Monday, August 3, 2015

Postcapitalism – Initial Thoughts

I’ve been trying to wrap my head around Paul Mason’s new book, Postcapitalism, but I haven’t made much headway. There’s a lot of ideas here, which bring to mind a lot of thoughts, and summer vacation and all that. Mason’s book seems to do a good job of combining a lot of criticisms made by others, about which more below. It seems like the criticisms fall into three major categories – structural problems, changes caused by information technology, and environmental problems. Here's his basic thesis:
Postcapitalism is possible because of three major changes information technology has brought about in the past 25 years. First, it has reduced the need for work, blurred the edges between work and free time and loosened the relationship between work and wages....Second, information is corroding the market’s ability to form prices correctly. That is because markets are based on scarcity while information is abundant. The system’s defence mechanism is to form monopolies – the giant tech companies – on a scale not seen in the past 200 years, yet they cannot last....Third, we’re seeing the spontaneous rise of collaborative production: goods, services and organisations are appearing that no longer respond to the dictates of the market and the managerial hierarchy. The biggest information product in the world – Wikipedia – is made by volunteers for free, abolishing the encyclopedia business and depriving the advertising industry of an estimated $3bn a year in revenue.
The end of capitalism has begun  (Guardian)

A) Problems caused by the political/ownership structure

Mason is just the latest in a long line of thinkers to suggest that the current economic model is failing on a number of fronts, and it’s easy to see why. Post 2008 here are just a few of the major trends we’ve seen:

1.) The hollowing out of the state by corporations and finance, meaning politicians can legislate only at the favor of big business and the banks.

2.) Staggering levels of inequality in the mature capitalist economies (a small conference room full of people controlling as much wealth as entire nations).

3.) Financialization of the economy where money is made by gambling transactions with no real benefits, and even harm, to the wider society (like lost jobs and raided pensions).

4.) Slow or stagnant growth missing the two percent growth targets “required” just to keep the system going (remember 2% exponential growth means a doubling every 35 years).

5.) Widespread corruption at every level – political, corporate, judicial, etc. Politicians ruling at the pleasure of banks and business interests and hamstrung by economic imperatives.

6.) Construction of a massive surveillance state and the constant threat of “terrorism.”

7.) Overhangs of debt crippling economies – not surprising in a system dependent upon usury – debt grows without restraint unlike the actual economy, which is under no such obligation.

8.)”Neoliberalism as the “final” economic theory dominating the world with no alternative (TINA) which is now applying austerity "medicine" all over the world. In practice, this has led to with a dismantling of civil society and auctioning off the public sector to a global rentier class.

That’s just a very brief overview. Here’s Mason:
The 2008 crash wiped 13% off global production and 20% off global trade. Global growth became negative – on a scale where anything below +3% is counted as a recession. It produced, in the west, a depression phase longer than in 1929-33, and even now, amid a pallid recovery, has left mainstream economists terrified about the prospect of long-term stagnation. The aftershocks in Europe are tearing the continent apart.

The solutions have been austerity plus monetary excess. But they are not working. In the worst-hit countries, the pension system has been destroyed, the retirement age is being hiked to 70, and education is being privatised so that graduates now face a lifetime of high debt. Services are being dismantled and infrastructure projects put on hold.

Even now many people fail to grasp the true meaning of the word “austerity”. Austerity is not eight years of spending cuts, as in the UK, or even the social catastrophe inflicted on Greece. It means driving the wages, social wages and living standards in the west down for decades until they meet those of the middle class in China and India on the way up.

Neoliberalism, then, has morphed into a system programmed to inflict recurrent catastrophic failures. Worse than that, it has broken the 200-year pattern of industrial capitalism wherein an economic crisis spurs new forms of technological innovation that benefit everybody. That is because neoliberalism was the first economic model in 200 years the upswing of which was premised on the suppression of wages and smashing the social power and resilience of the working class. ...it was the strength of organised labour that forced entrepreneurs and corporations to stop trying to revive outdated business models through wage cuts, and to innovate their way to a new form of capitalism....Today there is no pressure from the workforce, and the technology at the centre of this innovation wave does not demand the creation of higher-consumer spending, or the re employment of the old workforce in new jobs. Information is a machine for grinding the price of things lower and slashing the work time needed to support life on the planet....As a result, large parts of the business class have become neo-luddites. Faced with the possibility of creating gene-sequencing labs, they instead start coffee shops, nail bars and contract cleaning firms: the banking system, the planning system and late neoliberal culture reward above all the creator of low-value, long-hours jobs.
B) Problems caused by new technology:

