Digital platforms have created jobs and economic activities but at the expense of youth — those who drive and ride for platforms, and their economic futures. They have also created a lot of consumption that does not lead us to a better world of increasing wages or upward mobility.
Written by Jeremy Lim
A recent report has touted the economic contributions of Grab and its related activities at nearly Malaysian Ringgit 10 billion, or 0.5% of Malaysia’s GDP, in 2023. The foreword by Malaysia’s Minister of Digital Gobind Singh Deo praises the company for “promoting more efficient use of resources”, “creating a new wave of business opportunities”, increasing market efficiency, and “enhancing the lives of millions”. It is difficult to deny that e-commerce, e-hailing and delivery services have increased the number of jobs in Malaysia and much of Southeast Asia. But it should leave one to wonder: have these sectors risen at a cost to our workers and future economic prospects and could we have done better?
Why e-commerce, e-hailing and delivery services
The reason for singling out e-commerce, e-hailing and delivery services is, as the report also highlights, their significant contribution to economic output measured in GDP and employment. Another reason is the sheer ubiquity of these services, especially in urban spaces where economic activity and populations are most dense. The last reason is their utter simplicity. At the heart of it, these services move goods and passengers from one location to another and allow people to sell their goods or labour within this giant digital switchboard. A similar report on Grab in Thailand—which found its contribution being 1% of 2023 GDP—was released within the same month, making this analysis more relevant to regional developments as these platforms have taken over much of Southeast Asia.
Platform capitalism: a historical necessity
The entry of these types of businesses came about at a crucial economic juncture. The Malaysian state was looking to retrieve the golden years from before the 1997–8 Asian Financial Crisis when annual GDP growth averaged 8–9%. Aside from the rebound after the 2007–8 Global Financial Crisis, growth only averaged about 4–5%. This was the case for other Southeast Asian countries, particularly Thailand and Indonesia.
The slump in growth can be linked to the sharp decline in investment (measured as gross fixed capital formation). All of this was happening against the global economic background of manufacturing overcapacity and falling rates of return on fixed capital —machinery, equipment and production infrastructure). These declines were the likely drivers of premature deindustrialisation —failing to deliver the benefits of manufacturing fully— in Malaysia, the Philippines and Indonesia while Thailand is at risk of this problem.
If investment—particularly in manufacturing—could not be relied on to drive economic expansion, the engine of consumption could be fired up instead. Now e-commerce, e-hailing and delivery services —the main form of platform capitalism to our countries— are all around us in Southeast Asia, whether you are a consumer or an employee of these firms.
As Nick Srnicek observes in his book Platform Capitalism, the rise of the platform economy is linked to its reliance on excess capital and its “generating of monopoly rents into actual financial returns”. In other words, a key function of these industries is to soak up unused capital—that has few profitable places to go globally amid a worldwide decline in the profit rate—and generate fees as their primary source of revenue. Yet, this should not distract from the reality that without a pool of highly exploitable variable capital (the low wages of drivers and riders), this mode of accumulation would not function.
Who paid for the gains?
The money for this consumption came from all layers of Malaysian society but is likely drawn most heavily from the middle and upper classes. These two broad classes would have the disposable income to purchase more expensive goods, food, delivery and e-hailing services.
Where in the past one might just drive out to have dinner (and maybe spend Malaysian Ringgit 2–3 on fuel to get there), now one pays significantly more (upwards to Malaysian Ringgit 5–10) for the convenience of having it delivered to your doorstep. These labour-saving services allow for anyone with the financial means to have a virtual butler of sorts—getting food, goods of all kinds, transportation and even a variety of tasks done— through platform capitalism. The ease of accessing these goods and services through one’s phone at all hours of the day had led to compulsive buying among many, and even addiction for some.
On top of all this, only a fraction of these new economic activities and revenues have trickled down to the lower layer of the working classes who in all likelihood supplied the labour—delivery riders, e-hailing drivers and small food vendors—for this consumption. Even if these platforms only take a small slice of the commissions on these services—a whole host of them don’t even consistently turn a profit—it would not negate the fact that these workers do not earn a dignified wage and put their bodies at risk to acquire it.
What we lost, and could have had
The Malaysian Grab report was released in February with very little public interest (at least from what can be seen on various social media). I suspect that is because the company’s achievements are nothing to be celebrated in social terms as the many governments are busy looking to promote high-skill jobs, increase wages and give people better living standards.
It’s easy to see platform capitalism as a win solely on the increase of economic activity and overall employment created with e-commerce, e-hailing and delivery services. Yet workers, governments and lay people are reconsidering the effects of platform capitalism on our job prospects and debt burdens across Southeast Asia. It is becoming increasingly evident that the value that platform capitalism brings to the table may not last or have as much impact as initially supposed. In the past, the creation of labour-saving machines that do our cleaning and cooking generated more economic activity and manufacturing employment. Now, platform capitalism is trying to profit off labour-saving services by deeply exploiting our excess labour force, all while trying to get rid of them through robotaxis and drone deliveries.
These industries came about just at a time when they would essentially save many governments from having to deal with underemployment and the lack of meaningful job opportunities. They saved these governments from needing to make an expensive and painful transition to bring the local workforce back into labour-intensive manufacturing, upskill their youth, and ultimately to pay them better. They delivered a new frontier for Capital to invest in rather than have it innovate its way out of manufacturing’s collapsing profit rate.
Where does it go from here?
The lead author of the report on Grab’s role in the Thai economy told the press that “the platform economy is inevitable”, and it may certainly be the case given the global forces of financialisation. According to a recent Malaysian think tank’s report, as Malaysia transitions from “industrial to finance capitalism”, what we get is an economy that “combines flexible labour markets with the expansion of credit … to sustain consumption in the face of stagnating real wages”. Platform capitalism seems to fit the bill almost exactly in Malaysia and the rest of Southeast Asia to varying degrees.
Yet this should not distract us from the social and economic consequences of continuing this system. Even if one wants to be generous and consider platform-based gig economy and e-commerce as a stopgap measure, it should not overshadow the lingering problem of low and stagnant wages across the economy, and the role of debt in keeping the flywheel of consumption turning.
But more importantly, where could deepening platform capitalism even take us in ten or twenty years? How soon will these platforms reach their maximum users and revenue and subsequently see their profits stagnate or decline? Would it ever be able to offer its riders and drivers a stable and secure career ladder? What would the debt situation of many middle-class aspirants look like? The bleak reality of reproducing this system and having a sizeable number of people become “their own boss”—how many platforms advertise riding or driving for them—is that we as a society have locked away a better future for many among us.
Postscript: What would platform work look like under socialism? One obvious way to consider this possibility is to imagine if they were nationalised and made almost no profit —an option that could even be pursued under social-democratic capitalism. If these transportation and delivery services were seen as public goods like the post office, they could offer job security and flexibility which might allow their young workers to upskill and eventually move on to other vocations. Leaving aside the question of how much consumption a society should have under socialism, one could even imagine these two services being free and subsidised fully by the state, mediated through publicly owned platforms that are able to serve genuine social functions.
The longer original version of this article is available at New Mandala.