The Myth of the Sharing Economy

On Aug. 7, 2016, San Diego Uber driver Brandon Williams was violently attacked by a teenage rider who had forgotten his phone in the driver’s vehicle.

Williams stated, “I just heard the loud banging and the glass shattering and there was multiple shots. It was like a semi-automatic so I just thought to duck down as far as I could and drive as fast as I can in a straight line.” According to KGTV San Diego, when William’s vehicle was totaled, his personal insurance refused to pay anything, and Uber followed suit by refusing to cover any of his costs as a “contractor” and not an employee. Williams shared with KGTV how he was affected by such policies, “Because my personal insurance policy doesn’t cover commercial vandalism…over $15,000, which makes my vehicle totaled.”

Why do employees have to pay for damages incurred from their work? According to a legal brief Uber submitted to the California Public Utilities Commission, “Uber operates no vehicles, and does not hold itself out or advertise itself as a transportation service provider. In fact and law, Uber does not provide transportation services of any kind and does not own, lease or charter any vehicles for the transportation of passengers. On the contrary, Uber is a technology company that licenses the Uber App to transportation service providers. The transportation service providers pay a fee to Uber to use its software technology; the passenger of the transportation service provider pays the transportation service provider for transportation services received.”

Uber’s legal brief may sound like a lot of legal jargon, and it is. It’s the way a new technology and its billionaire investors create the image of a “community” or a “marketplace.” The reality is a digital tool which wealthy investors use to profit from vulnerable workers.

When companies such as Uber, Postmates, GrubHub, and AirBnB began filling up users’ smartphone screens, it’s been tough to shake the notion that life was simpler for it. Feeling anxious and need a mental health day in bed? Order some take out. Can’t afford a car but need to get home from the bar (or to it)? Get a ride for only $11. Taxis are expensive and can seem like a hassle when an app makes a ride just a click away. Transactions such as ridesharing, borrowing a car, outsourcing work, eating, shopping, and short-term rentals are increasingly available through these new companies that comprise the sharing economy, the coined term for this community-sourced, exchange-based market.

Mass media such as Fortune, CNN, Reddit, and Facebook are loud supporters, claiming its innovative benefits. These apps are built by people, linking them through the internet, and feed the increasing desire to divorce work and consumption from large corporations. As written by CNN’s Rachel Botsman, “New ideas such as car sharing and social lending challenge conventional models, but history teaches that these emerging ideas should be embraced.” The resounding approval champions these companies as communitarian, hip, urbane, and most importantly, convenient.

Uber drivers are told because they make their own schedule, they are flexible workers. If they need more money, they can work more; and if they are overworked, they can schedule themselves appropriately. Joining the sharing economy allows new employees to feel a new freedom from bosses, scheduling, and unpleasant workplaces. It successfully propagates a form of income free of traditional workplace oppressions.

The original services and products provided by the sharing economy still exist in most societies. Traditional providers such as hotels, bed and breakfasts, and hostels, are still in business today. Taxi services still operate in almost every city. Restaurants still offer their own delivery services and drivers.

The key difference between these traditional providers and the sharing economy are the risk they assume. Uber, the world’s largest transit company, has no regular employees who operate its fleet. The world’s most expansive hospitality company owns none of the properties their customers utilize. The most successful food delivery service owns no vehicles nor hires regular employees. Across the globe and especially in the areas where venture capital and technological progression meet, a new restructuring of the economy has risen.

The hottest companies have been able to hit the public consciousness with a certain ease that their predecessor service companies did not enjoy. These companies operate free of the burden of managing large groups of employees, committing investment spending to physical capital, or dealing with local regulators in different municipalities. They need only concern themselves with raising venture capital, managing websites, and promoting brands worth more than the GDPs of most nation states.

In the markets where these companies operate, which now exists in almost all major cities across the world and many smaller ones, a belief is projected on the utility of their services. AirBnB states on their website “No matter what kind of home or room you have to share, Airbnb makes it simple and secure to earn money and reach millions of travelers looking for unique places to stay, just like yours.” The hope is that people can take advantage of what they already own and aren’t using. When issues arise between customers and sharing economy workers, the corporations stand to lose very little, as they assume almost no financial or legal risk.

In 2014, the city of Amsterdam came to a legal clash with AirBnB over the activities of its hosts. AirBnB hosts had repeatedly violated local ordinances regarding the number of days a year private residences could rent out their rooms for short-term stays. As hosts dealt with lawsuits and police intervention, AirBnB did not assume any of this risk. A billionaire team of investors who reap wealthy dividends every quarter remain financially safe as hundreds of thousands of euros are levied towards the homes which are violating these municipal laws.

AirBnB refuses to maintain any responsibility over the empire it has built. Simultaneously, it pushes the boundaries of every democratically elected municipal government which attempts to protect their communities from exploitative practices. A non-profit organization, Peer, emerged in 2013 to start grassroots campaigns in favor of the sharing economy. Previous state regulations made it incredibly difficult for these companies to operate within the framework of state laws. Successful Peer campaigns in California, Seattle, and even New York allowed ride sharing and AirBnB rentals to operate without cumbersome regulation diminishing their access to markets. The Peers Foundation (now a for-profit company) is funded at last count by donations from 75 different sharing economy companies (including AirBnB and Lyft).

