Enrique Dans
Published in

Enrique Dans

Mariusz Niemiec — 123RF

Taxi drivers and the future

On March 16, taxi drivers in Madrid and Barcelona went on strike and even turned to violence to urge the authorities to protect their regulated service against companies like Uber and Cabify, which offer cheaper services.

For taxi drivers, traditionally ill-informed and, above all, poorly represented, striking seems a strange way of trying to defend themselves: faced with a taxi strike, most people needing to get somewhere are likely to try Uber or Cabify, and then find themselves in a high-end vehicle with a professional driver at the wheel offering a pleasant ride, with a bottle of water included, and all at around 30% less than the price of their usual taxi. In short, striking highlights the inability of the taxi sector to compete with such initiatives, which generates the feeling that taxi services, limited by a system of licenses intended to exploit an economy of scarcity, are doomed.

Systems based on municipal licenses made sense when their absence led to the tragedy of the commons: a lack of regulation led to a race to the bottom, with nobody making any money. New York is a classic example: it imposed taxi licenses in 1929 in the wake of the Great Crash; at the other end of the scale is Lima, which decided to deregulate the sector: in the first case, taxi licenses rose to one million dollars, due to the resistance of taxi drivers to increase the number of licenses in a city subjected to excessive growth. In the second, a system emerged in which anyone could run a taxi, which generated insecurity, abuses and arbitrary pricing.

These systems were designed for a world where the only way to get a taxi was by going outside and hailing one, heading to a taxi stand or by ordering one by phone. Today’s world is completely different: we all now carry pocket computers and are connected to the internet, which means that a fleet manager like Uber or Cabify is perfectly capable, at any moment, of having the right number of vehicles on the streets needed to meet demand, guaranteeing that these vehicles will be permanently active. When a vehicle is kept active and is making money all day, instead of waiting at an airport or train station for hours, or driving round the streets in search of customers wasting fuel and contributing to traffic, it can charge lower prices and still turn a profit.

The protests in Madrid and Barcelona is rooted in the misapprehension that taxi drivers have the exclusive right to provide transport. There have always been chauffeur-driven car hire, known in Spain as VTC, but they were positioned as a luxury service and very expensive. If technology now makes these luxury services affordable, there is no going back. If, furthermore, because it works, the authorities decide increase the number of licenses, we have to ask a very simple question: what is best for the common good? The evidence is clear: if you think there are too many taxis in New York, think again: the 13,237 existing taxi licenses, a number that has remained constant since the 1930s, are accompanied by another 40,000 privately owned companies. Anybody who thinks the authorities in Madrid and Barcelona are issuing too many VTC licenses is mistaken.

The best thing for the common good is an abundance of transport alternatives. Decades of taxi service have failed to persuade people not to use their cars to get around. The existence of a taxi service subject to a system of licenses and with regulated prices does not convince people to leave the car at home. Metro, bus and taxis are not enough, even if they are of high quality: we need carsharing services such as Emov, Car2go, Respiro, or Bluemove, initiatives like Cabify or Uber, municipal bicycles, and myriad other possibilities.

We have to move from the old-fashioned economy of scarcity to an economy of plenty. Services like Cabify or Uber respond to a long-term approach. The prices we enjoy today when we use its services are loss leaders, sustained thanks to the participation of private investors willing to provide the necessary funds to pay for it. But the intention of these services, contrary to what some naïve people think, is not to take control of the market and raise prices late, which would simply lead to the appearance of new competitors. The intention is to make the move to self-driving vehicles within three or four years.

The autonomous vehicle obviously involves removing the driver from the equation, the highest cost. The autonomous vehicle means companies like Uber or Cabify can be very profitable, because they will not own vehicles, they will be provided by automotive companies, investors willing to exploit them, etc. Hence the importance of the lawsuit brought by Google against Uber for misappropriation of its technology: if it is able to halt Uber’s move toward autonomous vehicles, which is progressing slowly but surely, the company could face serious problems down the road. But there would still be numerous companies willing to step in. In other words, the enemy of taxi drivers is neither Uber nor Cabify: it is the advance of technology, and fighting that is a losing game.

The sad reality is that taxi drivers are fighting for the crumbs from the table: they will soon be extinct. Within three to four years, driving will no longer be an activity carried out by people, but instead by machines. But instead of trying to sell their licenses while they may still be worth something, taxi drivers in Spain at least, seem determined to fight this out: pigs, or taxis, will fly. Well, actually, in Dubai, they now do (the latter). But there are none so blind as those who won’t see.

The future is what it is: cities with a multitude of transport services, some of them publicly owned, others private, and all of them shaping an economy of abundance where licensing systems no longer have any meaning. The days when a license that guaranteed the exclusive exploitation of a scarce resource could sell for hundreds of thousands of euros have gone forever, and those drivers still subject to this scheme would do well to get out as soon as possible, and without expecting to recoup a private investment with public money. The taxi as we know it has three or four years life left in it, and in that time things will get ugly, very ugly. Not because anybody has it in for taxi drivers, but because times have changed.

(En español, aquí)



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