The U.S. Congress house committee on small business held a hearing last week on what many experts believe is one of the most significant new sectors of the economy -- "collaborative consumption."
While it is still in its infancy -- senior companies are five years old -- what was seen as a niche curiosity has grown to the point where Forbes called it one of the most important economic developments to watch in 2014.
Collaborative consumption is more colloquially called the sharing economy.
While we are used to sharing certain goods (library books come to mind), the trend since the 1950s has been toward greater personal ownership. As generations of couples moved from cities to suburbs, they sought to fill their homes and garages with cars, furniture and appliances. Yet, millennials -- aged 20 to 35 -- in large urban centres are increasingly spurning this consumption. When it comes to transportation, for instance, they prefer to live in neighbourhoods where they do not need to drive, are more concerned with the environmental impacts of driving and are averse to the high cost of owning a personal vehicle. As such, they are choosing car-sharing over outright ownership to get around.
Today, collaborative consumption is spreading beyond big-ticket items such as cars to smaller household goods. The nascent 1000 Tools startup lets people rent power tools from each other, for instance, and Union Kitchen in Washington offers communal kitchenware. These companies essentially ask, is it really necessary for the average person to own a full set of power tools, or an expensive camera when they use these items only a few times a year? For many millennials, the answer is no. These young citizens are more concerned with access than ownership, and by sharing and renting, can enjoy the products they want without the hassle and expense of purchase, storage and maintenance.
Collaborative consumption also makes more efficient use of resources. Most private cars, for instance, sit idle for about 90 per cent of the day. Households have, on average, $3,000 worth of unused items. More broadly, as North America undergoes a new re-urbanization, it is simply not possible for everyone to cram all the stuff they own in a 2,000-square-foot mini-mansion into a city townhouse. With their dense, walkable neighbourhoods and easy access to restaurants and attractions, sharing makes an urban lifestyle possible without sacrificing the amenities of a suburban one. As one company's motto states, it allows citizens to "own less and do more."
With so many advantages, it is not surprising more and more North Americans view collaboration as a useful consumption strategy. As this sector expands, however, it does mean governments will be confronted with new questions. What sort of insurance do ride-sharing companies need, for example? Studies suggest one shared car takes 12 private vehicles off the road, so what impact will this have on a city's transportation network? Additionally, conventional urban design has embraced separation, with housing constructed well away from shopping districts and office parks, and the line between consumers and producers clearly demarcated; the sharing economy does away with these distinctions and thrives in places where use patterns merge. As such, what sort of changes will need to be made to allow a larger sharing economy to function efficiently?
It is useful for federal governments to learn more about collaborative consumption, but it will be officials at the municipal and provincial levels who will be grappling most directly with these considerations. Local policy-makers should, therefore, be proactive in examining what effect the sharing economy will have within their jurisdictions. Collaborative consumption has arisen out of a shift toward a culture that values the accumulation of experiences over assets and greater financial uncertainty for young workers entering the labour force. These factors are not likely to go away any time soon. With a healthy sharing economy offering significant social, environmental and economic advantages, it is in everyone's interest for governments to devise policies and regulations that accommodate this exciting economic trend.
Benjamin Gillies is a graduate from the University of Manitoba, where he focused on urban development and energy policy. He works as a consultant.