Adam Smith – P2P Foundation https://blog.p2pfoundation.net Researching, documenting and promoting peer to peer practices Mon, 13 Jan 2020 09:23:39 +0000 en-US hourly 1 https://wordpress.org/?v=5.5.15 62076519 Is Open Design a Viable Economic Practice? https://blog.p2pfoundation.net/is-open-design-a-viable-economic-practice/2019/12/27 https://blog.p2pfoundation.net/is-open-design-a-viable-economic-practice/2019/12/27#respond Fri, 27 Dec 2019 09:15:18 +0000 https://blog.p2pfoundation.net/?p=75625 BY ALEX PAZAITIS | JUNIOR RESEARCH FELLOW, TALLINN UNIVERSITY OF TECHNOLOGY CORE MEMBER, P2P LAB It has been roughly a decade after the days that people first discussed Open Design. It has hitherto evolved from a concept, to a movement, to a viable business choice. The RepRap 3D printer has been one of the first and... Continue reading

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BY ALEX PAZAITIS | JUNIOR RESEARCH FELLOW, TALLINN UNIVERSITY OF TECHNOLOGY CORE MEMBER, P2P LAB

It has been roughly a decade after the days that people first discussed Open Design. It has hitherto evolved from a concept, to a movement, to a viable business choice.

The RepRap 3D printer has been one of the first and most successful examples of open design. A 3D printer that could replicate itself is more than a design solution; it is a bold statement on the technological capacities of our time. A thing built to create other things, now creating copies of itself. Creation, being one of the core human characteristics, is now embedded in our creations.

It is, thus, no wonder it has sparked a wave of enthusiasm across diverse communities. Different visions of open innovation, distributed manufacturing and an automated self-sufficient society embody, to a lesser or larger extent the notion of open design. Though as much as the vision extends, the actual practice remains rather restrained. And while RepRap based 3D printers may have evolved to a billion dollar industry, industrial uptake of open design and open manufacturing is, arguably, still not there to see.

Part of the problem, as it is often the case, is structural. As a social activity, the open sharing of ideas and collaboration to create useful things by the users themselves has a self-evident merit. It can lead to better technologies, more learning from the side of the users, broader access to means of making and less waste, due to on-demand production and better maintenance capacity. But as a business option it goes almost against the foundations of everything we understand as the purpose of an enterprise.

In the end of the day, is able to survive to the extent it succeeds to exchange their products and services for money. Adam Smith in the Wealth of Nations, identifies this practice of exchange as a core survival tactic amongst individuals too. In a society where people produce themselves only a small fraction of the things they need, they exchange the products of their labour with these of other people to get the rest of it. It is then the common sense that markets and money is in fact the very purpose of the economy.

From a different perspective, the economy is about provisioning. It is the sphere of human activity that serves to cover societal needs: from the basic means of subsistence, to things and actions meant for pleasure and self-actualisation. From this point of view, sharing is actually a very economic function. Even more, on many instances it serves to create and distribute vital resources much more efficiently than markets. However, at least until recently, sharing could not be generalised as a capacity providing for human needs at scale. Therefore, it was mainly restrained to those domains where the costs of enforcing the rules necessary for market exchange were simply too high to bear.

But what the internet revolution brought about is much higher capabilities for communication and coordination based on shared information and human sociality. The sphere of these domains where market exchange is not the common sense has rapidly expanded. It became possible for people to pool, rather than exchange, the products of their labour on much greater scale, thus creating a much more generalised capacity for societies to serve their needs.

That is of course not to suggest that markets and money are simply done away with sharing and open design. Nevertheless, they no longer serve as the sole imperatives stimulating human creativity and coordination, if they ever have been. And it is vital for the flourishing of our societies to recognise, support and further stimulate these dynamics in our economic institutions. Even when access to better design and user experience is now more available than ever, businesses, especially small ones, will not invest in these possibilities before clear returns can be foreseen, in terms of covering their overheads, wages and taxes.

