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One Cheer for Uber and Lyft

A lot of recent libertarian commentary has treated Uber and Lyft as the greatest thing since Bitcoin and 3D-printed guns. On the other hand, a lot of critics — including not only liberals but anarchists who should know better — have demonized it as a corporate gentrification tool straight out of the fever dreams of Richard Florida. My own position is a lukewarm, half-hearted support for such services — hence the title. Having them around is somewhat better than not. But that’s pretty weak tea.

Why Uber and Lyft Are Better Than Nothing

If the mainstream libertarian endorsements of Uber and Lyft are unwarrantedly enthusiastic, the liberal criticisms are utterly wrong-headed.

The anarchist opposition is somewhat understandable, if still irrational. The most important site of contention between Uber and Lyft and the anarchist community is in Oakland, set against the preexisting background of ideological polarization between the local anarchist community and Silicon Valley — expressed among other things by sabotage of the Google Bus — over gentrification and skyrocketing rents. So it’s only natural that the ride-sharing controversy would be fitted into the Bay Area anti-gentrification narrative.

But no matter how justified the grievances over gentrification, even the genuine Left’s objections to these services are misguided. The arguments from establishment liberals and “Progressives” are much worse.

To begin with, anyone on the genuine Left should be opposed to the medallion cab system on principle. It’s entirely understandable that liberals would reflexively support anything that can be characterized as “regulating business,” because in their goo-goo worldview all economic regulations by definition serve to rein in corporate greed and restrict misbehavior by the “malefactors of great wealth,” all in the name of “working families.” Liberalism sees itself, as quintessential liberal Art Schlesinger Jr. put it, as “the movement on the part of the other sections of society to restrain the power of the business community.” But in reality liberals are the dupes of big business, just as (in the classic “Baptists and Bootleggers” scenario) fundamentalist preachers who lobby to keep counties dry are the useful idiots for those who sell bootleg whiskey. You may have heard the (perhaps apocryphal) anecdote of the whiskey bootlegger who plastered his car with bumper stickers: “Keep _____ County Dry — For the Sake of My Children!”

But anarchists should not be so naive. Anarchists know, or should know, that the state is the executive committee of an economic ruling class. The main thing the state does is enforce entry barriers against competition, enforce artificial scarcities and artificial property rights, and socialize operating costs and risk and privatize profit. Regulations may be passed off as measures to restrain big business avarice for the “common good,” but most of the time they’re actually passed in the interests of the regulated industries themselves, in order to protect them from competition.

And the medallion system is a classic example of this. It’s a lot like the FCC’s licensing system, in which a finite number of licenses were originally granted; as this limited supply of licenses was bought and sold over the ensuring decades, the price of a license soared into the stratosphere, to the point that simply buying a license to broadcast — never mind building the actual broadcast facility — was a huge capital investment limited to the big players. The medallion system works the same way. In a big city like New York, the local government issues a fixed number of licenses, which are subsequently bought and sold by cab companies. The price of a medallion — the price of simply being allowed to compete, mind you, not the actual necessary costs of doing business — is around a million dollars. And as you can imagine, existing cab companies are the loudest and most strident voices against increasing the number of medallions and allowing more competition.

That’s one of the main things licensing regimes do. They don’t just set minimum safety and quality standards, and allow anyone who meets those standards to enter the competitive marketplace (although even then members of the licensed trade or business lobby to make the standards unnecessarily stringent just to restrict the number of practitioners). They actually set a legal limit on the number of licenses that can be issued, based on calculations — set mainly by the influence of the regulated industry — of “what the market will bear.”

Anyone who believes this serves the public welfare, and not the welfare of the taxicab industry, is just plain stupid. We know liberals are just plain stupid. But anarchists and others on the genuine Left should know better.

A central criticism of Uber and Lyft is that they can’t do the poor any good, because they’re available only to those who have credit cards and can afford smart phones. But as a matter of fact, 47% of those with incomes of $30,000 or below own smart phones. That really shouldn’t be surprising, considering it makes economic sense for people with limited incomes to bundle phone service, email and Web browsing into a single service package in lieu of a desktop PC.

In any case, criticizing ride-sharing services on the grounds that they only serve those who have smart phones and credit cards reflects a basic misunderstanding of how competition works. Even if the very poor can’t afford Uber and Lyft, the fact that people who can do so desert the established medallion cab companies puts more competitive pressure on those companies, both to lower their prices and eliminate discriminatory practices.

