Car Services, Taxicabs and the American Dream

Car Services, Taxicabs and the American Dream

I’ve written about creative destruction before. There are two key elements to the economic concept. One, innovation (a new technology, a new application of an old technology, a new way of doing an old thing, a new activity that competes directly with an old one, and so on) destroys older technologies, or older ways of doing things, by making them no longer economically viable. Two, such destruction often is creative rather than merely destructive; the elimination of old things makes way for even newer forms of economic activity.

A decent analogy is the effect of a wildfire on the reproduction of certain species of trees. The seeds for new trees are released by fire, bringing new life as it weeds out less healthy trees.

In this way, Web-based car services like Uber and Lyft are setting fire to the way people get around in their communities, the way we think about the overall transportation infrastructure and the cost/benefit calculations of car ownership, among other dimensions of urban and suburban life.

The destructive effects are multiple:

In New York City, where licensed cabs collect a fee that supports the transit authority, an annual loss of $10 million in revenue due to passengers choosing Web-based services is anticipated.

Uber is aggressively entering the global transportation market place, amassing over $9 billion in capital to expand and pushing regional competitors (including Lyft in the U.S and similar services in India, China and Southeast Asia) into a creative collaboration.

But perhaps one of the most important elements of destruction involves the taxi industry itself. Where driving a cab once was a way for a relatively unskilled and uneducated individual to work hard and raise the standard of living for his (usually his) family, Uber’s drivers are cutting the legs out of that dreammaker, often for more fleeting financial goals.

One Tallahassee cab driver said it is much harder to have a good night on a Friday or Saturday night now that the college kids are picking up a few bucks for beer with nothing more than a car and a smartphone.

Those are the destructive dimensions. The question is, what are the creative ones?

There are plenty of positive answers. The same article that notes how cab drivers are being hurt argues that Uber is reshaping the overall car service sector in such a way that we may find it is more economically efficient, provides more reliable service and is perhaps more eco-friendly. These car services are breaking down what were, in some cities, entrenched monopolies wired into the political establishment and providing solid financial benefits to owners at the expense of citizens and sometimes drivers.

More broadly, such creative rethinking of a long-standing service model is likely to invite copycat endeavors in other industries as well, with similar potential benefits to consumers.

And, perhaps, similar damage to low-skill workers.

I’m neither a fan nor a foe of these car services.

My concern is that so many new technologies and new applications of existing technology are taking economic opportunity away from folks who are willing to work hard but lack the sorts of technical skills and/or education necessary to compete for the next creatively destructive breakthrough. Because there are a lot of men and women, younger and older, in that boat.

The more difficult it becomes for a significant percentage of this country’s population to make a living, the less credible the American Dream as a promise (or even a myth) becomes.

One of the foundations of our political culture is our notion of social mobility, the “rags to riches” mythos that most Americans still believe is true. If we work hard enough, any one of us can climb out of poverty and into the economic elite.

Such a mythos sustains arguments for a relatively free market economy (freer than most of our economic rivals around the globe) and for a leaner welfare state (leaner than most of our rivals). Both of those values seem still to be widely shared today.

But take away any real hope of mobility . . . or even of doing a bit better for your kids than was done for you . . . and one is likely to change the political equation dramatically.