Scottish-born economist - Angus Deaton - recently published his new book - An Immigrant Economist…
A few weeks ago, I was waiting for a flight at the airport and during a conversation with a person who often travels the same route and schedule that I use on a regular basis (we are now sort of ‘fellow travellers’ and share stories of delays, diverted flights etc), he asked me whether I use Uber. My reply was in the negative – I do not use the service and do not think it is a positive labour market development. He then said something like “but it is a flexible service and drivers can choose their hours”. To which I said something like “flexibility is just the latest buzz word for low-pay, casualised employment” except Uber takes that trend even further in the direction of capital. Uber is a replay of old models of worker exploitation jazzed up in Silicon Valley hype to appear to be ‘cool’. The ‘gig economy’ just layers additional disadvantages for workers and takes us back to the days following slavery. Progressive should avoid using the service for many reasons. There are also other issues relating to the commodification of our lives that also apply to services like Uber. Interestingly, a few weeks after that interchange, the Financial Times published an article (August 11, 2016) – Uber hitches a ride with car finance schemes – which reinforced my views on the scheme. And just yesterday (August 15, 2016), there was a very terse Letter to the Financial Times about this article – An economic model from the feudal age – which summarises why progressives should boycott this type of labour market trend.
I think my airport ‘friend’ must have been reading Uber’s homePage where you will see a flash car and a well-heeled female standing under the header and sub-heading
Uber needs partners like you.
Drive with Uber and earn great money as an independent contractor. Get paid weekly just for helping our community of riders get rides around town. Be your own boss and get paid in fares for driving on your own schedule.
Got a car? Turn it into a money machine. The city is buzzing and Uber makes it easy for you to cash in on the action. Plus, you’ve already got everything you need to get started.
Well even if you don’t have a car, Uber will get you one as long as you commit to a credit arrangement.
The reality of Uber and schemes like it is quite different.
The standard arguments against Uber including how it evades regulations that standard taxi services are forced to operate under apply also to my distaste for Uber, but I won’t go into them here.
Essentially, I don’t think it is fair to existing drivers who work very long hours at close to minimum hourly pay in the hope that they will enjoy a capital gain on the ‘licence’ they bought to enter the sector. These licences are very expensive because of the past regulated supply.
Uber is destroying the retirement pensions (sale of the licences) of thousands of workers. I don’t support that approach. The government should regulate Uber in the same way that it regulates the existing taxi services.
But that is not what this blog is about.
I also won’t address the claims that Uber has sneaky intelligence built into its app to work out how much battery life a person has on their mobile phone – leading to so-called ‘surge prices’ when they think someone is becoming more desperate for a route home. Please see account (May 23, 2016) – How Uber is able to exploit our desperation – for more on that.
The Uber conversation was interesting because over the last month I have been reading about sharecropping as a model of rural development.
This reading is part of a section of the book I am soon to complete on the how the Left has been duped into becoming neo-liberals.
In one part of the book, I am tracing how the advanced nations developed – which historically has been the antithesis of how neo-liberal institutions such as the World Bank and the IMF expect (and coerce) poor modern nations to develop.
So the anti-government model used by these institutions to enslave nations into debt and massive real resource plundering, while at the same time destroying the subsistance capacities that these nations relied on to feed their populations, was never remotely the approach taken by the now rich nations.
If they had followed the IMF model, they too, would still be wallowing in poverty and desperation.
It was in that context that I have been reading a lot about agricultural reform (and sharecropping).
Sharecropping is a feudal hangover and was a highly exploitative system of agricultural production. Uber looks a lot like sharecropping to me.
The Letter to the FT editor (cited in the Introduction) stated it this way:
The $68bn market valuation of Uber (“Uber recruits hitch ride on lending schemes”, August 12) can only be based on a cynical assumption that the company will be allowed to expand its drove of cyber serfs. It is nothing less than 21st century share cropping that preys on the gullible, the ignorant or the desperate. An economic model that is based on workers providing the capital for their own tools and bearing the risk of individual business failure while delivering profits to the owners of an algorithm is as sure a method of returning income distribution to the feudal age as anyone could devise.
