The sharing economy and its shifting definition

The most striking factor when discussing the ‘sharing economy' is the evolution of the term itself – largely in the direction of being used to signify a growing trend in market economy.

This has not always been the case. Even at the beginning of the 21st century when access to broadband Internet, smartphones and social media was robustly growing the activities of the sharing economy were associated more with ‘analogue’ practices, some of them with a well-established history.


Building local connections

The two most commonly known practices of building local connections were local currencies and time banking. Both have been presented as antidotes to a globalised, corporate economy as well as a way to revitalise local business and communities. While both of these may perform using digital platforms this was not their primary characteristic.

Historically the best known example of using local currency happened in Woerg, Austria. During the Great Depression of the 1930’s local authorities decided to suspend using the national currency and issued special bonds that could be spent in local shops and services. The money had a negative interest rate that encouraged their fast spending, stimulating the local economy and resulting in the decrease of unemployment levels.

Even though the experiment was terminated through the intervention of the Austrian government its model has been modified, replicated and used in various other places aroudn the world.

One of its most notable examples is the Bristol Pound which aimed at revitalising the local economy of the city of Bristol. It was issued in both paper and SMS form, and has a stiff 1:1 parity with the British Pound. Local authorities support its usage, offering clerks the possibility of earning the wage in the local currency. In the case of exchanging 100 thousand British Pounds for Bristol Pounds an additional 5% premium is offered.

Local currencies are often intertwined with time banking – a practice where people from local communities exchange services such as teaching a foreign language for mowing the lawn or baking a birthday cake.

They can be a distinct service as seen in Budapest where 240 people were using “talents” for exchanges or something connected with a currency. In the Austrian province of Voralberg 100 “talents” equal an hour of work or a service. Over 1,500 people, companies and social initiatives are involved in the project, enhancing its sustainability and ensuring a rich choice for the consumers, which allows for a steady circulation of value in the local economy.

As can be seen clearly, such concepts of a sharing economy differ from those promoted by companies such as Uber (operating since 2009) or Airbnb (2008). The activities mentioned above were not as much focused on gathering information via a digital platform as reinvigorating local economic activity. This contrasts with the current trends where global companies wrestle a share of local value for themselves.


New actors, new strategies

These differences between the basic sharing economy principles and the reality of apps, such as Uber, prompts some experts to refer to their activities as ‘sharewashing’. They accuse them of hijacking the principles of the sharing economy for their own commercial needs. They denounce the claim that their ‘market disruption’ is aimed at maximising choice for consumers. As Dirk Holemans, an expert in the field of commons and co-operative economy, writes in an article on sharing economy:

‘A free market runs smoothly when there is sufficient demand and supply, and when everyone has adequate information to take rational decisions. To achieve such a market equilibrium, government regulation is necessary, providing legislation to prevent secret price agreements and the formation of monopolies. Uber, however, wants neither the mechanism of the free market nor regulation by the government. It simply demands the freedom to broker a monopoly.

Compare this with a housing market where only one company in the world would know what sellers ask for their house and what potential buyers would be willing to offer. This is exactly how Uber operates: it is a broker functioning on the basis of a secret algorithm. Neither client nor driver are given any information on other clients or suppliers. The company’s goal is to replace an open market, regulated by the government, by a sealed-off Uber monopoly.

At the end of the day, Uber does not share at all: not sharing is what lies at the essence of their business model

This is not just bad for the free market, it no longer has anything in common with the sharing initiatives either, where citizens work transparently together to strive for a better society. At the end of the day, Uber does not share at all: not sharing is what lies at the essence of their business model, financed by Goldman Sachs’.

Yet this sharewashing trend seems to be on the rise. The ‘sharing economy’ brand is being taken over by projects such as global platforms like where people looking for freelance work from all over the world are in competition to be paid for graphic design or translations, resulting in a downword spiral where the bidder waits for workers offering the lowest payment possible for themselves.


Everything is everything

Different initiatives are being placed in the same baskets. Promoters of the new ‘sharing economy’ concept blur the lines between lending DIY tools, public bike-sharing schemes and Uber. They are indifferent to public policy choices and the results that the rise of platforms, such as Uber and Airbnb, have for mobility patterns or the affordability of local housing. By showing the virtues of car sharing they forget about the effect that car-hailing apps have in increasing the usage of private cars in local mobility systems.

Such a situation risks pursing regulatory policies that – while caring for workers and consumer rights – could suppress social innovation

Such a situation risks pursing regulatory policies that – while caring for workers and consumer rights – could suppress social innovation. It therefore requires a more nuanced approach from lawmakers, where a clear division would be made between the community-oriented ‘sharing economy’ and its for-profit branch.

The sharing economy – as German professor of Sustainability and Transformation Dynamics at the University of Witten/Herdecke, Reinhard Loske suggests – requires the openness of local, regional and central authorities for grassroots projects like community gardens, repair cafes, clothes exchange and local currencies. Training, priority parking and incentives to minimise food waste should be welcome moves in order to strengthen local economies.

For-profit initiatives should be regulated in a different manner, taking into account their wider societal impacts – Loske argues. If Airbnb results in an increasing scarcity of affordable housing then a maximum limit of days of letting private apartments could be introduced. The licence requirements for Uber drivers should be roughly the same as taxi drivers, and car sharing parking stations should be prioritised over free-floating projects.

– In Germany, energy cooperatives are good examples of collaborative economic models. Their members are co-owners of the means of energy production, being producers and consumers at the same time (so-called prosumers) – says Maria Skóra from the German Das Progressive Zentrum think-tank.  She shows us the ways that these models change our surroundings – for better and for worse.

– There are also examples of controlling or limiting the development of the sharing economy. A city court in Berlin issued a ban on short-term flat rentals as countermeasure to protect affordable housing the city. The ban on cooperating with unlicensed cab drivers also limited the operations of one of the taxi apps in a few German cities – she tells us about recent developments in Germany.

– What changes the most significantly along with expanding sharing/cooperative models is the management; flat networks and flexible working hours instead of rigid hierarchies. On the one hand, this development might blur the lines between work and private life or the use of private and corporate resources – adds Skóra.

– On the other hand, every cloud has a silver lining – alternative economic models allow for less resource use and more flexibility in time planning, which is vital to the environment and work-life balance. Nevertheless, certain regulations are needed not only to protect consumer and workers’ rights, but also to avoid unfair competition through tax evasion and social dumping – she concludes.


Reclaiming the narrative

The other long-term issue that requires work from varied social actors is reclaiming the original meaning of the sharing economy.

Commercial initiatives inspired by the view that using goods or services is a better alternative than ownership do not have to be viewed as something inherently ‘evil’ (especially when properly regulated). But equally they should not be put into the same bracket as initiatives of either public authorities (bike sharing) or grassroot initiatives aimed at strengthening social bonds and the local economy (time banking).

A clear distinction would be beneficial for the tech companies themselves, allowing them to avoid being tarnished with the ‘sharewashing’ label.

Researchers on the subject propose using different ways to more adequately describe this growing part of the market. A ‘platform economy’ shifts the focus from the ‘sharing’ aspect of such practices – often disputed – to new technologies and the way services are mediated and performed in the company-contractor-consumer triangle.

‘Plaform capitalism’ digs deeper as it binds these developments with changes in the global economy such as the growing flexibility of the labour markets, the rise of atypical forms of employment or the growing financial insecurity symbolised by the ranks of the working class. It allows us to analyse the likes of Uber or Airbnb in terms of trends in globalisation- changes in narratives about which disruptive business models constitute ‘modern’ entrepreneurship. theytheythey differ from previous ones.