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The sharing economy: not all it's cracked up to be?

Tue, 9th Sep 2014

It has a reassuring name, and at first sight the emerging ‘sharing’ or peer-to-peer economy has plenty going for it. Greens as well as mainstream economists are in favour of, as it were, sweating under-used personal or even corporate assets rather than scrapping and churning out ever more of them. And consumers have taken to cheaper alternatives to regular hotels or taxis as enthusiastically as they have embraced no-frills air travel. You can now rent almost anything from a dog to Jimmy Choos or a party frock to someone else’s driveway to park in.

Yet it’s wise to take a hard look at the bargain that’s being signed up to. A more significant portent of things to come may be the spat between German (and other) taxidrivers and Uber, the San Francisco taxi service in all but name that is spreading like a rash all over the globe. Taxidrivers aren’t the most popular category in the world, and it would be easy to take their protests as the doomed last throw of old-fashioned regulation and restrictive practice in the face of the individualised internet economy. Indeed in a contest between the regulated Hackney carriage and a crowd of digitally-enabled freelances in Mercs there can only be one winner.

But what’s actually going on here? As with so much on the internet, appearances are deceptive. The truth is that the internet doesn’t so much create jobs as eat them, chewing up full-time regular employment, swallowing much of the sustenance and spitting out what’s left as part-time, freelance mini-jobs. Thus, while a tiny number of founders and full-time staff at Uber or airbnb will become millionaires (or more) when their companies float, the average San Francisco host rents out a room 58 times a year for a total of $9,300, while a car owner nets $250 a month from RelayRides.

Don’t get me wrong. This is not nothing, and the technology that enables it, and many other forms of cooperation, is stupendously potent. But let’s not kid ourselves – these are not jobs. Hosts and renters aren’t employees, they foot their own costs and insurance – and then compete with each other and fulltime employees of conventional companies to keep prices down. For those at the centre who hoover up the value created this is a business model of stunning brilliance. For those delivering the actual service, not so much. It provides a hobby and pin money, not financial or emotional security. In this light Linux and Wikipedia, icons of the sharing economy, take on a rather less glowing significance, more important as harbingers of a coming no-wage economy than as the marvels of human generosity and cooperation that they undoubtedly are. For a less friendly example of where this leads, consider Amazon's Mechanical Turk, an internet marketplace (or 'digital sweatshop', take your pick) where Workers, or Turkers, can volunteer for menial tasks that computers can't yet complete for payment of around a dollar on hour

In fact, the freelancification of the economy is already well on the way. Much of the UK employment growth that the coalition boasts of is accounted for by freelancers earning much less than a full-time wage, and than they used to. For many freelance is not a choice – there’s no point in waiting for traditional companies because they don’t do job creation any more, any capital investment they carry out being more likely to cull jobs than generate new ones. Larry Summers, previously US Treasury Secretary, fears the west faces ‘secular stagnation’ (ie structural not cyclical); the McKinsey Global Institute reckons that 140m knowledge workers could be displaced by smart machines (including, incidentally, those eager Uber drivers if, as one would wager, Google’s driverless cars come to pass). Wage inequality, as the World Economic Forum, and even ratings agencies like Standard and Poor’s, are beginning to fret, will continue to increase, leading to political and social stresses and protests, further dampening growth, if not far worse.

The rise of the misnamed sharing economy, in other words, is just one more indication that the free-market new world order as summed up in the ‘Washington consensus’, which once appeared the embodiment of capitalist end of history, is now cracking up. Its monolithic certainties now resemble nothing so much as those of the Soviet communist regime  – frozen, lumbering, out of synch and time – before it fell apart in 1989.

The paradox, of course, is that, as the burgeoning sharing economy demonstrates, all the technology to enable dispersed, local, more democratic ways of working already exists. 3-D printing and other new techniques mean that physical production is likely to go the same way as services. For most intents and purposes the tyranny of economies of scale, an essential element of the old new world order, is lifted – unequivocally a good thing. What’s lacking is the institutional imagination that would enlist machine intelligence to amplify and reinvent work rather than kill it, as now. This is a political as much as an economic issue; if a quarter of the energy were channelled into it that now goes into job-eating Silicon-Valley start-ups, we would be well on the way. As Aditya Chakrabortty wrote in a recent article on why cleaners in New York earn three times more than their counterparts in London (it’s here – read it): ‘One thing ties together good jobs and crap jobs: both are produced not only by economics but by politics too’. Unless that effort is made, the sharing economy will come to look like just another example of Orwell-speak: sharing for the 99 per cent, but not for the 1 per cent playing a different game called winner-takes-all.

 

 


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User comments

Henning Sieverts :: 10th Sep 14
Simon is 100% right here, as he usually is. But the sharing economy (and its cousin the barter economy) not only destroy decent jobs, they also by and large evade taxes and publicly beneficial regulation of safety, labour equality, etc.
Paul Reading :: 16th Sep 14
See also "Auction your grannie" http://www.theguardian.com/society/2014/aug/27/councils-care-contracts-online-auctions Senior managers will cling to this sort of "solution" to keep themselves in post for another year at the cost of the jobs of front line staff.
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