Chapter Fifteen Excerpts: Peer Production and the Crisis of Value
Sometime in the next few weeks, I expect to have drafts of the last two chapters of my organization theory manuscript, Fifteen and Sixteen, online. From there, it will simply be a matter of working through the backlog of reading to fill in the gaps in the earlier chapters, polishing them up, and handling the bureaucratic details of getting them into a format an on-demand publisher will accept. In the meantime, here are two excerpted sections from Chapter Fifteen:
Chapter Fifteen. The Social Organization of Production: Cooperatives and Peer Production
E. Peer Production
F. The Social Economy and the Crisis of Capitalism
Lewis Mumford, in The City in History, discussed the closer connection between science and invention, in a way that prefigured more recent discussions of peer-to-peer culture. According to Mumford, in the neotechnic phase the possibilities for invention are suggested by, and follow directly from, the general level of scientific knowledge--which itself is the product of an egalitarian international community. So, although the actual coinage of the term "peer-to-peer" awaited the cyberculture, Mumford anticipated technical innovation as a decentralized process.
Peer production first emerged in information industries: software, entertainment, etc. As Johan Soderberg argues,
As is the case with cooperatives, peer networks are more productive than the capitalist competition because of the agency and motivational benefits of self-employment. Soderberg quotes Linus Torvalds' comment that proprietary software systems are bad "because the people don't care," and adds
As we saw from the Microsoft "Halloween Document" quoted in the "intellectual property" section of Chapter Three, Bill Gates viewed the free and open-source software movement as a subversive threat to profits on proprietary software.
Peer production's transferability to the world of physical production is also a matter of great interest. Open source hardware refers, at the most basic level, to the development and improvement of designs for physical goods on an open-source basis, with no particular mode of physical production being specified. In Stallman's terms, open source hardware means the design is free as in free speech, not free beer. Although the manufacturer is not hindered by patents on the design, he must still bear the costs of physical production. As Edy Ferreira described it,
At the simplest level, a peer network may design a product and make it publicly available on an open-source basis; it may be subsequently built by any and all individuals or groups who have the necessary production machinery, without coordinating their efforts with the original designer(s). For example, Vinay Gupta has proposed a large-scale library of open-source hardware designs as an aid to international development:
One item of his own design, the Hexayurt, is
The basic construction materials for the floor, walls and roof cost about $200.
One of the most ambitious attempts at such an open design project for village development is Open Source Ecology, with their experimental facility Factor E Farm.
Here's a list of the design categories and individual projects being developed by OSE, from their Wiki:
One project that's reached the prototype stage, the Compressed Earth Block press, can be built for $5000--some 20% of the price of the cheapest commercial competitor. Another project in development is the solar turbine, which uses the sun's heat to power a steam-driven generator, as an alternative to photovoltaic electricity.
Karim Lakhani describes this general phenomenon, the separation of open-source design from an independent production stage, as "communities driving manufacturers out of the design space":
Michel Bauwens, of the P2P foundation, provides a small list of some of the more prominent open-design projects:
A more complex scenario involves the coordination of an open source design stage with the production process within a large peer organization, with the separate stages of physical production distributed and coordinated by the same peer network that created the design. Dave Pollard provides one example:
The most ambitious example of an open-source physical production project is the open source car.
Can open-source practices and approaches be applied to make hardware, to create tangible and physical objects, including complex ones? Say, to build a car?...
Well, actually there's an open-source project even more ambitious than the open-source car, but it's fictional: the open-source moon project, a volunteer effort of a peer network of thousands, in Craig DeLancy's "Openshot." The project's ship (the Stallman), built largely with Russian space agency surplus, beats a corporate-funded proprietary project to the moon. [Analog, December 2006, pp. 64-74.]
A slightly less ambitious open-source manufacturing project, and probably more relevant to the needs of most people in the world, is Open Source Ecology's open-source tractor (LifeTrac). It's designed for inexpensive manufacture, with modularity and easy disassembly, for lifetime service and low cost repair. It includes, among other things, a well-drilling module, and is also designed to serve as a prime mover for the Compressed Earth Block machine, a saw mill, and other machinery.
In either case, whether physical production is coordinated with the design stage or organized independently, it may take place in comparatively heavily capitalized factories (likely owned by workers' cooperatives in a post-capitalist society), by outsourcing the production of specific parts to more modestly capitalized small shops, or to even cheaper emerging small-scale production facilities like the multimachine, or to a combination of some or all of the above.
Clearly, as we saw in Chapter Fourteen, the emergence of cheap desktop technology for custom machining parts in small batches will greatly lower the overall capital outlays needed for networked physical production of light and medium consumer goods.
The availability of modestly priced desktop manufacturing technology (coupled with the promise of LETS systems, mutual banks, and other forms of alternative credit) has led to a considerable shift in opinion in the peer-to-peer community, as evidenced by Michel Bauwens:
Kevin Kelly argues that the actual costs of physical production are only a minor part of the cost of manufactured goods.
This is essentially a restatement, from a less gushy point of view, of Tom Peter's observation that the bulk of product price is "ephemera" or "intellect," rather than nuts and bolts and labor. Or as I put it in Chapters Ten and Eleven, much less nicely, most of the price of manufactured goods is embedded rent on artificial property rights like "intellectual property." When physical manufacturing is stripped of the cost of proprietary design and technology, and the consumer-driven, pull model of distribution strips away most of the immense marketing cost, we will find that the portion of price formerly made up of such intangibles will implode, and the remaining price based on actual production cost will be an order of magnitude lower. In a world where commodity price consists entirely of labor and material costs, without rents to useless eaters with grants of privilege from the state, we can likely maintain the existing standard of living with an average work week of one or two days. The other three or four days of work, as I argued in Chapter Twelve, go to fixing Bastiat's broken windows, digging holes and filling them back in, and supporting idle rentiers.
In any case, there is a common thread running through all the different theories of the interface between peer production and the material world: as technology for physical production becomes feasible on increasingly smaller scales and at less cost, or the lower the transaction costs of aggregating small units of capital into large ones, the less disconnect there will be between peer production and physical production.
Franz Nahrada writes in the same vein, affirming Bauwens' distinction between cooperatives and peer production, but nevertheless arguing that
In effect, the distinction between Stallman's "free speech" and "free beer" is eroding. To the extent that embedded rents on "intellectual property" are a significant portion of commodity prices, "free speech" (in the sense of the free use of ideas) will make our "beer" (i.e., the price of manufactured commodities) at least a lot cheaper.
Although leading figures in the proprietary software (and proprietary everything) movement are fond of using alarmist language about peer producers--for example, Bill Gates' reference to the open-source movement as "communists"--peer production is in fact a case of "back to the future." It's a return to the kind of self-employment and small-scale production for consumption or local exchange that predated the Industrial Revolution and the corporate transformation of capitalism, but this time producing the kinds of high-quality manufactured outputs previously monopolized by large-scale industry. As "Jed," at Anomalous Presumptions blog, describes it, peer production makes it possible to produce without access to large amounts of capital:
But beyond that, Charles Johnson points out, because of the new possibilities the Internet provides for lowering the transaction costs entailed in networked mobilization of capital, peer production can take place even when significant capital investments are required--without relying on finance by large-scale sources of venture capital:
In making productive use of idle capital assets the average person owns anyway, providing a productive outlet for the surplus labor of the unemployed, and transforming the small surpluses of household production into a ready source of exchange value, the informal economy has as the cornerstone of its temple the stone which the builders rejected.
[Footnote: As we saw in Chapter Four, one of the ways that so-called "health" and "safety" codes, and occupational licensing, enforce radical monopoly and create barriers to cheap and comfortable subsistence, is by preventing people from using idle capacity (or "spare cycles") of what they already own anyway, and thereby transforming them into capital goods for productive use.
Consider, for example, the process of running a small, informal brew pub or restaurant out of your home, under a genuine free market regime. Buying a brewing vat and a few small fermenters for your basement, using a few tables in an extra room as a public restaurant area, etc., would maybe require a small bank loan for at most a few thousand dollars. And with that capital outlay, you could probably make payments on the debt with the margin from one customer a day. A few customers evenings and weekends, most of whom probably could be found mainly among your existing circle of acquaintances, would enable you to initially shift some of your working hours from wage labor to work in the restaurant, with the possibility of gradually phasing out wage labor altogether or scaling back to part time, as you built up a small customer base. In this and many other lines of business (for example a part-time gypsy cab service using a car you own anyway), the minimal entry costs and capital outlay mean that the minimum level of custom required to stay in business would be quite modest, and even a low level of turnover would be sufficient to pay the overhead. In that case, a lot more people would be able to start small businesses for supplementary income and just scale back their wage labor a bit, maybe gradually shift to complete self employment, all with minimal risk or sunk costs.
But that’s illegal. You have to buy an extremely expensive liquor license, as well as having an industrial size and strength stove, dishwasher, etc. And that level of capital outlay can only be paid off with a large dining room and a large kitchen-waiting staff, which means you have to keep the place filled or the overhead costs will eat you alive–IOW, Chapter Eleven. These high entry costs and the enormous overhead are the reason you can’t afford to start out really small and cheap, and the reason restaurants have such a high failure rate. It's illegal to use the surplus capacity of the ordinary household items we have to own anyway but remain idle most of the time. RFID chip requirements and bans on unpasteurized milk make it illegal to trade the small surpluses generated by ordinary household subsistence production. High fees for organic certification make it prohibitive to sell a few hundred dollars worth of surplus organic produce at a temporary roadside stand. You can't do just a few hundred or a few thousand dollars worth of business a year, because the state mandates capital equipment on the scale required for a large-scale business if you engage in the business at all.
So it's employers, as well as big competitors, who have a vested interest in keeping these entry costs so high. It’s a way of erecting an enormous toll gate between you and the possibility of self-employment, without a boss cracking the whip over you.]
Networked peer production dovetails both with Jane Jacobs' model of the Japanese bicycle factory, and with Kirkpatrick Sale's community repair, recycling, and remanufacturing shops, which we discussed in Chapter Fourteen. Along the same lines, Colin Ward suggests
Ward suggests, rather, that the Community Workshop will bridge the growing gap between the worlds of work and leisure.
Karl Hess also discussed community workshops--or as he called them, "shared machine shops"--in Community Technology.
This last is reminiscent of Jane Jacobs' observations on the development of local, diversified economies through the discovery of creative uses for locally generated waste and byproducts, and the use of such innovative technologies to replace imports.
E. F. Schumacher recounted his experiences with the Scott Bader Commonwealth, encouraging (often successfully) the worker-owners to undertake such ventures as a community auto repair shop, communally owned tools and other support for household gardening, a community woodworking shop for building and repairing furniture, and so forth. The effect of such measures was to take off some of the pressure to earn wages, so that workers might scale back their work hours. [E. F. Schumacher, Good Work, pp. 80-83.]
Another proposal for decentralizing manufacturing, first to the community and then to the household, is Nathan Cravens' Mutually Assured Production:
Eric Hunting (in the same comment thread) suggested, further, that the process of technological innovation under corporate capitalism, in a sort of "Phase 0," is laying the groundwork for this process. The high costs of technical innovation, the difficulty of capturing value from it, and the mass customization or long tail market, taken together, create pressures for common platforms that can be easily customized between products, and for modularization of components that can be used for a wide variety of products. And Hunting points out that, as we already saw in Chapter Nine, the predominant "outsource everything" and "contract manufacturing" model increasingly renders corporate hubs obsolete, and makes it possible for contractees to circumvent the previous corporate principals and undertake independent production on their own account.
Michel Bauwens, in commenting on Hunting's remarks, notes among the "underlying trends... supporting the emergence of peer production in the physical world,"
The strong implications of these possibilities, for a shift in economic power from large corporations to ordinary people in the social economy, are discussed at greater length in the section immediately following this one.
One potential cloud overshadowing networked peer production is the issue of whether it could survive a disruption to the Internet, in the event the infrastructure of the latter is compromised during the terminal crises of state capitalism. It's heartening, in this light, to remember that fairly extensive computer networks were built from the ground up by private users linking their own computers together over the phone lines, without any central web servers. The PC modem was developed in 1978 by Ward Christensen and Randy Suess to transfer data directly between their computers over the phone lines. In 1979 they introduced the X Modem protocol which allowed computers to transfer files directly without a host system. Based on these technologies, small computer networks sprang up outside the ARPANET. For example, in 1979 three students at Duke and UNC created a modified version of the UNIX protocol which made possible computer linkups over the phone lines. They used it as the infrastructure of Usenet. In 1983, Tom Jennings designed an interface system for posting bulletin boards on interlinked PCs, which became the basis of Fidonet. By 1990, it linked 2500 computers in the U.S. Meanwhile Bulletin Board Systems (BBS) in the 1980s linked several million users into assorted virtual communities, based on direct computer-to-computer connections over the phone lines. Along the same lines, wireless urban "mesh networks" today can use the electromagnetic spectrum to relay data directly from sender to sender, without the content ever passing through a centralized server. Unfortunately, such mesh networks can operate only over a few blocks--at most a single city. [Manuel Castels, The Rise of the Network Society. Second edition (Oxford and Malden, MA: Blackwell Publishers, 1996, 2000), pp. 49-50; Johan Soderberg, Hacking Capitalism, pp. 96-97.]
