[iDC] Fw: Industry 2.0, the new network ecology of neocapitalism

Michael Bauwens michelsub2003 at yahoo.com
Tue Sep 8 14:00:47 UTC 2009

----- Forwarded Message ----
> From: Michael Bauwens <michelsub2003 at yahoo.com>
> To: jhopkins at tech-no-mad.net
> Cc: idc-request at mailman.thing.net
> Sent: Saturday, September 5, 2009 1:28:36 PM
> Subject: Re: [iDC] Industry 2.0, the new network ecology of neocapitalism
> Hi Jon,
> I use  corporations in the very generic sense here. Remember, this model is not 
> so much what I'd like to see happen, as what we can actually see happen in the 
> prevailing business ecologies are open software and now open hardware. As 
> indicated in the second part of the article, i.e. the ladder of participation, 
> what I'd like to see happen are changes in institutional formats of the business 
> entities, towards forms that are more friendly to the peer to peer ethos and 
> community autonomy. However, I also have a strong believe, and some substantial 
> evidence, that this is happening already, since business entities have to adapt 
> to be acceptable to commons-oriented peer production ecologies. I think much of 
> the talk around capitalism 3.0, natural capitalism, Umair Haque's outcome based 
> capitalism, Yunus social businesses, the social enterpreneurship movements 
> reflects this broad shift already.
> Even if we accept that infinite growth capitalism is fundamentally incompatible 
> with biospheric survival, there are social forces operating within the market 
> that seek change, and these must be partial allies of peer producing 
> communities,
> The following is rather long, but it posits the elements of the new social 
> contract and neo-capitalism that will dominate the next Kondratieff wave, and 
> that I see as a transition period towards the peer to peer civilisation:
> (it was written for a russian audience, but applies globally)
> see in particular the last paragraph, 'the new soial contract'
> Essentially, much like in the high middle ages, I see the situation evolving 
> through new demands that will be expressed in new social charters, much as the 
> commoners did then
> Michel
> My
> understanding of the present crisis is inspired by the works on long waves by
> Kondratieff, and how it has been updated in particular by Carlota Perez, in her
> work:  Technological Revolutions and
> Financial Capital. This work has recently been updated and re-interpreted by
> Badalian and Krovorotov.
> The
> essential understanding of these approaches that economic history can be
> understood as a series of long waves of technological development, embedded in
> a particular supportive institutional framework. These long waves inevitably
> end up in crisis, in a Sudden System Shock, a sign that the old framework is no
> longer operative.
> Why is
> that so?
> These waves
> have a certain internal logic. They start with a  period of gestation, in which 
> the new
> technology is established, creates enthusiasm and bubbles, but cannot really
> emerge because the institutional framework still reflects older realities. This
> is followed by a period of maturation, marked by institutional adaptation,
> massive investment by the state, and productive investment by business, leading
> to a growth cycle. Finally, a period of decline and saturation, in which the
> state retreats, business investments become parasitic, leading to a contraction
> cycle with speculative financial bubbles,  which ends in a Sudden Systemic Shock 
> (1797, 1847, 1893, 1929 or 2008).
> To
> understand the current period, some dates are important:
> -          1929
> as the Sudden Systemic Shock ending the previous long wave
> -          1929-1945:
> gestation period of the new system
> -          1945-1973:
> maturation period, the high days of the Fordist system based on cheap domestic
> oil in the US
> -          1973:
> inflationary oil shock, leading to outward globalization but also speculative
> investment and the downward phase ending in the
> -          Sudden
> Systemic Shock of 2008
> The important thing is
> this, every long wave of appr. 50-60 years has been based on a combination of
> different structural developments in production and distribution. Whilst modern
> economics is totally focusing on the monetary side of things, the crisis is
> only explainable if we also look on the physical side. 
> So each long
> wave cycle was an interplay of
> 1) a new form of energy
> (f.e. the UK domination was based on coal, the US domination was based on oil);
> in the beginning of a new wave, the newly dominant power has particular
> privileged access to a cheap domestic supply, which funds its dominance; when
> that cheap supply dries up, a (inflationary) crisis ensues, which forces that
> power outwards, to look for new supplies in the rest of the world. This results
> in both dynamic globalization, but also in the awakening of a new periphery. 
> Because
> the last phase is linked to globalization and the control of external energy
> supplies, it is also strongly correlated to military overstretch, which is a
> crucial factor in weakening the dominance of the main player.
