Blog: The Global Game

Uber Uber über alles

27 October 2017

This TWOG is co-authored with Leslie Breitner, Director of McGill University’s International Masters for Health Leadership (www.imhl.org)

(Image source: www.cbc.ca)

Until 1945, the German people sang their national anthem beginning with  the line “Deutschland Deutschland über alles” (“above all else”).  Today many people sing “Uber Uber über alles”, whether for or against. 

One of us sings for, the other against. The two of us live in Montreal, work together, and leaving Uber aside, are good friends. Leslie lived her life in the United States, with a brief time in France, until she moved to Montreal in 2010. Henry is a born and bred Montrealer, with years spent in England and France as well as some in the U.S. This may help to explain our differences over Uber.

This TWOG is co-authored with Leslie Breitner, Director of McGill University’s International Masters for Health Leadership (www.imhl.org)

(Image source: www.cbc.ca)

Until 1945, the German people sang their national anthem beginning with  the line “Deutschland Deutschland über alles” (“above all else”).  Today many people sing “Uber Uber über alles”, whether for or against. 

One of us sings for, the other against. The two of us live in Montreal, work together, and leaving Uber aside, are good friends. Leslie lived her life in the United States, with a brief time in France, until she moved to Montreal in 2010. Henry is a born and bred Montrealer, with years spent in England and France as well as some in the U.S. This may help to explain our differences over Uber.

Leslie on Uber über the competition
I love technology, innovation, convenience and novelty, when it makes sense. Uber came on the scene with attractive pricing, but it was more about convenience and ease of use…no phone call, no confusion about where to pick up, and, best of all, no money exchange in the car. Upon arrival, a simple “thank you” and you’re on your way.

Is Uber a “disruptive innovation”? Does it matter?  What matters is that Uber and other ride-sharing companies have been disrupting the taxi business for the sake of better service, around the world, for almost a decade. Surely by now the taxi companies have had time to get their apps together.

I believe in a lawful society. I pay my taxes in two countries. But I also understand the time-honored tradition to avoid taxes by all legal means available. Beyond this, laws are regularly flouted when they are patently foolish, or exist to support monopolistic practices. This form of civil disobedience brings attention to the need for change. Along with Uber in transportation, Airbnb competes with traditional hotels, and Turo with traditional car rental companies. Hotels gouged people on personal phone calls, and then on Internet services, until mobile phones and Airbnb came along.  Turo avoids excessive airport taxes by enabling people to rent cars just offsite or from private owners who pick you up at the airport.

Governments must make laws that protect us, but that are also in our best interests. A level playing field and fair competition are important but, as we may be seeing now with Uber, an equilibrium can eventually be achieved through cooperation, negotiation and collaboration, allowing the type of choice one expects in a democracy.

Henry on Uber über the workers, the regulations, and governments
The dominating song today is really that of globalization: “Investors Investors über alles”—über the workers, über the rules and regulations, über national sovereignty. Make no mistake about it: Uber is just the latest version of the worker-busting practices that for some years have been driving middle class wages toward the minimum wage, to the delight of shareholders and customers alike. First the unions were busted, then job security was busted together with worker benefits, and with the resulting reduction of earnings has come busting of the social fabric of societies. No wonder so many people have had it with an economic globalization that is riding roughshod over decency and democracy.

People who operate real taxis had to buy that right from their municipal governments, and abide by various regulations designed to protect the public. Then Uber waltzed in and ignored all this while city administrations turned their backs. Better not mess with globalization. But certainly, mess with local workers. Why shouldn’t they too be earning minimum wage, so that we well-paid people, including those who run our governments, can cash in on the convenience? And as the taxi drivers fight back, they get labelled the bad guys, who are rude and drive dirty cars. (If this happens more often now, perhaps it’s because they are tired of being screwed.)

