The Uber economy

Uber is capitalism at its worst

The ridesharing company is dominating the marketplace, and in the long run that’s bad news for consumers
Photo: Senado Federal

Uber has been in the news quite a bit over the past year. Most recently, after an Edmonton resident was charged over $1,100 for a ride on New Year’s Eve and a Montrealer floated the idea of a class-action suit over their surge pricing. If it wasn’t already obvious, there’s an underlying theme to these stories of outrage: Uber is not an ethical corporation.

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Regardless, the value of Uber has reached $51 billion and they seem to find themselves in the news nearly every day. Their brand is absolutely unavoidable. And it does offer the best service at the best price point. Market competition has spoken, end of story, right? Maybe. Maybe not.

Walmart, Gap and nearly every other massive corporation imports developing world sweatshop-labour-intensive materials. We haven’t said no to them. Some, like Kathie Lee Gifford, have said no to sweatshop labour, only to return to using it once it’s convenient. And have we forgotten? Of course we have. Joe Fresh, Gap, Old Navy and friends are selling their wares by the barrel.

So what is Uber doing that is so damned bad that they get straight comparisons to child labourers? In a nutshell, it has introduced a platform of hyper-capitalism, and we’re eating it up like hotcakes.

Sabotage the competition

First, we can look at Uber’s playbook for sabotaging rival ridesharing service Lyft (published in August 2014) to get a firsthand look at their Machiavellian behaviour.

Lyft claims that 177 Uber employees have ordered and cancelled about 5,560 rides, according to CNN Money. Uber has also actively tried to recruit Lyft drivers using an army of contract recruiters armed with disposable phones and multiple credit cards.

After Uber became aware that media outlets were asking questions, Target CW — a San Diego-based employment agency contracted by the company — sent out multiple emails warning contractors that talking to the press violated a nondisclosure agreement they signed when they joined.

An unequal playing field

Next, it’s time to understand the legal difference between what Uber is doing and what taxi companies are doing. The taxi industry is highly regulated and each cab must have a medallion, which is basically a licence to operate a car as a taxi. With prices over $300,000, these medallions can be valued as highly as a home. Since Uber has shown up, those prices have plummeted.

Why go through the hassle of spending hundreds of thousands of dollars to become a taxi driver when you can just download an app and become an Uber driver for free? Taxi companies, which are regulated by the government, cannot compete.

Car insurance is another way that Uber drivers have taken liberties. Insurance for a commercial vehicle like a taxi can be expensive. In Montreal, for instance, insurance for a cab averages $10,000 annually, according to a representative at ELCO Insurance.

Most Uber drivers are not paying for the proper insurance, instead operating a private car as a commercial vehicle. Is this not fraud?

Uber drivers willingly put themselves at risk, because the company has the financial capital to pay any fines it may receive for operating illegally as it grows its market share and exorbitant valuation. In July, Uber offered to pay bylaw tickets for its Toronto drivers.

Local regulations be damned

There’s a parallel to be drawn with AirBnB, another company with a multi-billion-dollar war chest. The individuals using AirBnB to rent out their homes are not (typically) paying for hotel insurance; therefore, they can afford to charge much lower fees. And if anything goes wrong, AirBnB will cover the damage up to $1,000,000.

By circumventing local regulations under the guise of disruption, these multinational corporations are able to price out the local competition one competitor at a time until they form a monopoly.

What happens once this monopoly is formed? Without proper worker protections in place, Uber can lower the fees of employees until they’re practically impoverished. The company is getting rich off the backs of an underpaid workforce, and it is only going to get worse. That is, until they fire all of their human employees and replace their workforce with self-driving cars.

In the long term, Uber is an automated delivery and transport company. It poached many top minds from Carnegie Mellon university to head up its self-driving car division earlier this year, and it won’t be long until it is transporting packages across the city, replacing pizza delivery drivers and safely driving your kids home from school.

If we allow a single private company to control our transport, we are at their whim. And the way it’s looking right now, it almost feels inevitable.

Except it’s not. The future is rife with opportunity and potential alternatives.

Unionization matters

Progressive cities are not letting Uber have its way unfettered.

In an 8-0 city hall decision in December 2015, Seattle voted to allow Uber and Lyft drivers the opportunity to unionize. But don’t expect Uber to submit — they’ve already argued that this ruling goes against federal law.

Unionization is the greatest threat to unjust labour practices. Just look at how Walmart acts towards unions. Walmart shut down five stores for “union activism” in the United States and shut down the only unionized Walmart store in the world, which was located in Jonquière, Quebec. As a general rule, if it’s bad for Walmart, it’s good for everybody else.

In 2012, the Walmart heirs held more wealth than the bottom 40 per cent of the United States, as Bernie Sanders has noted. The power and importance of unionization cannot be understated.

And even though Uber requires their “driver-partners” (a technical term to avoid calling non-employees “drivers”) to sign agreements not to join class-action lawsuits, there are pending lawsuits coming up fast.

As Kashmir Hill writes for Fusion:

If cases like Liss-Riordan’s are successful, on-demand companies would have to pay overtime, deductions from wages, and, in California, the expenses incurred by their service providers. Those costs would mount into the millions, and proponents of the on-demand economy worry that they could force successful companies out of business.

By not classifying Uber drivers as employees, the company is able to avoid paying for payroll taxes and unemployment insurance. It uses the excuse of being a technology company instead of being a driving service with employees. And in doing so, it saves millions of dollars in taxes.

Uber alternatives

Uber isn’t going away any time soon, but it raises the question, what’s next? This is where things can get particularly interesting. With the decentralized technology of Bitcoin becoming more popular, an Israeli company has copied the idea to produce its own publicly accessible driving application. They call it La’Zooz, which is Hebrew for “to move.”

Whereas Uber is valued at $51 billion and owned by a variety of shareholders seeing financial returns, La’Zooz is “mined” in a fashion similar to Bitcoin through the use of its free app. You can then spend those units to pay for rides or sell them to others who want to take a ride. It is a commons-based approach to the Uber question, where the owners and the workers are active collaborators.

Only time will tell how successful Uber will get and whether La’Zooz has any chance of making a dent in the highly competitive field. But if there’s one thing we should never doubt, it’s our capacity for crowd-based solutions. In the meantime, at least we can be conscious of what it means to support Uber.

Jamie Klinger is the founder of JoatU, an alternative economic system for communities, as well as a freelance photographer and journalist.

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