Posted by: Dr Churchill | November 15, 2013

Not only the Barbarians are inside the gates but Feudalism is in your home eating your lunch — Now P2P economy is your only hope for escape

Market failure is a concept within economic theory describing when the allocation of goods and services by a free market is not efficient. That is, there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off. The outcomes are clearly not Pareto optimal. Market failures can be viewed as scenarios where individuals’ pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point-of-view.

Market failures are often associated with time-inconsistent preferences, information asymmetries, non-competitive markets, principal–agent problems, externalities, or public goods. The existence of a market failure is often the reason for government intervention in a particular market. Economists, especially microeconomists, are often concerned with the causes of market failure and possible means of correction. Such analysis plays an important role in many types of public policy decisions and studies. However, some types of government policy interventions, such as taxes, subsidies, bailouts, wage and price controls, and regulations, including attempts to correct market failure, may also lead to an inefficient allocation of resources, sometimes called government failure. Thus, there is sometimes a choice between imperfect outcomes, i.e. imperfect market outcomes with or without government interventions. But either way, if a market failure exists the outcome is not Pareto efficient. Mainstream neoclassical and Keynesian economists believe that it may be possible for a government to improve the inefficient market outcome, while several heterodox schools of thought disagree with this.  Maynard Keynes himself noted in the General Theory of Employment, Interest & Money that Banking has to be a bottom line occupation.  “It is better that a man should tyrannise over his bank balance than over his fellow citizens and whilst the “on paper rather better than usual, and the price not much higher than usual”, as Keynes himself put it.

The central argument of The General Theory is that the level of employment is determined, not by the price of labour as in neoclassical economics, but by the spending of money (aggregate demand). Keynes argues that it is wrong to assume that competitive markets will, in the long run, deliver full employment or that full employment is the natural, self-righting, equilibrium state of a monetary economy. On the contrary, under-employment and under-investment are likely to be the natural state unless active measures are taken. One implication of The General Theory is that a lack of competition is not the fundamental problem and measures to reduce unemployment by cutting wages or benefits are not only hard-hearted but ultimately futile.

 

Keynes sought to do nothing less but upend the conventional economic wisdom. He mailed a letter to his friend George Bernard Shaw on New Year’s Day, 1935: “I believe myself to be writing a book on economic theory which will largely revolutionize—not I suppose, at once but in the course of the next ten years—the way the world thinks about its economic problems. I can’t expect you, or anyone else, to believe this at the present stage. But for myself I don’t merely hope what I say,–in my own mind, I’m quite sure.”

And he was prescient indeed, because today, the emerging class structure of neo-feudalism in Europe and especially in the Southern states, much like its earlier European and Asian antecedents, is far more complex than simply a matter of the gilded “them” and the poor “us” slave system. To understand the emergent system at work, as we can now see in Greece, Italy, and Spain, we need to examine the broader, more divergent economic class structure that is emerging and revisit Keynes economic theory.

Let us examine the active societal subgroups in this vast Power Struggle:

The Aristocracy: The swelling number of billionaires and millionaires in the European states, has enhanced their power enormously. And that is emerging into something like the old aristocratic French state. Through kleptocracy, political power, corruption, and Media ownership, the oligarchs have tended to embrace fully Europe’s Austerity agenda for the masses. Berlusconi is a good example for this in Southern Europe and the mini Berlusconis hold their Bunga-bunga parties all over Europe as we speak.

This concentration of wealth and power has the direct effect of Social hardness and lack of acuity towards people’s vital needs. This Asberger’s syndrome policy responses from the plutocrat controlled politicians have the net effect of human misery because daily they are reducing basic Social Services, all of Society’s support mechanisms, and relief for the weaker strata of our communities. In turn society suffers, the middle class is squeezed, and the buying power of the public gets evaporated, with a very negative impact on jobs and trade in traditional industries such as the SME’s dotting the landscape as fallen birds on ice, manufacturing, agriculture, energy, and construction. Like the aristocrats who saw all their value in land, and dismissed other commerce as unworthy, they believe all value belongs to those who own the increasingly abstracted Financial revolution, the Media assets, and the PPPs along with the State’s procurement power, that has made them so fabulously rich.