As Michel Bauwens describes it, it is becoming increasingly impossible to capture value from the ownership of ideas, designs, and technique--all the "ephemera" and "intellect" that Peters writes about as a component of commodity price--leading to a crisis of sustainability for capitalism.
In a later blog post for the P2P Foundation, he elaborates on the nature of cognitive capitalism as a response to the limits on accumulation in the finite physical realm, attempting a new form of accumulation based on ownership of the cognitive realm. But this attempt is doomed to fail because of the increasing untenability of property rights in the information realm.
However, Bauwens writes, this is not feasible. The emergence of the peer model of production, based on the non-rivalrous nature and virtually non-existent marginal cost of reproduction of digital information, and coupled with the increasing unenforceability of "intellectual property" laws, means that capital is incapable of realizing returns on ownership in the cognitive realm.
Thus, there are two simultaneous crises: first, the failure of artificial abundance through subsidized inputs and externalization of cost, endless supplies of natural resources for appropriation (aided by state favortism), and the availability of new markets as outlets for surplus capital and output; and second, the failure of artificial scarcity in the cognitive realm. Taken together, this means that while markets and private ownership of physical capital will persist, "the core logic of the emerging experience economy, operating as it does in the world of non-rival exchange, is unlikely to have capitalism as its core logic."
Johan Soderberg relates this crisis of realization under state capitalism to capital's growing dependence on the state to capture value from social production and redistribute it to private corporate owners. This takes the form both of "intellectual property" law, as well as direct subsidies from the taxpayer to the corporate economy. He compares, specifically, the way photocopiers were monitored in the old USSR to protect the power of elites in that country, to the way the means of digital reproduction are monitored in this country to protect corporate power. [Hacking Capitalism, pp. 144-145.] James O'Connor's theme, of the ever-expanding portion of the operating expenses of capital which come from the state, is also relevant here. [The Fiscal Crisis of the State] The important point is that this strategy of shifting the burden of realization onto the state is untenable. The proliferation of bittorrent and episodes like the DeCSS uprising have shown that "intellectual property" is ultimately unenforceable. The RIAA's shakedown operation can be circumvented by the simple expedients of encryption and proxy servers. And as we have already seen, in an economy of subsidized inputs, the demand for such inputs grows exponentially, faster than the state can meet them. The state capitalist system will reach a point at which, thanks to the collapse of the portion of value comprised of rents on artificial property, the base of taxable value is imploding at the very time big business most needs subsidies to stay afloat.
In another article, in which he develops these themes at greater length, Bauwens writes that capitalism's successor system is likely to have a significant role for markets, but that the two structural presuppositions of existing capitalism--artificial abundance of resources and artificial scarcity of information--will be replaced by the reverse.
In the purely immaterial realm, the services of capital are becoming increasingly superfluous, as described by Michael Hardt and Antonio Negri:
In addition, capitalism faces a crisis of realization in another regard that Bauwens does not directly address. For over two centuries, as Immanuel Wallerstein observed, the system of capitalist production based on wage labor has depended on the ability to externalize many of its reproduction functions on the non-monetized informal and household economies, and on organic social institutions like the family which were outside the cash nexus.
Historically, capital has relied upon its superior bargaining power to set the boundary between the money and social economies to its own advantage. The household and informal economies have been allowed to function to the extent that they bear reproduction costs that would otherwise have to be internalized in wages; but they have been suppressed (as in the Enclosures) when they threaten to increase in size and importance to the point of offering a basis for independence from wage labor.
Just why the propertied classes came to see common rights as such a threat, and adopted a policy of Enclosure, is suggested by Raphael Samuel's account of Headington Quarry, a community of squatters who worked in quarries and small brickworks. Residents had family garden allotments, and engaged in a considerable amount of "poaching, rabbit-snaring, pig-rearing and cow-keeping...." Between the gardens and small game, they often had sufficient surplus to trade among themselves or to sell in the city.
The village was also, as Ward writes on Samuel's authority, "singularly free of landlords." [Colin Ward, "The hidden social history of housing--1. Cotters and squatters: informal settlements of the eighteenth and nineteenth century," in Social Policy: An Anarchist Response (London: Freedom Press, 1996), pp. 25-26. [19-29] The quote is from Samuel, "Quarry roughs: life and labour in Headington Quarry 1860-1920," in Samuel, Village Life and Labour (Routledge & Kegan Paul, 1975).]
The employing classes' fear of the subsistence economy made perfect sense. For as Kropotkin asked:
"The household as an income-pooling unit," Wallerstein writes, "can be seen as a fortress both of accommodation to and resistance to the patterns of labor-force allocation favored by accumulators." Capital has tended to favor severing the nuclear family household from the larger territorial community or extended kin network, and to promote an intermediate-sized income-pooling household. The reason is that too small a household falls so far short as a basis for income pooling that the capitalist is forced to commodify too large a portion of the means of subsistence, i.e. to internalize the cost in wages. [Immanuel Wallerstein, "Household Structures and Labor-Force Formation in the Capitalist World Economy," in Joan Smith, Immanuel Wallerstein, Hans-Dieter Evers, eds., Households and the World Economy (Beverly Hills, London, New Delhi: Sage Publications, 1984), pp. 20-21.] It is in the interest of the employer not to render the worker totally dependent on wage income, because without the ability to carry out some reproduction functions through the production of use value within the household subsistence economy, the worker will be "compelled to demand higher real wages...." [Wallerstein and Joan Smith, "Households as an institution of the world-economy," in Smith and Wallerstein, eds., Creating and Transforming Households: The constraints of the world-economy (Cambridge; New York; Oakleigh, Victoria; Paris: Cambridge University Press, 1992), p. 16.] On the other hand, "[t]he chief disadvantage of the too large units was that the level of work output required to ensure survival was too low.... [This] diminished pressure to enter the wage-labor market." [Wallerstein, "Household Structures," p. 20.]
The use of the social economy as a base for independence from wage employment has a venerable history. According to E. P. Thompson, "[n]ot only did the benefit societies on occasion extend their activities to the building of social clubs or alms-houses; there are also a number of instances of pre-Owenite trade unions when on strike, employing their own members and marketing the product." [E.P. Thompson, The Making of the English Working Class (New York: Vintage Books, 1963, 1966), p. 790.] G. D. H. Cole describes the same phenomenon:
The aims and overall vision of such organization was well expressed in the rules of the Ripponden Co-operative Society, formed in 1832 in a weaving village in the Pennines:
As the reference to exchanging "labour for labour" suggests, the system of cooperative exchange grew beyond the level of the individual retail store. Cooperative producers' need for an outlet led to Labour Exchanges, where workmen and cooperatives could directly exchange their product so as "to dispense altogether with either capitalist employers or capitalist merchants." Exchange was based on labor time, with a currency of paper "labour notes." "Owen's Labour Notes for a time not only passed current among members of the movement, but were widely accepted by private shopkeepers in payment for goods." Of course, this was a time in which the public was used to a wide variety of private banknotes in circulation. [Ibid., pp. 78-79.]
The principle of labor-based exchange was employed on a large-scale. In 1830 the London Society opened an Exchange Bazaar for exchange of products between cooperative societies and individuals. [Ibid., p. 76. ] The Co-operative Congress, held at Liverpool in 1832, included a long list of trades among its participants; the b's alone had eleven trades. The National Equitable Labour Exchange, organized in 1832-33 in Birmingham and London, was a venue for the direct exchange of products between craftsmen, using labor-notes as a medium of exchange. [E.P. Thompson, Making of the English Working Class, p. 791.]
The main difference in our own day is that the development of small-scale production technology has resulted in a revolutionary shift in competitive advantage from wage labor to the innformal economy. The rapid growth of technologies for home production in the twentieth century, based on small-scale electrically powered machinery and new forms of intensive cultivation, has led to a major shift in the comparative efficiencies of large- and small-scale production. The comparative efficiencies of the two systems were pointed out, as we have seen, by Ralph Borsodi almost eighty years ago, and the trend has continued since.
As James O'Connor described the phenomenon in the 1980s, "the accumulation of stocks of means and objects of reproduction within the household and community took the edge off the need for alienated labor."
Colin Ward, also writing in the Eighties, envisioned a major shift from wage labor to the household economy:
Credit considerations affect the family farmer in a similar manner. The family farm still tends to predominate even in mechanized production, simply because the economies of larger-scale industrial farming under direct corporate ownership and management are so poor, compared to those of a family farm which achieves full utilization of all equipment but can be directly worked by a single family or by a family with the help of hired laborers under their direct supervision. [Harold Brookfield, “Family Farms Are Still Around: Time to Invert the Old Agrarian Question,” Geography Compass 2:1 (2008), pp. 114-115. ] As a result, conventional agriculture is governed by the contract system, in which corporate agribusiness controls "the supply chains between farmers, their input suppliers and, especially, their market." It amounts to a kind of proletarianization on the same pattern as Brusco's first example of the home-work system in Italy, in which the farmer loses control of what and how much to plant, what methods to use, and so forth, and is paid barely enough to make ends meet. [Ibid., pp. 118-119.] As with the putting-out system for making tights in Italy, and the artisans in Nairobi, it's primarily the lack of credit and corporate control of the supply chain that constrain the small producer.
As we already saw in Chapter Nine, the shift from physical to human capital as the primary source of productive capacity in so many industries, along with the imploding price and widespread dispersion of ownership of capital equipment in so many industries, means that corporate employers are increasingly hollowed out and only maintain control over the physical production process through legal fictions. When so much of actual physical production is outsourced to the small sweatshop or the home shop, the corporation becomes a redundant "node" that can be bypassed; the worker can simply switch to independent production, cut out the middleman, and deal directly with suppliers and outlets. And the exponentially increasing demand for local produce, and the rise of farmers' markets and community-supported agriculture, mean increasing opportunities for family farmers, similarly, to circumvent ADM's and Cargill's control of the supply chains and produce directly for the local market.
We're experiencing a singularity, of sorts, in which it is becoming impossible for capital to prevent a shift in the supply of an increasing proportion of the necessities of life from mass produced goods purchased with wages, to small-scale production in the informal and household sector. The upshot is likely to be something like Vinay Gupta's "Unplugged" movement (see below), in which the possibilities for low-cost, comfortable subsistence off the grid result in exactly the same situation, the fear of which motivated the propertied classes in carrying out the Enclosures: a situation in which the majority of the public can take wage labor or leave it, if it takes it at all, the average person works only on his own terms when he needs supplemental income for luxury goods and the like, and (even if he considers supplemental income necessary in the long run for an optimal standard of living) can afford in the short run to quit work and live off his own resources for prolonged periods of time, while negotiating for employment on the most favorable terms. It will be a society in which workers, not employers, have the greater ability to walk away from the table. It will, in short, be the kind of society Wakefield lamented in the colonial world of cheap and abundant land: a society in which labor is hard to get on any terms, and almost impossible to hire at a low enough wage to produce significant profit.
The potential for defection is heightened by the greater efficiency with which the counter-economy extracts use-value from a given amount of land or capital.
Johan Soderberg refers to the possibility that increasing numbers of workers will "defect from the labour market" and "establish means of non-waged subsistence," through efficient use of the waste products of capitalism. [Soderberg, p. 172.] The "freegan" lifestyle (less charitably called "dumpster diving") is one end of a spectrum of such possibilities. At the other end is low-cost recycling and upgrading of used and discarded electronic equipment: the rapid depreciation of computers makes it possible to add RAM to a model a few years old at a small fraction of the cost of a new computer, with almost identical performance.
The central barrier to garage production of computers is the microprocessor, which can only be produced on capital equipment costing nearly a billion dollars. But reprogrammable microprocessors will eliminate that barrier, with millions of discarded chips enabling garage industry to operate entirely on recycled inputs in the same way that minimills reprocess scrap steel on a small scale wherever a market exists. In Cory Doctorow's Themepunks, for example, a small workshop uses the chips harvested from thousands of discarded Elmo dolls.
Paul Goodman and Ivan Illich both remarked, in their unique ways, on the effect of radical monopolies in making comfortable poverty impossible. As the alternative economy undermines the ability of artificial property rights to levy tribute on access to the means of subsistence, comfortable poverty becomes increasingly feasible.
Dave Pollard, of How to Save the World blog, describes his own version of the singularity in "The Virtuous Cycles of the Gift Economy." As people do the things they love and become better at them, it takes less and less money to live. People need to work less, and can devote the saved time not only to further developing production technique. People develop more skills, become more self-sufficient, and less dependent on store-bought commodities purchased with wages. They also invest a greater share of their productive energy in the gift economy and mutual aid, and a greater share of their time in building social capital. As a result, people on average are happier, healthier, and more responsible and competent; social problems and social costs decline, which further adds to the virtuous cycle of reduced cost and frees up more time from work. "These cycles are, of course, subversive. They threaten to undermine and starve the 'market' economy by freeing us, the end-customers of that economy, from the need to pay money into it."
This undermining and starving is exactly what we discussed in Chapter Thirteen: building the structure of the new society within the shell of the old. Pollard describes, as one way of bring about major global change, "incapacitation--rendering the old order unable to function by sapping what it needs to survive."
Gupta's short story "The Unplugged" related his vision of how such a singularity would affect life in the West.
