PHI 445 Week 2 Discussion

Capitalism and Socialism: Case Study: Uber

Uber is demonstrating a new business model; an on demand model. According to an on article on

Uber leading the economy of the future, the author wrote, “The success of Uber and of companies

with an Uber-like business model is particularly noteworthy in the context of a global economy

struggling with slow growth. Technology is unlocking these opportunities. In particular, mobile

applications are enabling start-ups to aggregate sufficient demand to support this new business

model, often by capturing unrealized value from assets these start-ups do not own. But even when

new infrastructure is required, needed investments are lower, which reduces start-up costs and time

to market”, (Walker Smith, 2016). Uber faces many challenges within numerous countries and the

egalitarianism of these countries economics. Uber hires their drivers as independent contractors so

that they do not have employee status. According to an article in Time Magazine, Uber is a $50

billion dollar company that is able to profit by passing the costs of running a business onto the

drivers. (Steinmetz, (2015). Uber only takes 20 percent of the fee. Uber does require background

checks, valid driver’s license, and car insurance. (Mashable, 2014).

The economic system that best supports Uber and the way they are operating is Capitalism.

Capitalism mandates that, “Economic planning should be decentralized through market competition,

not centralized through government policy”, (Feiser, 2015). Uber is operating in the same fashion as

a taxi service yet, not exactly like a taxi service and is evading regulations that apply to taxi drivers.

It is trying to evade requirements expected of taxi drivers. The economic theory of socialism

includes, “Economic planning should be centralized through government policy, not decentralized

through market competition”, (Feiser, 2015). An examination of laws that help and hinder Uber will

be examined next.

In an article on laws being passed for Transportation Network Companies (TNC’s) the author stated,

“Twenty-seven states, and the District of Columbia, have established regulations for TNC’s. Bills are

pending in at least five other states”, (Somerville & Levine, 2015). The TNC was created in 2013. In

three years these laws have both come to support and limit Uber. Laws that help Uber in Colorado

where I live fall under the Transportation Network Company Act. This act requires Uber to ensure

their drivers have passed background checks, carry insurance, and operate safe vehicles for

consumers. Laws that limit Uber’s operations would be, “Uber can’t operate in Miami, for example,

where existing laws were clearly drafted to protect taxicabs from competition even from other

licensed services. Limousines are prohibited from picking up passengers less than an hour after

receiving a reservation, for example, and the minimum fare by law is $80. The number of limousine

licenses has long been limited to five hundred and fifty”, (Downs, 2013).

In my findings, Uber is directly affected by laws and regulations for each state or country they

choose to operate in. Because it is growing so rapidly they have to have an incredible legal advisory

team. Uber is affecting the transportation networks, as well as the environment. Capitalism

supports fair competition for transportation services. Uber provides a unique service that benefits

the drivers as well as the customers.

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