The pie may be growing, but it’s clearly not growing for everyone. Since the U.S. adopted a pure paper currency system in 1971, employee wages as a percent of total gross domestic product have fallen substantially:
While the share of corporate profits has approximately doubled:
Some economists say this shift is a result of globalization. Others will point to automation, while still others will point to paper money itself. While these are all compelling explanations, another that receives less airplay is the role that declining antitrust enforcement, which accelerated during the Reagan administration, has played in the anemic bargaining position of the modern American worker.
Through the middle of the twentieth century, Congress repeatedly enacted legislation to restrict predatory pricing. Predatory pricing was viewed as a tactic that well-capitalized firms could use to bankrupt rivals, eliminate competition, and centralize control. Predatory pricing laws were thus intended to distribute power and opportunity throughout the economy. Cross-subsidizing, where a profitable company would charge monopoly prices in competition-free zones to subsidize below-cost pricing in zones with competition (with the intention of bankrupting them), was generally seen as anti-competitive and illegal.
But over the course of several decades, courts began to focus less on market structure and more on consumer impact. So long as consumers weren’t being charged exorbitant prices, courts became increasingly open to larger corporate formations dominating market activity. A modern example of an expected result would be Uber & Lyft, domestic duopolies that have raised significant venture capital and are able to charge riders significantly lower rates than old economy competition.
This chart seems good right? As a consumer I can buy a cheaper ride from a company that has figured out how to fulfill my demand more efficiently. But this chart fails to show what it’s like for workers. MIT just published The Economics of Ride-Hailing: Driver Revenue, Expenses and Taxes showing Uber & Lyft drivers made just $8.55/hour in profits after accounting for insurance, depreciation, and other expenses that go into being a gig-economy driver. Unfortunately, due to their lack of bargaining power, the fate of gig-economy workers is frequently in the hands of market forces that are well beyond their control. These market forces will transfer the value generated by the worker’s labor to the pockets of the venture capitalists backing the monopolistic or duopolistic marketplaces.
Is the Department of Justice doing anything to stop it? Maybe. The Department recently took on American Express, claiming that they unfairly used their two-way market position to exert illegal control over how their merchants would present various payment options to customers. However, the District Court’s initial decision against American Express was overturned by the Second Circuit Court of Appeals, and the case will go all the way to the Supreme Court. Unless the Supreme Court overturns the Second Circuit’s decision, it will likely mean that the threshold for anti-competitive practices by two-way marketplaces will increase, all but certainly leading to fewer gig-economy worker protections in the long run.
So you’re saying workers have it bad, and it’s only getting worse? Not necessarily! For gig-economy workers to earn a reasonable living, they need to have the power to set their own wages and prices. While most existing large platforms will not completely cede this right to their suppliers, many decentralized organizations will. The challenge then becomes building and scaling these decentralized marketplaces so workers and suppliers can retake control of wage and price setting.
Origin Protocol, a company founded by two technologists who were tired of being pushed around by large centralized marketplaces, has honed in on this challenge. Origin understands that the poor working conditions of gig-economy employees isn’t due to the bad actions of one or two bad actors, but is really the result of a systemic imbalance of power between market participants. Because they don’t think the solution to the problem is a “New Uber” or a “New AirBnB,” they are actually creating a comprehensive suite of developer tools that any group wishing to build a decentralized marketplace can use to accelerate and facilitate their product launch.
Decentralized marketplaces have unique challenges and benefits. While they offer greater autonomy and likely lower fees for their participants, the marketplaces are frequently much smaller and more poorly resourced than the larger centralized exchanges. So resources aren’t wasted reinventing the wheel several times over, it is imperative that a market specialist like Origin Protocol take responsibility for supporting the common needs of most or all decentralized marketplaces, such as identity solutions, payment tools, and community development. Effectively absorbing or offsetting these common costs, Origin Protocol is at the forefront of laying the foundational element of a 21st century economy that could massively empower the presently disenfranchised gig-worker whose life has faced years of setbacks due to changing market forces, capital concentration, and disempowering antitrust interpretations by the courts.
Over twenty-five decentralized marketplaces aspiring to offer decentralized ride sharing, room listings, and many other goods and services have committed to build their marketplaces in partnership with Origin. Many of these decentralized exchanges are reasonably well capitalized and are hard at work developing their utopian version of hassle-free commerce, free of rent-seeking middlemen. And while there is clearly a difference between a utopian vision and its practical execution, the simple emergence of functional decentralized marketplaces should place competitive pressures on monopolists, duopolists, and cartels to treat their suppliers and employees in a more humane fashion. Because of these factors, Origin Protocol and many others in the blockchain community believe decentralization and decentralized exchanges are the key to labor surviving and thriving in the 21st century.