A reduced pool of customers for the legacy cab companies, relative to the number of cabs in service, will mean increased competition for the customers who remain. Most people have heard anecdotes of, or directly experienced, cabs ignoring would-be fares who are members of racial minorities or otherwise regarded as “undesirable” by cabbies. They do so because the pool of competing fares is large enough for them to pick and choose. Reduce the size of that pool, and they must be less picky and nicer to those who remain.

At the same time, the competition exerts downward pressure on prices, and reduces the monopoly rents accruing to medallion cab companies. The pricing of taxicabs, in which the number of competitors in the markets is artificially restricted by the state, follows the same pattern that Henry George described in regard to land rent. Since there’s a growing number of people with more money bidding up the price of a fixed supply, the suppliers can price their product based not on the cost of providing the service, but on the consumer’s ability to pay. When you have more fares, and a larger percentage of them economically well off, competing for a fixed supply of cabs, they bid the price up. By definition, monopoly rent is an amount of money over and above what would be necessary as an incentive for the seller to bring their good to market. So if you reduce the number of competing customers and the amount of money available for them to spend, the seller must reduce the price to the consumer’s ability to pay — and the cab companies must eat the loss in the form of reduced profit, just as anything that reduces land rent comes out of the landlord’s pocket.

Some liberal criticism of the new ride-sharing firms is based on what amounts to an aesthetic affinity for managerialism and hierarchy, and a nostalgia for the high-overhead mass-production economic model of the mid-20th century. A good example is Rebecca Schuman (“It’s fine if you’re a Technolibertarian, just don’t pretend it’s progressive,” Pan Kisses Kafka, May 7), who is the education editor at Slate. Here we see the essential nature of establishment liberalism — both Hamiltonian and Schumpeterian. Despite all the greenwashed additions to “Progressivism” — the “think locally” and “small is beautiful” stuff — the core of “Progressivism” is still mid-20th century liberalism.

When I say liberalism is Schumpeterian, I mean it views the giant, hierarchical institution — as such — as inherently “progressive.” Joseph Schumpeter himself believed that monopoly capitalism was ideal for technological progress, because the size and market power of a monopoly corporation enabled it to fund large-scale R&D efforts, and pass on the cost to the public through administered cost-plus pricing. John Kenneth Galbraith — perhaps the patron saint of mid-20th century liberalism — saw the giant corporation’s central planning capabilities and immunity from market competition as the work of a “benign providence.” Liberals since have tended to view the large corporation as potentially more progressive than small, local and decentralized alternatives:  They’re large enough to be willing and able to afford regulatory compliance and relatively decent wage and benefit packages, because they can pass all the costs on to the consumer through monopoly pricing.

Hence Michael Moore’s nostalgia for a world where General Motors owned half the economy, but anyone who worked for them had a job for life with decent union wages. And hence the nostalgia — illustrated by Rachel Maddow’s spots filmed in front of the Hoover Dam — for an era in which a gigantic state fostered industrial gigantism by building enormous blockbuster projects like hydroelectric dams and the Interstate Highway System, whose main purpose was to subsidize big business and absorb surplus investment capital and surplus production capacity.

Democratic “Progressives,” in short, are every bit as pro-corporate as Tom Delay and Dick Armey; they just want an economy of liberal corporate giants run by managerial bureaucrats like Alfred Sloane and Bob McNamara, rather than a corporate economy run by cowboy CEOs downsizing their workforces and maximizing their bonuses.

At the same time, they’re Hamiltonian. That means the central focus of their agenda is anti-deflationary. The central feature of Alexander Hamilton’s policy, as Secretary of the Treasury, was to buy up all Continental war bonds at face value, even though their value on the securities market had depreciated in most areas to something like 3% of their initial price. It was a policy to keep the assets of the rentier classes — capitalists — from depreciating in value.

Since the late 19th century, industrial capitalism has been chronically plagued with a crisis of excess production capacity and surplus investment capital. Both parties, from the turn of the 20th century, have pursued policies to combat these tendencies by using the state’s purchasing power to utilize spare production capacity, or funding giant construction projects to soak up surplus investment capital. One of the main purposes of deficit spending, besides increasing aggregate demand to combat the tendency toward overproduction, is to give surplus capital a guaranteed profitable outlet in the form of U.S. bonds. The perpetual warfare state, government-funded blockbuster projects like the Interstate Highways (and the mass suburbanization and car culture that grew out of them) and the industrial model centered on waste and planned obsolescence, all are ways to make sure that the state engages directly in waste production, or encourages waste production, in order to guarantee sufficient demand for capital and labor to keep stock prices and dividends prices and maintain full employment.

