Platform Thinking – Justice, Competition and the Time Dimension
Markus H.-P. Müller argues that platform economies hold opportunities to build a better society.
Digital retail, neighbourhood communities, mobile learning, B2B sales - as different as their needs are, these digital solutions have one thing in common: they are based on platform thinking.
Digital platforms link suppliers and consumers in the same way that farmers’ markets, wholesale markets, auction houses, department stores and retailers have traditionally done. But because they are based on digital technology, and not on physically determined spaces with direct and personal encounters, platform economies allow us to realize economies of scale in an enhanced way compared to previous approaches. The world’s most valuable companies now have platform economy business models.
History shows us that big changes in trading patterns – through the Silk Road, the development of the railroad or the modern logistics industry – are very significant in terms of social and economic policy. Globalization and automation have already significantly changed the structure of global labour markets in recent decades. But digitalization will bring about a far greater change. It will challenge not only the ideas of work, but also how we live, trade and even define ownership.
The danger of such a fundamental shift is that, to use the old expression, we may not see the wood for the trees. In other words, we are aware of individual changes to our way of life, but not fully conscious that much of the wood is at risk of being cut down. So, we need a pre-emptive policy approach to make sure that the disruption is manageable and containable.
This argues for paying particular attention to the dynamics around labour market, justice and competition issues. This is not a static problem, and the time dimension is crucial.
Platform economies have major implications for labour markets. Some studies have claimed that up to 50% of jobs are at risk, although this may be overstating it: according to the OECD (OECD, 2019) and ZEW (Arntz, 2018), up to 14% of jobs are at risk. The so-called Moravec Paradox reveals the reasons for this: robots may still struggle with tasks where the routine appears simple but is not entirely predictable. So we are seeing more employment at the lower-skilled end of the labour market, as well as at the top. Traditional skilled labour in the middle is losing out, however. We can already see the impact of this on political polarization and our democratic systems.
The process of change (and its success or failure) is the result of structures, actions and decisions. Societies and economies are continuously changing: it can be difficult step back and reflect on what is going on. This can make it difficult for us to evaluate social and economic policy.
Consider for example competition. This can be a wonderful thing, from a consumer's point of view, when it comes to improving quality or value for money. And it is clear that for development and innovation, a degree of antagonism is a constructive trigger for adjustment. For a society, however, antagonism, or better to say competition, is not so easy. Of course, inequality is intrinsic to a market economy. People have different abilities and can thus develop different skills, although we should always remember that not everyone can offer the skills and abilities that a society demands at a given time from the market. Social systems must therefore be made sustainable and anticipative, so they can carry workers through difficult patches due to the dynamics of change. We should be aware, for example, that a society with a large and persistent share of structurally-precarious work may stop being sustainable. Education policy, to include workforce retraining, is therefore essential to keep economies going over the passage of time.
Platform economies will have a major impact on the evolution of competition over time upon the social reciprocity that characterizes our relationships. Platform economies with strong network effects (i.e. that become more valuable, the more people use them) raise major “winner takes all” concerns. Fears around welfare-damaging oligopoly and monopoly structures have been much discussed, with a particular focus on the USA and China.
However, competition issues are discussed within a legal and regulatory framework that is essentially over 100 years old. Is it still relevant? Competition may need to be redefined as platform economies force us to put more emphasis on cooperative and complementary models of collaboration. Cooperation, even if it is only temporary at times, appears to be the new driver for future competition and for different methods of outsourcing and managing contractual work. But it is also important to understand that such collaborations can and must dissolve in order to look for new opportunities: this will be a moveable feast.
The underlying question is whether we are moving towards a socially-inclusive market economy – or away from it. So far, the debate has centred on achieving distributive justice – the fair distribution of resources, including around environmental policy issues.
I would argue that contributive justice (the fair distribution of work, as set out by Michael Sandel) needs to be a focus too. Platform economies have to answer this question: how should we handle non-traditional employment relationships (for example, crowd working or temporary employment)? (In fact, formulating the question like this suggests a too backward-looking view: we need to consider what work patterns are coming next.) Policy regimes must also find answers to complementary questions, such as how we tax new forms of business and how we deal with new liability issues (for example, in the sharing economy). The rights of an individual in the labour force are also linked to data sovereignty, an issue of great importance – from both the labour force and corporate perspective. Just prohibiting use of data (or other changes) will not work: the issue is how to develop such rights and relationships in the world ahead.
Platform economies are forcing changes on us, but we should remember that economic evolution is continuous, and every society has to deal with change. Platform economies pose challenges, but also provide us with an opportunity to shape our future in a way that promotes welfare for all.
In our 21st century society, are we learning to view workers as assets and not as costs to be controlled? This question is important to answer at a time when algorithms, robots and automation are impinging on work practices from all sides. Additionally, and perhaps even more important, are those workers (seen as assets) directly tied to the firm and who should therefore bear the costs of their conservation and improvement? Here and in many other areas, platform economies are redefining the boundaries of the firm (Kenney/Zysmann, 2015). This in turn poses policy questions as to how we hit a balance between flexibility/adaptability and social protection, and how we recognize that flexibility can often come with protections against risk.
If we can answer these questions well, we have the opportunity to use changes resulting from platform economies to build a better society. But to seize this opportunity, we need a philosophy that looks at contributive as well distributive justice and can cope with the problems of the future, not the past.
Markus H.-P. Müller is Global Head of the Chief Investment Office International Private Bank, Deutsche Bank AG. Markus has held teaching posts in corporate finance and economics, being a visiting scholar at the Frankfurt School of Finance and the University of Bayreuth as well as at the Banking and Finance Academy of the Republic of Uzbekistan in Tashkent. His main research interests lie in the structural transformation of economies and societies as well as in the area of sustainability. Markus authored several books and articles on the transformation of society and economies. For his latest op-ed, please see here.
This work is solely the author's own opinion and is produced independently of his role at Deutsche Bank Group.