As the great American baseball player Yogi Berra once said, “When you come to a fork in the road, take it!” We are now in one place in the digital economy of the 21st century. Liberal democracies everywhere are playing a game of regulatory beating with platform monopolies, trying to impose new rules on privacy, taxation, and antitrust.
All the time, value intangible assets Like technology, software and patents are expanding as the workforce declines. Covid-19 has only accelerated this trend. Markets are supposed to enrich society. But in an age of surveillance capitalism, they are diluting it by concentrating all profits in the hands of the very few people who can tune in to most of the data and intellectual property.
OECD countries should definitely move forward with things like a global corporate tax minimum, antitrust measures, and a digital trade framework. But at the same time, we need to rebalance the market system itself, so that players on both sides of any given transaction have equal access to information, a common understanding of what is being bought and sold and a common set of rules. This is true for buyers and sellers on Amazon, drivers and riders on Uber, and advertisers and sites they want to access via Google.
Now, we don’t have any of that. For example, Uber can charge you and me different prices for a consultation, even if the drivers themselves are unable to make use of their data in ways that might be useful to them. This is very infamous about the rise of an intangible network-based economy. It leads to an asymmetry of power that offsets the usual benefits of capitalism.
This is not new. Every time there was a new transformative technology, from railroads to telephony, we saw a growth in the concentration of economic power.
That’s why I’m starting to think the quickest and most transformative measure is for politicians to do what they did in previous turbulence. Instead of dealing with individual companies one by one, they must simply establish new ground rules for how the markets operate.
Think of the “unbridled” banking era from 1816-63, during which individual financial institutions in the United States issued their own currency. In the end, the US government got everyone to deal in dollars. The public sector also specified which side of the road people should drive on when expanding highways, how reservoirs would be coordinated to provide clean water, etc.
Now consider sharing the ride today. Uber has its own set of standards, fees, and policies, as does Lyft, and any number of smaller providers (and that’s just getting involved—every area of temporary business is the same).
Consumers are largely subject to individual pricing, and workers do not have the ability to raise their own value by offering their work in real time to different employers via the same platform.
But imagine if the government simply set the rules for platform “privileges” in areas such as ride-sharing, bike rental, home-sharing – or any kind of temporary work – and then let the private sector compete on an equal playing field in an effort to run some of them.
You may have several private sector companies operating at the national level. Cisco, Microsoft, Google, or Amazon could compete to power the technology backbone of such a system. But retailers, city governments, or even local entrepreneurs can be the in-store suppliers. Everyone has access to the same data and algorithms, eliminating information asymmetries that conflict with truly efficient and fair markets. It’s Adam Smith 101.
Aspects of this idea have been pushed by many technologists and policy makers for some time. But the best way to put it is lately is British political entrepreneur Wingham Rowan, head of the nonprofit group Modern Markets for All, who wants to turn his temporary jobs business into a public utility. His goal is that instead of making individual companies max their profits in silos, the public sector can simply lay the groundwork for self-employment – how it should work, how much companies should pay – and then let the private sector do its work.
Modern Markets for All’s ideas, which won the US Conference of Mayors Award for Best Economic Development Initiative in 2018, got an important test during the pandemic, when the city of Long Beach, California, used them to deal with an employment mismatch. Suddenly, there were too many home health care workers and not enough baby sitters.
The city was able to bring 10 different companies to virtual gig work platform To help close the gap, while raising wages in the process. Minimum wage for childcare, for example, was about $22 an hour during the crisis, compared to the national average of $12.24.
Hours of work were tracked to ensure that employers paid people who were working full time as appropriate employees. The data on the platform was portable, meaning workers could share it with any employer they liked.
City officials hope to expand the nascent effort and also move into other areas such as construction and hospitality, overturning the idea of teamwork as a race to the bottom. We need more of these markets wherever there is an asymmetry of power in the digital world. This is a very big yard.