Harbour View: Uber – Fixing taxis not the answer

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America got USD$50 billion  Uber. Hong Kong got 13 cell phone dashboards. Innovation hub, indeed

Fixing taxis doesn’t justify blocking Uber, Lyft, KuaiDi, or other sharing economy companies from our markets. An overhaul in our antiquated thinking on straitjacket, not protective, licensing philosophy is needed.

Fixing taxis is not the answer to the Uber issue that  is seeing our city unite in one voice.

Uber’s arrival into a legal grey zone, but unambiguously popular market, has upset an antiquated system whose old privileges, combined with new technology, was giving Hong Kong a stunted version of a better way of organising transport. The genie  is out of the bottle and only harsh government oppression, of small business operators and an angry population, can put it back.

Privilege leaves us stunted

Drivers of taxis are complaining that they can barely earn a living and Uber is killing their business. If it is such a bad business, why are taxi medallions so fantastically expensive? A small cabal of owners make the money while drivers work long hours for minimal return. Far from standing still, drivers have innovated, driving a mini-Uberisation through discrete (and illegally) spreading phone numbers of dispatchers who will provide taxis on call for a discount. The result of this was the multi-phone dashboard one often sees in taxis.  But sketchy and unreliable innovation was what Hong Kong got.

It worked for the taxi drivers. It worked for some consumers, sometimes, sort of. Given the lack of competition from Uber-type services,drivers innovated the least amount needed and permitted. It allowed them to (again illegally) start turning down fares, expecting one of their many phones would ring in a moment with a better option. Consumers across Hong Kong bore the brunt of newly-finicky drivers and rage quietly built until Uber came along to fill the gap for reliable point to point driver service.  When Uber was taken away, the rage returned and boiled over.

The government, conscious perhaps of the taxi drivers large block of votes in the small circle functional constituency Transport seat, held by Frankie Yick (易志明), jumped to protect the taxi drivers.  After months of making some noises about Uber’s precarious insurance position (hotly contested by the San Francisco based innovator), they finally struck out at drivers and, bizarrely, interns at the Uber offices. Scaring the chickens by killing some low level monkeys seemed to work and Uber rides are now few and far between.

Public outrage caught the government off guard. The taxi drivers are even conceding their service has slipped and is now looking to create a code of standards and maybe offer their own Uber-like service.  

Social contract is no contract

All this has the ideal of a  social contract underlying it. Medallion owners pay huge amounts for licences and can get wealthy. They employ many otherwise unskilled or down on their luck people whose ranks swell during economic downturns. Good service and low prices keep consumers happy and reduce demand for private car  ownership. Occasional nods to improving street level air quality see periodic moves to introduce things like LPG and now electric taxis.

If the private car system is thrown open to all and sundry, the value of  the medallions plummets. Think of the real estate ‘social contract’ and you can see how this thinking pervades Hong Kong governance.

Even before the real Uber, arrived, mini pre-uberisation caused the social contract to fall apart. The problem is that  state managed systems of licensing retard our technological,  legal and economic development.  Innovation isn’t just the apps and technology – it is also about modernising our legal and regulatory system to have a more productive economy. Productivity means more output for less work and that is the only way wealth is generated. Other ways of generating wealth, like money printing and asset inflation, are mirages that disappear in spectacularly disastrous fashion.

When we use intricate and heavy-handed government management of the economy, two things happen. First, equality before the law is violated. The government must resort to deny basic human rights encompassing freedom of action, to form contracts, and speech, in order to protect those who invested in the government’s licensing system.

Second, innovation of all kinds is killed before it can happen. It is no surprise that in  a city that should have led the ride-sharing world, given our low rate of vehicle  ownership, ended up with deteriorating taxi service and up to 13 driver-distracting phones on a dashboard – not $50 billion USD valued Uber, Lyft, or other innovators.

The reality is that only protecting individual rights – not protecting old government systems – will lead us to become world beating innovators. It  is unfortunate in the extreme that it takes a gutsy American company, now with legions of rabid fans in Hong Kong, to upset our cozy protectionist apple cart and open our market and drive productive change.

If our taxi services improve, it  will be because the Uber outcry forced them to change in the absence  of normal competitive pressures. If their system is protected in the end, the bad ways will persist. If our transport options as consumers improve, it will be because Uber was willing to take a chance on Hong Kong and challenge our cartels and government.  If Hong Kong will innovate its way to greater prosperity, it needs to choose to leave well enough alone (formerly  known as positive non-interventionism), not ‘protect us’ through ‘approrpriate proaction.”

Talk of innovation here is just so much hot air when so many shibboleths are protected due to political considerations. To free our innovative  spirits, we must deny political self-interest and heavy handed bureaucracy. Let Hong Kong be free.