1.) So many goods are now non-scarce – they can be shared essentially infinitely with no one having to go without. This includes things like music, movies, software, writing--all the things that the “future” economy depends on. These are currently made artificially scarce through pricing monopolies and online spying. As once review summarized it, "the rise of information technology will corrode market mechanisms, erode property rights and destroy the relationship between wages, property and work"

2.) Networks make it easy to share goods directly – the often mislabeled” sharing” economy. These include the much-vaunted Airbnb, Uber, and so forth. Things like Tinder attempt to make even sex non-scarce.

Mason’s book reminds me of Jeremy Rifkin’s ideas. He makes many of the same arguments. His idea is the “zero marginal cost society concept:
The inherent dynamism of competitive markets is bringing costs so far down that many goods and services are becoming nearly free, abundant, and no longer subject to market forces. While economists have always welcomed a reduction in marginal cost, they never anticipated the possibility of a technological revolution that might bring those costs to near zero.….A formidable new technology infrastructure — the Internet of Things — is emerging with the potential to push much of economic life to near zero marginal cost over the course of the next two decades....What makes the social commons more relevant today is that we are constructing an Internet of Things infrastructure that optimizes collaboration, universal access and inclusion, all of which are critical to the creation of social capital and the ushering in of a sharing economy....This collaborative rather than capitalistic approach is about shared access rather than private ownership...Millions of people are using social media sites, redistribution networks, rentals and cooperatives to share not only cars but also homes, clothes, tools, toys and other items at low or near zero marginal cost....Nowhere is the zero marginal cost phenomenon having more impact than the labor market, where workerless factories and offices, virtual retailing and automated logistics and transport networks are becoming more prevalent. Not surprisingly, the new employment opportunities lie in the collaborative commons in fields that tend to be nonprofit and strengthen social infrastructure — education, health care, aiding the poor, environmental restoration, child care and care for the elderly, the promotion of the arts and recreation.... many economists argue that the nonprofit sector is not a self-sufficient economic force but rather a parasite, dependent on government entitlements and private philanthropy. Quite the contrary. A recent study revealed that approximately 50 percent of the aggregate revenue of the nonprofit sectors of 34 countries comes from fees, while government support accounts for 36 percent of the revenues and private philanthropy for 14 percent....As for the capitalist system, it is likely to remain with us far into the future, albeit in a more streamlined role, primarily as an aggregator of network services and solutions, allowing it to thrive as a powerful niche player in the coming era. We are, however, entering a world partly beyond markets, where we are learning how to live together in an increasingly interdependent, collaborative, global commons.
http://www.nytimes.com/2014/03/16/opinion/sunday/the-rise-of-anti-capitalism.html?_r=0

3.) Automation drastically reduces the need for work. I assume I don’t need to go into this yet again in great detail. I would also add that he global economy and networks now have added billions of workers driving down wages in developed countries and increasing the wealth of the owners of capital and profits for corporations who can straddle the globe.

This relates the oft-repeated question of, “If robots make all our goods, how will we generate the incomes necessary to buy all the goods?” There a wide range of answers to that question, but it is harder and harder to maintain the belief that the invisible hand will make everything okay. As I’ve argued before, I think we’ve been in a crisis since the 1970s, and we’ve ignored it by dumping unemployment on scapegoated minority groups and then jailing them to sweep it under the rug, thus keeping “official” statistics low. We also redefine who is considered to be "officially" in the workforce as need be. Now that it’s coming for more and more people, the statistical sleights-of-hand are looking more and more pathetic. Less and less people owning everything is incompatible with a consumer-based economy.

4.) The possibility of peer-to-peer collaborative creation of value by networked individuals as opposed to top-down hierarchical creation of value by absentee-owned corporations. e.g. Wikipedia and open-source software.