In the transitioning from the feudal order to the industrial one, no markets could ever exist and no exchange could take place if there weren’t for the provisions and enforcement of property rights and trade agreements. Likewise, in order to reap the benefits of the new technological capabilities, we need legal provisions to re-establish the relationship of businesses with their user communities now largely participating in the design and production; support measures like universal basic income for workers to be emancipated and devote their creative energy where it most needed in their local societies; and collective institutions that generalise and support pooling of productive capacities wherever possible, from digital platforms of open design, software and knowledge to open spaces for collaborative production, distributed manufacturing and needs-based design for societal needs.

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Michael Hudson on Junk Economics https://blog.p2pfoundation.net/michael-hudson-on-junk-economics/2018/04/22 https://blog.p2pfoundation.net/michael-hudson-on-junk-economics/2018/04/22#respond Sun, 22 Apr 2018 10:00:00 +0000 https://blog.p2pfoundation.net/?p=70612 d@w’s Paul Sliker and Dante Dallavalle talk with Michael Hudson, one of the world’s six economists who accurately predicted the 2007-2008 financial crisis. He explains how Orwellian doublethink is used to conceal how the economy really works. Republished from leftoutpodcast

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d@w’s Paul Sliker and Dante Dallavalle talk with Michael Hudson, one of the world’s six economists who accurately predicted the 2007-2008 financial crisis. He explains how Orwellian doublethink is used to conceal how the economy really works.

Republished from leftoutpodcast

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Beyond Supply and Demand: The Dynamic Equilibrium Between Global Thresholds and Allocations https://blog.p2pfoundation.net/beyond-supply-and-demand-the-dynamic-equilibrium-between-global-thresholds-and-allocations/2018/03/09 https://blog.p2pfoundation.net/beyond-supply-and-demand-the-dynamic-equilibrium-between-global-thresholds-and-allocations/2018/03/09#respond Fri, 09 Mar 2018 08:00:00 +0000 https://blog.p2pfoundation.net/?p=70045 As a monetary adviser, I spent many years questioning bankers on the authenticity of their balances sheets. What stood out most for me in these discussions was this: the social demand for commodities is often claimed by banks as having a direct link with the ecological supply of resources which are extracted, produced and sold as commodities. But this... Continue reading

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As a monetary adviser, I spent many years questioning bankers on the authenticity of their balances sheets. What stood out most for me in these discussions was this: the social demand for commodities is often claimed by banks as having a direct link with the ecological supply of resources which are extracted, produced and sold as commodities. But this just isn’t true. Bank reserve assets are not discounted to reflect the decline of the world’s non-renewable resources. In fact, as society’s ecological debt continues to mount, no one is actually keeping track.

Consider how odd this is: the demand for goods is used as a proxy for the relative accessibility of non-renewable resources — yet the increasing scarcity of fossil fuels isn’t showing up in the price we pay at the gas pump. Same with water and rare minerals, which are not valued according to their declining availability. Nor does eco-value appear on the spreadsheets of most stock traders, insurance companies or other businesses.

What’s causing such rampant misreporting and misallocation? I’ve come to see this now as more a problem of accountability than accounting. Frankly, the challenge is to admit our mistakes and reconceptualize the modern system of economic valuation, starting with the theory that it’s based on a fundamental law of equilibrium. Take, for example, Adam Smith’s idea that the efforts of individuals in pursuing their own interests naturally benefit society, or the notion that an organic circular flow exists between market prices and people’s incomes. Are these assumptions valid? And what do we mean by economic balance? Is it a principle of physics or biology?

Let’s begin by asking, is supply and demand truly able to manage the thresholds of resources which an environment can sustain, or to ensure that these resources are allocated sufficiently for the population living in that environment?

In both classical and Keynesian economics, the ratio between the supply of a quantity of a good or service and the demand for it is determined by the price of this quantity. What is tallied on the supply-side of this equation are production costs, which include labor, capital, expectations of future prices and suppliers, and the technology that’s used in production. The relative availability of materials and energy for production is also listed as a supply cost, although seldom in ecological terms. The rate at which people and their organizations may harvest or use a particular resource within its regenerative capacity is not normally registered on the supply side as an ecological yield, but as a financial outlay. Nor are the negative effects of pollution, waste, ill-health or risk typically included in production costs.