The FT article that the Letter was referring to (also cited in the Introduction) outlines how Uber is extending loans to would be drivers to expand their network and then deducting payments from the drivers’ earnings.
We read that these credit lines :
… are part of an expanding programme to get vehicles into the hands of drivers – often by offering them loans or car leases whose cost will be taken straight out of their wages.
Further, in the same way that the so-called pay day lenders offer instant cash at, often exhorbitant interest rates, to workers short of cash, Uber is starting to provide advances (loans) to new drivers.
An Uber spokesperson told the FT that:
If somebody cannot pay the monthly amount, they can simply return the car.
As that ‘somebody’ enters the unemployment queue.
The “credit facility” was “arranged by Goldman Sachs and funded by more than half a dozen Wall Street banks” – so that should tell you something about the scheme.
The article reveals some of the terms that the credit arrangements offer. Loan repayments are onerous.
We read that the predatory lending schemes that Uber uses to expand its network of drivers are “an attempt by Uber to bind drivers to the company for the duration of the loans … [it] … makes it impossible for you to leave your job before it is paid off.”
A moment’s thought leads to the conclusion that an official from the National Employment Law Project in the US (Ms Smith) draws:
Uber’s vehicle financing … [is] … an effort to foist capital costs on to drivers. “Responsible companies pay for their own equipment and tools,” says Ms Smith. “Uber has shifted that cost and risk on to drivers, who are making poverty-level wages.”
Another commentator calls it a “company store model”.
The ‘Company’ hypes itself up talking about ‘flexibility’ and ‘choice’ for the drivers.
Flexibility and choice in this context mean that drivers are small business absorbing all the risk of the venture, providing their own worktools (sometimes under onerous credit conditions) and if that all fails – they have the flexibility to become impoverished and unemployed.
Meanwhile all the cool cat consumers are busy pressing their iPhone apps in search of the next fare!
So 21st century share cropping and company town – Uber has the worst of both.
Sharecropping is a long-practised type of agriculture that stems out of a feudal mentality.
I don’t wish to write a lot here about the plethora of arrangements that have historically been terms ‘sharecropping’.
While still prevalent in nations such as India and Pakistan, it is a well-known arrangement as a result of the way it was deployed after the American Civil War to transition from slavery to some other form of agricultural production, which was little more than implicit ‘slavery’.
The essential characteristics involve some sort of lease to a farmer of land owned by someone else. In the post Civil War period, the slavers leased back the land to the old slaves once emancipation had been achieved. This was, in part, to avoid a major labour supply shortage.
It was much easier for the former slave owners to avoid paying wages and instead create a new class of independent producers dependent on land leases provided by the former slave owners.
Roger Ransome and Richard Sutch analysed the sharecropping system in their excellent 1972 historical article (see reference) and concluded that (p.642):
Sharecropping allowed the exploitation of the small farmer by the monopolistic financial structure dominated by the local merchant. Unable to obtain alternative sources of credit for supplies he needed, the small farmer was forced to pledge his future crop as a lien against credit advanced for the growing season.
[Reference: Roger L. Ransom, R.L. and Sutch, R. (1972) ‘Debt Peonage in the Cotton South After the Civil War’, The Journal of Economic History, 32:3, 641-669. JSTOR Link]
The so-called Crop Lien System – which “was a credit system that became widely used by cotton farmers in the United States in the South from the 1860s to the 1930” reminds me closely of the way that Uber is tying up its workforce.
Under the crop lien credit system, sharecroppers “obtained supplies and food on credit from local merchants … [who] … held a lien on the cotton crop and the merchants and landowners were the first ones paid from its sale.”
If nothing was left over after the payments were made then tough luck.
The land was owned by the former slave owner (just as Uber owns its ‘algorithm’ and IT structures) and the risk of the enterprise falls back onto the sharecropper (Uber driver).
The crop lien system also tied the sharecropper to a particular farmer.
Ransom and Sutch found that (p.642):
The crop lien bound the farmer to the merchant and restricted his options to buy elsewhere or dispose of his crop in the most advantageous manner. Through use of his monopoly power, the merchant was able to insist that the farmer concentrate on the production of cotton at the sacrifice of food for home consumption, thereby forcing the farmer to buy his provisions from the merchant. The credit prices charged for these supplies were exorbitant, reflecting not only the local merchant’s inefficiency, but his exploitative powers as the sole source of rural credit.
