The ‘Fourth Industrial Revolution’ is upon us, with all the challenges that that brings for the way we live, consume and do business – so the argument runs at this year’s World Economic Forum at Davos currently taking place. Interacting with this is the shift towards the ‘sharing economy’ – also an area of great and growing interest for businesspeople, economists and politicians. How will it change the way we govern in this new era?
As a reader of Progress, it is likely that you have used Uber to get from one end of London to another, or stayed in a home found on Airbnb’s platform while travelling. If so, you are one of 23m (and counting) users of sharing platforms in the United Kingdom. These platforms have increasingly come to symbolise the ‘sharing economy’, a relatively new and evolving system of creating value based on maximising the potential of our underused assets and human resources. Through these online platforms, we are able to share our things, such as our cars and our homes, but also the intangible, such as our skills and our time.
On the face of it, peer-to-peer transactions of this nature seem fairly simple and innocuous. Essentially, I have a thing that you want, a platform connects us, and you have the thing that you want possibly instantaneously, or ‘on demand’. Early enthusiasts were trumpeting the social and environmental benefits (in a few words, more trust, less waste) and made allies in mainstream media. Both Time magazine and The Economist were quick to embrace the sharing economy’s underlying principle of ‘access over ownership’.
As of late, however, sharing platforms have come under more scrutiny and a backlash has ensued, particularly in the United States where many of these companies have their roots. Titans in traditional industries are fighting back against emerging heavyweights in the sharing economy, arguing that these newer companies are circumventing regulations that they ought to be similarly subjected to (for instance, when it comes to ensuring the safety of their staff and customers).
Governments in the US and UK (and more broadly in Europe) have taken disparate approaches to responding to these claims, finding it difficult to negotiate the tension there seems to be between enforcing the rules as usual and encouraging innovation. While some governments, especially in Europe, have suspended the operations of platforms such as Uber, others are taking into consideration that these platforms have an incredible capacity to self-regulate. When it comes to safety for example, Uber is making efforts to go beyond the rating and review systems that are now a standard feature of most sharing platforms; in a recent pilot in Seattle, the company began experimenting with colour-coded lights to enhance the security of picking up passengers.
The market failures these platforms are vulnerable to are also being addressed by third party platforms and organisations. A wave of startups are specialising in background checking services and identity verification, while in the US there is growing dedication to developing ‘portable benefits’ for gig workers of sharing platforms such as Deliveroo (on-demand food delivery) and TaskRabbit (on-demand errand-running). Portable benefits offer health coverage, retirement options, and accident and sick pay to gig workers who may not be tied to a single employer that can offer them this level of protection. These benefits also take into account that many sharing platforms, particularly the bigger players, do not see themselves as traditional employers, but rather as intermediaries who are not obligated to workers in the way that incumbents are.
As these sharing platforms try to pre-empt state intervention and inspire a host of others to mediate on their behalf, we will all need to reflect on how government oversight is needed. It may no longer make sense for government to define how standards of safety should be met, but government could play a role in limiting the increasing market power of some sharing platforms.
The main takeaway here should be that conventional approaches to regulation are not fit for purpose in the new economy. In a recent report, the RSA proposed ‘shared regulation’ as a new way forward, which would entail dispersing power and extending self-regulation to more than just businesses by encompassing users and other stakeholders in the process. As we hurtle towards the fourth industrial revolution, the sharing economy prompts us to rethink how we govern in the best interests of society as emerging businesses ‘disrupt’ life and labour markets as we know them.
———————————
Brhmie Balaram is senior researcher in the RSA’s Economy, Enterprise and Manufacturing team. She tweets @brhmie
This piece forms part of today’s guest-edit of the Progress site by Stephen Kinnock MP, covering the discussions at Davos on the economy, business and the World Economic Forum’s central theme this year of ‘The Fourth Industrial Revolution’. Follow the guest-edit today here