The impossibility of regulating street vendors

The Times reports that many American cities are grappling with the issues raised by an increase in food trucks vending relatively inexpensive and convenient food in its streets.

Opponents of food trucks argue that such food trucks clog streets, eat into scarce parking spaces, pollute the area, annoy neighbours, and cannibalize the earnings of existing restuarants. Therefore, several US cities - Seattle, Chicago, and Raleigh - have sought to regulate food trucks with more restrictions - notifying areas where they could park, types of food they could sell, distance from restuarants etc. Such restrictions are expected to regulate the food truck business without causing much harm to existing business, raising opposition from neighbours, and by minimizing negative civic externalities.

This example is an excellent illustration of the difference between societies like India and the US in using regulations to control such types of activities in our cities. The city councils in the US obviously take for granted that these restrictions are enforceable and the minority of deviants could be forced to toe the line by strict enforcement. In contrast, in Indian cities, practical considerations, as discussed here, makes enforcement a near impossibility.

For a start, most city spaces and corners are already occupied either by squatting hawkers or cart-based vendors. Despite grappling with the problem for several years now and having passed numerous legislations, no Indian city has even remotely succeeded in addressing the problem of regulating street vendors. In simple terms, the challenge is in choosing between depriving tens of thousands (as in the case of any decently large city) off their livelihoods and in the process bringing order and discipline into urban life or leaving cities as stages for vibrant small-scale entrepreneurial activity with all its attendant disorderliness problems.

There are two issues here. Is there enough space to accommodate the demand? And assuming there is enough space, is enforcement of regulations possible? The first question is easily answered. No! The rapid pace of urbanization in recent years has ensured that there is no corner of any city which has been left free from being encroached. The informal market (controlled by local musclemen) in accessing such spaces and the magnitude of its rents is a reflection of their huge demand.

Any rationing would perforce leave massive numbers of people without their livelihoods. This is apart from sucking the government into a highly corrupt and inefficient allotment process, which the informal second-best market is currently administering with reasonable fairness and efficiency. The possible incentive distortions with such an arrangement are unimaginable and hugely counterproductive.

About the second issue of enforcement, as already discussed, it is a non-starter. When deviations and violations are the norm than the exception, enforcement becomes simply impossible. Enforcement works when deviations are at the margins. Strong enforcement signals can get the recalcitrant few at the margins to fall in line. It fails when the majority are deviants or violators.

Given the scarcity and demand for space, actual enforcement would involve uprooting large numbers of street vendors from each area in order to limit, regulate and discipline the hawking activity. Apart from the political impossibility of getting such policies through municipal councils, there is the practical issue of finding out alternative livelihoods for them.

This argument should not be seen as one supporting street hawkers. It is merely outlining the challenges that need to be overcome if we are to regulate street vendors in developing countries. Unfortunately, it is a challenge which does not appear to have been satisfactory addressed anywhere.