The Inevitability of the Gig Economy
by Wendy Liu (@dellsystem) on November 19, 2017

The gig economy may finally be souring in the eyes of the public. No longer widely heralded as the pinnacle of ingenuity and customer convenience, companies like Uber and Deliveroo are facing increasingly negative press coverage of their exploitative business model. Even the innovative merits of the gig economy are being challenged by no less than the Financial Times, in a surprisingly radical op-ed questioning the narrative that the gig economy is the inevitable result of technological change, and asking whether broader economic factors also played a role.

What the Financial Times article misses, however, is the opportunity to name the culprit, and thus the entire teleological aspect of the gig economy. It’s true that its rise is not simply the inevitable result of technological change. But the economic factors that played a role aren’t merely a coincidence, either. It would be more accurate to say that the gig economy is the inevitable result of technological change under neoliberalism.

Neoliberalism and the Shape of the Internet Revolution

To truly understand the gig economy, you have to examine how its ascendance was shaped by the recent evolution of capitalism. You have to untangle the neoliberal knot to find the three main threads that, when paired with technological innovation, explain the gig economy’s rise: the role of ideology; the recent excess of capital; and the ongoing decline in the power of labour. It’s the confluence of all these factors that laid the foundations for the gig economy.

The first thread relates to the main ideological underpinnings of the technology startup world. As Moira Weigel writes in The Guardian, the primary strain of thought in the industry pairs personal liberty with a pro-market stance, in an outright celebration of capitalist credo even while other industries might try to downplay its influence. In this world, wealth is a wonderful thing that doesn’t need to be justified, and economic inequality is a celebrated consequence of the disruption unleashed by startups. For the individual entrepreneur, it’s all about using the market to achieve personal glory—to be called the next Zuckerberg and get your face on the cover of Time—and that’s sublimated into an almost religious pursuit of growth. Not personal growth, but growth via the cybernetic extension of you that is your startup. Parasitic, unstoppable growth. Skirt regulations, “hack the system”, sacrifice your personal health; whatever it takes until your startup blankets the world.

The second thread is a consequence of easy monetary policy after the financial crisis, when federally-mandated low interest rates resulted in an excess of capital seeking out increasingly scarce avenues for profitable investment. Nick Srnicek calls this asset-based Keynesianism, and the consequence is overaccumulation—too much capital chasing high returns at a time of general stagnation. Venture capital is the most demanding form that this capital takes, because their investments are intentionally high-risk; as 3 of every 4 startups are expected to fail, the remaining ones have to return enough to make up for the rest. Which means there’s no point in investing in companies that promise only modest returns over a long period of time. Instead, the prevailing mentality is more go-big-or-go-home - unless your startup has the possibility of becoming absolutely massive in a short period of time, you’ll have a hard time convincing early-stage investors to give you their money.

On the other hand, once your business model has received venture capital’s stamp of approval, raising more money becomes fairly straightforward. This is how Uber managed to raise $15 billion at a valuation of $68 billion, despite massive losses: if you have monopolistic ambitions and a technology-fuelled growth trajectory, a lot can be forgiven. Technology has become a sort of collective dream, in which investors’ boundless optimism for the promise of “innovation” becomes a belief that the industry can absorb unlimited amounts of surplus capital. If you think this sounds eerily reminiscent of the conditions that produced the dot-com bubble, you’re not alone — though, of course, some venture capitalists have a vested interest in declaring otherwise.

The last thread is the weakening influence of labour under neoliberalism, most notably in the US under Reagan and in the UK under Thatcher. The short story is: after a period of economic prosperity in many developed countries post-WWII, growth began to falter; in the consequent struggle over how to distribute diminishing profits, capital won, resulting in the balance of power shifting away from labour. In the last few decades, we’ve seen the decline of union power, the rollback of market-impeding regulations, and the cutting of public services. Added to this dangerous mix we have the fallout of the financial crisis, which left most of the advanced economies with high un- and underemployment, not to mention millions of people underwater on their mortgages. Combined with the austerity-driven hollowing out of the welfare state, the outcome is increased precarity as more and more people have no option but to find paid employment in order to survive.

