The 'Sharing Economy': Throwback to the Depression?

Wednesday, 01 Jan 2014 08:52 PM

By Michael Kling

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Welcome to the "sharing economy," where you get to become a "micro-entrepreneur" by cleaning other people's houses and renting your spare bedroom to complete strangers, all thanks to the Internet.

New York Times columnist Thomas L. Friedman and others have praised the benefits of this new dynamic, describing how people make money by using websites to rent out their spare bedrooms, share personal belongings, and offer cleaning services and car rides.

But Steven Strauss, an adjunct lecturer at the Harvard Kennedy School, is far from impressed by the brave new world. In an article for The Huffington Post, he writes that the new micro-entrepreneurs are like real entrepreneurs except that they have no regular salaries, paid vacations, employer-provided health insurance, or a chance to get rich.

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However, a new underclass — the unemployed and those lacking high school or college diplomas who earn much less than college-educated workers — is well-suited to become micro-entrepreneurs, he says.

Strauss asserts that these micro-entrepreneurs are motivated by the need for money rather than any New Age philosophical commitment to "lightweight (asset-free) living." In much the same way that the poor earned cash by doing odd jobs during the Great Depression, these micro-entrepreneurs use such sharing websites out of economic desperation, he says. Citing figures from Pew Research, he notes that income inequality is greater than it's been since the 1928, when the top 1 percent had 23.9 percent of all pretax income and the bottom 90 percent had 50.7 percent.

A prime example of a sharing-economy website is Airbnb.com, which rents out spare bedrooms. "It rents these rooms to complete strangers, who in turn get to stay with complete strangers," Strauss writes. "What a delightful and desirable use of one's home!"

"I suspect Mr. Friedman, who makes $40,000/speech, isn't an active and regular user of Airbnb," Strauss writes. "He's not likely to want to stay with random strangers when he travels, nor have random strangers stay at his home."

Strauss says he's not criticizing the websites offering sharing websites. They've lowered search and transactions costs and improved service by offering ratings. "But let's not delude ourselves about some of the underlying economic forces driving this trend."

Whatever your feelings about the sharing economy, the trend seems likely to accelerate in 2014, according to Silicon Beat, the tech blog. Airbnb has expanded into a new 72,000-square-foot office, and California has legalized ride-sharing services, which should permit ride-sharing outfits to blossom.

The Internet is allowing almost everything to be rented through our peers, but the new economy will create complications for regulators, insurance companies and tax laws, Silicon Beat predicts.

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