Conversely, the demand side of the market economy measures consumer income, tastes and preferences, prices of related goods and services, expectations about future prices and incomes, and the number of potential consumers. Rather than reflect actual human need, demand is a measure of individual consumption at the point of sale. It’s simply the price at which a person is willing to pay for something, signifying how much cash or credit is exchanged in the transaction. But what’s not measured by demand is the individual’s accessibility to breathable air, clean water, nutritious food, adequate shelter, or meaningful security, love, belonging and inclusion. Subjective expressions of need, beauty, volunteer labor, loss of commons or health and safety risks are simply not involved in the transmission of demand through the cash register, barcode scanner or wireless purchase.

A similar structure for market equilibrium is applied in banking and finance. Just as the supply-demand formula in microeconomics is based on a functional connection between producers and consumers, the supply-demand ledger is used in macroeconomics to express a similar type of relationship between lenders and borrowers. Here, the equilibrium between the money supply and the demand for money is adjusted through an interest rate, which represents the price that is charged for money.

Once again, this represents a certain kind of transactional balance within the marketplace, but does not reflect the broader relationship between the ecology and its population. When all that’s expressed in the standard supply-demand equation is the price of a particular commodity or good, or an interest rate which signifies the price of money, neither resource preservation and replenishment rates nor specific measures of the human need for this resource are accounted. Nor does the supply-demand equation convey the underlying costs of social harm or environmental damage that may be incurred.

This disequilibrium in value has also led to deep political biases in how the supply-demand model should be applied in society. On one hand, classical and neo-classical economists say that ‘supply creates its own demand’. They promote strong policies for investment and production through individual initiative and limited government intervention in the economy, while rationalizing endless resource extraction, production, growth and waste. In using supply-demand for their scale of balance, these analysts rarely question why the exponential values in the economy are so disjointed from the biological growth rates which occur in the natural world.

On the other hand, Keynesian economists say that boosting wages and purchasing power generates demand. They promote policies of shared investment and production through intervention by a government in its economy, while ignoring the destructive competition which this creates between available resources and the needs of a population for these resources. Here, Keynesians are little different than classical economists: both schools assume that meeting human needs is dependent on extractive production, expanding population, continuous demand, increasing personal income, rising consumption and the unintended but inevitable byproducts of manufactured pollution and disposable waste.

Neither choice is correct because the basic theory of market equilibrium ignores environmental and social costs, deeply misinterpreting the dynamic link between ecological support systems and the people who depend on them. This vital connection is seen simply as a ‘supply chain’ through which a quantity of something demanded by consumers or borrowers is delivered to them based on the quantity that firms or banks can supply. Neither the classical or Keynesian approaches to supply and demand reflect the constraints to the productive capacity of Earth’s resource base or the maximum size of a population which can be maintained indefinitely within that environment.

Our economic proxies for environmental balance are directly to blame for these fateful miscalculations. As a subsystem of a larger ecosystem, the supply-demand model does little to equalize the natural sources of productive input with the natural sinks of consumed output or waste, leading to massive market failure. Under the illusion of supply-demand equilibrium, human population is now using the basic resources of food, water, energy and minerals faster than Nature can replenish them to meet the needs of its people. To reverse this critical overshoot, we’ll have to transform our epistemology, our ideologies, our institutions and rules, as well as our methods of accounting.

All of this requires a clearer understanding of the interactions between the biosphere and human society. The ecological threshold of available resources and the allocations of those resources to meet the needs of a population are actually opposing forces which continuously counteract one another. This dynamic principle exists between every species and its environment: living organisms react to changes in their ecosystem and make adjustments to survive.

Through this constant interplay between natural and physical forces, instead of supply creating its own demand through prices or demand being dependent on income, the signaling of need by an organism routinely triggers the creation of its own supply. These self-regulating forces work in Nature and within the biology of the human body; they must also work in human societies. Measuring the replenishment of renewable and non-renewable resources will enable a society to sustain their yield relative to the offsetting needs demonstrated by the size and growth of the human population.

