While Ostrom’s work revealed that legal relations governing resources invisibly structure the commons, what those legal relations in fact reveal is our social and economic relations about resources: Who makes what? How much of what? And who gets what?

In the commons, the answers to these questions are embedded in a social logic according to community norms and values. In market societies, the source of these answers are to be found in the non-social economic logic of capitalism. The catalyst for this non-social economic logic, according to social theorists like Karl Polanyi and others, was the separation of people from their means of subsistence through the enclosure of the commons: throwing people off their land, separating them from the basics of life — food, water, and shelter — and charging rent for access. In the feudal commons, access to the means of subsistence was guaranteed by one’s inclusion and social status in a community and territory. In the transition to market economies, one’s subsistence became a matter of one’s ability to pay rent and/or labor for a wage. This new system unleashed a logic of competition for productive land and work, the accumulation of capital to reinvest into labor and time saving technologies, and the expansion of instrumental relations and commodification into every space and sphere of life.

As Polanyi said: “Instead of economy being embedded in social relations, social relations are embedded in the economic system.” Or to put it simply, instead of profit serving the needs of people, people came to serve the needs of profit. Polanyi’s optimistic outlook was that through property, welfare and finance regulation — through law — the market could be embedded once again to serve human and social purposes.

So, from this perspective, law is a tool for lawyers, judges, legislators, and most importantly citizens, to wield against the market, to combat the inequities that it produces in its unfettered wake-both top down and bottom up. And law can be utilized beyond property, welfare, and finance law to other domains. Law can be used towards decommodifying our means of subsistence by guaranteeing access to fundamental resources that are crucial to human life, both top down, by naming things like healthcare, education, and housing (just to name a few) as a right, to which access should be guaranteed, but also from the bottom up, by changing the structure of property and contract entitlements, for instance to allow for simultaneous use of shared resources, and curb unrestricted transfer rights. Law can also be used to reorganize work away from wage labor and towards workers’ ownership, by enacting through legislation the recognition of new legal entities like the Cooperative Corporation or the B Corporation that place non-market values at their center, or bottom up through the creation of workers cooperatives (a rapidly growing movement throughout the world). Law can also be used to alter the structure of intellectual property rights in ways that encourage sharing, collaboration, and innovation, top down by policymakers refusing to create certain kinds of property rights in these resources, but also bottom up through legal innovation and resistance through individuals adopting the Creative Commons license or “copyleft” policy over other proprietary forms of copyright.

In this new series on Shareable, “Law: The invisible architecture of the commons,” we will showcase new and emerging legal institutions that offer an alternative system of incentives for encouraging cooperation, sharing, and sustainability. These legal institutions demonstrate how citizens, working together with lawyers and policymakers, can successfully design legal institutions for themselves to decommodify our access to fundamental resources, alter the wage labor relationship through new types of legal entities, and create new ways of stimulating ownership, innovation, and collaboration around knowledge goods.

Cross-posted from Shareable

Photo by Sinéad McKeown

The post Law: The invisible architecture of the commons appeared first on P2P Foundation.

These documents earn wealth for their creators specifically because they are proprietary.

Think of it. Legal code is an intellectual product created by the government for public benefit. Yet, it can only be distributed in the form of a  product owned by private law firms.

Stated another way, law is much like proprietary software.

But what if legal were like an operating system? What if it was open-sourced, and transparent. What if anyone could navigate legal systems? What if the operating system worked in most every language?

This is the goal of Common Accord

If you’d like to help make this happen, check out Common Accord’s Slack group or their Conference at MIT.

Extracted from: https://github.com/CommonAccord/Cmacc-Org/commit/be62562f4cc2d0d241512850f12598b21a8e509f

CmAQuick.sec=CommonAccord is an initiative to create global codes of legal transacting by codifying and automating legal documents, including contracts, permits, organizational documents, and consents. We anticipate that there will be codes for each jurisdiction, in each language. For international dealings and coordination, there will be at least one “global” code. {CCL.Link}

Conference.sec=We are co-organizing a conference at MIT Media Lab – May 23-24: Conference Program

Slack.sec=Join our Slack group!

Codification.sec=Codification of legal form documents makes them transparent and continuously improving. It is part of the tradition of legal codification – from Hammurabi through Napoleon, the UCC, the ALI, and Creative Commons. Codification demystifies law and encourages transparency and autonomy.

Extracted from http://financialcryptography.com/mt/archives/001556.html

CommonAccord are basically doing the same thing described – wrapping together a smart contract with a legal document and then creating some form of identifier out of it when they produce their final contract.

Extracted from – http://www.commonaccord.org/index.php?action=doc&file=S/About/CCL/0.md

Proposal – Center for Collaborative Law

1. Problem
   Transacting is slow, insecure, uncertain and expensive.

1. Problems of payment, clearing, automation and interoperability are being addressed by the FinTech and open source communities, notably in blockchain implementations.
2. Legal compliance and optimization remain slow, uncertain and expensive.
3. Data privacy and security remain weak.
4. Centralization creates systemic risks.
5. Legal codification is slow and fragmented.

