On August 28, a public hearing about a bill seeking to ban Uber took place in the Legislative Assembly of Minas Gerais state, Brazil. Following similar actions in São Paulo and Vitória, representatives of Students For Liberty Brazil showed up and made the case for freedom of transportation.
We arrived early and were harassed by taxi drivers from the outset. Not all of them behaved that way, as many tried to calm down their colleagues, but to no avail. The confrontation became so heated that the legislature’s police intervened to guarantee our safety. We remained guarded at all times, and in the end the officers even escorted us out of the building through the back door.
While there were around 400 taxi drivers protesting Uber, our delegation had 11 SFL representatives and nine activists from partner organizations. Thaiz Batista, a Brazilian SFL Executive Board member, took the stage to defend Uber, citing examples of other apps that once upset the apple cart and also faced attempts to ban them. That includes the popular messaging platform Whatsapp.
One can understand why people fear Uber, at least until they get what it really represents. The world is changing quickly, and that can be threatening, but the uberization of the economy is here to stay and will continue to raise fears in many sectors.
Uber Won’t Kill Taxis
Airbnb scares hotels; Netflix scares cable television; and Whatsapp scares telecom giants. But radio didn’t kill newspapers, televisions didn’t kill radios, and the internet didn’t kill the television. Likewise, the uberized economy will not mean the death of taxis, hotels, cable TV, or telecoms. It will only require that they adapt.
The biggest problem is that change is scary. It means new habits, new actors, and new trends, but when change brings about innovation, it’s always a good thing.
Uber will not kill Minas Gerais taxis, for many reasons. First, Uber does not always directly compete with taxis. Second, Uber cannot cover the entire taxi market. Third, taxis will have to improve their service to regain some of their market share.
There are many ways in which Uber does not compete with taxis. A Uber Black ride, for example, is more expensive than a regular taxi ride. The service’s success only shows that some consumers are willing to pay for a premium transportation service. In addition, potential Uber clients are not the majority of Brazilians; they’re rather those who already have smartphones and don’t mind spending more to get around town, many times leaving their own cars at home. In other words, most Uber users were not regular taxi clients.
Uber cannot cover the entire market either. Fewer than 30 percent of Brazilians have a smartphone, which means that Uber cannot reach the majority of potential clients. It is true that in big Brazilian cities, where Uber operates, more people use smartphones. But there is another way that taxis still win: you can’t hail a Uber car on the street. You can barely identify one. This portion of the market remains the sole domain of taxis.
Finally, competition raises standards across the entire market. What happens when a new player shows up and starts “stealing” your clients? The natural response is to improve your service. If taxis decide to improve their services, they will also see another very natural consequence: new clients. It is a bit of a challenge, no doubt, but consumers and the taxi industry will benefit from Uber entering the market.
Blame the Bureaucracy
But is the competition between Uber and taxis unfair? Maybe.
In Brazil, taxi drivers enjoy a series of tax breaks that Uber drivers do not, but that is not the whole picture. One thing must be said in defense of taxi drivers: their job is extremely regulated, and they are forced to comply with an enormous amount of bureaucracy that creates inefficiencies across the market.
As private agents constrained by a municipal monopoly, they suffer from the worst of both worlds. The monopoly is so poorly managed that it does not even generate gains to drivers, because prices are fixed and many taxi licenses belong to a small number of people, concentrating what little profit there is.
This does not mean we should bind Uber with the same regulations that burden taxi drivers. On the contrary, Uber has proved that individuals freely choosing how to move around town works. Uber drivers decide to join the company and consumers choose to use the service.
Besides, Uber is not the only company offering this service, other apps have sprung up to give Uber a run for its money. Even Google is reportedly preparing to enter the market.
Unfortunately, the public hearing on Friday wasn’t productive at all. The majority of taxi drivers refused to listen to different points of view. They even turned their backs to the Uber spokeman when she took the stage. They went out of their way to intimidate us, booing and making noise while reporters were interviewing us, and cursing and threatening us throughout.
A takeaway from this experience is that the fight should not be against Uber, but against inefficiency. What prevents taxi drivers from innovating and competing is the regulatory status quo.
Therefore, the debate should not focus on more (bad) regulations, but in favor of less or none at all. With less government interference, the taxi market would be able to grow and be more competitive, benefiting not only consumers, but taxi drivers as well.
Bernardo Vidigal is the Brazilian programs associate with Students for Liberty. Follow him @BernardoVidigal