The Sharing Economy deserves a fairer share!

… And Seven Criteria to Detect a Real Sharing Economy Initiative

Local and national governments are finally discussing and taking action to cope with new players in the market. This is long overdue, because too often policy makers are caught by surprise when it comes to innovative business models and technologies. The result? Missed opportunities, but also opportunistic abuse. The sharing economy has unfortunately become a victim of both. Let me start with the good news:

I am in favor for a customized tax regime for the sharing economy.

That’s the good news, because many countries (including Belgium) are going about it totally wrong. That angers and saddens me. I’m angry because too often the arrangements made, are fundamentally unjust. I’m sad because a beautiful concept as the ‘sharing economy’ — under loud cheers from a whole slew of politicians and economists — is completely eroded.

The sharing economy is fundamentally ecological

To start off, we need to reestablish some clarity, because the term “sharing economy” is being hijacked by new profit organizations. This blurs the debate and engaged citizens are the ones to pay the price. The sharing economy is fundamentally ecological. Born from a sustainable vision of the future it wants to realize a respectful treatment of our precious commons (i.e. commonplace such as resources, nature, knowledge, heritage …). Sharing — as an alternative to ‘having’ — symbolizes these underlying ambitions of this new branch of the economy.

Before we can declare an organization as a participant in the sharing economy, it needs to respect some clear criteria. These are certainly not conclusive or exhaustive, but they do give a good insight into the goals of an initiative.

Cooperative: Is there a real collaboration between the initiator and those who engage themselves in the project? This does not mean that the organization must by definition be a cooperative, but participants in the story do have to be able to make a real contribution to the direction and policies of the organization.

Transparent: How transparent is the organization? Transparency not applies to finances, but also data and decision-making. Is there an open data policy and there is clarity by whom and how decisions are made?

Sustainable: A legitimate concern in the sharing economy is sustainability. Does all this “sharing” automatically to a more sustainable society? It’s a must to analyze the impact an organization has on the commons and to ensure there are no unintended negative consequences.

Local: Does the organization strengthen the local economy, or does it extract value? With the global democratization of information the service industry is rapidly being globalized. One consequence of this is that more and more local value is flowing abroad. Does the organization counterbalance this trend by making the local economy more robust and cost effective?

Replicable: An organization within the sharing economy shouldn’t be striving for a monopoly position. A lot of people talk about scalability, but replicability is more important.That’s the reason why blue prints are often publicly available and is shared freely. The philosophy is behind this is simple: more experiments means more experience and a richer knowledge base. If a market monopoly is a necessity for success, the initiative is not part of the sharing economics.

Redistributive: What happens to the value created? An organization might not only create social value, but perhaps also financial income. The way these are distributed and/or reinvested is crucial.

Risk-sharing: In addition to benefits, there might also be costs. Who bears the risk? Are these the participants, the founders of the organization, its customers or are risks shared? Within the sharing economy, the risks are spread as much as possible so that no one is a real victim of any wrong outcome.

A sharing-organization is fundamentally different from a conventional profit-organization, yet it isn’t part of the public or nonprofit-sector either. Bicycle and car-sharing projects, sharing kitchens, repair- and creator hubs are just a few examples. Often they are small, local and decentralized. The initiator may vary. Sometimes governments take the lead and another time a local community, a driven entrepreneur or a collaboration of various partners. The border between organizer and participant/customer tends to fade as well. The one time you cook or repair something, other times you borrow something yourself.

I prefer to speak of participants in the sharing economy. This indicates that there is a need for a new vocabulary, because the various roles in the sharing economy are fundamentally different from the traditional employer/ employee/customer model. There really is a need for a legal and fiscal framework to give these organizations a chance of survival. At the moment organisations are often creative with regulations for volunteers, but it is clear that this participatory citizenship goes further. Quite often it also includes a real economic element for example. So there is a clear demand for a fiscal framework for committed entrepreneurs and citizens.

The battle for the term “sharing economy”

That sharing economy has clearly stumbled upon something valuable, because its mechanisms be are quickly being adopted in other branches of the economy as well. The result is that simultaneously new players emerge in the classic profit sector. Neoliberals and economists tend to apply the term ‘sharing economy’ to these organizations as well. Not because of their ecological values but because they have found a solution — through the use of sharing principles — to a classic economic challenge: validating ‘unused assets.

The names are quite familiar: Airbnb, Uber, … Companies that are data-driven, very disruptive and highly scalable. Led by young entrepreneurs and a global brand recognition they are for some the poster child of the company of the future. The way in which these organizations break with both the traditional 9–5-working schedule as the ‘employer/employee paradigm’ enjoys high praise in neoliberal circles.

You don’t have to be a genius to understand what is going on today. The term ‘sharing economy’ is used indiscriminately in the media, citizens and politicians. Most don’t do this intentionally. It isn’t easy to distinguish all the trends of one another, even though it’s clear that The Ubers and Airbnb’s obviously don’t meet the previously listed criteria. There is no transparency and they mainly extract value from the local economy. The risks are very unevenly distributed and growth is a must to achieve a market monopoly. They are profit businesses par excellence and yet they do have a legitimate interest to create confusion.

By also positioning themselves as pioneers in the new “Sharing Economy”, they blur the boundaries between ecological sharing economy and the traditional market. By doing this, they maneuver themselves in a legal gray zone and often manage to dodge national labor legislation. In addition, local actors undermine the market by moonlighting. These and above criticism is not new and policy makers are realizing that this is an untenable situation.

Need for new economic framework, or not?

Using the label “Sharing Economy” two types of companies are urging governments to take legislative action. One type is local, transparent and participatory. The other is closed and dominant multinational. Sadly to often it’s the second one’s plea that gets heard.

This saddens me because the local sharing economy often remains empty handed, while its legitimate demands were hijacked by others. It also angers me because illegal practices are rapidly regularized by favorable tax-regimes. In essence governments toss existing labor and tax frameworks trash by creating a new economic actor: the micro-entrepreneur. That’s a shame because while everyone is fixated on the financial income for the Uber-driver, the Menu-Next-Door-cook and Airbnb-manager, no one dwells on the social costs and competitive disadvantage for others.

Finally, this type of legislation also harms the image and chances of the authentic sharing economy. It makes it particularly difficult for local initiatives to gain a foothold as the market becomes dominated by international cheaters. And that is very unfortunate, because we’ll need engaged citizens and authorities with a heart for a sustainable neighborhood and city, to strengthen local economies in the future.

So wake up legislators, get to know the specifics and be an ally rather than a hindrance for sharing initiatives.