Curse and blessing of the economy of sharing

By Jeanette Seiffert

Sharing cars, apartments and other things has long ceased to be a niche phenomenon, but a billion-dollar business. While some find the idea of sharing cuddly and collective, others speak of “platform capitalism”, which only boosts consumption even more.

The so-called Sharing Economy, as the sharing of consumer goods or services via platforms on the Internet is called, has become a stable trend.

With a few mouse clicks or a few taps on your smartphone, you can book a cleaning help, borrow Lego bricks, swap your evening dress for a handbag or book private accommodation with the accommodation agency Airbnb. For more and more people, this is a welcome alternative to the traditional offer.

The concept is not new, says Daniel Veit, economist at the University of Augsburg. The origins of our economy can be traced back to partial and exchange models:

“We are, so to speak, completing a circle and coming back to an economy that functions – supposedly – in a similar way. Because in reality most business models look very different.”

Because sharing, or even community benefit, has long been more than a niche phenomenon in which fellow human beings do something good for others: it is a billion-dollar business. New suppliers with sometimes very aggressive business practices are constantly entering the market. The taxi and hotel industry is currently feeling the effects: its sales are suffering from the favourable offers on platforms such as Uber or Airbnb. The providers, on the other hand, emphasize that they only supplement old business models with innovative concepts – and thus simply make the cake bigger.

“We don’t want to displace the taxi, we simply want to point out further possibilities,” says Fabien Nestmann, head of Germany at Uber. “If this creates a bit of competition, it’s definitely an interesting thing. I say that now for myself personally, I always think it’s good when there’s competition”.

But can one really speak of fair competition if a hotel or a normal taxi company has to fulfil a whole series of legal requirements, but a private room landlord or over-driver does not? The economist Daniel Veit has doubts: “If you look at yourself, for example: A private car is insured for a certain mileage and a certain driving form. If you take this insurance, which is around a thousand euros a year, as a basis and suddenly use this car as a taxi, then you are in competition with taxis that have to provide an annual insurance of around 5,000 euros in order to operate this vehicle in this way. From his point of view, it would be urgently necessary to create new rules for these newly emerging economic sectors. In principle, Uber Managing Director Fabien Nestmann also sees this: “Uber is part of a development that we have at the moment, where technologies, especially technology platforms, open up or facilitate new business fields. And what is important is to find a legal framework where such technological realities are assessed and then allowed.”

At its core, providers like Uber are therefore concerned with as little regulation as possible. They take a libertarian approach and see themselves as a symbol of free enterprise that should unfold as freely as possible. “We believe that the Passenger Transport Act does not take into account all the possibilities that already exist today, and that opportunities for the citizen, for all of us, cannot develop as they should. Sigrid Bender opens the door to a narrow corridor that leads into a nicely furnished room. A French bed, refrigerator, toaster, microwave: for a good 30 euros per night, the Bender couple offers the room with its own entrance and bathroom on various online portals such as Airbnb, 9Flats or Wimdu. The idea was born two years ago, when the two adult sons left the house. “Yes, what do you do with so many rooms, two people? We would have had seven rooms and two bathrooms, that’s just too much.” Instead of moving into a smaller apartment, they now finance part of the rent by subletting for days. The rental portals make it very easy: You create a profile with pictures and a short description of the accommodation, set the price per night and then just have to wait for requests. And they came quickly, says Sigrid Bender: “Cologne is a student city – rooms are always in demand”.

Especially since the Benders’ apartment is located in the popular Südstadt district of Cologne, centrally located and easily accessible by public transport from the university, trade fair centre or city centre. The guests are mostly distance students or working people on business trips – many come back regularly. Billing is convenient via the respective portal: depending on the provider, they charge up to 20 percent commission. An offer, from which all profit obviously: The Benders, because they use the dwelling optimally and earn a few euro besides; the guests, because they receive a favorable accommodation, which is larger and more personal than most hotel rooms.

Nevertheless, the rental platforms on the Internet have come under fire: Especially in the inner cities of large cities, where living space is scarce, there are more and more landlords who prefer to offer rooms or entire apartments on the Internet on a daily basis rather than rent them out permanently. This is more lucrative and more flexible.

“We also have a lot of enquiries from students who want to stay longer,” says Sigrid Bender. “But we don’t do that, because we want to let our friends live there, so we need it for us privately. Many cities try to put a legal stop to private subletting: Berlin, for example, passed a law against the “misappropriation of living space” at the beginning of the year. Sigrid Bender knows how controversial the accommodation service is: But in her case the accusation of a shortage of living space does not apply. “Well, in our case it would be the case that if we were no longer allowed to do this, it would not mean that this room would be available again as living space.” After all, no one benefits if the room is empty, she argues.