These divergent forces must be given an empirical basis in socioeconomic policy beyond the inept framework of supply-demand. Counterbalancing the needs of a population with its resource support systems requires a major readjustment. Here’s how this might work. What’s now included on the supply side as extraction, production and waste is redefined as the self-organization of resources within the ecological limits of the planet for their regeneration. And what’s now reported on the demand side as a measure of income is redefined as the  of people in meeting their daily requirements through the common use of these resources.

When supply becomes an ecological value and demand becomes the value of human need, ‘build it and they will come’ is transformed into ‘demonstrate the need and it is met’. Now, instead of a crude approximation for economic equilibrium, we have an actual measure for the cooperative activities of people managing their resources to meet their needs — a measure based on the level of regenerative output which their ecology can optimally ‘carry’ or sustain.

The term for this dynamic equilibrium between people and their environment, which points the way out of our supply-demand matrix, is biocapacity. Biocapacity expresses the intrinsic value of sustainability within an ecosystem. It is based on the thresholds of resources which can be sustained in an environment as measured against the allocations of resources sufficient to meet the needs of its population. Through this ecosystem value, biocapacity offers direct indicators and guidelines to help us organize our own sufficiency through the steadily fluctuating, self-adjusting metabolism of society as a living system.


Note: James Quilligan presented these comments at the Global Thresholds and Allocations Council (GTAC) Kickoff Meeting at the Royal Dutch Federation of Accountants in Amsterdam, convened by Reporting 3.0 on 31 January 2018, in a session on Allocation Approaches with fellow speaker Mark McElroy of the Center for Sustainable Organizations, moderated by Bill Baue of Reporting 3.0. The 35+ global experts gathered at the meeting sat in rapt attention while James spoke, and broke into spontaneous applause when he finished. Please see the GTAC Landing Page on the Reporting 3.0 website for links to the GTAC Concept NoteMeeting Presentation Deck, and Meeting Program (with abstracts by all speakers, including GRI Co-Founder Allen WhiteJohan Rockström of the Stockholm Resilience CentreDoughnut Economic author Kate RaworthFuture Fit Foundation CEO Geoff KendallInternational Integrated Reporting Council Managing Director Neil Stevenson, and many others.)

This article was first published in Sustainable Brands.

 

 

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Life’s economy is primarily based on collaborative rather than competitive advantage https://blog.p2pfoundation.net/lifes-economy-primarily-based-collaborative-rather-competitive-advantage-2/2017/05/26 https://blog.p2pfoundation.net/lifes-economy-primarily-based-collaborative-rather-competitive-advantage-2/2017/05/26#respond Fri, 26 May 2017 08:00:00 +0000 https://blog.p2pfoundation.net/?p=65401 This post originally appeared on Medium.com A holistic understanding of modern evolutionary biology suggests that life evolves by a process of diversification and subsequent integration of diversity through collaboration (John Stewart in BioSystems, 2014). As our focus shifts from individuals and individual species as the unit of survival to the collective of life — its complex dynamic... Continue reading

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This post originally appeared on Medium.com

A holistic understanding of modern evolutionary biology suggests that life evolves by a process of diversification and subsequent integration of diversity through collaboration (John Stewart in BioSystems, 2014). As our focus shifts from individuals and individual species as the unit of survival to the collective of life — its complex dynamic interactions and relationships — we begin to see that collaborative and symbiotic patterns and interactions are of more fundamental importance than competition as a driving force of evolution. Life’s key strategy to create conditions conducive to life is to optimize the system as a whole rather than maximizes only some parameters of the system for a few at the detriment of many (Wahl, 2016).

The patterns of evolution show a general trend of diversification and subsequent or parallel integration at a higher level of systemic complexity. This integration tends to happen predominantly through the creation of more complex organismic or social entities, primarily by collaboration and symbiosis. John Stewart suggests that this is moving us towards a ‘global entity’ (2014). Maybe this entity already exists in the life-sustaining processes of the biosphere?

The biologist Peter Corning, former president of the International Society for Systems Science and director of the Institute for the Study of Complex Systems, suggests that “one aspect of this more complex view of evolution is that both competition and cooperation may coexist at different levels of organization, or in different aspects related to the survival enterprise. There may be a delicately balanced interplay between these supposedly polar relationships” (Corning, 2005; p.38). He emphasizes that collaboration has been a key factor in the evolution of our own species. The socio-economic payoffs of collaboration in response to ecological pressures and opportunities among early humans have shaped the evolution of languages and cultures, both require and enable complex patterns of collaboration.