The Clergy: The Oligarchs may have the money, but by themselves they cannot control a huge multi-state like Italy or Spain, much less Europe. Gentry domination requires allies with a broader social base and their own political power. In the Middle Ages, this role was played largely by the church; in today’s Christian-secular Europe, the job of shaping the masses has fallen to the government apparatus, the professorial classes, and the Power beholden and corrupted single-view media, which together constitute our new Clergy. The Clergy generally defines societal priorities, defends “right-thinking” oligarchs, and chastises those, like traditional energy companies, that deviate from their theology.

The New Serfs: If current trends continue, the fastest growing class will be the permanently property-less. This group includes many ex-Middle class citizens and families who lost their breadwinner jobs, all the unemployed, the young educated and permanently unemployed class, all the social welfare recipients and other government dependents, but also the far more numerous working poor. In the past, the working poor had reasonable aspirations for a better life, epitomized by property ownership or better prospects for their children. Now, with increasingly little prospect of advancement, Europe’s serfs depend on the Clergy to provide Social Policy and produce few marginal benefits like soup kitchens — making their permanent impoverishment less gruesome. This sad result remains inevitable as long as the state’s economy bifurcates between a small high-wage, finance oriented sector, and an expanding number of lower wage jobs in tourism, hospitality, seasonal agriculture, health services, and personal service jobs. As a result, the working class, stunted in their drive to achieve the European Integration dream, now represents the largest portion of domestic migrants out of the Southern economically failed states to the industrialized North and Germany in particular.

The Yeomanry: In neo-feudalist Greece, the biggest losers tend to be the old private jobs sector middle class. This includes largely small business owners, professionals, and skilled workers in traditional industries most targeted by regulatory shifts and significantly higher taxes. Once catered to by all political spectrum parties, the yeomanry have become increasingly irrelevant as Europe has evolved into a one-party state where the ruling Coalitions have achieved a potentially permanent, sizable majority consisting largely of the Oligarchy controlled political party apparatus, with the clergy offering justification, and the serf class suffering quietly. This new order is funded by the ruling Aristocracy. Unable to influence government and largely disdained by the clergy, the middle class and lower middle income Europeans are becoming a permanent outsider group, much like in early medieval times, when they were forced to pay ever higher taxes, as well as soaring utility bills, and war fines, and required to follow regulations imposed by people who often have little use for their “middle class” values.

The Political Implications of Neo-Feudalism

As many economists of the 19th and 20th century, have suggested, unbalanced and disharmonious economic and social class structures contain within them the seeds of their dissolution. In Europe this becomes obvious daily. Callous austerity measures and Politicians’ short sighted policies that are impervious to the people’s suffering — is killing the Greatest Middle Class society the world over and robs us all of the gains that we’ve been steadily making since the Enlightenment.

Yet except for occasional rumbling from the far left, and the literal Libertarians, neo-feudalism likely represents the future. Certainly in Germany, Angela Merkel with the intellectual and political skills needed to oversee a neo-feudal society, remains all but unassailable politically. If Merkel, or her policies, are to be contested, the challenge will likely come from left-wing activists and vociferous libertarians; who find her policies insufficiently supportive of the social spending demanded by the serfs and  insufficiently zealous in the pursuit of economic balance within society.

The economy in the Southern European States, and elsewhere across the continent will likely determine the viability of neo-feudalism. If a weaker economy forces state and local government budget cutbacks, there could be a bruising conflict as the various classes fight over diminishing spoils. But it’s perhaps more likely that we will see enough slow growth in our future, so that  Ms Merkel will be able to keep both the clergy and the serfs sufficiently satisfied. If that is the case, the new feudal system could shape the evolution of the European class structure for decades to come.

And that future comes full of Monopolies and oligopolies controlling the European Common Market — even if for practical and legal reasons they do not appear to be that way. For example if all the European car industry is concentrated in Germany that is a defacto monopoly although not addressed as such in the Economics books, in the European parliament discussions, or in the eyes of the European Anti-monopoly and competitiveness commissioners.

