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Taxi and Uber's black car service drivers protest the ride-hailing services Uber X and Lyft Wednesday, Dec. 16, 2015, in Philadelphia. The drivers are protesting that Uber and Lyft are operating without legal approval in the city. Uber says it understands drivers’ frustration but blames regulation by the Philadelphia Parking Authority and says riders are looking for an alternative. (AP Photo/Matt Rourke)
Taxi and Uber's black car service drivers protest the ride-hailing services Uber X and Lyft in Philadelphia on Dec. 16, 2015. Matt Rourke—AP

How the Gig Economy Could Save Capitalism

Jun 15, 2016

forooharbookForoohar is an assistant managing editor at TIME and the magazine’s economics columnist. She's the author of Makers and Takers: The Rise of Finance and the Fall of American Business.

I’ve spent much of the last three years looking at how our current system of market capitalism isn’t working. But recently I’ve begun thinking more about what is working — or at least, what might have the potential to work better. In particular, I'm curious about how the platform technologies of the “sharing economy” might offer the possibility of empowering labor in a new way, creating a more inclusive and sustainable capitalism.

Until recently, I had been fairly skeptical about this possibility. It seemed to me that, so far, the sharing economy as exemplified by firms like Uber or TaskRabbit has put more power in fewer hands by creating what British economist Adair Turner has described as a “feudal agricultural hiring fair in which the lord shows up and says, ‘I’ll take you, and you, and you today.'"

But there is, of course, another side to things. Sites like Airbnb allow people to increase their income streams by monetizing existing resources. There are also a burgeoning number of digital cooperatives, like Swift, the Uber copycat owned and run by drivers themselves, that allow workers to have an ownership stake in new digital firms. That’s where things start to get very interesting.

There is a growing debate in some technology and economic circles about whether digital services could, in fact, lead to a post-Marxian future in which labor begins to gain power, rather than lose it, by becoming the owner of capital. British thinker Paul Mason’s work, “Postcapitalism,” is a must-read on this topic, as is Douglas Rushkoff’s “Throwing Rocks at the Google Bus.” I’m also looking very much forward to Larry Summers and Chrystia Freeland’s upcoming collaboration, “The Post-Widget Society: Economic Possibilities for Our Children,” which is out next April. I don’t know what their take will be, but the title alone, a reference to John Maynard Keynes' famous speech, is intriguing.

In the meantime, I’m reading NYU Stern School professor Arun Sundararajan’s new contribution to the debate, entitled “The Sharing Economy.” Like Mason and Rushkoff, he argues that the current system of shareholder capitalism may be at its end, given that it has the tendency of enriching the few rather than the many, something I also argue in my new book. It’s crucial that the next iteration of capitalism increase the labor share of the pie, which has been shrinking since the 1950s, in order to provide more stable economic growth (flat wages in a 70% consumer economy eventually means zero growth). What’s interesting is that, as both Sundararajan and Rushkoff point out, platform capitalism isn’t really new. It’s just a high-tech version of the pre-industrial marketplaces of old, in which individual merchants sold their wares directly to buyers in a public square. As “The Sharing Economy” notes, as late as the turn of the 20th century, almost half of the compensated U.S. workforce was self-employed. It was only with the rise of large corporations that the paradigm shifted.

“The shift back to crowd-based capitalism will be fundamentally empowering for labor,” argues Sundararajan, “because it moves the current system from big employer/employee relationships, to a smaller, more entrepreneurial system.”

This comes with opportunities and challenges. We're seeing the latter already, in the form of a breakdown of the corporate social compact, the many individuals in the gig economy without benefits (see Elizabeth Warren’s recent call to action on this), and just in time, technology that can wreak havoc with people’s schedules and lives.

But the opportunities, if exploited correctly, could be profound. Indeed, they could give rise to a new kind of labor movement, desperately needed in this country. “If the sharing economy can move individuals from being labor providers to having some form of ownership,” says Sundararajan, then we might see more labor mobility — as well as individuals that are less tied to a single institution, and thus have greater negotiating power. This is crucial. The decline of labor's share of economic growth relative to the corporate sector is the key reason we’re in the longest, weakest recovery of the post-World War II era.

Of course, this shift will require the state to play a role. Portable benefits, an idea supported by many tech titans, would help provide a basic safety net for workers. Labor laws, which are geared towards an imbalance between individuals and large institutions, will need to be rethought, as will regulatory systems (already, there have been difficult legal liability conundrums when things go wrong in, say, an Airbnb, relative to a hotel). But making sure we get the rules of crowd-based capitalism right is a huge priority. A more collaborative, community-based form of capitalism could change not only our economy, but our polarized politics.

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