Alberto Mingardi  

Taxi drivers of the world, unite!

Dear Reader Almost Pass... The Missing Arguments...

On Wednesday last week, taxi drivers all over Europe protested and went on strike against Uber. Uber is set to conquer the European market, in spite of allegations of illegality of the services it provides under current EU regulations.

Uber has chosen an uneasy path: it challenges existing regulations, rather than investing into the political process to get them eased down. Taxi drivers have proved to be, over time, a tremendously resilient interest group. I'll give the example I'm most familiar with. In Italy, we have been talking about liberalising taxi drivers' licenses for some fifteen years now. My Institute used to promote a proposal first advanced by Franco Romani, a great man and a wonderful scholar of law and economics. The problem with increasing the number of taxi drivers, as seen by those who are already in this trade, is the erosion of the value of their license. Romani proposed to liberalise by doubling the number of licenses available. Instead of issuing new ones, taxi drivers would be assigned a second one. If they all agreed that they didn't want more competitors, they could simply burn the second licenses. Or they could think about it and start to trade them. Instead of thinking about the loss of value of their own license (which they'll verify once they retire and try to sell it to somebody else), they could focus on ripping an immediate gain out of the sale of the second one.

Over the years, I talked about this with many taxi drivers. Not surprisingly, they didn't like the idea. People tend to be naturally conservative, and even more so those that were raised in an uncompetitive environment. They prize stability and tranquility over the potential and yet unsure gain of a second license. Of course, no municipality in Italy has ever tried this strategy: thus, we have no experiment to rely upon.

Uber has been a game changer, and now the problem is technology, not a proliferation of new licenses.

I found fascinating that the taxi drivers succeeded in mobilising in unison, all over Europe. Indeed, Uber is a global company: but it is remarkable that protestors succeeded in organising globally too. It is also fascinating that taxi drivers' interests are homogeneous, regardless of the fact they do operate in Berlin, London or Milan. There are minor differences in taxi regulation, but they followed a remarkably similar path. London is the only place where the taxi system is somewhat more "meritocratic", as drivers need to pass through an apparently highly complicated examination. So, their anti-Uber rhetoric actually sounds better: "Why should we have to go through that examination process, when people can just go and rent a Mercedes car and work up here, just because they've downloaded an app?"

But, at the end of the day, the story is rather simple and similar everywhere. The number of taxiS allowed to operate has been limited over time. Black cars were forbidden to pick up passengers on the street. Now technology makes that available, but also allows for simple citizens to attempt to provide a similar service, if they want to (UberPop). In the world of GoogleMaps and GPS, you don't need to paint your car white (as in Milan) or black (as in London) to signal that you'd be happy to transport people if they're to be charged.

The famous final sentence of Marx and Engel's Manifesto, "Proletarians of all countries, Unite!", was famously popularised in "Proletarians of the World, Unite. You have nothing to lose but your chains!". In the case of taxi drivers, they do unite precisely because they feel they have much to loose.

Investors appear to think that way too, as Uber capitalisation is now close to the market cap of Hertz and Avis combined. Is Uber the taxi of the future?

We don't know, but certainly the company is pretty smart in managing the protest. Instead of building bridges with taxi drivers, Uber used the strike as a marketing device, offering big discounts to clients and attracting new ones. So the Washington Post reports that "Uber's British ridership went up 850 percent yesterday thanks to black cab protests that left Londoners snarled in traffic".

The Uber story is getting more interesting every day: vested interested that are very entrenched in a local environment succeed in coalescing worldwide, a multinational company turns a strike into a profit-opportunity. I look forward to the next shows.

Comments and Sharing

COMMENTS (6 to date)
Duncan Earley writes:

I have never understood why city governments think limiting taxi licences is a good idea. Its not a knowledge issue like sugar subsidies... Voters hate taxi shortages and are vocal about it. Its the big puzzle of local government for me.

Mike W writes:

I believe the rationale for regulating the taxis here in Las Vegas is to prevent the gouging of out-of-towners and thereby damaging the tourist trade. Uber overcomes that argument.

ThomasH writes:

I think taxi drives should unite to demand that they be regulated like Uber. I think conservatives are going to loose on this one.

mike davis writes:

Two questions.

First, the proposal to issue new licenses to existing license holders is clever but if rates are regulated, would it really make much difference? Cartels have to stop two things: entry and cheating. Issuing new licenses might encourage entry but if the cops are enforcing the cartel pricing, would consumers be that much better off?

Second, why are the European cabbies mounting a much stronger protest against Uber than is seen in the U.S?

Could it be because the rents earned by Euro cabbies are significantly higher than in the U.S.?

Or are there some cultural differences that help explain it? Do European blue collar workers have a stronger sense of class solidarity than American blue collar workers? U.S. cab drivers are now overwhelmingly new immigrants. (At least I think that’s true. I’m too lazy to find numbers to confirm it.) Does that matter?

R Richard Schweitzer writes:

As posted over at the liberty Law blog, there are potential solutions which might give rise to a transitory era from this disruption.

The existing systems for dispatching, cruising or stationing in most taxi systems can either (1 ) be incorporated into one or more of the existing Uber-type communications; or (2) they can establish their own Uber-type “hailing” communication; or one which gives preference to their particular facilities.

While the new system is more responsive, information available does not indicate that it is less expensive for the services rendered.

Mark V Anderson writes:

Based on the politics I've seen of Europe, I think the taxi drivers will win. Based on the absurdist "pro-worker" opinions that seem to be majority opinions in most American cities, I don't see how Uber can overcome such "thought" in more leftist Europe. Taxi drivers clearly fit the model of the proletariat, and so are irresistible to leftists.

I hope I'm wrong and European cities are more rational than that. Am I overly prejudiced against Europeans, Alberto?

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