Uber claims it is not a taxi service. (Just as I claim that this is not a blog because I call it a TWOG.) Funny, because Uber picks up people and ferries them around the city for a fare. Sure sounds like a taxi service to me. No, they say, it’s a ride-sharing service. Maybe originally, but when was the last time you shared an Uber car with a stranger? OK then, Uber drivers are self-employed. Well, what are the taxi-drivers who own their permits and join a co-op? We live in a world of fake words too.

Apple has succeeded by competing with better products. Uber succeeds by cheating with a better service. It is the ultimate pit bull in a globe of pit bull corporations—apparently in its management and corporate culture too. The following sentence appeared in a recent article in The New York Times, about London’s efforts to rid itself of Uber: “There is a feeling in the air that regulators should stand up to businesses that simply ignore any regulations they don’t like.”  Really? Stand up to global corporations, holding them to the rule of law? What a novel idea! This is not a feeling in the air; there’s a sledgehammer striking the ground.

Leslie and Henry: Synergy über alles? 
Maybe we are both right. Our differing perspectives might just be a matter of context. Leslie cites corruption in the taxi industry, which has been especially so in New York City with its medallions — there are now fewer than in 1937, when they were first introduced, at $10! Certain people made fortunes on these – the price went to well over a million dollars before Uber became prominent — while some of the drivers who rented their cars struggled. In other words, in New York at least, this decimation of earnings preceded Uber, although it has hardly abated. So why shouldn’t the overwhelming proportion of NY drivers who don’t own medallions switch to Uber?

Henry points out that in Montreal, taxis are plentiful, many of them driven by polite owners who earned better incomes, at least before Uber came along. The city has tight restrictions on the number of permits that can be owned, tied to the individual ownership of the cars themselves. In other words, contexts do vary. Montreal may be closer than New York to what happens in cities elsewhere that have been challenging Uber.

Is what we have here, therefore, a solution to a corruption problem in New York City being applied to cities where that problem doesn’t exist? Is this, in other words, a case of the American exceptionalism, forsaken by Donald Trump in foreign policy, only to be carried on by American corporations in the global marketplace? That’s at least how many Canadians see the world today, and many Europeans too. Americans love novelty, and the competition that brings it, while Canadians tend to be more suspicious of aggressive multinationals, and more concerned about the underdog and fair play.

It seems to us that our positions can be reconciled—synergistically, if you like. Keep the benefits of the Ubers, but force them to play by the rules, at least sensible rules. This may be happening in Montreal right now. When the government of Quebec recently sought to impose restrictions on Uber, the company said it would leave by a certain date. The government didn’t cave, and Uber didn’t leave. Now on the table is a proposal to have Uber buy a certain number of permits, to collect and pay taxes as well as fees per ride, and to ensure that its drivers are properly licensed and insured while the cars are regularly inspected. In other words, act like the taxi company Uber is. The company is not exactly signaling its delight with this proposal, but it could be one way to maintain the innovations while ending the indecencies. Will this throw the Uber baby out with the taxi bathwater? Who knows?

Established taxi businesses certainly need to wake up—more quickly. They can do a better job of replicating many of Uber’s innovations. (Prepaying by credit card, for example, is hardly under patent.) Meanwhile, other variations are popping up all over the place. In London, using Gett, some of the legendary black cabs provide service via a mobile phone app. The rider can choose to pay a fixed fee up front or go by the meter. In the U.S., governments are now scrambling to strike a balance between the growing need for flexible urban transportation and protecting the interests of the taxi drivers.

Even Leslie has her own hybrid service: she met a licenced driver who prefers to drive his own customers. So, for certain needs, she arranges directly with him, at taxi rates. Yes, she actually pays more than for Uber. But in the bargain, she is assured that his car will always be clean and well-maintained, and most important, that she has a safe driver she can trust—indeed, someone who has become almost a friend.  Leslie has struck her own blow for decency.

Follow this TWOG on Twitter @mintzberg141, or receive the blogs directly in your inbox by subscribing here. To help disseminate these blogs, we also have a Facebook page and a LinkedIn page.

© Henry Mintzberg and Leslie Breitner, 2017.