Remember though that it still represents a giant market Failure. And as all market Failures of record — all the agents in a market can gain significant market power, by the state actors allowing them to block other mutually beneficial gains from trade from occurring through other actors and agents in other locales and other states or communities. This can lead to classic inefficiency due to imperfect competition, which can take many different forms, such as ”permanent” monopolies, oligopolies, or monopolistic competition. The expensive Euro helps usher this new era because the agent does not or cannot, implement perfect price discrimination. In a monopoly, the market equilibrium will no longer be Pareto optimal.The monopoly will use its market power to restrict output below the quantity at which the marginal social benefit is equal to the marginal social cost of the last unit produced, so as to keep wages low, and prices and profits high. An issue for this analysis is whether a situation of market power or monopoly is likely to persist if unaddressed by policy, or whether competitive or technological change will undermine it over time.

Probably both.

But in the long run we are all dead so what does it matter?

It is then a further question about what circumstances allow this new European Feudal Monopoly to arise. In some cases, monopolies can maintain themselves where there are “barriers to entry” that prevent other companies from effectively entering and competing in an industry or market. Or there could exist significant First-mover advantages in the market that make it difficult for other firms to compete. In another way, a Natural monopoly is an extreme case of the failure of competition as a restraint on producers. A natural monopoly is a firm, country, state, region, whose per-unit cost decreases as it increases output; in this situation it is most efficient (from a cost perspective) to have only a single producer of a good.

I saw the movie Inequality for All, where Robert Reich explains the depth and meaning of inequality in America. He paints a compelling picture. The same picture fully applies to Old Europe as well…

Reich sets up the movie with a teaser: “Something happened in the mid-’70s.”

Indeed “something did happen in the mid-’70s.” For one thing, since then workers’ wages as a fraction of the total economy have lagged by over a trillion dollars per year. If workers’ wages had kept up with gains in productivity since the mid-70’s, wages would be double what they are now. Most new income goes to the top 1 Percent.

2013-10-16-WagesasshareofGDP.4713.jpg

Figure 1. Workers’ wages have fallen as a share of total GDP. The movie translates my blue squiggly line in the graphic into human terms, seen in the faces of families, students, workers, co-workers and neighbors. Their struggle, disappointment, and diminished prospects answer another key question in the movie: Does inequality matter?

It matters. A lot.

Our current downward spiral leads us to a Lesser America — less social cohesion, less political stability, less prosperity, less ability to compete globally.

The upward spiral of my parents’ era expressed American ideals — stronger communities, opportunity and fairness, shared prosperity, and investment in the future.

In one scene in the movie, Robert Reich is speaking to power plant workers facing layoff. One worker says the owners are probably smarter and more deserving than he is, and they should keep the gains he produces. He is happy to take whatever they offer.

We hear a different view from a co-worker’s wife. Her husband takes his job seriously, works hard and creates value through his work. Don’t rich people have enough already? What is gained when the 1 Percent have even more? Isn’t there some left over for her family?

This woman has just enough self-esteem to claim a fair share of the wealth her husband creates. Her husband’s work has dignity, and her family has a legitimate claim when our society divides the gains from work.

Attitudes matter. My daughter once told me that I usually make eye contact with housekeepers in a hotel, or a waiter filling my water glass, or a cab driver. Actually, most people I know in the labor movement do that. It’s a fundamental labor value — all work has dignity.

Look at this image from the Norman Rockwell Museum, representing a Vermont Town Hall meeting. The tradesman with dirty fingers has the attention of his neighbors. His interests matter.

2013-10-16-Rockwellfreedomofspeech.jpg

It took decades to create this trillion dollar money pump for the 1 Percent.

First, advocates for the 1 Percent took away the dignity of work. In today’s political discourse, the tradesman in the Rockwell painting is thrown together with teachers, public employees, construction workers, grocery store clerks, students in public universities, and fast food workers as moochers, or parasites.

Second, public sentiment and public policies shifted bargaining power away from workers, in favor of the 1 Percent.

Business strategy replaced “stakeholder” value with shareholder value. These terms are obscure, but the very real effect was to abandon any commitment large businesses may have had to communities and workers.

