economics

Michel Bauwens recently spoke at the Harvard Berkman Center to give his big-picture analysis of the economic and social transition now underway.  The hour-long video of his talk provides a clear explanation for why peer production is flourishing and out-competing conventional business models and markets.  It’s all part of an epochal shift in how value is created, argues Bauwens.

Citing major transitions of the past – from nomadic communities to clans; from clans to class-based, pre-capitalist societies; from pre-capitalism to capitalism – Bauwens said, “We’re in a period of history in which a marginal system of value is moving to the center of value-creation.” 

For those who don't have an hour to watch the video, below, a review of Michel's key points: 

Unlike traditional leftist visions of revolution, which require a social movement to seize state power and then install another system, the emerging world of peer production is based on another vision:  build an alternative economy outside the circuits of capitalism, or at least insulated from its exploitation, and then develop its own functionalities and moral authority. 

The point is not so much to displace or smash capitalism, he said, as to make the commons the new, more compelling “attractor” for activities that create value.  Rather than try to use private labor to produce value, which is then captured by privately owned corporations and sold in markets based on artificially created scarcity, the peer production economy proposes a new model:  abundance based on an ethic of sufficiency.

Instead of allocating surplus value through the market or hierarchical systems, the peer production economy creates value through open, voluntary contributions and “massive mutual coordination,” said Bauwens.  The goal is to create commons through social systems and the sharing of resources.

On June 21, I gave a presentation to a number of staffers and others at the Agence Française de Développement in Paris outlining my vision of the commons as an alternative vision of "development."  The talk was entitled "Beyond Development:  The Commons as a New/Old Paradigm of Human Flourishing."  Here are my prepared remarks:

I am grateful to be back in your lovely city, and I am grateful for your invitation to speak today about the commons as a new vision of “development.”  As the planet reels from the slow-motion catastrophe of climate change, we are seeing the distinct limits of the prevailing paradigms of economic thought, governance, law and politics.  While collapse and catastrophe have their own lurid attraction to many, the human species – and our governments – have a duty to seriously entertain the questions:  What new structures and logics will serve us better?  How can we better meet basic human needs – not just materially, but socially and spiritually?  And can we move beyond rhetoric and general abstractions to practical, concrete actions?

After studying the commons for nearly twenty years as an independent scholar and activist, I have come to the conclusion that the commons hold great promise in answering these questions.  But it is not a ready-made “solution” so much as a general paradigm and organizing perspective – embodied, fortunately, in thousands of instructive examples.  The commons is a lens that helps us understand what it means to be a human being in meaningful relation to other people and to the Earth.  This then becomes the standard by which we try to design our social institutions.

Talking about the commons forces us to grapple with the checkered history of “development” policy and what it reveals about global capitalism and poorer, marginalized countries.  We have long known that development objectives tend to reflect the political priorities of rich, industrialized western nations, particularly their interests in economic growth and private capital accumulation. 

Every so often I am invited to write a piece that in effect answers the question, “Why the commons?”  I invariably find new answers to that question each time that I re-engage with it.  My latest attempt is an essay, “Commoning as a Transformative Social Paradigm,” which I wrote for the Next System Project as part of its series of proposals for systemic alternatives. 

For those of you have been following the commons for a while, my essay will have a lot of familiar material.  But I also came to some new realizations about language and the commons, and why the special discourse about commoning and enclosures is so important. I won’t reproduce the entire essay – you can find it here as a pdf download or as a webpage at the Next System Project – but below I excerpt the opening paragraphs; the section on the discourse of the commons; and the conclusion.

Introduction

In facing up to the many profound crises of our time, we face a conundrum that has no easy resolution: how are we to imagine and build a radically different system while living within the constraints of an incumbent system that aggressively resists transformational change? Our challenge is not just articulating attractive alternatives, but identifying credible strategies for actualizing them.

I believe the commons—at once a paradigm, a discourse, an ethic, and a set of social practices—holds great promise in transcending this conundrum. More than a political philosophy or policy agenda, the commons is an active, living process. It is less a noun than a verb because it is primarily about the social practices of commoning—acts of mutual support, conflict, negotiation, communication and experimentation that are needed to create systems to manage shared resources. This process blends production (self provisioning), governance, culture, and personal interests into one integrated system.