5.) Mason describes these, using economic jargon, as “positive externalities” associated with networks and argues they can only be captured via rentier monopolies like Facebook, but that this is self-defeating. This argument reminds me of Jaron  Lanier’s writings which talk about “network efficiencies” as a central feature of the modern economy:
[Jaron] Lanier has an unusual authority to criticize the digital economy: He was there, more or less, at the creation. ...[b]ut unlike most of his fellow technologists, he eventually came to feel that the rise of digital networks was no panacea....On the contrary: “What I came away with from having access to these varied worlds was a realization that they were all remarkably similar,” he writes. “The big players often gained benefits from digital networks to an amazing degree, but they were also constrained, even imprisoned, by the same dynamics.” Over time, the same network efficiencies that had given them their great advantages would become the instrument of their failures. In the financial services industry, it led to the financial crisis. In the case of Wal-Mart, its adoption of technology to manage its supply chain at first reaped great benefits, but over time it cost competitors and suppliers hundreds of thousands of jobs, thus “gradually impoverishing its own customer base,” as Lanier put it to me.

There are two additional components to Lanier’s thesis. The first is that the digital economy has done as much as any single thing to hollow out the middle class. (When I asked him about the effect of globalization, he said that globalization was “just one form of network efficiency.” See what I mean about a universal theory?) His great example here is Kodak and Instagram. At its height, writes Lanier “Kodak employed more than 140,000 people.” Yes, Kodak made plenty of mistakes, but look at what is replacing it: “When Instagram was sold to Facebook for a billion dollars in 2012, it employed only 13 people.”

Which leads nicely to Lanier’s final big point: that the value of these new companies comes from us. “Instagram isn’t worth a billion dollars just because those 13 employees are extraordinary,” he writes. “Instead, its value comes from the millions of users who contribute to the network without being paid for it.” He adds, “Networks need a great number of people to participate in them to generate significant value. But when they have them, only a small number of people get paid. This has the net effect of centralizing wealth and limiting overall economic growth.” Thus, in Lanier’s view, is income inequality also partly a consequence of the digital economy…“If Google and Facebook were smart,” he said, “they would want to enrich their own customers.” So far, he adds, Silicon Valley has made “the stupid choice” — to grow their businesses at the expense of their own customers. Lanier’s message is that it can’t last. And it won’t.
http://www.nytimes.com/2014/01/07/opinion/nocera-will-digital-networks-ruin-us.html
What persuaded me of the need for a second book is the discordance between what I find empirically in the world and the ideas about policy that everyone seems to return to as if there’s no alternative. We’re locked into a continued belief that investing in a particular kind of information-technology venture is good for society, when actually these often seem to be pulling society apart and creating ever more extreme income inequalities. We seem unable to connect the dots between the continued dysfunction of the financial sector, even as it expands profitability, and the rise of information technology.
http://knowledge.wharton.upenn.edu/article/owns-future-jaron-lanier-remains-digital-optimist/

C) Environmental problems:

This is usually framed in terms of climate change, which is threatening to end the relatively stable temperatures of the Holocene era during which all of human history has unfolded. Heat waves, floods, droughts, rising sea levels, species extinction, and so on lead to costs which offset any benefit to additional economic growth.We’ve been sold a bill of goods in the developing world that pollution is no longer an issue, but we’ve all seen the footage of the smog-choked cities where our manufacturing has moved. More production meaning more pollution can’t go on forever, and we’ve clearly reached the limits of the biosphere’s ability to absorb our waste stream.

This leads to calls to “decarbonize” the economy. This is the replacement of carbon-emitting energy sources with a mixture of solar, wind, geothermal, hydroelectric, and possibly nuclear sources. Transportation would presumably be electrified.