Job security has largely vanished. The idea of “a career” has been replaced by contingent or precarious work. We see more part-time, and temporary work, “perma-temps,” unpaid interns, wage theft, and dumping older experienced workers in favor of cheaper younger workers. Good jobs are privatized or contracted out, where the same worker comes back at lower wages, with worse benefits and less job security. College professors — the ultimate knowledge workers — are displaced by precarious adjunct faculty.

When workers are regarded as commodities, businesses provide less training on the job, externalizing those costs to workers and communities. Pensions express a long-term employment commitment. The message of a 401(k) is portability — you will leave this job, probably in 3-5 years.

Executives aggressively oppose union organizing, spending millions of dollars to intimidate, discourage, delay, and punish union organizers. We hear less and less about a strike, where workers seek more or defend what they have. Now, it’s lockouts by employers demanding concessions — at ports, in hockey, basketball and football — even symphony orchestras in Minneapolis and New York!

Households have stopped saving, piling up huge debt instead. Families, living paycheck to paycheck, are constantly at risk of ruin from layoffs or medical expenses. Crushing student loans make recent graduates very compliant and risk-averse in the labor market. Changes in bankruptcy laws favor investors, and banks, but put homeowners, students and retirees in the back seat.

Speculative hedge fund income and capital gains are taxed at a fraction of rates the rest of us pay on wages and earned income.

Millions of good manufacturing jobs moved offshore. Job growth is strongest in lower-paid service jobs. One-sided trade agreements consolidate investor rights and corporate rights at the global level, handcuffing civil society in every country. Investor rights take priority over the environment, labor rights, human rights, public health, and prudent financial regulation.

The ultimate loss of bargaining power for workers is the billions spent to elect our political leaders. Having cornered the market in electoral politics, the 1 Percent are furiously discrediting the role of government, eroding worker protections, and dismantling programs that offered economic security and opportunity for past generations.

This shift in bargaining power happened for two reasons. In the early ’70s, the 1 Percent realized they could do it, and because we let them do it.

The power plant worker in the movie accepts his wage peonage, dependent on his patrón for his livelihood. His co-worker’s wife still believes in her husband’s career.

And this is exactly what has happened in Europe as well through the Sovereign debt crisis, the banking consolidation, and the financialization of our economies.

But we are aware of this Giant market Failure and we have ways and remedies to correct it — albeit as a huge Political and Social cost…

The first step toward disabling the trillion-dollar money pump is within our power as individuals.

We can recognize a key human value — the dignity of work.

We are all connected to our communities.

We all do better when we all do better.

Am a capitalist for one basic reason: to raise living standards in my community.

A familiar mantra of capitalism guides me: Markets are powerful and efficient.

I’m also a realist, so I temper that mantra: Markets are powerful and efficient. And markets fail.

Market failure is an established, well-understood field of study in mainstream economics. Generations of economists accept the basics of market failure.

However, American and European economists turn their heads away at the mention of it, because it sounds like heresy.

Consider the four biggest market failures in human history:

  • Climate change: $40 trillion, so far
  • Health care in America: trillions per year, ongoing
  • The housing-financial asset bubble: at least $8 trillion
  • Free trade: $8 trillion, so far

According to the chief economist for the World Bank, Nicholas Stern, climate change is the greatest market failure in human history. Greenhouse gas emissions are a classic externality, where everyone on earth subsidizes oil companies and consumers of fossil fuels. Fossil fuels are under-priced by $40 trillion — a rough estimate of the cost that future generations will pay for damage we’re doing to the Earth.

Health care in America wastes roughly $1 trillion per year, compared to other wealthy countries, and the problem is steadily worsening.

First, health care is not a market. A market involves buyers and sellers. In American health care, we’re not really sure who is a buyer and a seller.

2013-08-23-Fourcorners.2.jpg

Figure 1. Find the buyer and the seller in American health care.As a result, market incentives are badly misaligned.

Very few patients shop around for deals. After the doctor says the word “cancer,” most people lose their shopping instincts.

The housing and financial asset bubble is a classic market failure. Mortgage brokers misled home buyers into bad mortgages. Banks bundled unaffordable mortgages into bogus securities and sold them to investors. Rating agencies provided false security to investors. Herd mentality and massive group-think inflated the asset bubble. Losses in housing values alone exceeded $8 trillion.