The idea was to combine "Gandhi's Goals" ("self-sufficiency," or "the freedom that comes from owning your own life support system") with "Fuller's Methods" (the dymaxion principle of getting more with less). Such freedom
Our present discussion dovetails nicely with our discussion in Chapter Twelve of resilient communities and local production as a response to Peak Oil. James L. Wilson, at the Partial Observer, writes of ordinary people seceding from the wage system and meeting as many of their needs as possible locally, primarily as a response to the price increases from Peak Oil--but in so doing, also regaining control of their lives and ending their dependence on the corporation and the state.
If this singularity will enable the producing classes in the industrialized West to defect from the wage system, in the Third World it may enable them to skip that stage of development altogether. Gupta concluded "The Unplugged" with a hint about how the principle might be applied in the Third World: "We encourage the developing world to Unplug as the ultimate form of Leapfrogging: skip hypercapitalism and anarchocapitalism and democratic socialism entirely and jump directly to Unplugging."
Gupta envisions a corresponding singularity in the Third World, when the cost of an Internet connection, through cell phones and other mobile devices, falls low enough to be affordable by impoverished villagers. At that point, the transaction costs which hampered previous attempts at disseminating affordable intermediate technologies in the Third World, like Village Earth's Appropriate Technology Library or Schumacher's Intermediate Technology Development Group, will finally be overcome by digital network technology.
In Gupta's story, the Unplugger movement included a significant minority of Western society, to the extent that their withdrawal from the consumer market caused economic dislocations. We have already seen, in Chapter One, the Brave New World model of push distribution that the industrial economy depends on, and in Chapter Twelve the amount of employment and economic activity that involve processing subsidized waste--the moral equivalent of digging holes and filling them back in again. It is therefore entirely reasonable to ask, as did one of E. F. Schumacher's questioners:
Schumacher responded that it would be largely a paper collapse: "Well, I shouldn't worry too much about it."
Schumacher's answer is perhaps too glib. The question of the transition period is a real one. There is a very real possibility that the material foundations of the new decentralized economy will not be sufficiently laid down before the old economy's system of circulation breaks down, so that many who are dependent on employment lose their means of support with nothing to take its place. How to manage the transition is far beyond the scope of this analysis. My main purpose has been, first, to show that such a transition is likely, whether we like it or not, as state capitalism reaches its limits and the technical and organizational means of withdrawing from it become available; and second, to show the likely outlines of a successor society based on the new technical and organizational means. My personal opinion, as I have already discussed in Chapter Twelve in regard to the crisis of centralization resulting from Peak Oil, is that the transition will be relatively long and stable, compared to (say) the catastrophic collapse scenarios of James Kunstler.
At any rate, the more widespread the means of subsistence in the informal and household economies, and the more local infrastructure exists for exchange and barter, the more closely the transition crisis will resemble the paper crisis envisioned by Schumacher. For someone who has avoided or paid off credit card debt, who has obtained a modest mortgage and made paying it off as quickly as possible his top priority, and who has a large and productive vegetable garden, the possibility of unemployment is scary. But it's nowhere near as terrifying as for someone who's currently barely making the monthly interest payments on his mortgage, and who's cashed out all his home equity and maxed out all his credit cards buying a Wii and a big-screen TV and getting a new model car every couple years. Even for the creditors and the unemployed described by Schumacher's questioner, having a roof over your head free and clear and a reliable source of food will reduce, to a large extent, the concrete harm from the paper collapse.
My hope, at least, is that conventional measures like GDP will suffer (if only gradually, over a generation) what appears to be a catastrophic implosion, as people simply stop buying shit, cut back on the hours of wage labor they previously worked to earn the money to pay for shit, and supply more and more of their own needs producing for themselves and exchanging with their neighbors. My hope, at the same time, is that people will be so busy producing for themselves and their neighbors, and enjoying their control over their own lives and work and consumption, that the collapse of the state capitalist economy won't matter very much to them.
Chapter Fifteen. The Social Organization of Production: Cooperatives and Peer Production
E. Peer Production
F. The Social Economy and the Crisis of Capitalism
E. Peer Production
Lewis Mumford, in The City in History, discussed the closer connection between science and invention, in a way that prefigured more recent discussions of peer-to-peer culture. According to Mumford, in the neotechnic phase the possibilities for invention are suggested by, and follow directly from, the general level of scientific knowledge--which itself is the product of an egalitarian international community. So, although the actual coinage of the term "peer-to-peer" awaited the cyberculture, Mumford anticipated technical innovation as a decentralized process.
Peer production first emerged in information industries: software, entertainment, etc. As Johan Soderberg argues,
[t]he universally applicable computer run on free software and connected to an open network... have [sic] in some respects levelled the playing field. Through the global communication network, hackers are matching the coordinating and logistic capabilities of state and capital. [Johan Soderberg, Hacking Capitalism: The Free and Open Source Software Movement (New York and London: Routledge, 2008), p. 2.]
As is the case with cooperatives, peer networks are more productive than the capitalist competition because of the agency and motivational benefits of self-employment. Soderberg quotes Linus Torvalds' comment that proprietary software systems are bad "because the people don't care," and adds
To a hired programmer, the code he is writing is a means to get a pay check at the end of the month. Any shortcut when getting to the end of the month will do. For a hacker, on the other hand, writing code is an end in itself. He will always pay full attention to his endeavour, or else he will be doing something else. [Soderberg, p. 26. Soderberg also quotes Marx, from Grundrisse: "In fact, of course, this 'productive' worker cares about as much for the crappy shit he has to make as does the capitalist himself who employed him, and who also couldn't give a damn for the junk." Ibid., p. 197n.]
As we saw from the Microsoft "Halloween Document" quoted in the "intellectual property" section of Chapter Three, Bill Gates viewed the free and open-source software movement as a subversive threat to profits on proprietary software.
Peer production's transferability to the world of physical production is also a matter of great interest. Open source hardware refers, at the most basic level, to the development and improvement of designs for physical goods on an open-source basis, with no particular mode of physical production being specified. In Stallman's terms, open source hardware means the design is free as in free speech, not free beer. Although the manufacturer is not hindered by patents on the design, he must still bear the costs of physical production. As Edy Ferreira described it,
any piece of hardware whose manufacturing information is distributed using a license that provides specific rights to users without the need to pay royalties to the original developers. These rights include freedom to use the hardware for any purpose, freedom to study and modify the design, and freedom to redistribute copies of either the original or modified manufacturing information.
This definition fits what McNamara calls "Open Implementation" hardware, described as "hardware for which the complete bill of materials necessary to construct the device is available."
In the case of open source software (OSS), the information that is shared is software code. In OSH, what is shared is hardware manufacturing information, such as hardware definition language descriptions, and the diagrams and schematics that describe a piece of hardware.
At the simplest level, a peer network may design a product and make it publicly available on an open-source basis; it may be subsequently built by any and all individuals or groups who have the necessary production machinery, without coordinating their efforts with the original designer(s). For example, Vinay Gupta has proposed a large-scale library of open-source hardware designs as an aid to international development:
An open library of designs for refrigerators, lighting, heating, cooling, motors, and other systems will encourage manufacturers, particularly in the developing world, to leapfrog directly to the most sustainable technologies, which are much cheaper in the long run. Manufacturers will be encouraged to use the efficient designs because they are free, while inefficient designs still have to be paid for. The library could also include green chemistry and biological solutions to industry challenges, for example enzymatic reactions that could be used in place of energy, and chemical-intensive processes or nontoxic paint pigments for cars and buildings. This library should be free of all intellectual property restrictions and open for use by any manufacturer, in any nation, without charge.
One item of his own design, the Hexayurt, is
a refugee shelter system that uses an approach based on "autonomous building" to provide not just a shelter, but a comprehensive family support unit which includes drinking water purification, composting toilets, fuel-efficient stoves and solar electric lighting."
The basic construction materials for the floor, walls and roof cost about $200.
One of the most ambitious attempts at such an open design project for village development is Open Source Ecology, with their experimental facility Factor E Farm.
We are actively involved in demonstrating the world’s first replicable, post-industrial village. We take the word replicable very seriously - we do not mean a top-down funded showcase - but one that is based on ICT, open design, and digital fabrication - in harmony with its natural life support systems. As such, this community is designed to be self-reliant, highly productive, and suffciently transparent so that it can truly be replicated in many contexts - whether it’s parts of the package or the whole. Our next frontier will be education to train Village Builders - just as we’re learning how to do it from the ground up.
Here's a list of the design categories and individual projects being developed by OSE, from their Wiki:
HABITAT PACKAGE: CEB Press - Sawmill - Living Machines - Modular Housing Units - Modular Greenhouse Units - Solar Turbine CHP System - AGRICULTURE PACKAGE: Modular Greenhouse Units - Orchard and Nursery - Electric Garden Tractor - Organoponic Raised Bed Gardening - Agricultural Microcombine -Bakery -Dairy - Energy Food Bars - Agricultural Spader - Well Drilling Rig - Freeze Dried Fruit Powders - Hammer Mill - ENERGY PACKAGE: Solar Turbine CHP System - Compressed Fuel Gas - Inverters & Grid Intertie - Electric Motors/Generators - Fuel Alcohol - FLEXIBLE INDUSTRY PACKAGE: Multimachine & Flex Fab - Metal Casting and Extrusion - Plastic Extrusion & Molding - TRANSPORTATION: Open Source Car - Electric Motors/Generators - Electric Motor Controls - MATERIALS: Aluminum Extraction From Clays - Bioplastics
One project that's reached the prototype stage, the Compressed Earth Block press, can be built for $5000--some 20% of the price of the cheapest commercial competitor. Another project in development is the solar turbine, which uses the sun's heat to power a steam-driven generator, as an alternative to photovoltaic electricity.
Karim Lakhani describes this general phenomenon, the separation of open-source design from an independent production stage, as "communities driving manufacturers out of the design space":
The rise of open source software is a clear example of users innovating and developing products that can out compete traditional manufacturers. But this effect is not just limited to software. In physical products ranging from snowboards to electronic microscopes, users have been shown to be the dominant source of functionally novel innovations. Communities can supercharge this innovation mechanism. And may ultimately force companies out of the product design space. Just think about it - for any given company - there are more people outside the company that have smarts about a particular technology or a particular use situation then all the R&D engineers combined. So a community around a product category may have more smart people working on the product then the firm it self. So in the end manufacturers may end up doing what they are supposed to - manufacture - and the design activity might move to the edge and into the community.
Michel Bauwens, of the P2P foundation, provides a small list of some of the more prominent open-design projects:
The Grid Beam Building System, at http://www.p2pfoundation.net/Grid_Beam_Building_System
The Hexayurt, at http://www.p2pfoundation.net/Hexayurt
Movisi Open Design Furniture, at http://www.p2pfoundation.net/Movisi_Open_Design_Furniture
Open Cores, at http://www.p2pfoundation.net/Open_Cores and other Open Computing Hardware, at http://www.p2pfoundation.net/Open_Hardware
Open Source Green Vehicle, at http://www.p2pfoundation.net/Open_Source_Green_Vehicle
Open Source Scooter http://www.p2pfoundation.net/Open_Source_Scooter
The Ronja Wireless Device at http://www.p2pfoundation.net/Twibright_Ronja_Open_Wireless_Networking_Device
Open Source Sewing patterns, at http://www.p2pfoundation.net/Open_Source_Sewing_Patterns
Velomobiles http://www.p2pfoundation.net/Open_Source_Velomobile_Development_Project
Open Energy http://www.p2pfoundation.net/SHPEGS_Open_Energy_Project
A more complex scenario involves the coordination of an open source design stage with the production process within a large peer organization, with the separate stages of physical production distributed and coordinated by the same peer network that created the design. Dave Pollard provides one example:
Suppose I want a chair that has the attributes of an Aeron without the $1800 price tag, or one with some additional attribute (e.g. a laptop holder) the brand name doesn't offer? I could go online to a Peer Production site and create an instant market, contributing the specifications, a bunch of technical links available online about just what makes this chair so special, and, perhaps a maximum price I would be willing to pay. People with some of the expertise needed to produce it could indicate their capabilities and self-organize into a consortium that would keep talking and refining until they could meet this price -- and, if not, they might counter-offer something close. Other potential buyers could chime in, offering more or less than my suggested price. Based on the number of 'orders' at each price, the Peer Production group could then accept orders and start manufacturing....
As [Erick] Schonfeld suggests, the intellectual capital associated with this instant market becomes part of the market archive, available for everyone to see, stripping this intellectual capital cost, and the executive salaries, dividends and corporate overhead out of the cost of this and other similar product requests and fulfillments, so that all that is left is the lowest possible cost of material, labour and delivery to fill the order. And the order is exactly what the customer wants, not the closest thing in the mass-producer's warehouse.
The most ambitious example of an open-source physical production project is the open source car.
Can open-source practices and approaches be applied to make hardware, to create tangible and physical objects, including complex ones? Say, to build a car?...
Markus Merz believes they can. The young German is the founder and "maintainer" (that's the title on his business card) of the OScar project, whose goal is to develop and build a car according to open-source (OS) principles. Merz and his team aren't going for a super-accessorized SUV—they're aiming at designing a simple and functionally smart car. And, possibly, along the way, reinvent transportation.
Well, actually there's an open-source project even more ambitious than the open-source car, but it's fictional: the open-source moon project, a volunteer effort of a peer network of thousands, in Craig DeLancy's "Openshot." The project's ship (the Stallman), built largely with Russian space agency surplus, beats a corporate-funded proprietary project to the moon. [Analog, December 2006, pp. 64-74.]