This essay provides a brisk overview of the commons, commoning, and their great potential in helping build a new society. I will explain the theory of change that animates many commoners, especially as they attempt to tame capitalist markets, become stewards of natural systems, and mutualize the benefits of shared resources. The following pages describe a commons-based critique of the neoliberal economy and polity; a vision of how the commons can bring about a more ecologically sustainable, humane society; the major economic and political changes that commoners seek; and the principal means for pursuing them.

Finally, I will look speculatively at some implications of a commons-centric society for the market/state alliance that now constitutes “the system.” How would a world of commons provisioning and governance change the polity? How could it address the interconnected pathologies of relentless economic growth, concentrated corporate power, consumerism, unsustainable debt, and cascading ecological destruction?

....

For the Uncommons conference in Berlin on October 23, Michel Bauwens recently distilled his years of thinking about digital collaboration into a short text, “Ten Commandments of Peer Production and Commons Economics.”  The document describes the key pillars of “a mode of production and value creation that is free, fair and sustainable.”  I am reproducing his entire text here because I think it is so succinct and seminal.

As we have tried to show elsewhere, the emergence of Commons-Oriented Peer Production has generated the emergence of a new logic of collaboration between open productive communities who created shared resources (commons) through contributions, and those market-oriented entities that created added value on top or along these shared commons.

This article addresses the emerging practices that should inspire these entities of the 'ethical' economy. The main aim is to create new forms that go beyond the traditional corporate form and its extractive profit-maximizing practices of value extraction. Instead of extractive forms of capital, we need generative forms, that co-create value with and for the commoners.

I am using the form of commandments to explain the new practices. All of them have already emerged in various forms, but need to be generalized and integrated.

What the world and humanity, and all those beings that are affected by our activities require is a mode of production, and relations of production, that are “free, fair and sustainable” at the same time.

OPEN AND FREE

1. Thou shall practice Open Business Models based on shared knowledge

Closed business models are based on artificial scarcity. Though knowledge is a non- or anti-rival good that gains in use value the more it is shared, and though it can be shared easily and at very low marginal cost when it is in digital form, many extractive firms still use artificial scarcity to extract rents from the creation or use of digitized knowledge. Through legal repression or technological sabotage, naturally shareable goods are made artificially scarce, so that extra profits can be generated. This is particularly galling in the context of life-saving or planet-regenerating technological knowledge. The first commandment is therefore the ethical commandment of sharing what can be shared, and only creating market value from resources that are scarce and create added value on top or along these commons. Open business models are market strategies that are based on the recognition of natural abundance and the refusal to generate income and profits by making them artificially scarce.

Thou shall find more information on this here at http://p2pfoundation.net/Category:Business_Models

FAIR

2. Thou shall practice Open Cooperativism

Many new more ethical and generative forms are being created, that have a higher level of harmony with the contributory commons. The key here is to choose post-corporate forms that are able to generate livelihoods for the contributing commoners.

Open cooperatives in particular would be cooperatives that share the following characteristics:

1) they are mission-oriented and have a social goal that is related to the creation of shared resources

2) they are multi-stakeholder governed, and include all those that are affected by or contributing to the particular activity

One of the great economists of the twentieth century had the misfortune of publishing his magnum opus, The Great Transformation, in 1944, months before the inauguration of a new era of postwar economic growth and consumer culture. Few people in the 1940s or 1950s wanted to hear piercing criticisms of “free markets,” let alone consider the devastating impacts that markets tend to have on social solidarity and the foundational institutions of civil society. And so for decades Polanyi remained something of a curiosity, not least because he was an unconventional academic with a keen interest in the historical and anthropological dimensions of economics. 

As the neoliberal revolution instigated by Reagan and Thatcher in the 1980 has spread, however, Polanyi has been rediscovered.  His great book – now republished with a foreword by Joseph Stiglitz – has attracted a new generation of readers. 

But how to make sense of Polanyi’s work with all that has happened in the past 70 years?  Why does he still speak so eloquently to our contemporary problems? For answers, we can be grateful that we have The Power of Market Fundamentalism:  Karl Polanyi’s Critique, written by Fred Block and Margaret R. Somers, and published last year. The book is a first-rate reinterpretation of Polanyi’s work, giving it a rich context and commentary.  Polanyi focused on the deep fallacies of economistic thinking and its failures to understand society and people as they really are. What could be more timely?