We should add costs for the recession, millions of foreclosed homes, personal bankruptcies, lost opportunities, millions of workers unemployed and careers damaged permanently.

Markets rewarded bad behavior and punished millions who behaved responsibly.

Free trade is a market failure, but it is also an intellectual failure for the economics profession, and a policy failure on the part of elected officials. Our cumulative trade debt since NAFTA is well over $8 trillion. Our economy is de-industrializing, with thousands of factories closed, millions of jobs lost, and no improvement in sight.

Free trade has enjoyed inexplicably unassailable reverence since David Ricardo introduced it in 1817. It was unrealistic in 1817, and it is unrealistic today.

It starts with hopelessly idealized assumptions, applied blindly in the complex global economy, where trading partners and multinational companies exploit those assumptions for their own purposes. We were promised mutual gain, but we suffer huge deficits, concentration of wealth and power among trade’s “winners” and loss of bargaining power, de-industrialization and stagnant wages for the rest of us.

If the study of free trade were moved from economics departments in universities to mathematics departments, it would be discredited on logical grounds by the end of the first day. Similarly, its half-life in a physics, astronomy, or chemistry department would be a week or two — the time it would take to send graduates students to the lab to collect data.

It is worth noting that conventional free trade theory is considered largely irrelevant in business schools, where students learn the realities of how to move capital and production around the world.

Worse by far, our so-called free trade agreements are really designed to protect and enrich global companies. These agreements toss aside democratic checks and balances, weaken civil society and erode the middle class.

Under the right conditions, markets will, in fact, produce broad-based well-being. In 1776, Adam Smith argued that beneficial market control occurred when merchants in the village were personally connected to the well-being of their neighbors, who lived and shopped in the village. Social and economic cohesion would prevent market failure.

But globalization, as we’ve managed it, de-couples modern corporate decision-makers from any obligation or connection to communities anywhere.

2013-08-23-Interests.jpg

Figure 2. Globalization de-couples investor interests from public interests.
The test of a market economy is whether it raises living standards. We fail that test when we look at growing inequality and reduced career prospects for the next generations of Americans. As a society, we have stopped sharing the gains from productivity and trade. Almost all new income goes to the top 1 percent — more than $1 trillion per year.

Some economists object that inequality is beyond the narrow scope of economics, so it’s not “really” a market failure. Granted, our looming inequality has broad dimensions — social, political and moral, as well as economic.

However, when economists duck responsibility for inequality, they are really acknowledging that free markets and free trade will predictably create inequality, without strong intervention in the form of public policy and social values. That sounds like market failure to me.

Here’s the take-away message. The narrow orthodoxy of free markets and free trade says that markets will solve all our problems, and government intervention is bad. Look at politics in America, today.

Unfortunately, the real world is a very large system with many interacting forces and interests.

Markets fail. A legitimate purpose of public policy is to intervene in markets to prevent market failure. Public policy has a necessary role in protecting the environment, human rights, labor rights, education and public health, managing growth, regulating markets, and managing global trade.

That’s capitalism for realists.

And the way it is practiced in Europe and America today is shameful, because all our Economic Thinkers and Politicians have forgotten what Adam Smith wrote in his first Book: ”The Theory of Moral Sentiment”

And when we see the future?

What do we see?

Let’s think about the car.

The great symbol of industrial capitalism is the automobile industry. Applying state-of-the-art technology, intensive capital, a new organization of work,  and a large-scale approach to both production and market, something incredible at the time was obtained: making the automobile -a sophisticated machine- into a consumer product that was accessible to the masses of the middle class.

What did the car represent for the world back then, which was still fundamentally agrarian?

In the first place, a prodigious, even drastic, increase in productivity. If there’s anything representative of what capitalism has historically meant, it is the development of productivity. And productivity, in the end, is technology. But technology also influences the system through other variables. The most important, maybe, is optimal scale.

What is optimal scale? The optimum size for the use of resources, starting with capital itself, that are used as means of production. Logically, scale is optimal for a particular market size and for a given technology.

If markets do not grow sharply, starting at a certain level of economic development, all the force of technological evolution will tend to reduce the optimum scale of production. Those who continue producing above that scale, using excessive capital, with larger dimensions, simply will accumulate inefficiencies.