Missing from most of the analyses of capitalism’s end, including this one, is one I’m sure my readers are familiar with – the Peak Oil concept. I cribbed this brief summary from a recent article by Albert Bates:
One barrel of oil has 5.7 million BTUs of energy, or 1700 kWh. An average adult can, in hard labor, generate 0.6 kWh/day. That's 11 years of human labor packed into each barrel of oil. Put another way, fifty dollars currently buys you eleven petroleum slaves working year-round at hard labor...Thanks to petroslavery, we have higher wages, higher profits, really cheap products and more people doing little to nothing. The average USAnian uses 60 barrels per year (or equivalent coal, gasoline and fracked gas) or roughly 660 fossil slaves standing at the beck and call of each and every citizen...Nonetheless, extraction costs for fossil fuels are rising -- 17% per year for the past 10 years. That drives up energy costs and as that price goes up, its like having to pay your slaves. Profits decline, and some slaves get laid off.
http://www.resilience.org/stories/2015-07-28/the-gift-of-the-maya

The modern industrial world is dependent upon burning hydrocarbons, notably oil which powers the entire transportation infrastructure (portable and high BTU content), and coal/natural gas which is burned to run electrical turbines. Without constantly increasing energy input, the thinking goes, you cannot grow the economy. The extraction of any resource follows a bell curve, meaning it reaches a peak and then declines. Also, the marginal cost goes up, because you harvest the easiest to get resources first. Growth is incompatible with dwindling energy sources and/or rising costs. Conventional petroleum resources seem to have reached their peak, and the new hydrocarbon resources which we are substituting  require much more upfront cost and energy to acquire, leading to more expensive energy resources overall. As energy prices go up, the circle of prosperity contracts.

Whenever you bring this up, you’re told that the economy can grow infinitely without using more energy and resources, and the internet is usually rolled out as an example. But see above! The idea that we’ll all sit around making YouTube videos and food blogs runs into the problems cited above. Mason addresses the environmental problems with capitalism, but not the energy supply question. Even if non-carbon sources of energy can replace current ones, it is unlikely that they will enable another few centuries of exponential economic growth.

Mason sees this as another economic transition enabled by technology similar to the ones that came before, as from feudalism to capitalism.
The feudal model of agriculture collided, first, with environmental limits and then with a massive external shock – the Black Death. After that, there was a demographic shock: too few workers for the land, which raised their wages and made the old feudal obligation system impossible to enforce. The labour shortage also forced technological innovation. The new technologies that underpinned the rise of merchant capitalism were the ones that stimulated commerce (printing and accountancy), the creation of tradeable wealth (mining, the compass and fast ships) and productivity (mathematics and the scientific method).

Present throughout the whole process was something that looks incidental to the old system – money and credit – but which was actually destined to become the basis of the new system. In feudalism, many laws and customs were actually shaped around ignoring money; credit was, in high feudalism, seen as sinful. So when money and credit burst through the boundaries to create a market system, it felt like a revolution. Then, what gave the new system its energy was the discovery of a virtually unlimited source of free wealth in the Americas.

The modern day external shocks are clear: energy depletion, climate change, ageing populations and migration. They are altering the dynamics of capitalism and making it unworkable in the long term. They have not yet had the same impact as the Black Death – but as we saw in New Orleans in 2005, it does not take the bubonic plague to destroy social order and functional infrastructure in a financially complex and impoverished society.

Today, the thing that is corroding capitalism, barely rationalised by mainstream economics, is information. Most laws concerning information define the right of corporations to hoard it and the right of states to access it, irrespective of the human rights of citizens. The equivalent of the printing press and the scientific method is information technology and its spillover into all other technologies, from genetics to healthcare to agriculture to the movies, where it is quickly reducing costs...The main contradiction today is between the possibility of free, abundant goods and information; and a system of monopolies, banks and governments trying to keep things private, scarce and commercial. Everything comes down to the struggle between the network and the hierarchy: between old forms of society moulded around capitalism and new forms of society that prefigure what comes next.

The modern equivalent of the long stagnation of late feudalism is the stalled take-off of the third industrial revolution, where instead of rapidly automating work out of existence, we are reduced to creating what David Graeber calls “bullshit jobs” on low pay. And many economies are stagnating. The equivalent of the new source of free wealth? It’s not exactly wealth: it’s the “externalities” – the free stuff and wellbeing generated by networked interaction. It is the rise of non-market production, of unownable information, of peer networks and unmanaged enterprises.
Mason calls his proposal project zero:
I call it Project Zero – because its aims are a zero-carbon-energy system; the production of machines, products and services with zero marginal costs; and the reduction of necessary work time as close as possible to zero.
Anyway, those are just my initial thoughts. More to come…

5 comments:

  1. Infinite growth of energy/materials use is obviously impossible, but pure economic growth can go on for a very long time. It's just a number.

