3 July 2015

The Uberisation of the world


The violence carried out by Parisian taxi drivers against self-employed Uber drivers was followed by strikes that paralyzed the French capital last week. This confirms, albeit two centuries apart, Alexis de Tocqueville’s observation that “The French start a revolution when confronted with change, not a reform.”

Similar incidents occurred in the United States and in other European capitals, but Paris was the only place in which events took a violent, revolutionary turn. The methods employed by the Parisian taxi drivers are of course unacceptable, but they seem to have the right intuition. In the same way Airbnb shook up the hotel sector, Uber has announced a profound transformation of the economy. This is not unlike the dawn of the industrial revolution, when British textile workers foresaw the destruction of their jobs by new mechanical advances. A splinter group known as the Luddites began in Nottinghamshire in 1811, but paid dearly for their efforts when they revolted. The police brutally repressed the uprisings, and technological change swept the country. The Canuts suffered a similar fate in Lyon in 1830, when they attempted to destroy the new looms.

Today’s Uber protestors are yesterday’s Luddites, on the cusp of a similar upheaval. But these two industrial revolutions separated by the centuries are founded on opposing principles. The first turned self-employed textile artisans into drones for huge, capitalist manufacturing companies. Uber, Airbnb and other initiatives adopting the same modes of operation are in fact destroying this factory economy and restoring the ideal of the artisan. Uber drivers are self-employed entrepreneurs who can join an open network if they see fit. And the same goes for home owners who choose to rent their property to passing guests; Airbnb has enabled the public to build on their housing investments in niches that would have otherwise remained dormant.

But like any economic revolution, Uberisation will only work if two phenomena converge. There was a shortage on the market that “factories” were incapable of compensating for, while new technology – in this case an online application – was created to meet the need. The convergence of the two means consumer demand is satisfied, with superior quality and for a better price. In the same way, the industrialisation of the textile sector enabled everyone to dress more decently thanks to the introduction of new machines. On a more modern, less dramatic note, Uber was born in Paris in 2009, when the founders from San Francisco couldn’t find a taxi after leaving a technology conference called Le Web. In a similar vein, Airbnb was created in San Francisco when the founders were unable to find a hotel room after a convention in 2008.

This nascent economic revolution also has social foundations. In the services sector, which represents two thirds of jobs in developed countries, it is becoming easier to be a self-employed entrepreneur than an employee. And this economic, technological and social revolution is also set to gradually affect industrial production; 3D printers are already being used by self-employed entrepreneurs to produce increasingly complex objects in their homes.

The historic changes we are experiencing confirms the economists’ renowned theory that Joseph Schumpeter defined as “creative destruction” in 1940: progress is made by destroying the past, which inevitably means some will lose out. But these victims are not all innocent. With regard to the Parisian taxi drivers, almost all of them belong to a private monopoly that has been taking advantage of its position for 50 years, while making no effort to improve its service. Other victims deserve help and compassion. Just like the Canuts in Lyon, they find themselves drowning under a technological wave they were unable to anticipate. This is where the government has a role to play, supporting the unemployed, assisting them in their vocational reorientation and encouraging them to become self-employed themselves.

European governments have unfortunately failed to take on this responsibility. French President François Hollande gave a clumsy speech, something of a personal forte, in which he declared that “Uber should be banned, then made illegal”. In a state of law, this sequence should be reversed, with illegality preceding a ban. More shocking still, the French managers of Uber were arrested by the police and interrogated for two days like criminals. Was it to intimidate them? Has Hollande taken a leaf out of Putin’s book? California has seen similar events.

After being pressured by the unions, magistrates have ruled that the self-employed drivers working for Uber should be treated like employees, which would destroy the company’s entire business model. These are all rearguard tactics not dissimilar to the Luddite campaign. At the end of the day “the market decides”, as consumers hold the power, not judges or governments. Some will mourn this new, free market advancement, the retreat of the State, the material progress and the death of an old world. And they have every right. But resorting to violence is not a right, and revolution is never more than a display of powerlessness, which is what Tocqueville was trying to tell us.

Guy Sorman is an economist at the University of Paris and author of many books on classical liberalism including: The American Heart, In Praise of Giving, 2014. He is also publisher of France Amerique and founder of Action against Hunger.