The real Economics 101

 I commend to your attention this essay by Aaron Benanav, which purports to be about Uber and Lyft but is really making a much broader argument. As I have noted here before, and elsewhere, these companies have no prospect of ever making a profit. Investors have bought billions of dollars worth of their stock, which allowed founders and early investors to walk away with vast fortunes, while the rest of the billions is feeding a continual bonfire of immense losses. They lose money on every transaction, yet they have intentionally fueled ever-growing losses by investing in expansion to new markets. In the process they have bankrupted the traditional taxi industry and impoverished hard working people who spent their lives scraping together enough money to buy a taxi medallion. Meanwhile, they have increasingly squeezed the life out of their own drivers, who have no job security, no benefits, and who are barely making any money at all after depreciation on their vehicles. Uber and Lyft don't actually own anything other than control over their vassals.

While some people presume that the plan is to get a monopoly and then jack up the price, that won't work. If they were to charge enough to be profitable, then others would enter the market -- which would be very easy because the traditional taxi industry still exists and could simply re-expand. The only way they keep their monopoly is to keep losing money. So are the investors crazy?

Probably. I will say that I haven't bought their stock. But as Benanav explains, the investors were hoping that robot cars would come along and the companies could get rid of drivers entirely. That still might not work -- other people could come into their markets with competing self-driving cars -- but right now there are oceans of capital sloshing around the world with no really good investment opportunities. And why aren't there good investment opportunities? Because workers don't have enough disposable income to buy more crap. Investment follows demand. Lowering taxes on business income, eliminating environmental and worker safety regulations, letting the minimum wage slip ever further behind inflation, all of the measures governments are taking to try to attract investment, don't work because they're like pushing on a string. 

Workers aren't losing out because of international trade agreements, or affirmative action, or the special secret welfare that only the Blah people get. They're losing out because of the logic of capitalism. As Benanav puts it:

People need security that is not tied to their job. The pandemic has revealed this imperative more than ever before. In a world that is as wealthy as ours, and given the technologies we have already produced – even without the realisation of the dreams of automation – everyone should have access to food, energy, housing and healthcare. If people had that security, why would they choose to work in terrible jobs where they are paid low wages? The owners of Uber and Lyft know that their business is predicated on a world in which they get to make the key decisions that shape our futures, without our input. The world of work is going to have to be democratised. They are just delaying what should be inevitable.

 I don't think the Democratic party establishment really gets this. But there are a few plutocrats who understand that the future of capitalism depends on massive structural reform that redistributes wealth downward and marshals investment in public goods -- most urgently sustainable energy. Siphoning wealth ever upward is not sustainable, and isn't even good for the plutocrats in the long run. 

And by the way, there have been a few experiments with universal basic income and no, it does not cause people not to work. 

When asked if UBI would disincentivize people from working, [Karl] Widerquist [of Georgetown] argued that the exact opposite would happen: It would free people up to decide what kind of work is best for them. This distinguishes UBI from other welfare programs: Unemployment insurance requires you to be unemployed. Social Security requires you to be retired. Social Security Disability Insurance requires you to be disabled.

"In all these ways, the existing system disincentivizes work, because you have to stay out of work or keep your income low to get it," Widerquist explained. "Basic income has no work disincentivization because it's a lump sum. You get it, whether you're rich or poor. Now taxes might discourage work. That might more work slightly less attractive, but the basic income itself does not what it does."

Instead, he pointed out that "it gives you the freedom and power to reject work. If working conditions are terrible and wages are really poor, that does disincentivize work. If they give you a good job and a good wage, does basic income discourage you from taking it?"

By his analysis, Widerquist felt that people who argue UBI would disincentivize work really argue that they want people "in the lower and the middle class to have no other choice but to work, and to have to take any wage and to take any job, no matter what the wages and working conditions are. I believe that the labor market should be a free market, where you enter as a free person and you can reject the market if you don't want it."

However, there is a lot you can do other than just handing people money. Public investment can create good jobs. Free higher education, affordable housing, feeding kids -- making sure people have the basics doesn't mean they won't want to work in order to have dignity and disposable income. Good quality public transit employs people, and helps other people get access to jobs. There's a lot more that can be said about this, but letting people have no option but to work in dangerous, unpleasant jobs at below poverty wages does not make the world better.