A slightly less ambitious open-source manufacturing project, and probably more relevant to the needs of most people in the world, is Open Source Ecology's open-source tractor (LifeTrac). It's designed for inexpensive manufacture, with modularity and easy disassembly, for lifetime service and low cost repair. It includes, among other things, a well-drilling module, and is also designed to serve as a prime mover for the Compressed Earth Block machine, a saw mill, and other machinery.
In either case, whether physical production is coordinated with the design stage or organized independently, it may take place in comparatively heavily capitalized factories (likely owned by workers' cooperatives in a post-capitalist society), by outsourcing the production of specific parts to more modestly capitalized small shops, or to even cheaper emerging small-scale production facilities like the multimachine, or to a combination of some or all of the above.
Clearly, as we saw in Chapter Fourteen, the emergence of cheap desktop technology for custom machining parts in small batches will greatly lower the overall capital outlays needed for networked physical production of light and medium consumer goods.
The availability of modestly priced desktop manufacturing technology (coupled with the promise of LETS systems, mutual banks, and other forms of alternative credit) has led to a considerable shift in opinion in the peer-to-peer community, as evidenced by Michel Bauwens:
I used to think that the model of peer production would essentially emerge in the immaterial sphere, and in those cases where the design phase could be split from the capital-intensive physical production sphere. Von Hippel's work is very convincing in showing how widespread the model of built-only capitalism already is.
However, as I become more familiar with the advances in Rapid Manucturing (see http://www.p2pfoundation.net/Rapid_Manufacturing)and Desktop Manufacturing (see http://www.p2pfoundation.net/ Desktop_Manufacturing), I'm becoming increasingly convinced of the strong trend towards the distribution of physical capital.
If we couple this with the trend towards the direct social production of money (i.e. the distribution of financial capital, see http://www.p2pfoundation.net/ P2P_Exchange_Infrastructure_Projects) and the distribution of energy (http://www.p2pfoundation.net/P2P_Energy_Grid); and how the two latter trends are interrelated (see http://blog.p2pfoundation.net/combining-distributed-energy-with-distributed-money/2007/05/06), then I believe we have very strong grounds to see a strong expansion of p2p-based modalities in the physical sphere. See also Kevin Carson's book manuscript about trends in decentralized production technology (http://mutualist.blogspot.com/)
Kevin Kelly argues that the actual costs of physical production are only a minor part of the cost of manufactured goods.
....material industries are finding that the costs of duplication near zero, so they too will behave like digital copies. Maps just crossed that threshold. Genetics is about to. Gadgets and small appliances (like cell phones) are sliding that way. Pharmaceuticals are already there, but they don't want anyone to know. It costs nothing to make a pill.
This is essentially a restatement, from a less gushy point of view, of Tom Peter's observation that the bulk of product price is "ephemera" or "intellect," rather than nuts and bolts and labor. Or as I put it in Chapters Ten and Eleven, much less nicely, most of the price of manufactured goods is embedded rent on artificial property rights like "intellectual property." When physical manufacturing is stripped of the cost of proprietary design and technology, and the consumer-driven, pull model of distribution strips away most of the immense marketing cost, we will find that the portion of price formerly made up of such intangibles will implode, and the remaining price based on actual production cost will be an order of magnitude lower. In a world where commodity price consists entirely of labor and material costs, without rents to useless eaters with grants of privilege from the state, we can likely maintain the existing standard of living with an average work week of one or two days. The other three or four days of work, as I argued in Chapter Twelve, go to fixing Bastiat's broken windows, digging holes and filling them back in, and supporting idle rentiers.
In any case, there is a common thread running through all the different theories of the interface between peer production and the material world: as technology for physical production becomes feasible on increasingly smaller scales and at less cost, or the lower the transaction costs of aggregating small units of capital into large ones, the less disconnect there will be between peer production and physical production.
- P2P can arise not only in the immaterial sphere of intellectual and software production, but wherever there is access to distributed technology: spare computing cycles, distributed telecommunications and any kind of viral communicator meshwork.
- P2P can arise wherever other forms of distributed fixed capital is available: such is the case for carpooling, which is the second mode of transportation in the U.S.....
- P2P can arise wherever financial capital can be distributed. Initiatives such as the ZOPA bank point in that direction. Cooperative purchase and use of large capital goods are a possibility....
Franz Nahrada writes in the same vein, affirming Bauwens' distinction between cooperatives and peer production, but nevertheless arguing that
at the same time it is imagineable that cooperatives work out arrangements that lead to a circulation of material goods and therefore enable mutual supply in a circular process, to some degree eliminating the need for monetary income. This economy would work in a biomorphical way, the surplus on one point being the input on others....
Once we really get a grasp of really efficient home production, the rules of the games will change drastically. In this respect I share Stefan Mertens optimism, although I hate to bring it all down to the notion or image of the fabber. There are very interesting intermediate schemes which work at community level - technologically possible, but neglected from the point of view of capitalist production.
In effect, the distinction between Stallman's "free speech" and "free beer" is eroding. To the extent that embedded rents on "intellectual property" are a significant portion of commodity prices, "free speech" (in the sense of the free use of ideas) will make our "beer" (i.e., the price of manufactured commodities) at least a lot cheaper.
Although leading figures in the proprietary software (and proprietary everything) movement are fond of using alarmist language about peer producers--for example, Bill Gates' reference to the open-source movement as "communists"--peer production is in fact a case of "back to the future." It's a return to the kind of self-employment and small-scale production for consumption or local exchange that predated the Industrial Revolution and the corporate transformation of capitalism, but this time producing the kinds of high-quality manufactured outputs previously monopolized by large-scale industry. As "Jed," at Anomalous Presumptions blog, describes it, peer production makes it possible to produce without access to large amounts of capital:
The problem for capitalists in peer production is that typically there is no way to get a return on ownership. Linus Torvalds doesn’t own the Linux source code, Jimmy Wales doesn’t own the text of Wikipedia, etc. These are not just incidental facts, they are at the core of the social phenomenon of peer production. A capitalist may benefit indirectly, for a while, from peer production, but the whole trend of the process is against returns on ownership per se....
Historically, entrepreneurship is associated with creating a profitable enterprise....
The classical idea of profit is monetary and is closely associated with the rate of (monetary) return on assets....
The peer production equivalent of profit is creating a self-sustaining social entity that delivers value to participants. Typically the means are the same as those used by any classical entrepreneur: creating a product, publicizing the product, recruiting contributors, acquiring resources, generating support from larger organizations (legal, political, and sometimes financial), etc.
Before widespread peer production, the entrepreneur’s and capitalist’s definitions of success were typically congruent, because growing a business required capital, and gaining access to capital required providing a competitive return. So classical profit was usually required to build a self-sustaining business entity.
The change that enables widespread peer production is that today, an entity can become self-sustaining, and even grow explosively, with very small amounts of capital. As a result it doesn’t need to trade ownership for capital, and so it doesn’t need to provide any return on investment.
But beyond that, Charles Johnson points out, because of the new possibilities the Internet provides for lowering the transaction costs entailed in networked mobilization of capital, peer production can take place even when significant capital investments are required--without relying on finance by large-scale sources of venture capital:
it’s not just a matter of projects being able to expand or sustain themselves with little capital (although that is a factor). It’s also a matter of the way in which both emerging distributed technologies in general, and peer production projects in particular, facilitate the aggregation of dispersed capital — without it having to pass through a single capitalist chokepoint, like a commercial bank or a venture capital fund. Because of the way that peer production projects distribute and amortize their costs of operation, entrepreneurs can afford to bypass existing financial operators and go directly to people with $20 or $50 to give away and take the money in in small donations, because they no longer need to get multimillion dollar cash infusions all at once just to keep themselves running: the peer production model allows greater flexibility by dispersing fixed costs among many peers (and allowing new entrepreneurs to easily step in and take over the project, if one has to bow out due to the pressures imposed by fixed costs), rather than by concentrating them into the bottom line of a single, precarious legal entity. Meanwhile, because of the way that peer production projects distribute their labor, peer-production entrepreneurs can also take advantage of spare cycles on existing, widely-distributed capital goods — tools like computers, facilities like offices and houses, software, etc. which contributors own, which they still would have owned personally or professionally whether or not they were contributing to the peer production project, and which can be put to use as a direct contribution of a small amount of fractional shares of capital goods directly to the peer production project. So it’s not just a matter of cutting total aggregate costs for capital goods (although that’s an important element); it’s also, importantly, a matter of new models of aggregating the capital goods to meet whatever costs you may have, so that small bits of available capital can be rounded up without the intervention of money-men and other intermediaries.
In making productive use of idle capital assets the average person owns anyway, providing a productive outlet for the surplus labor of the unemployed, and transforming the small surpluses of household production into a ready source of exchange value, the informal economy has as the cornerstone of its temple the stone which the builders rejected.
[Footnote: As we saw in Chapter Four, one of the ways that so-called "health" and "safety" codes, and occupational licensing, enforce radical monopoly and create barriers to cheap and comfortable subsistence, is by preventing people from using idle capacity (or "spare cycles") of what they already own anyway, and thereby transforming them into capital goods for productive use.
Consider, for example, the process of running a small, informal brew pub or restaurant out of your home, under a genuine free market regime. Buying a brewing vat and a few small fermenters for your basement, using a few tables in an extra room as a public restaurant area, etc., would maybe require a small bank loan for at most a few thousand dollars. And with that capital outlay, you could probably make payments on the debt with the margin from one customer a day. A few customers evenings and weekends, most of whom probably could be found mainly among your existing circle of acquaintances, would enable you to initially shift some of your working hours from wage labor to work in the restaurant, with the possibility of gradually phasing out wage labor altogether or scaling back to part time, as you built up a small customer base. In this and many other lines of business (for example a part-time gypsy cab service using a car you own anyway), the minimal entry costs and capital outlay mean that the minimum level of custom required to stay in business would be quite modest, and even a low level of turnover would be sufficient to pay the overhead. In that case, a lot more people would be able to start small businesses for supplementary income and just scale back their wage labor a bit, maybe gradually shift to complete self employment, all with minimal risk or sunk costs.
But that’s illegal. You have to buy an extremely expensive liquor license, as well as having an industrial size and strength stove, dishwasher, etc. And that level of capital outlay can only be paid off with a large dining room and a large kitchen-waiting staff, which means you have to keep the place filled or the overhead costs will eat you alive–IOW, Chapter Eleven. These high entry costs and the enormous overhead are the reason you can’t afford to start out really small and cheap, and the reason restaurants have such a high failure rate. It's illegal to use the surplus capacity of the ordinary household items we have to own anyway but remain idle most of the time. RFID chip requirements and bans on unpasteurized milk make it illegal to trade the small surpluses generated by ordinary household subsistence production. High fees for organic certification make it prohibitive to sell a few hundred dollars worth of surplus organic produce at a temporary roadside stand. You can't do just a few hundred or a few thousand dollars worth of business a year, because the state mandates capital equipment on the scale required for a large-scale business if you engage in the business at all.
So it's employers, as well as big competitors, who have a vested interest in keeping these entry costs so high. It’s a way of erecting an enormous toll gate between you and the possibility of self-employment, without a boss cracking the whip over you.]
Networked peer production dovetails both with Jane Jacobs' model of the Japanese bicycle factory, and with Kirkpatrick Sale's community repair, recycling, and remanufacturing shops, which we discussed in Chapter Fourteen. Along the same lines, Colin Ward suggests
the pooling of equipment in a neighborhood group. Suppose that each member of the group had a powerful and robust basic tool, while the group as a whole had, for example, a bench drill, lathes and a saw bench to relieve the members from the attempt to cope with work which required these machines with inadequate tools of their own, or wasted their resources on under-used individually-owned plant. This in turn demands some kind of building to house the machinery: the Community Workshop.
But is the Community Workshop idea nothing more than an aspect of the leisure industry, a compensation for the tedium of work? [Ward, Anarchy in Action, p. 94.]
Ward suggests, rather, that the Community Workshop will bridge the growing gap between the worlds of work and leisure.
The paradoxes of contemporary capitalism mean that there are vast numbers of what one American economist calls no-people: the army of the unemployed who are either unwanted by, or who consciously reject, the meaningless mechanical slavery of contemporary industrial production. Could they make a livelihood for themselves today in the community workshop? If the workshop is conceived merely as a social service for 'creative leisure' the answer is that it would probably be against the rules.... But if the workshop were conceived on more imaginative lines than any existing venture of this kind, its potentialities could become a source of livelihood in the truest sense. In several of the New Towns in Britain, for example, it has been found necessary and desirable to build groups of small workshops for individuals and small businesses engaged in such work as repairing electrical equipment or car bodies, woodworking and the manufacture of small components. The Community Workshop would be enhanced by its cluster of separate workplaces for 'gainful' work. Couldn't the workshop become the community factory, providing work or a place for work for anyone in the locality who wanted to work that way, not as an optional extra to the economy of the affluent society which rejects an increasing proportion of its members, but as one of the prerequisites of the worker-controlled economy of the future?
