Taxi drivers of the world, unite!
By Alberto Mingardi
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.