If a society is viewed merely as an aggregate of individuals who have no common interests, and no stake in the social order, then why should they care? But of society is viewed […] as an interdependent collective survival enterprise,’ then each of us has a vital, life-and-death stake in its viability and effective functioning, whether we recognize it or not.” — Peter Corning, 2005, p.392

If we want to re-design economics based on what we know about life’s strategy to create conditions conducive to life, we need to question some basic assumptions upon which the narrative underlying our current economic systems is built. The narrative of separation has predisposed us to focus on scarcity, competition, and the short-term maximization of individual benefit as the basis on which to create an economic system. Life’s evolutionary story shows that systemic abundance can be unlocked through collaboratively structured symbiotic networks that optimize the whole system so human communities and the rest of life can thrive.

We are not the masters of life’s diversity, and have the potential to become a regenerative presence in ecosystems and the biosphere.

Both collaboration and competition contribute to how life creates conditions conducive to life. The biologist Andreas Weber explains: “The biosphere is not cooperative in a simple, straight-forward way, but paradoxically cooperative. Symbiotic relationships emerge out of antagonistic, incompatible processes” (Weber, 2013: 32). Weber stresses that we have to understand how the works of the economist Adam Smith and the political economist Robert Malthus influenced Charles Darwin in his attempt to construct a theory of evolution.

Example of collaboration in leaf-cutter ants.

The limited narrative of separation, with its exclusively competition- and scarcity-focused understanding of life, is supported by outdated biological and economic theories. Weber calls this an “economic ideology of nature” and suggests that an ideologically biased perspective “reigns supreme over our understanding of human culture and world. It defines our embodied dimension (Homo sapiens as a gene-governed survival machine) as well as our social identity (Homo economicus as an egoistic maximizer of utility). The idea of universal competition unifies the two realms, the natural and the socio-economic. It validates the notion of rivalry and predatory self-interest as inexorable facts of life” (pp.25–26).

The optimization of resource-sharing and processing in order to (re)generate and share abundance and systemic health, rather than competition for scarce resources, is the basis of life’s way of doing economics! In attempting to create a life-friendly economy, we need to understand the profound implications that the emerging ‘systems view of life’ has for our undertaking. Here is a 7min video of Fritjof Capra presenting the book with explicit reference to economics.

Fritjof Capra on ‘The Systems View of Life — A Unifying Vision’, Capra & Luisi 2014 (7 minutes)

As the twenty-first century unfolds, a new scientific conception is emerging. It is a unified view that integrates, for the first time, life’s biological, cognitive, social, and economic dimensions. At the forefront of contemporary science, the universe is no longer seen as a machine composed of elementary building blocks. We have discovered that the material world, ultimately, is a network of inseparable patterns of relationships; that the planet as a whole is a living, self-regulating system. […] Evolution is no longer seen as a competitive struggle for existence, but rather a cooperative dance in which creativity and constant emergence of novelty are the driving forces. And with the new emphasis on complexity, networks, and patterns of organization, a new science of qualities is slowly emerging.” Fritjof Capra and Pier Luigi Luisi (2014b)

Integrating economy and ecology with wisdom

The evolutionary biologist and futurist Elisabet Sathouris describes how in the evolution of complex communities of diverse organisms a ‘maturation point’ is reached when the system realizes that “it is cheaper to feed your ‘enemies’ than to kill them” (personal comment). Having successfully populated six continents and diversified into the mosaic of value systems, worldviews, identities (national, cultural, ethnic, professional, political, etc.) and ways of living that make up humanity, we are now challenged to integrate this precious diversity into a globally and locally collaborative civilization acting wisely to create conditions conducive to life.

