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Making Networked Sharing Socially Beneficial, Not Just Predatory and Profitable

Every time Uber, the Web-based taxi intermediary, enters a new city, it provokes controversy about its race-to-the-bottom business practices and bullying of regulators and politicians.  The problem with Uber and other network-based intermediaries such as Lyft, Task Rabbit, Mechanical Turk and others, is that they are trying to introduce brave new market structures as a fait accompli. They have only secondary interest in acceptable pay rates, labor standards, consumer protections, civic and environmental impacts or democratic debate itself. 

Rather than cede these choices to self-selected venture capitalists and profit-focused entrepreneurs, some European cities and regional governments came up with a brilliant idea:  devise an upfront, before-the-fact policy framework for dealing with the disruptions of the “sharing economy.”

If we can agree in advance about what constitutes a socially respectful marketplace – and what constitutes a predatory free-riding on the commonweal – we’ll all be a lot better off.  Consumers, workers and a community will have certain basic protections. Investors and executives won’t be able to complain about “unlevel playing fields” or unfair regulation. And public debate won’t be a money-fueled free-for-all, but a more thoughtful, rational deliberation.

Now, if only the European Union will listen to the Committee of the Regions (CoR)!  The CoR is an official assembly of regional presidents, mayors and elected representatives from 28 EU countries. It routinely expresses its views on all sorts of major policy issues that may have local or regional impacts. In December, the CoR submitted a formal statement about the “sharing economy” to the EU in an opinion written by rapporteur Benedetta Brighenti, the deputy mayor of the municipality of Castelnuovo Rangone, in the province of Modena, Italy. 

Other states, provinces and cities of the world would do well to emulate this impressive, forward-looking policy statement.  Entitled, “The Local and Regional Dimension of the Sharing Economy,” the CoR statement sets forth a broad policy framework for dealing with the social and civic impacts of network platforms that enable new sorts of micro-rentals and piecemeal work. These are the business models most often associated with Uber, Airbnb, Task Rabbit and other “gig economy” ventures.

The Cor statement is remarkable, first, for proposing some worthwhile distinctions in how we think about the “sharing economy.”  It argues that there are really four types of economies –

  • the “access economy” that is renting things rather than selling them permanently;
  • the “gig economy” that hosts contingent work in digital marketplaces;
  • the “collaborative economy” that fosters peer-to-peer governance and production processes; and
  • and the “pooling economy” that enables collective ownership and management.

It is customary for many city governments to be ignorant of the economics and social effects of network platform businesses, or to uncritically embrace “disruption” as a great advance for humanity.  The CoR statement is quite different in tone and sophistication.  It does not simply celebrate the new tech platforms.  It notes that many of them are enabling a “reverse transformation or transition in some sectors of the current economic model to long-standing economic traditions and economic models,” such as cooperatives, the social and solidarity economy, handicraft production, and commons. 

Rather than welcoming any sweeping tech innovation as progress, the CoR intelligently urges the EU the EU to think about basic “design principles” for policies governing the sharing economy.  Here in the US, it’s every city and occupational sector for oneself, each fighting against the venture capital-funded giants who seem intent on bulldozing past any democratic accountability or “archaic” protections of workers, consumers or the general public (because “disruption” is necessarily good).

Let me readily concede that Uber is a far more convenient and inexpensive alternative to the traditional regulated taxi monopolies.  The latter are often slow, unresponsive and averse to change, while Uber rides can be much easier to secure and cheaper. But much of Uber’s economic viability comes from evading traditional worker and consumer protections, using data and algorithms to drive down wages, and aggressive lobbying to overcome regulators. 

What the CoR proposes is a more thoughtful, rigorous and transparent process for considering the entire range of effects from tech-driven “disruptions.”  It wants a more serious, documented reckoning of net social and economic gains, to make sure that the “disruptions” are not simply the result of consolidating market power and shifting benefits to private interests from workers, public safety, the environment, social well-being and democratic accountability.

For example, the CoR proposes that EU policymaking not just focus on “the commercial and consumer aspects of the sharing economy while leaving aside the non-commercial and commons-based approaches.”  Just because the benefits of commons are not monetary, or cannot be easily quantified, is no reason to conclude that commons may not be more socially beneficial forms for meeting people’s needs.  For example, “platform cooperativism,” in which a city government assures open standards, open competition, and data-sharing, could provide greater public benefit than a sector-dominating network platform company.

Thus, the CoR wants the European Commission to analyze and define the different forms of the sharing economy, and to take a sectoral approach in any regulation of the “sharing economy” so that the legal and institutional frameworks for regulation are appropriate.  It also endorses the idea of regional autonomy in regulating the sharing economy, consistent with the principle of subsidiarity – governance at the smallest feasible level.

In terms of designing policy structures for the sharing economy, the CoR urges that:

  • Policies consider “all possible positive and negative impacts,” including tax avoidance, unfair competition and violations of local and regional regulation.  Policymakers should also consider the effects on “environmental regulation, social cohesion, equality and social justice, sound land use [and] urban governance.”
  • “Social economy effects on personal economic security and social welfare must be thoroughly scrutinized,” because the social economy may be giving rise to “a new social class, the collaborative class, that needs social and economic safeguards.”
  • Data collection from sharing economy platforms “need to be open source as much as possible,” and should “build in the platform technical mechanisms to feed public, relevant but not sensitive or strategic data to LRAs [local and regional authorities].  This is necessary because “free access to the market for newcomers needs to be guaranteed.”
  • “Trust and reputation must be accurately and independently managed” via regulation, certification or third-party arbitration, or through peer review.

The CoR statement is far-sighted in calling for greater coordination among various EU departments to ensure that policies are consistent.  It also urges that public administrators support the consolidation of a "collaborative institutional ecosystem” in its policy approaches, so that the general, common interests of everyone is taken into account.  In other words, the Invisible Hand won’t do the job.

The final, adopted opinion European Committee of the Regions is available here in English and in Italian. Additional information on the opinion is available on the Opinion Factsheet page on the CoR website, which also gives access to the opinion in other language versions as they become available.

I heartily recommend the CoR statement as a great place for other states, provinces and municipalities to grapple with the far-reaching challenges of platform enterprises.  There's an important role for law and policy to play, especially in protecting the common good and vulnerable individuals and in fostering commons-based alternatives of equal or greater benefit. But achieving these goals will require a new sophistication about platform economics and their social impacts, and innovative regulatory approaches.

"Uber ride Bogota (10277864666)" by Alexander Torrenegra from Secaucus, NJ (New York Metro), United States - On my first @Uber ride in Bogota heading to a Startup Weekend. Priceless easiness and safety. I love disruptive innovation.. Licensed under CC BY 2.0 via Commons.

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