More and more of a person’s alternative ‘free’ time becomes absorbed under the Uber model if they are struggling to make ends meet and repay the credit line.
The US National Employment Law Project spokesperson (cited above) told the FT that the Uber credit line was:
… predatory lending, plain and simple … It is a car lease that comes from your employer and makes it impossible for you to leave your job before it is paid off.
Ransom and Sutch quote Charles Otken who in 1894 summarised the experiences with sharecropping in this way:
This condition of affairs in the South introduced a credit system whose tremendous evils and exorbitant exactions have brought poverty and bankruptcy to thousands of families. As a policy, it is vindictive in its subtle sophistry; as a system, it has crushed out all independence and reduced its victims to a coarse species of servile slavery.
They knew how to write in those days!
We can be sure that the Wall Street banksters will dress up their credit scheme for Uber drivers in some fancy terminology – that invokes ‘cool’. But you can also be sure that the conditions will not favour the drivers. Same old.
The Uber conversation also reminded me of an excellent book I read in the early 1980s by Roy Kriegler –
Working for the company : work and control in the Whyalla shipyard (published in Melbourne by Oxford University Press).
‘Working for the Company’ was the result of Kriegler’s PhD research and he used an innovative technique to gather his data. He went and worked undercover at the BHP shipyards in the regional South Australian town of Whyalla. His book describes his experiences as a worker faced with hostile climatic conditions (hot), regional cultures (isolated) and a pernicious management (old style oppressors).
Whyalla was a 400 kilometre drive from the South Australian capital of Adelaide across “hot, desolate plains” (out into the South Australian desert).
Of Whyalla, Kriegler writes (p.1)
It is difficult to imagine the bitter disappointment that British and European immigrants must feel when they first see Whyalla, where they elected to settle on account of the job opportunities and favourable impressions conveyed to them by alluring brochures and over-zealous company and government officials. They come from the lush, green hill-sides of Europe, from villages bathed in mediaeval history, to a barren, windswept concrete and corrugated-iron city bathed, not in history, but in a fine coating of iron ore dust.
Whyalla was a one-company town and was developed when “BHP acquired the leases covering the iron ore deposits at Iron Knob and Iron Monarch in the Middleback Ranges” in 1897.
With massive public subsidies (yes, corporate welfare was alive and well there too) and ridiculous concessions (such as, BHP would be free “to discharge effluent into the environment”), the town grew.
The book describes how (p.5):
With the exception of a primary school, a post office, two policemen and their shared bicycle, almost everything then was owned or supplied by the Company … essential services … roads … electricity … supply of water …
BHP even “held the licence over the cemetry” so that “people could not even die and be buried except under the auspices of the Company” (p.6).
As time passed, the government started to provide massive subsidies by assuming responsibility for essential services, building houses and roads, and other communal infrastructure (airport, rail, schools etc).
But the Company remained dominant and exploited that dominance at the expense of the work force.
Some of the graphic narrative he provided has stuck with me more than 35 years since I read the book, including his description of the air conditioned bosses cafeteria juxtaposed against the tin shed the workers sat in to eat their lunches.
In another account, he writes (p.128):
During my first week at the Shipyard, I strolled into a toilet block which was spotlessly clean and I recall how pleased I was that the workmen’s toilets were of such a high standard. The next time that I returned to use these amenities, I was in more of a hurry and bumped my forehead against the door because I didn’t expect it to be locked. When I raised my head to look at the protruding object that had struck me, I noticed that it was the corner of a sign which read ‘staff only’. I was disappointed when I eventually found the workmen’s toilets. They were old and in a filthy condition and a large ‘U’ shape had been cut out of the toilet doors, presumably to discourage loafing. Staff, I discovered later were issued with a key to use their own toilets.
The book also describes the complex arrangements that entrapped the workers who often moved to the remote town for employment. The company had a close relationship with the major retail stores in the town.
They encouraged the workers to take on extended credit (hire purchase etc) to furnish houses etc at rather exploitative terms, which made it hard for workers to be mobile between employers or towns. BHP managers would actually take workers to the shops to assist them in signing credit forms etc.
