Labor’s new sharing economy principles should focus not on creating more legislation, but on how to deregulate our existing anti-exchange economy, writes Darcy Allen.
Recently, Labor introduced their six National Sharing Economy Principles: primary property is yours to share, supporting good wages and working conditions, paying fair share in taxation, proper protection for public safety, access for the disabled, and enforcement of the new rules.
While these principles form part of a ‘plan to build a more innovative and entrepreneurial Australia’, they say very little about how this will be achieved.
It’s one thing to embrace disruption. But it’s another to understand how to do it.
Indeed, Australia must embrace innovation and entrepreneurship. The Turnbull government nauseatingly pushed the need to embrace disruption, especially with Wyatt Roy’s hack-a-thon a few weekends ago.
But all Labor has provided is more rhetoric. How exactly these new rules should be formulated, or, further, how we should integrate these into our existing systems has been ignored. All we’ve received is a re-packaged problem of doing something, anything, about the burgeoning Uber and Airbnb.
The only real lesson here is that Labor wants to write more laws. More laws about labour markets, and disability, and wages, and taxation.
Taking this path will only be making the same mistake which got us into this mess in the first place – creating more rules that dictate how companies and individuals go about their activities.
Put simply, sharing economy platforms are a new way of organising the way we do things. These platforms make consumers and producers better off by cutting out the middle man.
Rather than exchanging through a big company, individuals can interact directly. This means lower costs, more adaptability, and often higher quality services.
But demand for the sharing economy is so strong not just because the sharing economy is good, but because our current regulations are so bad. Our bureaucratic anti-exchange regulations make many industries, such as taxis, prohibitively expensive, slow and inefficient.
Users of the sharing economy are not coerced into participating. Millions flock towards the sharing economy precisely because the government-regulated alternatives are lacklustre.
Ameliorating these problems is not simple. But we can be sure it will not be creating more new ‘sharing economy-specific’ regulation. Unfortunately this is precisely Labor’s plan.
To produce more regulations is to misdiagnose the fundamental problem.
The problem here is not the sharing economy. The problem is our complex and rigid regulatory environment. Such rigidity is not removed by adding more pages of legislation to the pile.
Any regulations defining what an industry looks like, or who can work in a particular occupation, becomes the enemy of economy growth.
Economies don’t grow by say, 4 per cent, because every company in the economy grows by that amount. They grow when new, often small, companies enter into markets, disrupting and destroying their competitors. Specific regulations only become the friction in this story.
Contrary to what Labor believes, we can’t have both a ‘flexible and responsive framework’ and a ‘sharing economy-specific’ rules. These two objectives are inherently in tension. The more specific the rules, the less flexible the framework.
Innovation occurs at the boundaries of industries, technologies and occupations. Creating more rules to regulate, say, Uber, only imposes rigidity when Uber 2.0 comes to our shores.
The most long-lasting solution will be to move away licensing more generally. In Victoria alone there are over 390 separate licenses, permits, approvals, certification and registration schemes.
Occupational licenses exist when the government sets a hurdle which determines whether or not you can work in a particular industry.
One prominent lesson from the sharing economy is the decentralisation of labour. This is an excellent thing – it means we are better placed as individuals to operate our own small businesses as independent contractors.
But many industries remain riddled with old and entrenched licenses which are simply too prescriptive for the average person to abide by.
The sharing economy is embracing bottom-up solutions to regulatory problems, rather than first seeking government control.
Rating and reputation systems, for instance, are an abundant and essential element of the sharing economy. These bottom-up solutions often solve our regulatory problems more effectively than the current top-down approach.
If the government is to embrace the sharing economy, it should turn attention towards embracing economic freedom.
We may well be on the cusp of an economic revolution. But Australian’s will only benefit if they are left to freely and easily engage in market exchange, without approval from government.
You may also be interested in the report I co-authored with Chris Berg, The sharing economy: how over-regulation could destroy an economic revolution, with the Institute of Public Affairs. The report was covered in The Australian here. You can also find my other sharing economy pieces on OECD Insights, The West Australian, and recently in the IPA Review.