Uber: To Socialize or Not to Socialize?

I’d describe myself, at best, as an occasional reader of the quarterly leftist publication, Jacobin. I’m by no means a long-time, consistent or even an enthusiastic reader. Sometimes I find things on their site that I think are interesting, such as their recent take on Thomas Paine from a leftist position. With that article in particular I didn’t really find it agreeable, but it was well written, educated and well sourced.

So no harm there.

But given my lack of consistent reading, perhaps I should not have had such high hopes when I saw the title for Seth Ackerman’s article “How to Socialize Uber.” My excitement sprung from anticipation for both the article itself and what this process and end result of socializing Uber might look like. It sounded like a great way to have more transparency with Uber as well as giving more control to the drivers.

My excitement was probably heightened because C4SS has had both its fair share of criticisms (and here) mixed with partial and even full out praise. We also had a few articles that straddled the line.

But something C4SS lacked was what to do with Uber instead. There were certainly some useful criticisms, but most of the time there weren’t actual proposals of what we would want Uber to be instead. Nor what Uber could do to be a better libertarian institution. That was certainly a part of some of those articles, but it was never the main focus.

So seeing an article that was going to make concrete proposals about not only how to make Uber better but also doing it in a way that involved cooperatives immediately appealed to me.

And even if I had bothered to read the original article from The Nation by Mike Konczal and Bryce Covert called “Socialize Uber,” I doubt I would have been any less hopeful.

Konczal and Covert make many great points, chief among them:

Almost all of the actual capital is already owned by the workers, in the form of cars that they pay for and maintain themselves. And these workers labor individually, doing the same tasks, so there’s no need for a management class to control their daily operations. The capital owners maintain the phone app, but app technology isn’t the major cost, and it’s getting cheaper and easier by the day.

Given that the workers already own all the capital in the form of their cars, why aren’t they collecting all the profits? Worker cooperatives are difficult to start when there’s massive capital needed up front, or when it’s necessary to coordinate a lot of different types of workers. But, as we’ve already shown, that’s not the case with Uber. In fact, if any set of companies deserves to have its rentiers euthanized, it’s those of the “sharing economy,” in which management relies heavily on the individual ownership of capital, providing only coordination and branding.

A commenter criticized this passage for undermining the role of the middleman in the economy. But there’s no reason given why the middleman could not eventually be eliminated or replaced. And in fact the latter is exactly what’s been proposed to begin with.

To their credit though, the commenter asked a good question:

If you’re right, and Uber has opened the door, then why nationalize Uber at all? Just have a bunch of workers set up their own driver-owned cooperatives, and presumably they’ll draw away all the drivers who are loosely affiliated with the ride-share companies anyways because of superior working conditions.

To which another commenter said:

Socialize, not nationalize. It is recommending smaller owner-run co-ops since they own most of what makes the business work on the ground, given advances in communications technology.

But the question then becomes, is this form of socializing (rather than nationalizing) practical?

The blogger Will Wilkinson doesn’t have high hopes:

If it’s true, as they say, that “Newer ride-share ventures can piggyback on Uber’s success and take advantage of these new terms,” then it seems that Uber and Lyft drivers ought to be able to organize, finance the creation of a new app (no big deal, it would seem), and then dominate the market by charging less than those awful, useless, Silicon Valley tech-bro rentiers, all the while getting paid more. Why go through the tumult of trying to socialize Uber when a worker collective would so clearly out-compete Uber?

Or maybe it’s not so clear that it would. Maybe organizing drivers, developing, maintaining, and continuously improving an app, doing all the necessary marketing, and managing the whole system isn’t really such a breeze, and by the time you take into account all those costs, which worker-collective drivers would have to cover, they’d end up keeping something in the neighborhood of 80% of their fares, just like Uber drivers. That’s my hunch.

Meanwhile, Brian Dominick, who is a self-professed ardent supporter of worker owned institutions and collectivization, makes many strong arguments against this proposition as well.

The most basic argument against socialization of Uber is the practicality of them buying the company to begin with:

The only way the workers could buy Uber is if they pooled their money and acquired the company, which would cost way more than its current $40 billion valuation. Indeed, due to the special circumstances of needing to acquire every last share and option from current holders, this would constitute, by a factor, the most expensive acquisition in the history of venture capitalism.

