It's a Wonderful Life - Part II

From the Chicago Dispatcher, December 2007

It's a Wonderful Life - Part II
Organizing Chicago Taxi Drivers

A spectre is haunting Chicago. There are people out there who believe that they are still fighting a war that began in Russia in 1917. They think you're a victim and they're treating you like one. They think you should be taken care of and that they are the ones to take care of you. They are playing by rules from a playbook that was destroyed along with the Berlin Wall in 1989. They spew Socialist rhetoric that few people take seriously anymore but that may sound comforting to a some uninformed and frustrated taxi drivers.
Let's get right into it. They say things like, “No lease-cap increase!” But why? Why do they say this? Why is this near the top of their list?

Are you in favor of a lease cap increase? If you are a lease driver reading this, you might immediately say no. You might think that, especially if you always plan to be a lease driver and have an employee's mentality. But remember, you are not an employee. You are a business owner. You don't have to be a lease driver for the rest of your life.

You are like a larvae in a cocoon when you are a lease driver. The cocoon is the owner of the cab. You don't have to stay in the cocoon forever. You can break out of the cocoon and become a butterfly, when you buy a medallion. And if you survive and flourish, you can even create your own cocoon one day to help other larvae become butterflies.

But some people want you to stay in that cocoon. Who? There's two types of people who want you in that cocoon forever. One is the cab owners. It's not for any bad reason. It's just that you are their customers and they don't want you to leave them, just as you don't want your passengers to find other means of transportation. If you become an owner yourself, you cease to be their customer and you become their competitor.

The other group consists of misguided Socialists who don't understand this business and think that they know how to take care of you better than you do. They don't see you as having any potential. You are inept. You are poor. You have no station in life. You need to be coddled and taken care of because you can't do anything yourself. They want you in that cocoon. And they tell you not to worry because they're going to make sure that cocoon always keeps you nice and snug by fighting to keep lease rates down. Now just drift off to sleep and don't pay attention. We'll take care of you. Shhh.

Let's get back to the lease cap issue. Are you in favor of an increase? If I were a lease driver, which I am, I would not be. But if I ever buy my own cab, I would be sympathetic to lease drivers, but it wouldn't make much of a difference for me personally because I would no longer be paying a lease. Instead I would be paying a medallion and car loan. I would start to understand the hardships owners face. Once I start leasing my cab out when I want to take a little time off, I may start to feel the constraint of the lease cap because now my income is limited and I have bills to pay. Then I buy another cab, and another one and I lease these cabs out to drivers and that is my only source of income. Now I start thinking that a lease cap increase isn't such a bad idea. Then the city imposes more rules that are going to cost me money as an owner, but they're saying to me that I can't raise my prices to pay for these requirements. So I refinance my medallions to cover the costs of new vehicles and their required equipment. The prices of medallions have been driven up, yet I'm no better able to service those loans than I was before. I know how I can get more money. I'll just take out a bigger loan on my medallion since I have equity in it now.

Are you starting to feel the choke?

What the heck happened? I'm just a cabdriver who tried to build myself up, but I'm being held down by city policies and financiers who control medallion prices. So now what do I do? I guess I have to sell out to the big boys before my medallions are foreclosed. Hey, that's business. Right? I seem to think that I've heard that before.

So at the end of the day, because of people supporting the artificial suppressing of the lease cap, the little guys are forced out of the market and the biggest guys are getting bigger. What ends up happening when all the dust settles is that you have huge fleets and lots more lease drivers. That’s good for your “Friends” at the American Friends Service Committee, who say they want to help you organize with their Taxi Workers Organizing Project. There will be more pathetic workers who need to be protected. Maybe they can call their connections on the East Coast and get more funding now. “Hey boss. Bad news. The problem’s getting worse. This project is going to take longer than we thought. Oh, and send more money.”

If they actually fix the problem, they lose their jobs.

Back to my scenario. Drivers have gotten a few meter increases, the financiers are getting more money from the increased loan I have to repay, but my income as an owner is still fixed. So now my incentive to grab a piece of the American dream as an owner has been hurt.

So, taxi organizers who claim to be Friends of drivers are complicit partners in keeping lease drivers as lease drivers, whether that was their intention or not. And their policies, if adopted, assure the consolidation and growth of the largest fleet operators. Congratulations.

Oh, and you'll see even more of the smaller and medium sized guys gobbled up soon because lease payments aren't keeping up with what they owe the finance companies or they simply don't make enough money to put up with the nonsense. They'll take their capital elsewhere.