Critics tend to see the expansion of consumer behavior as the forerunners of a new, more sustainable economy, as providers such as Uber and the online room broker Airbnb see themselves: because not everyone is forced to own everything necessary themselves, and people share many things instead, fewer resources are consumed. But is that really true?

Niko Paech, who conducts research at Oldenburg University on environmental economics and sustainable management among other things, is sceptical: In his opinion, the cheap and easily available offers tend to lead to an expansion of consumer behaviour: “After all, it is annoying if you want to multiply things, and things a) have to be bought and b) accommodated and c) maintained and cared for. And then you can increase the stock of consumer goods by outsourcing certain functions. This means that the car that I don’t want to pay for or accommodate myself will be held up by the car-sharing company and made available to me.”

Our economy is designed for growth, explains the scientist – and under these circumstances it is not the case that sharing models contribute to “dematerialisation”: “It is rather the other way around: Sharing models lead to a densification of our material prosperity”. In purely theoretical terms, the “Sharing Economy” offers the opportunity to get by with fewer resources and money: But this is only true in a society that has freed itself from the idea of growth.

“But under the present conditions, which correspond to an increase logic of income and consumption, sharing in principle means only an enrichment of our life with even more services and products, which become cheaper through sharing.

In plain language, this means that the money that someone saves by booking accommodation with Airbnb during a trip is spent in the end on more trips – or on being able to afford an expensive flight to the other end of the world. And the many car-sharing and ride-sharing offers that are springing up in the big cities are competing above all with local public transport – and are clogging the inner cities even more. “This is known as rebound or boomerang effects.”

Niko Paech also understands this to mean that certain offers lead to the development of a certain consumer behaviour:

“If, for example, young people who would never have had the idea of driving a car, because they would have had to buy the car, were to be introduced to motorised private transport by the availability of such sharing solutions, then routines or mobility cultures would also be stimulated – or people would be introduced to certain mobility cultures.

Sharing: That sounds cuddly and communal, like justice and social balance. Nevertheless, there have long been much more fundamental concerns about the economy of sharing. The economist Daniel Veit sees many positive aspects in principle: “The problem is only that this phenomenon, which so far has represented a strong niche function, is much broader. And of course, this widespread use leads to side-effects for society as a whole.”

One of these effects is that switching portals like Airbnb or Uber offer new tax loopholes: After all, who wants to check whether landlords or part-time drivers also pay tax on their additional income? Veit also refers to the effects on the world of work: On the one hand, the “Sharing Economy” theoretically offers everyone a simple opportunity to become a small businessman. On the other hand, this would create largely unregulated areas that could undermine hard-won employee rights.

Those who offer their manpower or certain services on a platform are generally self-employed, i.e. bear all risks themselves. Collective wage agreements, occupational health and safety, sickness insurance? – No, that’s not the case. Trade unions warn against new forms of exploitation: there is a threat of new precariousness from poorly paid and largely defenceless workers.

Some therefore speak of a rude “platform capitalism”, which is less about customer sovereignty and self-determined networking than about market power and long-term profits. Many even doubt that the concept of sharing is appropriate for many new Internet offerings: In the case of the large sharing platforms, it has long since ceased to be a question of reaching an agreement with the neighbours to share the washing machine in the basement. Or it’s about lending someone a drill or some moving boxes. It’s about a tough business.

Small suppliers are being pushed out of the market

The fact that there is a trend towards market concentration here, as in other sectors of the economy, speaks in favour of this. Behind Uber, for example, are major investors such as Goldman Sachs and Google Ventures. The market value is now estimated at up to 25 billion dollars – which would make the transport service worth more than Adidas or Lufthansa. According to economist Daniel Veit, there have been many small start-ups in this area so far. But with increasing popularity, what Veit calls “economic network effects” is also emerging in this area: “These network effects lead to the ‘big fish’ always winning and the small fish not reaching the critical mass, so to speak, to be able to play in this game at all”. The result: the smaller suppliers are pushed out of the market or bought up. “This leads to a strong concentration of market power on individual players.” The consequences can already be seen: Successful platforms, which provide cleaning services or, like Uber, driving services, earn up to 20 percent of the hourly wage. “But in the end, apart from providing this digital platform, they did not make any valuable contribution.

Uber Managing Director Fabien Nestmann sees it differently: “We don’t have any employees as a platform, that’s right – but everyone benefits from such platforms if suppliers and searchers are brought together faster, more efficiently and more securely. Despite all the negative side effects, Daniel Veit believes that it is precisely this efficiency and simplicity that will lead to the importance of the Sharing Economy increasing further in the future:

“The question will be, and this is the great challenge for our society, to meet it in such a way that it does not ultimately undermine the positive achievements of our community agreements, but that it will take place in a value-giving way for all of us”.

Source: Deutschlandfunk – Post from 21.11.2014

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