economics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In industrialized societies, where so many people regard economic growth as the essence of human progress, the idea of deliberately rejecting growth is seen as insane.  Yet that is more or less what the planet’s ecosystems are saying right now about the world economy. It’s also the message of an expanding movement, Degrowth, that is particularly strong in Europe and the global South. 

A few months ago I blogged about the massive Degrowth conference in Leipzig, Germany, that attracted 3,000 people from around the world. The basic point of the discussions was how to get beyond the fetish of growth, intellectually and practically, and how to transform our idea of “the economy” so that it incorporates such important values as democracy, social well-being and ecological limits.

Several of the movement’s leading figures have now released a rich anthology of essays, Degrowth:  A Vocabulary for a New Era (Routledge). It is the first English language book to comprehensively survey the burgeoning literature on degrowth.  More about the book on its website and an amusing three-minute video.  

The editors -- Giacomo D’Alisa, Federico Demaria, Giorgios Kallis – are three scholars at the Autonomous University of Barcelona, Spain, and members of the group Research & Degrowth. The editors describe degrowth as “a rejection of the illusion of growth and a call to repoliticize the public debate colonized by the idiom of economism.”  The basic idea is to find new ways to achieve “the democratically-led shrinking of production and consumption with the aim of achieving social justice and ecological sustainability.” 

Here’s how the book jacket describes the volume: 

We live in an era of stagnation, rapid impoverishment, rising inequalities and socio-ecological disasters. In the dominant discourse, these are effects of economic crisis, lack of growth or underdevelopment. This book argues that growth is the cause of these problems and that it has become uneconomic, ecologically unsustainable and intrinsically unjust.

When the language in use is inadequate to articulate what begs to be articulated, then it is time for a new vocabulary. A movement of activists and intellectuals, first starting in France and then spreading to the rest of the world, has called for the decolonization of public debate from the idiom of economism and the abolishment of economic growth as a social objective. ‘Degrowth’ (‘décroissance’) has come to signify for them the desired direction of societies that will use fewer natural resources and will organize themselves to live radically differently. ‘Simplicity’, ‘conviviality’, ‘autonomy’, ‘care’, ‘commons’ and ‘dépense’ are some of the words that express what a degrowth society might look like.

The economist Paul Samuelson once wrote, “I don't care who writes a nation's laws—or crafts its advanced treaties—if I can write its economics textbooks.” 

What a pleasure to learn that an insurgent team of economists, The Core Project, is about to rewrite the nation’s laws.  The new introductory economics textbook is called The Economy.  It is surely the most daring, cosmopolitan and empirically driven textbook since Samuelson’s tome was unleashed on undergraduates in 1948.  It is also packed with innovations worthy of our digital age. The Core Project’s sardonic tagline says it well:  “Teaching economics as if the last three decades had happened.” 

This is not your grandfather’s econ textbook.  Nor is it an exercise in ideological spin or neoliberal bashing. In both style and substance, Core-Econ (the name for the Core Project's website) shakes off the dreary norms of conventional economics and embraces the critical intelligence of the real world. 

Savor the delicious paradox that The Economy is published as an interactive ebook available for free downloads (pdfs) and printing. It is published under a Creative Commons Attribution, NonCommercial, NoDerivatives license, demonstrating that a free lunch is entirely feasible (at least for non-rival goods like books).

So far, ten of the twenty-one planned teaching modules have been published online; the remaining ten modules are expected to be completed by the end of 2014. At the moment, the online version is available as a “beta” release, which means that anyone can submit feedback and suggestions to improve the text before its release.

New Start magazine, a British magazine associated with the Manchester-based Centre for Local Economic Strategies, has just come out with a terrific issue (#525, October 2014) about co-operatives and commons.  The essays focus on how “more democratic forms of ownership – of land, housing, workplaces and the public realm – can revive our places.” 

While most of the essays deal with British co-ops and commons, the lessons and strategies mentioned have a relevance to many other places. Consider land ownership, a topic that is rarely a part of progressive political agendas.  Steve Bendle, director of a group called Community Land and Finance, offers a clear-eyed assessment of how government is obsessed with enhancing the value of land for landowners and developers – while largely ignoring how land could be used to serve citizens, taxpayers and the wider community. 

Unneeded land and government buildings, for example, are generally put up for sale on the market rather than used to serve the needs of a community for housing, work spaces or civic infrastructure.  The assumption is that privatized, market-driven uses of the assets will yield the greatest “value” (narrowly defined as return on investment to private investors). 

When government (i.e., taxpayers) finances new roads, subways or rail systems, the market value at key locations and buildings invariably rises.  But government rarely does much to capture this value for the public. 

Bendle concludes:  “So developers and landowners make profits, while the public sector struggles to secure a contribution to infrastructure costs or to deliver affordable homes despite successive attempts to change the planning system.”

I remember in the late 1970s how the corporate world essentially invented the use of cost-benefit analysis in health, safety and environmental regulation. It was a brazen attempt to redefine the terms for understanding social ethics and policy in terms favorable to capital and markets.  Instead of seeing the prevention of death, disease and ecological harm as a matter of social justice, period, American industry succeeded in recasting these issues as economic matters.  And of course, such arcane issues must be overseen by a credentialed priesthod of economists, not ordinary mortals whose concerns were snubbed as selfish NIMBYism (Not in My Backyard).