All of this seems really problematic for any sort of socialization involved with Uber. So what could Ackerman have to say to these problems?

The World According to Ackerman

Fortunately for us, Ackerman’s got a solution: Get the state involved.

The simplest way, as I pointed out in response to Weisenthal’s query, would be for cities to adopt regulatory codes that only permit ride-sharing by worker-owned firms. Uber would then seamlessly become a software provider.

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Once these laws are passed, Uber can continue to sell its innovative software services at whatever price the market will bear, a price it will obviously set so as to ensure it is fully compensated for the technology and risk-bearing it’s already supplied. (Or, at least, it will hope the market will bear that price.)

The plus side of this process is that it doesn’t necessarily require the workers to have a lot of capital. As long as they can influence the cities regulatory boards to a certain degree they can get what they want.

To be fair, it’s not clear whether this would get around Wilkinson’s problems about the costs of all of the marketing and upkeep with the app. But if a lot of those people who are doing those jobs now stayed with the newly socialized Uber, perhaps it could work. On the other hand, it is true that this would depend on the wages that Uber could now work out among themselves. As well as whether those new wage rates would be enough to keep those involved with coding and marketing at Uber.

Regardless, Ackerman’s proposal is undermined because it’s not clear how or why these lawmakers would be convinced in the first place.

Now, to his credit, he quickly cedes that “charming” CEO Travis Kalanick probably would not be interested in such a proposal. But then in an odd move, Ackerman tries to argue how that wouldn’t make sense under the company’s philosophy.

The main problem with that argument is that it presumes the company’s philosophy is actually so important to them that they’d recognize this hypocrisy. And even if they did, any leftist worth their salt should know companies, especially those subsidized by the state, more often than not, will drop their philosophy if they see a bigger market advantage in doing so.

Besides that, it’s also not clear why it’d even matter to begin with if Kalanick was being hypocritical in his stance. Are people who are at the top and are guilty of being hypocritical somehow a new phenomenon? Would this somehow be a shocking revelation that would jostle the workers and the regulatory boards to jointly seize control of the situation?

And although it’s nice to think about theory and how these things may best work out, I’m not sure why the workers would have enough social capital to be able to influence the regulatory boards. Because if the workers don’t have enough social capital to socialize Uber and they don’t have the material capital to socialize it either, then why would they have the necessary resources to “persuade” (see: bribe) the regulatory boards otherwise.

This argument is particularly odd coming from a fairly explicit Marxist publication. Wasn’t Marx the one who talked about the state as an enabler of the ruling class? Marx saw the state as an institution that is defined by its opposition to the good of the proletariat. It is the “executive committee” of the ruling class after all.

And if this is the case then why should we expect the state’s regulatory bodies to care what the Uber workers want to do with the company? Ackerman’s whole argument seems to be repeating a problem that unfortunately Covert and Conczal made in their Nation argument. They are letting theory and ideology get in the way of seeing the mechanisms that would inevitably brush up against, if not completely stop, their ideal situations from happening.

With Covert and Conczal they underestimate the costs, knowledge and labor it takes to constantly update the application that Uber relies on. And they also underestimate the advantages of having the middle man even if I agree with them that it can be replaced in certain situations.

Ackerman wholly ignores the apparatus of the state and its historic and economic role in society. This role has fairly consistently defined itself through its opposition to measures that would fundamentally challenge its authority and also aid the proletariat.

Sure, the state sometimes cedes to “popular pressures” but these are often piecemeal decisions that are done just to quell the riots and make sure we all fall back into line at the end of the day. As the anarchist writer Voltairine de Cleyre suggested, it isn’t by advocating for some but all that we shall eventually make our strides towards more human autonomy in society.

Speaking of which, Ackerman’s article also suffers from the classic conflation of state and society. Throughout the article he keeps talking about how the state is what’s going to help lead us to better collaborative and collective arrangements. But the state is precisely the institution that most meddles with cooperation. Not to mention the state is part and parcel the reason worker cooperatives are not as prevalent as they would be otherwise.

