The share economy and the perils of unregulation

Much to my delight, and to that of anyone with class war on the brain, the backlash against the ‘sharing economy‘ has really begun in earnest. What grew out of Silicon Valley as a series of brilliant schemes designed to leverage the labour of the masses to generate profits for a lucky few is starting to collapse as people get wise to the fact that the whole thing is a house of cards. Cities are starting to rethink their tolerance of services like Airbnb and Uber, while organisations and agencies are taking on the larger economy itself.

To review, for those who still believe in the sharing economy on some level: The whole thing is a pyramid scheme. It’s sold to workers with the claim that they can pick their working hours, setting, and what they do in exchange for cuts of corporate profits, using their own possessions as their workplaces. Thus you have instant workers who can appear at a moment’s notice to do the bidding of someone with the willingness to install an app and hand over credit card information. Companies, meanwhile, don’t need to pay wages, salaries, or benefits, let alone payroll tax, and they don’t even need to invest in infrastructure because their ’employees’ provide everything.

Rent out your house or your car, drive people around, run things around town on your bicycle, serve as a personal assistant for quick jobs, whatever. People are promised hefty annual incomes if they’re willing to seriously commit, but what they rapidly find is a brutal hustler economy where they’re constantly having to quest and struggle for the next job, because what they receive isn’t really enough to survive on, especially in crowded urban areas.

Workers are starting to question the validity of the sharing economy in a serious way, with a growing number of media outlets publishing in-depth pieces about the problems with it, usually featuring young, sprightly journos who decide to give it a spin for a week in the name of research. Unsurprisingly, the workers being pushed out are also pretty angry, including people like bike messengers and taxi drivers. Meanwhile, businesses like the hotel industry are furious about the rise of services dotted across their cities, cutting rates and competing with their business.

There are a lot of problems with the sharing economy, but one of the most serious aside from the obvious worker exploitation is deregulation. That’s a problem from both a liberal and conservative perspective, actually, one of the rare cases in which people can probably unite on an issue although their solutions would likely vary.

On its face value, deregulation seems like a conservative given — the free hand of the market falls where it will, and that’s just how it’s going to be. But the truth of the matter is rather more complicated. When deregulated industries are competing against regulated ones, the regulated ones lose. Those based in the sharing economy aren’t paying taxes, licensing fees, and other operating expenses that burden regulated companies. People are always going to opt to stay in a cheap Airbnb over an expensive hotel that comes with occupancy tax and other overhead costs, and hotels will have trouble beating that Airbnb rate given their bottom line.

Likewise, a similar example comes up with food trucks, a growing hipster trend in many regions. Aside from the fact that an eight dollar taco violates every imaginable principle of food truck culture, where the idea is supposed to be cheap, simple food, food trucks operate at a strong advantage against restaurants in many regions. Depending on the city, they typically have much lower overhead costs, starting with the lack of the need for a physical location — which is a personal business choice, but one compounded by reduced taxes and fees. Food trucks may need to submit to health department inspections like everyone else, but their mobile, nimble nature and lack of other regulations allows them to operate beyond the reach of their competition.

Conservatives might argue that the solution to the unequal regulation problem is simply to deregulate everything, abolishing taxes, fees, licenses, and inspections. This would be in keeping with conservative attitudes and policies, but arguably, the situation is more complicated.

Because deregulation isn’t just about business competition. It also has a significant dark side and it’s one that has to be addressed. Companies like Uber and Lyft largely evade responsibility for the actions of their drivers because they can throw them under the bus, which taxi companies cannot do. If a driver hits another car or kills someone or strikes a cyclist, that driver wasn’t ‘working’ for Uber. Uber was just the facilitating service, and thus wasn’t responsible. If a passenger is raped, assaulted, or robbed, that’s also not Uber’s responsibility; again, it doesn’t regulate or supervise drivers (claims that the company performs basckground checks don’t really stand up to scrutiny given that it’s allowed those with a history of violent felonies and other crimes to sign up for the service).

Regulation isn’t just about oppressing businesses and making it impossible for them to function in a world where they’re taxed to death. It’s also about protecting consumers. Without regulation, the ‘sharing economy’ operates in a strange void where companies can do as they please without any real oversight, and governments are powerless to stop them. Until this issue is resolved, the sharing economy isn’t just exploitative and unfairly advantaged: It’s also outright dangerous.

Image: Lyft San Antonio, Garrett Heath, Flickr