Uber and the City
As Uber gains more control over transportation in cities, it will also inevitably gain more interests in the decisions cities make that affect public transportation
It's been a rough week for Uber. After a woman was reportedly raped by an Uber cab driver in New Delhi, India has advised all states to ban such web-based taxis. This comes as bans were announced in Thailand, Madrid, and even Portland in the U.S. Legal challenges have sprouted up almost as fast as Uber's ruthless expansion. Germany has moved to block Uber, and even Seoul, often called a city of the future for its embrace of technology, announced a ban on the American-based Uber and an intention to develop an "in-house" taxi-hailing app. All of these cases around the world show the increasingly problematic impact of the much-vaunted "sharing economy" in the world's cities.
The Sharing Economy: Myths and realities
As Uber encounters cities and governments wary of both the economic impact on taxi drivers as well as safety and insurance concerns, the company digs in, even more determined to ride out these purportedly backwards bureaucratic regulators. It is self-evident to them that they are the wave of the future, and everyone else are merely Luddites. For Uber and similar companies, the so-called sharing economy is a utopian system that will empower small-scale entrepreneurs and free up underutilized assets for participation in the market. It bears some resemblance to the ideas of development theorist Hernando de Soto, who in his The Mystery of Capital, argued that giving the poor formal property rights would allow them to turn their underutilized slum dwellings into capital for participation in markets. This is, more or less, the argument that Uber seems to make about its service: empowering those with cars to sell their services through the web.
Another theorist, Jeremy Rifkin, has posited that the so-called sharing economy is emblematic of a "zero marginal cost" economy, in which the emerging affordability of production and proliferation of information technologies leads to a post-capitalist future. In an article on Uber, he writes rather optimistically that, "New companies, like Uber, will thrive, primarily as aggregators of shared network services, allowing them to prosper as powerful partners in the coming era, but they will no longer be the exclusive arbiters of economic life." But of course, exclusive (or at least powerful) arbiter of the transportation market in cities is precisely what Uber does hope to achieve. And once that monopoly power is in their hands, what is to stop them from raising prices, or increasing the percentage it takes from drivers? Uber will be controlled by investors, and profit is the end goal.
The problem is that Uber as an app doesn't function as a mere market through which others sell or buy services, such as eBay. Uber owns no cars or actual transportation infrastructure, but the mobile app itself is, in a sense, the transportation infrastructure. If Uber was simply another transportation company operating in cities alongside cabs, they wouldn't be so "disruptive". Their ruthless expansion is proof enough that they are not satisfied with making mere profit. Rather, they intend on disrupting, again using this Silicon Valley buzzword, the way people move around in cities. Cab companies, however bureaucratic or sluggish they may be, were never intent on continuously revolutionizing the experience of transit in cities. They provided a service that was useful, but it was regulated because cities know that if an infinite number of cab medallions were issued, competition could become so fierce that cab drivers wouldn't be able to make money and quality and safety could suffer, too.
Flexibility of labor
Cities around the world have reacted warily towards Uber. One factor is the protest of cabs and their unions or representatives. Uber's impact on the cab medallion market in New York does suggest that it is already having a rather significant impact on cab drivers. The prices of a cab medallion, the official certification one needs in New York to be a yellow cab driver, are falling dramatically. But what's also clear is that Uber drivers are making wildly varying hourly salaries, and usually are able to do well only while driving during so-called peak hours during which surge pricing is implemented. Uber's claim of $90,000 median annual salaries in NYC has been widely debunked, and interviews with many drivers have shown that many are making less than minimum wage.
While Uber's CEO Travis Kalanick is known to be a proud libertarian in the mold of other Silicon Valley entrepreneurs, he also recently admitted that Uber's success would have been much harder without Obamacare. Without a way for self-employed drivers to obtain reasonable health insurance, many Uber drivers might have opted to take on jobs that provided health insurance. Uber, which provides no health insurance, not to mention its lack of concern for insurance or liability in the case of driver injury or death, takes the proverbial high road. In other roads: the high road of not concerning itself with trifling issues like "laws" and "government. Yet of course, Uber is taking advantage of a government program.
