Author: Estella Liu, Luna Chen

“Unveiling the Unseen Consequences of Modern Sharing”

“While some still laud the ‘sharing economy’ as a boon to our cities and our wallets, the term has come to represent a kind of wilful ignorance that recasts poverty as an opportunity for innovation for others” (North 2014, as cited in Mosaad et al., 2023). These words resonate deeply in an era dominated by for-profit sharing economy (SE) platforms like Airbnb and Uber. What began as a promising concept of utilizing idle resources for mutually beneficial economic exchanges has undergone a transformation that raises serious concerns.

As the SE landscape evolved, it gradually shifted away from its initial altruistic vision and started generating negative externalities for a myriad of stakeholders. This transformation is a subject of intense debate, drawing attention from scholars, policymakers, and concerned citizens alike. In this blog, we delve into the intricate web of issues surrounding the contemporary sharing economy, examining the repercussions of its divergence from its core principles.

Definition of sharing economy

The term “sharing economy” was coined in 2007 to describe an economic framework wherein individuals and organizations share resources and services with each other (John, 2016). The emergence of the internet and digital platforms has transformed the “sharing economy” (John, 2016). The advent of the internet has ushered in a transformative era, reshaping the fabric of society, and introducing new paradigms across various sectors.

Join us on a journey to explore the ‘dark side’ of the sharing economy, as we unravel the multifaceted consequences of the rise of for-profit SE platforms. From economic disparities and labor exploitation to the impact on local communities and the environment, we’ll delve into the challenges that have emerged, citing research by scholars such as Ertz, Leblanc-Proulx, and Hassan (2018, 2020 as cited in Mosaad et al., 2023). Through a critical lens, we aim to foster a deeper understanding of the complexities surrounding the SE, offering insights into the ways it has redefined prosperity for both its beneficiaries and those left behind.

In the midst of this ongoing debate, one question remains at the forefront: Can the sharing economy truly live up to its promise of creating a more equitable and sustainable future, or has it become a vehicle that perpetuates inequality and exploitation? Let’s embark on this exploration together to uncover the truth about the sharing economy and its impact on our society and economy.

“Uber: Disrupting Transportation or Exploiting Drivers?”

According to Schor (2016), platform technology not only reduces the transactional costs associated with sharing, but also establishes trust mechanisms in a variety of ways, thereby granting economic and social sustainability to the sharing economy model (Cui et al., 2020). The economic cost is reduced, but it is essential that these trust mechanisms be governed and regulated fairly, providing service providers and consumers with the means to defend their rights. On February 26, 2023, Uber drivers demonstrated in defence of their rights, highlighting the instance of James Jordan. Despite five years of devoted service, 27,000 completed journeys, and an app rating of 4.95, he confronted permanent deactivation due to anonymous complaints. This discriminatory process left him unable to provide for his family and significantly eroded the trust between Uber and its drivers, which could lead to a brain drain.

“Uber” by stockcatalog is licensed under CC BY 2.0.

“Obike: The Rise and Fall of a Dockless Bike-Sharing Phenomenon”

Another example of sharing economy‘s problem is Obike. Bicycle-sharing company, Obike, which was emerged in 2016, became very popular in Singapore (Zhou, 2018). However, by 2018, the challenges of bike sharing had escalated to a crisis level (A, 2018).  The problem of abandoned bikes had spread across the entire island, and authorities had to respond by issuing over 2,000 removal notices and impounding more than 340 bicycles (A, 2018).  The lack of effective regulation had allowed the situation to spiral out of control, with public spaces increasingly congested by these neglected bikes. It closed down in June, leaving bikes strewn throughout Singapore’s streets and over 100,000 upset users unable to claim back an estimated US$4.6 million in deposits (Zhou, 2018).

Obike’s exit had significant repercussions, extending beyond the cluttered streets of Singapore (Singapore’s Abandoned Bikes Show How Not to Regulate the Sharing Economy, 2018). The company initiated liquidation proceedings, leaving its users in a precarious financial situation as they were unable to recover the deposits they had paid to use the bikes (Singapore’s Abandoned Bikes Show How Not to Regulate the Sharing Economy, 2018). This episode underscored the financial instability that can be associated with sharing economy startups when they lack sustainable business models and adequate regulatory frameworks (Singapore’s Abandoned Bikes Show How Not to Regulate the Sharing Economy, 2018).  In total, Obike held an estimated SGD 6.3 million in unredeemed deposits, highlighting the potential financial risks for consumers when participating in such platforms (Singapore’s Abandoned Bikes Show How Not to Regulate the Sharing Economy, 2018).

