When my friends and I landed in St. Croix, US Virgin Islands (USVI) in the summer of 2023, we assumed getting around would be a breeze. It is a US territory, after all. We were unpleasantly surprised to find this was not the case. Instead—too young to rent a car—we were met with no rideshare apps (Uber, Lyft, etc.) and left with only a handful of dirty, expensive, dubiously safe, and slow-to-arrive taxis.

The government has essentially handed control of ride services on the islands to a cartel of licensed taxi drivers—and they abuse this crony privilege to the fullest.

The Taxi Cartel

Prices were a seemingly non-negotiable $20 per person regardless of distance, and they only accepted cash. It was only a few miles from the airport to our Airbnb yet still cost an astonishing $140 for the fifteen-minute, one-way ride for the seven of us. To add insult to injury, our driver was unfriendly, drove rather recklessly, and declined to stop for us at a nearby grocery store without charging an additional $20 fee.

I soon decided to inquire with the locals about possible alternatives. It was then that I discovered a seemingly lucrative, word-of-mouth, black-market taxi service. A woman running a beachside gift shop discreetly handed me a simple business card. I was told to call the number and keep it under wraps. (Note: Out of respect for privacy and legal concerns, I am omitting the real name of the unlicensed provider referenced in this article). …

The USVI taxi cartel and the entrepreneurial response is a case study in what Austrian economists have been telling us for decades: regulations under the facade of “protecting the public” always benefit the select few—the regulators and their cronies—at the detriment of society at large. As Mises puts it:

The inefficient expert will always aim at bureaucratic supremacy. He is fully aware of the fact that he cannot succeed within a competitive system. For him all-round bureaucratization is a refuge. Equipped with the power of an office he will enforce his rulings with the aid of the police.

The Taxicab Commission’s opposition to free competition stems from their desire to preserve the racket through which they prosper at the expense of consumers, knowing they cannot compete on their merits alone with superior, more eager, more value-productive competitors. …

Licensing requirements and price controls—in any industry—result in misallocation: shortages or surpluses and overpriced or underpriced goods and services. This is due to the inability of bureaucrats to access invaluable market data, namely, price signals. Mises puts it plainly: “It is just a system of groping about in the dark.”

Finally, the notion that the economy is a static state that must be preserved for the sake of stability is senseless. The economy is dynamic—constantly changing as consumer preferences, technology, the external environment, and entrepreneurial activity evolve. Attempting to preserve past conditions breeds inefficiency and stifles innovation—ultimately at the expense of everyone outside of the politically-preferred class.

The taxi cartel in the US Virgin Islands is a microcosm of a broader economic truth: when the state suppresses competition by any means, the result is higher costs, lower quality, and protection for the privileged few—unless driven entrepreneurs manage to flip the script.