Author: Laura Porak
Review: Katarzyna Gruszka
This is an essay of the writing workshop Socio-Ecological Economics, published on 9 February 2019
Digitalisation no longer seems “a choice but a necessity for European businesses and economies as a whole” (DSMMR) to compete on the international market. This affects not only the production of goods and services and the labour market, but also social relations and not at least the environment: Following a technological determinism where, because of recent technological developments no other way of shaping the economic relations seems possible (Flecker 2018: 6), economic relations will follow a prescribed path. Neglecting the ability to change the economic system, the creation of a new “digital single market” with platforms as key component, seems necessary to adapt to these changes (COM 2016: 15) following the imperative of international competitiveness. Platforms are a new type of business model providing infrastructure and intermediation between groups, mostly consumers and producers (Srnicek 2017: 255) enabling the so-called “sharing economy”.
Linguistically, “sharing” is connected with altruism, pro-social and democratic associations. In this tradition, early examples provided services that were not exclusively transactional (Cockayne 2016: 9). Along with this attitude, a certain normative sentimentality arises, promising more “authentic” forms of inter-personal economic engagement, new forms of social participation (Cockayne 2016: 22) and potentially a new approach towards the use of finite resources in order to build a more sustainable economic system. While the public discourse is very much focused on the possibilities arising from the new types of businesses and the emancipatory potential for the individual, their institutional and legal framework and framing in the public discourse driven by the European Union should be carefully assessed, as the impacts of platforms on society are not exclusively positive.
In practice ‘sharing’ has recently been transformed into an economic practice (Cockayne 2016: 4), promoting ubiquitous accessibility of goods and services, under-valuation of labour, and increasing flexibilisation (Cockayne 2016: 6). Additionally, the effects of platforms on the environment are rarely addressed and many people lack awareness of the impacts; it is widely believed that this form of digital production has little impact on natural resources when the opposite is true, as the whole digital infrastructure requires a considerable quantity of resources and energy (Platform Value Now).
The development of platforms is by the European Commission described as an innovative process, with this sector growing faster than any other in the economy (COM 2016: 2), contributing to major economic growth (EC). Innovation is, in this context, positive (if not necessary), where the innovative entrepreneur plays, as already Schumpeter stresses, a prominent role (Borbely 2008: 402). The European Commission emphasizes that only this way their international competitiveness can be maintained, for which also attracting new businesses is necessary. For this the “right framework conditions and the right environment is essential” (COM 2016:3), so that new online platforms can be maintained, grow and emerge in Europe (COM 2016:3). It is suggested that creating a “functional digital single market, breaking down barriers to allow businesses to enter and scale-up fast in Europe” (COM 2016: 3) facilitates this goal. The liberalisation of the European market is here made into a premise to secure international competitiveness; for this reason, a digitalisation of the entire industry is also necessary (COM 2016: 4).
The European Commission encourages the ability of platforms to create markets, suggesting no other possible usage of these digital infrastructures (COM 2016: 2). It is assumed that markets, where voluntary, informed transaction leads to benefits on both sides, are needed to coordinate the behaviour of individuals (Friedman 1982). This is supported by the aim of “organising new forms of participation or conducting business based on collecting, processing and editing large amounts of data”, whereby the market function is very much stressed again. This benefit can be quantified in revenue, further elaborated by giving platforms a “key role in digital value creation” by facilitating new business ventures and creating new strategic dependencies (COM 2016: 2). Stressing the aim as the creation of value (i.e., revenue) reveals the general interest of the European Commission, which is supported by having “employability, growth and innovation” as main goals (European Commission). Market liberalisation helps to reach this goal by attracting businesses, as possibilities are given for future development of a Single European Market, not only for the Digital Economy.
Furthermore, innovation processes should foster the necessary “cross-border interoperability” and research should aim at helping the “emergence of innovative platform-based ecosystems” (COM 2016: 4). The European Union states that “facilitating and supporting the emergence of competitive EU-based platforms is both an economic and strategic imperative for Europe” (COM 2016: 4), as online platforms foster digital value creation and therefore “economic growth in the digital single market” (COM 2016: 4). By following this strategy, the European Union acts in interest of capital accumulation (Attac: 18), as the development of large, transnational firms is not hindered. Instead, unlimited access to data is enabled, which has become a central resource in modern capitalism (Srnicek 2017: 255). By allowing further development of huge platforms, the centralisation of information in the form of data takes place, leading to power shifts, as in the digital sector firms grow not only to a capital-based logic of centralization but also to a data-centric logic (Srnicek 2017: 255).