Would Ackerman deny that a lot of these costs that Willkinson and Dominic are pointing out would be gone, if the state stopped these arbitrary regulations on businesses?

“By the Way, I Stole This Riff”

The title of this article is actually a rephrasing of a great essay by Sheldon Richman called, From State to Society: How and How Not to Privatize.

In it, he tackles the issue of privatization and why the state can only privatize in ineffective and morally problematic ways.

Now, while here I’m concerned with socialization I feel that there are sill some lessons we can take from Richman’s article that Ackerman could benefit from:

If we confine our attention to functions that may legitimately be performed in the marketplace, the label privatization is applied to a disparate group of measures. On the one hand, it is used to describe Great Britain’s and the Czech Republic’s programs to transfer state firms to private hands in the 1980s and 1990s, respectively. On the other, when Baltimore in the 1990s contracted with Education Alternatives Inc. to run nine city schools, that also was called privatization, despite the city’s maintenance of ownership and coercive funding of the schools. It was merely contracting out a government monopoly.

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This should lead us to refine our idea of what liberals* seek. It’s not privatization per se, but free competition through voluntary exchange, that is desirable. It matters little whether the government calls people who perform its functions public employees or private contractors. In fact, when a company becomes a monopoly government contractor, to that extent it is an arm of the state rather than a private firm. (*here, Richman means classical liberals)

The term “privatization” is a pretty tangled as the term gets ascribed to many different processes or outcomes that are all very different from each other. For example, “private prisons” are currently the process of going from one monopolistic hold that the government has to a now near-oligarchic group of state-subsidized companies.

Likewise this idea of “society” or “the public” being the same as the state is reliant on these conflations of “private” and “social”. Ackerman gets knee deep in these conflations in his article as he seems to constantly link the end goal of socialization with the state.

Charles Johnson on his Sprachkritik: “Privatization” laid it out rather thoughtfully on the topic of socialization when he said:

What we advocate is the devolution of state-confiscated wealth and state-confiscated industries back to civil society. In some cases, that might mean transferring an industry or a resource to private proprietorship (if, for example, you can find the person or the people from whom a nationalized factory was originally seized, the just thing to do would be to turn the factory back over to them). But in most cases, it could just as easily mean any number of other ways to devolve property back to the people

Socialization then seems like a better label for what we as libertarians should be interested in.

Unfortunately when people are discussing the idea of returning property to “the public”, “society” or “the common good” they’re discussing it as if it’s somehow inextricably linked with the state. But the state is by definition not the public due to its near oligarchic status as an enabler of monopolies and its own status as a monopoly. Governments are, barring whatever the textbooks told us in school, a select group of individuals in society who hold an inordinate amount of power and rights in proportion to most people.

They are, as de Cleyre wrote, “a thing apart” and not an integral member of the public in some meaningful way.

This is especially true given the consistently low voting turnouts throughout recent years in the US.

In her essay, The Economic Tendency of Freethought, de Cleyre also completely tore apart the larger idea of the government even metaphorically representing the public:

Government is as unreal, as intangible, as unapproachable as God. Try it, if you don’t believe it. Seek through the legislative halls of America and find, if you can, the Government. In the end you will be doomed to confer with the agent, as before. … Oh, the legislators! Yes, but the legislator, per se, has no more power to make a law for me than I for him. I want the power that gave him the power.

I shall talk with him; I go to the White House; I say: “Mr. Harrison, are you the government?” “No, madam, I am its representative.” “Well, where is the principal? — Who is the government?” “The people of the United States.” “The whole people?” “The whole people.” “You, then, are the representative of the people of the United States. May I see your certificate of authorization?” “Well, no; I have none. I was elected.” “Elected by whom? the whole people?” “Oh, no. By some of the people,–some of the voters.” (Mr. Harrison being a pious Presbyterian, he would probably add: “The majority vote of the whole was for another man, but I had the largest electoral vote.”) “Then you are the representative of the electoral college, not of the whole people, nor the majority of the people, nor even a majority of the voters. But suppose the largest number of ballots cast had been for you: you would represent the majority of the voters, I suppose. But the majority, sir, is not a tangible thing; it is an unknown quantity. An agent is usually held accountable to his principals. If you do not know the individuals who voted for you, then you do not know for whom you are acting, nor to whom you are accountable. If any body of persons has delegated to you any authority, the disposal of any right or part of a right (supposing a right to be transferable), you must have received it from the individuals composing that body; and you must have some means of learning who those individuals are, or you cannot know for whom you act, and you are utterly irresponsible as an agent…

She goes on to say that even if government did have the say-so of the majority of people that this would still fail to address how the government came to have more rights than anyone else to begin with.

