Do not outlaw, just outdate

 Do not outlaw, just outdate

On March 6, a group of traditional jeepney drivers, which claims to have over 40,000 members, staged a nationwide strike to protest the government’s modernization program that would practically outlaw the public utility vehicles (PUVs) by yearend.

The government’s intention is legitimate: It wants to phase out polluting old jeepneys and replace them with more environmentally friendly PUVs called “e-jeepneys.” The government’s implementing prescription is to cease the issuing of franchises, and have drivers join cooperatives towards pooling their resources to purchase and operate more ecofriendly but more expensive PUVs.

In phasing out traditional ways in favor of modern ones more suited to the times, and outlawing the traditional ways, the government creates push back, resentment, and militancy. Human nature embraces the old ways of doing things. Changes come with great effort. It is also possible that the traditional jeepney drivers are right that the modernization program will strike a blow at their livelihoods, given that the alternative minibuses and e-jeeps cost millions of pesos.

Hence, it is not surprising that jeepney drivers staged a nationwide strike, and continue their resistance. As government pushes through with the plan to phase out old jeepneys, some drivers will lose their livelihoods, other drivers might follow the new law with resentment, and the rest can become “outlaws” by driving their banned vehicles in illegal routes.

There is an alternative way to outlaw something, and that is to outdate it. In the classic book Capitalism, Socialism, and Democracy (1942), Austrian economist Joseph Schumpeter argues that the nature of capitalism is not static, and that competition, together with the profit motive, creates an environment conducive for “creative destruction.” Such creative destruction produces new and better ways to supplant the outdated.

Those who lived the early 1980s may remember the cassette tape. The government did not outlaw them, but they disappeared. Always innovating, the private sector invented the compact disc (CD), making the cassette outdated. The millennials may remember that CDs, which, like the cassette tapes, were not outlawed by government. But CDs started vanishing as the private sector innovated and came up with the USB (universal serial bus technology). And at present, the USB is becoming a relic though it is not outlawed. Making it outdated is cloud technology, which is revolutionizing how we store data.

So, how come the traditional jeepneys have not been creatively destroyed? Here are some explanations.

First, the government has not been able to modernize the infrastructure for mass transit. Neither has it been able to adopt the proper strategy. Not only is infrastructure in trains and subways lagging, but the strategy is biased towards building infrastructure that allows for the movement of private vehicles and not for the movement of people and goods. Because the focus has been on the movement of private vehicles that usually service less people, and less on public transport, then many people still take traditional PUVs, making traditional jeepneys useful.

Second, although government can innovate, it must accept its role of being more of a facilitator of private innovation, rather than being the innovator itself. The government’s prescription to have drivers join cooperatives so that they can pool their resources to purchase and operate more environmentally friendly PUVs is a good idea. But the fact is that no private sector entity has taken the lead to create corporations or cooperatives because of the lack of enabling positive conditions. The government plan is thus not innovative enough. Remember that it is the profit motive that drives private innovation. If there is profit, the government need not use a heavy hand; the private sector and the drivers themselves will initiate the creative destruction.

Similarly, the government has not successfully created an environment where private sector innovators can strive sustainably and fairly. For example, the entry of Uber and Grab taxis into the market was a way to creatively destroy the traditional taxi. But as Uber started to grab a significant market share through uncompetitive means, the promise of what Uber had to offer disappeared, and the old traditional taxi remains in place. The government can learn from this experience in dealing with innovation plans to address the issue of traditional jeepneys.

The motivation behind the government’s modernization program is to adopt to more environmentally friendly ways of providing mass transportation. And by outdating, the government creates the condition for traditional jeepneys to be “creatively destroyed.”

Is this issue framed as a mutually exclusive choice between environment and livelihood? Not so. In the creative destruction of the USB by the cloud, people producing USBs lost jobs, but others gained jobs in the cloud industry while making consumers’ lives better. In the creative destruction of the traditional jeepney through innovation, the worst that can happen is that drivers of traditional jeepneys would lose their old livelihood, but this would be offset by the production of new and better jobs.

Further, the new innovation and new jobs improve the commuters’ experience and the environment. In this case, the government must provide support to the affected drivers through subsidies and technical training.

Luis F. Dumlao is a senior research fellow at the Ateneo Center for Economic Research and Development and occasionally writes columns for Action for Economic Reforms.