“Batavus delivery bike” by Richard Masoner / Cyclelicious is licensed under CC BY-SA 2.0.

The rise and fall of bike sharing in Singapore, as evidenced by the case of Obike and its subsequent fallout, provide a stark reminder of the challenges that sharing economy models can face without proper oversight and management (Singapore’s Abandoned Bikes Show How Not to Regulate the Sharing Economy, 2018).  While these platforms promise convenience and innovation, they must be accompanied by effective regulations to mitigate negative externalities and ensure the well-being of consumers and the urban environment (Singapore’s Abandoned Bikes Show How Not to Regulate the Sharing Economy, 2018). This case serves as a cautionary tale for the sharing economy, emphasizing the need for a balanced approach that fosters innovation while safeguarding the interests of all stakeholders.

 “Airbnb: A Paradigm Shift in Travel Accommodation”

While digital platforms are offering convenience and economic opportunities, they can also pose challenges to societal well-being (Van, 2018). One of these challenges centers on the housing market, where platforms like Airbnb have disrupted the traditional real estate landscape. Airbnb allows individuals to share their homes with travelers, converting residential spaces into short-term accommodations. Van (2018) argues that the rise of platform societies has led to debates about the public value derived from digital platforms. Airbnb benefits from the short-term rental market without directly owning properties (Rearick, 2023). Additionally, compared to hotels, Airbnb does not need to pay local taxes, and does not have to comply with the city’s rules and regulations. The lack of regulations for sharing economy platforms has resulted in economic outcomes, where platform hosts and the platforms themselves reap unequal rewards.

“Airbnb Office” by Open Grid Scheduler / Grid Engine is marked with CC0 1.0.

On August 23^rd, 2023, The Austrian capital city of Vienna, introduced regulations that limiting the number of days a property can be rented on Airbnb (Stevens, 2023). Vienna’s response to the challenges posed by Airbnb reflects broader discussions about the need for regulatory interventions. By introducing limitations on short-term rentals, the city aims to preserve housing affordability and balance economic interests. This example underscores the complex dynamics of networked change. While digital platforms like Airbnb offer novel opportunities, they also bring forth challenges that require careful consideration and policy responses.

Navigating the Complexities of the Sharing Economy

In our exploration of the modern sharing economy, we’ve revealed a landscape filled with opportunities and challenges. Once celebrated as a catalyst for economic empowerment and resource optimization, the sharing economy has evolved into a complex arena where the lines between progress and exploitation blur.

Our examination of for-profit sharing economy giants like Airbnb and Uber has consistently highlighted one recurring theme: unintended consequences. The sharing economy’s departure from its original altruistic vision has birthed negative side effects, impacting a diverse range of stakeholders.

References

Cui, L., Hou, Y., Liu, Y., & Zhang, L. (2020). Text mining to explore the influencing factors of sharing economy driven digital platforms to promote social and economic development. Information Technology for Development, 27(4), 779–801. https://doi.org/10.1080/02681102.2020.1815636

John, N. A. (2016). Sharing Economics. In The Age of Sharing. Polity Press.     http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=4770940

Mosaad, M., Benoit, S., & Jayawardhena, C. (2023). The dark side of the sharing economy: A systematic literature review of externalities and their regulation. Journal of Business Research, 168, 114186. https://doi.org/10.1016/j.jbusres.2023.114186

Singapore’s abandoned bikes show how not to regulate the sharing economy.          (2018). Apolitical.  https://apolitical.co/solution-articles/en/singapores-abandoned-bikes-show-how-not-to-regulate-the-sharing-economy

Stevens, P. (2023, August 23). Vienna to tighten short-term rental rules next summer. Short Term Rentals. https://shorttermrentalz.com/news/vienna-tighter-rules-july-2024/

Zhou, N. (2018, June 25). Obike closes bike-sharing HQ raising customer fears for deposits. The Guardian. https://www.theguardian.com/lifeandstyle/2018/jun/25/bike-sharing-company-obike-to-immediately-cease-all-operations-in-singapore