Regulating Uber: The politics of the platform economy – Public lecture by Kathleen Thelen

27 March 2019

“Lessons from the rich democracies show that Uber can be regulated but countries have to act quickly or mobilise consumers to the cause. Once Uber has established a large, loyal and addicted consumer base, it’s hard to take away – no politician wants to be the one to take away consumer accessibility,” said Kathleen Thelen, Ford Professor of Political Science at the Massachusetts Institute of Technology, Immediate Past President of the American Political Science Association and STIAS fellow, who was presenting the first STIAS public lecture of 2019.

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STIAS Fellow Kathleen Thelen during her public lecture on 19 March 2019

Thelen is using Uber as a lens to explore the comparative political economy of the platform economy specifically in Europe and the United States, and pulled together some of the lessons of these experiences that might be applicable to lower- and middle-income economies (LMICs).

“My project is about ‘digital capitalism’,” she said, “and, specifically, the emergence of the ‘Gig’ economy associated with the rise of new platform business models such as Uber, AirBnB, TaskRabbit and others. These app-based companies create value not by producing ‘things’ or services in the traditional way, but by enabling producers and consumers to interact. However, they pose new challenges, because they create new markets beyond the reach of current labour and regulatory policies. I am exploring variations in how these models are received and regulated in different countries and contexts.”

“Uber is a window on the Gig economy. It is a labour-based platform which started in San Francisco in 2011 and spread like wildfire – it’s now in 600 cities in 60 countries providing a natural experiment of how different countries react to these new players.”

She also pointed out that the Uber menu varies by country indicating different levels of consumer acceptance. “For example UberX or UberPop – the low-budget options involving ordinary drivers driving their own cars without commercial licences did not survive in some of the rich democracies. Plus there are options like UberBike (with cars that carry bicycles) and UberEL which uses electric vehicles which are only offered in certain markets.”

“Within the advanced capitalist world, different countries have responded in wildly different ways to this new service,” she added, “from welcome embrace and accommodating regulatory adjustments to complete rejection and legal bans.”

Thelen focused on the United States, Germany and Sweden, to document three very different responses, the conflicts that Uber provoked in these countries and the actors and coalitions that mobilised around these flashpoints.

To regulate or not to regulate

She detailed the different responses in the three countries. “In the US there was broad deregulation of existing transportation legislation to accommodate Uber. In Germany, by contrast, there was a vigorous defence of existing regulations, mostly shutting Uber down. Sweden made some adjustments but not complete deregulation.”

“Obviously these responses, to some extent, reflect the relative power of various stakeholder groups including the transportation and taxi industries, the trade unions and organised labour.”

Potential flashpoints include the issue of unfair competition with Uber seen as operating outside the rules; labour issues related to the fact that Uber drivers are employed as independent contractors which means they don’t have access to benefits; tax avoidance because the app does not allow for income monitoring and reporting; and, whether the vetting systems ensure consumer safety.

In order to understand how these issues played out in the three countries Thelen and her colleagues analysed media coverage – examining over 800 articles coded on different variables – including the issues covered, the actors involved, where the conflict played out and by whom; and if there was a social media campaign deployed.

“We also attempted to capture the tone of the debates,’ she said. “How the different actors and coalitions in these countries framed the problem.”

“We were surprised to find the employment labour issues were not that big in any of the three countries although they were bigger in the US than the other two. Consumer safety was more pronounced in the US while taxation was a massive issue in Sweden.”

“In Germany Uber was presented as unfair, ruinous competition while, in the US, Uber was seen as enhancing competition in an overly regulated field.”

“In the US Uber cultivated a loyal consumer base and set itself up as a champion of consumer choice. Generally politicians want to project a consumer-friendly face so this meant that even opposition political parties were on the same page with Republicans praising the championing of the free market while Democrats saw Uber as enhancing innovation and progress.”

“In the US Uber also mounted aggressive social media campaigns to counter any opposition. For example, the De Blasio app, which gave consumers the option of emailing their disapproval directly to the New York City government.”

“In Germany Uber never got off the ground. The overarching taxi association mounted an immediate cease and desist order which framed Uber as a threat to the public interest and themselves as defender of the rule of law. The debates therefore moved quickly away from the public to the judicial arena.”

“The situation in Sweden was very different. The taxi industry is largely deregulated and there are very few restrictions on competition so Uber had relatively smooth sailing.”

“Most social benefits in Sweden are universal so that wasn’t an issue but taxation to fund these became a big flashpoint,” she continued. “The Uber app didn’t allow the tax authorities to monitor information from Uber so they saw Uber’s competitive advantage as based on tax evasion. The labour unions and taxi associations therefore mobilised citizens as tax payers. They didn’t want to shut Uber down but wanted the technology to ensure that the tax authorities could access the information needed.”

In discussion Thelen focusing on the possible lessons of these examples for LMICs including South Africa. She highlighted the very different contexts. “Many LMICs are characterised by high unemployment, large informal sectors and less-developed transportation infrastructure. So Uber brings both opportunities and challenges,” she said. “It creates jobs but they are not stable, don’t include benefits and are characterised by low pay and long hours. It provides new transport options but, not necessarily for the poor, and potentially crowds out more sustainable, equitable public alternatives.”

“In many LMICs there is also a secondary model of drivers who don’t have cars who work for owners – which means they receive an even smaller slice of the pie which is a huge problem.”

“Similarly to the rich economies, many of the drivers are foreigners who struggle to get into the formal labour market but this often means they are also more susceptible to exploitation.”

“Lack of regulation opens the doors for exploitation,” she said.

“Some cities, like Sao Paulo in Brazil, have managed to negotiate like charging Uber for using certain roads and putting more drivers into underused areas.”

“If the city and country offers a large and lucrative enough market for Uber they are more likely to negotiate with the government as well as with labour unions and taxi associations, and this can include issues like minimum wages and formal employment for drivers,” she concluded.

Michelle Galloway: Part-time media officer at STIAS
Photograph: Christoff Pauw

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