Both liberals and conservatives pursue variants of the same Hamiltonian policy. Conservatives disavow Keynesianism with their mouths, while pouring money into military spending and subsidies to the car culture just as much as Democrats (although they’re more concerned about keeping up full demand for capital than for labor). Liberals, on the other hand, enthusiastically embrace Hamiltonianism.

Either way, the idea is to create as much subsidized waste as necessary, in the form of planned obsolescence or protecting inefficient production methods from competition, to keep capital and labor fully employed. This means embracing what amounts to a Rube Goldberg economy of subsidized waste, with everybody running in hamster wheels, or digging holes and filling them back in again, so that everybody has a full-time job and 401ks keep going up.

So the Hamiltonian agenda — doing things as inefficiently as possible in order to fully utilize labor and capital — is fundamentally at odds with technologies of radical abundance. We of the free market Left want to use technologies of abundance to destroy the rent-extracting capabilities of the old corporate dinosaur industries, and do things with the lowest possible material and labor inputs. But we want to eliminate all monopolies, artificial property rights and artificial scarcities, and all the resulting embedded rents in the prices of goods and services, so that competition socializes all the cost savings of increased efficiency instead of letting capitalists enclose them as a source of profit. We want to eliminate the portion of housing cost that comes from absentee titles that hold vacant land out of use and from the way housing codes (written mainly by contractors) criminalize both new cheap modular housing designs and older vernacular methods. We want to eliminate the 95% of medicine cost that comes from drug patents, and the portion of the price of manufactured goods (probably a majority of it) that comes from imbedded “intellectual property” rents rather than the cost of labor and materials. We want to eliminate all the legal barriers to replacing some portion of our wage labor with low-overhead production in our own homes, using the spare capacity of household goods we already own (including our cars).

Let’s get something straight: Criminalizing self-employment isn’t “progressive.” Economic exploitation is what results when the employing class uses the state to close off workers’ access to the means of production and subsistence, so that employers no longer have to compete against the opportunity for self-employment, direct production for use, and comfortable subsistence in the informal sector. That’s the reason capitalist farmers in England pushed for the Enclosure of common pasture, waste, wood and fen — because the peasantry would only work at agricultural wage labor for as long and as cheap as the employers wanted if they were robbed of alternatives.

Schuman’s article illustrates both the Schumpeterian and Hamiltonian tendencies in spades. Consider her comments on Airbnb:

The “middleman” in the hotel world is the government, sure, but it’s also the thousands upon thousands of lower-wage workers who depend upon hotels for survival, from reservation agents to housekeepers. Those “annoying” hotel taxes that you pay go to provide resources for everyone in the city–resources you use while you’re visiting, and resources that are available to everyone, including the poor. The “sharing” economy means “sharing” wealth and resources, but only between “deserving” people. Everyone else gets cut out, and becomes even more forgotten and invisible than before.

So her ideal is to prop up enormously inefficient, bureaucratic corporate dinosaurs because they keep as many wage workers as possible on retainer — to do everything in as high-overhead a way as possible, so that everyone in society can be employed. The average person’s house and car are by far their biggest capital assets — capital assets that are often far from fully utilized. Being able to use one’s car to transport other people outside the taxicab companies’ monopoly, or host someone overnight in an extra bedroom outside the hotels’ regulated monopoly, is a way that ordinary people can use the spare capacity of their own capital assets, in the informal economy, to support themselves directly outside the wage system, and reduce their dependence on wage income, and increase their bargaining power against their bosses, to the extent that they are able to shift a portion of their wage income to self-employment.

Schuman doesn’t want this. Just like the capitalist farmers of England in the 18th century, she wants to force everyone into the cash nexus: everyone working for wages, for a boss, in order to earn the money to buy stuff from companies that pay other people to make and do stuff. No “masterless men” or cottagers living off the waste without a landlord’s permission for her. She is an ideological kinswoman to the pioneers of mass-advertising in the ’20s and ’30s who stigmatized homemade bread and home-grown tomatoes as “old-fashioned,” and the people at Nestle who convinced women in India that infant formula was modern and up-to-date.

