Local Governments Declare War On Uber, Lyft
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Posted 05:36 PM ET
Governments around the world have declared war on ride-sharing companies Uber, Lyft and Sidecar. Because they offer a more convenient and higher-quality service at lower cost, taxi companies lose business when ride-sharing companies enter a market. In San Francisco, taxi ridership has declined 65%.
In response to this competition, taxi companies have complained to city governments demanding that these new entrants be regulated.
They argue the new competition is unfair and unsafe for the users of ride-sharing services. City and state governments have responded to this lobbying pressure by initiating legal actions to slow the growth of ride-sharing.
This is not the first time governments have acted to block innovation in the transportation industry. Early in the 20th century, cities granted railroads a monopoly franchise and regulated the fares they could charge.
In exchange for the monopoly franchise, cities benefited because the railroad provided road maintenance services, funded street lighting, paid taxes, and were a source of political support for elected officials.
By 1914, some car owners started providing local transportation services at the same price as the city railroads. They were called jitneys. Jitneys travelled faster, followed more flexible routes than the rail system, and generally provided a higher quality trip. Much like today's ride-sharing users, the jitneys were popular with young city dwellers and business people (whose time is valuable).
This competition caused city railroad revenues to fall, leading to layoffs and the cancellation of some routes. Just like today, the railroads and their unions claimed the jitneys were unsafe and increased crime, requiring greater government regulation.
New regulations controlled the routes and schedules of the jitneys. They banned them from operating in the most densely populated (and profitable) parts of the city. They required the jitneys to purchase liability bonds and pay taxes greater than those paid by the railroads.
Within a year, 125 of the 175 cities where jitneys operated passed laws protecting railroads. By 1917, the jitney industry was destroyed.
This illustrates how incumbent businesses use the political system to protect their financial interests.
They claim that new businesses have an unfair advantage over existing companies. Politicians respond by shielding these businesses from the new competition in return for election support. When governments block innovation they constrain the very essence of progress in a market economy — creative destruction.
It is common for businesses to raise safety and crime issues as a justification for government regulation.
Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials-viewpoint/122614-732238-taxi-companies-lobby-hard-to-take-down-new-competition.htm#ixzz3N57S8yXb
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