Together, these threads form the socioeconomic landscape onto which the invention of the smartphone emerged. And so the perfect storm of economic factors combines with technological change: the technology entrepreneurs, who have no problem skirting regulations in the pursuit of growth, and flush with cash from approving venture capitalists, see an opportunity to profit from the smartphone proliferation among all this idle labour. Of course, that’s probably not how they think of it. For them, it’s merely a technical solution to a personal problem: making it easier to order food, or get a ride to the airport, or get their clothes washed. The existence of a class of people who are willing to be on the other side of those transactions—to run errands for a stranger in exchange for a small amount of money—is taken for granted. They assume that there exists a smartphone-equipped reserve army of labour, people who are just waiting for a push notification before they spring into action, ready to take on any job no matter how poorly paid or stultifying.

And they were right. That army did exist, and still does. It is on the back of their efforts and the assumption of their continued existence that gig economy companies have been able to climb to such vertiginous valuations.

Monopolised Capital—Precarious Labour

In a way, then, the real innovation behind the gig economy—the real reason behind its economic inevitability—isn’t primarily technical. It’s in the way technological change interacts with labour, giving rise to a new type of corporation. In Platform Capitalism, the major companies behind the gig economy are referred to as “lean platforms”, characterised by a business model that involves owning as few physical assets as possible; instead, the focus is on software assets, which are key to high potential profit margins and growth rates. Labour that doesn’t directly add to intellectual property creation is abstracted away, as these companies attempt to import the software industry’s monopoly-driven tendencies into the untapped market of the real world. This is how these companies were able to scale so quickly—no corporation that depends on the long-term development of physical assets can scale as quickly as Uber (founded 2009) or Deliveroo (founded 2013). Thus this business model has an almost evolutionary advantage, in that corporations that adopt this model will either out-scale their competitors or die trying. This is the sort of thing that gets venture capitalists really excited, and so they’re happy to subsidise operations (at least for a few years) while the kinks are sorted out.

Of course, the real world is a lot messier than the digital world; information may be infinitely and instantly replicable, but most physical goods are surely not. Still, you can approximate the efficiency of the digital by taking a lean platform approach. For taxis: don’t own cars or employ drivers, just convince people who already own cars to drive others around and give you a cut of whatever they make. For cleaning houses: don’t hire cleaners or even buy cleaning supplies, just be the platform that connects customers with cleaners who desperately need work. For food delivery: don’t employ the couriers, and certainly don’t own the restaurants, just get cash-strapped cyclists to speed anxiously between restaurant and customer, knowing that their livelihood depends on the pizza still being warm when it arrives. Despite the pretense that workers benefit from the flexibility these jobs offer, the gig economy is really little more than the high-tech version of the historical ‘day labourer’ market—combining corporations’ drive for cheap and plentiful labour with technological innovations that enable it.

Thus the lean platform approach is the ultimate startup fantasy. The strategy is to eliminate any corporeal assets that might slow growth, in order to become an assetless behemoth that manages to skim off the top of every transaction. Anything that is not crucial to producing the intellectual property (branding, software, data) of these companies should be shed, because digital assets are scalable and can be reproduced at zero marginal cost while physical assets are not. The actual human beings who drive the cars or deliver the food or clean the houses are the least desirable assets of all, saddling the corporation with baggage that could impede growth: pensions, healthcare, regular wages even if there’s no demand for their services. In an ideal world, these corporations would not have to rely on human workers at all; instead they’d simply own the software for powering self-flying drones and self-driving cars. Software can’t complain about low wages, or unionise, or file worker protections lawsuits that force startups to shut down. Workers, however, can: they’re organising, and raising awareness, and starting to turn the tide of public opinion against the corporations.