Scales

That’s why technological development negatively affected the countries of the Soviet bloc first. Why? Because of the way they had developed, and because of the centralized nature of their economy. Both inertia and gigantism were in the DNA of their industrial organization. By the ’70s, the situation was so bad that the USSR had to assure its basic supply by buying grain from the US. The protest movements in Poland, and strikes in Russia, were the product in the ’80s of a shortage that seemed to have no remedy. The centralized system of State property was leaking everywhere. It wasn’t President Reagan who “overthrew” the Soviet bloc, but nor was it the popular protest movements. The Soviet system crumbled after dragging growing inefficiencies for two decades.

But was it different in Europe or the USA?

No, and in fact, it is precisely because of that crisis of scale that big economic changes happened in the ’80s and ’90s. What is usually known neoliberalism.

What is neoliberalism, really? A set of policies oriented towards breathing life into an over-scale of capital. What do Thatcher, Reagan and finally, Clinton do?

  1. Deregulate, feed the large consortia of the military and aerospace industry, in the case of the two first, and of intellectual property in the third… modify international agreements in favor of big interests… in a word, generate rents from states who compensate for the inefficiencies of Big Businesses
  2. Expand the size of markets, so over-scaled big businesses would make sense, which was called globalization
  3. Capital itself was more and more over-scaled. New companies in new sectors require less and less scale, and therefore, less capital. In the ’80s, gigantic funds began to appear, masses of capital that looked for places to go.

They have to to distribute their risks in ever more places. And that means management costs and growing inefficiencies. These are typical symptoms of a problem of over-scaling. So, the neoliberal state helps, through financial deregulation and the opening of borders to capital flows, giving rise to new financial areas that will group sectors and entire regions through securitization, financialization, and a whole new series of financial products that distribute and globalize risks, making them, in the end, as we’ve seen, systemic.

But in the world of the ’90s, other things are happening at the same time…

In the first place, the structure of communications changes. We’re going from a decentralized world (the world of the telegraph and of nations) towards a distributed model of communication (the world of the Internet).

Without getting into detail, that new distributed structure makes scale independent from scope. A small Chinese enterprise, such as the one that created the vuvuzela, or that created the EGo, the standard for electronic cigars, can sell throughout the world. Of course, it won’t be able to meet all the demand, but hundreds of other small businesses will emerge that will meet it quickly.

So, at least in part, the opening of commercial barriers in the ’90s will backfire for neoliberalism’s corporate objectives. The result has been a constant increase in commerce based above all, in the emergence of new, smaller-scale, less capital-intensive, agents, at the periphery. It’s what is known as globalization of the small.

The direct consequence has been the greatest reduction of poverty in human history, but also a remarkable growth of inequality and a growing economic instability — why?

Capital, far from adapting to the reduction of scale, has continued increasing it, resorting to “financialization” and “securitization,” separating from the productive system, and regularly creating bubbles to put that surplus of capital in.

 Relationship between production and capitalIn these graphics, the evolution of trade versus capital flows is seen. While commerce maintains constant growth, capital grows exponentially. We can see also how the peaks coincide with the bubbles.

From the point of view of the organization of production, what happens is that technological change is drastically reducing the efficient size of scale. But this causes a real problem for capital: the closer to individualized production we are, the less necessary it turns out to be. It begins to accumulate large funds of financial capital that can’t be directly integrated into production. Capital has fewer large projects to invest in, and starts to move more and more quickly, more sensitive to changes in opportunities, as we can see in history of international capital flows.

Its strategy of forcing scale to ensure rents, has had weighty consequences, such as the restriction on intellectual property, the unnecessary “redefinition” of the Internet to make sense of recentralizing infrastructure (Google, Facebook, etc.), and above all, it has been able to to multiply the pressure to capture the State.

That strategy can only lead to the simultaneous destruction of the market and the state, a phenomenon that we call “decomposition,” and which is parallel to the destruction of productive capacity brought about by crises and the wars that precede and accompany them.

And there’s still more.

