldn't the competition reduce prices and lower their wages? Don't worry, said the economists. What you lose in margin you'll make up in volume, because more people will be able to afford your services!
So the economists set up a text-messaging service where a random subset of truckers are allowed to bid for a contract. The truckers start undercutting each other to get work. Prices fall! On average prices fall 7%. Some additional people (it is not specified how many) hire poop trucks. Hooray!
Then the grant funding the economists's work end, and they hand the service (dubbed "Uber for Poop" by the journalist, which one economist considers a compliment because Uber is doing great things) over to the Senegalese government, which runs it for an additional year before dropping the project. Then journalist Robert Smith tells us he is taking a fellowship, and won't be around as much any more, but thanks for listening to Planet Money.
Let's summarize, shall we?
- A group of poop-truck operators in Senegal show solidarity and effectively form a union. There exist independent contractors who shovel poop by hand, but they are mysteriously illegal and do not have access to dispose of sewage at the waste treatment centres even if they wanted to.
- Some American NGO and some American university economists (neither group of which lives under a free market) decide that this is unacceptable, and so work to undermine solidarity and break the union. When unions work to give Americans 40 hour work weeks and benefits then that is fine, but if they protect the living standards of Senegalese poop-truck operators it is an outrage.
- The economists design a system that is like Uber for poop. They convince the truck drivers that they will make up in volume what they lose in scale, which is exactly how Uber drivers feel.
- Remember kids: Uber is NOT a free market. Uber sets the prices and the drivers abide by them, or they are kicked off the system. Uber's stated goal is to get rid of drivers entirely. This is the analogy the university economist appreciates.
- The text-message application successfully undermines solidarity and fosters competition among the truck drivers, breaking trust and social ties.
- Prices go down 7%, so instead of paying a month's salary to get one's septic tank cleaned one can pay 93%.
- Unfortunately, prices do not drop enough to put the hand shovelers out of business, which I guess is one of the goals of these subsidized economists.
- As soon as their funding runs out, the economists demonstrate their dedication to market capitalism by abandoning the project. Why would they stay? Nobody asks where this funding came from, because it was probably US government largesse.
- Then the Senegalese government drops the project. Why would it keep it running? It is not profitable.
- We all cheer, and Robert Smith goes off to enjoy his fellowship (and on whose money is this fellowship funded?)
- Then we wonder why America has a reputation of meddling in the affairs of other countries then messes things up. We are all supposed to vehemently deny that America continues to be a colonialist oppressive state.
- Nobody asks why exactly it is okay for the Senegalese earn $60 per week when US university professors spend that much on a meal, or why the Senegalese government gets off the hook for developing infrastructure in its cities.
Yay capitalism! Yay market forces. Keep listening to Planet Money and keep pretending that it does not have an agenda of its own.
Look, man. I'm not trying to say that it is okay for poop to get buried in the street, or that it is easy for the Senegalese government to provide actual plumbing the way we have in North American cities. I am not even saying that there is no role for do-gooder NGOs or university economists in fighting poverty. If these are your conclusions then you are missing the point.