How The Heavy Hand Of Government Stifles The On Demand Economy

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This century has produced a new lexicon that didn’t exist a generation ago: Broadband. Apps. Connectivity. Streaming video. Social networks. The on-demand economy.

The new millennium has also produced a startling number of successful American companies with worldwide reach: Airbnb, Amazon, Facebook, Google, Lyft, Netflix, Pandora, Snapchat, Twitter, Uber, Yahoo, Yelp.

With so many American innovators leading and improving the global economy, it would seem natural for American policymakers to do everything possible to allow these companies to flourish. Instead, we see far too many examples of our politicians actively discouraging or burdening new services from the country’s leading American companies. With good intentions, but flawed logic, politicians are jumping in to regulate these new companies, slowing the pace of innovation.

In July, Democratic New York Mayor Bill de Blasio was forced to table a plan to limit the growth of ride hailing companies like Uber and Lyft in New York after riders launched a public campaign to stop the proposal. Ride hailing services give New Yorkers and visitors access to quick, clean and affordable transportation options and help expand the city’s economic growth by creating more job opportunities. So why are city regulators trying to slow their expansion and limit consumer choice?

Ride hailing companies continue to face pressure from courts and politicians who say drivers should be treated as employees rather than independent contractors. Labor unions are pushing this view, while ignoring that many ride hailing drivers are drawn to the flexibility of being independent contractors. (Meanwhile, taxicab drivers in many cities are also considered independent contractors, a fact that is rarely mentioned in these debates.)

On-demand economy services like Airbnb that link homeowners with those looking for places to stay are also under attack, as hotel unions join with the lodging industry to regulate, and in some cases ban, these services. The city of San Francisco is considering a measure that would cap Airbnb stays at 75 days, a move that Airbnb says will cost the city $58 million in tax revenue over the next 10 years. Why would city leaders seemingly ignore the potential good that immense amount of revenue could do?

Our nation was built on a foundation of freedom — freedom to contract with each other for goods and services, freedom to innovate and create new products, freedom to start a new business and maybe even fail at it. The government should only impose itself on industry if there’s a compelling public interest.

Rather than force new services to fit the framework of old rules, innovative startups offer regulators a chance to revise outdated rules to reflect a new reality. Ride hailing services naturally weed out bad drivers and poor service, especially when compared with the legacy cab drivers who aren’t rated on or accountable for the quality of their service. Government can and should require driver screening and insurance, but it’s the dynamic feedback nature of the wireless service that safeguards the public and benefits drivers.

Home-sharing services like Airbnb give users more options when they travel and provide extra income for homeowners. Government can and should collect hospitality taxes after some threshold of rentals, but cities benefit from the influx of tourism whether visitors stay in hotels or not. Recently, my family took a holiday in New York City, where Manhattan has few hotel options for families with children. Thanks to Airbnb, we rented an apartment for a third of the comparable hotel price.

Meanwhile, millions of Americans enjoy new services and experiences thanks to the ever evolving tech economy — whether it’s making a living from eBay or Etsy, figuring out where to eat or stay from Trip Advisor or Yelp, or enjoying new music from Pandora. Politicians need to get out of the way, let these businesses thrive and intervene only when there’s a demonstrated, compelling need — and even then, do so as narrowly as possible. The public is voting with their apps and their finger taps. Politicians would be wise to listen to the sounds of the page clicks. It’s what their constituents want.

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling books, Ninja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro

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This post has already been read 181 times!