The Internet isn’t just a communication phenomenon. With free software, whose development and spread are its product direct, a new mode of producing and distributing has appeared. Given the deficiencies of national accounting systems, we can only intuit the true impact that free software has had so far. We only know partial things, such as, for example, the value earned by countries in development through the incorporation of free software to their industries and administrations has exceeded all development aid, both public and private, sent throughout history from the central countries.

What is the production cycle of free software?

In the first place, capital, market and benefit will be completely redefined.

Ciclo_de_producción_p2p_English

The center of the system is no longer the accumulation of capital, but of the “commons,” a form of capital: knowledge, universal and free access to for anyone.

What goes to market? Maintenance, customizations, private developments… and then they are set free, incorporated to the commons, and available to all.

The market of free software starts with that universal accessibility, which is to say, with the elimination of rents from intellectual property, from position, etc. The only extraordinary benefit that a developer of free software can have, which is minimal and extremely temporary, comes from having innovated and improved something. But it lasts a short time as rent. When you make something good and you release it, you’ll earn prestige, and you’ll get more orders… for a time. These are rents that extinguish themselves. As a medium, the free software market renumerates those who produce it for the value of their work, with a little extra if they innovated enough to “make a name for themselves.”

The good news is, this cycle isn’t exclusive to free software.

First, there were other intangible goods based on knowledge, from music to novels to textbooks. But in the last three years, more and more projects that seek to build things have taken off.

Ultimately, the value of an object on the market today is mostly design, technology, engineering… all of which are also intangibles.

And with the advent of 3D printing we can all become the mini factory or the Guild makers we dreamed of…

That’s why we no longer talk about the system of free software production, but of the P2P mode of production, and just as it serves to produce software, it serves to produce material objects and all kinds of services.

In the last three years, industrial manufacturing projects based on the possibilities of high productivity on a small scale from a technical knowledge commons have multiplied. That is: small scale of production, huge scope (because the commons is, by definition, universal).

The “Open Source Ecology” project alone is working on the design of 40 free basic industrial machines: from a wind generator to a tractor to a brick-making machine.

We think that these technologies, while still a bit green, can be a valid basis to confront the effects of the financial crisis in the traditional local productive community, that of the micro and small industrial enterprise, from neighborhood workshops to component factories.

And finally, let’s go back to the traditional communal system. Both the historical model and P2P are based in a different kind of property: the commons.

But, while in historical communities, the subjects of that property, the ones who could exploit and use it, were a concrete community of people physically united in a locality, but now:

  • that possibility of use and exploitation is universal
  • the work and communities who do so are not necessarily defined by their locale, in a territory, but rather on a network, as can be seen in any free software project or P2P industry
  • and what each one does, what anyone provides, reverts directly to everyone through the new knowledge commons, which, by its own nature, is unity
  • Community is bearing fruit in unlikely to be thought of circumstances
  • All efforts are self perpetuating

The sum total of all knowledge is already based on this community building process as we all stand on the shoulders of those who came before us.

Think of it.

Even if only because there is Nothing New Under the Sun.

Yours,

Pano

PS:

Naturally the P2P mode of production is the heir to a rich community tradition that comes out of technological Progress, human evolution, and necessity. But it is also the child of modernity, and the incredible development productive capitalism has left us. It has its own logic, rules, and modus-operandi.

The kernel — or internal logic — is based on abundance, and not on the scarcity of the old systems of political management and economic theory, or even human belief. P2P at the community level, is a big machine to create public and universal goods without the need of the State, or of the large conglomerate.

P2P, distributes development and the possibility of producing without confining the people in a territory or assigning them to a community by birth.

Definitely, we can be very proud of the communal ways of the past — yet now, the P2P mode of production points the way to a future that, surely, old generations libertarian would have loved to have even dreamed of.

Think of this next time you jump in any enterprise, and think about getting involved in politics. As a matter of fact don’t just think about it but do it. Because we need all new political activists in order to break the chokehold of the old order Political classes that block a balanced economic development model that can lift Europe out of this new Er of poverty for all.

Think that the One Percent doesn’t count.

THINK HARD and ACT because as David Ben-Gurion said: “Thought is a strenuous art — few practice it, and then only at rare times.”

And I say:  ”Stop bitching about politics and Run for Office today”

That’s how You change things….

 


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