Keith Paton..., in a far-sighted pamphlet addressed to members of the Claimants' Union, urged them not to compete for meaningless jobs in the economy which has thrown them out as redundant, but to use their skills to serve their own community. (One of the characteristics of the affluent world is that it denies its poor the opportunity to feed, clothe, or house themselves, or to meet their own and their families' needs, except from grudgingly doled-out welfare payments). He explains that:
When we talk of 'doing our own thing' we are not advocating going back to doing everything by hand. This would have been the only option in the thirties. But since then electrical power and 'affluence' have brought a spread of intermediate machines, some of them very sophisticated, to ordinary working class communities. Even if they do not own them (as many claimants do not) the possibility exists of borrowing them from neighbours, relatives, ex-workmates. Knitting and sewing machines, power tools and other do-it-yourself equipment comes in this category. Garages can be converted into little workshops, home-brew kits are popular, parts and machinery can be taken from old cars and other gadgets. If they saw their opportunity, trained metallurgists and mechanics could get into advanced scrap technology, recycling the metal wastes of the consumer society for things which could be used again regardless of whether they would fetch anything in a shop. Many hobby enthusiasts could begin to see their interests in a new light.
'We do,' he affirms, 'need each other and the enormous pool of energy and morale that lies untapped in every ghetto, city district and estate. [eith Paton, The Right to Work or the Right to Live? (Stoke-on-Trent, 1972), in Ward, Anarchy in Action, pp. 108-109.]
Karl Hess also discussed community workshops--or as he called them, "shared machine shops"--in Community Technology.
The machine shop should have enough basic tools, both hand and power, to make the building of demonstration models or test facilities a practical and everyday activity.... [T]he shop might be... stocked with cast-off industrial tools, with tools bought from government surplus through the local school system... Work can, of course, be done as well in home shops or in commercial shops of people who like the community technology approach....
Thinking of such a shared workshop in an inner city, you can think of its use... for the maintenance of appliances and other household goods whose replacement might represent a real economic burden in the neighborhood....
...[T]here might be similar projects that the machine shop could undertake beyond the building of demonstration models and other regular community technology tasks. The machine shop could regularly redesign cast-off items into useful ones. Discarded refrigerators, for instance, suggest an infinity of new uses, from fish tanks, after removing doors, to numerous small parts as each discarded one is stripped for its components, which include small compressors, copper tubing, heat transfer arrays, and so on. The same goes for washing machines....
Similar in spirit to the shared machine shop could be a shared warehouse. Everyone knows the agony of having to throw something away even though instinct says that someday it will be needed....
A community decision to share a space in which discarded materials can be stored, categorized, and made easily available is a decision to use an otherwise wasted resource....
The shared warehouse... should collect a trove of bits and pieces of building materials.... There always seems to be a bundle of wood at the end of any project that is too good to burn, too junky to sell, and too insignificant to store. Put a lot of those bundles together and the picture changes to more and more practical possibilities of building materials for the public space.
Spare parts are fair game for the community warehouse. Thus it can serve as a parts cabinet for the community technology experimenter....
A problem common to many communities is the plight of more resources leaving than coming back in.... The shared work space and the shared warehouse space involve a community in taking a first look at this problem at a homely and nonideological level. [Karl Hess, Community Technology (New York, Cambridge, Hagerstown, Philadelphia, San Francisco, London, Mexico City, Sao Paulo, Sydney: Harper & Row, Publishers, 1979), pp. 96-98.]
This last is reminiscent of Jane Jacobs' observations on the development of local, diversified economies through the discovery of creative uses for locally generated waste and byproducts, and the use of such innovative technologies to replace imports.
E. F. Schumacher recounted his experiences with the Scott Bader Commonwealth, encouraging (often successfully) the worker-owners to undertake such ventures as a community auto repair shop, communally owned tools and other support for household gardening, a community woodworking shop for building and repairing furniture, and so forth. The effect of such measures was to take off some of the pressure to earn wages, so that workers might scale back their work hours. [E. F. Schumacher, Good Work, pp. 80-83.]
Another proposal for decentralizing manufacturing, first to the community and then to the household, is Nathan Cravens' Mutually Assured Production:
Phase 1. Regional Production. Manufacture general store goods at regional distribution centers every few hundred square miles for local outlet distribution. This approach could be considered the mainframe computer era of material production. It will make obsolete the hundreds of factories that manufacture only a few goods. Accomplishing this would decrease waste created by hundreds of factories and will help turn what may have been wasted in specialized factories into useful material for making other items for use (cradle-to-cradle) in this phase. It will also shift global economies into local ones, providing a production method that can duplicated itself worldwide. Global information with local distribution is the theme.
Phase 2. Outlet Production. In computing, we can liken these systems to mainframes that can contain themselves within an office rather than a whole floor. Manufactured resources will be produced and purchased at each outlet location....
Phase 3. Personal Production. It can produce anything based on the values mentioned. This likens to the PC, laptop, and hand held device stage of computing....
Eric Hunting (in the same comment thread) suggested, further, that the process of technological innovation under corporate capitalism, in a sort of "Phase 0," is laying the groundwork for this process. The high costs of technical innovation, the difficulty of capturing value from it, and the mass customization or long tail market, taken together, create pressures for common platforms that can be easily customized between products, and for modularization of components that can be used for a wide variety of products. And Hunting points out that, as we already saw in Chapter Nine, the predominant "outsource everything" and "contract manufacturing" model increasingly renders corporate hubs obsolete, and makes it possible for contractees to circumvent the previous corporate principals and undertake independent production on their own account.
I would like to suggest an additional intermediate stage in production evolution prior to regional; the industrial ecology as demonstrated by the personal computer industry. Industrial ecologies are precipitated by situations where traditional industrial age product development models fail in the face of very high technology development overheads or very high demassification in design driven by desire for personalization/customization producing Long Tail market phenomenon. A solution to these dilemmas is modularization around common architectural platforms in order to compartmentalize and distribute development cost risks, the result being 'ecologies' of many small companies independently and competitively developing intercompatible parts for common product platforms -such as the IBM PC.
Increasingly, we see today the design of many kinds of durable goods shifting away from monolithic architectures and their manufacturers shifting away from sole-ownership of production capacity. Sometimes this is intentional, sometimes it occurs when products become platforms by default through the emergence of after-market competition driven by the desire for customization and service. (as was nearly the case with the Volkswagentraditional factories. Beetle but suppressed by VW for lack of comprehension of the nature of the market phenomenon their product had produced) Production is increasingly contract-based and a growing number of 'manufacturers' don't actually manufacture anything. They just contract. This has produced a dual global trend in demassification and generalization (still across certain product sectors) of manufacturing capacity that has now produced a situation where the volume of consumer goods now produced by contract manufacture exceeds that produced by
The more vertical the market profile for a product the more this trend penetrates toward production on an individual level due high product sophistication coupled to smaller volumes. In the 90s the aerospace, defense, telecom, and IT industries experienced a phenomenon of engineering entrepreneurial flight, sometimes known as the midnight engineer phenomenon, where lack of job security coupled to cuts in benefits compelled many engineers to abandon corporate employment in favor of entrepreneurship with many becoming contract competitors to their former employers. Competitive contracting regulations in the defense industry (when they're actually respected...) tend to, ironically, turn many kinds of military hardware into open platforms by default, offering small businesses a potential to compete with larger companies where production volumes aren't all that large to begin with. Consequently, today we have a situation where key components of some military vehicles and aircraft are produced on a garage-shop production level by companies with fewer than a dozen employees.
All this represents an intermediate level of industrial demassification that is underway today and not necessarily dependent upon open source technology or peer-to-peer activity but which creates a fertile ground for that in the immediate future and drives the complementary trend in the miniaturization of machine tools.
Michel Bauwens, in commenting on Hunting's remarks, notes among the "underlying trends... supporting the emergence of peer production in the physical world,"
is the ‘distribution’ of production capacity, i.e. lower capital requirements and modularisation making possible more decentralized and localized production, which may eventually be realized through the free self-aggregation of producers.
The strong implications of these possibilities, for a shift in economic power from large corporations to ordinary people in the social economy, are discussed at greater length in the section immediately following this one.
One potential cloud overshadowing networked peer production is the issue of whether it could survive a disruption to the Internet, in the event the infrastructure of the latter is compromised during the terminal crises of state capitalism. It's heartening, in this light, to remember that fairly extensive computer networks were built from the ground up by private users linking their own computers together over the phone lines, without any central web servers. The PC modem was developed in 1978 by Ward Christensen and Randy Suess to transfer data directly between their computers over the phone lines. In 1979 they introduced the X Modem protocol which allowed computers to transfer files directly without a host system. Based on these technologies, small computer networks sprang up outside the ARPANET. For example, in 1979 three students at Duke and UNC created a modified version of the UNIX protocol which made possible computer linkups over the phone lines. They used it as the infrastructure of Usenet. In 1983, Tom Jennings designed an interface system for posting bulletin boards on interlinked PCs, which became the basis of Fidonet. By 1990, it linked 2500 computers in the U.S. Meanwhile Bulletin Board Systems (BBS) in the 1980s linked several million users into assorted virtual communities, based on direct computer-to-computer connections over the phone lines. Along the same lines, wireless urban "mesh networks" today can use the electromagnetic spectrum to relay data directly from sender to sender, without the content ever passing through a centralized server. Unfortunately, such mesh networks can operate only over a few blocks--at most a single city. [Manuel Castels, The Rise of the Network Society. Second edition (Oxford and Malden, MA: Blackwell Publishers, 1996, 2000), pp. 49-50; Johan Soderberg, Hacking Capitalism, pp. 96-97.]
F. The Social Economy and the Crisis of Capitalism
As Michel Bauwens describes it, it is becoming increasingly impossible to capture value from the ownership of ideas, designs, and technique--all the "ephemera" and "intellect" that Peters writes about as a component of commodity price--leading to a crisis of sustainability for capitalism.
Recall the following: the thesis of cognitive capitalism says that we have entered a new phase of capitalism based on the accumulation of knowledge assets, rather than physical production tools. [McKenzie Wark's] vectoralist thesis says that a new class has arisen which controls the vectors of information, i.e. the means through which information and creative products have to pass, for them to realize their exchange value. They both describe the processes of the last 40 years, say the post-1968 period, which saw a furious competition through knowledge-based competition and for the acquisition of knowledge assets, which led to the extraordinary weakening of the scientific and technical commons. And they do this rather well.
But in my opinion, both theses fail to account for the newest of the new, i.e. to take into account the emergence of peer to peer as social format. What is happening?
In terms of knowledge creation, a vast new information commons is being created, which is increasingly out of the control of cognitive capitalism.
In a later blog post for the P2P Foundation, he elaborates on the nature of cognitive capitalism as a response to the limits on accumulation in the finite physical realm, attempting a new form of accumulation based on ownership of the cognitive realm. But this attempt is doomed to fail because of the increasing untenability of property rights in the information realm.
This system is now facing serious barriers that are a function of the finiteness of the natural resource base that is our planet, and global warming is one example of it. One of the meanings of global warming, coupled with the general trend of globalization, is that our growth-system now covers the whole planet, there is no more outside. What this means is that the limits of an extensive development are being reached....
This is no trivial affair, as the failure of extensive development is what brought down earlier civilizations and modes of production. For example, slavery was not only marked by low productivity, but could not extend this productivity as that would require making the slaves more autonomous, so slave-based empires had to grow in space, but at a certain point in that growth, the cost of expansion exceeded the benefits. This is why feudalism finally emerged, a system which refocused on the local, and allowed productivity growth as serfs had a self-interest in growing and ameliorating the tools of production.
The alternative to extensive development is intensive development, as happened in the transition from slavery to feudalism. But notice that to do this, the system had to change, the core logic was no longer the same. The dream of our current economy is therefore one of intensive development, to grow in the immaterial field, and this is basically what the experience economy means. The hope that it expresses is that business can simply continue to grow in the immaterial field of experience.
However, Bauwens writes, this is not feasible. The emergence of the peer model of production, based on the non-rivalrous nature and virtually non-existent marginal cost of reproduction of digital information, and coupled with the increasing unenforceability of "intellectual property" laws, means that capital is incapable of realizing returns on ownership in the cognitive realm.
1) The creation of non-monetary value is exponential
2) The monetization of such value is linear
In other words, we have a growing discrepancy between the direct creation of use value through social relationships and collective intelligence (open platforms create near infinite value through the operations of the laws of Metcalfe and Reed), but only a fraction of that value can actually be captured by business and money. Innovation is becoming social and diffuse, an emergent property of the networks rather than an internal R & D affair within corporations; capital is becoming an a posteriori intervention in the realization of innovation, rather than a condition for its occurrence; more and more positive externalizations are created from the social field.
What this announces is a crisis of value, most such value is ‘beyond measure’, but also essentially a crisis of accumulation of capital. Furthermore, we lack a mechanism for the existing institutional world to re-fund what it receives from the social world. So on top of all of that, we have a crisis of social reproduction: peer production is collectively sustainable, but not individually.
Thus, there are two simultaneous crises: first, the failure of artificial abundance through subsidized inputs and externalization of cost, endless supplies of natural resources for appropriation (aided by state favortism), and the availability of new markets as outlets for surplus capital and output; and second, the failure of artificial scarcity in the cognitive realm. Taken together, this means that while markets and private ownership of physical capital will persist, "the core logic of the emerging experience economy, operating as it does in the world of non-rival exchange, is unlikely to have capitalism as its core logic."
