Preventing
services like Uber and Lyft from operating discourages competition and
innovation
By Craig
Westover June 9, 2014 | 1:45 p.m. EDT + More
Everyone
seems to love rideshare services Uber and Lyft. Everyone, that is, except
regulators and the government-imposed transportation cartels they defend. You
know, the ones who have been working off the same tired model of service since
the days of the horse and buggy? Virginia’s Department of Motor Vehicles
recently fined the operators of both innovative car services, and last week the
government issued cease and desist orders demanding both stop
operating or their part-time drivers would face more fines.
How
popular is Uber? Just this past week it
was valued at more than $18 billion.
In a
previous life, I worked for a Fortune 500 corporation at a time when
“entrepreneurial spirit” was the buzz phrase of corporate America. While
downsizing and rightsizing, America’s corporations in the 80’s adopted a
“If-you-can’t-beat-them-join-
“We
want our managers to be more entrepreneurial,” our divisional vice-president
wrote in a memo. “We want you to think like entrepreneurs. We want you to be
innovative and take risks, but be careful.”
Do
we see the problem, here? Corporate executives thought they
were delivering the message “be innovative and take risks,” but operational
managers heard only the message “be careful.” Not surprisingly, whatever
entrepreneurial spirit existed was nipped in the bud.
Fast
forward to the political climate of 2014. Like misguided corporate
executives of the 1980s, elected officials are sending mixed messages to
American entrepreneurs.
The
popularity of urban living is on the rise. Young, progressive Americans — the
so-called creative class — are moving back to the cities and bringing with them
a whole new set of expectations that elected officials fail to grasp, but
entrepreneurs do.
These
urban pioneers and entrepreneurs are seeking and providing services in
non-traditional ways that are at odds with politically powerful, entrenched
interests shaped by decades of regulations that suddenly put them at a
competitive disadvantage. Instead of remaking their businesses to be more
competitive, entrenched interests look to government to provide regulatory
cover for their inefficiencies.
Case
in point is the conflict in a number of cities between ridesharing companies
such as Uber or Lyft and traditional taxicab companies. Ridesharing offers
convenience, comfort and affordability and is consistently one of the least
expensive means of getting around major cities. It provides drivers with a
steady income (that routinely exceeds twice the minimum wage) with little
initial investment.
Ridesharing
is a winning situation for everyone except
established cab companies, who argue they should have a monopoly
on driving people around town. And, as we’ve seen in Virginia and elsewhere,
cab companies have clout. Across the country they are leveraging their
political connections to convince city officials to regulate, limit or outright
ban ridesharing altogether.
The
conflict between innovation and established interests is not limited to
transportation. A new class of “unexpected libertarians” is emerging in cities
across the country who are increasingly frustrated with many aspects of urban
life where government is proving incapable of fostering innovation and choice —
two expectations that are pillars of the millennial generation.
In
response to a host of other urban innovations that challenge the dominance of
established businesses, cities are “leveling the playing field” not by relaxing
regulation across the board but by expanding the scope of regulatory
restrictions and the heavy hand of government.
AirBnB, a
website that connects travelers with property owners who have homes, rooms and
even boats and treehouses to rent has come under intense fire because it
assumes responsibility for the quality of the rentals it lists instead of
abiding by hotel codes and paying hotel taxes. Food trucks providing
diverse and affordable fare are deemed unfair competition by restaurant owners
who petition
city halls to regulate the competition. As microbreweries
become less a fad and more a trend, big-time
brewers and beer distributors become increasingly hostile and
petition local governments to impose strict regulations on how the newcomers
sell their products — or even prevent them from opening at all.
Do
we see the problem here?
Rhetoric
doesn’t solve problems; actions do. Innovation doesn’t follow existing rules,
so laws must adapt to allow the marketplace to innovate, grow and improve.
Elected officials need to let the market work. Competition on equal terms means
freeing existing businesses to compete, not preventing new business from
challenging the status quo.
(Craig Westover is a communications
fellow with the Institute for Justice.)
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