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Uber versus the Buenos Aires Cartel Is Battle of David and Goliath

By: Adam Dubove - @dubdam - Jan 14, 2016, 8:44 am
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The real war is between cartels and millions of consumers’ freedom to choose. (Guillermo Tomoyose)

EspañolThe arrival of Uber in Buenos Aires is imminent. The company behind the ride-sharing phone app has begun filling several managerial positions in Argentina. The second largest South American city may finally join Bogotá, Rio de Janeiro, Santiago, and 300 others around the world, including 15 located in Latin America, that offer this service.

But it will not be easy. National and local governments, unions, and taxi drivers around the world have opposed Uber for putting their decades-long, monopolistic business models at risk. A service offering better cars, lower fares, higher security, and personalized attention is a threat to those privileged enough to have never faced competition.

In Argentina, there are additional problems. Uber’s business model is a direct attack on a sector that has operated under a fascist system. And that’s a big deal in a country like Argentina, where Italian-style fascism was the official ideology in 1946, and in many ways is still celebrated today.

The taxi industry is the best example of that fascist model. On paper, taxi drivers own their vehicle, but they have no legal authority over their cars. The Buenos Aires government sets what color the car paint should be, what kind of equipment they can put inside, how many hours they can work, and how much they can charge. And city authorities are the one who decide who can work, granting licenses to those that pay juicy fees — a taxi license can cost US$25,000, more than the vehicle itself.

The taxi cartel hates competition and knows how to effectively suppress choice. In August, Buenos Aires officials targeted an individual who decided to buy a bike and start a pedicab service, after growing tired of recycling trash to survive. The authorities first imposed a fee per 10 blocks (and additional fees for longer distances). Then they banned the service, before ultimately permitting it to continue, while stipulating that pedicab drivers could only accept voluntary payments.

EasyTaxi and SaferTaxi, two companies that allow individuals to request a taxi through phone apps, also felt the state’s fist. Last week, Buenos Aires banned those services because the law only allows individuals to solicit a taxi the 20th century way: by telephone or by hailing a car on the street.

A petition on Change.org to lift the prohibition has already collected more than 7,000 signatures, and continues to grow.

Taxi drivers’ fear is understandable. Uber’s disruption in the market is what cars were to horse wagons, or what electricity and the electric lamp meant for candle makers.

Unions, who see their privileges under threat, are already in action. Sacta, the company that verifies and regulates taxi operations in Buenos Aires, reportedly utilizes EasyTaxi to lure drivers in so they can fine them US$500 and suspend them for 15 days.

Benefits for Everyone, Privileges for the Few

Uber is here to break a model that resembles a guild from the Middle Ages, rather than a modern market economy. Its advantages lie not only in more comfortable and cheaper trips, but also the availability of rides in regions not regularly covered by taxis or where waiting times are high.

The possibility of paying with credit cards reduces the risk that comes with carrying cash, both for the driver and the customer.

Uber’s revolution is not just technological, it’s economic as well. It allows people who want to become drivers to turn their cars from consumption goods into capital goods. To employ a fashionable word, it empowers individuals. As economist Don Boudreaux explains, services like Uber and Airbnb create capitalists by making idle goods like cars and spare rooms profitable.

Just like the state stopped the poor garbage man from becoming an entrepreneur with his bicycle, the taxi cartel in Buenos Aires will prevent thousands from becoming their own bosses with Uber. Arguments about safety or “jobs” are red herrings. What’s really at stake is the system of privileges at complete odds with the modern world.

The battle also isn’t against Uber per se. The new Cold War is one waged against millions of potential consumers who could benefit from a better service.

We can safely predict that the ride-sharing app will have a battle on its hands operating in Buenos Aires. The violence and harassment seen in other cities against Uber drivers will probably happen there too.

The terms for the battle are set. On the one hand, there will be those who stubbornly defend a fascist model. On the other, many will uphold the freedom to choose, as millions of consumers already have in cities across the world, giving Uber the popular support they need to face regulators. Whose side are you going to be on?

Translated by Daniel Duarte and Scott Myers.

Adam Dubove Adam Dubove

Adam Dubove is a journalist, co-host of The Titanic's Violinists radio show, and the secretary of the Amagi Institute. Follow him on Twitter: @dubdam, and read his blog: Diario de un Drapetómano.