Regulation in the sharing economy

When it comes to the sharing economy, folks should be allowed to do their own thing

May 2, 2016
by Michael Hlinka

From the April 2016 print edition.

I consider myself a child of the 1960s. I was born in 1958 into a household that most would characterize as being extremely conservative. My father owned his own small business. He was a hard worker and diligent saver. My mother stayed at home until my older sister and I were both in high school. (Back in those days, at least in my neighbourhood, it was common practice for public school children to go home for lunch.) There wasn’t anything in my upbringing that could have been considered the least bit radical, or anti-authoritarian.

That being said, everyone in North America was impacted by the hippie phenomenon. Its ethos was “do your own thing”, that is, as long as you weren’t hurting anyone else while you were doing whatever it was that was your thing. The movement was in part inspired by opposition to the Vietnam War. Kids didn’t want to be told by elders to fight a war they didn’t believe in. And it was also a protest against the perceived materialism and shallowness of that era. Hippies believed in living off the land and consuming only as much as was necessary to live. Communes sprang up across this continent and sharing was considered a virtue, because it meant that instead of (for example) each household having its own automobile, one could serve three.

All of these memories flooded back to me several days ago when I read a report generated by MaRS. It’s difficult to pigeonhole exactly what MaRS does, but it provides a forum for entrepreneurs to meet with other key stakeholders and perhaps partners: Politicians, investors and mentors are just a few parties that come to mind. The MaRS building is in downtown Toronto, located just off the University of Toronto campus and just steps away from Ontario’s parliament building. And the MaRS report was discussing regulation in the sharing economy.

What exactly is the sharing economy? I went to a blog called The People Who Share to get the skivvy. According to them, the name sort of gives it away. The sharing economy is nothing more and not less than people co-operatively coming together and sharing resources, in order that they are used more efficiently. It’s an interesting development. Part of the ideology is Hippie-inspired. But there’s also a much more pragmatic, bottom-line realization that in an economy where growth is slowing, it makes hard-core business sense to use resources as productively as possible.

One of the outputs of the sharing economy is the transportation service Uber. There is a clear divide about how it’s seen by politicians and the public. Politicians hate it. The city council in my hometown, Toronto, is doing everything it can to put it out of business. People, on the other hand, love it, voting with their wallets and cellphones to direct business to it and away from the traditional taxi and limousine services that are both heavily regulated and highly taxed (in the form of required licenses). And this is the reason the political classes despise Uber: they can’t expropriate value from it.

Another example of the sharing economy is crowd funding. This is a means for ordinary people to invest in a variety of start-up companies. Its promise is that it has never been more possible for small enterprises to get the money they need. At the same time, the options for individuals are unprecedented. But standing in its way are establishment forces—vested interests that in the guise of “protecting the public” are shackling entrepreneurs and investors both. Is it possible that some fraudsters might use crowd funding? Of course—but shouldn’t adults be responsible for making adult decisions with their money?

The greatest impediment to the sharing economy and a flourishing of economic activity is government, which by its nature is a profoundly reactionary force, always backward looking. Business on the other hand, is profoundly progressive. Years ago, Joseph Schumpter talked about the “creative destruction” of capitalism. Uber only became possible because of cellphone technology that allowed customers and providers to link seamlessly. Crowd funding thrives with the Internet and social media, where community isn’t as much about geography as it is about shared values.

Yes, Uber’s development is at the expense of the traditional taxi industry. Yes, crowd funding means the traditional financiers become increasingly irrelevant. But it’s because these two traditional businesses don’t create the value that they expropriate. And for that reason, they turn to political forces to frustrate the market and what people would like to do freely. But the sharing economy is the future—and the sooner the mullahs and apparatchiks do the honourable thing, which is to recognize their personal irrelevance and do something useful (like maybe drive an Uber), the better it will be for everyone else.

Folks should be allowed to do their own thing!

Toronto-based  Michael Hlinka provides  business commentary  to CBC Radio One and  a column syndicated across the CBC network.