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New York’s mayor is proving Uber right about cab cartels

New York City Mayor Bill de Blasio presents the 2015 city budget at City Hall in New York, Thursday, May 8, 2014. De Blasio devoted much of his financial resources to create a budget, which now will be subject to negotiations with the City Council and must be approved by July 1, that backs up the campaign promises that ushered him into office in January, when he became the city’s first Democratic mayor in a generation.
AP Photo/Seth Wenig, Pool
Pinching consumers won’t help the taxi industry.
  • Tim Fernholz
By Tim Fernholz

Senior reporter

Published Last updated This article is more than 2 years old.

New York mayor Bill de Blasio thinks he’s doing the taxi cartel that runs the city’s famous yellow cabs a favor. But actually he’s only making it easier for Uber, the car-service company that is the taxi industry’s nemesis, to justify its recently reported $10 billion valuation.

Unlike his predecessor, Michael Bloomberg, who famously vowed to “fucking destroy” the incumbent taxi industry, de Blasio cozied up to the sector—and its hundreds of thousands of dollars in campaign donations—during his mayoral run. Now, he’s appointed one of his taxi fundraisers to be a taxi regulator, and more importantly, held up plans to expand the city’s taxi fleet by an additional 6,000 new cabs.

The extra cabs would have been part of the “borough cab” program introduced by Bloomberg, which was designed to alleviate New York City’s congenital shortage of cabs outside downtown Manhattan. (The borough cabs, painted an unappetizing shade of green, can’t ply for trade downtown; in return, they pay much less for a license than yellow cabs, whose medallions cost over $1 million on average.) The yellow cab industry opposes the borough cabs because they reduce the value of its monopoly. This is much the same reason it opposes new entrants like Uber and other car services that use the internet to provide car service outside the regulated framework of the taxis.

But by restricting the number of cabs, the mayor is essentially making Uber’s case for its own existence. He’s reinforcing Uber’s narrative that the current system is rigged against consumers, and companies like Uber are needed to disrupt it and meet the unmet demand. And, in this case, Uber’s probably right.

But that doesn’t solve a problem Uber prefers to elide: the fact that, being unregulated, its drivers aren’t subject to the city’s supervision and safety checks. And that’s really where New York’s government is failing. It’s neither meeting the demand for paid car services by approving new cabs, nor is it creating a system whereby Uber, or its competitors Lyft and Sidecar, can safely fill the gap. And, if the city ever does decide to start regulating the Ubers of the world, it will be easier for those companies to allege that the new rules are designed only to benefit incumbent taxi companies—and harder for de Blasio to convince the public otherwise.

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