The only caveat from the P2P Foundation point of view is that, it still assumes that capitalism is the only system that creates value, but counter-balanced by investments of the state in the human economy. What is still lacking is an understanding of how the commons itself is a value creation engine, that needs to be recognized.

See our own approach via our report: Value in the Commons Economy.

And without further ado, here is …

Marc Saxer:

Ever since the Second Industrial Revolution petered out, global capitalism has faced a demand crisis. If you think that all we need now is to stop austerity and spend our way out of the crisis, think again. Over the past few decades, developed economies were kept alive through artificially created demand. The inflation of the 1970s, the public debt of the 1980s, the private debt of the 1990s and the quantitative easing of the 2000s were all strategies to inject future resources for present consumption. Even if the dystopian vision of a world without work does not come true, workers’ waning consumer power can no longer fuel growth. This means progressive hopes for a Keynesian revival or a return to Fordism are misguided.

Progressives must find new answers to the challenges posed by the digital revolution. In a global economy, rejecting technological innovation is not an option. But the new technologies should also be embraced in their own right: the automation of dirty, dangerous, physically demanding tasks is set to improve workplace safety and satisfaction.

Yet, digital capitalism is ripe with potentially fatal contradictions. Mass un- and underemployment could aggravate the demand problem to a point where the world economy implodes. If digital automation continues to threaten the security and dignity of the majority population, the current revolt against globalism will only be a small foretaste of what is to come.

What we need is a new development model for the digital age. Front and centre of this new model must be the need to create decent livelihoods. Our best chance to create decent livelihoods in the digital age is the Human Economy.

The Human Economy is composed of two interwoven economies. The digital capitalist economy, which generates the surplus needed to remunerate work for the common good. And the human commons, which creates the consumption demand needed to keep the digital capitalist economy going.

Decent jobs: Make the workforce fit for the digital economy

In the digital economy, entrepreneurs will hire humans to perform new tasks. Human work also continues to be in demand in the service industries, from tourism to entertainment, from design to fashion, from food to arts and crafts and from research to development. To realise this potential for decent human jobs, the skills of the workforce will have to be permanently upgraded.

Decent livelihoods: Remunerate work for the human commons

The human economy needs to be built around the recognition of human contributions to the common good. Millions of livelihoods could be generated in the human commons, from health services to elderly care, from child raising to education, from providing security to generating knowledge. However, many of these tasks, which are beneficial for society, do not generate enough income in the capitalist economy. In order to create decent livelihoods, remuneration mechanisms for these tasks must be created.

Five policies to bring about the Human Economy

1. Level the playing field for human work. Under fair conditions, there is still a need for humans to work together with Artificial Intelligence, robots, and algorithms. By shifting the tax burden from labour to capital, the playing field can be levelled for human workers. We need to explore how robots and data can be taxed with the aim of delaying the rationalization of work until new livelihoods are created.
2. Invest in full capabilities for all. Humans excel at communication and social interaction, creativity and innovation, experience and judgement, leadership and foresight, flexibility and learning. Harnessing these talents is the industrial policy of the Human Economy. To fully explore human talents, our education systems need to be fundamentally overhauled. To allow for the necessary public investment in public goods, the austerity paradigm must be reversed.
3. Boost consumption demand through basic income. The debate over the best way to boost consumption demand has sparked the first political battle of the digital age. The opposing camps in the debate over basic income run counter to the left-right formation characteristic of the industrial society. On one side, Silicon Valley techies who seek to boost consumption demand, Davos billionaires who fear the coming of the pitchforks, neoliberals who want to cut back the welfare state, corruption fighters who seek to cut out the middleman, and Marxists who dream of the end of alienating work in the leisure society; on the other, unions who defend their role in collective bargaining, socialists who smell a Trojan horse to do away with social security, economists who warn against moral hazard and social justice advocates who fear social exclusion. As the debate shows, the usefulness of basic income schemes will depend on their design, and many alternative approaches are being introduced. The Institute for the Future calls for Universal Basic Assets, e.g. entitlements to open source assets such as housing, healthcare, education and financial security. Yanis Varoufakis calls for a Universal Basic Dividend, financed by a Commons Capital Depository.
4. Distribute sources of wealth more evenly. If robots replace humans, then the question is: who owns the robots? In an economy where capital increasingly replaces labour, capital ownership needs to be democratized. Richard Freeman suggests a ‘workers share’ could spread the ownership of companies amongst employees to make them less dependent on wage income. An alternative can be Sovereign Investment Funds which could re-socialise capital returns.
5. Remunerate socially beneficial work. If the digital capitalist economy fails to create enough jobs, the state needs to play the role of employer of last resort. This economic necessity may become politically useful. In the vertigo of change, more effort is required to strengthen social cohesion. The state can encourage such contributions to the common good by remunerating them.

