Technologies change the nature and patterns of the economy in the 21st century. New models of entrepreneurship emerge, creating better conditions for pursuing profits and accumulating wealth. “On-demand economy” is a relatively new concept. In essence, it is a new environment, where technologies bring people and available job opportunities closer to each other. Uber, a taxi service launched in San Francisco in 2009, is rightly considered as the starting point in the evolution of on-demand economies, which rely on freelancers and contractors to satisfy consumer demand for quality services. If Adam Smith were alive, he would view the new on-demand economy as a land of enormous opportunities for the creation of personal and collective wealth. By contrast, Marx would perceive the new economy as a source of serious class tensions. In either case, on-demand economic relationships will continue to evolve, fostering positive economic and social change and creating issues that need to be resolved to avoid social conflicts and financial losses.
As mentioned earlier, on-demand economies represent a new type of economic and social relationships. They differ considerably from the traditional organizational and employment frameworks. Gone are the times when workers came to their workplace five days a week, spent eight hours a day fulfilling their workplace obligations, and received fixed salaries and benefits from the employer. Today, technologies “match jobs with independent contractors on the fly, and thus supply labor and services on demand” (The Economist). The on-demand economy is a triumph of freelance workers, who are skilled, flexible, and client-oriented. It is also an opportunity for the organizations, which do not want to waste their money and time on hiring and retaining qualified staff. The benefits of on-demand economies are obvious. Equally obvious are their drawbacks. Adam Smith’s economic theory and Karl Marx’s views on economy could be helpful in analyzing the hidden facets of the on-demand economy and its place in the postmodern world.
Smith’s Wealth of Nation is a classical work that had considerable effects on the evolution of economic theory. The concept of the division of labor is at the heart of Smith’s work. The same concept defines the nature and complexity of contractual relationships in an on-demand economy. From the viewpoint of Smith, it is a new system of economic relationships, where independent contractors gain the full control of the product or service they produce. On the one hand, they are free to decide when and how they are willing to enter contractual relationships and spend their time on work. On the other hand, freelancers assume responsibility for delivering a product or service that matches customers’ qualifications, expectations, and criteria. Organizations are losing control over their subordinates. However, workers no longer enjoy traditional job stability. As The Economist writes, it is no longer fashionable or desirable to belong to a particular company. The on-demand economy introduces a new sense of stability, which gives skilled workers and freelancers a sense of confidence that they will find a personal and professional niche to earn their living. Such niches become more numerous, since on-demand economies lead to increased labor specialization. The latter, in turn, results in increased productivity.
The relationship between specialization and productivity is quite straightforward: workers who specialize in one or several professional domains have greater opportunities to refine their skills and abilities and pursue excellence in the services and products they provide to clients. Their productivity also increases, since they do not waste their time on unnecessary or redundant activities. In the meantime, the expansion of the on-demand economy leads to the creation of new service niches. They also foster further division of labor. Such expansion is inevitably followed by opulence, because each worker becomes more skilled and experienced, reduces the amount of time needed to fulfill routine operations, and uses his or her creativity and talent to offer a unique product or service (The Economist). Such uniqueness becomes a source of competitive advantage for freelance workers. Only the most creative ones can survive the competition. Such creativity drives economic growth and progress in the long run.
Such competition also has a potential to increase social and employment tensions. From the viewpoint of Karl Marx, the relations of production present a huge challenge in any on-demand economy. Most freelancers are bound to enter contractual obligations with the companies that promise to link them to available job opportunities. They lack any definite employment status, which inspires social, legal, and economic debates (Isaac & Singer). For many on-demand workers, such contractual obligations are the only way to realize their creative strivings. The benefits gained from such cooperation may not justify its costs. For once, the new mode of contractual obligations does not provide any access to the forces of production, which remain in the hands of large companies that manage the supply of and demand for consumer services. The on-demand economy also does not eliminate the risks of class struggle. The key tensions are likely to emerge between technology owners who take a lion’s share of profits and freelancers, who lack any definite legal or employment status. Most companies in the on-demand economy do not reimburse workers business expenses on the basis that they are not officially employed (Isaac & Singer). Meanwhile, freelancers are obliged to undergo regular training to update their knowledge and skills. This is the only way they can remain competitive in the on-demand market. Simultaneously, the on-demand economy leaves little room for communism. It makes the prospects of the proletarian dictatorship highly unlikely. The technological revolution taking place in the 21st century will never lead to full communism. Rather, it will revitalize the capitalist relationships of inequality and corporate dominance for years ahead.
To conclude, the on-demand economy represents a new type of economic relations. Technologies bring freelancers and available job opportunities closer to each other. Adam Smith and Karl Marx would have different views on on-demand economies. One thing is clear: this mode of economic development will persist for the coming years.
- Isaac, Mike & Natasha Singer. “California Says Driver Is Employee, Not a Contractor.” The New York Times, 17 June 2015. Web. 16 Oct 2015.
- The Economist. “There’s an App for That.” The Economist, 3 Jan 2015. Web. 16 Oct 2015.