‘Give me a one-handed economist!’, hail an Uber with the other?

Harry S. Truman uttered these words during his presidency while considering policy decisions that would ultimately be on the one hand positive, while on the other, negative. Seven decades later, policy-makers are faced with the same two-handed conundrum when trying to address the shifting economic landscape brought about by the so-called “On-Demand” economy.

Governments are sure to have their hands full trying to enact legislation that is both economically progressive and socially protective.

What is the On-Demand economy?

The Economist ran an article that talks about the emergence of the On-Demand economy and the momentum it has been gathering in recent years. The author places this trend into the larger context of the social contract in capitalist societies, pointing to the way in which these trends will reshuffle the very nature of workers, companies, and politicians.  Here is how:

The On-Demand economy can be attributed to two larger trends: technology and changing social habits. The former has been in motion since the 1970s with the advent of automated manufacturing and outsourced labor, the latter can be derived from the relationship between capital and labor – a distinctly Marxist concept that has been profoundly ubiquitous in the contemporary economy due to technological innovation. The article states:

But two powerful forces are speeding this up and pushing it into ever more parts of the economy. The first is technology. Cheap computing power means a lone thespian with an Apple Mac can create videos that rival those of Hollywood studios. Complex tasks, such as programming a computer or writing a legal brief, can now be divided into their component parts—and subcontracted to specialists around the world. The on-demand economy allows society to tap into its under-used resources: thus Uber gets people to rent their own cars, and InnoCentive lets them rent their spare brain capacity.

The other great force is changing social habits. Karl Marx said that the world would be divided into people who owned the means of production — the idle rich — and people who worked for them. In fact it is increasingly being divided between people who have money but no time and people who have time but no money. The on-demand economy provides a way for these two groups to trade with each other.

What all of this does is give greater leverage to consumers. However, while ordinary consumers are set to benefit from less expensive services — taxi fares and basic administrative services that can be spliced and subsequently outsourced — white-collar jobs like lawyers and accountants face real threats. In the process of becoming leaner, more efficient and productive problem solvers, businesses are looking to outsource their work to temporary vendors that can do the same quality work at a fraction of the cost.

On-Demand work is now capable of handling complex tasks, like writing legal briefs and handling budget data. In the next several years federal and state/provincial governments, not just in the United States but all over the world, will be looking for ways to protect existing industries that can now be outsourced while simultaneously nurturing an innovative environment for new On-Demand firms to enhance the purchasing power of ordinary consumers.

 

[The Economist]