The consistent failure to monetize the immaterial economy won’t go away

Kevin Carson’s fifteenth ‘Org Theory’ chapter has been consistently quoting my work on the crisis of value (which is of course, very indebted to the similar views of Adam Arvidsson).

Here therefore is a very good overview of the topic, by Kevin Carson:

As Michel Bauwens describes it, it is becoming increasingly impossible to capture value from the ownership of ideas, designs, and technique–all the “ephemera” and “intellect” that Peters writes about as a component of commodity price–leading to a crisis of sustainability for capitalism.

Recall the following: the thesis of cognitive capitalism says that we have entered a new phase of capitalism based on the accumulation of knowledge assets, rather than physical production tools. [McKenzie Wark’s] vectoralist thesis says that a new class has arisen which controls the vectors of information, i.e. the means through which information and creative products have to pass, for them to realize their exchange value. They both describe the processes of the last 40 years, say the post-1968 period, which saw a furious competition through knowledge-based competition and for the acquisition of knowledge assets, which led to the extraordinary weakening of the scientific and technical commons. And they do this rather well.

But in my opinion, both theses fail to account for the newest of the new, i.e. to take into account the emergence of peer to peer as social format. What is happening? In terms of knowledge creation, a vast new information commons is being created, which is increasingly out of the control of cognitive capitalism.

In a later blog post for the P2P Foundation, he elaborates on the nature of cognitive capitalism as a response to the limits on accumulation in the finite physical realm, attempting a new form of accumulation based on ownership of the cognitive realm. But this attempt is doomed to fail because of the increasing untenability of property rights in the information realm.

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….

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.

However, Bauwens writes, this is not feasible. The emergence of the peer model of production, based on the non-rivalrous nature and virtually non-existent marginal cost of reproduction of digital information, and coupled with the increasing unenforceability of “intellectual property” laws, means that capital is incapable of realizing returns on ownership in the cognitive realm.

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 ‘beyond measure’, 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 collectively sustainable, but not individually.

Thus, there are two simultaneous crises: first, the failure of artificial abundance through subsidized inputs and externalization of cost, endless supplies of natural resources for appropriation (aided by state favortism), and the availability of new markets as outlets for surplus capital and output; and second, the failure of artificial scarcity in the cognitive realm. Taken together, this means that while markets and private ownership of physical capital will persist, “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.”

Johan Soderberg relates this crisis of realization under state capitalism to capital’s growing dependence on the state to capture value from social production and redistribute it to private corporate owners. This takes the form both of “intellectual property” law, as well as direct subsidies from the taxpayer to the corporate economy. He compares, specifically, the way photocopiers were monitored in the old USSR to protect the power of elites in that country, to the way the means of digital reproduction are monitored in this country to protect corporate power. [Hacking Capitalism, pp. 144-145.] James O’Connor’s theme, of the ever-expanding portion of the operating expenses of capital which come from the state, is also relevant here. [The Fiscal Crisis of the State] The important point is that this strategy of shifting the burden of realization onto the state is untenable. The proliferation of bittorrent and episodes like the DeCSS uprising have shown that “intellectual property” is ultimately unenforceable. The RIAA’s shakedown operation can be circumvented by the simple expedients of encryption and proxy servers. And as we have already seen, in an economy of subsidized inputs, the demand for such inputs grows exponentially, faster than the state can meet them. The state capitalist system will reach a point at which, thanks to the collapse of the portion of value comprised of rents on artificial property, the base of taxable value is imploding at the very time big business most needs subsidies to stay afloat.

In another article, in which he develops these themes at greater length, Bauwens writes that capitalism’s successor system is likely to have a significant role for markets, but that the two structural presuppositions of existing capitalism–artificial abundance of resources and artificial scarcity of information–will be replaced by the reverse.

We live in a political economy that has it exactly backwards. We believe that our natural world is infinite, and therefore that we can have an economic system based on infinite growth. But since the material world is finite, it is based on pseudo-abundance.

And then we believe that we should introduce artificial scarcities in the world of immaterial production, impeding the free flow of culture and social innovation, which is based on free cooperation, by creating the obstacle of permissions and intellectual property rents protected by the state.

What we need instead is a political economy based on a true notion of scarcity in the material realm, and a realization of abundance in the immaterial realm.

In the purely immaterial realm, the services of capital are becoming increasingly superfluous, as described by Michael Hardt and Antonio Negri:

the cooperative aspect of immaterial labor is not imposed or organized from the outside, as it was in previous forms of labor, but rather, cooperation is completely immanent to the laboring activity itself. This fact calls into question the old notion (common to classical and Marxian political economics) by which labor power is conceived as “variable capital,” that is, a force that is activated and made coherent only by capital…. Brains and bodies still need others to produce value, but the others they need are not necessarily provided by capital and its capacities to organize production. Today productivity, wealth, and the creation of social surpluses take the form of cooperative interactivity through linguistic, communicational, and affective networks. [Michael Hardt and Antonio Negri, Empire (Cambridge and London: Harvard University Press, 2000), p. 294.]