None of which is anything new, of course. This is the same sort of class struggle that we’ve seen throughout history, and as with every previous attempt by an exploited class to demand better treatment, gig economy workers are meeting fierce resistance from their oppressors, who justify their exploitation by framing it in terms of innovation and growth. After all, better worker protections don’t mesh with a growth-oriented lean business model; preferably, there would be a stream of on-demand contractors who are willing to do the most menial of tasks in exchange for subsistence-level income. The goal is to shift the burden of the reproduction of labour away from the employer, leaving someone else—the state, the worker’s family, charities, who cares—to pick up the slack. In a very visceral way, these corporations are attempting to subvert the unwritten contract that previous generations have expected: by exposing their workers to the vicissitudes of the market, they abdicate their expected responsibility to provide for them while still making money off their work.

We Only Want the Earth

To defenders of the gig economy, the recent backlash seems ridiculous. In their view, workers should be grateful that these apps provide them with any work at all, which they otherwise wouldn’t have access to. Why on earth would workers complain about having something rather than nothing? Surely it’s better than the initial, pre-gig economy starting conditions of un- and underemployment.

But that’s a false dichotomy that speaks to a failure of imagination. We don’t necessarily need to return to the initial starting conditions. We can be much more ambitious than that: we can imagine an entirely different world, one that requires a fundamental rethinking of the current economic system. We should ask ourselves if our economic optimization function has trapped us in a local maximum—a suboptimal situation that can’t be ameliorated by moving forward or backward—and if we need to take a stochastic leap of faith into the unknown in search of something better. The corporations who are succeeding in this new economy may not be responsible for the situation we’re in, but if we let them continue operating untrammeled, we may never get out of it.

Maybe it’s time we go back to first principles. What do we actually want? What is the goal we want our economic system to achieve? What sort of society do we want to build, and how is it different from the society we have now? We have to hold on to that vision to figure out how to get there. We have to remember that before anything else, we are human beings living in a society of other human beings and that everything we’ve constructed is just artifice on top of that.

These companies, and the people who work for them, did not personally create the conditions of precarity that allowed them to accumulate power and profit on an enormous scale. They are not to blame for these preconditions. But if we ever want to transcend these preconditions, we’ll have to halt their pursuit of never ending growth.

In the short term, this will mean using regulatory channels to improve employment conditions for workers. There has been some success so far, but it’s still quite limited: Uber may have lost their appeal to classify drivers as self-employed, but there is no guarantee that this ruling will be enforced in a speedy manner, especially since Uber plans to appeal the ruling (again); on the flip side, Deliveroo actually won their own legal battle over workers’ rights. Alternatively, launching a competing worker-owned app may be another way of protecting workers’ rights.

In the long term, though, we’ll have to do more than change a few regulations and start some new co-ops. Ultimately, the real societal threat these companies pose isn’t limited to the confines of the gig economy—it’s everywhere, anywhere there is low-paid work in substandard conditions. The gig economy is just the latest means of using technology to get precarious workers to sacrifice their time in the service of capital. As long as we accept disempowerment of workers in the name of greater efficiency, as long as we prioritise the rights of individual corporations to gain market share over our collective rights as people, then the underlying conditions will stay the same, and the exploitation epitomised by the gig economy will not go away.

In the end, if we really want to confront the gig economy, we can’t narrow our focus to the convenient villains provided by the Ubers and Deliveroos of the world. Taking down the current crop of corporations will not solve the larger structural factors that allowed them to scale so quickly in the first place. To truly combat the gig economy, we’ll have to combat neoliberalism. We’ll need to fight for decommodification, and demand better public services, and challenge the intellectual hegemony of the free market. We’ll need to be bold enough to imagine a better world: a world where economic gains are shared equally, and where technology is used not to divide and control us but instead to truly liberate us. A world, in short, where there is no more gig economy.


Wendy Liu (@dellsystem)

Wendy is an economics editor.


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