Administered by Tanya Sardana

----

¹Apparently, this line originally referred to a unified Germany over its parts, but the Nazis presumably had something else in mind. This line is no longer officially sung.

²“Why Clayton Christensen is Wrong About Uber and Disruptive Innovation”, by Alex Moazed and Nicholas L. Johnson, Techcrunch.com (27 February 2016)

³“London and Über: It’s Complicated” by Helen Lewis (23 September 2017)

Globalization or Democracy? Trade Pacts and Tribunals behind Closed Doors

7 December 2016

 Wallonian Farmer, photo by André Mouraux

Canada’s Minister of International Trade, Chrystia Freeland, shed a few tears of frustration in October when the little region of Wallonia blocked the Canada-EU trade pact that she worked so hard to negotiate. Imagine that: a bunch of Belgian farmers standing up to the mighty forces of globalization. Next thing you know, Britain will be brexiting the EU and Trump will be trexiting the TPP (Trans-Pacific Partnership). What is this world coming to? Its senses?

At the very least, the genie is out of the globalization bottle. Many people now realize the opaque consequences of globalization. Unfortunately, no small proportion of them have been convinced by demagogues to accept solutions that could be worse.

 Wallonian Farmer, photo by André Mouraux

Canada’s Minister of International Trade, Chrystia Freeland, shed a few tears of frustration in October when the little region of Wallonia blocked the Canada-EU trade pact that she worked so hard to negotiate. Imagine that: a bunch of Belgian farmers standing up to the mighty forces of globalization. Next thing you know, Britain will be brexiting the EU and Trump will be trexiting the TPP (Trans-Pacific Partnership). What is this world coming to? Its senses?

At the very least, the genie is out of the globalization bottle. Many people now realize the opaque consequences of globalization. Unfortunately, no small proportion of them have been convinced by demagogues to accept solutions that could be worse.

The Loaded Global Game   Economists have been telling us for decades that globalization is motherhood, as is free trade and free enterprise. After all, they insist, greed is good and markets are sacred while governments are suspect. Well, I am one of those who believe that governments are suspect when they buy into this nonsense. You don’t have to be bribed to be corrupted; you just have to be conned by dogma.

Nowhere is this more evident than in the sham tribunals that have been written into the trade pacts of recent years. These enable those free enterprises to sue sovereign nations whose laws or regulations—even in matters pertaining to health, culture, and environment—they deem to have affected their profits. So much for free people.

To understand why Trump and Farage as well as Sanders have been getting so much support, please notice two disconnected dots: the multinational enterprises that barrel ahead in the back rooms and the people in local communities who feel shut out. Something is rotten in the state of democracy.

This global game is loaded. The international trade pacts privilege large corporations that can move freely around the globe. They face no countervailing power, to use John Kenneth Galbraith’s forgotten phrase1—no global taxes, no global regulations to speak of (except for the ones they develop for themselves), no global government with teeth, just a set of international agencies, all of them economic—the IMF, The WTO, the World bank, the OECD—that act mostly as their cheerleaders. All of this has enabled these corporations to ride roughshod over governments, for example by playing them off against each other for tax breaks and by being allowed to enter the back rooms of the trade negotiations for their own benefit. 

Local businesses, in contrast, are subject to the countervailing power of their own governments, comprising regulations and national taxes. They have no foreign tax haven where they can plant some phony headquarters. Instead, these businesses are rooted in local communities, which, in fact, they serve socially as well as economically. And make no mistake about their importance to us all: count the number of local businesses with which you regularly interact. I’ll bet they far outnumber the global ones. Yet the concept of community does not figure in mainstream economics, nor therefore in the trade pacts. It took the peculiar veto power of Wallonia to open the closed doors of this pact, thereby providing three million people with an 11th-hour deal for themselves. Is this any way to make some of our most momentous policy decisions?

