Disrupting the regulators

 

2013-04-24 04.49.50 amNICK CATER

The Australian, 4 August 2015

 

What sort of nanny state tyrant would want to restrict the inalienable right of citizens to wear a Micky Mouse suit in public? The honour goes to the mayor of New York, Bill de Blasio, who wants to license street performers who dress as cartoon characters for the amusement of tourists.

“I think this has gone too far,” de Blasio told journalists last week. “It needs to be regulated.” By any reasonable judgment, more red tape would be a disproportionate response to the assault of a police officer by Spider-Man on the corner of West 42nd Street and Broadway nine days ago. The disgraced superhero appeared in court the next morning under the name of Junior Bishop and was duly charged with assault, resisting arrest and criminal mischief. No need for any further laws, surely.

Yet the instinct to make the authorities responsible for practically everything unpleasant in modern life is woven deep into the progressive psyche. Its pervasiveness in Australia was parodied brilliantly in the 1965 classic Let Stalk Strine, in which the pseudonymous Afferbeck Lauder explains the word “aorta”.

“Aorta build another arber bridge. An aorta stop half of these cars from cummer ninner the city — so a feller can get twirkon time.”

It was no accident that Lauder’s alter ego, Alastair Morrison, picked on urban transport since it was, and still is, one of the most heavily regulated sectors of the economy. Encouragingly, however, the state’s anti-competitive stranglehold is being loosened, thanks to technology.

De Blasio’s tough talk on Elmo and Spider-Man follows his inglorious defeat in his fight with the car-for-hire business Uber. De Blasio wanted to cap the number of Uber vehicles by requiring the company to seek City Hall’s permission each time it upgraded its smartphone app. The number of Uber cars on New York streets recently has overtaken the number of yellow cabs, disgruntling an industry that helped fund de Blasio’s 2013 campaign.

Last week, after backlash from consumers and digital corporations, the mayor backed down. In Australia, where the Uber conundrum is exercising the minds of politicians and bureaucrats, de Blasio’s capitulation should serve as a cautionary tale. De Blasio used every lame argument in the progressive handbook to make the case for regulation.

Uber was a corporate behemoth trying to dictate to government; it relied on a predatory business model that cheated workers of their benefits; Uber would undermine the quota system for disability-friendly vehicles; regulation protects consumers from overcharging.Uber would discourage “low-carbon and multi-modal options” (bike riding and walking in layman’s terms) and would increase dependency on fossil fuels.

De Blasio and his coercive arguments were on a hiding to nothing against a company that delivers safe and reliable transport through voluntary co-operation, the essence of the free market. Uber is winning because it is better. It is quicker, more reliable, more convenient, more personable and often cheaper than a regulated taxi.

The ultimate reproof for the regulatory state is that Uber is safer. Customers know their driver’s name, phone number and the vehicle’s make, model and registration. There is no need to hang around on the pavement because the app beeps when the car is outside. The driver collects no cash and can rest assured that in the event of any unpleasantness Uber has their name, address and credit card details. Passengers may still be drunks, but at least they are not random drunks.

The result is that Uber has broken the taxi driving glass ceiling. In Australia more than 10 per cent of Uber drivers are women, the company reports, and the number is increasing every month. That’s more than double the proportion of women who reported driving cars for a living in Melbourne, Sydney or Canberra in the 2011 census.

In the end, the biggest disruption from Uber is not that unleashed on the regulated taxi industry but on the idea of regulation itself. Small technology is proving to be the enemy of big government. Software undermines the hardware of the bureaucratic state by socialising knowledge and extending choice. Consumers armed with information can decide what’s best for them; they don’t need the government to make the decision for them.

Smarter governments are beginning to get where this is leading. In NSW last week the case collapsed against 24 Uber drivers who had been prosecuted under the Passenger Transport Act. Transport Minister Andrew Constance has commissioned a review that he hopes will find a way of levelling the field between licensed and unlicensed drivers. Smartly, he is signalling that it may require lowering the regulation on metered taxis rather than increasing it for Uber.

The Harper review argued that the digital disruption of the taxi industry should be a catalyst for change. Instead, the report concluded, regulation appeared to be “more concerned with protecting a particular business model than being flexible enough to allow innovative transport services to emerge”. Even those in the community that regulation claims to assist, such as the elderly, have turned into digital technology adaptors. New entrants to the taxi market enabled greater choice and offered prompter service, National Seniors Australia wrote in its submission.

“It will be important to ensure that these innovations are not stifled by further anti-competitive regulation aimed at protecting incumbents,” National Seniors wrote.

State governments in particular have a pecuniary interest in maintaining the status quo. The amount they collect from the taxi industry in fees, taxes and charges is not inconsiderable. The rules are changing however. The digital economy is harder to regulate and harder to tax, and governments should read the writing on the wall.

Government should aspire to be the disrupter, not the victim of disruption. As in business, software can help governments to discover leaner and more efficient ways of going about their business. If the ancient art of tax collecting is harder in the digital era, the solution is simple. Governments should learn to get by doing more with the revenue they’ve got.