Ironically enough, one of her commenters tried to demonstrate their street cred as a “Progressive” (brave, reverent and clean) by mentioning that they made as many of their own clothes as possible. What?! What about all the employees of the apparel industry? What about the employees of the brick-and-mortar clothing retailers? What about the taxes on store-bought clothing that go to fund those resources used by everyone? A real liberal wouldn’t do anything for herself in the informal sector that could be bought on the cash nexus. I’m just shaking my head in disgust at this crime against Schumpeterian and Hamiltonian orthodoxy.

At the same time, this model of enforced middlemen, with high bureaucratic overhead, unnecessary capital outlays and subsidized waste, is the reason that “comfortable subsistence is impossible” (Ivan Illich) and “it costs 300% or 400% times more to make or do anything” (Paul Goodman). You know, Ivan Illich and Paul Goodman — those right-wing Randroid Tea-Partiers, just like Pyotr Kropotkin.

It’s the same ideology that makes liberals like Joe Biden want to use the power of the police state to stamp out file-sharing and enforce the “intellectual property” monopolies that the gatekeeping function of the movie and record industries and the big publishing houses depend on, so they can maintain enormous office buildings full of people getting paid wages to do what anyone can now do at home with a few hundred dollars worth of hardware and software.

On top of all that, she just gets so much wrong because her liberal aesthetics make her tone deaf. She’s typical of managerial-centrist liberals who mistake themselves for the “Left,” and see reflexively dismiss anything horizontal or decentralist as “right-wing.” Much like Thomas Frank, another totally clueless managerial-centrist, she lumps together as “Technolibertarian” currents as disparate as ’90s-style Dotcom capitalism a la Bill Gates and the free culture movement of Richard Stallman, Linus Torvalds and The Pirate Bay — never mind that the two are at odds, and the latter is actually the nucleus of the post-capitalist successor society.

And given her ideological predilection to see anything identified with “government” or “regulation” as ipso facto “Progressive” and “anti-business,” she’s utterly incapable of perceiving the capitalist nature of the regulatory regime. For example:

…what’s got these startup circle-jerks particularly Ayn Randy is that these “sharing” services have cut out the middleman–i.e. the evil government that evilly taxes and regulates what should be left entirely to consumers and the invisible hand of the market.

Um, no. The middleman is the evil taxicab companies that use the government to evilly protect them from competition and evilly price-gouge.

So Schuman’s idea of “Progressivism” is enforcing the monopolies that enable giant corporations to extract rent, protecting the wage system against self-employment, and forcing everyone into the cash nexus.

Because they’ve drunk so much of their own “Democrats Care” and “The Government Is Us” Kool-Aid, liberals like Schuman are absolutely ideal as dupes for capitalist rent extraction. They have been completely socialized into the official ideology of the capitalist state. The central means by which capitalists extract profit from workers and consumers is the artificial property rights, artificial scarcities and entry barriers enforced by the state. And liberals, with their naive acceptance at face value of any regulation purportedly aimed at restricting business misbehavior, are the best shills corporate interests could ever have for promoting their interests.

Liberals like Rebecca Schuman make the best capitalist apologists of all.

Why Uber and Lyft are Nevertheless Evil and Must Be Destroyed

Nevertheless, Uber and Lyft must be supplanted and destroyed. They are commonly viewed as p2p services, but they are in fact capitalist corporations masquerading as peer-to-peer. They are guilty of the very same crimes as the medallion cab companies — only they use “intellectual property” rather than local licensing regulations to extract rents from their drivers and customers. Uber and Lyft are proprietary, walled garden systems. And I suspect that, if someone came up with an open-source app that directly linked drivers and riders without a corporation skimming off the top, local governments would hit it — unlike Uber and Lyft — like a ton of bricks.

So what do we do? Call in the state to regulate Uber and Lyft? Yeah, that worked out so well with the medallion system. Adam Smith wrote that whenever the state undertakes to regulate relations between workmen and their masters, it has the masters for its counselors; and likewise, when it undertakes to regulate business, it has the business owners as its counselors.

No. As Director James Tuttle of Center for a Stateless Society (the outfit that pays me to write this) says, there are three things we need to do: “hack the app, salt the service, fight the competition with better competition.” That is, we create free and open-source, cooperative alternatives to the proprietary walled garden systems, and if necessary take a black market approach to do as much of it as possible outside the state’s surveillance. We salt the corporate ride-sharing services, Wobbly-style, with drivers who will agitate and organize against Uber and Lyft, and fight to reduce the share of their labor-product the corporations skim off the top. We do to Uber and Lyft what Uber and Lyft are doing to the medallion cab companies — but we make what they did to the cab companies look like a kiss by comparison.

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