The Macro-economic Challenges of Building a New Commons-Based Economy

As commercial interests try to convert what has essentially been a commons into a total market order, the Internet is experiencing a mid-life crisis.  The open Internet is in the process of being enclosed by a variety of commercial forces.  The struggle for political and creative freedom is getting more urgent and complicated as commercial forces try to “develop” the Internet.

The challenge for people who believe in free culture is to reinterpret the core values of the Internet and somehow develop new ways to protect them in today’s more complicated environment.

So what the some of the key macro-economic trends of our time?

As I seee it, the basic story of the Internet over the past fifteen years has been an explosion of socially created value– a huge abundance of creative output that private corporations are trying to capture, monetize and appropriate for themselves.  In neoliberal economics, of course, this is known as wealth-creation.  It’s the classic dynamic of capitalism – to raid the commons in an attempt to convert it into steady revenue streams, capital and political influence. 

The theft of socially created value is justified by the claim that sharing and collaboration don’t really have value.  They occur outside of the marketplace, and so there is no price tag associated with it.  And so, with the help of our own governments, tech and other businesses have aggressively set about to digitize and monetize the commons.

These enclosures are taking three primary forms, as Reed Hundt, the former FCC Chairman in the U.S. has pointed out.  The first is the enclosure of the devices that connect to the Internet.  It was inevitable that specialized devices would replace the all-purpose PC at some point, and so we now have BlackBerries, iPhones and iPads, among many others.  Each is starting to fragment the world of Internet appliances and create new communications protocols and new types of walled-garden content.  Apple is of course the most visible innovator in this regard, but there are many others. 

A second set of enclosures has consolidated the once-competitive and open world of Internet service providers and rolled them up into giant oligopolies -- or in the U.S., a duopoly of cable and telephone companies. 

This means that huge corporations can now leverage their role as gatekeepers to the Internet by charging discriminatory rates.  They want to segment the market, in the classic ways.  The richer companies who can afford to pay higher fees will get faster, higher-quality service -- and the rest of us get slow-lane, inferior service, not to mention snooping into our email and other private dealings on the net. 

All of this will destroy the commons as an open, accessible, competitive platform.  It’s why net neutrality is so vital to political and marketplace freedom in the future. 

A third major enclosure is the enclosure of “the cloud.”  This is the world pioneered by Facebook, Google and Twitter, in which companies with remote servers and databases give us “free” services -- and in return, we give them the permanent right to spy on us.  Eben Moglen of the Software Freedom Law Center had a memorable speech on this topic earlier this year.

Open platforms may resemble commons because they encourage user sharing and collaboration.  But in fact they are proprietary business models designed to spy on us, sell us to marketers and curb our political and creative freedoms.  Although they often provide useful and ingenious services, I consider them faux commons.  

Finally, government enclosures of the Internet commons are increasing. The new private chokepoints created by corporate enclosures of the Internet commons are the irresistible tools for government to monitor citizens and control political debate.  The chokepoints are a means by which the market/state duopoly can consolidate control over democracy. 

People are waking up to realize that – contrary to the libertarians fantasies of the 1990s and even today -- the Internet does not trump national sovereignty.  Nation-states can and do control most of what will be transmitted over the Internet.  We see this reality in China, Russia Saudi Arabia, and yes, in various nations that are nominally committed to democracy and the rule of law.   

So what is to be done?

This conference is about developing hybrids that can economically sustain open collaboration online.  This is a very timely topic because it is increasingly clear that powerful micro-economictrends have profound macro-economic consequences.  Commons-based peer production, as Benkler has noted, is becoming a major force of economic and cultural production.  The micro- and the macro-economic are starting to blur. 

This is good news for free culture because our commons-based models can scale quickly on the Internet -- so long as we have an open, non-discriminatory access and transmission. 

So I think we need to focus on two major priorities: 1) fight for an open Internet infrastructure so that our commons-based models have a chance of scaling and interconnecting with others in the Commons Sector; and 2) develop effective micro-economic models that are commons-based yet market-friendly.

Let’s first acknowledge that the commons is a fountainhead of abundance.  Networked participation is creating gushers of socially generated value.  It’s because networked culture can avoid the huge expenses of centralized production.  It can be more efficient and socially legitimate because the community is self-organized and its rules are self-enforcing.