To achieve the goal of a Single European Market for the Digital Economy, unification and also deregulation of the market is necessary, as “differing national rules for online platforms generate uncertainty for the economic operators, limiting the availability of digital services and [increasing] confusion for users and businesses” (COM 2016: 4), while synchronised rules are said to facilitate growth and enable a rapid scaling up of innovative platforms (COM 2016: 5). The strategy applied is both neo-mercantilist and neo-liberal: It is neo-liberal, as it promotes the provision of a single digital market with as few regulations as possible to ensure an efficient functioning of the market to maximize welfare (Attac: 19). It is also neo-mercantilist, as protection of the single digital market seems necessary: The European Commission strongly emphasizes that Europe needs to maintain its competitiveness in relation to other markets (Attac: 24). The potential trade-offs, especially for individuals who are very exposed to the market in such an environment, are not brought up. It is only said that existing rules in areas such as competition, consumer protection, protection of personal data and single market freedoms should be applied to ensure trust from business and the public (COM 2016: 5), as this is a necessary premise for people to invest in platforms. However, public authorities should respond to new market and technology developments by, if necessary, adapting existing regulations (COM 2016: 5).
On the other hand, there is the suspicion that traditional regulations having local service provision in mind may impede online platform business models (COM 2016: 5), so that they should not be applied. This leaves the regulation of platforms open to a certain extent, which seems to be taken into account by the European Union by strongly emphasising that regulations of digital platforms should be limited to a “problem driven approach” (COM 2016: 5), where only those areas where problems appear are regulated, so that the market can self-regulate in other areas. This will result in deregulation, liberalisation and limited state intervention, as any interventions are seen as hindering the market functioning. This suggests furthermore that, according to the European Commission, the emphasis should be put on “principles-based self-regulatory measures”, which “can be achieved by appropriate monitoring mechanisms in the right balance between predictability, flexibility, efficiency and the need to develop future-proof solutions” (COM 2016: 5). This balance is not elaborated further, ignoring the fact that there are contradictions in those aims. Furthermore, not only are power relations neglected, but a perfect market is also assumed, where this kind of equilibrium can be established. At the same time the need to ensure that “fundamental rights of users” are not limited is emphasized (COM 2016: 9), aiming at liberal market rights effected in the “self-regulation” of online platforms (COM 2016: 9).
The European Commission promotes “instant and effortless” (COM 2016: 2) access to users over communication technologies, which aligns with the aim of promoting open access to goods and services (COM 2016: 2) on a market. Furthermore, platforms should enhance consumer welfare by contributing to improved competitiveness, increasing consumer choice (COM 2016: 2). This approach implies consumer sovereignty, originating in the assumption of an individual being free to choose, not influenced by circumstances, power relations or social norms. This idealistic sovereignty does in fact not exist. Nevertheless, it is implied in (neo-classical) economic theory, where the exchange between individuals is assumed to occur on a free market, under perfect competition, where the only role of platforms is to ensure exchange between two rational, independent agents. The role of individuals is reduced in the relationship between consumers and suppliers, meeting on an anonymous market, only interested in maximising their self-interest. This neglects power relations, that undoubtedly influence consumer behaviour. Especially in such a new, fast growing sector, where only a few regulations have been enforced, the influence of market power is potentially very high, as legislation is in many cases either not fast enough or not willing to follow up with the rapid changes. This assumption is supported by empirical evidence: it can be shown that powerful market monopolies are established around platforms like “Airbnb” or “Uber”, setting certain rules in their terms and conditions on how users should interact, and prices are established (Gig Economy), challenging national and international policy.
