The Sharing Economy at the time of Piketty

TIME Magazine’s cover of this week is dedicated to the Sharing Economy. Within the magazine, the journalist Joel Stein analyzes the main key factors for the success of this new form of economy that is globally revolutionizing all the markets. In order to develop the Sharing Economy we needed eBay, PayPal and Amazon, which made it safe to do business on the web. We needed Apple and Google to provide GPS and Internet-enabled phones that make us always reachable. We needed Facebook which made people more likely to know each other. And we needed the Great Recession that made us wonder what we really need and how to get value from what we own. In this perspective, we can start from the Great Recession to briefly analyze the Sharing Economy from a capitalist point of view.
In the book «Capital in the Twenty-First Century,», French economist Thomas Piketty analyzes the evolution of inequality in order to show how capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based. And that happened during the French Revolution as well as nowadays, with a peak growth (still rising) starting from the eighties. According to these data, Piketty comes up with two conclusions:
A) The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms.
B) The dynamics of wealth distribution reveal powerful mechanisms pushing alternately toward convergence and divergence. Furthermore, there is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently.
According to the first conclusion, Piketty, identifies one political force that pushes toward convergence, (that is then toward reduction and compression of inequalities): the diffusion of knowledge and investment in training and skills. And two forces of divergence: 1) Top earners can quickly separate themselves from the rest by a wide margin. 2) The process of accumulation and concentration of wealth when growth is weak and the return on capital is high. From which the formula behind all the work of Piketty r > g (where r stands for the average annual rate of return on capital, including profits, dividends, interest, rents, and other income from capital, expressed as a percentage of its total value, and g stands for the rate of growth of the economy, that is, the annual increase in income or output).
Starting from The Principle of Infinite Accumulation of Marx, for whom in a world where capital was primarily industrial (machinery, plants, etc.) rather than land property, in principle there is no limit to the amount of capital that could be accumulated (just like financial capitalism nowadays…), the French economist concludes that if the rates of population and productivity growth are relatively low, then accumulated wealth naturally takes on considerable importance, especially if it grows to extreme proportions and becomes socially destabilizing. In other words, when the rate of growth of the economy (g) stagnates, the rate of return (r) on capital (gained or, more often, inherited) is higher. That means that low growth cannot adequately counterbalance the Marxist principle of infinite accumulation. With the result that the rich get richer and the poor get poorer.
As a socio-economic system built around the sharing of resources, the Sharing Economy seems to be very much in line with Piketty’s theories. In the Sharing Economy model, sharing can be based on a barter or, as often happens, on a compensation in money. The most famous cases are obviously Airbnb, Blablacar, Uber, LYFT and all those platforms where you can share any assett, be it tangible (house, bicycle, car etc etc) or intangible (time, skills, knowledge etc etc). In this prospective, the Sharing Economy is the last frontier of capitalism because it turns any property into a potential profit and every person into a potential entrepreneur, taking The Principle of Infinite Accumulation of Marx to a new frontier where the accumulation no longer concerns only the object (be it a house or a car…) but also its capital value (the rent of the house and then the return on investment originated from it). And that leads to the conclusion that, among Piketty’s forces of divergence, we might also include all those assets that now can generate new forms of revenue thanks to the Sharing Economy.
Summing up, I do not want to point the finger at the Sharing Economy, which I consider one of the most interesting and innovative business models in the last decades, (and that’s why I travel with Airbnb, I use carsharing and bikesharing and so on), but I think that it’s important to take the Sharing Economy for what it really is: a new frontier of capitalism that might turn any object from a cost into a profit and not a socialist ideology that promotes the sharing of goods and the philanthropic collaboration between people.