Daily Catch

Uber and suffocating government regulations

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The word came down just days ago. Uber is going to lose its licenses to operate in London. The official reason given is that Uber’s “approach and conduct demonstrate a lack of corporate responsibility.” Regulators (political appointees focused on protecting their turf) faulted Uber’s safety and security practices for the decision. On the surface, this makes sense as many Uber drivers have been charged with the horrific crime of rape. Although this would be more impactful if more than 1,000 of London’s Black Taxi drivers have not also been accused of rape, murder, and child abduction.

The real reason Uber was banned had nothing to do with safety and security. It has to do with protectionism. Government is supposed to serve the needs of the people, at least democratic governments. Totalitarian and dictatorships do what they want, but democratic governments are supposed to serve at the will and pleasure of the people. However, the city government in London is serving special interests too lazy or incompetent to compete in the free market and view their jobs as an entitlement. This decision to revoke the licensing for Uber will affect 3.5 million users and 40,000 drivers.

The short-term effects of this decision create an inconvenience for Londoners and prove that government cares more about crony protectionism than serving the people. The long-term effects of this decision are far more terrifying. This decision, forcing innovative companies to comply with archaic regulations designed from times past, has the potential of killing innovation and disrupting businesses globally.

Innovation and disruption focus on exploiting weaknesses and flaws in traditional business models. Using Uber and Lyft as examples, these companies found multiple flaws in transportation and offered solutions that embraced technology, need and opportunity. The very existence of these companies forced traditional businesses like taxi services to adapt or become obsolete.

The free market method of adapting would have been to evaluate the reasons why an Uber or Lyft entered the marketplace and work to solve those weaknesses and compete against the disruptive organizations offering better value and service. But that would be hard, forcing too many entrenched industry personnel out of their comfort zones to work harder. Why do that when the taxi industry can simply call on its trade group representatives to (cough) talk to government and find a way to kill the competition.

This is yet another rotten example of cronyism that infects the government taxpayers pay for, the one that voters elect and put into office with the expectation that these politicians will serve the voters’ best interests.

It does not matter if the organization is a corporation, trade group or union. These organizations, flush with cash, own government. They manipulate regulations to hurt small businesses, start-ups and SMEs. And politicians and regulators willingly accept political contributions from these groups.

For a crony organization, the cost of the political contribution is minimal compared to the risk of lost business or the investment that might be needed to update and change the industry. Much like corporations supporting a higher minimum wage, influencing regulators is about self-interest and killing competition rather than the public good.

Regulations hurt business growth and kill innovation. Regulations slow economic recovery and stunt opportunity creation. Government can change this by removing the majority of regulations, however, government will not because these regulations are moneymakers. It’s similar to the mafia with its protection rackets, only with government protectionism, the damage is far more destructive because it is presented as the “common good.”

Maria Ludkin, Legal Director of GMB, the drivers’ union, is quoted as saying “No company can behave like it’s above the law, and that includes Uber.” That’s right, no organization or person is above the law, but given the number of assaults, abductions, murders and rapes committed by taxi drivers, it seems like the law is being enforced selectively. She continues, “No doubt other major cities will be looking at this decision and considering Uber’s future on their own streets.” That is the problem. The London politburo, I mean regulators, are setting a dangerous precedent by selectively focusing on one organization that their patrons dislike rather than working to enforce regulations equally and require traditional businesses to evolve and improve.

These regulations, created with the influence of crony organizations, ultimately affect the consumer. These restrict customer choice and cost. More importantly, these types of regulations influence markets and provide an inferior product that does not have to change because it is protected by regulators and politicians.

The fact that Uber is the company being victimized by government regulators is annoying and frustrating. If it can happen to Uber, who will be next? Airbnb has been targeted by the hotel and rental industries, Tesla has the potential to be targeted by the automotive industry, so where does it end? How much does innovation and entrepreneurship have to suffer because traditional, established businesses want to kill competition?

There is no question that some regulations are needed. However, those regulations cannot be enforced in a corrupt, unbalanced way. Let the market decide what is best and what is most important. London has a population over 10 million. Because of these protectionist regulations, 34 percent of London’s population will lose a choice they had in their travel and commute.

About Matt Rogers

Matt Rogers is a passionate believer in the power of small business capitalism and opportunity creation. Through his experiences in banking, international business and academia, as well as living internationally, Matt possesses a unique view of entrepreneurship, innovation, and culture and how these forces can benefit a society. Matt currently teaches entrepreneurship and innovation in Bogota, Colombia and writes about the importance of entrepreneurship and innovation in an era of growing government regulation and corporate power. He can be reached at matt.f.rogers@gmail.com

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