• Solution
  Add open-source codified legal documents to blockchain automation platforms:

1. Codify legal documents and records using the “Cmacc” data model and the tools of open source;
2. Iterate a legal “object model” to describe persons, properties, places, transactions and relationships; and
3. Add a layer of user-managed access control.
4. Integrate with blockchain and other platforms, such as git, document management, document assembly and enterprise contract management systems.

• Impact
  
  1. Rapid legal codification.
  2. Improved speed, transparency and certainty in business dealings.
  3. Greater access to justice, rule of law and self-governance.
  4. Greater transparency of institutions.
  5. Improved outcomes for social objectives such as privacy, health, climate and decentralization.
• Sauce
  
  1. A simple record format that renders into documents and has the power of a “graph” object model with multiple prototype inheritance.
  2. A large number of sample legal document solutions.
  3. Fit with blockchain and OAuth-UMA security.
  4. Fifteen years of efforts regarding source-based legal codification.
• Status – Convergence of Blockchain, Legal and Access Security
  A number of currents are converging:
  1. Bitcoin has spurred interest in P2P transacting platforms. Among many other efforts, the Linux Foundation’s Hyperledger Project brings together a large number of actors to agree on a common platform.
  2. CommonAccord has a data model (Cmacc) that can extend P2P solutions to all legal relationships and be a bridge for integration with legacy systems such as Word (legal), ECM and ERM.
  3. There is a strong tradition of legal codification via bar and trade groups, agencies and clinics, and now also legal “hackers”.
  4. Decentralized access control based on OAuth and related technologies is widely used and well-understood.

  The combination of Blockchain/Cmacc/Access is ripe for open-source iteration.

• Plan
  There is currently no legal structure to hold the shared legal text, which we expect to evolve into a legal operating system. Nor are there national or trade-sector equivalents. 

Photo by lafa.pixellutions

The post Project Of The Day: Common Accord appeared first on P2P Foundation.

In this article, FairShares Association co-founder Rory Ridley-Duff outlines the continuing case for social and economic reform to support a FairShares Model of enterprise. FairShares brand principles change the way that investment activity is understood to ensure that capital is allocated for entrepreneurial, labour and user activities as well as financial contributions.  The result is wealth and power that is shared more fairly.

Download PDF Version

Introduction

At the start of 2014, I came across new studies that acted as a powerful reminder of the need for a FairShares Model.  In this article I will describe the most striking of these, then argue that the co?operative and social enterprise movements need to concern themselves with everyone in the ‘bottom’ 80% of the population, not just those in extreme poverty.  They also need to protect the wealth embedded in our natural environment.

I recently came across a YouTube animation that portrays private wealth distribution in the US using data from a study at Harvard University[1]. This tells a completely different story to Shift Change[2], a documentary about social economy in the US and Spain.  While the Harvard study reports that top US CEOs get380 times the average worker’s pay, Shift Change reports that worker co-operatives either adopt equal pay systems or accept small wage differentials sanctioned by the worker-owners.  For example, the ratio between top and lowest paid workers in the Mondragon Co-ops – where there are 100,000 workers – averages just 5:1[3] [4].

The Harvard study claims that 90% of citizens are impoverished by private sector business practices.  The ‘bottom’ 80% owns just 7% of total wealth, while the top 20% has 93%.  Only 10% gain, and the top 1% gain disproportionately.  There is no doubt.  Hayek’s theory that economic freedom leads to a ‘trickle down’ effect is untrue.  It produces a ‘trickle up’ effect instead [5] [6].  But Shift Change shows that where co?operative business models become dominant, wealth is spread more evenly and equitably.  Member-owned businesses more often than not, are as (commercially) successful as their private sector counterparts [7] [8].  That’s where the FairShares Model comes in – it stimulates change to support growth in the social economy.

Most social enterprises focus on the poorest communities.  Whilst important, it is more urgent that we reform systems that exploit and impoverish up to 90% of working people (as well as the environment in which they live).  We need social enterprises for the bottom 90% (everyone impoverished) not just the bottom 10% (the most impoverished).  We also need a way to prevent the top 10% of earners acquiring hegemonic control over investment decisions.  If this task is beyond us, the goals of social enterprise will also be beyond us.

It is not an accident that most people are getting poorer (in both absolute and relative terms).  Studies of company law make it clear than private enterprises are not designed to share power or wealth [9].  Founders fix structures at incorporation to privilege a set of interests (i.e. entrepreneur(s) and financial investors in companies, consumers or workers in single stakeholder co-operatives). Charitable organisations are also inflexible: board and workforce members are subordinate to charitable/social objects set by the founders.

Entrepreneurship research clarifies how enterprises start.  One or more founding members – by design or accident – find opportunities to develop new markets for products and services [10]. If viable, they organise resources to support a business and build socio-technical systems to maintain management control.  Growing enterprises, however, also depend on the goodwill of the workforce, customers (service users) and institutional investors to access the human, social and financial capital needed for sustainability [11].