Why can it regulate businesses but no one else can? Why can it only organize defensive forces for war? Where did it get the legitimate authority to do all of these things that none of us can do? And what should we do about it?

Johnson makes the point to call the sort of “privatization” that benefits corporations more than the public a sort of “privateering” and I think likewise a sort of “socialziation” that benefits or cedes much more control to the state then the public or relevant communities is better termed “nationalization”.

Now, I wouldn’t say what Ackerman is calling for total nationalization by any means. But he clearly wants the state to be involved in the process of opening up institutions to a wider net of direct beneficiaries. It’s also fair to say that if you’re trying to socialize something that it shouldn’t just be the workers who get control. Socialization seems more apt if a given cooperative is more community run than worker run. If it’s worker run then it’s certainly arguable that it’s more socialized than if it was controlled by the bosses. But I don’t think it’s at the end of the socialization spectrum either.

Perhaps we could still see Ackerman’s proposal as at least quasi-nationalistic. The reason being that his proposal cedes a lot of the newly socialized Uber’s authority to the state. More troublesome than just the authority it cedes to the state is the product of this ceding. Ackerman is proposing that the worker cooperatives hold some sort of artificial monopoly on the supplying of certain services.

Here, we see a complete reversal of the usual conditions in our economy that’s mostly dominated by corporations and big businesses that give little power to the workers involved. Now, under Ackerman’s proposal, we’d have a situation that would lead to workers having this same sort of artificial monopoly in the economy.

None of this is to say that such a move couldn’t hold any benefits for the economy more generally. Take for example the Emelia Romagna cooperatives in Italy. Even though cooperatives are artificially propped up by the state to some capacity the overall good they’re doing for that region of Italy is obvious.

But the larger point remains that Ackerman and those persuaded by his proposal are just asking the state to do what it does for corporations. Now, instead of the corporations having monopoly privileges, the workers are the ones who have this sort of privilege. This problem is what Benjamin Tucker pointed out in his classic State Socialism and Anarchism essay. For a state-socialist like Ackerman the solution to monopoly is more monopolies.

This sort of proposal also underplays the states historical role as an enabler of the ruling class (if Marx is to be believed) and treats it like it is something that could easily be made to benefit the workers instead. The problem with this position is that it views the state as a neutral tool that anyone with the right resources, can control and bend to their own will.

But contra to this I would argue that the state is not a neutral tool and thinking as much does a disservice to Marx’s cogent analysis of the state apparatus. The history of the state is one of mass murder, subsidization to privileged players and the locking out of poor people.

Say what you will about revolutionary Marxism, at least it doesn’t think the revolution will come from piecemeal reforms that eerily mirror the benefits that corporations currently receive. This isn’t to let those Marxists off the hooks, but damn is it good to not be a liberal sometimes.

Conclusion: Towards The Mutualization of Society

So if the case for Uber’s socialization fails from both a social and material capital perspective and we can’t expect developing separate worker cooperatives and successfully challenge Uber, what is to be done?

I think that the main problem for Wilkinson and Dominic’s arguments is that they are both talking about how to compete with Uber on Uber’s terms. This is largely the fault of folks who want Uber’s corporate structure to be changed, but still have the same scale of supply.

That probably isn’t feasible for a host of reasons, one of which is a form of statistical discrimination of “the weird effect” as I’d term it.

Banks, venture capitalists and so on are less likely to get involved with a worker cooperative than a regular hierarchical company. As Konczal and Covert point out in their article, Uber isn’t even really a part of any sharing economy given that it takes 20% from its employees, is a privately-run company that involves outsider investors, and the workers have no real say in how Uber is structured.