We have now reached a new tipping point where enmities are more expensive in all respects than friendly collaboration; where planetary limits of exploiting nature have been reached. It is high time for us to cross this new tipping point into our global communal maturity — an integration of the economy and ecology we have put into conflict with each other, to evolve an ecosophy.” –Elisabet Sathouris (2014)

The challenge of a fundamental re-design of how we do business, of our patterns of production and consumption, of the types of resources and energy we use, goes hand in hand with the structural redesign of our economic systems. We have to challenge economic orthodoxies and basic assumptions, and find ways to integrate multiple perspectives if we hope to redesign economies at multiple scales and learn how to manage our household with wisdom (oikos + sophia).

If our Homo sapiens sapiens wants to continue its fascinating yet so far relatively short evolutionary success story we have to evolve wise societies characterized by empathy, solidarity and collaboration. Wise cultures are regenerative and protect bio-cultural diversity as a source of wealth and resilience (Wahl, 2016).

[In the remainder of this module on Economic Design of Gaia Education’s course Design for Sustainability] we will take a closer look at the social and ecological impacts of the current economic and monetary system, and will explore why the globalized economy behaves as it does before we explore strategies for re-design and inspiring examples of best processes and practices in the transition towards sustainable and regenerative economic patterns at multiples scales. By revisiting basic assumptions about economics we can begin to integrate ecology and economy in full reconnection of the interbeing of nature and culture. We need wisdom to re-design an economic system fit for life. Here are some insights that can help us:

  • The rules of our current economic and monetary system have been designed by people and we can therefore re-design them.
  • We have to question the role of scarcity, competition, and the maximization of individual benefit has cornerstones of our competitive economy.
  • In redesigning economic systems at local, regional and global scale we should pay special attention to how the system incentivises regenerative practices, increases bio-productivity sustainably, restores healthy ecosystem functioning, while nurturing thriving communities.
  • Modern evolutionary biology transcends and includes Darwinian justifications of competition as ‘human nature’, as it acknowledges that complex patterns of collaboration have enabled the evolution of our species and the continued evolution of consciousness towards planetary awareness.
  • Our ability to cooperate has shaped who we are in equal and possibly more profound ways than competitive behaviour, hence we need to re-design economic systems to establish a healthy balance between the way competition and collaboration are incentivised in the system.
  • Rather than maximizing isolated parameters or the benefit of a select few, a re-design of our economic system to serve all of humanity and all life will have to optimize the health and resilience of the system as a whole (understanding humanity as nature; and the economy as a sub-system of society and nature in interconnected eco-social systems).
  • The dominant narrative of separation creates a focus on scarcity, competition and individual advantage, while the emerging narrative of interbeing challenges us to create a win-win-win economy based on the understanding that it is in our enlightened self-interest to unlock shared abundances through collaboration.

AUTHOR’S NOTE: This is an excerpt from the Economic Design Dimension of Gaia Education’s online course in Design for Sustainability, which I recently revised and re-wrote on the basis of an earlier version by Jonathan Dawson (now head of economics at Schumacher College). The 400 hour on-line course offers a whole systems design approach to taking part in the transition towards thriving communities, vibrant regional economies and diverse regenerative cultures everywhere. The Economic Design Dimension starts on March 6th, and runs for 8 weeks (80 study hours). The above is a little preview of the nearly 140 pages of text, links and videos, that participants explore under the guidance of experience tutors and as part of a global community of learners. For more information take a look at the content of this on-line training for global-local change agents in economic design. Much of the material I used in authoring the curriculum content for this course is based on the years of research I did for my recently published book Designing Regenerative Cultures.

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Economy of Things https://blog.p2pfoundation.net/economy-of-things/2017/02/27 https://blog.p2pfoundation.net/economy-of-things/2017/02/27#respond Mon, 27 Feb 2017 11:00:00 +0000 https://blog.p2pfoundation.net/?p=64052 Though we often think the modern culture of consumerism is an export from United States and a product of capitalism, people long before today’s era were enjoying the benefit of soft shoes, beautiful cloth and exceptional goods. Acquisition has been an important part of community and identity, essential to societies even though only recently so... Continue reading

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Though we often think the modern culture of consumerism is an export from United States and a product of capitalism, people long before today’s era were enjoying the benefit of soft shoes, beautiful cloth and exceptional goods. Acquisition has been an important part of community and identity, essential to societies even though only recently so many people have been part of a middle class, capable of affording the mass consumption of today’s world. What insights can we glean from the history of consumption and economic thought for what it means to be human?

