Transport for London's proposed crackdown on Uber taxi service has triggered a polarised response from the public.
Uber supporters in their tens of thousands have signed an online petition defending the taxi service, while detractors claim it is ripping off its own staff as well as the British taxpayer. While this row is specifically about Uber, there is a broader context to this as Uber is the most famous and successful example of what has become known as the "sharing economy".
The sharing economy is a description for an amorphous and wide-ranging set of businesses and practices across the world. Many claims, sometimes conflicting, have been made about the sharing economy. Some critics of Uber, for example, see it as an example of unbridled capitalism, while others such as the left-wing economist Paul Mason see it as a "route to dotcommunism", a death knell for the market economy.
How are we to understand such an apparently contradictory phenomenon? There are three observations I would like to make:
- A lot of what is called sharing is not really sharing
- Much of what is claimed to be new about the sharing economy is not really new
- The sharing economy, however defined, is not a solution to the big economic problems we face.
So what aspects of the sharing economy are not really about sharing? Having friends to stay over on a Saturday night is sharing. Handing them a bill with their breakfast makes me a hotelier. Giving somebody a lift is sharing. Charging them for it makes me a cabbie. Lending somebody a tenner until tomorrow is sharing. Charging them 6% interest for it is usury.
None of these things are sharing, they are selling. There is nothing wrong with selling, but I suppose the selling economy is a tautology. Indeed, the ultimate form of "sharing" in this sense would be prostitution, although I do not think the IPO [Initial public offering] for that is imminent.
Why does the misnomer matter? Because of the moral, environmental and ethical claims that are being made for the sharing economy. That somehow it is taking us away from traditional forms of ownership and into a new and more cooperative world. If anything it is taking us in a different direction, towards the monetisation of everyday transactions between people and a less communal and more individuated approach to the world, as if we are all involved in a permanent car boot sale of our time, skills and possessions.
What can we say is new about the sharing economy? Generally these types of services are the product of the internet and the capacity for disintermediation that it has brought. But disintermediation is a posh word for cutting out the middle man, and there is nothing very new about that. The internet has undoubtedly changed things by allowing mass peer-to-peer connectivity and that has definite consumer benefits.
However, the real winners in this process have been the pirate capitalists who have moved in and used the technology to break up and disrupt existing industries. This has been and forever will be the story of capitalism: creative destruction. The internet-driven changes are the latest phase of a centuries-old economic system, not the harbinger of a new one.
Airbnb has become hugely successful because it has adopted another old truism of the capitalist economy: sweat your assets. Do not leave what for most people is their most valuable asset, their house, empty when they go away. Uber is succeeding partly because it has solved a problem that was fixed a while ago in the heavy transport industry: do not have an empty vehicle on the return journey. Peer-to-peer lending is a more extensive version of the "friends and family" approach to seed funding entrepreneurs and start-ups. At present peer-to-peer funding does not appear to be able to address the problem which faces most growing businesses once they have got past the start-up phase: the step up funding of £2m to £10m or more of which there is a huge dearth in this country.
These and other innovations can be useful and valuable for their users. But they do not point the way to a different world. They are simply adapting traditional business methods through the use of new technology, and good luck to them.
Lastly, I would say that however smart and innovative some of these new businesses are, they do not have the potential to solve the big economic problems we face. The sharing economy really got going because of the recession and the economic pressures and opportunities it helped to create.
But sharing is operating on the periphery of the global economy, not at its centre. The taxi industry undoubtedly benefited from a one-off productivity increase through Uber and the like. But there appear to be few other major industries which can benefit in the same way from this kind of disruption. Also, in the case of both Uber and Airbnb, they are displacing existing services and therefore not contributing much extra demand in the broader economy.
There is evidence in the US, which is more advanced than Europe in the sharing economy, that many people have been forced into renting and driving cabs because their wages have stagnated and their living standards fallen. They have been driven, literally in some cases, towards sharing by austerity. Low productivity in many Western economies has led to stagnating wages. Inadequate productive investment by both big businesses and governments has been a major factor in causing low productivity.
Until the twin problems of low productivity and inadequate investment are addressed the main sharing that is going on will be sharing out the misery.
Rob Killick is the CEO of Clerkswell and Easy SharePoint. He is speaking at the Battle of Ideas festival on "The Sharing Economy: radical capitalism or high-tech pocket money?" on 17 October at London's Barbican. IBTimes UK is a media partner for the festival.