Uber and Lyft Are Threatening a Capital Strike

Uber and Lyft want you to believe they’re suffering an unfair assault by the state of California’s government to end drivers’ independent contractor status. The reality: Uber and Lyft are very wealthy and very powerful, and they’re using that wealth and power to threaten a capital strike, a withdrawing of investment in a way that would hurt drivers and riders, to get what they want.

A worker cleans a sign in front of the Uber headquarters on May 18, 2020 in San Francisco, California. Justin Sullivan / Getty

On August 10, a Superior Court judge in California ordered Uber and Lyft to reclassify the state’s drivers from independent contractors to employees within ten days. Both multibillion-dollar firms immediately appealed the decision and peddled very similar messages through the media.

Uber CEO Dara Khosrowshahi went on MSNBC to announce that, should the ruling stick, his company may well cease operations in the nation’s most populous state: “If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly.” Lyft soon followed suit, with executives reportedly telling investors they, too, would consider withdrawing should they lose their appeal. Several days later, Uber escalated further, sending their users emails and texts warning of a potential shutdown should they lose their appeal in court.

At first glance, this may seem like an instance of two companies left in the lurch and scrambling to stay afloat once their business models have been upended, which is exactly how they themselves framed it. But that’s not what’s really going on.

Uber and Lyft aren’t sympathetic firms floundering in the face of government attack. They’ve essentially threatened what’s known as a “capital strike,” a tactic in which companies withhold resources or investments in an effort to get what they want. In a capitalist society, it’s a key tool wielded by the powerful to perpetuate inequality.

Here’s how it works: private businesses exist to make as much profit as possible. If they don’t, they’ll eventually be outcompeted and elbowed out of the market by larger, more powerful firms. One important way to maximize profits is to keep labor costs down, and bosses have plenty of ways to do it: industrial bosses of the past relied on cheap child labor; today, they often advocate for weak minimum wage laws or fight to keep unions out of their workplaces.

Uber and Lyft’s most profit-driving “innovation” wasn’t its app or its on-demand ride service — it was minimizing labor costs by openly flouting decades of labor law, erroneously classifying its workers as “independent contractors” so as to skirt around requirements that employers provide basic benefits for full-time employees. The fact that they’ve done so with relatively little resistance until now is a testament to their political power — both Uber and Lyft have not only flooded cities with cheap cars to undercut existing taxi industries, but they’ve hired politically connected lobbyists and lawyers to argue their cases in court and influential social circles.

Both companies have grown exponentially using this strategy, which begets more growth the more attractive they become to investors and creditors, thereby allowing them to lower prices and expand further, growing ever more powerful as a result. It’s this political and economic heft that primes companies like Lyft and Uber for a capital strike: when private firms are as large as these companies are, untold numbers of people sincerely depend on the resources the company controls.

Misclassified drivers depend on income to survive; local residents depend on transportation infrastructure provided by a private company in the absence of public investment in better transit; and the elected officials beholden to all of them face significant pressure to capitulate to the firm’s demands. This basic dynamic highlights why framing “money in politics” solely as campaign donations is too narrow: a company that unilaterally controls as much wealth as Uber is too powerful by definition, and it has de facto veto power over democratic will through its ability to retaliate against the majority to serve the interests of its owners.

When leftists talk about “class war,” they’re referring to any number of strategies to correct this power imbalance between those with immense wealth and those without it. Unions are one big example of how to do that, giving workers more power, leverage, and resilience against capital strikes than they’d have on their own. Even further, a company’s ability to wield such power against workers in the first place is rooted in the fact that its wealth is privately controlled: a truly just workplace is one controlled by workers themselves, who are guaranteed the foundational rights conferred by a robust welfare state regardless of employment status, and who have no interest in launching capital strikes against themselves.