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A Period of Conflict and Clash
A non-licensed private cab driver working with Uber shows a Uber mobile application in Nairobi on February 4, 2016. (SIMON MAINA/AFP/Getty Images)

A Period of Conflict and Clash

Walter Russell Mead

Uber is under political fire from Kenyan taxi drivers, even as reports emerge that Uber drivers have been victims of attacks. The AP:

Taxi operators in Kenya Wednesday asked the government to stop operations of Uber, the ride sharing app which has risen in popularity because of its cheaper fares [. . . .}

Chairman of the Taxi Cab Association of Kenya Josphat Olila said Wednesday that the organization will hold protests in a week. Mwangi Mubia, the association's spokesman said 4,000 taxis are being driven out of business because of Uber's cheaper fares. On Tuesday, Interior Ministry Spokesman Mwenda Njoka issued a statement saying that there have been reports of attacks on Uber drivers this week.

Resistance to Uber is a global phenomenon. Taxi drivers in first world cities like London, Paris, and New York, as well as in poor countries, have fought—and in some places, fought violently—against the introduction of Uber. It’s easy to denounce these anti-Uber drivers as luddites and criticize these cab companies as crony capitalists—which they usually are.

But it’s also important to understand what Uber and related companies are doing in broader context, for in that context, these companies are much more unsettling and disruptive than they may at first appear. In fact, the dispute over Uber and similar businesses opens a window into some of the world’s most important problems.

In a country like Kenya, life for those at the bottom is scary and grim. They live in large slums without safe drinking water or good health services, where people pay high rents to criminal syndicates for the right to build and inhabit shacks—a.k.a “informal housing.” Kids in these slums play soccer with plastic garbage bags wound into a ball and held together by string. Open sewers flow down steeply eroded gullies.

People in these places don’t get much protection from the state. There’s no food and water safety bureau, no police, little health care, no recognition of their property rights, and no courts that settle their disputes. They have minimal education. As for protections against sex discrimination or means of obtaining disability payments or unemployment insurance: fuggedaboutit.

You get a kind of tiered society in places like this. Below the level of political leaders and the rich, there is a bubble of “formal sector” workers. They include people employed by foreign interests (NGOs, foreign investors, and so on) and “on the books” employees of both state enterprises and well-established private companies. These jobs usually come with good wages and all kinds of perks. Employment laws for the formal sector are often modeled on European labor legislation and in many poor countries, it can be as hard to get fired from one of these jobs as it is to get fired from the U.S. Postal Service—or the New York City public schools.

But the bubble is small, and in many countries most people are in the informal sector. Dump pickers, street vendors, causal laborers, most domestic workers, and lots of other people essentially fall outside the range of government concern: no minimum wage, no health and safety regulations on the job, and no social insurance.

The imbalance between these formal and informal sectors can be incredibly dysfunctional. In South Africa, government employees and employees of international companies like the great mines that play such an important role in the economy, have worked long and hard to solidify their position and to create ever stronger protections around formal sector jobs. One result: The government can’t afford to extend quality services to all of its people because the civil service is so expensive. Moreover, foreign investment is deterred because the labor laws in the formal sector are so strict that South Africa, despite huge unemployment and high rates of poverty, is uncompetitive internationally as a manufacturing platform.

In a situation like this, people first attempt to get a job in the formal sector. But when they lack the education, political connections, or whatever it may be to get inside the bubble, the next strategy is to band together with other people in a similar job or situation to get a kind of informal protection. The vendors on a given street will organize to prevent other vendors from setting out their stalls or undercutting their prices. The informal van services that many people use, because the government’s mass transit doesn’t serve the places where poor people live, are organized and not just anybody can set up a rival van service along the routes.

For people who have or who acquire a stake in these informal networks, the strength of their organizations can be a matter of life and death.

There’s a lot wrong with this kind of society. The crony capitalists and the formal sector workers enjoy inflated standards of living that deny opportunities to many others. The informal networks, organized outside the state with no recourse to formal legal protections, often depend on hired muscle and are easily infiltrated by or turned into criminal gangs. You just have to look around one of these huge slums—found around cities from Cape Town to Cairo in Africa and in much of Asia and Latin America as well—to see millions of people work very hard, with most of them not getting anywhere. As a system of social organization, this falls well short of the optimum.

Economists like Hernando de Soto have done some interesting thinking about how to bring the informal sector inside the bubble and how the property rights and hard work of urban slum dwellers could, if given the right kinds of institutional support and recognition, serve as the basis for better lives for hundreds of millions around the world.

But all that is long-term, and for people on the edge of survival, time horizons are short. Ultimately, innovations like Uber and the dismantling of cozy crony systems will make life better for most of the residents in an urban area. Passengers will get cheaper, faster rides, drivers will be able to set their own hours, and more people will have access to a growing market. But the disruption that hits organized taxi drivers in a city like Nairobi will too often destroy one way of making a living without opening new options. And when drivers who fear displacement band together in gangs and try to defend their economic position with, if necessary, violence, they are reacting pretty much as everybody does in the society in which they live.

The new technologies and the new business formats that the Information Revolution is creating, then, have very different impacts in different places around the world—and global disruption is happening faster than ever. The Industrial Revolution began in Great Britain in the late 1700s, and it took hundreds of years for the factory system to spread around the world. Ride-sharing technology, on the other hand, is just a few years old, and is already being adopted in countries at all levels of development. But the problem isn’t really Uber, either. The problem is the lack of opportunities that makes taxi drivers so willing to fight for what little they have. For creative destruction to work and to be sustainable, those whose jobs or industries perish must, on the whole, be able to find other jobs and other opportunities.

These problems aren’t going away anytime soon, and we should all brace for a period in world history in which the clash between new technology and new ways of doing things, on the one hand, and entrenched interests, on the other, is rising, sometimes explosively. We aren’t looking at a period of social calm and rest, not in Kenya, not in Europe, not in the Middle East, and not in the Americas.

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