Even the perceived make up of “local folks like me” who have represented the investment in these sharing economy ventures is a result of misleading propaganda from the companies themselves. AirBnB disguises where most of their income is made by communicating who the majority of their hosts are. AirBnB states that the majority of AirBnB listings are “single listing” homes, meaning the only home that owner rents out. The reality is that the majority of AirBnB’s revenue worldwide is generated by a combination of “entire home listings,” rentals where the owner is not present in any part of the dwelling, essentially an empty dwelling whose sole purpose is to generate profit through short term rentals. These are often owned by “professional hosts,” AirBnB room hosts who receive a significant portion of their income through short term rentals.

One of the greatest costs which the sharing economy has incurred has been the devastating effect professional AirBnB hosts and property managers have had on gentrification in larger cities. Those who already have wealth to invest in properties are driving up property values in neighborhoods which are convenient, centrally located in urban environments, conducive to public transportation, and represent good deals on the housing market. All of these qualities are equally attractive for a working class family or a visiting tourist, but property owners can make more money utilizing these spaces for short term rentals instead of renting it to families or working class adults. The most apparent visual effect of such a rapid change is the increased splintering of communities in lieu of temporary stays for tourists.  

An essential element of the sharing economy is the accessibility to enter the workforce. The idea that anyone can easily get involved by utilizing what they already own is heavily promoted. The reality, however, requires hosts, drivers, and other participants to own expensive assets to participate in the sharing economy. This new class of “micro entrepreneurs” must own suitable residential property to qualify for AirBnB or buy modern and standard fitting cars to drive for Uber (most costing upwards of $12,000). These hosts and drivers represent a new class of technologically hip, moderately wealthy individuals who own expensive properties or can afford costly vehicles.

Technological progression has historically represented one of the most important factors in changing labor economies. When the industrial revolution came about in the 19th century, entrepreneurs and its burgeoning producers were excited by the opportunity for rapid economic expansion. Technology had advanced through the application of cotton gins, large scale mills, and the incremental rise of factories to begin mass producing the needs of society.

The effects of economic paradigm shifts are observable in the context of U.S. history. Fifty years after the U.S began to industrialize, the nation bore witness to the rise of “robber barons” such as John D. Rockefeller, J.P. Morgan, and Andrew Carnegie. These entrepreneurs and venture capitalists were not concerned with the regulation of the emerging industries which had made them vastly wealthy. They utilized their money and political influence to keep wages down, prevent the passage of laws to regulate factories and coal mines, and effectively campaigned to maintain legal child labor. John D. Rockefeller Jr.’s Colorado Fuel and Iron Company would force employees to live in company towns, and if they had any issue with their living situation would go as far as to carry out armed violence against them with private armies of “security” forces (the Ludlow Massacre of 1917 ended with the violent murder of 25 workers). Upton Sinclair’s seminal text “The Jungle” was written in the hopes that people would become aware of the horrifying employment conditions which humans were subjected to in meat factories.

While the modern sharing economy may not see violent murders carried out to maintain company towns, we are seeing similar trends in ideology. Rather than being operated by the workers who provide Uber and Postmates with the labor which it profits off of, it is managed centrally by a large corporate structure and financed and run by billionaires. These companies pitch advertising which paints an image of local community members hiring each other to help out. In reality these “community members” live under the control of Silicon Valley venture capitalists.

The manner in which these new companies can operate so effectively without any physical capital is by profiting off of old industries and services through new means of supply. By utilizing the novel and inherently trust-based format of their businesses, these companies work together to lobby local communities and states to permit lax regulation of their businesses and contractors. When California threatened to regulate Uber and Lyft in 2014, sharing economy lobbying groups rushed to mobilize a politically active force to defeat these measures. In Portland, AirBnB agreed to follow local regulations in a deal with the previous mayor after the city curbed its serious concerns regarding regulations of individual homes and safety codes. The deal struck in 2014 has yet to be implemented. Across the world, the sharing economy has refused to engage with the actual communities it participates in, preferring to do everything to protect their profit motive, no matter the expense to the local community.

Assumptions are made that this technology is positive, aids community building, and provides opportunities for the disenfranchised.  Evidence suggests that this style of community building only advances those with the means to own expensive properties and profits the wealthy. These communities are not the disenfranchised communities which need economic uplifting. The sharing economy has left a strong imprint on the public consciousness, and, like the robber barons of the industrial era, the work of the many is leading to the outrageous wealth of the few. Sharing companies think government regulation is infringing on their freedom. They use legal loopholes to dodge responsibilities when things get ugly. Understanding the complex economic issues underlying a new emerging market is crucial for citizens to make informed decisions in the public arena.

This article originally appeared in the print edition of our March 2018, issue.

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