The workers were then enslaved with onerous credit arrangements and risked losing everything if they quit the company.
The book details a number of other ways in which the Company manipulated and controlled workers to ensure they could capture as much surplus value from the workers as possible.
And, after years of corporate welfare assistance from both State and Federal governments, BHP closed the shipyard associated with the steel works in Whyalla in 1978. 1800 workers lost their jobs as the yards were closed down.
Kriegler wrote that the closure was the “as a result of a lack of orders, rising costs, poor management and a lack of capital investment by the Company” (p.10).
Typical story. The Company moved on to find other means of exploitation to profit from while the workers left behind had few opportunities.
Uber is a bit like that, which is why I dislike the model.
I also read another interesting article at the weekend (August 13, 2016) – Commodification – by Branko Milanovic (a former World Bank economist who has written extensively about inequality.
His thesis is that any movement towards a more cooperative model of economic behaviour (eschewing “single-minded profit maximizing”) will be constrained by “the increasing commodification of many activities”.
This is not a new theme.
In 1974, the great American author and activist – Harry Braverman – published his magnificent book – Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century (New York, Monthly Review Press, 1974) – which traced the way in which Capitalism was impacting on the design of work in America.
He examined what he termed his “de-skilling” hypothesis where capital systematically restructured labour processes to enhance their control in order to extract higher profits.
He also proposed that commodification was becoming generalised under Capitalism – extending into more and more areas of our ‘social’ lives.
Progressively, these “labour processes” (market-values) subsume our whole lives – sport, leisure, learning, family – the lot.
Everything becomes a capitalist surplus-creating process.
The mass consumption era morphed into something even more comprehensive where aspects of our lives that were previously consider ‘non work’ (which meant non capitalist) became markets, with commodities supplied to support. The technological gadget revolution has accelerated this process.
If we judge all human endeavour and activity by whether they are of value in a sense that we judge private profit making then we will limit our potential and our happiness.
Harry Braverman clearly understood that the capitalist profit-seeking machine would seek to impose its constructs on all aspects of human activity. Even those activities that were previously part of our non-working lives – our lives away from the oppression of work.
The aim was to make everything ‘work’ by which a special meaning was attached – that activity that allowed private capital to make profits and accumulate more capital.
Branko Milanovic argues in a similar fashion:
The most obvious case is commodification of activities that used to be conducted within extended families and then, as we became richer and more individualistic within nuclear families. Cooking has now become out-sourced and families often do not eat meals together. Cleaning and child-rearing have become more commercialized than before or ever.
He considers the “gig economy further commercializes either our free time or things we own”.
This is where Uber comes in.
Uber was created precisely on the use of free time: limo drives had extra time that they could use to drive people around and make money. So, now anybody who has some free time can ‘sell’ it by working for a taxi company or delivering pizza. A portion of the leisure time that we could not commercialize (simply because it was so short and discrete) has now become marketable.
And the problem:
The problem with this kind of commodification and flexibilization is that it undermines human relations and trust that are needed for the smooth functioning of an economy.
Continuity in our working lives becomes a thing of the past. We become ruled by an iPhone app and workers come in and out of the market as their taxi business rises then falls on low pay and fluctuating demand.
Co-operation is undermined by this lack of continuity.
It is worth thinking about.
The problem with consumers thinking it is ‘cool’ to use Uber-type services is that if that trend continues their lives as workers will become more difficult.
That is the problem we all face in our dual faces (consumers and workers). What might seem to be a better service or a cheaper product for the consumer may carry the cost for the workers producing or providing the output.
If we think Uber represents the future of work then we are also agreeing that we want insecure, low-paid work without the usual entitlements, which have defined progress, to become the norm where the risk of enterprise is borne by the worker and the fixed capital to support the service becomes the workers’ responsibility.
It is not a vision of a progressive future at all as far as I can see.
Sharecropping declined because it undermined the prosperity of the worker in favour of the landowner and society moved on to provide better worker protections. Uber and its ilk look very similar to the early days of sharecropping, Silicon Valley hype notwithstanding.
The Wall Street banksters have an uncanny habit of shifting the costs onto workers and taking very handsome returns for themselves.
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.