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Like all disrupters, the gig economy has brought benefits and challenges. For consumers, the arrival of Uber, Deliveroo and Airbnb has brought more choice and flexibility to taxi passengers, fast food munchers and those looking for cheap accommodation. But for London’s black cabs, traditional takeaways and hotels, the story is not so positive. They have had no choice but to adapt rapidly to new technology in order to hold on to business. Meanwhile, pressure is ratcheting up on regulators to smooth the playing field between the old and new.
What are these new entrants to do: fight the political system with people power — as Uber has done in response to its threatened ban in London — or accept tighter conditions? Sarah O’Connor looks at how these disrupters can gig responsibly, casting back to the 1930s when employment agencies were the bad guys and castigated by established institutions. They survived by compromising with regulators, negotiating agreements with trade unions and driving out the rogue traders. Gig traders will probably end up doing the same.
In the short term, the recommendations from the Taylor employment review are a good place to start (as we argued in a recent FT View). Providing more rights to workers in the gig economy seems inevitable. But there is a risk, as Sarah points out, that “gigging responsibly” costs more and undermines the consumer benefits. Many of the disrupters do not make a profit anyway and are relying on a zero-sum game, beating the competitors and cleaning up on the business.
Whether gig companies take more responsibility will ultimately be decided by the consumers rather than politicians. The power of the pocket will have the most impact on the behaviour of these new firms. Choice made the gig economy, and choice could break it.
Climate risks: Martin Wolf looks at climate change in his column, outlining how the poorest economies are the most likely to suffer. It is the more developed countries, with better infrastructure, capital markets and exchange rates that will adapt to the changes imposed by a shifting climate.
Power in China: George Magnus argues that President Xi Jinping is exerting a Leninist-style grip on China but serious questions remain about the country's economic prospects. The next five years will either see further market discipline, or continued struggles with growth and debt.
Baader-Meinhof revisited: Fred Studemann looks at the 40th anniversary of the radical left terror gang and examines how Germany's struggle to combat terrorism today is drawing on lessons from that era.
What you've been saying
An independent Catalonia is in Britain’s best interests — letter from Charles Drace-Francis:
“If the Catalans had not revolted in February 1640, Portugal would not have been able to regain its independence — very few British people realise that Philip II of Spain gobbled up Portugal in 1580 and the Armada was launched mainly from Lisbon. Moreover, Catherine of Braganza would probably not have married Charles II and Britain would not have prospered as we did — see Sir John Elliott’s excellent book The Revolt of the Catalans. Again, if the Catalans had not supported the Archduke Carlos in the War of the Spanish Succession, Prince Georg of Hesse-Darmstadt would probably not have been able to seize Gibraltar — and more importantly hang on to it — see my father’s book The First Peninsular War.”
Comment from Triple B on How big is the risk of another Black Monday equities crash?
“Most hedges are now offset by the counterparty at the inception of the trade — a big improvement over 1987 in terms of risk management. However, it may be important to remember that the counterparties put on delta hedges at inception. I suspect that the current ultra low volatility means that these delta hedges are very thin in an historical context. When the trade starts to go the wrong way for the counterparty, vol is also likely to be spiking. This means that the counterparty has to increase the hedge based on price movement but the increase in vol will further amplify the amount of delta hedging they will have to do. Put simply, a negative move in the S&P requires the counterparty to short more S&P and the increase in vol means that the amount they have to short will be even larger than normal. It is probably not as bad a set-up as 1987 but it does point to a similar compound reaction to a drop.”
We must up our game on China while we still can — letter from Tim Clissold:
“China is not a democracy, nor is it a dictatorship. President Xi is a very powerful man, but China is no family business like Cuba or North Korea; it is a system of authoritarian bureaucracy that manages supervised capitalism and draws on 2,000 years of experience in governing a large state. To say that “we know almost as little about the inner workings of China’s top leadership as we do about North Korea’s” is not true. Every five years, the government of China publishes a blueprint for the future and then they deliver; gigawatts of renewable energy, thousands of miles of high speed rail, a billion hand held devices with e-banking platforms.”
The best of the rest
There’s plenty to be suspicious about in the Weinstein row — Isabel Hardman in The Spectator
Upswingers and Downswingers — David Brooks in the New York Times
Where Brexit talks went wrong, and what happens now — Walter Ellis in Reaction
Secessionism’s Dangerous Return — Walter Russell Mead in the Wall Street Journal
Politics and friendship are a toxic mixture — Hugo Rifkind in The Times
Frederick Studemann: Memories of a violent German autumn return Security techniques learnt from the Baader-Meinhof campaign are being deployed today
David Gardner: Iraq’s seizure of Kirkuk is part of a much bigger story The contagion of Kurdish separatism is uniting the Middle East’s contending powers
Instant Insight: Theresa May should resist the temptation of a ‘no deal’ Brexit The UK prime minister will face calls to walk out of talks, writes Sebastian Payne
Martin Wolf: Why climate change puts the poorest most at risk IMF data show low-income nations suffer from events for which they bear no blame
George Magnus: Xi Jinping consolidates his power in China As the Chinese leader tightens his grip, serious economic questions remain
Free Lunch: Britain is the party holding Brexit talks back Negotiations have still not moved on to discussing a post-Brexit transition period
Sarah O'Connor: Uber, Lyft, take heart from fellow disrupters and gig responsibly Will customers pay extra for pizza deliveries and car trips?
FT View: An attack on freedom of speech at Europe’s heart The murder of Daphne Caruana Galizia is a threat to EU values
FT View: Bombardier’s deal with Airbus is bad for business The response to Boeing’s appeal for action deepens protectionism
The Big Read
The Big Read: How big is the risk of another Black Monday equities crash? Thirty years on, the market is different but has similar characteristics, from high valuations to trading strategies that could accelerate a sell-off