The social democratic path to the human economy

Creating decent livelihoods in the digital age will require massive investment in public goods. Generating the revenue to pay for these investments is not an easy political task. While the rich too often find ways to dodge taxes, the poor cannot afford to pay them. The middle classes, feeling abused by the “self-serving elites” and the “entitled poor,” are in open revolt. This is the political reason why the tax burden must be shifted from labour to capital.

In the political economy of today, however, the proposed policy shifts will certainly be an uphill battle. Whether the political economy of digital capitalism will be more conducive for the Human Economy is an open question. On the one hand, distributed technologies and the networked economy have the potential to democratize the means of production. On the other hand, the unprecedented concentration of power in the hands of digital platform companies like Google, Facebook and Amazon points to the opposite direction.

The bizarre alliance around basic income schemes indicates a window of opportunity. Digital capitalism is reshuffling political fortunes, and progressives should go out of their way to build coalitions around the need to boost demand. After half a century of supply-side economics and cost-cutting politics, putting incomes back into the centre of economic thinking is an opportunity progressives must not miss.

Building the Human Economy is not a technical task, but the outcome of political struggles. Only a broad societal coalition will be able to implement the necessary policy shifts. To build this transformative alliance, we need a platform onto which as many communities as possible can come together. This platform cannot be a smorgasbord of policies, but a narrative which explains how we can make the digital transformation work for everyone.

What could this narrative sound like? Amidst the conflicts over sovereignty, identity and distribution transformation, we need to strengthen the foundations of solidarity among all members of the society. This can only be done through a new social contract for the digital society. This social contract needs to be brokered around a compromise between all stakeholders.

The Human Economy offers such an inclusive compromise. In essence, it transcends the conflict between capital and labour by making human capital the engine of the economy. For capital, the Human Economy offers a solution to the existential threat of collapsing consumption demand. For the working population, the threat of mass unemployment is mitigated through decent livelihoods. And for political decision makers, the looming threat of social unrest is relieved.

The social democratic path to development, in other words, creates the necessary demand to sustain the digital economy, the social security people need to embrace permanent change, the political stability required for the implementation of disruptive reforms. The social contract for the digital society, in a nutshell, is to provide full capabilities to everyone who is willing to contribute to the common good.

Originally published on socialeurope.eu

Photo by fumi

The post The Human Economy: Creating Decent Livelihoods In Digital Capitalism appeared first on P2P Foundation.

The path towards abundance is no longer a proposal or a utopian dream. It is a real path, an economic and social movement taking place in parallel to the decomposition of the old ways, and which offers us a new promise to overcome scarcity, war and collapse.

For two decades now, it’s a rare month that newspapers don’t surprise us with a multi-million-dollar valuation of some enterprise, website or mobile app. The famous “rounds of financing” of start-ups, media hype when someone announces a public offering, and the eternal discussions about their “lossifits” have become part of business folklore and media hubbub. They’re really an obscene example of the growing difficulties of capital to find a place in real production. They are one more symptom of the overscaling of financial capital which is really one side of a process whose other side is that we have never been so close to abundance. But that deserves an explanation.