In addition, capitalism faces a crisis of realization in another regard that Bauwens does not directly address. For over two centuries, as Immanuel Wallerstein observed, the system of capitalist production based on wage labor has depended on the ability to externalize many of its reproduction functions on the non-monetized informal and household economies, and on organic social institutions like the family which were outside the cash nexus.

Historically, capital has relied upon its superior bargaining power to set the boundary between the money and social economies to its own advantage. The household and informal economies have been allowed to function to the extent that they bear reproduction costs that would otherwise have to be internalized in wages; but they have been suppressed (as in the Enclosures) when they threaten to increase in size and importance to the point of offering a basis for independence from wage labor. “

6 Comments The consistent failure to monetize the immaterial economy won’t go away

  1. AvatarMichel Bauwens

    There is a link: for the last 30 years, the bulk of the value is immaterial, and it cannot be measured in any good way by the current monetary system, hence the wild gyrations as the market forces vainly try to estimate the ‘value’. The enormous suplus in money floating around, is constantly searching to create speculative bubbles, mostly based on inflated estimatios of such immaterial value.

  2. Kevin CarsonKevin Carson

    Thanks very much for posting this series of excerpts, Michel.

    Walden Bello has an article situating the current crisis in the context of the long-term fall in the direct rate of profit, and various measures to circumvent it:

    He starts with WWII, whose effects were a textbook example of Marx’s “counteracting tendencies” in vol. III of Capital. It turned the entire world outside the U.S. into an undercapitalized field for investing surplus capital and absorbing surplus output. But this came to an end, and with it the generation of profitable postwar capitalism,around 1970.

    Afterward neoliberalism was adopted as a way to restore the rate of profit, but that has declined in effectiveness as productive capacity in the Third World (especially China) has expanded, and contributed to overproduction and a resumed falling direct rate of profit.

    Finally, capital turned to financialization and a series of bubbles to counterate the falling DROP. That’s failing now.

    Although he doesn’t mention it, the inability to capture value as a result of the unenforceability of IP is surely as much a factor as the failure of neoliberalism to restore the profit rate.

    To sum up, the Depression was a crisis of overproduction and overinvestment, which was “solved” only by blowing up all the capital and all the productive capacity in the world outside the US, and by the US government buying up (as “defense”) a significant portion of surplus capacity even then. Since then, it’s been one expedient after another to combat the underlying tendency of the falling DROP.

  3. AvatarJo

    Michel, I would be interested in reading more about the link to the opacity in the financial system.

    As it happens, I have islamic bankers in my class this year and they point out that the banning of interest leads to a) asking what is tangible in the service that is delivered and b) how the lender shares the risk with the borrower. They have piqued my interest and resolved the increasing anxiety I felt over years when i watched the cynical habits of business.

  4. AvatarJo

    @Kevin, thanks for that – it is much as I intuited.

    Where do we go from here? Do the Islamic bankers have a point and a valid alternate model?

  5. AvatarMichel Bauwens


    Remember that from our perspective, premodern feudal, tributary, agrarian systems where ´static´systems. In such a system, interest, i.e. a requirement to pay back more than you received, is disastrous, since you can only take the money from a static pie, i.e. from somebody else. It is therefore very logical that traditional spiritual-economic systems (they did not differentiate then), not just islamic banking but the same goes for christian and jewish ideas), that interest was banned.

    This started to change with pressure from the merchant class, and their growth based system. If the system grows, as long as the pie grows, nobody will feel the pinch directly. But as our world reaches physical limits, growth based interest becomes a problem again, and so do neotraditional solutions.

    The issue today is with fractional reserve banking. I´m not sure about exact ratio, but any real input of money can be leveraged 30, 70, perhaps 100 times. This is no longer money that represents any real value flow, but an excess that becomes speculative, and seeks an outlet. It´s inherently inflationary, but instead of inflation in money, it can express itself in bubbles, inflation of housing prices. The problem is that they started over’leveraging not even real money, but mortgages that could not be paid back.

    Another way to invest the excess, is through the valuation of the immaterial value of current production. We know that this value exists, but no one really knows how much it is really worth. This then, give scope for all kinds of financial speculatins, a game based on expectations and trust, not on any objective measure.

    The dramatic problem now is the following, as over’leveraging has become toxic (98 or 99% of the money no longer represents physical production), they need an enormous amount of money to restore confidence, and this will be a painful process (until we go back to trustworthy underlying values to what is being leveraged). But that money, while having inflationary effects, also is an incredible burden on social policy, and can freeze money for a long time, making any progressive social policy impossible, or at least very difficult. This may lead to polarisation, as social movements start making demands, and this money needs to come from somewhere … If it is no longer available from the state, it needs to be taken from … Right, a recipe for serious social strife in the coming years.

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