The cult of free market fundamentalism has become so normative in our times, and economics as a discipline so hidebound and insular, that reading Polanyi today is akin to walking into a stiff gust of fresh air.  We can suddenly see clear, sweeping vistas of social reality.  Instead of the mandarin, quantitative and faux-scientific presumptions of standard economics – an orthodoxy of complex illusions about “autonomous” markets – Polanyi explains how markets are in fact embedded in a complex web of social, cultural and historical realities.

So what might a commons-based economy actually look like in its broadest dimensions, and how might we achieve it?  My colleague Michel Bauwens of the P2P Foundation offers a remarkably thoughtful and detailed explanation in a just-released YouTube talk, produced by FutureSharp. It’s not really a video – just Michel’s voiceover and a simple schematic chart – but the 20-minute talk does a great job of sketching the big-picture strategies that must be pursued if we are going to invent a new type of post-capitalist economy.

Michel focuses on the importance of three specific realms that are crucial to this new vision – ecological sustainability, open knowledge and social solidarity. Each is critical as a field of action for overturning the existing logic of market capitalism. 

Fortunately, there are many promising developments in each of these realms. Many parts of the environmental movement seek to go beyond the standard “market-oriented solutions.” There is a growing body of open source-inspired projects for software code, information, design and physical production, which is now spawning new types of global sharing of information with distributed local production. And there are many advocates and initiatives for social justice and fairness in the economy, such as cooperatives and the solidarity economy movement.

The problem, says Bauwens, is that these movements do not generally connect with each other or coordinate internationally. He therefore sees the need for “meta-economic networks” to bridge these fields of action. So, for example, we need “open cooperativism” enterprises to bridge open knowledge systems and cooperatives, so that open network (or licensed) systems are not simply dominated by large corporations in the way that Google, Uber and Airbnb have done. We also need to develop an “open source circular economy” to bridge the worlds of eco-sustainability and open knowledge.  We will never address major environmental problems if the technological and product solutions are based on proprietary knowledge; open circulation of knowledge can change that.

The latest issue of Boston Review has a lively forum on the growing power of network-based businesses such as Amazon, Uber and Airbnb.  These companies may not be monopolies in the strict conventional sense of the law, but they nonetheless use their market dominance and network platforms to extract all sorts of advantages from competitors, suppliers and consumers. 

K. Sabeel Rahman, a professor at Brooklyn Law School, presented his assessment of the situation, and then nine people of various persuasions (including me) responded.  Rahman stated the problem succinctly:

The kinds of power that Amazon, Comcast and companies such as Airbnb and Uber possess can’t be seen or tackled via conventional antitrust regulations.  These companies are not, strictly speaking, monopolies; Urban and Airbnb, in particular, do not engage in the kind of price-fixing or market dominance that is the usual target of antitrust regulation today.  These companies are better understood as platforms or utilities:  they provide a core, infrastructural service upon which other firms, individuals and social groups depend.

The problem is that conventional antitrust regulation isn’t really equipped to deal with information economy platforms, which tend to connect buyer and sellers in more efficient ways while offering very low prices. What’s the problem with that? Well, the problem is open networks paradoxically result in "power law" outcomes in which a minority of players tend to dominate the universe of users. Some companies have used this network-based advantage to limit competitors' access to the market, impose unfair conditions on consumers or producers, and evade consumer and labor-rights laws. 

Rahman calls for a re-purposing of Progressive era policies from a century ago that tamed large monopolies like railroads by subjecting them to public utility regulation. Is this the way to go? Juliet Schor of Boston College agrees that there is a problem, but considers the regulatory approach nostalgic and unimaginative. She argued: 

“Peer-to-peer structure and peer ownership of capital undermine the argument for private ownership of platforms and, by extension, for the public utility model.  This is not to say there isn’t a strong public interest in this sector – there is.  But the compelling feature of these entities is that most of the value in the market is produced by the peers, not the platforms.  This suggests that platforms can and should be owned and governed by users.  If they are, we can worry less about rent extraction, concentrations of political power, and the other concerns Rahman raises.”

I recently encountered a brilliant new essay by German writer Ina Praetorius that revisits the feminist theme of “care work,” re-casting it onto a much larger philosophical canvas. “The Care-Centered Economy:  Rediscovering what has been taken for granted” suggests how the idea of “care” could be used to imagine new structural terms for the entire economy. 

