Europe and the on-demand economy

Ever since the Great Depression of the 1930s, Europeans love to fight advances of Anglo-Saxon capitalism. So it was to no surprise that protests against the popular ride-sharing service Uber, culminating in ugly attacks on drivers and arrests of management in June, were generally met with sympathy all over the continent. To this date the service (or certain but vital aspects of it) had been banned in Belgium, France, Germany, the Netherlands and Spain. And with a whole lot of Uber-derived startups entering the fray, more trouble can be expected.

The idea behind this trend, is what The Economist calls the on-demand economy, an evolution of the euphemistical termed sharing economy. The central point is no longer about unutilised assets — like a car or an apartment — although it certainly does play a part. It is increasingly about freelance labour and how to organise it more efficiently.

European Horror

This sends shudders of horror down the spine of European intellectuals. Labour representatives put on their fighting gloves. They see this push as yet another try of neoliberal forces to circumvent the achievements of organised labour. In Germany this critique has condensed to the idea of Plattformkapitalismus. Companies no longer care about making products or indeed a profit, but focus instead on building a platform, where other people can make money. This allows these platforms to monopolise the market and subjugate all participants by sheer economic necessity. If everybody is there, you need to be there too. And if you are there, you need to compete with everybody — for projects or attention or fame.

In the eyes of most European thinkers competing individuals do not make up for a great society. In a hyper-competitive world people simply don’t have the time to care for others or the common good. This crowds out communal values, threatens social cohesion, weakens political process and generally leads to dissatisfaction and stress.

The ultimate nightmare of these critics is a world described by Tyler Cowen in his book Average is Over, in which smart people join forces with computers to unlock marvellous productivity gains, while the rest has to get by with stagnating income and free tidbits. Social capital, political participation, emotional fulfilment and even mental sanity are not part of the deal.

Daring Dreams

Proponents on the other hand see it — naturally — quite differently. For them the on-demand economy is not a devious ploy, but merely the next step of a logical progression. Everything started — of course — with the Industrial Revolution, a time when invention and specialisation liberated the masses from toiling on the field. All of a sudden, or so it seems, people could turn to other things than working for their own livelihood. This led to the creation of many large and mid-size companies. In the 19th century reduced transaction costs — through communication tools, global markets, logistics etc. — allowed these companies to grow to unprecedented scale, which created wealth for the whole society. This, however, required a continuous flow of high-skilled worker, which had a ground level of training — i.e. education — and could be trained further to perfection. It was during that time that the idea of a career was born. Lifetime employment was the goal of employer and employee.

Ever since the 1970s, however, manufacturing jobs have been automated or outsourced. Companies needed a more flexible workforce to stay ahead. Employees were encouraged to take skill development in their own hands. Changing ones employer every couple of years became the norm.

Today we live in a world of hyper-specialisation and rapidly changing markets. People need to be very skilled and very flexible, pursuing multiple career paths and entrepreneurial ventures. And millennials seem to like it very much, as this allows them to work on their own schedule, exploring their own unique way, which they seem to cherish — up to a certain point, at least — more than money. The on-demand economy exactly fits that bill.

So it comes to no surprise that some contractors working for Instacart, a three year old food delivery service from San Francisco, thought themselves of being „screwed“ when the company announced a switch to part-time employment. They like the flexibility of work less or hustle more.

European Chance

Europeans, in general, are not that entrepreneurial. And with a long — and proud — history of collective action and social welfare, Europeans are quick to see workers being marginalised and exploited. The arguably right impulse for the Industrial Age may, however, not be the right one for the future, especially considering European demographics. It is the only mayor economic zone that will shrink and age at the same time. This will lead to a huge labour gap, which has already shown its effects in some regions of the continent.

In addition to that, the world is increasingly being divided between people who have money but no time and people who have time but no money. This will make manual work and services provided by the on-demand economy more and more valuable. These two forces will give freelancers considerable bargaining power over the platforms. Regulation may not be necessary in some cases and can be applied moderately in others — for example if strong network effects “lock in” the platforms’ position.

The second reason for Europe to embrace the on-demand economy is immigration. Unstable regions in Africa and the Middle East — and in future possibly climate change — will lead more and more people to seek a new life in the North. Antiquated labour laws — which protect insiders but discriminate against outsiders — and relative closed cultures, however, prevent new arrivals from participation and integration. Europe should open its labour markets for these immigrants with the understanding that it needs more workers. The on-demand economy may be the best hope for that.

Technology will have a significant impact on how we work and live together in the years to come. At the moment we see the effects only on a very small scale. However, with the words of Clay Shirky, things have to become technological boring until the become socially relevant. Maybe we should start now to think about the social implications of technology. And maybe Europe should think the hardest.