The Sham Tribunals  Here is what was written about these tribunals in a spate of articles three years ago, as their consequences became evident. In the Guardian: their hearings “are held in secret, the judges are corporate lawyers, many of whom work for companies of the kind whose cases they hear. Citizens and communities...have no legal standing. There is no right of appeal.”2 A New York Times article and editorial pointed out how “big tobacco” had been using these tribunals to “intimidate” and “bully” poor countries into rescinding regulations intended to control the use of tobacco. The health minister of Namibia reported receiving “bundles of letters” from the industry about its attempts to curb smoking rates among young women.3

As for our rich country, Canada, with regard to NAFTA (the North American Free Trade Agreement), one Canadian official reported seeing “the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years” (in the Guardian article). Before the trade negotiations for the EU-US pact had even begun, according to another New York Times article, European officials were “consulting with business leaders on both sides of the Atlantic on how to structure a free-trade pact…. Among other things, the business community was seeking an active role in writing new regulations.”4 Cry for democracy Minister Freeland.

The recent Canada-EU agreement has removed the most abusive aspects of these tribunals. But not the tribunals themselves, whose very existence is abusive, as are some other aspects of the agreement. Here is what a prominent group of Canadians with extensive experience on this issue wrote in a open letter to the people and parliamentarians of Wallonia. This “agreement will impose new constraints in many...areas of public policy”, including “pharmaceutical regulations, public health, agriculture… [and] labor rights.”5 This undermining of democracy by democratically elected government is happening in Trudeau’s Canada, not Erdogan’s Turkey.

Time to use our own courts   Democratic countries have laws and courts dedicated to protecting all their citizens and institutions. We don’t need special courts outside our borders devoted to the protection of private capital. We should be challenging in these courts the self-assumed right of our governments to bargain away our basic rights as citizens. Strike down this travesty of justice in just one country and watch the whole house of cards come down.6

Globalization needs to be constrained, not further entitled. Continue to allow it to trump democracy and watch the rise of more Donald Trumps.

 

© Henry Mintzberg 2016. For more on global, local, and community, see my book Rebalancing Society...radical renewal beyond left, right, and center.

Follow this TWOG on Twitter @mintzberg141, or receive the blogs directly in your inbox by subscribing hereTo help disseminate these blogs, we also have a Facebook page and a LinkedIn page.


1 J.K. Galbraith, American Capitalism: The Concept of Countervailing Power (Houghton-Mifflin, 1952)

2 Monbiot, G. 2013, November 4. This transatlantic trade deal is a full-frontal assault on democracy. The Guardian. www .theguardian.com/commentisfree/2013/nov/04/us-trade-deal- full-frontal-assault-on-democacy

3 Tavernise, S. 2013, December 13. Big Tobacco steps up its barrage of litigation. International New York Times.

4 Hakim, D. 2013, October 8. European officials consulted business leaders on trade pact. New York Times. www.nytimes .com/2013/10/09/business/international/european-officials- consulted-business-leaders-on-trade-pact-with-us.html

6 As part of their deal, the people of Wallonia have set off a process that may accomplish just that, while judges in Germany are already questioning the constitutionality of the tribunals in the EU pacts.

 

Developing from the Inside Up

17 April 2015

Last week’s TWOG questioned the “level playing field” of economic development: that a country has to throw open its markets to foreign competition if its economy is to take off. In this global game, the New York Giants take on some high school team form Timbuktu. Guess who wins.

The Globalization Model

This is but one model of economic development, which we can call globalization; it works from the outside-in. Thankfully, there are two others. But this one dominates our beliefs, if not our reality.

Check its record: you may be surprised: No major economy ever developed this way, not the U.K, not Japan, not South Korea, not even the United States.1

Last week’s TWOG questioned the “level playing field” of economic development: that a country has to throw open its markets to foreign competition if its economy is to take off. In this global game, the New York Giants take on some high school team form Timbuktu. Guess who wins.

The Globalization Model

This is but one model of economic development, which we can call globalization; it works from the outside-in. Thankfully, there are two others. But this one dominates our beliefs, if not our reality.