By identifying “care” as an essential category of value-creation, Praetorius opens up a fresh, wider frame for how we should talk about a new economic order.  We can begin to see how care work is linked to other non-market realms that create value -- such as commons, gifts of nature and colonized peoples --all of which are vulnerable to market enclosure.

The basic problem today is that capitalist markets and economics routinely ignore the “care economy” -- the world of household life and social conviviality may be essential for a stable, sane, rewarding life.  Economics regards these things as essentially free, self-replenishing resources that exist outside of the market realm.  It sees them as “pre-economic” or “non-economic” resources, which therefore don’t have any standing at all.  They can be ignored or exploited at will.

In this sense, the victimization of women in doing care work is remarkably akin to the victimization suffered by commoners, colonized persons and nature.  They all generate important non-market value that capitalists depend on – yet market economics refuses to recognize this value.  It is no surprise that market enclosures of care work and commons proliferate.

A 1980 report by the UN stated the situation with savage clarity:  “Women represent 50 percent of the world adult population and one third of the official labor force, they perform nearly two thirds of all working hours, receive only one tenth of the world income and own less than 1 percent of world property.”

Harvard law professor Yochai Benkler gave attendees at the World Economic Forum in Davos a dire warning about future instability if the “Uber-ification of all services” continues.  In his intense six-minute talk, “Challenges of the Sharing Economy,” Benkler notes how open networks and collaborative production models have led to the “destabilization of the firm," and ultimately threaten to bring about “the potential reorganization of the entire services sector.”

The big challenge today, he argued, is that the social and the political have diverged, as demonstrated by the Occupy movement. And this leads to worrisome social pressures that the political system is disinclined to address.

I realize that Benkler must have been under a strict time limit -- he was talking quite rapidly for this talk -- but it sure would be nice to hear his proposed solutions for re-integrating the social and the political in functional ways, and how he proposes moving that agenda forward.  But at least the Davos crowd was alerted to this fundamental political challenge. Whether they will deign to recognize the issue and move beyond their adulation for the Uber, Airbnb and other lucrative forms of network monopoly is another matter.

In an amazingly prescient essay, “The Exit From Capitalism Has Already Begun,” journalist and social philosopher André Gorz in 2007 explained how computerization and networks are causing a profound crisis in capitalism by making knowledge more shareable. He argues that shareable knowledge and culture undercuts capitalist control over the global market system as the exclusive apparatus for production and consumption (and thus our "necessary" roles as wage-earners and consumers). 

The essay, translated by Chris Turner, originally appeared in the journal EcoRev in Autumn 2007 and was reprinted in Gorz’s 2008 book Ecologica. It’s worth revisiting this essay because it so succinctly develops a theme that is now playing out, one that Jeremy Rifkin reprises and elaborates upon in his 2014 book The Zero Marginal Cost Society. 

Let’s start with the conundrum that capital faces as computerization makes it possible to produce more with less labor.  Gorz writes:

The cost of labor per unit of output is constantly diminishing and the price of products is also tending to fall. The more the quantity of labor for a given output decreases, the more the value produced per worker – productivity – has to increase if the amount of achievable profit is not to fall. We have, then, this apparent paradox: the more productivity rises, the more it has to go on rising, in order to prevent the volume of profit from diminishing. Hence the pursuit of productivity gains moves ever faster, manpower levels tend to reduce, while pressure on workers intensifies and wage levels fall, as does the overall payroll. The system is approaching an internal limit at which production and investment in production cease to be sufficiently profitable.

Over time, Gorz explains, this leads investors to turn away from the “real economy” of production, where productivity gains and profits are harder to achieve, and instead seek profit through financial speculation in "fictitious" forms of value such as debt and new types of financial instruments. The value is ficititious in the sense that loans, return on investment,  future economic growth, trust and goodwill are social intangibles that are quite unlike physical capital. They depend upon collective belief and social trust, and can evaporate overnight.

Still, it is generally easier and more profitable to invest in these (fictitious, speculative) forms of financial value than in actually producing goods and services at a time when productivity gains and profit are declining.  No wonder speculative bubbles are so attractive:  There is just too much capital is sloshing around looking for profitable investment which the real economy is less capable of delivering.  No wonder companies have so much cash on hand (from profits) that they are declining to invest. No wonder the amount of available finance capital dwarfs the real economy. Gorz noted that financial assets in 2007 stood at $160 trillion, which was three to four times global GDP – a ratio that has surely gotten more extreme in the past eight years.