Ride-Snaring
NYC aims to recreate cronyism of cab cartel
BRACE yourselves, New York: It’s about to get a lot more difficult — and expensive — to move around the city. Don’t blame road construction, subway delays or a UN General Assembly meeting. Blame the City Council, which is poised to pass draconian regulations that threaten to undo all the gains from the ridesharing revolution.
The proposals up for a vote Wednesday include an immediate one-year cap on all new ridesharing licenses and a taxi-style regulatory regime that empowers the Taxi and Limousine Commission to set minimum fares, dictate driver wages, require new entrants to demonstrate a public “need” and arbitrarily determine how many vehicles can operate on New York streets.
Mayor de Blasio and many on the council have spent years trying to rein in these popular services, but it’s the hundreds of thousands of New Yorkers who use them every day who will pay the price. Ridesharing has not only made travel more affordable; it’s expanded options into historically underserved neighborhoods like the outer boroughs. It has also allowed tens of thousands of drivers to earn a living.
Yet de Blasio and others routinely blame these companies for an array of social ills, from Manhattan congestion to even recent taxi-driver suicides. They also accuse ridesharing of destabilizing New York’s longstanding medallion system. Taxicabmedallion owners are a powerful special interest that just happens to have donated more than $500,000 to the mayor’s campaigns.
The city uses medallions to do two things: license someone to operate a taxi, and strictly limit the number of cabs allowed in the city.
Most of the roughly 13,000 taxi medallions in New York City are owned by taxi-fleet operators, not individual drivers. Their artificial scarcity made them a valuable commodity; four years ago, individual medallions sold for more than $1 million. Today, however, that same medallion is worth less than $200,000 and, since medallions are typically debt-financed, many medallion owners are stuck with loans they cannot pay off.
The city seems uninterested in solving that problem. In fact, it rejected an offer by ridesharing firms to pay $100 million for a hardship fund for these medallion owners.
Nor does the city seem interested in doing anything for the thousands of taxi drivers who do not own medallions. They’re forced into an absurd arrangement that requires them to pay medallion holders for the privilege of working a shift. They start each day owing money, whether they have one hail or a hundred. Driving for ridesharing offers a chance to avoid these fees, but strict caps on rideshares may close off that escape route.
City leaders say ridesharing causes congestion because ... they say so. No firm data prove it, and the legislation calls for a study of the problem only after the supposed solution of capping rideshares is implemented. What’s more, the study will focus only on for-hire vehicles, ignoring a range of other potential causes like the ceding of pavement to bike and pedestrian lanes, or population growth.
Cronyism and control seem more important than solving problems. New York’s medallion system gave regulators power to set prices and control the number of cabs. On their watch, prices rose, service suffered and poor and minority neighborhoods became taxicab deserts. Medallion owners became a powerful cartel that spent decades “investing in politicians,” as the city comptroller once put it.
Ridesharing apps exposed how harmful this system is.
For decades, New Yorkers paid high fares because regulators and medallion holders wanted them to, not because they needed to. They endured long waits for a ride in a dirty car because entrenched interests didn’t want more competition.
Ridesharing gave people a genuine choice for the first time in decades. But, as noted economist Milton Friedman once observed, “a major source of objection to a free economy is precisely that it ... gives people what they want instead of what a particular group thinks they ought to want.”
Well, the City Council seems to think that what the public ought to want is a return to a stale old system of greased palms and greasier cars, where politics trumps the free choice of millions. The council will try to turn the clock back on a decade of innovation and all the benefits that have flowed from it.
It may succeed, but New York City will lose.