April 2, 2020

Last week, a video went viral showing an angry Airbnb host ranting about the platform’s policy of allowing guests to cancel coronavirus-affected bookings penalty-free. The host seems to have believed a system of mutual obligation was in place between him and the company, and complained: “Maybe you’re good at big numbers, engineering the perfect algorithm, designing the perfect culture, building systems at gravity-defying scale. But […] you would not have an empire without us. It’s our homes on the platform, it’s our face on millions of listings. It’s our soul that brings the magic.”

But when it came to the crunch, it appeared that Airbnb did not see the company’s relationships with its hosts as requiring particularly substantial obligations. That relationship was only useful so long as it was mutually beneficial; and now that it wasn’t, the weaker party was on his own.

The question of what obligations, if any, a business should have to anyone but their shareholders is an old one, but for some decades the most popular answer has been “None save what regulations demand, and regulations should be as light as possible”. The resulting commercial environment can be characterised by the callous phrase “business is business”, a formulation that dismisses all considerations save economic competitiveness, even in the face of suffering inflicted by this approach.

At the same time, we have continued to believe (informally at least) that loyalty and mutual obligation can and should persist — at least in the service of economic competitiveness. The whole point of ‘networking’, after all, is to build the relationships that can drive further commercial activity; pursuing customer loyalty is in a company’s economic interest, and will drive a higher quality of service and hence better products.

This central privileging of commercial individualism has, over time, created an economy that resembles a pyramid. Each layer seeks to skim rents off the layer below, all the way down to a low-paid precariat whose role is to make the actual stuff — such as food, buildings or consumer products — that powers the whole ecosystem.

Few organisations better epitomise this model than Airbnb, where the platform’s owners earn rents by providing advertising exposure to Airbnb ‘hosts’, who in turn seek rents from ‘guests’ who want accommodation. This model is not even dependent on asset ownership, but has in fact prompted a further proliferation of activities in the pyramid, such as arbitrage, managing others’ portfolios or even outright scams.

Airbnb sets great stock by ‘culture’, promoting a glossy, aspirational worldview via its cutesy magazine. John Patrick Leary savaged this Airbnb ideal in Jacobin in January, as “a fantasy of production without exploitation, of an economy made of smooth glossy surfaces, benefiting all”. Now, as coronavirus rips through economic systems worldwide, we are beginning to see how little real power this model of ‘culture’ actually commands, however chummy its copywriting, within a system where loyalty is optional but competitiveness institutionalised.

More from this author
Stay-at-home mums are ready for lockdown

By Mary Harrington

The Airbnb host in the viral video, sad though his situation is, didn’t receive much sympathy from those lower down the rent-seeking food chain. But then, why should they? The Airbnb ecosystem has been accused of contributing to housing shortages in high-rent cities, as landlords eschew less lucrative longer-term rentals in favour of Airbnb, pushing up prices in the remaining rental stock. Wired estimates that one in 50 London properties is let via Airbnb, while a 2017 study by the FCA found that Londoners in their 20s were paying almost half of their income in rent.

Though rent-seeking slum landlords are not new, the widespread acceptance of a moral system that views rent-seeking as legitimate (albeit unwelcome) is out of step with post-war ethics, if not those of earlier ages.

Though they were landlords, my grandparents would have been baffled and repelled by it. As farmers in Herefordshire, from the 1950s until my step-grandfather’s death in the 1990s, they let their attached farm cottage at a peppercorn rent to Bob, who worked with them on the farm.

When I stayed with them, I remember often coming back from an outing to find muddy vegetables left on the kitchen windowsill, gifts from Bob’s garden. As my grandparents became more frail, Bob and his family did odd jobs for them, kept an eye on them and kept them in countless small ways connected to the community.

After my step-grandfather died, the farm was sold and the proceeds divided between my grandmother and my step-grandfather’s children. My step-grandfather’s son-in-law, a property developer, was keen to evict Bob and his family, and re-designate his cottage from agricultural to residential status, so as to realise its market value.

My grandmother balked at what she saw as an unacceptable betrayal of a long-standing relationship. To resolve the ensuing conflict, she gifted some tens of thousands from her share of the farm sale to Bob, so he could make a competitive offer and stay in his family home.

More from this author
Get off social media and help!

By Mary Harrington

In my grandmother’s worldview, shaped by her experience of wartime communitarianism, land ownership and rent were elements in a broader set of mutual moral obligations. To her, asset ownership conferred a duty to ensure Bob’s welfare as far as she could. Her stepson, on the other hand, saw the situation through a post-Thatcher transactional lens, in which it was proper to disregard such considerations in favour of the asset-owner’s right to maximise economic gain.