Uber is a part of “the sharing economy” in the same way that Rand Paul is a libertarian.

Which is to say, while it has some interesting deviations from “Business as Usual” in the taxi industry, it’s still nowhere near as libertarian or as much of a victory as some libertarians want to point to.

I agree with Dominic that we should just ditch Uber altogether and try to instead create new and better institutions. Not to compete with Uber per se or in the short run overthrow it (the long run may be more feasible) but to add to it. To give customers more choices and more ways to express their economic decisions by moving with their feet and their wallet to companies that treat their workers better.

Economic pluralism is a great way to give people more ways to obtain the ends they have in mind. It may not be easy to raise the sort of capital or get the sort of reach that Uber does but who says you need to or even want to? You can have multiple local and networked organizations that loosely coordinate to help the actual sharing economy develop. Keeping it local and decentralized requires a lot less capital (both social and material) and while it limits outreach significantly it may be a worth sacrifice if it challenges Uber enough.

The ideal situation would be where big corporations who are seen as some sort of hero of the libertarian movement were replaced by genuinely libertarian institutions. Ones that did not rely so heavily on lobbying, rigged trade markets, poor relations with the workers and hierarchical structures.

My alternative to the idea of socializing things back to “civil society” (itself a rather nebulous concept too tangled in governmental implications for my liking) is for mutualization. Mutualization has been advocated on C4SS a few times, particularly on the topic of Detroit (also see here):

As Natasha Petrova wrote:

Mutualization and cooperatization involves turning control of the service over to the people who produce it and receive it. In the case of water; this would entail handing it over to engineers, plumbers, electricians, rate=payers, and so forth. It would be a consumer’s-producer’s cooperative. This would make it neither governmental nor corporate. A transcendence of both forms of social organization. A showing of the fact that there are ways to organize services beyond the usual dualism of corporate and government control.

Carson defines mutualization as the idea that a given institution,

…should be transformed into stakeholder cooperatives governed by some mixture of representatives from those working in the public services and their consumers. So (for example) a public utility, instead of being sold to a corporation, should be turned into a cooperative jointly owned and managed by some combination of utility employees and ratepayers.

Carson also mentions an unlikely advocate of this form of mutualization, Murray Rothbard:

Mutualization was also promoted, after a fashion, by American libertarian Murray Rothbard. In “Confiscation and the Homestead Principle” (Libertarian Forum, June 15, 1969) he argued that, since state titles to property were invalid, state property like public utilities should be treated as unowned, and immediately become (via homesteading) the property of those currently using it. That would mean state industry to the workers, collective farms to the villagers, and public services reorganized as consumer cooperatives.

Similarly Johnson argues that, “Government industries and lands where an original private owner cannot be found could, and probably should, be devolved to the co-operative ownership of the people who work in them or on them. The factories to the workers; the soil to those who till it.”

In Libertarian Property and Privatization: An Alternate Paradigm Carson outlines mutualization further saying:

This means decentralizing control of, say, schools, police, hospitals, etc., to the smallest feasible local unit (the neighborhood or community) and then placing them under the democratic control of their clientele. For example, the people of a town might abolish the city-wide school board, and place each school under a board of selectmen responsible to the pupils’ parents. Ultimately, compulsory taxation would be ended and the schools run on user fees. In practical terms, mutualizing is more or less equivalent to reorganizing all the State’s activities as consumer cooperatives.

Using Uber as a case model means replacing it’s current supply scale as well as changing its structure on a basic level of organization and hierarchy.

The workers would not only own it but it’d be much more disperse and more focused on the local and less on the national. Each individual chapter of Uber would be autonomous and might loosely associate itself with other chapters and send representatives to joint meetings of a given region. Or they may organize conferences over the internet to help make larger scale decisions.

Nevertheless the capital this would take would be much less intensive because each autonomous sector of Uber would largely be focusing on their own locality. Each sector could still help out other nearby chapters to keep supply better in line with demand. But for the most part they’d keep to their own spread of areas that they know best and make sure that those areas are done well. All while being organized through direct/participatory democracy with worker and in some cases community or consumer control over the given chapter.

