7 March 2016

Why the sharing economy will flourish regardless of government regulations


Established market players attempt to block new entrants into the market. It is a scenario which has been played out time and time again throughout history, yet it does us all a disservice. It is happening today with the sharing economy, but to demonstrate how futile such resistance is, we need to look no further than the music industry.

In the 1960’s there was a concerted attempt to block pop music, first by not allowing it on the radio. This was initially couched in language, propagated by the existing market players, that pop music was subversive and dangerous. But in reality it was cold, hard economics. The BBC wanted to keep its own monopoly on music and the Musicians Union thought playing too much music would lead to the decline of live music.

Pirate radio stations, a great bastion of British creative and subversive spirit was also restricted by the state who perceived it as a threat to the government’s monopoly on broadcasting creative events. The 2009 film The Boat that Rocked by Richard Curtis tells this story in depth.

If this attitude had prevailed the Beatles may never have happened. The world would have never had the rich cultural diversity that pop music brought and the music industry would not have been one of the UK’s major export industries.

In reality, they could never have prevailed. When the majority of a nation’s youth are taken by an idea, the idea will eventually have its day. Holding it back only prolongs the pain for existing market players who do nothing to prepare themselves for the future.

It may seem ludicrous now to ban pop music, but the same debate is unfolding right now before our eyes in the guise of the sharing economy.

Instead, of the Musicians Union, today we have the various taxi unions and hotel associations around Europe, who fear the rise of new market players such as AirBnB, Home and Away and Uber.

Once again governments, who are fearful of change and who have long relationships with the existing market players, are doing their best to scupper the progress and creative innovation, economic benefits and freedom of consumer choice, that such innovations bring.

Cities around Europe are bringing in new restrictions on individuals renting out their homes for short term rents, forcing them to meet the same regulations, cost and bureaucracy as hotels. Sadly these cities are oblivious to the fact that this will discourage tourists from coming in the first place and mean that everyone in the city loses out.

Whilst last month Transport for London (TfL) was forced to backtrack on its ludicrous proposals to force people to wait outside for five minutes before the taxi could pick them up, London mayoral candidate Sadiq Kahn seems to think it is a good idea to alienate the vast majority of the electorate by pledging to clamp down on Uber, a service that has made taxi services affordable again for working Londoners.

This thinking is all about cold hard economics. Protect existing market players and ignore what the people want. Yet, freedom and pop music eventually won the day back in the 60’s, freedom and the sharing economy will eventually win this battle as well.

Modern technology means services like AirBnB and Uber are here to stay because millions of mainly young consumers across the world are utilising modern technology for a service which they view as more affordable and more convenient. They are the future.

In another throwback to the 60’s the existing market players are again arguing that the sharing economy is subversive and dangerous. The hotel sector for example argues that properties let by Airbnb do not have adequate risk assessments or meet necessary food hygiene standards. Apparently these properties are fine for people to live full time in, but not good enough for someone to stay for only one or two nights.

As consumers who use these products are demonstrating, regulatory bodies do not know best and can no longer decide on the behalf of the consumer what the rules should be. Consumers have a choice. If they wish to stay in a highly regulated environment, paying more for it, then they have the choice to do so.

The alternative choice is to book through a home-sharing site, which is ultimately regulated by customer reviews, people who have used the service and are in a position to provide honest feedback. Trust is vital in the online world and often provides a more rigorous protection than blunt government regulation.

Free choice is essential. The madness of the anti-sharing economy is clear if you consider the situation of staying around a relative or friend’s house. How many people would stop to ask for certificates or regulatory approval before staying the night?

In the The Boat That Rocked we saw how consumers ultimately won the battle, with the power and popularity of music simply being too popular for the government to continue supressing. We would be prudent to avoid that battle again. We know what the final result will be, so why waste time? Let’s embrace the sharing economy and be on the right side of history.

Daniel Dalton is a Member of the European Parliament.