The shortcut that failed

At the end of the nineteenth century, two states, Prussia and Japan, discovered a shortcut to development: authoritarian State planning. At first, it worked, and worked so well that the progressive political forces of the time—social democracy, a large part of liberalism, nationalism, and even sectors of conservatism?built their economic models on it. At the limit, the Soviet State born of the ruins of Russia and its empire after the civil war, for the first time, attempted the “total nationalization” of production: a system planned and oriented to maximize the training and activation of the large masses of capital needed to create the modern infrastructure of a continent, to teach a population to read, and satisfy its basic needs.

And at first, it worked. So much so that it became the path to follow for most of the European colonies that achieved statehood, and the magic formula to develop regions of the central countries that had been left behind. Recent examples outside the socialist States would include the industry developed by Francoism in Asturias or Peron’s five-year plans. Everything was based on quickly reaching large scales in use of capital, and no one better than the State, through public or nationalized enterprises, to reach it.

In reality, as theoreticians of bureaucracy in Europe or Galbraith in the US would soon point out, State businesses were not that different from what big businesses had become in economies where the market called the shots. Success consisted of having large-scale businesses, with lots of capital, able to import or create new technologies, hire tens of thousands of people, and of produce the industrial goods that would make it possible to increase the general productivity of the economic system.

Business over-scaling and crisis

The problem, as would become clear to economists like Boulding as early as the ’50s, is that to try to reach development, and ultimately abundance, with hyper-scaled productive units is like trying to reach heaven by climbing a tree. At the beginning, it looks like you’ll go very quickly, but as you go higher, the branches are more fragile, and finally, all your effort—still very far away from the objective—ends up focusing on not falling.

Every era has an optimum size of scale that depends on technology and the dimension of the market. The better the technology, the smaller the optimum size for a given dimension. Beyond that size, the inefficiencies created by the form of organization itself make every increase in capital or in people hired counterproductive, and the value produced is reduced.

In the first stages of capitalism in each place, with all the large basic infrastructure to make—highways, telephone lines, railways, sewers, etc.—the optimum size was gigantic for the levels of resource accumulation allowed by the pre-capitalist agrarian economy. It seemed that “the greater the scale, the greater the growth”… but precisely because it worked, the first symptoms of crisis would soon come.

The first great collapse

In 1955, when the USSR starts to talk about “peaceful co-existence” with the American bloc, it’s really talking about “peaceful competition.” At that time, the accelerated development of the USSR, the extension of its model first to Eastern Europe and soon to a good part of the decolonized countries of Asia and Africa, and even Cuba, create the impression that the most centralized forms of state capitalism are the owners of the future. But soon, by the beginning of the 60s, the numbers start to not work out. Political and cultural factors were blamed, but the fact is that gigantism is beginning to fail… on both sides of the Iron Curtain.

In the West, the market will prioritize a change in technological orientation: information technology grow to become an industry. It is clearly oriented towards improving management, which is to say, to reducing inefficiencies of scale. But it’s not enough. Markets must expand to justify the sizes already reached: the “European Community” progressively becomes a “Common Market,” and in 1973, Great Britain is integrated, once the preferential market in its former colonies is no longer enough.

Beginning with the crisis of ’73, the numbers of the Western nations and the results of their big businesses don’t give any reason to be optimistic, either. By the ’80s, the inviability of the industrial businesses on the largest scale, the public scale, is obvious. Industrial overscaling has become a danger to the survival of the State itself. This is the time of “reconversion” in regions like Asturias or Flanders, and the moment when the numbers of eastern Europe—but also Cuba—really begin to break down.

In the US and Great Britain the first political response to the crisis of scale emerges: neoliberalism. Basically, it consists of racing forward: finance is deregulated and financialization appears as a way of homogenizing, and therefore expanding, the market for capital, the speculative use of which is growing more and more as it becomes more difficult use it in capital-intensive big businesses. The State restructures its relationship with big businesses: the rents they receive actually increase, but on a new basis: legislation on intellectual property becomes hardened. Management and informatization become a true “cult” in the attempt to reduce inefficiencies.