"This is the key paradox of the sharing economy: these companies may boast about how they are empowering small-time entrepreneurs and part-time drivers trying to make a living. But in the background is the powerful company controlling an information network that makes a large flexible labor force possible."
Loss of Urban Autonomy
Labor and services may be more flexible in this sharing economy, as Jeremy Rifkin argues. But at the same time as services like Uber proliferate in global cities, they are also consolidating economic power in the hands of one very large company. This is the key paradox of the sharing economy: on the surface the PR of these companies may boast about how they are empowering small-time entrepreneurs and part-time drivers trying to make a living. But in the background is the powerful company controlling an information network that makes a large flexible labor force possible. Whereas cab companies in most large cities are locally owned and subject to local laws and regulations, Uber would have us believe than in a supposedly flat world, notions of state or a city are quaint and backwards. But Uber's attempt to displace local transit operators in cities around the world will have an effect analogous to the effect of massive property investment in cities around the world as well: control moves from small-scale ownership to large, global-scale ownership of land by hedge funds, investors, and private equity funds.
If a company like Uber obtains increasing market share in cities around the world, it will have power over pricing: to change at will the amount drivers make, and the amount passengers pay. Now of course, it's a market: they will only be able to charge what people will pay within reason. But several other factors change the equation. On the labor side, a proliferation and competition among drivers will drive down profitability for individual drivers. For passengers, there are of course certain benefits to using a company that operates in cities around the world. You land in a city, you hail a cab with Uber. Maybe you even accrue frequent rider points the more you use it. These kinds of loyalty programs could emerge as ways to keep passengers from using other services, just as airlines have.
As Uber gains more control over transportation in cities, it will also inevitably gain more interests in the political decisions cities make that affect public transportation. Say a city wants to build more metro lines in a certain area only reachable by private cab. But Uber has an interest in maintaining demand for its services, and spends money lobbying city governments to nix the plan. This is a hypothetical situation, of course. But given Uber's ruthless techniques trying to establish a foothold in all major cities around the world, it doesn't require much imagination to see how the growing control of transportation in cities around the world by one company might affect planning and transportation decisions in those cities.
This point should distinguish Uber from rival Lyft and fellow sharing-economy marvel Airbnb. Unlike Uber, Lyft has not challenged the authority of municipal regulations with quite the same zeal or fanaticism as Uber (ie: threatening to expose critical journalists' personal lives). Airbnb, while also generating conflict with cities over lack of regulation and complaints from neighbors of strangers traipsing through residential apartments, has not as of yet challenged the hotel industry in major cities in the same way Uber has challenged taxi drivers. Uber therefore represents a certain type of threat to the autonomy of municipal governments and their ability to regulate public transportation, which is arguably a public good even though it is sometimes run by private companies.
The Caveat
Having lived in Beijing, I can readily attest to the sheer difficulty of hailing a cab in many places in China's sprawling capital. The city suffers from a lack of cabs, and mandates such low fares that drivers are often loathe to take you to the place you need to go, complaining that they are headed in a certain direction. Refusals based on race are probably a factor too. Therefore I'm not going to say that the monopoly of cab companies is a perfect situation. Innovation and technology are inevitable.
However, one should differentiate between technological innovation in urban transportation and disruption of a city's autonomy. Cities have the ability to develop their own taxi hailing apps. Seoul's mayor already announced the city's intention to do so. Rifkin's ideas about the "zero marginal cost" economy should therefore be considered in a new way: the cost of developing such apps is so cheap, that Uber's current success is no guarantee of its future. Local alternatives to Uber could provide similar levels of service and convenience while also keeping the control of a city's transportation infrastructure within that city.
Uber and the Right to the City
The real issue for those who oppose Uber is not to stand helplessly in the way of technological progress. Many can admit that the ability to hail rides using smartphones is a convenient and perhaps inevitable innovation. But at a larger level, the rise of Uber presents a new challenge to the right to the city by those who live and work in cities around the globe. There should be more analysis of the potential power Uber could begin to exercise on a whole range of policies that might impact them--including policies that might involve urban public transportation funding, sustainability, road use, etc. Their past behavior shouldn't give us too much hope for anything less.