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Economy

Risks and Rewards of Cultivating a Sharing Economy

professor of Sociology at Boston College
Uber app in use

While the sharing economy has attracted a great deal of attention in recent months with platforms like Airbnb and Uber experiencing explosive growth, it has come with a number of regulatory and political battles.

Boosters claim the new technologies will yield utopian outcomes. Critics denounce them for being about economic self-interest rather than sharing, and for being predatory and exploitative. Not surprisingly, the reality is more complex.

These new technologies supporting peer-to-peer economic activity are potentially powerful tools for building a social movement centered on genuine practices of sharing and cooperation in the production and consumption of goods and services. But achieving that potential will require democratizing the ownership and governance of these platforms.

The sharing economy covers a sprawling range of digital platforms and offline activities, from financially successful companies like Airbnb to smaller initiatives such as repair collectives and tool libraries. Sharing economy activities fall into four broad categories: recirculation of goods, increased use of durable assets, exchange of services, and sharing of productive assets.

Recirculation of goods lowers the traditionally high transaction costs of secondary markets and provides reputational information on sellers, reducing the risks of transacting with strangers.

Increased use of durable assets provides people with low-cost access to goods and space, and some offer opportunities to earn money, often to supplement regular income streams.

Service exchange, which includes companies such as TaskRabbit and Zaarly, pairs users who need tasks done with people who do them.

Sharing productive assets or space enables production, rather than consumption, including initiatives such as hackerspaces, which grew out of informal computer hacking sessions; makerspaces, which provide shared tools, and co-working spaces.

The most successful platforms—Airbnb and Uber, most recently valued at $13 and $40 billion respectively—have strong backing from venture capitalists and are highly integrated into existing economic interests. The introduction of venture capitalists into the space has changed the dynamics of these initiatives, particularly by promoting more rapid expansion.

While some of the platforms present a gentle face to the world, they can also be ruthless. Uber, for example, has been engaging in anti-competitive behavior, such as recruiting its competitors’ drivers. By contrast, many of the initiatives in the sharing space, such as tool libraries, seed banks, time banks, and food swaps, are non-profits aiming to serve needs.

Sharing Economy Risks Include Labor Exploitation and Monopolization

The debut of the sharing economy was marked by plenty of language about doing good, building social connections, saving the environment, and providing economic benefits to ordinary people. It was a feel-good story in which technological and economic innovation ushered in a better economic model.

But Dean Baker, a progressive economist, claims the new sharing is “largely based on evading regulations and breaking the law” and subjects consumers to a substandard, possibly unsafe product. Anthony Kalamar has called out “sharewashing,” in which platforms shift risk onto employees under the guise of “sharing.”

A central theme of a number of critics is that for-profit platforms have coopted what began as a progressive, socially transformative idea. Regarding regulation, insurance, and taxation, the platforms are mobilizing political support. My sense is that most, although not all, are accepting of the idea that some regulation is necessary to allow the platforms to operate and grow.

There is less clarity about how the platforms are affecting labor conditions. Critics see them as architects of a growing “precariat,” a class on the precarious edge of economic security, and argue that the impetus for sharing is not trust, but desperation. From the perspective of drivers, errand-runners, and hosts, they describe a race to the bottom, with risk-shifting from companies to individual “micro-entrepreneurs.”

Part of the difficulty in assessing the impact of these new earning opportunities is that they are being introduced during a period of high unemployment and rapid labor market restructuring.

But there is another dimension, which is whether there is competition among platforms. Will they come to monopolize a given space? If the volume of users continues to grow, then critical mass may be achievable on multiple platforms. On the other hand, the more the platforms are backed by and integrated with the large corporations that dominate the economy, the more monopolized the sector will be, and the less likely value will flow to providers and consumers.

The Next Frontier of Peer-to-Peer: Organizing to Redistribute Wealth

An alternative to the co-optation path is one in which sharing entities become part of a larger movement that seeks to redistribute wealth and foster participation, ecological protection, and social connection. This will only happen via organization, even unionization, of users.

Airbnb has begun to encourage its users to organize, creating its own organizing platform which has led to the creation of numerous local groups of users who are coming together on and offline for a variety of purposes, including sharing advice and affecting public policy. But they may develop agendas of their own, including making demands of the company itself, such as setting price floors for providers, pushing risk back onto the platforms, or reducing excessive returns to the entrepreneurs and the venture capitalists.

Alternately, organizations that are part of the solidarity sector, such as unions, churches, civil society groups, and cooperatives, could create platforms for their members. They could build alternatives to the for-profits, particularly if the software to operate these exchanges is not too expensive.

For example, a taxi cooperative in Portland, Oregon, has adopted the technology used by ride sharing companies and will effectively morph into a driver-owned Lyft or Uber. In general, mounting a competitive challenge to business-as-usual should be easier when production is peer-to-peer because the platform is a broker, not a producer.

In the end, though, it is not just about economics. The key to making sharing economies socially just is to emphasize an explicit politics of sharing, as well as nurturing collective, public forms of sharing.

Sharing Companies Should Look Globally to Spur Social Movement

There is potential in this sector for creating new businesses that allocate value more fairly, that are more democratically organized, and that can bring people together in new ways.

But the early stage goodwill from the big platforms will dissipate as they become incorporated into the business-as-usual economy. There is an enormous amount of new economic value being created in this space. It is imperative that it flow equitably to all participants.

The ability of the new sharing practices to help catalyze a social transition may also depend on the form these initiatives take around the world. Outside the U.S., the impetus to share in transportation, housing, foods, and goods is more integrally tied to city-level goals of carbon emission reduction, informational transparency and genuine democracy.

My hunch is that the more that U.S. sharing activists connect with other sharers around the globe, the more success we will have in pushing the goals of eco-accountability, value distribution, and social solidarity.

Ultimately, a cross-fertilization could both create accountability for the sharing platforms and organizations and embed sharing practices and cooperative economic activity into the DNA of the social movements.

A longer version of this article first appeared in the Great Transition Initiative.

Juliet Schor

professor of Sociology at Boston College @julietschor

Juliet Schor is professor of Sociology at Boston College and is currently serving as a distinguished visiting professor at the Radcliffe Institute, Harvard University. Her current research topics include consumer culture, sustainable lifestyles and the relationship between time use and carbon emissions.

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