The taxi industry tries to regulate a technology-fueled competitor.
Cab drivers and journalists have a natural affinity for each other. Cab drivers love the fact that journalists will gladly listen to their stories and complaints, and journalists love the fact that cab drivers can often provide a good quote to spice up a story in a strange city where news is happening.
So when I was in Paris earlier this month and observed a massive protest by hundreds of cab drivers — they were deliberately clogging traffic by driving incredibly slowly on major arteries — my sympathies were initially with the cabbies. Then I found out that they and cab drivers in many other European cities that day were demanding that Uber, the service that allows you to hail a car ride from your smartphone, be shut down. Uber, which launched only four years ago, now operates in over 100 cities in 38 countries and is experiencing mushroom-like growth. Uber has been so successful, it just managed to earn an $18 billion market valuation.
The anger against Uber — and its smaller competitor Lyft — is also worldwide and growing. In some cities, Uber cars have had their windows smashed and their tires flattened.
Basically, the taxi industry is heavily regulated almost everywhere. The deal is that cab owners put up with a lot of picayune regulations in exchange for price floors and/or a limit on the number of cabs that are licensed to operate. A Washington Post investigation of the cab industry in Chicago and other cities found that it “is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them, and middle men to manage and lease them to drivers who own nothing at all. Together, they’re fighting to protect an asset that was worth about $2.4 billion in Chicago last year.”
It’s no wonder that in so many cities the taxicab owners, the owners of black livery vehicles, and the drivers of both have joined together to try to regulate Uber out of existence. This month, the Department of Motor Vehicles in Virginia issued cease-and-desist orders to Uber and Lyft. Drivers will be fined if they are caught accepting Uber clients.
Uber and Lyft are straight out of the “creative destruction” model that economist Joseph Schumpeter said was the essence of free markets. Competition can serve as a powerful force to improve the operation of economies. Uber has built a better, tech-savvy mousetrap for transportation services. Uber drivers’ cars are often newer and cleaner than traditional cabs, and customers can easily request upgrades. Drivers are screened, and a passenger can see a picture of the driver and his or her customer-service rating before getting into the car. Low-ranked drivers can be and are removed from the system, an accountability system that’s missing from most cab companies.
Many drivers with an entrepreneurial bent also like Uber because they can decide what hours they will work and use the service to earn a supplementary income if they happen to be unemployed. Armando Rojas, an immigrant from Colombia who now lives in New York City, told me he likes the flexibility of Uber “and the fact you are more your own man.” Having said that, he complains the company has lately added fees, which, combined with new taxes, make it almost as difficult for him to make ends meet as it would be if he were driving a cab.
The latest battleground between Uber and its enemies is in Cambridge, Mass., the home of both MIT and Harvard, powerhouses of scientific research. But the low-tech cab industry is pulling all the strings it can to get local government to kill innovation and unplug Uber. “We will do everything and anything to help our fellow brothers kick [the app services] out,” Chando Souffarnt, a cab driver, told the Boston Herald at a recent hearing on the issue. He was challenged by Gordon Gossage, a Lyft driver, who said cab drivers “don’t have the constitutional right to be protected from competition.”
The new regulations the Cambridge licensing commission proposes would effectively ban Uber-style services. They would impose a $50 price floor on Uber rides and restrict the way the company uses technology to calculate fares.
Despite the collusion between crony capitalists and local governments to stop Uber, I believe that smartphone-hailed car rides are here to stay. Uber has grown so quickly and developed such a loyal customer base that it won’t be easily shut down.
“If there were medallions associated with the buggy whip, we probably would still have them today,” Lee McGrath, an Institute for Justice attorney who is defending Uber drivers in court, told the Washington Post. Smartphones and computers have revolutionized shopping for airline tickets, and it now appears inevitable they will do the same to ground transportation.
— John Fund is national-affairs columnist for NRO and co-author of the recently released Obama’s Enforcer: Eric Holder’s Justice Department.