Incidentally this sort of system could compete better with venture-capitalist funded institutions like Uber and big taxi corporations. But in order to do so they might have to do what worker cooperatives like Firestorm, the anarchist run bookstore located in Asheville, North Carolina did: They turned to the community.

To be fair they turned to much more than just their community but in any case launching fundraisers can be a great way in these years of GoFundMe, Kickstarter and Indiegogo campaigns. These campaigns are often low-cost ways to get a lot of capital (relatively) fast. Obviously your project would either have to appeal to people, you’d have to have a lot of connections and already be somewhat well established. If you don’t fit the bill on any of that then you’re going to at least need a good amount of material or social capital to make your fundraiser successful.

But even so, it’s been shown to be a viable way that independent entrepreneurs or businesses can get through a lot of intensive overhead costs that they otherwise would be sunk by. In which case a lot of the concerns that Wilkinson and Dominic have are very much relevant and worth keeping in mind. But they’re hardly as much of a game stopper as both seem to think.

How would the workers mutualize Uber?

As I noted earlier via Dominic, it seems unlikely the workers could buy Uber and decentralize it on a much more local scale. So barring a buy-out how could workers seize the means of production back from their employers? I think there are a variety of free market labor union activities that they could engage in. Workers could try simply to get better conditions in the workplace before they go for the gullet. This would be more in line with using reform as a way to eventually get to radical change.

An analogy of this sort of tactic might look like the writers of South Park doing a bunch of small things the FCC typically wouldn’t let get by. But then they do this one really bad thing that the FCC would definitely never allow. The FCC then removes this single huge issue because it is so obviously inappropriate. But in doing this they may be more inclined to think their job is done. Or, better yet, upon seeing this big problem removed, they may find it harder to notice the myriad of other smaller things that were also done.

Now, this obviously doesn’t lead to the FCC being abolished but it does make it seem inefficient and potentially even impeding artistic creativity more than it helps it. It also gives the confidence to the writers in what they can do, how to get around the regulatory agencies and so on.

The South Park writers are pros at this sort of thing and it is not hard to imagine other people being able to do this within the context of a workplace. Actions like this, particularly if done often enough, might also lead to a PR problem for the authority in the given situation. They ultimately come off as unnecessary, intrusive and the public would start likely start leaning towards more openly derisive positions.

Another example would be the workers organizing a campaign around a big issue (Sheldon Richman noted on his piece that tips seem to be a problem in particular) and try to work upwards from there. Get the public more on their side and use public perception to get the Kalanick to make some major concessions to them. Ideally those concessions would be in terms of decision making power and who gets the profits, etc.

Ultimately I think a better free market model of labor struggle will involve strategies like dual power than trying to reform existing institutions within their own structures and on their own terms.

Issie Lapowsky of Wired sums up this approach well:

In a way, Uber may have actually smoothed the path for competitors by defining the broader category in the first place, says Thilo Koslowski, an automotive industry analyst at Gartner. In other words, instead of having to explain their services from scratch, newer companies can just say, “We’re like Uber, but….”

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That may be why lately, it seems other ride-related startups have given up on trying to race Uber to the top. Instead, they’re starting to seed the fertile pastures that Uber overlooked along the fast lane to growth.

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According to Rajeev Chand, managing director and head of research at Rutberg & Co, there is ample evidence that smaller competitors can thrive even after a market leader has been defined. He believes that’s the likely outcome for the ride-app space. “There will be one major winner which is clear now is Uber, but I think there will be other winners, too,” he says. The challenge for these other players is finding a niche that matters to consumers when Uber’s existing service already works for so many applications.

And so even if Uber is abandoned as a structure to work within we can switch tactics and instead focus on filling gaps that Uber left behind. This may mean that the mutualized Uber competitors will not really be competitors in the strictest sense but they may not have to be. Because eventually, these gaps could turn into opportunities to expand and eventually dethrone Uber. All the while this increase in competition through a larger set of options can help us get to where we want to go more effectively.

As Carson advises, we don’t need to force anyone to stop doing what they’re doing. We just need to build better alternatives and have them out-compete what is normal now.

Last cabby out can put their medallion to the fire.