The limits of the sharing economy

October 7, 2015

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Catholic Church and the United Nations sometimes sound like idle dreamers. But Pope Francis’ concern for “the well-being of individuals and of peoples”, as he put it to the U.S. Congress last month, is actually quite practical. So are the 69 U.N. Sustainable Development Goals. Both target the area where economics and finance have so far failed.

For anyone who thinks all people deserve the same opportunities, the state of the world is scandalous. One-fifth of the global population suffers from hunger and malnutrition. Larger portions lack clean water, have little education and live in the midst of toxic levels of pollution.

The components of prosperity are well enough understood to end all of these global-scale tragedies. But people just don’t think globally. Resources, products, ideas and human beings move more or less freely around the world, but economic solidarity still doesn’t.

Consider a prosperous family in a Detroit suburb. Its economic community is global. It extends well past inner city Motown. It reaches to India, Iraq and Mexico, the countries which Global Detroit consultants say contribute the largest number of immigrants to the region. Indeed, it reaches to anywhere in the world the prosperous family might consider visiting.

Suburban Detroiters might say they already struggle to find much solidarity with poor Detroit city, just a few miles away. They are quite right. It is always a struggle to think bigger. It is more natural to think selfishly, or to promote the good of a smaller community – a family, a tribe, a nation or some shareholders. Technology companies like AirBnB and eBay get people to think of distant strangers as peers, but where overall prosperity is concerned the sharing economy still runs up against limits.

The welfare state shows that people can learn to expand their horizons. Systems designed to protect, nurture and equalise take the idea of solidarity and extend it to everyone inside the national borders.

Mobile phones are another example. While nations once jealously guarded domestic producers and technology, the industry is now global. The same mobile handsets are sold almost everywhere, and the raw materials, parts and expertise which create those phones are gathered from almost everywhere. Apple and Samsung design smartphones to be used in Angola as well as America. A similar reliance on global commonality is seen in aircraft, mining, cars, software and pharmaceuticals.

Finance, meanwhile, hasn’t lived up to expectations. Institutions which can safely move funds from place to place have been supporting traders for centuries. More recently, banks and other intermediaries have become more global in their approach to investments. But the record is mixed. Financial globalisation has been marred by recurring problems with trade imbalances, excessive third-world debts, and rapacious demands on poor countries.

Organisations can do more. The United Nations, the World Bank and many specialised bodies are already quite global. In the economy, they spread cash, high standards and noble aspirations. The new Sustainable Development Goals are a good example of the last. These multinational institutions can be expanded. They can also be encouraged to focus on the most needy. If every leading university and research institute adopted a counterpart in a poor country, the gains could be significant. Funds would be found once the global solidarity mindset prevailed.

Multinational companies already do a lot of global sharing, but they too could do more. Shareholders would have to get used to getting only cash left over after increased spending on solidarity. That already happens in the mining sector, where most governments only approve projects which include expensive commitments to local communities. Even if shareholder value purists may not like to admit it, companies already have obligations to their communities which take precedence over profit-seeking. For example, shareholders only get the cash left over after taxes are paid.

There are undoubtedly many other ways to help bring the economic world closer together. Ideas will really start flowing freely when most people decide that global solidarity is more of an obligation than an aspiration. The warm welcome Germany is giving to refugees from Syria and Afghanistan is a moving example of how an enlarged definition of “who we are” changes behaviour.

However, as yet such neighbourly sentiment rarely crosses political borders. That could change. A good way to start the process is to plan to tear down some of the national walls around welfare states. That might sound a stretch. French voters, for example, would never approve combining their government-funded medical system with the comparable arrangement in Bangladesh.

Still, smaller steps towards a welfare world-state are quite possible. A large universal fund for disaster relief might be a good start. The misery caused by floods and wars brings sympathy in rich countries and drags down development in poor ones. Besides, the World Bank has already started, with a Disaster Risk Financing and Insurance facility. It could be expanded. A more ambitious initiative would be a global medical training plan, funded by national contributions set according to wealth and disbursed across the nations according to need. Cross-border migration could be another frontier for shared global policies and funding.

Global welfare might sound like a pipe dream. Then again, universal national pensions, healthcare and unemployment benefits were considered crackpot notions not that long ago. These days, people are encouraged to think big. Nothing in the economy is bigger or better than global solidarity.

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No global company is loyal to any particular country. This is the conflict arising from the global economy. We haven’t done away with borders yet. In fact, we have people clamoring to build taller fences, taller walls. But they still want a global economy. In the long run, you must choose protectionism or un-protected. If you lock your doors at night…. you believe in protectionism. Period.

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