Meanwhile, Commissioner Reyes and Alderman Allen have decided to sit on their hands and watch all of this go down. They’re going to let the market work. Well the market’s not working. The city doesn’t let the market work when it comes to rates of fare. The city doesn’t let the market work when it comes to lease rates. The city doesn’t let the market work when it comes to how many medallions are on the street. But the city wants to let the market work when it comes to medallion prices?

How do the biggest guys stay afloat? Don't they make their money from lease payments as well? Yes. But unlike the smaller and medium sized players, some of the biggest fleets own or work very closely with finance companies. They themselves are basically the lenders who can then rely on interest payments, which have no cap, to get around the lack of funds they receive from lease payments. They might not even mind the suppressed lease cap for now as long as the little guys continue to crumble. But once the market is cornered, they will push the city for a lease cap increase. And when that time comes, then the city will miraculously decide to give them one.

Who’s to blame for this? You can’t really blame the financiers if they’re playing within the rules. That would be like blaming a driver for not working in the neighborhoods when there’s a big convention at McCormick Place.
The blame for this rests on the city and on the lobbyists who are working against the interests of drivers and owners when they’re supposed to be on our side.

But let's turn back specifically to organizing. Organizing taxi drivers on a social level will fail. That's right. It will. It will fail for the reasons already mentioned. Cabdrivers are in it for the money, just as cab owners are. Most taxi drivers don't define themselves as taxi drivers. If you see a taxi driver in a store and you ask him what he is, he will probably tell you four or five things before he says he's a taxi driver. He might say, “I'm Muslim.” He might say, “I'm African.” He might say, “I'm short.” Taxi drivers generally don't define who they are by what they do. They define who they are by, well, who they are.

So how can taxi drivers be organized? If they can't be organized legally as employees and they won't organize themselves socially because they have no intrinsic unity, how can they be organized?

The best way to organize cabdrivers is economically. People who truly want to empower drivers should help them become owners of taxicabs and even affiliations. That's how drivers develop business skills. That's how they break out of the cocoon.

There's a saying, “Give a man a fish, he eats for a day. Teach a man to fish, he eats for a lifetime.”

For drivers to be empowered, they need to be taught to fish for themselves. They need to be helped and encouraged to be owners of their own medallions. They need to have the opportunity to buy equity in their affiliations.
These ideas aren't new. They aren't imaginary. They are already out there and working. John Henry Assabill is the president of the Gold Coast Cab Association, which is an economic organization. This association was set up so that the drivers would own the association and share in the profits and losses of its operations.

If the Friends actually cared about drivers and think the lease cap should never be raised, why don't they buy medallions, buy the vehicles and equipment and lease the cabs out to drivers for less than market? If they think that owners are making such huge profits in spite of their own loans and other expenses, why don’t the Friends buy medallions and charge a lot less on the lease that the current market is making? Surely if they believe that owning a cab is so profitable, they could buy medallions, lease them for less and still make big profits and then buy more medallions. Why not just buy medallions for drivers? I'm sure they could get the financing to do it. I can even think of a couple of salaries they could free up to help do this. But they won't do it. Cab owners are evil and you need to be protected from them - not become one yourself.

The moment you, as a lease driver, start showing any signs of success by buying a cab, you become a threat to them. How dare you leave the cocoon!

In the words of Ronald Reagan, “The trouble with our liberal friends is not that they're ignorant; it's just that they know so much that isn't so.”

But let's forget about them and get back to organizing cabdrivers. What cabdrivers need if they want to organize is a union. No, not an employee union. A credit union, financed by cabdrivers. Cabdrivers shouldn't just borrow money to buy medallions; they should also lend money to other drivers who want to buy medallions too. And they should be compensated for this if they have no religious or other objection to earning interest on loans. Drivers do have the ability to be the owners, lessors, lesses, borrowers and lenders of this industry. This would actually build loyalty to the profession because drivers would be investing in the industry - investing in themselves, really. The charter of this credit union could set aside money to be used for political purposes. Plans could be drawn up to help drivers attain benefits through the credit union.

We can discuss this further on CabMarket.com in the Discussion Forum and I’ll dicuss other ways taxi drivers can organize and otherwise empower themselves.

In the classic Christmas movie “It's a Wonderful Life,” George Bailey operates a building and loan for the residents of Bedford Falls. He helps the people of the town stay out of old man Potter's slums by helping them invest in each other to buy their own homes. George didn't sell out to Potter and he didn't think the best way to solve the people's problems was by keeping Potter's rent low.

Merry Christmas.

George Lutfallah, C.L. #79310