I’m reproducing here my monthly column for the Amsterdam-based Center for the Experience Economy:
To avoid misunderstandings at the outset, let me clearly state that I distinguish markets from the system of infinite accumulation of capital that we call capitalism. Markets have always existed, and are a mechanism to deal with and allocate scarce rival resources through the mechanism of price. Under capitalism this mode of exchange has become dominant, but has also been coupled to something else, a system that is based on continuous growth.
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. If China and India would reach the current level of the West, we would need four planets instead of the two we are already using up, and this seems a logical impossibility.
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.
But is that really so? I have a set of arguments and observations that argue against that hope. First of all, in the field of the immaterial, we are no longer dealing with scarce goods, but with marginal reproduction costs and non-rival goods. With such goods, sharing does not diminish the enjoyment of the good, since all parties retain their ability to use them. The emergence of peer production shows a new form of creating value, that is in fundamental aspects â€˜outside the marketâ€™. Typically, in commons-based production we have a common pool, accessible to everyone (Linux, Wikipedia), around which an ecology of business can form to create and sell scarcities (usually services and experiences). In sharing-oriented production (YouTube, Google documents), we have proprietary platforms that enable and empower the sharing, but at the same time, sell the aggregated attention (a scarcity), to the advertising market. Finally, in the third crowdsourcing mode, companies try to integrate participation in their own value chain and framework.
So the good news is that indeed business is possible. But I would like the readers to entertain the following proposition, nl. That:
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 â€˜beyond measureâ€™, 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 collective sustainable, but not individually.
For all of this, we will need new policies, major reforms and restructurations in our economy and society.
But one thing is sure: we will have markets, but 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.
It can no longer grow extensively, but it cannot replace it by intensive growth. The history of slave empires and their transition to feudal structures is about to repeat itself, but in a different form.