This has implications for how we protect value.  Value will continue only if we are actively committed to maintaining a continuous flowof knowledge -- rather than to guaranteeing broad private ownershipin knowledge.  Copyright ownership may play a constructive role – but broad copyright rules that limit fair use and the public domain do not.

In the next few days, I think we should be less focused on the faux-commons of open platforms that simply channel socially created value towards private corporations – and focus mostly on and commons-based models of sharing and collaboration, in which the commoners accrue long-term equity from their fruits of their labor and stewardship.

In other words, we should be discussing business models that not only are compatible with the commons, -- often referred to as “open business models” – but mostly on those business hybrids that actively enhance and conservethe commons. 

User communities must have the means to control their own output -- whether it’s code, music, video or data.  They must be able to build their own technological platforms, legal regimes and revenue streams to sustain the commons.

One question is whether the market and the commons can be successfully blended into new hybrids.  I think we can – but there are some serious challenges in doing so.  For one thing, the market and the commons entail some very different social relationships and expectations.  They are focused on creating different forms of value.

That’s one reason that I’m skeptical of micro-payments as a solution.  I think we should welcome the role that capital can play in expanding and validating the commons – as IBM has done with GNU Linux and open source software more generally – but we must be entirely clear about protecting the value of the commons and its indispensable value proposition. 

In other words, any hybrid business model must first respect the commons.  It’s okay for monetize the fruits of the commons.  It’snotokay to privatize the commons or corrupt its ability to sustain itself over time. 

In the information commons, we must make sure that knowledge and creativity can circulate freely (i.e., at no cost) within the commons.  Once the perimeter of the commons has been secured, then, and only then companies canexplore how those flows of knowledge and creativity might be monetized or privately captured. 

Consider these three examples in which the commons and market have jointly settled into a beautiful, symbiotic relationship:     

First, there’s free and open source software.  FLOSS works only because of the General Public License and other licenses assure that a creative community of commoners – and their creative flows – can survive.  The licenses assure that the free flow of code.

How does FLOSS support itself financially?  Through volunteers, through academic support and through the cold, hard calculations of companies.  They see the value of paying employees to contribute to FLOSS projects and of supporting the Apache Foundation and the Eclipse Foundation and other such foundations.

Fashion is another example of business and the commons working together.  Apparel design is the oldest open-source industrial sector in existence.  You can’t own the herringbone suit or the peasant dress or the wraparound skirt.  Apparel design is a commons.  You can’t privately claim ownership rights in design except in a few special cases.  What you own is a trademarked name and logo, which you use to distinguished your products in the marketplace and inspired brand loyalty.  

And you know what?  This system works beautifully!  It has given us a tremendously robust and fast-paced flow of creativity.  It’s given us a highly competitive and innovative industry with low barriers to entry precisely because no one can acquire monopolies over specific designs.

A third example of a business/commons hybrid is academic research and publishing.  It’s true that large corporations are trying to appropriate university research through their research partnerships, and commercial journal publishers are often parasites on the publishing of academic disciplines.  But the point is that academia is a highly productive source of new knowledge because it is a commons.  People collaborate as colleagues rather than as market competitors, for example, and there is no need to publish commercially.  In fact, there are now more than 5,000 open-access scholarly and scientific journals.

There are other examples in which creativity circulates freely and the money comes from elsewhere, but I find these rather rudimentary and less impressive, at least for now.  For example, the tip jar model.  The crowd-sourcing of new projects may have proise, as seen on the open music website Musopen, the journalism website, and Kickstarter projects – but they seem to have trouble scaling. 

There is also the familiar “loss leader’ model in which people give away works or post them on the Web as a way to induce people to buy something else.  Cory Doctorow has become a successful paid author by posting his books on the Internet with Creative Commons licenses….and Jamendo allows free sharing of music but then licenses it to films and advertisers.  In Brazil, techno brega musicians give away CDs as a way to advertise their in-person, sound-system performances. 

The point of all of these examples is that the role of socially created value outside of the marketis becoming increasingly important to business.  That’s the essential lesson of Professor Eric von Hippel’s pioneering book, Democratizing Innovation, in which he shows how communities are a source of value in developing market value. 

It reminds me of a recent story in the New York Times which pointed out how important out-of-town debuts for Broadway musicals were – because they allowed the producers to see how audiences reacted and then improve the shows before they premiered on Broadway.  It’s another case of the audience as co-creators.

On the Internet the social foundations of market activity are becoming more apparent.  Commons-based, distributed peer production is growing in power because it can be more efficient than conventional markets.  In my book Viral Spiral, I call this “The Great Value Shift.” 