The key issue is that while we have developed systems for recognising the contribution of financial capital, we do not have adequate arrangements for recognising contributions of intellectual, human, social and natural capital.  To understand why, we have to review the way social norms for constituting joint-stock companies and non-share companies have developed.

There is a connection between business ideology and the arrangements in law by which entrepreneurs acquire share capital (ordinary shares).  They register as directors, then recruit employees to operationalize their ideas. New capital is issued when more financial capital is needed, but not when more intellectual, human, social or natural capital are needed.  In an unadapted CLS, employees and customers are subordinated to the interests of shareholders. They are not invited to be full members or to contribute towards decisions outside their specialist area of expertise [12]. If employees are offered share capital, voting rights are often limited or controlled by trustees who – in many cases – are under no legal obligation to vote in accordance with the wishes of their beneficiaries [13].

The intellectual property created by the workforce is acquired by the Company and controlled by executive managers and directors. In effect, majority shareholders treat intellectual, human, social and natural capital investments by others as if they were additional financial investments by themselves.  They continue to acquire rights to all the property created by the interactions between employees, customers and the natural environment.  This system of enterprise widens the wealth gap between those who own and govern the enterprise, and those who sell their labour to it, or buy goods from it.  Even in the richest countries, wealth inequalities grow wider (unless the state intervenes) [14] and the natural environment is degraded [15].

A typical response to the social problems created by privately owned economies is to create (private) charities and ‘non-profit’ companies using a Company Limited by Guarantee (CLG). This form of incorporation usually involves specifying charitable or social objects that define the purpose(s) of the enterprise. Founders reframe themselves as trustee-directors responsible for allocating resources in pursuit of social goals.

Charitable CLGs do not issue share capital so trustee-directors give up personal rights to the surplus wealth created by the enterprise. Their role (in law) is one of stewardship, ensuring that funds raised are used to further charitable (or social) objectives defined in the Articles of Association. As in a CLS, they employ staff to pursue social goals. Employees are still not (usually) legal members.  They continue to be subordinate to the trustee-directors and give up the (intellectual) property they create.

Do we have to choose between these two models? Three bodies of knowledge suggest we do not. Firstly, there is a global movement backed by the UN to increase responsible use of corporate assets [16]. Secondly, the UN’s International Year of Co-operatives highlighted the global growth of the social economy [17]. Particularly important is the way that the internet has reduced the costs associated with co-operative working.  The upsides of co-operation (intellectual exchange and collaborative decision-making) no longer come with the downsides of democracy (hefty co-ordination costs) [18]. Lastly, more enterprises identify themselves as social, deploying business models that improve human well-being through innovative trading strategies [19].

Creating non-shareholding companies enables the wealthier sections of society to address some symptoms of poverty and exclusion that private enterprises create, but it cannot address the root causes because it changes neither the ownership structure nor governance processes that creates and sustains them. Traditional private / non-profit models continue to institutionalise a division between producers and consumers on the one hand, and entrepreneurs and (social) investors on the other. For this reason, Level 1 of the FairShares Model asks important questions about representation in ownership, governance and management.

FairShares Model – Level 1

As shown above, the FairShares Model is based on an approach to social economy defined by Social Enterprise Europe.  It operates from the assumption that the exclusion of primary stakeholders from member-ownership (i.e. employees, producers, customers and service users) is a cause of contemporary poverty. At Level 2, the answer to each FairShares question suggests the set of corporate arrangements that is most favourable: entrepreneurs get Founder Shares; workforce members get Labour Shares; trading commitments are rewarded with User Shares; and financial capital creation is rewarded with Investor Shares.

FairShares Model – Level 2

This represents a new approach to valuing investments.  When there are surpluses (profits), not only do the providers of financial capital get a return, but also the contributors of other types of capital.  In a FairShares Company, half the capital gain is issued to Labour and User Shareholders as new Investor Shares,while the other half increases the value of existing Investor Shares.  In a FairShares Co-operative, surpluses can be allocated to restricted funds controlled by Labour and User member-owners, who then use their chosen approach to direct democracy to allocate surpluses to social investment projects.

None of this means that the conventional mechanism for allocating shares to external financial investors has to stop.  In a FairShares Company / Co-operative, Investor Shares can be issued to external investors if debt finance is hard to secure.  But, even with this, at least 70% of the wealth accumulated will find its way into the hands (and bank balances) of producers and consumers.  It enriches the ‘bottom’ 90% as much as the ‘top’ 10%.  And if this is not sufficient, FairShares Articles of Association (at Level 3) includes community dividends that act as an asset lock for philanthropic capital if the enterprise is dissolved.

The Articles of Association provided by the FairShares Association are not the only model rules that support FairShares brand principles [20].  But they do represent an ambitious attempt to bring together the most enduring developments in multi?stakeholder ownership, governance and management so that we change the way investments are recognised and valued [21] [22].  The FairShares Model offers a system for ensuring that capital is allocated to different types of contribution so that wealth and power can be more fairly shared.

References

The post The Case for FairShares appeared first on P2P Foundation.