Check its record: you may be surprised: No major economy ever developed this way, not the U.K, not Japan, not South Korea, not even the United States.1

The Interventionist Model

So enter a second model, which we can call interventionist, and depict it as top-down. It explains more of the successful reality. Economies grow behind various government efforts to promote and protect their national enterprises.

These efforts have taken a variety of forms. Most common have been protective tariffs, even in what have since become the wealthiest countries of the world. Common too has been the state construction or subsidization of national infrastructures to help businesses develop—for example, dams for power generation and highways to move goods. The U.S. government granted land for the building of privately-owned railroads, at the same time that it was maintaining significant tariff barriers.

The interventionist model took its most extreme form under the communist regimes of Eastern Europe, with their comprehensive five-year plans and extensive ownership of economic enterprises. Happily for their people, those days are over. Unhappily for them, and many other people, this was replaced by the globalization model, which has since been promoted as the only game in town. (See the TWOG of November 7, entitled “Has the Berlin Wall fallen on us?”)

Once again, check the reality. The interventionist model is alive and well throughout the world, if not in this extreme form. Or sometimes it is alive and sick, because while the rich countries force the globalization game on poor countries, they themselves cheat by playing the interventionist game, for example by using tariffs or domestic subsidies to keep the agricultural produce of poor countries out of their own markets.

Of course, tariff barriers have mostly come down. But subsidies to domestic enterprises have not, as in the case of cheap loans to help them sell their goods abroad. Some of this may be justified, in helping young enterprises to get off the ground. But these interventions have hardly been limited to that. Tune in to all the accusations that Airbus and Boeing fling at each other about such practices. Of course the bigger and richer the country, the more it can do this kind of cheating, and so the greater likelihood that its enterprises will win in the global game.

The Indigenous Model

Happily for most of us, there is a third model, which offers the greatest hope for this troubled globe—as soon as we recognize the central role it has played in all successful economic development (even though elements of the other two models are always present as well). We can call this model indigenous, and depict it as inside-up.

The enterprises that build and sustain a healthy economy rarely come in from the outside. Some are created by the state—which at times can be for good reason—while many others are supported by it in one way or another. Most, however, are built by local entrepreneurs, who engage local people with their novel ideas. These companies tend to source locally, including their use of law firms, consultants, and advertising agencies, all of which further aids the growth of the domestic economy.

Every major country has its iconic examples of such enterprises. Say America and think Google or IBM; say India and it may be Tata or Infosys; in Japan, Honda; in Brazil, Embraer. No matter how global these particular enterprises have become, all have maintained their headquarters, and their roots, in their countries of origin. And so they keep providing significant economic benefits. (Not so for the smaller countries—I speak here as a Canadian. The iconic enterprises are more frequently sold off to foreign interests, with the loss of such benefits. But the government must not interfere: after all, this is a global game, run by the big guys.)

Even in the most developed countries, however, further economic development depends not on these large established enterprises so much as on the establishment and retention of new indigenous ones. They create the jobs, instead of doing the downsizing. (See the April 2 TWOG on downsizing as bloodletting.) Think about the role that the Apples, the Googles, the Facebooks, and the rest play in the American economy today.

Global enterprises coming in from the outside do not usually build on a country’s unique strengths, or encourage the autonomy necessary to learn, which is key to all development. People forced to imitate learn only how to copy. Some of this is obviously necessary in today’s world, but it can never be sufficient for any country. Pride in our own accomplishments may not figure in economic theory, but it sure does in the success stories of great enterprises—and great economies. So it is time to get past the dominating game of globalization, with all its cheating, in order to foster the healthy development of all countries, rich and poor.

© Henry Mintzberg 2015

1. Chang, H.-J. (2002). Kicking Away the Ladder: Development Strategy in Historical Perspective. Anthem Press. When I first published about these ideas, in 2006, I had to explain why Ireland was not an exception: it already was rather developed, and within the E.U., when it went so one-sidedly to this outside-in model. Given Ireland’s subsequent economic performance, I no longer need to make this point.