Monday, June 20, 2016

The Sharing Economy and the Future of Capitalism

The Collaborative Commons, the Sharing Economy and the Future of Capitalism
By Mick Brooks

The commons associated with the traditional village economy are long gone. There is much talk nowadays of a new collaborative commons of ideas, provided by the Internet.

The Enclosure of the Commons
One of the fundamental processes of primitive accumulation in the creation of capitalism was the enclosure of the commons, the transformation of common land into private property. Unfettered private property right is the foundation of capitalism. Though not usually suited to growing crops, the rough ground surrounding the crop-growing area was a vital part of the medieval village economy.

The commons provided grazing land for their animals, were often the only source of fresh water and fish, gave a supply of firewood or turf as fuel and had many other uses. They were usually regarded as the common property of the villagers. The point about the pre-capitalist commons was that the villagers could not live without them. The rising capitalist class realised that enclosure of the commons would enforce the proletarianisation of the peasantry.

By the late nineteenth century in England, after much of the damage had been done, there was a movement to protect what was left of this common land. The remaining commons were to be preserved as recreational spaces.

Two conclusions follow: Capitalism and unfettered private property rights, as Karl Polanyi recognised in his book ‘The GreatTransformation’, were regarded as profoundly unnatural. They had to be enforced upon the population.

The existence of the commons was supported by the ideology of the ‘moral economy’ embodying the principle of solidarity, the common sense of the pre-capitalist era. This ideology was smashed after a long struggle.

Public Goods
How does neoclassical economics analyse the commons?  It regards capitalism and private property as natural and eternal. The traditional justification for private ownership of private goods is that they have been earned by the sweat of one person’s brow. This is never the case in twenty-first century capitalism. Use values are produced by collective labour, not just in the workplace but through the entire complex division of labour in modern society.

Neoclassical economics classifies the commons as a kind of public good. Official economics has to admit the acceptance of ‘public goods’, but only as a weird exception to the general rule of private goods. Public goods in their sense do not mean all goods provided by a public body, such as the National Health Service.

Samuelson, and others following him, define public goods under capitalism very narrowly. The usual examples they give are a lighthouse and national ‘defence’. The light from the lighthouse shines on those who pay and those who don’t. Likewise we all share the ‘benefits’ of national defence. These goods are therefore described as ‘non-excludable’.

They are also ‘non-rival’ in consumption. If I eat a chocolate bar, you can’t eat the same bar. It costs more to make more chocolate bars. This is not the case with important commodities. It costs no more to pass information to one person than to a million. So the whole world of ideas and information should naturally be a common treasury. Other examples of things with public goods characteristics are the streets around us and radio and TV programmes.

To sum up: in the case of a public good nobody can stop you using it, and in any case there’s no harm done since everyone can enjoy it without wearing it out or using it up.

Zero Marginal Cost
The most obnoxious area of neoclassical economics is called welfare economics. It claims to evaluate the well-being of economic activities. Its central principle is that price should be equal to marginal cost.  The argument is not that we have to pay for things because capitalists are greedy people determined to make money out of the rest of us. Heaven forbid! Providing a private good such as a bar of chocolate diverts resources from elsewhere. (As if all resources are fully utilised under capitalism!)

What is the marginal cost of lighting the way of another ship from a lighthouse? Nothing. If marginal cost is zero, then the price should be zero. So the light should be provided free. But this won’t happen under capitalism. Welfare economics is hoist with its own petard. It is intended to justify capitalism but shows that, for a whole range of commodities, capitalist provision doesn’t work at all or will not provide optimal quantities. That is why the official economists are anxious to banish public goods to a footnoted exception to the general rule.

Free Riders?
Garrett Hardin, in his article ‘The tragedy of the Commons’, viewed the commons as a public good. He did no research whatsoever and just applied the precepts of neoclassical economics, and Malthus in particular, to the issue. Since the commons were assumed to be free to all, he claimed there will be a ‘free rider’ problem. Too much of a free good will be consumed because people are greedy. The commons will be overstocked and overgrazed.