Johan Soderberg relates this crisis of realization under state capitalism to capital's growing dependence on the state to capture value from social production and redistribute it to private corporate owners. This takes the form both of "intellectual property" law, as well as direct subsidies from the taxpayer to the corporate economy. He compares, specifically, the way photocopiers were monitored in the old USSR to protect the power of elites in that country, to the way the means of digital reproduction are monitored in this country to protect corporate power. [Hacking Capitalism, pp. 144-145.] James O'Connor's theme, of the ever-expanding portion of the operating expenses of capital which come from the state, is also relevant here. [The Fiscal Crisis of the State] The important point is that this strategy of shifting the burden of realization onto the state is untenable. The proliferation of bittorrent and episodes like the DeCSS uprising have shown that "intellectual property" is ultimately unenforceable. The RIAA's shakedown operation can be circumvented by the simple expedients of encryption and proxy servers. And as we have already seen, in an economy of subsidized inputs, the demand for such inputs grows exponentially, faster than the state can meet them. The state capitalist system will reach a point at which, thanks to the collapse of the portion of value comprised of rents on artificial property, the base of taxable value is imploding at the very time big business most needs subsidies to stay afloat.
In another article, in which he develops these themes at greater length, Bauwens writes that capitalism's successor system is likely to have a significant role for markets, but that the two structural presuppositions of existing capitalism--artificial abundance of resources and artificial scarcity of information--will be replaced by the reverse.
We live in a political economy that has it exactly backwards. We believe that our natural world is infinite, and therefore that we can have an economic system based on infinite growth. But since the material world is finite, it is based on pseudo-abundance.
And then we believe that we should introduce artificial scarcities in the world of immaterial production, impeding the free flow of culture and social innovation, which is based on free cooperation, by creating the obstacle of permissions and intellectual property rents protected by the state.
What we need instead is a political economy based on a true notion of scarcity in the material realm, and a realization of abundance in the immaterial realm.
In the purely immaterial realm, the services of capital are becoming increasingly superfluous, as described by Michael Hardt and Antonio Negri:
...the cooperative aspect of immaterial labor is not imposed or organized from the outside, as it was in previous forms of labor, but rather, cooperation is completely immanent to the laboring activity itself. This fact calls into question the old notion (common to classical and Marxian political economics) by which labor power is conceived as "variable capital," that is, a force that is activated and made coherent only by capital.... Brains and bodies still need others to produce value, but the others they need are not necessarily provided by capital and its capacities to organize production. Today productivity, wealth, and the creation of social surpluses take the form of cooperative interactivity through linguistic, communicational, and affective networks. [Michael Hardt and Antonio Negri, Empire (Cambridge and London: Harvard University Press, 2000), p. 294.]
In addition, capitalism faces a crisis of realization in another regard that Bauwens does not directly address. For over two centuries, as Immanuel Wallerstein observed, the system of capitalist production based on wage labor has depended on the ability to externalize many of its reproduction functions on the non-monetized informal and household economies, and on organic social institutions like the family which were outside the cash nexus.
Historically, capital has relied upon its superior bargaining power to set the boundary between the money and social economies to its own advantage. The household and informal economies have been allowed to function to the extent that they bear reproduction costs that would otherwise have to be internalized in wages; but they have been suppressed (as in the Enclosures) when they threaten to increase in size and importance to the point of offering a basis for independence from wage labor.
Just why the propertied classes came to see common rights as such a threat, and adopted a policy of Enclosure, is suggested by Raphael Samuel's account of Headington Quarry, a community of squatters who worked in quarries and small brickworks. Residents had family garden allotments, and engaged in a considerable amount of "poaching, rabbit-snaring, pig-rearing and cow-keeping...." Between the gardens and small game, they often had sufficient surplus to trade among themselves or to sell in the city.
The notion of common rights was built in to the cottager's economy, and so too was that of personal independence: it was possible to make 'a bit of a living' even when wage-paid labour gave out, and even when there was no money, to keep the table supplied with food, and have enough food to feed the fire. Perhaps it is this which helps to explain why Quarry, though 'rough' by the standards of more regulated communities, seems to have escaped the kind of destitution so familiar in the late Victorian countryside, and so rampant in the towns. Subsistence never gave out, however severe the season, nor was charity ever called upon to take its place--there was little available save that which the working population of the village provided for themselves....
Numbers of villagers escaped the servitudes of wage labour altogether, and there were many more for whom employment was characteristically short term and indirect. Within the village nothing like a capitalist class emerged. In building the smaller jobs were often taken on by pairs of mates, or by individuals acting on their own, or with a helper. Stone-digging work and navvying were often in the hands of 'companionships'--self-selecting bands of men, linked to one another by ties of friendship or blood and sometimes both.
The village was also, as Ward writes on Samuel's authority, "singularly free of landlords." [Colin Ward, "The hidden social history of housing--1. Cotters and squatters: informal settlements of the eighteenth and nineteenth century," in Social Policy: An Anarchist Response (London: Freedom Press, 1996), pp. 25-26. [19-29] The quote is from Samuel, "Quarry roughs: life and labour in Headington Quarry 1860-1920," in Samuel, Village Life and Labour (Routledge & Kegan Paul, 1975).]
The employing classes' fear of the subsistence economy made perfect sense. For as Kropotkin asked:
If every peasant-farmer had a piece of land, free from rent and taxes, if he had in addition the tools and the stock necessary for farm labour--Who would plough the lands of the baron? Everyone would look after his own....
If all the men and women in the countryside had their daily bread assured, and their daily needs already satisfied, who would work for our capitalist at a wage of half a crown a day, while the commodities one produces in a day sell in the market for a crown or more?
"The household as an income-pooling unit," Wallerstein writes, "can be seen as a fortress both of accommodation to and resistance to the patterns of labor-force allocation favored by accumulators." Capital has tended to favor severing the nuclear family household from the larger territorial community or extended kin network, and to promote an intermediate-sized income-pooling household. The reason is that too small a household falls so far short as a basis for income pooling that the capitalist is forced to commodify too large a portion of the means of subsistence, i.e. to internalize the cost in wages. [Immanuel Wallerstein, "Household Structures and Labor-Force Formation in the Capitalist World Economy," in Joan Smith, Immanuel Wallerstein, Hans-Dieter Evers, eds., Households and the World Economy (Beverly Hills, London, New Delhi: Sage Publications, 1984), pp. 20-21.] It is in the interest of the employer not to render the worker totally dependent on wage income, because without the ability to carry out some reproduction functions through the production of use value within the household subsistence economy, the worker will be "compelled to demand higher real wages...." [Wallerstein and Joan Smith, "Households as an institution of the world-economy," in Smith and Wallerstein, eds., Creating and Transforming Households: The constraints of the world-economy (Cambridge; New York; Oakleigh, Victoria; Paris: Cambridge University Press, 1992), p. 16.] On the other hand, "[t]he chief disadvantage of the too large units was that the level of work output required to ensure survival was too low.... [This] diminished pressure to enter the wage-labor market." [Wallerstein, "Household Structures," p. 20.]
The use of the social economy as a base for independence from wage employment has a venerable history. According to E. P. Thompson, "[n]ot only did the benefit societies on occasion extend their activities to the building of social clubs or alms-houses; there are also a number of instances of pre-Owenite trade unions when on strike, employing their own members and marketing the product." [E.P. Thompson, The Making of the English Working Class (New York: Vintage Books, 1963, 1966), p. 790.] G. D. H. Cole describes the same phenomenon:
As the Trade Unions grew after 1825, Owenism began to appeal to them, and especially to the skilled handicraftsmen, who were still an important element in the towns. Groups of workers belonging to a particular craft began to set up Co-operative Societies of a different type--societies of producers which offered their products for sale through the Co-operative Stores. Individual Craftsmen, who were Socialists, or who saw a way of escape from the exactions of the middlemen, also brought their products to the stores to sell." [G.D.H. Cole. A Short History of the British Working Class Movement (1789-1947) (London: George Allen & Unwin, 1948), p. 76.]
...[This pattern of organization was characterized by] societies of producers, aiming at co-operative production of goods and looking to the Stores to provide them with a market. These naturally arose first in trades requiring comparatively little capital or plant. They appealed especially to craftsmen whose independence was being threatened by the rise of factory production or sub-contracting through capitalist middlemen.
The most significant feature of the years we are discussing was the rapid rise of this... type of Co-operative Society and the direct entry of the Trades Unions into Co-operative production. Most of these Societies were based directly upon or at least very closely connected with the Unions of their trades, and many of them were actually indistinguishable from the Unions, which took up production as a part of their Union activity--especially for giving employment to their members who were out of work or involved in trade disputes.... [Ibid. p. 78.]
The aims and overall vision of such organization was well expressed in the rules of the Ripponden Co-operative Society, formed in 1832 in a weaving village in the Pennines:
By the increase of capital the working classes may better their condition, if they only unite and set their shoulder to the work; by uniting we do not mean strikes and turning out for wages, but like men of one family, strive to begin to work for ourselves....
The plan of co-operation which we are recommending to the public is not a visionary one but is acted upon in various parts of the Kingdom; we all live by the produce of the land, and exchange labour for labour, which is the object aimed at by all Co-operative societies. We labourers do all the work and produce all the comforts of life;--why then should we not labour for ourselves and strive to improve our conditions. [Ibid. pp. 793-794.]
As the reference to exchanging "labour for labour" suggests, the system of cooperative exchange grew beyond the level of the individual retail store. Cooperative producers' need for an outlet led to Labour Exchanges, where workmen and cooperatives could directly exchange their product so as "to dispense altogether with either capitalist employers or capitalist merchants." Exchange was based on labor time, with a currency of paper "labour notes." "Owen's Labour Notes for a time not only passed current among members of the movement, but were widely accepted by private shopkeepers in payment for goods." Of course, this was a time in which the public was used to a wide variety of private banknotes in circulation. [Ibid., pp. 78-79.]
The principle of labor-based exchange was employed on a large-scale. In 1830 the London Society opened an Exchange Bazaar for exchange of products between cooperative societies and individuals. [Ibid., p. 76. ] The Co-operative Congress, held at Liverpool in 1832, included a long list of trades among its participants; the b's alone had eleven trades. The National Equitable Labour Exchange, organized in 1832-33 in Birmingham and London, was a venue for the direct exchange of products between craftsmen, using labor-notes as a medium of exchange. [E.P. Thompson, Making of the English Working Class, p. 791.]
The main difference in our own day is that the development of small-scale production technology has resulted in a revolutionary shift in competitive advantage from wage labor to the innformal economy. The rapid growth of technologies for home production in the twentieth century, based on small-scale electrically powered machinery and new forms of intensive cultivation, has led to a major shift in the comparative efficiencies of large- and small-scale production. The comparative efficiencies of the two systems were pointed out, as we have seen, by Ralph Borsodi almost eighty years ago, and the trend has continued since.
As James O'Connor described the phenomenon in the 1980s, "the accumulation of stocks of means and objects of reproduction within the household and community took the edge off the need for alienated labor."
Labor-power was hoarded through absenteeism, sick leaves, early retirement, the struggle to reduce days worked per year, among other ways. Conserved labor-power was then expended in subsistence production.... The living economy based on non- and anti-capitalist concepts of time and space went underground: in the reconstituted household; the commune; cooperatives; the single-issue organization; the self-help clinic; the solidarity group. Hurrying along the development of the alternative and underground economies was the growth of underemployment (full employment at less than a living wage), ... and mass unemployment associated with the crisis of the 1980s. "Regular" employment and union-scale work contracted, which became an incentive to develop alternative, localized modes of production....
...New social relationships of production and alternative employment, including the informal and underground economies, threatened not only labor discipline, but also capitalist markets.... Alternative technologies threatened capital's monopoly on technological development... Hoarding of labor-power threatened capital's domination of production. Withdrawal of labor-power undermined basic social disciplinary mechanisms.... [James O'Connor, Accumulation Crisis (New York: Basil Blackwell, 1984), pp. 184-186.]
Colin Ward, also writing in the Eighties, envisioned a major shift from wage labor to the household economy:
[Jonathan Gershuny of the Science Policy Research Unit at Sussex University] sees the decline of the service economy as accompanied by the emergence of a self-service economy in the way that the automatic washing machine in the home can be said to supersede the laundry industry. His American equivalent is Scott Burns, author of The Household Economy, with his claim that 'America is going to be transformed by nothing more or less than the inevitable maturation and decline of the market economy. The instrument for this positive change will be the household--the family--revitalized as a powerful and relatively autonomous productive unit'.
The only way to banish the spectre of unemployment is to break free from our enslavement to the idea of employment. The pre-industrial economy was, after all, a domestic economy, and the old American phrase for an employee, a 'hired man' carries with it the notion that he was something less than a free citizen, as does the old socialist definition of the working class as those with nothing to sell but their labour power. The very word 'employment' has only been used in its modern sense since the 1840s just as 'unemployment' in the sense in which we use it, is even more recent....
The first distinction we have to make then is between work and employment. The world is certainly short of jobs, but it has never been, and never will be, short of work. William Morris grasped this a hundred years ago when he contrasted useful work with useless toil. The second distinction is between the regular, formal, visible and official economy, and the economy of work which is not employment....
...Victor Keegan remarks that 'the most seductive theory of all is that what we are experiencing now is nothing less than a movement back towards an informal economy after a brief flirtation of 200 years or so with a formal one'.