According to the European Commission, platforms have ”brought a range of important benefits to the digital economy and society“ (COM 2016: 3), as they facilitate efficiency gains by economies of scale and possibilities for new types of businesses to develop. These two claims may be true, but in fact they do cause contradictory impacts as these businesses can also be characterized by no real working contracts, as supply and demand are only brought together by the platforms enabling exchange without engaging in a working contract (Gig-Economy). This exposes the users to unfair working relations with no social security. Labour is devalued and viewed as infinitely available commodity for on-demand purchase. Consumers expect compliance from labour as they would from commodities, enforcing normative standards through practices of “soft-control” mediated through the platform (Cockayne 2016: 10). This also has the effect of undermining workers’ possibilities for collective action and progressive changes to their circumstances (Cockayne 2016 :23), as might be possible in an organized union.
Platforms are said to give new possibilities to the citizens’ participation in society and democracy (COM 2016: 3), as the internet seems to give access without entry barriers and has therefore a collaborative, emancipatory potential. Only focusing on these aspects again neglects the non-transparent power relations under the framework of a platform economy (Gig Economy), leading to new challenges for regulation. As in fact the ubiquitous demand access to other people’s resources and labour-power creates a new working class, who must invest their little surplus into assets which can be sold on a platform (Cockayne 2016: 80). At the same time the open social differences between classes are vanishing from the public sphere and discourse, so that also the need for regulation is in many cases not pursued; instead, the creation of new emerging markets is rather seen as a solution following a neoliberal agenda (Hermann 2007: 33).
Ensuring a suitable and balanced contractual relationship between service providers and business users to stimulate investment is described as necessary (COM 2016: 12), highlighting once more the aim of growth. The application of EU competition law is suggested, preventing activities that may negatively affect innovation (COM 2016: 13). Instead, innovation should be encouraged, as it is assumed that there still is a lot of potential for competitive European platforms to emerge (COM 2016: 15). Policy should respond directly to the challenges arising from legitimate interests of consumers and other users (COM 2016: 15). However, it is also stated that “appropriate, self-regulation and co-regulation can often achieve better outcomes for enabling the development of strong platform ecosystems in Europe” (COM 2016: 15), while existing policy should “complement” it, clearly showing the neo-liberal orientation of the European Union.
The European Commission wants to maintain a balanced and predictable regime for online platforms (COM 2016: 8), as this is seen as crucial for future investments and economic growth. User trust in online platforms seems to be necessary for investment and further development of the business sector (COM 2016:10). In respect to online platforms, especially the access and processing of personal data is a topic of major concern for consumers, who argue that more transparency in general is needed (COM 2016: 10). The European Commission legitimises the usage of data by the fact that it “spurs marketplace efficiency and innovation, but it can also help save lives, improve education, as well as improve government services and policy development.” (COM 2016: 10). According to the European Commission, not only the economy seems to benefit from online platforms, as emphasized at length, but there are apparently benefits for a general public. However, these extreme statements are not elaborated on further, leaving them as attempt to legitimize the development of online platforms and usage of data with no argument. Instead, the European Commission simply states that there is a recently adopted review of the EU rules regarding the access and processing of personal data. They acknowledge that the general public desires more transparency concerning the collection of their personal data (COM 2016: 10), without elaborating on how to enforce this. The possibility of influencing consumers is acknowledged and seen as a problem, as “loss of trust can undermine the business model of the platform” (COM 2016: 11), but the European Commission states that the existing laws already require transparency and only need to be followed. There seems to be little or no interest in creating new legislation aiming at protection of consumers in the context of online platforms.
Thus, the European Commission follows a technological determinism by creating a digital single market to ensure international competitiveness. Technological development and the narrative of “there is no alternative” (to neoliberalism) lead to certain economic conditions, neglecting possibilities to reshape economic relations (Flecker 2018). In this context, the positive impacts of platforms and their importance for economic growth are very much emphasized. The liberalisation of the European digital platform market aims at enacting the four freedoms of the European Single Market. The need for unification of regulations is pointed out, as a more liberal market should lead to efficiency gains ensuring the international competitiveness of the European Union and economic growth, while regulations should be limited to a “problem-driven-approach.” The emancipatory potential of online platforms is touted, but not put into practice. The potential trade-offs for individuals in this context are only brought up in respect to working conditions, which are already very much in the public discourse, while other impacts such as on the environment are simply not mentioned, so that no consciousness for this topic is raised. Rather, the general tendency of the European Union to foster economic interests of big enterprises and powerful states continues, while other goals such as sustainability, which could be followed by supporting the emancipatory power of individuals and enabling new forms of sharing and exchange, are put behind.
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