Enrique Dans
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Enrique Dans

IMAGE: Jon Nicholls (Flickr — CC BY)

Ten things the rest of the world can learn from Spain’s taxi strike

Much of the media coverage of the latest flare up in Spain’s ongoing campaign by taxi drivers against ride hailing services like Uber and Cabify has been based on fundamental misunderstandings of the issue, at the same time as regional and local governments have failed to tackle the escalating violence used by cab drivers and have instead buckled under pressure and resorted to measures that can only be described as weak-kneed and populist. If nothing else, the situation in Spain should serve as a warning to other countries.

The pathetic response of Catalonia’s regional government to an indefinite strike by taxi drivers in Barcelona and Madrid that began on January 21 has been to require users to book non-licensed taxis (known in Spain as VTCs) 15 minutes ahead of their journey time. Cabify and Uber have said they will cease operations there, leaving their 4,000 drivers unemployed. MyTaxi, which represents licensed drivers in Barcelona, celebrated by raising the minimum price of a journey to €7.

Spain’s taxi drivers are out of touch with reality. Over the years, I have written about how they have ruined their reputation and that of the cities they operate in through their violent tactics to protect their interests. The simple truth is that with every taxi strike more and more people opt to download urban transport apps, try them out and establish conclusively the superiority of the service they offer. Given the choice of a customer-focused service with introductory offers and loyalty programs, increasing numbers of people are turning away from traditional taxis that continue to talk purely in terms of a fare. In France taxis now typically offer free water, mobile phone chargers and a range of payment systems, while in Spain many drivers are still living in the last century and will even balk at changing a €50 note or refuse to use credit card apps, despite being obliged by law to do so.

Herewith a few thoughts on why licensed taxi drivers are now part of the problem rather than the solution to urban transportation:

  1. Taxi licensing systems are obsolete. They date back to the days when, due to the so called tragedy of the commons, it was necessary to establish a maximum number of drivers who could operate in a city so as to prevent price wars that would eventually put them out of business. For example, Lima decided not to establish a licensing system: the result was a free for all that, far from benefitting passengers, created a highly unsafe situation. But systems based on apps and privately run adjust to supply and demand. Most Lima’s taxis now work on apps, giving drivers a reasonable level of income and passengers safety. Taxi drivers’ objections to surge pricing only demonstrates their inability to understand that these systems regulate supply and demand and increase the value proposition for driver when there are not enough vehicles offering their services.
  2. Legislation is not written in stone and instead, must adapt to technology. Spain’s taxi drivers are demanding a one-to thirty ratio between licensed taxis and ride hailing vehicles. This ratio dates to the days before smartphone apps and when the only way to order a vehicle with a driver was via a telephone call. Apps have changed all that and the law must evolve accordingly.
  3. No particular skills are required to transport people around a city other than a clean driving license, no criminal record for offenses that could be considered a threat to passengers, and the ability to read a GPS. Establishing requirements, licenses or making drivers sit exams is simply creating entry barriers and feeding a black market in licenses, which in some cities have been sold for astronomical sums.
  4. Cities should seek to consolidate the widest and most diverse range of mobility services, including public services such as buses, trams, metro, trains, as well as unrestricted taxis and mobility apps, car-sharing such as Car2go and Emov, car pooling and micromobility systems such as bicycles or scooters, all coordinated with apps to provide coordination and a shared ticketing system. Applications such as Google Maps, Apple Maps, Citymapper, or Uber, which cities like Denver now include public transportation in its app, all point in the right direction.
  5. Restrictions on these services reduce mobility. Shared mobility systems require economies of scale. In cities where Uber Pool operates, the average price of transport decreases significantly. In Madrid, there are several companies looking to offer this type of service, but faced with violent opposition from taxi drivers, have pulled out for the moment.
  6. Taxi drivers should not be allowed to bring a city to a halt. Firstly, because they are self-employed and so have no right under law to strike. Furthermore, many taxi drivers use their license to exploit other drivers by subcontracting their taxis out to them. In the case of Spain, we are not talking about a strike, so much as a lockout: it’s drivers working for app-based companies who are the employees and who are being stopped from working. How the police failed to act to protect people from being held hostage in this way beggars belief: the message being sent out by the authorities is that using violence and intimidation are legitimate means of protest.
  7. Nobody has the right to simply expel competitors. Not only is it illegal, it’s unsustainable. If one thing has emerged in all this, it’s that taxis and public transport alone have failed to meet our needs. The only way to increase mobility in our cities is by offering as wide a range of transportation solutions as possible. Taxis clog up our streets as they cruise around in search of fares, while app-based vehicles only take to the road after they’ve been hired.
  8. It’s a myth that taxi drivers are being put out of work by evil companies based in tax havens: Uber is registered in Delaware, as are half of online businesses, because it’s the fastest and cheapest place in the United States to set up a business. Cabify is a Spanish company but also set up in Delaware for the same reason, and in any normal country it should be a source of national pride rather than being forced out of business. Both companies take a percentage of each fare, but the vast majority of the income generated goes to workers who pay income tax in Spain, and significantly more than taxi drivers do, who are able to sometimes take payment in cash and not declare it. That idea that “foreign multinationals have come to rob us” is a lie. Giving in to taxi drivers simply portrays Spain as backward country that is hostile to foreign investment and technology.
  9. The solution to the conflict may be to see it as industrial reconversion… but with certain limits. The only rational outcome is to end a system based on licenses. This might involve limited compensation, but people who paid huge sums of money for licenses obtained in an unofficial an irregular market assumed a certain level of business risk, and cannot expect the rest of the citizens to pay for that. The Australian solution has — and should have — clear limits.
  10. Last but not least: the autonomous vehicle will put all drivers out of work in a few years. Waymo One has been operating problem-free in several US cities since December and is significantly cheaper than conventional taxis (drivers represent 70% of the cost of a trip). The company has signed deals to buy 62,000 vehicles from Chrysler and 20,000 from Jaguar and is building a factory in Michigan to make autonomous vehicles. Within a few years, the only places where people will still be allowed to drive cars will be small, rural towns where the market size doesn’t justify the cost of autonomous vehicles that, to be profitable, needs to be in service all the time. What will taxi drivers do then? Destroy autonomous vehicles while smiling for the cameras? Before then, economic common sense says that the licensing system must have gone.

Populist, short-term solutions such as those being put forward by the Catalan regional government are absurd, fail to solve the problem, have the whiff of corruption (link in Spanish) and reflect badly on Barcelona. When a tourist arrives into a city and finds that there are no transportation apps working, it immediately makes the city look bad. Instead, a rethink is needed to create new scenarios for urban transportation, scenarios that really improve people’s lives rather than protecting the interests of a few. It might be too much to ask of our politicians to plan for the future, but we can always hope that common sense reigns.

This article was previously published on Forbes.

(En español, aquí)

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On the effects of technology and innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

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Enrique Dans

Enrique Dans

Professor of Innovation at IE Business School and blogger at enriquedans.com

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