We are talking about the movement of work back into the domestic economy....
What about ordinary productive work at home? Home-working has always been a byword for exploitation, low pay and sweated labour. This is why the trade unions are so hostile towards it. But is by no means a declining industry, and it is possible to reduce its least desirable aspects.... The most suggestive illustration of one of the preconditions for effectively moving industrial production back into the home comes from the many studies of the informal economy in Italy. Sebastino Brusco claimed that it was only the existence of a vast informal sector of small workshops that saved the Italian economy from ruin in the 1970s. He points to the phenomenon of whole villages with power tools sub-contracting for the industrial giants of the motor industry, and when hit by recession, turning to other kinds of industrial components.
A BBC film took us to another Italian industrial village where 80 per cent of the women's tights made in Italy are produced. It illustrated two aspects of the informal economy there: the woman who, using a hand machine, earns a pittance from the contractor who brings her the unfinished goods for assembly and collects them finished, in the classic sweatshop situation; and, as a completely contrasted example, the woman who, with her mother, makes a good living assembling tights in her home, using a sophisticated machine which cost them L5,000 and is now paid for. Brusco claimed that what we were seeing was the decentralisation of manufacturing industry in a way which for him, as for Kropotkin, foreshadowed the pattern of a post-industrial society. Even Kropotkin's combination of industry and agriculture can be found, and is in fact traditional, in Italy. Philip Mattera reports: 'There are even people who have been moonlighting in agriculture. Studies of employees of the few large factories of the South, especially the huge Italsider plant in Taranto, have found that many are using their free time to resume their prior occupation as small farmers.'
The key difference between Brusco's two examples of the tights-makers was that one was trapped in the sweated labour situation and the other was freed from it by increased productivity, in just the same way as do-it-yourself users of power tools have increased theirs. It is of course a matter of access to a very modest amount of credit. [Colin Ward, "Anarchism and the informal economy," The Raven No. 1 (1987), pp. 27-28, 31-32.]
Credit considerations affect the family farmer in a similar manner. The family farm still tends to predominate even in mechanized production, simply because the economies of larger-scale industrial farming under direct corporate ownership and management are so poor, compared to those of a family farm which achieves full utilization of all equipment but can be directly worked by a single family or by a family with the help of hired laborers under their direct supervision. [Harold Brookfield, “Family Farms Are Still Around: Time to Invert the Old Agrarian Question,” Geography Compass 2:1 (2008), pp. 114-115. ] As a result, conventional agriculture is governed by the contract system, in which corporate agribusiness controls "the supply chains between farmers, their input suppliers and, especially, their market." It amounts to a kind of proletarianization on the same pattern as Brusco's first example of the home-work system in Italy, in which the farmer loses control of what and how much to plant, what methods to use, and so forth, and is paid barely enough to make ends meet. [Ibid., pp. 118-119.] As with the putting-out system for making tights in Italy, and the artisans in Nairobi, it's primarily the lack of credit and corporate control of the supply chain that constrain the small producer.
As we already saw in Chapter Nine, the shift from physical to human capital as the primary source of productive capacity in so many industries, along with the imploding price and widespread dispersion of ownership of capital equipment in so many industries, means that corporate employers are increasingly hollowed out and only maintain control over the physical production process through legal fictions. When so much of actual physical production is outsourced to the small sweatshop or the home shop, the corporation becomes a redundant "node" that can be bypassed; the worker can simply switch to independent production, cut out the middleman, and deal directly with suppliers and outlets. And the exponentially increasing demand for local produce, and the rise of farmers' markets and community-supported agriculture, mean increasing opportunities for family farmers, similarly, to circumvent ADM's and Cargill's control of the supply chains and produce directly for the local market.
We're experiencing a singularity, of sorts, in which it is becoming impossible for capital to prevent a shift in the supply of an increasing proportion of the necessities of life from mass produced goods purchased with wages, to small-scale production in the informal and household sector. The upshot is likely to be something like Vinay Gupta's "Unplugged" movement (see below), in which the possibilities for low-cost, comfortable subsistence off the grid result in exactly the same situation, the fear of which motivated the propertied classes in carrying out the Enclosures: a situation in which the majority of the public can take wage labor or leave it, if it takes it at all, the average person works only on his own terms when he needs supplemental income for luxury goods and the like, and (even if he considers supplemental income necessary in the long run for an optimal standard of living) can afford in the short run to quit work and live off his own resources for prolonged periods of time, while negotiating for employment on the most favorable terms. It will be a society in which workers, not employers, have the greater ability to walk away from the table. It will, in short, be the kind of society Wakefield lamented in the colonial world of cheap and abundant land: a society in which labor is hard to get on any terms, and almost impossible to hire at a low enough wage to produce significant profit.
The potential for defection is heightened by the greater efficiency with which the counter-economy extracts use-value from a given amount of land or capital.
…[T]he owning classes use less efficient forms of production precisely because the state gives them preferential access to large tracts of land and subsidizes the inefficiency costs of large-scale production. Those engaged in the alternative economy, on the other hand, will be making the most intensive and efficient use of the land and capital available to them. So the balance of forces between the alternative and capitalist economy will not be anywhere near as uneven as the distribution of property might indicate.
If everyone capable of benefiting from the alternative economy participates in it, and it makes full and efficient use of the resources already available to them, eventually we'll have a society where most of what the average person consumes is produced in a network of self-employed or worker-owned production, and the owning classes are left with large tracts of land and understaffed factories that are almost useless to them because it's so hard to hire labor except at an unprofitable price. At that point, the correlation of forces will have shifted until the capitalists and landlords are islands in a mutualist sea--and their land and factories will be the last thing to fall, just like the U.S Embassy in Saigon.
Johan Soderberg refers to the possibility that increasing numbers of workers will "defect from the labour market" and "establish means of non-waged subsistence," through efficient use of the waste products of capitalism. [Soderberg, p. 172.] The "freegan" lifestyle (less charitably called "dumpster diving") is one end of a spectrum of such possibilities. At the other end is low-cost recycling and upgrading of used and discarded electronic equipment: the rapid depreciation of computers makes it possible to add RAM to a model a few years old at a small fraction of the cost of a new computer, with almost identical performance.
The central barrier to garage production of computers is the microprocessor, which can only be produced on capital equipment costing nearly a billion dollars. But reprogrammable microprocessors will eliminate that barrier, with millions of discarded chips enabling garage industry to operate entirely on recycled inputs in the same way that minimills reprocess scrap steel on a small scale wherever a market exists. In Cory Doctorow's Themepunks, for example, a small workshop uses the chips harvested from thousands of discarded Elmo dolls.
Paul Goodman and Ivan Illich both remarked, in their unique ways, on the effect of radical monopolies in making comfortable poverty impossible. As the alternative economy undermines the ability of artificial property rights to levy tribute on access to the means of subsistence, comfortable poverty becomes increasingly feasible.
Dave Pollard, of How to Save the World blog, describes his own version of the singularity in "The Virtuous Cycles of the Gift Economy." As people do the things they love and become better at them, it takes less and less money to live. People need to work less, and can devote the saved time not only to further developing production technique. People develop more skills, become more self-sufficient, and less dependent on store-bought commodities purchased with wages. They also invest a greater share of their productive energy in the gift economy and mutual aid, and a greater share of their time in building social capital. As a result, people on average are happier, healthier, and more responsible and competent; social problems and social costs decline, which further adds to the virtuous cycle of reduced cost and frees up more time from work. "These cycles are, of course, subversive. They threaten to undermine and starve the 'market' economy by freeing us, the end-customers of that economy, from the need to pay money into it."
This undermining and starving is exactly what we discussed in Chapter Thirteen: building the structure of the new society within the shell of the old. Pollard describes, as one way of bring about major global change, "incapacitation--rendering the old order unable to function by sapping what it needs to survive."
But suppose if, instead of waiting for the collapse of the market economy and the crumbling of the power elite, we brought about that collapse, guerrilla-style, by making information free, by making local communities energy self-sufficient, and by taking the lead in biotech away from government and corporatists (the power elite) by working collaboratively, using the Power of Many, Open Source, unconstrained by corporate allegiance, patents and 'shareholder expectations'?
Gupta's short story "The Unplugged" related his vision of how such a singularity would affect life in the West.
Wealth stored as dollars was essentially a share in America's national economy - a credit note backed by the US Government. But Buckminster Fuller showed us that wealth-as-money was a specialized subset of Wealth - the ability to sustain life.
To "get off at the top" requires millions and millions of dollars of stored wealth. Exactly how much depends on your lifestyle and rate of return, but it's a lot of money, and it's volatile depending on economic conditions. A crash can wipe out your capital base and leave you helpless, because all you had was shares in a machine.
So we Unpluggers found a new way to unplug: an independent life-support infrastructure and financial architecture - a society within society - which allowed anybody who wanted to "buy out" to "buy out at the bottom" rather than "buying out at the top."
If you are willing to live as an Unplugger does, your cost to buy out is only around three months of wages for a factory worker, the price of a used car. You never need to "work" again--that is, for money which you spend to meet your basic needs.
The idea was to combine "Gandhi's Goals" ("self-sufficiency," or "the freedom that comes from owning your own life support system") with "Fuller's Methods" (the dymaxion principle of getting more with less). Such freedom
allows us to disconnect from the national economy as a way of solving the problems of our planet one human at a time. But Gandhi's goals don't scale past the lifestyle of a peasant farmer and many westerners view that way of life as unsustainable for them personally: I was not going to sell my New York condo and move to Oregon to live in a hut, you know?...
Fuller's "do more with less" was a method we could use to attain self-sufficiency with a much lower capital cost than "buy out at the top." An integrated, whole-systems-thinking approach to a sustainable lifestyle - the houses, the gardening tools, the monitoring systems - all of that stuff was designed using inspiration from Fuller and later thinkers inspired by efficiency. The slack - the waste - in our old ways of life were consuming 90% of our productive labor to maintain.
A thousand dollar a month combined fuel bill is your life energy going down the drain because the place you live sucks your life way in waste heat, which is waste money, which is waste time. Your car, your house, the portion of your taxes which the Government spends on fuel, on electricity, on waste heat... all of the time you spent to earn that money is wasted to the degree those systems are inefficient systems, behind best practices!
Our present discussion dovetails nicely with our discussion in Chapter Twelve of resilient communities and local production as a response to Peak Oil. James L. Wilson, at the Partial Observer, writes of ordinary people seceding from the wage system and meeting as many of their needs as possible locally, primarily as a response to the price increases from Peak Oil--but in so doing, also regaining control of their lives and ending their dependence on the corporation and the state.
Dad laughed. "You're lucky Gramma only lives a few blocks away. When I was your age my grandparents lived 2000 miles away!"
"2000 miles!" Milton, Rose's big brother, gasped. "Did you ever get to see them?"
"Oh, once, maybe twice a year. We flew, and sometimes they flew to visit us. But then flying got too expensive, and there were horrible experiences with flight delays, which is no fun for kids or their parents. And so we tried driving, but it was hard for my parents to both get the vacation days from their jobs at the same time. It would take four days to get there and four to get back just to see Gramma and Grampa for five days. And anyway, the price of gas got so high that even driving got to be too expensive. So, then we saw them once every year-and-a-half to two years."
"But why would they live so far away from you?"
"Because of my grampa's job, and also my Mom's job."
"Why didn't they live closer and have different jobs?'
"Good question. They had to stay with the companies they worked for because that's who paid for their health care."
"Were they slaves, Daddy?"
Dad laughed, "No! No, that's not what . . . nah." But he thought to himself, "Maybe they were, in a way."* * *
"Well, you see all these people working on their gardens? They used to not be here. People had grass lawns, and would compete with each other for having the greenest, nicest grass. But your gramma came home from the supermarket one day, sat down, and said, 'That's it. We're going to grow our own food.' And the next spring, she planted a vegetable garden where the grass used to be.
"And boy, were some of the neighbors mad. The Homeowners Association sued her. They said the garden was unsightly. They said that property values would fall. But then, the next year, more people started planting their own gardens.
"And not just their lawns. People started making improvements on their homes, to make them more energy-efficient. They didn't do it to help the environment, but to save money. People in the neighborhood started sharing ideas and working together, when before they barely ever spoke to each other....
"And people also started buying from farmer's markets, buying milk, meat, eggs and produce straight from nearby farmers. This was fresher and healthier than processed food. They realized they were better off if the profits stayed within the community than if they went to big corporations far away.
"This is when your gramma, my Mom, quit her job and opened started a bakery from home. It was actually in violation of the zoning laws, but the people sided with gramma against the government. When the government realized it was powerless to crack down on this new way of life, and the people realized they didn't have to fear the government, they became free. And so more and more people started working from home. Mommies and Daddies used to have different jobs in different places, but now more and more of them are in business together in their own home, where they're close to their children instead of putting them in day care."....
Milton said, "Dad, it sounds like things were a lot worse back then. But some people say that the country is in decline, that we're not as wealthy as we used to be. They say we must restore our national greatness. Is that true?"