When the Soviet bloc finally collapses, “globalize” becomes the new mantra. The neoliberal strategy looks to the East and see the volume of extension of markets that has been made possible as a triumph: it has reformed the world to rationalize the over-scaled sizes of its companies.

Globalization and the globalization of the small

Along the way, in the ’90s, technological development had accelerated, and with it, the optimum size of enterprise had been reduced even more. The Internet and large cell-phone networks appear, liberalization drastically reduces the costs of transportation both of cargo and of people, and we start to see the first glimpses of abundance.

But in the first phase, the dismantling of trade barriers looks like it’s going to basically favor multinationals by allowing them reduce size, gaining back at least part of the efficiency lost to overscaling. It’s a time for “breaking value chains“: production is divided into phases that are subcontracted to SMEs in peripheral countries. From the viewpoint of the developed countries, it’s a “dislocation” of production, and a real threat to industrial salaries. Unions abound with the idea that businesses change production sites to be able reduce salaries. The fact is that what makes that salaries are low in subcontracted businesses in these countries is that their productivity is, initially, lower than that of Europe, and therefore they have to compensate for their lack of knowledge and technologies by reducing other costs.

But that changes in two ways: the first is that peripheral SMEs learn to coordinate their own chains, without depending on brands from the central countries, by taking advantage of the reduction of transportation costs and the new accessibility of central markets. The second is that, especially in the consumer-goods market, they benefit from one of the first products of emerging abundance: free software. In less than five years, the volume of this movement exceeds the sum total of all aid to developed countries since World War II.

The result, which is known as “globalization of the small” when seen as a whole, is an unprecedented rise in world trade and a way out of extreme poverty for hundreds of millions of people, most of them in Asia. In quantitative terms, it is the greatest leap towards abundance in the history of humanity. With it, the productivity of the industrialized nations will grow steadily, also increasing salaries and improving living conditions.

The crisis of the center and the P2P mode of production

But for capital, times are hard. The scale of the leaders of the change is too small, and that of the great financial centers too big, for capital to be invested efficiently in the new productive economy. The result is a speculative rush towards anything “commodifiable,” which hits a ceiling in 2007. It is no coincidence that the fall of Enron, the company that did business by turning things like bandwidth or electricity into “commodities,” shortly precedes the collapse of the financial system in the developed countries, which was tangled up in financial products whose complexity was nothing more than the result of try to homogenize risks beyond what’s reasonable.

The longest crisis in the history of capitalism, however, showed the path of abundance. While the financial system collapsed, the business model that had leading the globalization of the small was developed and universalized into what John Robb called the direct economy. The direct economy is the meeting point of the vectors of change of the moment: it basically means the substitution, to the highest degree possible, of necessary financial capital with the free and communal use of knowledge and the capital needed to pay everyday costs through advance sales that often times take the form of “crowdfunding” on virtual platforms.

The intensive use of free software also turns the cycle of P2P production into a model to follow for a whole set of industries in which the reduction of optimal scales is made evident by the impact of the direct economy. The appearance of 3D printers, the rudiments of free multipurpose hardware (like Arduino), and the evolution of good part of the hacker movement into the “maker” movement describe a situation today in which, more than ever, we can talk of the path towards abundance not only in the world of the immaterial, but also in traditional industrial production.

Conclusions

Beyond the crisis, we’re living in a fascinating historical moment. Before our eyes, technological development has reduced the optimum size of businesses to a level that in more and more occupations can be carried out efficiently in a local setting or community, and can even be distributed globally. Many of them are supported to a greater or lesser extent by the result of a productive cycle of a new kind in which capital and market are being redefined, dissipating rents and creating abundance.

The path towards abundance is no longer a proposal or a utopian dream. It is a real course, an economic and social movement happening in parallel to the decomposition of the old ways and which offers us a new promise of overcoming scarcity, war and collapse.

But like every promise of every historical age, isn’t destined to become reality, and has no existence outside of the willpower and actions of people and real communities who must make it present. It’s only a possible result, a horizon to move towards and to struggle for. The question that we will try to respond in the following installations is how.

Translated by Steve Herrick from the original (in Spanish)

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