    You are underestimating the potential for healthcare among other things. These are NOT bullshit jobs. You forget that 100 years ago, doctors and dentists were just barely useful. They could set broken bones, pull teeth and do a few other things better than a lay person, but as soon as they tried anything more ambitious (and they often did) they ended up killing/hurting more people than they helped. Things are different now.

    Just look at dental implants. Now it is possible for everyone to have good teeth. As someone who had a lot of dental problems at one time (and whose family also had problems going back for generations, thank you sugar industry!) I can assure you that modern dentistry is NOT bullshit work, much of it is NOT easily automated, and there is enormous growth potential. Same goes for all sorts of other healthcare.

    And please don't point to obesity as proof that healthcare is bullshit, effectively digging holes (eating oneself into obesity) then filling them back up again (treating the diseases that result from obesity). Every animal on this planet is subject to disease and always has been. Treatment of disease and extension of healthy years of life is most definitely a valuable thing and the potential is there for this to growth for centuries.

    Healthcare is mostly labor, with a very light energy and raw materials impact. I walk by a hospital everyday. The building itself is fairly compact, but surrounding it are several acres of parking lots. That's where the energy and raw materials are being wasted. What will happen in the future, as American living standards converge with those of China and India, which is hardly a moral wrong to get excited over, is that private automobiles will become a luxury item. Most of these healthcare workers will have to live near where they work and walk rather than riding to work. Will do them good to get some exercise that way. Energy and raw materials usage will decline but there will still be economic growth and lots of non-bullshit jobs.

    Take Jaron Lanier's rants with a grain of salt. The guy's a crappy musician, that's why he can't make money with music. The other problem is the music people stopped being innovative and got fat and lazy during the vinyl to CD transition years, when money was pouring into the industry. There is plenty enough money being spent on subscription music services for the truly quality musicians to do very well. The amateurs like Jaron Lanier will just have to get a day job as nurse or other healthcare worker. Story is even more true for books. Tons of quality authors are making a good living off ebooks. The discontents are those whose books don't sell because they aren't worth a damn. Call it winner take all, but winner take all has always existed in the culture industry. There have always been a zillion poetasters for every quality poet.

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    1. The bullshit jobs are the administrators, and I know whereof I speak. I've actually shadowed doctors and nurses, and nobody works harder than they do. But I've also been in meetings and attended ceremonies where there were two Allen-Edmunds-wearing vice presidents for every tennis-shoe-clad doctor/nurse. THOSE are the bullshit jobs.

      I agree with you that there is a lot of potential for health care. But I don't see it as labor-intensive, certainly not enough to offset efficiency gains in the rest of society, even if we could all do that (I can't even imagine being able to jab a needle into another human being; the sight of blood makes me queasy).

      The other problem is how to pay for it. Need has nothing to do with ability to pay. The only humane, rational system is a socialist system, which actually proves Mason's point, rather than invalidates it. If our largest growth industry is socialized, can we be said to be a capitalist economy anymore? Sure, there are always going to be direct market transactions, but there have always been those. At what point can we say that we are living in postcapitalism? As I've argued here before, I think our ideas about free markets are just propaganda by professional economics fraudsters that has nothing to with actual reality.

      And that's a point I'm hoping to make next: what do we mean by capitalism? And what do we mean when we say we live in a capitalist economy?

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    2. The administrators are the result of the crazy healthcare financing system we have in the US. At some point that will be rationalized. As for not labor-intensive, are you kidding? Nothing is more labor intensive than healthcare. As for how to pay for it, you're falling into your old trap of thinking money is a real thing. Money is just a transmission of power and accounting mechanism.