In Extraenvironmentalist #95 we first speak with Professor Frank Trentmann about his new book Empire of Things: How We Became a World of Consumers, from the Fifteenth Century to the Twenty-First. We hear from Frank about how we’ve come to live with so much stuff. Then, we talk to Professor Laurence Malone about his work and teaching on Adam Smith and in editing the Essential Adam Smith. Dr. Malone helps us understand the real meaning of the invisible hand.

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Free trade vs free tech https://blog.p2pfoundation.net/free-trade-vs-free-tech/2017/02/17 https://blog.p2pfoundation.net/free-trade-vs-free-tech/2017/02/17#respond Fri, 17 Feb 2017 10:00:00 +0000 https://blog.p2pfoundation.net/?p=63572 The pursuit of freedom has been one of the fundamental elements of the western civilisation. A quest so pervasive that has expanded through almost every discipline and domain of human thought and practice, receiving a variety of interpretations. For freedom is an ambiguous word. It can be seen as freedom from something or freedom for... Continue reading

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The pursuit of freedom has been one of the fundamental elements of the western civilisation. A quest so pervasive that has expanded through almost every discipline and domain of human thought and practice, receiving a variety of interpretations.

For freedom is an ambiguous word. It can be seen as freedom from something or freedom for something; freedom for action or freedom for inaction; freedom to own and freedom to share; freedom for people and freedom from people.

Free trade and the global political economy

A large part of the modern global construct of institutions is justified on one particular interpretation of freedom: freedom of trade. From the General Agreement on Tariffs and Trade, to the institutions of Washington Consensus (IMF, World Bank and the US Treasury Department) and the EU common market and the Eurozone; to the controversies of the Trans-Pacific Partnership and the Transatlantic Trade & Investment Partnership, a large volume of the world-wide struggle and conflict concerns the regulation of international trade and the related financial flows.

And this is something more than a certain political choice of the time. The exchange of commodities is a practice that is hard-wired into the very core of the industrial production and capitalism. From the very beginnings of the industrial revolution the protrusion of exchange as a social practice has been recognised. Adam Smith in the first chapters of the Wealth of Nations unveils this trade-off in early industrial society, which is traced back to the division of labour, a central aspect in the development of industrial production. In a society with developed division of labour individuals produce only a small fraction of the goods or services that are necessary to satisfy their needs. Therefore, they have to exchange the products of their own labour to those of other people’s labour. Labour, in turn, becomes itself a commodity, valued and exchanged like any other, rationalising human exploitation in economic affairs.

Admittedly, Smith’s era was not the first time when the practice of exchange appeared in human societies. Trade has been around for much of the documented human history. But in the industrial society it was the first time that a certain level of technology and the organisation of the production rationalised trade as a crucial function for societies. In turn, the price system institutionalised markets as the determinants of the value of things.

Subsequently, the pursuit of freedom become institutionalised through the promotion of free trade. The idea of free trade as an emancipatory force for nations also has its roots back to the classical political economy and the theory of David Ricardo. The main concept justifying the Ricardian theory of free trade is the comparative advantage. Ricardo suggested that when a nation concentrates its productive resources to that sector where there is an advantage in terms of the cost of production in comparison to other nations, it can become more competitive and dominate the international markets in this sector.

However, what Ricardo widely dismissed is that there are qualitative differences between different economic activities. It is easy to understand how a nation producing agricultural products and raw materials cannot compete with a nation producing high value-added manufactures and technological products. For the first one, becoming competitive is a race to the bottom, constantly pushing wages and prices down, as well as its national income, while for the second one, competitiveness comes from technological innovation and higher productivity. Moreover, similarly to individuals, when nations produce only a fraction of the goods they need, based on their comparative advantage, they cannot abstain from importing the rest of them. The declining terms of trade against nations with lower levels of technology will eventually lead to the explosion of their trade deficits and international debt. Thus the only comparative advantage they are developing is one in becoming and remaining poor.