And so it came to be that, with the full sanction of law, a dollar sum could be assigned to our health, or to the cost of getting cancer, or to a statistical baby born with birth defects. Regulation was transformed into a pseudo-market transaction.  That mindset has become so pervasive three decades later that people can barely remember when ethical priorities actually trumped big money. 

It is therefore a joy to see Barbara Unmüssig’s essay, “Monetizing Nature:  Taking Precaution on a Slippery Slope,” which recently appeared on the Great Transition Initiative website.  Unmüssig is President of the Heinrich Boell Foundation in Germany and a stalwart supporter of the commons, especially in her backing of the 2010 and 2013 conferences in Berlin.

Striking a note that is note heard much these days, Unmüssig points out the serious dangers of seeing the natural world through the scrim of money.  Here is the abstract for her piece:

In the wake of declining political will for environmental protection, many in the environmental community are advocating for the monetization of nature. Some argue that monetization, by revealing the economic contribution of nature and its services, can heighten public awareness and bolster conservation efforts. Others go beyond such broad conceptual calculations and seek to establish tradable prices for ecosystem services, claiming that markets can achieve what politics has not.

However, such an approach collapses nature’s complex functions into a set of commodities stripped from their social, cultural, and ecological context and can pose a threat to the poor and indigenous communities who depend on the land for their livelihood. Although the path from valuation to commodification is not inevitable, it is indeed a slippery slope. Avoiding this pitfall requires a reaffirmation of the precautionary principle and a commitment to democratic decision-making and social justice as the foundations of a sound environmental policy for the twenty-first century.

In a sign of the growing convergence of alternative economic movements, the Degrowth movement’s fourth international conference in Leipzig, Germany, last week attracted more than 2,700 people.  While a large portion of the conference included academics presenting formal papers, there were also large contingents of activists from commons networks, cooperatives, the Social and Solidarity Economy movement, Transition Town participants, the “sharing economy,” and peer production. 

By my rough calculation from browsing the conference program, there were more than 350 separate panels over the course of five days. Topics ranged from all sorts of economic topics (free trade, business models for degrowth, GDP and happiness) to alternative approaches to building a new world (Ivan Illich’s “convivial society,” permaculture, cooperatives, edible forest gardens). 

Degrowth?  For most Americans, the idea of a movement dedicated to non-growth, let alone one that can attract so many people, is incomprehensible.  But in many parts of Europe and the global South, people see the invention of new socio-economic forms of production and sharing as critical, especially if we are going to address climate change and social inequality. 

Some degrowth activists are a bit defensive about the term degrowth because, in English, it sounds so negative and culturally provocative.  (The French term décroissance, meaning “reduction,” is apparently far less jarring than its literal transation as “degrowth.”)  One speaker at the conference conceded this fact, slyly noting, “But unlike other movements, it will be exceedingly hard for opponents to co-opt the term ‘degrowth’”!

In a 2013 paper, “What is Degrowth:  From an Activist Slogan to a Social Movement” (pdf), Frederico Demaria et al. write:  “”’Degrowth’ became an interpretive frame for a new (and old) social movement where numerous streams of critical ideas and political actions converge.  It is an attempt to re-politicise debates about desired socio-environmental futures and an example of an activist-led science now consolidating into a concept in academic literature.”  A new beachhead of this academic inquiry is a book Degrowth:  A Vocabulary for a New Era, due out in November.

Everybody talks a lot about economic inequality, but there don’t seem to be many credible proposals out there, let alone ones that have political legs.  French economist Thomas Piketty documented the deep structural nature of inequality in Capital in the 21st Century, but the best solution he could come up with was a global wealth tax.  Good luck with that!

What a pleasure, then, to read Peter Barnes’ new book and discover some sensible, practical ideas.  Barnes is a writer, entrepreneur and long-time friend; we worked together a decade ago with the late Jonathan Rowe in exploring the great potential commons in re-imagining politics, policy, economics and culture. The author of pioneering policy ideas in Who Owns the Sky? and Capitalism 3.0, Barnes has just published With Liberty and Dividends for All:  How to Save Our Middle Class When Jobs Don’t Pay Enough (Berrett-Koehler Publishers). 

The book aims to reduce inequality not through the tax system or education and training, but by inventing new commons-based institutions that can generate nonlabor income for everyone.  The secret of the wealthy, of course, is that they don’t depend on salaries or wages, but on investment income from their equity assets. 

So how might commoners pull off this trick?  By generating income from common assets.  The money won’t come from government spending or redistribution, or from new taxes on business.  It will come from commoners seizing control of the shared equity assets they already own – the atmosphere, airwaves, the sovereign right to create money (now enjoyed by banks), and the public institutions that make stock markets and copyrights possible.

These equity assets belong to all of us. Unfortunately, most of the benefits from these assets have been privatized by banks, oil companies, telecom companies, the culture industries, depriving us of income to which we, as common property holders, are entitled.

Barnes proposes renting out various common assets to businesses that wish to use them.  This is a well-accepted principle – to pay for something owned by someone else.  Why should companies get a free ride on public assets?  Barnes proposes charging corporations for the use of the airwaves, the pollution sink of the atmosphere, and the right to monopoly protections such as copyrights, trademarks and patents.  Revenues from our common assets could be channeled into independent, non-governmental trust funds that would then regularly generate dividends for everyone.