Harvey neatly inverts the question in his essay ‘The Future of the Commons’. If the cattle were owned in common it would not be in the interests of their communal owners to overgraze the commons. They would introduce an optimal number of beasts on to the commons. The real problem is private ownership of cattle.

In fact the commons were not open for every passer-by to use. Usually their use was regulated and access restricted, but Hardin ignored all this. Elinor Ostrom, who has won a Nobel Prize in economics studying the subject, emphasises that common resources, such as water in California, are not available to everyone, but only to a selected group such as farmers. They in turn collectively decide optimal use.

So ownership of the commons can be exclusionary as well as inclusive. The most grotesque example of this is St. George’s Hill in Surrey, part of which is a gated community affording luxury spas and golf courses, tennis clubs  etc, to the privileged residents within, while keeping hoi polloi firmly out.

The irony is that St. George’s Hill is the place where in 1649 Gerrard Winstanley, leader of the communist diggers, declared the earth to be “a common treasury for all its people.” Now it is a commons for rich people only!

There are many examples of commodities with public goods characteristics, commodities that will not easily be provided under capitalism. The air we breathe and the languages we create are public goods, totally ignored by neoclassical economics since nobody had found a way of making money out of them so far. Who would have thought, twenty years ago, that genetic materials such as DNA sequences could be claimed as private property and patented, as is the case with the EU Biotech Directive? Life in the city would be intolerable without open spaces such as parks. The countryside and views like that from the top of Ben Nevis are all public goods that can’t be taken away from us. (Though they’ll try and try.) Public education benefits us all, as we can all communicate with one another more effectively, as does infrastructure such as sanitation and public health facilities, paved roads and innumerable cultural assets.

We can allow, along with the economics textbook writers, that chocolate bars and underpants are pure private goods. The area of commodities with public goods characteristics is much wider than economists suppose. The NHS is not defined as a classic public good. People’s complaints and illnesses are dealt with individually, but after all it is not in our interests that our neighbours walk around infected with disease. We all share the benefits of a healthier society.

Unless a bus is choc-a-bloc it doesn’t cost the bus company a penny more to pick me up and take me where I want to go. So I should go free. That’s a classic argument for free urban public transport.
Even privately owned goods such as cars can have public good characteristics. Unless it’s full (and cars are seldom full) there is space for others. This is the case for the ‘sharing economy’. This has been known for a long time. Student noticeboards have advertised for decades that you can share a lift home for the weekend as long as you go halves on the petrol costs.

The different is that nowadays computerisation and the internet allows us to identify all the empty seats in cars and where they are going. Potentially this is an enormous benefit to humanity, but I will try to show that the ‘sharing economy’ under capitalism as manifested by the likes of Uber is a fraud.

Likewise houses are normally regarded as pure private goods. Airbnb was originally boosted as a way of using that spare bedroom to put up a visitor, another instance of the ‘sharing economy’. Where a commodity has public goods characteristics then there is the prospect of sharing.

Capitalists have been aware of the widespread nature of the public good characteristics of items they sell for centuries. They have found ways of limiting access to them and making money thereby. This, of course, is not in the wider social interest. Intellectual property rights such as patents and copyright are ways of limiting the free flow of ideas in the interests of profit.

In the case of radio broadcasts and TV programmes, one solution is for capitalist providers to sell advertising to pay for them. It is impossible to prevent listeners from buying cheap radios for £10. They still get to listen for free, but have to put up with the ads. Another solution to providing public goods is to accept that capitalists won’t provide them, and for the central government or local authority to supply them instead. This is the case for street lighting, the streets themselves and all the rest of the infrastructure without which capitalism couldn’t function. Public goods are pervasive because we all live in society and are all interdependent.

The New Collaborative Commons
The commons have been a subject of renewed interest among wider layers than just Marxists and economic and social historians. The reason for this is the emergence of the internet as a common resource. One instance of this renewed interest is ‘The Zero Marginal Cost Society’ by Jeremy Rifkin. Rifkin comes across as a technological determinist. A previous book by Rifkin proclaimed ‘The Third Industrial Revolution’.

