Pethokoukis, Economics, U.S. Economy

Uber having to hire David Plouffe is all that’s wrong with America

2014uber

Uber hasn’t built a new kind of nuclear power plant or reengineered the measles virus to cure cancer. Instead, it has developed a piece of software that helps connect people seeking automobile transportation with people willing to supply automobile transportation.

It’s a potentially dangerous innovation — at least to local taxicab monopolies. So Uber finds itself squaring off against politicians and regulators doing the bidding of these long-time contributors, I mean, incumbents. Uber’s response to these attacks is to hire political strategist David Plouffe to run a “campaign” — the word of choice used by Uber CEO Travis Kalanick – to win hearts and minds and political support around the world. From The New York Times: “Mr. Plouffe, who ran President Obama’s 2008 campaign, said he planned to run Uber’s communication efforts much like a political race, pushing to woo consumers and regulators alike in the company’s fast-paced expansion across the world.”

I am sure Plouffe is earning top dollar. But what choice did Uber have given the continued cronyist onslaught? The success of its expansion is hardly assured. In New York City, for instance, taxi medallions continue to sell for a million dollars each, perhaps a market-signal that the car-booking industry will eventually lose its Big Apple fight. But investors seem confident and keep sinking money into Uber, Lyft and other “sharing economy” companies. After all, valuable technological innovations have a good track record of survival, with maybe the notable exception of nuclear power.

Then again, who knows what companies and innovation we never see because they were unable to surmount regulatory burdens or other government favors on behalf of entrenched interests. And all the time and effort young companies now have to spend in wooing government — what a waste. Look, there is lots of evidence that the US economy is losing its entrepreneurial dynamism including fewer young, fast-growing firms and a rise in the share of mature companies. And now over 30% of jobs are covered by restrictive, often unnecessary occupational licensing.

Innovation and productivity and higher living standards are driven by an economy’s competitive intensity. Less competition and more cronyism means less innovation and lower growth. As a McKinsey report puts it:

How exactly do we foster economic dynamism? Instead of picking winners and funneling subsidies to them, countries must get the basics right. These include a solid rule of law, with patents and protections for intellectual property, enforceable contracts, and courts to resolve disputes; access to finance, particularly for start-ups; and an efficient physical and communications infrastructure. Once the basics are in place, the key is ensuring strong competition within sectors. Governments can encourage this by minimizing the barriers to entry and exit in an industry, opening their markets to trade, repealing subsidies and regulations that favor incumbents, and breaking up monopolies.

A simple, time-tested formula, but one the US may have forgotten.

Follow James Pethokoukis on Twitter at @JimPethokoukisand AEIdeas at @AEIdeas.

6 thoughts on “Uber having to hire David Plouffe is all that’s wrong with America

  1. I guarantee you that within two years Uber will be pushing government to protect it from other smaller upstart ride companies. They’ve seen how the game is played and hired one of the best at protecting incumbents.

    • Agree – the sad commentary on our times is the widespread knowledge that more money can be made via the political means than via the economic means…

  2. What you should be disturbed about is that there is now a cab company with the money and the agenda to even hire someone like this. Uber is the biggest, most powerful cab company in history — don’t be surprised when they turn out to be the crookedest.

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