The rich and technologically advanced nations have widely exploited this function of global trade. They feed their manufactures to the countries that are practically deprived of the ability to industrialise and offer huge amounts of money in the form of loans, purported to help developing nations service their external debts. In return they force further liberalisation of trade and finance, so that indebted countries can keep buying their products, while they take advantage of the deregulation to take control of their resources, leading to devastating results for the developing economies. Seven decades of development aid programmes and other three of fiscal consolidation programmes for indebted countries testify to this direction. The neo-liberal fallacy has led to a new form of colonial expansion of rich nations against poor ones.

Joseph A. Schumpeter graphically summarises the Ricardian theory of free trade in one sentence: “It is a perfect theory that can never be refuted and lacks nothing but sense”. The divorce of the theory from reality is as vast as the inequality it has caused in the world. And all that global  institutions seem to be doing is feeding their disillusions, with policies that further strengthen the forces generating this inequality in the first place.

“Free as in freedom”: why free tech matters

Richard Stallman in 1983 initiated the free software movement and the pursuit of an alternative interpretation of freedom: the freedom of people to use, study, share and improve the technological means of computation. A different approach of people’s capacity to create and relate to each other. While the free software movement is focusing this effort on computers, it is in fact a struggle that concerns technology in general. It refers to the freedom of humans to control the fundamental means of their subsistence; the freedom to pursue their own meaning of freedom.

What would have happened if the international institutions were promoting free technology instead of free trade? What if TTIP stood for “Transatlantic Technology and Innovation Partnership” setting down the rules for the diffusion of knowledge and technology?

There is indeed one historical moment that illustrates the potential outcome of such an effort within the current global structure. President Harry S. Truman in his 1949 inaugural address announced the famous “Point Four” foreign aid program. With the Cold War pressure intensifying, Truman called for this “bold new program” as essential for combating  the appeal of communism to the impoverished nations. Instead of the provision of financial aid, point four consisted in the provision of technical assistance and foreign investment to developing nations. Even though a total of 400 million USD had been invested until 1954, including on-spot visits of technical experts to developing nations and the education of their students in the US, it is no surprise that in absence of predefined trade agreements and guarantees US business was reluctant to provide support. Simultaneously, like the Marshall plan, point four was directed by the US and never got adopted on UN level, while the plan has been harshly criticised by neo-liberal advocates.

Nevertheless, Point Four has arguably created a viable survival strategy for developing nations within the Cold War insanity, while it contributed to the emergence of the “non-aligned movement”, a group of states following their own political objectives without formally committing to either power bloc. Indeed, the free flow of technology and know-how can create unique opportunities for societies to prosper. Technological diffusion, in contrast to comparative advantage reinforces variety within the economy and generates the conditions for the development of synergies and balanced development.

Technological advance defines the boundaries of the sphere of the feasible. It is a fundamental force that pushes the ever-moving frontier of the human knowledge forward. Whereas freedom of trade merely relates to the maximisation of individual gain, freedom of technology means the freedom for humanity to improve as a whole. An this implies an emancipation of technology from capitalism; a new global political economy where technology enables and enhances people, societies and nature.

A global political economy based on the freedom of technology relates to the freedom of nations to choose how they mobilise and allocate their resources and the freedom of people to relate to each other. It doesn’t necessarily mean that all nations would reach the same level of technology and would stop competing with each other. Technological advance is a systemic and context-specific process, while cultural and territorial proximity matters. But it could instead allow for a fairer type of competition, one that is subsumed under cooperation and participation on equal footing. Individual and collective success would then be more genuine, rather than a result of exploiting the less advantaged. It could eventually lead to freer nations or to an international order beyond the nation-state.

It is obvious that free tech is not a much desired outcome from the supporters of free trade. They will not easily give up their own comparative advantage in being rich, even though it is becoming more and more obvious that the continuous deterioration of global inequality is feeding back to the rich economies as well. International trade is a zero-sum game: someone must lose in order for someone else to win; and right now it seems we are running out of “losers”. Likewise, technological advance can only create a positive-sum result, when coupled with freedom: the freedom for people to pursue the edge of their own capabilities.  

Free tech is indeed a better objective for the global political economy and most probably a more viable one. And it is surely one for societies to start fighting for.


Lead image by Wicker Paradise. Additional image by TODO

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