      The most important thing in life for all animals is food, because without that we die quickly. Historically, most people were involved with agriculture, ranching, hunting or fishing. Nowadays only a few people are involved with those industries. How could a transformation from a food-based to an industrial economy have come about? Where did and does everyone get the money to pay for food? Why don't the food producers get together and jack up the price so they control everything, given the importance of food? The answer is the rest of us produce things the food producers want and we have mechanisms in place to prevent them from exercising their potential power. Think about that for a while and maybe you'll understand better what is going on and how "where do we get the money" is a stupid question, like something a boob who vision of the world is based on his personal financial situation would say. The transition from the economy now to a healthcare economy is no different from previous transitions.

      If money is concentrated in the hands of a few rich hoarders, then of course the economy falls short of demand. But that is a separate issue. The economy routinely fell short of demand back in the feudal era due to concentration of wealth in the hands of rich hoarders.

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  2. I have to admit I really struggle to wrap my head around exactly what the hell Mason is going on about is his postcapitalism stuff. What really bothers me is that there's no quantitative data or anything in his work, it's all just hand waving assertions about this and that. I doubt that many of his claims would stand up to serious empirical scrutiny. He's doing a talk near me in a few weeks, so I might go along and have a look, but I don't think I'll be any more impressed. As far as I can tell, it's just a mixture of techno-optimism mixed with a kind of bizarre market-fundamentalism mixed together with the positivist idea that humanity is still on some glorious march towards progress.

    Basically as far as I can tell he's obsessed with the internet and "networks" and how these will somehow magically enable us to dematerialise the economy. Which is patently nonsense. Behind the internet there sits a giant, belching industrial machine, the type which you need to sustain power, water, advanced manufacturing and communications networks, all of which are prerequisits for layering the internet on top of them. Not to mention the disgusting industrial processes which produce places like this ( http://www.bbc.com/future/story/20150402-the-worst-place-on-earth ). He also seems to subscribe to the idea that if someone's got a phone and access to the web, then they're suddenly going to be rich. Well, rubbish. If you've got a phone and live in sub-saharn africa somewhere, then it's great that you've got it, but it doesn't make up for a lack of roads, healthcare or any other functioning infrastructure. I've heard this viewpoint (derogatorily) referred to as "Maslow's smartphone", and rightly so.

    The final point that really undermines his argument is that if this IT revolution really were taking place, and machines were ready to take over from all of our jobs, then by implication the productivity figures should be through the roof (fewer hours worked and more output = raised productivity). Instead in many of the advanced nations productivity is stagnant, and a lot of people are scratching their heads over it ( http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q201.pdf ). I suspect this has a lot to do with energy prices in recent years, specifically oil extraction, but my ideas are only half formed really.

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    1. But does capitalism = industrialism? That kind of sounds like what you're saying. If he's saying we no longer need to make things, well, then, yes, that's absurd. But is that what he's implying?

      That's a weakness in the criticisms. If people say that any making of artifacts and market exchanges using some sort of currency is capitalism, then, yes, it's not likely that capitalism is going anywhere. But if that's your definition, then we've always had capitalism!

      I'll explore that more later. But he does seem to be correct in that there are incompatibilities between the capitalist model and some of the technologies unleashed by capitalism. A lot of these criticisms are not new; the Zeitgeist movement is another source of similar criticisms. There are ways to resolve this, and one of them might be what I've termed Neofeudalism, which would be a much more pessimistic outcome, even though all signs are currently pointing in that direction.

      As for rising productivity, well, I think that has more to do with how most of our jobs are useless, so there's no "productivity" to measure. we've pushed down the costs of "stuff" at least in the West, to near zero; there is already more stuff than we'll ever need. Making stuff is just not that important to the economy anymore. It's hard to measure productivity when we're all just "managers" staring at Excel spreadsheets all day and filling out billing forms. I suspect Jeavons paradox might resolve this dilemma - we've made our work so much more complex that productivity gains are cancelled out. My office could crank out buildings in half the time of 1980, but today's buildings are so much more complex, demands are higher, and there's so much more to document. So are we more productive? We've poured all the gains into complexity.

      Maslow's smartphone = good one! That's a good example of what I mean by the materialist bias of economics. I remember reading an article by Kevin Kelly where he was arguing that the fact that more people have cell phones than toilets is a *good* thing that is entirely down to individual choice - people just want cell phones more. Never mind the fact that people die of water-borne diseases every day.

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