Friday, October 10, 2014

Competition or monopoly control: the rise of Uber

A headline from an article in the Daily Signal, a right-wing blog: 

Ride Sharing: Cab Drivers Hate It, Entrepreneurs Love It. 

This headline is self-contradictory.  If cab drivers aren't entrepreneurs, who is? Cab drivers dislike the competition from well-financed, unethical companies because they are just scraping by as it is.

A quote from the same article: 

Ever wonder why taxis are run-down and unclean and drivers can be terrifyingly bad? Lack of competition is at least part of the answer. 

Nope. Never wondered. Because these guys (taxi drivers) are my neighbors here in Alexandria, VA. They are struggling to ear a living in their adopted country, speak little English, and learned to drive without learning basic rules of the road.

Ever notice how, to a conservative, more competition is the answer to every problem? Taxis are an example of too much competition, at least in Washington, DC. The number one competitor of the taxi is the private automobile, but there are also car rentals, zip cars, hotel limousines, and mass transportation.

The need for competition, according to the writers at the Daily Signal, is limited to working-class businesses, however. 

States have licensing requirements for all manner of occupations, from barbers to florists to interior decorators. Sometimes those regimes actually make entering a field without a license a crime, which can lead to outlandish SWAT-style raids during which people get arrested for “barbering without a license.”
The article and its right-wing authors do not mention that the primary and most expensive regulation of professions is not of working class but of upper class workers.  The monopoly privileges enjoyed by doctors and lawyers (among others) result in huge incomes for those on the inside and jail sentences for those on the outside who would like to get a piece of the pie. But I digress.

What taxis need in Washington DC is more regulation. The drivers need to achieve basic competency in English. They need to know where things are and the best ways to get there. And they need to understand the rules of the road in America. A little common courtesy would be helpful, too.

Oh, yeah, they would need to be guaranteed a wage, and not the current starvation wage, but a livable wage, the kind they could get with a strong union.

Maybe then I will use taxis again.

The Rise of Uber

Uber is a corporation that is taking over the market now served by taxis. It uses the same strong-arm tactics used by ENRON--lying, cheating, and stealing. These are apparently the acceptable modes for competition in Capitalist America these days.

My problem with Uber is this. They are taking over a market where there is already little profit to be made. Taxi drivers work for a minimum wage, or even less. Uber will probably drive all other competition from the market, using its capitalization of over $1.5 billion. This amount of capital is like taking an uzi to kill a fly.

The inevitable result will be an ENRON-style failure. Uber will operate at a loss until it buries its competition. At that point, it will raise rates until it looks profitable on paper. Its marketing department and flacks in the financial press will hype the company as the next Amazon. After its original backers make a fortune by selling shares in an IPO, it will be discovered that all the profits were illusory and the company will collapse, leaving the taxi business worse than it is today. 

Check that. At least in DC, it can't be any worse than it is today. Fortunately, there is an excellent subway system that will take you to the airport. That is hardly the case in other cities where Uber is trying to take over the market.

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