The increasing ability of people to exchange goods, services and labor directly via online platforms is transforming how modern economies operate. However, to ensure that the rise of the “sharing economy” works efficiently and improves conditions for all parties, some regulation is needed.
People can now circumvent many traditional service businesses. They can share transport, using Uber, Lyft or RelayRides; provide accommodation through Airbnb; tender household chores via TaskRabbit, Fiverr or Amazon’s Mechanical Turk and arrange their grocery deliveries using Favor and Instacart.
Similarly, crowdfunding platforms, such as Kickstarter and Lending Club, allow startups to raise grants, loans or investment from the general population, rather than relying on a financial intermediary.
Illustration: Lance Liu
By cutting out the middleman, these online platforms empower individuals, reduce transaction costs and create a more inclusive economy, but their evolution is far from straightforward and many such services will require careful regulation if they are to flourish — as protests and court rulings in Europe against Uber demonstrate.
One reason why Uber and other sharing-economy pioneers are so disruptive is that they represent a highly efficient form of peer-to-peer capitalism. Buyers and sellers can agree directly on the price of every transaction and business reputations depend on transparent customer feedback, generating continuous pressure to improve performance.
The sharing economy also boosts entrepreneurship, as people see new ways to fill gaps in the market. What began as a simple way for households to boost incomes — by renting out one’s apartment or car — has become a formidable disruptive force. Forbes magazine estimates that the sharing economy’s revenues topped US$3.5 billion last year. During this year’s soccer World Cup in Brazil, a nation with a chronic shortage of hotel rooms, more than 100,000 people used home-sharing Web sites to find accommodation.
The opportunity to buy or sell has also become much more inclusive: Half of Airbnb hosts in the US have low to moderate incomes and 90 percent of hosts globally rent their primary residence.
Several cities have recognized the benefits to be gained from promoting a sharing economy. Seattle, for example, has deregulated its transportation and hospitality sectors, challenging the city’s taxi and hotel monopolies.
However, economic change of this magnitude inevitably has its opponents, some with legitimate concerns. Do peer-to-peer businesses undercut incumbents by not paying similar taxes? Are such businesses — flush with venture capital — running their operations at a loss in order to capture market share? And should these firms be allowed to access telecoms data to learn about customers’ habits and movements, thus giving them an unfair advantage?
Some firms have set their own operating standards. TaskRabbit, which subcontracts household jobs like assembling Ikea furniture, requires participants to pay a minimum wage and has launched an insurance scheme to protect its US workers. On the other hand, technology platforms that use “algorithmic scheduling” to automatically align workers’ shifts and hours with business cycles continue to disrupt family life and cause unnecessary stress. Policymakers need to stay ahead of these sharing-economy trends.
As services and software converge, public officials must enhance their technical skills and work with the private sector to ensure market fairness and efficiency. For example, they must prevent the manipulation of reviews and other practices that mislead consumers trying to assess the quality of a company’s service. Airbnb and the online travel agent Expedia allow reviews only by customers who have actually used their services; that could become a regulatory norm throughout the sharing economy.
Governments also have a broader role to play. As more people adopt “portfolio careers” — relying on several sources of income, rather than a single job — it becomes harder to collect and analyze labor-market data.
Governments will need new accounting and reporting standards to calculate wages, forecast incomes and categorize workers within the growing ranks of the self-employed. Such standards, coupled with data-sharing guidelines, will help determine when — and how much — to tax sharing-economy transactions.
None of this will be easy. Though self-employment and part-time labor are hardly new, the sharing economy is different because it allows freelancers to become “nano-workers,” shifting among employers not just monthly or even weekly, but several times a day.
As US and European unemployment rates remain high and wages stagnate, people increasingly rely on such diverse income streams. Today, almost 27 million people in the US survive on part-time and project-based incomes.
With nearly half of all services jobs in the Organisation for Economic Co-operation and Development at risk of automation, the sharing economy can smooth the disruption caused to displaced workers as they upgrade their skills. Indeed, sharing-economy data can help governments identify those workers at greatest risk and support their retraining.
The sharing economy reflects the convergence of entrepreneurialism and technological connectivity.
Taxi drivers and hotel owners may feel threatened, but the sharing economy has the potential to increase and redistribute earnings in cities that are already struggling with poverty and inequality.
Those who are displaced will have far better prospects in the more prosperous and inclusive environment that the sharing economy promises to create.
Ayesha Khanna is chief executive of Technology Quotient, an education and skills development company. Parag Khanna is a senior fellow at the New America Foundation.
Copyright: Project Syndicate
Saudi Arabian largesse is flooding Egypt’s cultural scene, but the reception is mixed. Some welcome new “cooperation” between two regional powerhouses, while others fear a hostile takeover by Riyadh. In Cairo, historically the cultural capital of the Arab world, Egyptian Minister of Culture Nevine al-Kilany recently hosted Saudi Arabian General Entertainment Authority chairman Turki al-Sheikh. The deep-pocketed al-Sheikh has emerged as a Medici-like patron for Egypt’s cultural elite, courted by Cairo’s top talent to produce a slew of forthcoming films. A new three-way agreement between al-Sheikh, Kilany and United Media Services — a multi-media conglomerate linked to state intelligence that owns much of
The US and other countries should take concrete steps to confront the threats from Beijing to avoid war, US Representative Mario Diaz-Balart said in an interview with Voice of America on March 13. The US should use “every diplomatic economic tool at our disposal to treat China as what it is... to avoid war,” Diaz-Balart said. Giving an example of what the US could do, he said that it has to be more aggressive in its military sales to Taiwan. Actions by cross-party US lawmakers in the past few years such as meeting with Taiwanese officials in Washington and Taipei, and
Denmark’s “one China” policy more and more resembles Beijing’s “one China” principle. At least, this is how things appear. In recent interactions with the Danish state, such as applying for residency permits, a Taiwanese’s nationality would be listed as “China.” That designation occurs for a Taiwanese student coming to Denmark or a Danish citizen arriving in Denmark with, for example, their Taiwanese partner. Details of this were published on Sunday in an article in the Danish daily Berlingske written by Alexander Sjoberg and Tobias Reinwald. The pretext for this new practice is that Denmark does not recognize Taiwan as a state under
The Republic of China (ROC) on Taiwan has no official diplomatic allies in the EU. With the exception of the Vatican, it has no official allies in Europe at all. This does not prevent the ROC — Taiwan — from having close relations with EU member states and other European countries. The exact nature of the relationship does bear revisiting, if only to clarify what is a very complicated and sensitive idea, the details of which leave considerable room for misunderstanding, misrepresentation and disagreement. Only this week, President Tsai Ing-wen (蔡英文) received members of the European Parliament’s Delegation for Relations