Huffpost Politics
The Blog

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Robert Kuttner Headshot

Share Economy or Bare Economy?

Posted: Updated:
Print Article

The digital economy has given us new ways to be both part time entrepreneurs and consumers, in what enthusiasts call the Share Economy. Have a spare room? You can rent it out to strangers via Airbnb.com -- or use Airbnb to find cheap lodging. You'll meet fascinating new friends, and most likely nothing bad will happen.

Do you need a taxi? Use Uber or Lyft to hail a passing driver and catch a ride for less than the cost of a cab. Or supplement your income by becoming that driver.

Want your car to bring in some income while it sits idle in your driveway? Rent it out via RelayRide.com.

Have some spare time to run errands? You can sign up to be as TaskRabbit, maybe for what works out to less than minimum wage. Or you can hire a TaskRabbit to clean your garage.

As they say over at CNN, is all of this a good thing or a bad thing? Well, it's both.

As the New York State Attorney General Eric Schneiderman pointed out in a New York Times op-ed piece last week, "Many of these companies claim that the fact that their goods and services are provided online somehow makes them immune from regulation. Such regulation is deemed necessary to protect both consumers and neighbors."

Schneiderman has gone after Airbnb, arguing that

The longstanding distinction between hotels and apartment buildings protects the rights of building residents who didn't choose to live 10 feet away from a parade of strangers. The law also protects tourists -- who are usually unfamiliar with the rooms and buildings where they are sleeping -- by imposing stiffer fire safety and building codes on hotels.

Meanwhile, the city of Brussels has banned Uber from operating there on the premise that it represents illegal competition with licensed taxis. Drivers who use the Uber smartphone app to pick up riders face a 10,000 Euro fine.

And, judging by a sample of customer reviews of RelayRide on Yelp, some are satisfied while others complain about everything from clients who get into accidents to vehicles that are filthy, and slopping vetting of both parties to the transaction by the small staff at RelayRide that takes a big cut of fees paid to car owners.

What's going on here?

It's clear that digital technology and smartphone apps have enabled new ways for vendors and buyers to do end runs around traditional notions of what is commerce and what is informal barter. Many people argue that these innovations both expand personal liberties and allow for more efficient use of resources.

If two consenting adults want to put an economic value on an empty car or a vacant room, isn't that a net gain to both? Isn't this precisely what free markets do -- and why should government get involved at all?

There are two problems, say critics. First, the whole history of capitalism is one of balancing the entrepreneurial impulse against hazards to consumers. The fact that some consumers may be innocent of the hazards is not a good reason to pretend they are not there.

In theory, say the enthusiasts, the free market will sort this out. Uber insists that it vets drivers, provides insurance, and takes steps to prevent creeps taking advantage. If it fails to run a sound operation, ten other such companies will fill the vacuum.

On the other hand, long ago we as a society decided that it was good for both buyer and seller if there was a clear definition of what a taxi was, with regulated fares, inspected cars, licensed drivers, clear liability and a formal system for complaints. Long ago, we agreed to differentiate an apartment from a bed-and-breakfast from a hotel. Are we really ready to dispense with such protections and return to a Wild West sort of commerce?

Of course, there have long been informal exceptions to these seemingly rigid categories. People advertise for roommates, sublet apartments, get paid to drive someone's car cross country, run errands and do odd jobs.

The trouble with Uber, airbnb, RelayRide, TaskRabbit, et al is that that they turn these informal arrangements into full-blown commerce and start crowding out the more regularized sort. But what's wrong with that?

It seems to me that it's fine when these forms of barter operate around the edges. It's troubling when they make major inroads into the economy.

The second problem has to do with how people make a living. Back in the 20th century, most of the advanced capitalist nations decided that it was beneficial if working people could have access to regularized employment -- a job with a predictable paycheck, rules of engagement, and opportunities for advancement.

The new, deregulated economy is making such jobs scarce. A shift to the quasi-barter economy of Uber, RelayRide and TaskRabbit will make them even more scarce. Some people sign up as Uber drivers or rent out rooms via Airbnb because it's cool -- others because they can't find jobs that pay a living wage or an apartment they can afford.

So the new, ultra-libertarian digital economy is both the solution and the problem. As a cool add-on, the entrepreneurial apps that allow digital sharing are both fun and make for more efficient use of idle resources. But as the core of the economy, they reinforce an insecure society in which everyone is a free-lance.

Robert Kuttner's latest book is Debtors' Prison: The Politics of Austerity Versus Possibility. He is co-editor of The American Prospect and a senior Fellow at Demos, and teaches at Brandeis University's Heller School.

Like Robert Kuttner on Facebook. Follow Robert Kuttner on Twitter.