When it works, this latter model — “the Airbnb model”, you might call it — creates a mobile, liquid and creative economy, in which growth and innovation are unleashed to drive new gains. Economic relations are freely entered into by autonomous individuals and organisations, via agreements enforced by contracts, all founded on a presumption that each entity involved is — as is proper — engaged in the pursuit of its own interest. Reciprocal social connections my grandmother saw as conferring binding obligations are here largely decorative, as Airbnb’s hosts just discovered to their distress.

As this model gained widespread adoption in the late twentieth century, it enabled the ‘release’ of considerable economic ‘value’ that had previously been constrained by social limits. Building societies demutualised, enabling these institutions to move from the less lucrative business of lending money to small regional businesses into the wildly profitable one of trading financial products — at least until the system collapsed in 2008.

Elsewhere, companies saved money by outsourcing jobs instead of incurring the obligations attendant on direct hiring. At a personal level, all prizes in this mass shedding of social obligations went to individuals with the energy, entrepreneurial vigour and determination to keep re-skilling. Today, all are told to view ourselves as individual maximisers of personal brands, and the quintessential Airbnb model worker is a freelancer, engaged in some more or less lucrative aspect of the gig economy.

Not all businesses today are selfish rent-seekers. Far from it: faced with the pandemic, some companies are demonstrating a keen awareness of their social embeddedness. Manufacturers are retooling to meet social needs such as ventilators, while the restaurant chain Leon is delivering meals to NHS critical staff. But everywhere the Airbnb model dominates, companies are still seeking to minimise obligations.

Amazon, owned by the world’s richest man, has been criticised by senators for its lack of protection for workers affected by coronavirus. Airbnb only offered cancellation compensation to hosts after an outcry. The University of Pennsylvania will pay directly employed staff this term, but lay off subcontracted dining staff at the end of the month. And freelancers are now struggling and also the most elusive demographic for government to reach with bailouts.

Suggested reading
Farewell free trade, and good riddance

By David Goodhart

The usual voices are now declaring that the solution to coronavirus must, inescapably, be socialism: more nationalisation, more state support for workers. Jeremy Corbyn’s retiring salvo amounted to “coronavirus proves I was right”. But underwriting businesses’ ability to pay their workers — even if, or especially if, they are not willing to see themselves as having obligations to those workers — does nothing to address an “Airbnb model” of commerce that explicitly rejects any notion that the commercial sphere owes duties to wider society as well as to shareholders.

In 2008, government bailed out the banks at taxpayer expense, driving a decade of public service cuts. Today, faced with total economic shutdown, they are bailing out the rest of the business world as well. Others have already pointed out that the commitment of governments to underwrite economies throughout the developed world will amount, in practice, to a staggering transfer of wealth to existing asset owners from ordinary workers and taxpayers. Far beyond just the banks, this is now happening across the entire global economy, on a scale that dwarfs the 2008 bank bailout.

But the solution cannot be socialism, or indeed a massive wealth transfer to asset owners under the sign of socialism. We need to talk not about nationalising companies — which has not gone especially well whenever it has been tried — but re-mutualising or re-embedding businesses in a wider network of social duty and purpose. Companies such as Timpson are leading the way on this front. We need to talk about how about how we incentivise prosocial corporate behaviour — structurally, that is, not as greenwash or window dressing — and sanction companies that cling to the Airbnb model.

However we go about it, we must now grasp the nettle of about re-institutionalising social purpose, and social obligations, in the world of commerce. If we do not, we will end up (as in 2008) mortgaging our children to the eyeballs to shore up an economic model where, the higher up the “value chain” you go, the more returns are realised by liquidating mutual social obligations.

I am not optimistic. All the talk about worker representation on boards came to nothing after the Great Crash. Between the default Tory setting of market fundamentalism, and a Labour Party captured by the hard left, I see little hope of us taking concrete steps to re-mutualise commerce in the near future. Far more likely will be that we inch ever closer to adopting a system where an overwhelming state underwrites Airbnb capitalism. China, in other words, just without the bat soup.

Comment


  • April 5, 2020
    Capitalism is not the problem here, rather it is big business corporatism with its big bucks bribery (sorry lobbying). We no long (and have not for decades) lived in a democracy rather it is a Corporate-ocracy.

  • April 4, 2020
    I think the AirBnB argument flawed. COVID-19 forced AirBnB to choose between the renter (make them pay for a booking they can't use) or the property owner (receive payment for a service not used). AirBnB chose the renter and in doing so lost its commission. Mary might prefer that they chose the...

  • April 3, 2020
    I cannot see what Airbnb did wrong. They entered into a commercial contract with their hosts and guests, then enacted force majeure due to the Coronavirus. Had the bookings been marketed and made directly between the guest and host, the situation would be exactly the same. What I do object to is...

To get involved in the discussion and stay up to date, join UnHerd.

It's simple, quick and free.

Sign me up