Governments Finally Embrace the Sharing Economy

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Why you should care

For years, governments viewed the sharing economy with suspicion. Now, they’re adopting it as a solution to society’s future challenges. 

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On a predecided day in August, tens of thousands of Uber drivers across Australia refused to pick up passengers, protesting the company’s wage regulations, which don’t account for traffic snarls and waiting times. But in the city of Boroondara, in Melbourne’s eastern suburbs, there was a much less contentious example of the sharing economy playing out — fully supported by the local government. The affluent, elderly town, which has Australia’s largest number of single-occupancy dwellings, was opening its doors for home- and food-sharing projects, in the hope of fighting loneliness by attracting cash-strapped Melbourne millennials.

This was a reversal of roles — a government facilitating the sharing economy even as a firm synonymous with it was struggling. For years, governments around the world have mostly viewed the disruptive nature of the sharing economy with skepticism. Some cities have banned ride-sharing apps. Others have tried to regulate or discourage home-sharing platforms. Now, that’s changing. More and more governments at the city, state and national levels are dumping their initial reticence and embracing the sharing economy, reshaping what this experience and the affected industries could look like in the coming years.

The first city to comprehensively adopt the sharing economy was Seoul, South Korea’s capital. In 2012, mayor Park Won-soon launched the Sharing City Seoul project, directing the Seoul Metropolitan Government to provide administrative support, consulting, promotions and financial aid to his city’s nascent sharing economy. Incubators came up. The number of sharing businesses and organizations nearly doubled from 37 in 2013 to 70 in 2016, with the help of more than $6 million in subsidies. They’re not always reinventing the wheel, just building them smarter than before. Playplanet, for instance, takes the already disrupted home-rental space and disrupts it further. A green Airbnb of sorts, it connects travelers with eco-friendly hosts. Others are catching on.

The [Seoul] local government is playing a really crucial role [in fostering the sharing economy].

Monica Bernardi, University of Milano-Bicocca.

In 2016, the U.K. enacted a sharing economy tax allowance and Rent a Room tax relief after commissioning a review of barriers to the market a couple of years earlier. Eight federal Chinese departments in July 2017 announced plans to liberalize regulations on the sharing economy, saying in a statement that “we should avoid using the old method to regulate a new format of business.” China has set up a government-backed commission to explore growth opportunities for the sector. San Francisco in 2014 created an urban agriculture incentive zone that provides tax breaks for city farmers pursuing some community farming. Sweden in August 2017 launched its Sharing Cities project to turn the cities of Stockholm, Gothenburg, Malmö and Umeå into laboratories for innovation in the sharing economy. Gothenburg and Malmö have opened up city assets, like buildings, to the public, and are supporting bike kitchens and providing tool shops.

For some, like Gothenburg and Malmö, the adoption of the sharing economy is aimed at lowering the environmental impacts of consumption and fostering socialization, especially as the cities take in a growing number of refugees. Others, like China, have seen the economic potential of this industry, predicted to contribute 20 percent of the country’s GDP by 2025, according to its state council. And for others, like Boroondara in Australia, it’s a way for an aged community to survive, by taking up something often associated with millennials.

“It’s the older residents who are the big supporters of sharing in that community,” says Darren Sharp, director of consulting firm Social Surplus, who helped to promote the program in the city of Boroondara.

In some ways, the softening of governments to the sharing economy isn’t surprising. As the sharing economy grows, the digital platforms used to connect people may soon be viewed by users more as public infrastructure they don’t expect to pay for, says Karin Bradley, a professor at the Royal Institute of Technology in Stockholm. Governments can’t afford to ignore infrastructure used by millions of people.

But for many years, governments almost instinctively appeared to treat the sharing economy with suspicion. Amsterdam in 2013 and New York in 2016 imposed tough regulations on Airbnb. Uber was temporarily barred in New Delhi in 2014 and in London in 2017 over safety concerns. Bulgaria and Hungary banned Uber in 2015, and Turkey in 2017. In the U.S., Illinois and Georgia bar its government employees from using Airbnb while on official travel.

Some of these restrictions have remained in place, while others have lifted bans. In many cases, governments introduced bans in response to pressure groups and taxi unions disadvantaged by the disruption brought by the sharing economy. And the sharing economy can come with drawbacks. Some of China’s bike-sharing companies, for instance, regularly collect and sell users’ data to the highest bidder. Bad sharers — say a commuter who doesn’t return his bike — might even get a ding on some future social credit score.

Still, there’s growing acknowledgment among governments that it makes more sense to join — and where possible mold — the sharing economy instead of fighting it. One strategy that many are adopting is to support their own “homegrown sharing ecosystem,” to maintain some control, and to keep the benefits local. Locally devised tools can also better target specific needs.

In Gothenburg, a publicly run website hosts a “Smart Map” to show free areas of exchange around the city, “promoting access rather than ownership.” This has helped asylum-seekers in the country, says Bradley. “These open spaces and noncommercial spaces are very beneficial for newly arrived people and also for people with little economic resources,” she says.

Seoul’s near-obsessive emphasis on taking input from its residents defines its approach. There’s even a giant ear sculpture outside of Seoul’s City Hall, where citizens can whisper complaints. The city’s sharing ecosystem includes Kozaza, a shared housing company with a focus on travelers staying at traditional Korean hanok homes, a car-sharing company called SOCAR and a children’s clothing swap, Kiple, among dozens more. Even though it is a state-run program, it has a “bottom-up approach,” says Monica Bernardi, an urban sociologist at the University of Milano-Bicocca, who has studied Seoul’s sharing economy. “The local government is playing a really crucial role,” she says. “It’s not just for the economic development that they are doing all these things, but for helping people to reconnect to each other.” Looking ahead, she expects Seoul to double down on those initiatives that focus on social benefits.

And China, with its otherwise restrictive government, is fast emerging as a global leader in the sharing economy. It saw $500 billion worth of transactions by around 600 million people in 2016. China has more than 40 bike-sharing companies, with the two largest — Mobike and Ofo — providing more than 50 million rides a day.

For these governments, the sharing economy is no longer a beast to control. It’s increasingly their go-to fix to find solutions to society’s challenges.

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