When one refers to the ‘sharing economy’, one invariably thinks of Airbnb. It is in effect the most prominent example of the sharing economy. The figures say it all: Airbnb offers 250,000 rooms in 30,000 cities in 192 countries. Clients choose their rooms and pay for everything online. However, their beds were provided by private individuals, rather than a hotel chain.
Airbnb has become such an important part of common parlance that even a small boutique hotel that accepts clients just on a bed and breakfast basis is referred to as Airbnb. Yet people do not just rent beds from each other, which is what Airbnb enables them to do, but also cars, boats, bicycles and other assets.
Let us, however, first take a step back. What is a sharing economy? The encyclopaedia definition is “a socio-economic ecosystem built around the sharing of human, physical and intellectual resources.It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations”. Some also refer to it as the peer economy or collaborative consumption.
Is it all that new? No, it isn’t. We have had various examples of the sharing economy over the decades and probably centuries, and in various parts of the world. The difference is that there were not the opportunities offered by technology today.
These ensured that the sharing economy took on a significant role, even though it is difficult to quantify its actual size. Transaction costs have been reduced, making sharing assets cheaper and easier to access than ever – and therefore possible on a much larger scale. Before the internet, renting a room from someone else was possible, but it was usually more trouble than it was worth.
Companies like Airbnb match up owners and renters. In addition, tablets and smartphones with GPS let people see where the nearest rentable room is, while social media provides a way to check up on people and build trust. Online payment systems do the rest to complete the transaction.
The economy is changing and either it does that with the consent of politics or does it outside politics
One can also mention the example of eBay and other similar sites. These have provided everyone with the opportunity to become a retailer and sell goods and services that would otherwise have been thrown away.
The growth of the sharing economy is starting to catch the attention of governments. Up to a certain extent the growth has been so spectacular that it has caught governments unaware, with the result that certain elements of it are totally unregulated. On the other hand, the vice president of the European Commission Jyrki Katainen said, in support of the sharing economy, that it was “an opportunity to increase productivity, increase the number of jobs, increase the quality of the services”.
In the European Union there are those that want to kill this concept as it is seen to threaten their position in the market. One example of this has been the reaction in most EU member states to Uber – the car sharing company. Taxi drivers are literally up in arms. The risk is that while in the United States and, even in China, the sharing economy continues to make big inroads, the EU is still seeking to make up its mind on how to tackle it.
Katainen was quoted saying: “If there are problems with new business models, let’s solve the problems instead of killing the whole business model.” A member of the European Parliament said: “We need a cool head and to be reasonable because the economy is changing and either it does that with the consent of politics or does it outside politics.”
From an economic perspective, the sharing economy provides opportunities for using assets to the full. It also provides easy access to a wide range of goods and services that are often of higher quality and more affordable than those provided by traditional business set-ups. It also enhances interdependence in an economy, while providing consumers with a greater freedom of choice. It provides more opportunities for solidarity among individuals and has been judged by many to be more environment friendly.
These elements all lead to a more efficient use of resources, thereby making the sharing economy a positive step forward.