Rifkin’s book ‘The Zero Marginal Cost Society’ is subtitled ‘The Internet of Things, the Collaborative Commons and the Eclipse of Capitalism.’ Rifkin has identified the internet as the potential site of an intellectual commons. The opening sentences read, “Capitalism is giving birth to a progeny. It is called the sharing economy on the Collaborative Commons.” The prospects for this new commons are provided by the onrush of technology. “The internet of things – is giving rise to a Third Industrial Revolution.” (p.13)

His thesis is as follows: “What is becoming increasingly clear is that the capitalist system that provided a compelling narrative of human nature and the overarching organizational framework for the day-to-day commercial, social and political life of society – spanning more than ten generations – has peaked and begun its slow decline.” (p.2)

Technology has produced the situation where, “The cost of producing each additional unit – if fixed costs are not counted becomes essentially zero, making the product nearly free. If that were to happen profit, the lifeblood of capitalism, would dry up.” (p.4)

He concludes, “It is these design features of the IoT” ((Internet of Things) “that bring the social commons out of the shadow, giving it a high-tech platform to become the economic paradigm of the twenty-first century.” (p.13)

In effect Rifkin is arguing that capitalism will be bypassed on account of new technology. Though insightful in some ways, his optimism is profoundly misplaced. How does this projection of the future connect with our concerns with the medieval commons?

A Sharing Economy?
In recent years the ‘sharing economy’ has become a buzzword. It has been pointed out that the average power drill is only used for 15 minutes. When you have to put up a set of shelves you really need one. The solution is surely to share rather than own. A genuine sharing economy has been going on for far longer than capitalism. It is a vital cement to our existence as social beings. People share childminding duties, garden produce and countless other things without thinking anything of it, even under the capitalist system.

Computerisation and the internet allow us to match those who need something with those who have resources going unused. What is different now is that to match ‘supply’ and ‘demand’ needs an electronic platform, and that gives the platform owner enormous power. Markets are supposed to emerge spontaneously in response to social need. The ‘sharing economy’ platforms such as Uber and Airbnb have been created and brought into existence artificially by big profit-seeking corporations.

These platforms are a form of intermediary. Other intermediaries include Google and Facebook. We regard these services as free to use, and indeed they have public good characteristics. How does Google make money? It makes billions in profits. It sells advertising. Its advertising is expertly targeted on us as individuals, because we give away quite intimate details of ourselves, our interests and our circumstances every time we search on Google. Nobody asked our permission as to whether it is OK to collect this information. In effect Google is spying on us via its algorithms.

In When Google Met Wikileaks’ an account of a meeting Julian Assange had with Google head, Eric Schmidt, Assange comments: “For Assange, the liberating power of the Internet is based on its freedom and statelessness. For Schmidt, emancipation is at one with US foreign policy objectives and is driven by connecting non western countries to western companies and markets. These differences embodied a tug-of-war over the Internet’s future that has only gathered force subsequently.” *

Julian Assange is quite right to point out that there is a tug-of-war going on for the soul of the internet, a struggle between the emancipatory possibilities of unlimited access to information and ideas and the power of sinister snooping that it gives to big corporations, allied, in the case of Google, to their co-operation with the US capitalist state.

The problem is not technology, which can give us the prospect of freedoms never dreamed of by Marx. The problem is capitalism which is desperate to enclose the intellectual commons against us. Apart from the big companies that try to monopolise our access to knowledge, we have another new enemy. These are the electronic platforms set up to establish ‘markets’ like Uber and Airbnb for the ‘sharing economy’. Studies have noted that there is a ‘winner-take-all’ effect as the successful first mover drives out rivals in one market area after another.

In effect these platforms act as landlords, monopolising access to their created market, and are therefore able to dictate terms to both the suppliers and their customers.  In the same way markets in the Middle Ages often developed on church lands, since Sunday was a day off for the peasantry after attending a church service. The church was therefore able to levy a charge on stall holders at these markets.