In the future, markets will instead have to find new ways to work in tandem with the Commons Sector.  It will have to “build off” of the insights, preferences and contributions of social communities, much as IBM and Red Hat and dozens of other companies have entere into a symbiotic dance with free and open source software.

Businesses can earn profits by having its privileged access to a given commons – say, the people who do extreme skiing or bicycling or surf-boarding – so long as the business interactions are respectful of the commons.

So the question is, can we maintain enough control over our various (lower-case) creation commons that we can regulate our interactions with businesses that may wish to deal with us?  I suggest that many answers might lie in creating new sorts of guilds of creative artists who can interact collectively with businesses that wish to exploit their talent for money.

That way, it would be possible for people to get paid – while still allowing information to flow freely without metering it.  People could collaborate without requiring permission or payment.

So how do we secure the commons adequately to avoid getting bullied by companies?  My guess is that the means for securing the commons will vary from one medium to another.  In software commons, it’s the GPL and other licenses.  In the fashion commons, it is trademark law.  In academia, it’s the financial support of the university, foundations and government.  In many open business models, its advertising, commercial licensing, tip jars and so on. 

While the details will vary from one creative sector to another, here are some basic principles that I think should prevail:

*  That which is generated within the commons must stay within the commons – unless the commoners decide otherwise.

*  The design principles for commons-based institutions should look to Professor Elinor Ostrom’s work.  Professor Ostrom, you may recall, won the Nobel Prize in Economics last year for her pioneering studies of cooperative management regimes, especially for natural resources in developing countries.  Ostrom has noted that successful commons tend to have defined boundaries…. a clear set of rules for managing resources….transparency and oversight by the commoners….and graduated sanctions against vandals and free riders. 

I would stress the importance of boundaries to the commons.  Unlike open platforms, which are open to everyone on the network, a commons has boundaries that help protect its resources and nurture the community’s identity.  There are important to mainaining the commons. 

It’s also important to have effective ways to patrol the boundaries of the commons.  In medieval times, the commoners used to “beat the bounds” of their commons.  This was an annual party at which everyone collectively took a walk around the perimeter of the commons to make sure that no one had enclosed it anywhere.  And if they discovered a fence or other enclosure, they used crowbars and sticks to knock it down. 

So how do we “beat the bounds” today?  The Free Software Foundation and Software Freedom Law Center are two ways.  But the community itself can also patrol the perimeter of the commons, as Wikipedia contributors constantly do.

If we are going to develop commons/market hybrids, then we are going to need to find our own ways to “beat the bounds” of our commons – to make sure that no one is privately appropriating shared resources; to make sure that the community has a rough consensus about its mission and that the rules are fair; and to make sure that any monetization is not eroding the social relationships of the community.

A prominent law professor at Yale Law School, Carol Rose, has talked about “property on the outside, commons on the inside.”  That is a crude model of what we must develop – new schemas that assure the free flow of knowledge and creativity within the commons yet that can selectively treat some of that knowledge and creativity as marketable property.

A friend of mine at the Berkman Center at Harvard – John Clippinger – talks about the need for new sorts of “trust frameworks” on the Internet.  He notes that trust frameworks will not be based on property law so much as the devising of new commons mechanism, be they technological, legal or social.  Authority will not be imposed from above; it will be validated from below. 

So in trying to devise effective, sustainable commons mechanisms, I believe we need to:

1.  Secure the Internet infrastructure through net neutrality so that it is possible to build new commons without commercial or state interference. 

2.  Develop new micro-economic prototypes that leverage the commons and can scale – yet still protect the integrity of the commons. 

I am intrigued, for example, by Diaspora, the open-source social networking alternative to Facebook, and by Eben Mogen’s proposal that free culture develop a federation of small, cheap, personal micro-servers.  The idea is to allow us to communicate directly with each other through the Internet, bypassing the proprietary manipulations of the cloud.

3.  Develop a rough taxonomy of commons-based business models so that we can begin to get a larger picture of the whole.  That’s what this conference is all about.  We need to learn what works and what doesn’t, and what patterns of success can be identified.

4.  Invent new sorts of upfront & sustaining financial support for innovative commons-based models.  These models could involve crowd-sourcing such as Kickstarter, but I believe we also need new sources of seed capital, so that new projects can scale more quickly, improve their quality more quickly, and go viral.