Un Fare

How Uber Cheats Everybody

“In the tradition of capitalism, there is nothing new here,” says Richard D. Wolff, Professor Emeritus of Economics at the University of Massachusetts and currently visiting professor at the New School University in New York City. When an industry starts, says Prof. Wolff, it undergoes “ruthless competition” with like businesses and, in the process of fighting its way to the top of the industry, it cuts corners. It may use inferior/cheaper materials or be less careful in production. This raises concerns in the public over whether the product or service is delivered “as advertised” (at best) or is dangerous to the public (at worst).

What eventually happens, he says, is that the public demands that the government get involved to regulate the business or industry to ensure that however businesses compete, they will not endanger the public. This is how things began in the taxi and limousine business: in order to beat the competition, companies scrimped on insurance or vehicle maintenance or driver qualifications or cut-rate fares, and so on. Left to itself, says Prof. Wolff, a capitalist competition will eventually endanger the public, so the public will demand that government ensure public safety and fair (or “fare”) competition. The government starts requiring businesses to behave less like sociopaths and truly serve the public without endangering the public.

UberLogo.pngThis is what companies like Uber and Lyft and the like are doing. The taxi industry already went through this process, but Uber and Lyft are re-inventing the steering wheel. No, this isn’t a software innovation; this isn’t “ride-sharing”; this is really an old vintage in a new vessel. Uber is taking an unfair advantage over the taxi industry by trying to escape quality assurance and labor regulations under the guise of “ride sharing.” Uber isn’t really ride-sharing, says Prof. Wolff: it’s worker exploitation. That’s because the Uber drivers are responsible for everything that costs money (insurance, maintenance and cleanliness, gasoline, etc.), while Uber itself, a company valued at more than $60 billion, gets to pick the pockets of their so-called driver-partners for everything that makes money (a “partner” who has no voice in business decisions and shares none of the profits). Uber doesn’t even guarantee that your driver isn’t a criminal!

The difference between an Uber and a taxi is that taxi service comes with certain guarantees and Uber comes with certain risks. Indeed, Prof. Wolff predicts that, left unregulated, the Ubers and Lyfts of the world will capture the industry, the regulated taxi companies will go out of business (never mind that thousands of jobs will be lost), there will be a kind of “wild west” effect in the industry, there will follow a lot of cheating of drivers and customers, a lot of accidents without insurance protection, passengers, drivers and pedestrians will get injured or killed—and we’ll go right back to where we were before: the public demanding that government get involved to ensure public safety and fair competition.

Oh, and don’t forget the other inevitability of capitalist “competition”: capitalist enterprises tend toward concentration and eventually fall into monopoly. And then, when you have nobody else to hail for your taxi service, what do you think will happen to those low fares? In Germany (as well as Spain, where Uber is banned), Uber tried to pull this stunt, but the Germans were not so easily fooled. And the European Court of Justice will decide sometime in 2017 whether Uber is indeed a ride-hailing app or just another taxi service.

But Uber’s sins against the common weal only get worse.

As Richard Stallman pointed out on his blog, Uber drivers can be fired (or “deactivated”) for low passenger ratings. What gets you a low passenger rating vs. a high rating? Sure, catering to your customer is helpful, but what if your customer wants to do something illegal or abusive in your car? Restaurant wait staff know very well how abusive customers can be, because customers know their tips depend on their tolerance. How much worse do you think it could it get in the privacy of a car?

Stallman goes on to point out a plethora of problems with Uber—from cutting driver rates arbitrarily, to discriminating against black or female passengers, to undercutting its competitors to drive them out of the business—something Standard Oil did in the early 20th century. And as the gridlock releases, there will be only one car left on the road.

But Stallman’s biggest critique of Uber should cause one to pause: the loss of privacy.

Uber requires passengers to identify themselves, both to order a ride and to pay. It also records where you get the ride and where you go with it. Uber can track who has a one-night stand. … If you take an ordinary taxi and pay cash, it will generate no records associated with you…. Uber’s … practice of identifying passengers enables drivers to find out who the passenger is. This makes some women scared to use Uber.

Yes, says Stallman, Uber today is one choice among many. But when it achieves monopoly status—and every capitalist enterprise lusts after monopoly status—prices will go up, quality will go down and freedom will be left with the meter running. And as the writer at Jacobin opined,

“Sharing economy” companies like Uber shift risk from corporations to workers, weaken labor protections, and drive down wages. … Drivers aren’t “partners” — they are laborers exploited by their company. They have no say in business decisions and can be fired at any time. Instead of paying its employees a wage, Uber just pockets a portion of their earnings. Drivers take all the risks and front all the costs — the car, the gas, the insurance — yet it is executives and investors who get rich.

Even granting some regulatory control, Uber will attempt to subvert those regulations with its wealth—what is called “regulatory capture.” Regulatory capture can be cured only by democratic control. Uber and like companies are cheating: cheating you, their drivers and the public. Before you are seduced into hailing an Uber, just because of those Un Fare prices, be prepared for what you will give up.

Update (12/16/2016): See this article.
Update (1/14/2017): See this article.

Posted in Economics, Rant

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John Mill

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