10 March 2016

Why the sharing economy is a victory for popular capitalism


There is a political lesson to learn from today’s digital transformation: where socialism has failed, technology can succeed. Capitalism is indeed often charged with the steadily exclusive and increasingly concentrated ownership of the means of production. Nowadays, however, as the meme goes, the largest taxi company worldwide (Uber) owns no vehicles; the largest provider of accommodation (Airbnb) owns no real estate; the largest phone companies (Skype and Whatsapp) own no telecommunications or infrastructures; the most valuable retailer (Alibaba) has no inventory; and the fastest growing bank (SocietyOne) has no actual money. The assumed means of production of several industries, indeed, are spreading among people more than ever. Are we witnessing the end of capitalism as we know it and the beginning of a new economic era?

This is, for example, the main argument of Jeremy Rifkin’s The Zero Marginal Cost Society. According to Rifkin, two concurrent forces, unintentionally triggered by market economy, are leading to its own collapse: on the one hand, the never-ending pursuit of ways to boost productivity and lower prices, so as to lure consumers and maximize profit, is knocking down the “marginal cost” of production of goods and services; on the other hand, the growing interconnection of people – partially generated by that same pursuit, in the form of technology – is fostering the shared consumption of those goods and services, rather than their industrial-scale overproduction. Therefore, as marginal costs approach zero, the competitive paradigm cannot be fully appropriate for organising commercial life, for a simple reason: there is quite little to compete for.

The zero marginal cost revolution has quickly brought the music industry to its knees, made newspapers’ and magazines’ business model appear decades-older, weakened the publishing industry. In few words, it has literally removed from the logical underpinnings of market economy entire commercial sectors, their goods and services suddenly becoming more abundant and cheaper than ever.

Paul Mason, author of Postcapitalism: A Guide To Our Future, makes a similar argument, arguing that the end of capitalism will take place due to the creation of a more dynamic economic system which, after passing largely unnoticed at its beginning, will eventually replace it, bringing people closer to a new economic paradigm, founded on “sharing” rather than on exchange.

Sharing is a non-economic practice by its very definition: is takes place on a totally different ground than profit, usually composed of trust, fondness, habit, traditions. The existence and success of for-profit peer-to-peer platforms (like Blablacar or Airbnb) is emblematic of the fact that environmental concerns and willingness are certainly significant in order to make people “share”, but not enough in the absence of economic incentives; otherwise, non-profit platforms allowing people to share their rides and lodgings for free would replace the former in a little while, as the costs of maintenance would not be prohibitive.

Nor Airbnb neither Uber are charities. Maximising the utilization of otherwise idle assets is indubitably efficient and arguably consistent with a redistributive approach, besides being able to change consumer behaviours and lifestyle in a positive way; still, when market-mediated and for-profit, sharing is no longer sharing at all. Conversely, along with reducing transactions costs and favouring the meeting of demand and supply, that kind of sharing is the core of capitalism.

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”, Adam Smith said. Similarly, people sharing” their houses and cars are actually pursuing their own interest, but doing so they promote that of the entire society more effectually than when they are really interested to promote it. Technology has not enriched everyone, nor it has led to perfect equality; yet, it does seem to get us closer to a number of the goals that socialism has claimed to want. Which is wry, since the very nature of capitalism is blossoming within the rise of the sharing economy, releasing the potential to transform any person into an entrepreneur and any property into a source of profit, making altruistic behaviour to become business and everyone’s past “wastes” to become efficient and valuable resources. And, above all, making the internet the closest thing to Adam Smith’s “invisible hand” that mankind had ever experienced.

Giacomo Lev Mannheimer is a Fellow at the Istituto Bruno Leoni.