Dad said, "It depends on what you mean by wealth. No, people aren't making as much money as they used to. But they don't need to. If you make the things that money used to buy, you don't need the money. If your friends and family and work are close by, you don't need the cars and plane tickets. The people who want to define standard of living in terms of dollar value are missing the point. It's the quality of life that's important, and it's much better now than it's ever been. The people who want to restore "national greatness" don't even know what makes a nation great. For them it's military uniforms and political speeches and big businesses employing lots of people to build tanks and prisons and rockets. They talk about 'freedom,' but what they really want is for the government to be as powerful as it used to be, which is the opposite of freedom. We didn't really become free, and this nation didn't really become great, until the government went bankrupt and fell apart. And here we are, at Gramma's house. God bless America!"
If this singularity will enable the producing classes in the industrialized West to defect from the wage system, in the Third World it may enable them to skip that stage of development altogether. Gupta concluded "The Unplugged" with a hint about how the principle might be applied in the Third World: "We encourage the developing world to Unplug as the ultimate form of Leapfrogging: skip hypercapitalism and anarchocapitalism and democratic socialism entirely and jump directly to Unplugging."
Gupta envisions a corresponding singularity in the Third World, when the cost of an Internet connection, through cell phones and other mobile devices, falls low enough to be affordable by impoverished villagers. At that point, the transaction costs which hampered previous attempts at disseminating affordable intermediate technologies in the Third World, like Village Earth's Appropriate Technology Library or Schumacher's Intermediate Technology Development Group, will finally be overcome by digital network technology.
It is inevitable that the network will spread everywhere across the planet, or very nearly so. Already the cell phone has reached 50% of the humans on the planet. As technological innovation transforms the ordinary cell phone into a little computer, and ordinary cell services into connections to the Internet, the population of the internet is going to change from being predominantly educated westerners to being mainly people in poorer countries, and shortly after that, to being predominantly people living on a few dollars a day.
Why will the internet wind up filled with people who live in such poverty?
Because the Internet will be global, and that’s how the world really is. Most people are very poor, and as the price of a connection to the Internet falls to a level they can afford, as they can afford cell phones now, we’re going to get a chance to really help these people get a better life by finding them the information resources they need to grow and prosper.
Imagine that you are a poor single mother in South America who lives in a village without a clean water source. Your child gets sick now and again from the dirty water, and you feel there is nothing you can do, and worry about their survival. Then one of your more prosperous neighbors gets a new telephone, and there’s a video which describes how to purify water [with a solar purifier made from a two-liter soda bottle]. It’s simple, in your language, and describes all the basic steps without showing anything which requires schooling to understand. After a while, you master the basic practical skills - the year or two of high school you caught before having the child and having to work helps. But then you teach your sisters, and none of the kids get sick as often as they used to… life has improved because of the network.
Then comes solar cookers, and improved stoves, and preventative medicine, and better agriculture [earlier Gupta mentions improved green manuring techniques], and diagnosis of conditions which require a doctor’s attention, with a GPS map and calendar of when the visiting doctors will be in town again.
In Gupta's story, the Unplugger movement included a significant minority of Western society, to the extent that their withdrawal from the consumer market caused economic dislocations. We have already seen, in Chapter One, the Brave New World model of push distribution that the industrial economy depends on, and in Chapter Twelve the amount of employment and economic activity that involve processing subsidized waste--the moral equivalent of digging holes and filling them back in again. It is therefore entirely reasonable to ask, as did one of E. F. Schumacher's questioners:
How do we move in a direction of intermediate technology if, in getting there, we stop growth and go through a world of social collapse and bankruptcy?
Schumacher responded that it would be largely a paper collapse: "Well, I shouldn't worry too much about it."
It's only on the money side, and that's not the real side. It's quite easy if the debtors don't pay. I'm not so terribly worried. If people have too much debt, they ought to default. And the creditors will be extremely angry and call them names, but life goes on. Now, of course, if these things are taken that seriously, then there may be just a general confusion and a depression. That can also happen.... It's not my interest, quite frankly. I would like to stick to real things. To the hungry people, to the work opportunities. On the whole, that has little to do with these games played in high finance. [Discussion of E. F. Schumacher's "The Ethics of Thinking Small," in Dorf and Hunter, eds., p. 182.]
Schumacher's answer is perhaps too glib. The question of the transition period is a real one. There is a very real possibility that the material foundations of the new decentralized economy will not be sufficiently laid down before the old economy's system of circulation breaks down, so that many who are dependent on employment lose their means of support with nothing to take its place. How to manage the transition is far beyond the scope of this analysis. My main purpose has been, first, to show that such a transition is likely, whether we like it or not, as state capitalism reaches its limits and the technical and organizational means of withdrawing from it become available; and second, to show the likely outlines of a successor society based on the new technical and organizational means. My personal opinion, as I have already discussed in Chapter Twelve in regard to the crisis of centralization resulting from Peak Oil, is that the transition will be relatively long and stable, compared to (say) the catastrophic collapse scenarios of James Kunstler.
At any rate, the more widespread the means of subsistence in the informal and household economies, and the more local infrastructure exists for exchange and barter, the more closely the transition crisis will resemble the paper crisis envisioned by Schumacher. For someone who has avoided or paid off credit card debt, who has obtained a modest mortgage and made paying it off as quickly as possible his top priority, and who has a large and productive vegetable garden, the possibility of unemployment is scary. But it's nowhere near as terrifying as for someone who's currently barely making the monthly interest payments on his mortgage, and who's cashed out all his home equity and maxed out all his credit cards buying a Wii and a big-screen TV and getting a new model car every couple years. Even for the creditors and the unemployed described by Schumacher's questioner, having a roof over your head free and clear and a reliable source of food will reduce, to a large extent, the concrete harm from the paper collapse.
My hope, at least, is that conventional measures like GDP will suffer (if only gradually, over a generation) what appears to be a catastrophic implosion, as people simply stop buying shit, cut back on the hours of wage labor they previously worked to earn the money to pay for shit, and supply more and more of their own needs producing for themselves and exchanging with their neighbors. My hope, at the same time, is that people will be so busy producing for themselves and their neighbors, and enjoying their control over their own lives and work and consumption, that the collapse of the state capitalist economy won't matter very much to them.
posted by Kevin Carson | 3:04 PM
14 Comments:
This is up there, nay, surpasses, most of "Studies".
This is high quality here. Providing radical and consistent frameworks to understand history and economics.
Hey Kevin,
I wanna make sure you saw this:
DIY at the next level?: TechShop, Construction Junction
http://mutualist-jc.blogspot.com/2008/01/diy-at-next-level-techshop-construction.html
Eliezer Yudkowsky, though I don't think he's ever held a normal job, suggests that managers really do know more than their employees and are more competent, the same is true of high-level managers compared to mid-level and so on up the chain. I immediately though "I bet Kevin Carson would have something to say about this".
I just received a copy of Kropotkin's "Mutual Aid" from a friend. It got me to thinking; for a while I'd been planning on reading some Proudhon and I wondered which work of his you'd most recommend?
Great Work, Carson!
Will there be no chapter 17 (mutual aid) then?
Thanks very much, Ineffabelle and Victor.
Adam: I'm subbed to MJC's feed, so I can't believe I missed that. It will definitely be in the next version of Ch. 14 posted.
RJ: I've consolidated Ch. 17 into 16. Now it's "The Social Organization of Production, Distribution and Mutual Aid."
TGGP: Thanks for the link. I posted some comments over there (pasted below):
You might well have been able to make the same observation about the senior planning officials in Gosplan and the Soviet industrial ministries. The problem is that nobody's "smart" and "competent" enough to administer a planned economy, and that's what a corporation is. The question isn't how "smart" or "competent" senior management is, but the nature of the information they act on given Hayekian information problems. More specifically, [they are] (as Kenneth Boulding said) in progressively more tangential contact with reality, the further up the hierarchy they are, until the guy at the top of the pyramid is living in a completely imaginary world based on information filtered from below. This is how hierarchies work--it's what R.A. Wilson called the Snafu Principle.
We have such large organizations, so isolated from genuine market data, that nobody's smart enough to run them. The solution is not to find the smartest guy you can to make CEO and put in charge of an enormous hierarchy. It's to reshape organizations so that 1) information problems are reduced by putting authority in the hands of people who are dealing directly with the situation, and 2) agency problems are reduced by eliminating the conflict of interest involved in hierarchy as a result of the ability to externalize the costs of decisions on those below.
P.S. Competence can actually be counterproductive, from everyone else's standpoint, when there's a conflict of interest involved.
Even stipulating that (say) Carly Fiorina, Bob Nardelli, and "Chainsaw Al" Dunlap are really a bunch of geniuses, how do you explain the fact that they screw up so bad[?] Either they really are smart, and are pursuing their self-interest in an intelligent manner that just happens to be at odds with the interest of the "little people" in the company, or they're just incompetent and following the flawed MBA playbook. Either way, what they're doing amounts in practice to the behavior of an Ottoman tax farmer: stripping the organization of assets, gutting human capital, and hollowing out long-term productive capability in order to game their own bonuses and stock options. If the corporate economy requires "geniuses" like this to administer it, it must be really fucked up.
KC, since that's close to a repost of what you put at Overcoming Bias, here's a repost of my follow up there:-
Even the Ottoman tax farmer approach worked pretty well with a good CEO/Sultan, largely because it was a fairly flat structure with people acting autonomously. The Sultan provided the right incentives, and right up until Suleiman the Magnificent changed it for his successors the system threw up high quality Sultans. It was pretty much devised by Sultan Orhan's brother and vizier Aladdin.
PML: How did the tax farmer system overcome the main point of comparison to corporate management--the tendency, on the part of tax farmers, to milk long-term economic potential because their successors would reap the consequences?
KC, there are several relevant points.
The first is the difference from western Europe that Machiavelli brought out, that the feudal aristocracy had their own rights but the Ottoman office holders were all agents of the Sultan, responsible to him and remitting revenues to him. The former had a built in incentive for long term planning while the latter did indeed have short term built in incentives, but from the point of view of the state the latter was better, since the state actually got the resources. Machiavelli favoured the Turkish approach, but he left out the fact that western states were built up by feudal methods; it usually wasn't the case that nobles encroached on what the king had had, but rather that the king captured the feudal system and encroached on what had been autonomous. So there's something to be said each way.
The next thing is that the Turkish approach used a very flat structure that it was practical to police, i.e. to give and monitor KPIs without micromanaging. With a strong and competent Sultan, the local officials had another set of incentives on top of the built in ones: to play it straight by the Sultan or face the consequences. This worked very well, provided only that there wasn't neglect - much harder to spot than ripping off the Sultan, particularly since there wouldn't always have been enough central knowledge of local needs. Nevertheless, there were enough local institutions (organised around religious groupings) to look after local needs; the tax farmer didn't have to be the one looking after them. So, with a "good" Sultan, willing and able to spot rip offs, it worked (he had his own household to check out the provinces, and he travelled throughout his domains). It was a lot easier to keep honest than the layered Chinese system, though even that could be done by an Emperor who used his own household as an independent auditing servive over the Mandarins.
Finally, the whole Turkish system was itself a lot like slash and burn agriculture. It presupposed raids and conquests, meaning fresh lands to bring under the yoke and no reason to conserve areas being raided anyway (e.g. the Sultan taxed independent soldiers going on his campaigns for booty, rather than paying them). Local short termism was consistent with overall long termism, since it wasn't a static realm.
Two things mucked it up: the ossification of the succession system (so "good" Sultans became the exception rather than the rule); and, the cumulative effect of inflation caused by New World bullion on an empire near the end of the value adding chain (countries at the beginning and end suffered in different ways, while ones in the middle gained). New trade routes bypassing the Levant didn't help, either.
Thanks for the explanation, PML.
One more piece of clarification may be in order. The Ottomans basically started out by continuing the late Byzantine or Byzantine influenced kinds of tax already in place in conquered lands. These included a cunning variant of Hearth Tax, the Kapnikon, that gave tax payers an incentive to live in ways that were easy to tax and to assist in catching tax evaders - and that led to Kosovo still having village compounds that were easy for Serbs to get at. All these taxes were collected in analogous ways to those used by the late Byzantine Empire that were a sort of hybrid of tax farming and military service arrangements (in varying proportions). After Suleiman the Magnificent's time (or starting late in it), needs changed and more urban and commercially oriented tax farms were started up, with more of a cash emphasis on what was collected and what was forwarded.
Aside: in many places tax farming has often also had a combination of bank credit to peasants and organising "putting out" work to add value to payments in kind, then selling the output to the government among others (often the military) to get actual cash or sometimes tax credits. The profits from the whole system were finally used to buy the next period's tax farming rights - so the system provided payments in advance to the government, another credit/banking function. There was an integrated set of activities as well as the taxes themselves, some of them productive.
Anyhow, for some people "Ottoman tax farming" only signifies the latter and later sort, which were more abused in practice. Even so, a quick internet search told me that these later Ottoman tax farming rights were often deliberately long term, and even able to be inherited, precisely in order to alleviate the short termism incentives.
For what it's worth, the earlier approach also had a lot in common with the Riotvary/Zemindar system that the British inherited from the Moguls in India and then westernised (you know... no more communal village land, etc.).
kevin, i have translated to portuguese your aricle "economic calculation in the corporate commonwaelth", as it was published in the FEE
http://enxurrada.blogspot.com/2008/10/29-kevin-carson-clculo-econmico-na.html
here it is...
Beautifully done, Rafael. Many thanks!
Bravo Bravo. Extravagant work and my mind is no longer in stress. I read soo much that I cant really of anything else but this well written assignment!
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