The Case of Uber

Uber shows us where the rhetoric about the ‘sharing economy’ really leads.  There are genuine advantages in the platform’s ability to match drivers with passengers. Traditionally cabbies have spent a lot of time hanging around or driving around waiting to be hailed. In New York Uber drivers’ idle time has shrunk from 36 to 20 minutes per hour.

That’s not the whole story. In the first place Uber has gained its global prominence by using blatantly unfair competition against existing taxi services. For instance London black cab drivers have to acquire ‘the knowledge’ over years, compendious information on the network of London streets. Uber drivers are deemed not to need that. Many city administrations require registered taxi services to provide facilities to transport disabled passengers. Uber makes no such provision.

“Uber has been accused of breaching regulations in France, Belgium, the Netherlands, Germany, Canada, Australia, New Zealand and Brazil. In the US Uber faced 50 federal lawsuits alone in 2015, in cases that tested the company’s liability for assaults by its drivers, ‘deceptive pricing’ and alleged discrimination against disabled people.” (Guardian, 27.04.16)

The article goes on to point out that Uber has a strategy of flooding the market of a city with drivers. Then the company starts to cut prices and squeezing its ‘agents’. Uber does so by stealth, for instance by upgrades to the app and changing fare and payment rates.

Despite the hippyish talk sometimes used to justify the ‘sharing economy’ Uber, and other platforms such as Airbnb, are hardnosed big business enterprises. They have been funded by liquid venture capital funds from California.

In conversation with potential investors Uber CEO Brent Callinicos boasted that Uber could raise rates taken from the drivers from 25% of the fare to 30%. He was asked, “You’ve got happy employees, you’ve got happy customers, you’ve got happy shareholders. The holy triumvirate are all really excited about your company. Why are you going to risk that and push the employees’ salary down 5%. Callinicos replied simply, “Because we can.”

This is quoted in ‘What’s Yours is Mine: against the Sharing Economy’ by Tom Slee. The title is a reply to ‘What’s Mine is Yours: the Rise of Collaborative Consumption’ by Botsman and Rogers.

Of course the Uber’s drivers are not actually employees.  Andrew Calloway continues the narrative of working in the sharing economy: “I was never an employee; I was a ‘partner’, or a ‘hero’ or  even a ‘ninja’, depending on the app. Sharing economy companies are just middlemen, connecting independent contractors to customers.” He concludes, “We still do have a boss. It just isn’t a person. It’s an algorithm.”  (Monitor, January/February 2016)

Uber spies on its drivers. Passengers are asked to rate their ride from one to five. The crucial number is 4.6. If a driver falls below that satisfaction rating Uber does not hesitate to boot them off the platform.

Casualisation of Labour
Under capitalism the sharing economy is a method of accelerating the casualisation of huge chunks of the workforce. Since the crash of 2008 in particular, millions of workers all over the world have lost what they thought were secure jobs. Many adults can drive and own a car; and they have become desperate to make a living. Uber takes advantage of that. If you’re an Uber ‘associate’ you don’t get sick pay, holiday pay, a pension or any income guarantee. It’s a life of complete insecurity.

Ursula Huws, Professor of Labour and Globalisation at Hertfordshire University, reports: “It is known by many different names: ‘gig economy’, ‘sharing economy’, ‘crowd working’, ‘platform capitalism’ and even ‘uberisation’. But one thing is clear: we are witnessing a phenomenal growth in new forms of work organised via online platforms.

Up to now there has been little accurate information about its extent in the UK but, according to the latest research into the scale of this far-reaching change to national work culture, around 11% of online adults aged 16-75, equivalent to up to five million people, are being paid for work through online platforms like Upwork, Uber and TaskRabbit.” (

This is the reality of the ‘sharing economy’ under capitalism. What it also shows, though, is that capitalism has become completely redundant. The economy is increasingly powered by the achievements of what Marx called ‘the general intellect’, more and more commodities that we need can be provided free, since the cost of providing extra ones are zero, and we can match people’s needs to our resources to provide a genuine sharing economy, a socialist society. Only capitalist ownership of the means of production, including the electronic platforms which allow them to control and super-exploit labour, stands in the way. 

*In an earleir version there was an typo in this paragraph. It has been changed to read correctly.

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