> 2) some radical
> technological innovations (no more than 3 according to the authors); The 3 last
> ones: 1830: Steam and railways • 1870: Heavy engineering • 1920: Automotive and
> mass production –
> 3) a new ‘hyper-productive’
> way to ‘exploit the territory’; This is where land use comes in. In the last
> period: industrial agriculture and the ‘Green Revolution’ where responsible for
> a hyper-productive agriculture. This latter phase of a long wave cycle is also
> marked by hyper-exploitation of existing land base. The example of the dust
> bowl in the American mid-West is an example. This leads to new methods of
> land-use that can be used to develop new types of land for the next up cycle.
> 4) an appropriate financial
> system: the new public companies, New Deal type investments (such as the
> Marshall Plan) in the growth cycle phase, morphing into the parasitic
> investments of casino capitalism in the second phase. Importantly, Badalian and
> Krovorotov note that each new financial system was more socialized than the
> previous one, for example the joint stock company allowing a multitude of
> shareholders to invest.
> In the growth phase, the
> newly expanded financial means fund the large infrastructural investments
> needed to create the new integrated accumulation engine; in the declining
> phase, the financial system overshoots the capabilities of the productive
> economy, becomes separated
> from it, and starts investing in parasitic investments. At that point financial 
> capital tends to be disruptive to production to
> maintain capitalization.
> 5) a particular social
> contract. Here also, we can see waves of more intensive ‘socialization’. For
> example, the Fordist social contract created the mass consumer in the first
> phase, based on social peace with labour, while in the second parasitic phase,
> the part going to worker’s was drastically reduced, but replaced by a systemic
> indebtedness, leading to the current Sudden System Shock.
> 6) As we mentioned above,
> each wave has been dominated by a particular great political power as well, and 
> in the second phase of expansion, a new periphery is
> awakened, creating the seeds for a future wave of dominance by new players. 
> Roots of the current crisis
> It is important not to
> forget the essential characteristics of the contraction cycle: what enables
> growth in a first phase, becomes an unproductive burden in the second,
> declining phase of the wave.
> If we review the 6 factors,
> it’s easy to see where the problems are:
> 1)      The era of abundant fossil fuels is
> coming to an end; after Peak Oil, oil is bound to become more and more
> expensive, making oil-based production uneconomical. Nuclear Power is no real
> replacement for this,  as its own raw
> material is equally subject to depletion.
> 2)      The era of mass production, based on
> the car, requires a too heavy environmental burden to be sustainable. 
> 3)      Industrial agriculture destroys the
> very soils that it uses and is mainly based on depletable petroleum-derivates,
> while being unsustainably energy-intensive.
> 4)      The financial system is broken and
> the $10 trillion bailout drains productive investments towards unproductive
> parasitic investments.  Similarly to a
> losing gambler in a casino, existing players will tend to play for higher and
> higher stakes hoping to undo their inevitable defeat, thereby destroying
> valuable means that could be used for the productive economy.
> 5)      The Fordist social contract, broken
> in the 80s, has led to the increased weakening of the Western middle class and
> a generalized precarity, which no longer functions after Sudden System Shock. 
> 6)      The old dominant power, the U.S. can
> no longer afford its dominance, and has awakened the periphery. The powers that
> see the opportunity to compete are looking for new societal structures that
> help them emerge. They cannot rely on the strategies of the dying long wave to
> achieve these goals, but must invent new ones.
> Seeds of the new
> 1)      The technology for renewable energy
> has been developed, but needs at least $150b annual investments in the U.S.
> alone, in order to become economical. A Green New Deal would jumpstart the new
> energy era. The wasteful heavy energy usage of the fossil fuel era will need to
> be replaced by smart precision-based energy usage.  Solar energy will be the 
> backbone of
> renewables but can be supplemented by other forms.
> 2)      The era of mass production is ready
> to be replaced by more local production in small series, based on developments
> such as flexible and rapid prototyping based manufacturing, mass customization,
> personal fabrication and additive fabrication, multi-purpose machinery. This 
> flexible
> system of manufacturing is faster, cheaper, more adaptive, more compatible with
> the solar and renewable energy, can only thrive by deepening participative
> engagement, thus requiring the re-awakening of production intelligence and
> personal initiative that were discouraged by the various forms of the
> industrial system, including the systems based on central planning.
> 3)      Post-industrial organic agriculture
> has already proven more productive than destructive industrial agriculture, but
> needs to be generalized; land use needs to be re-expanded within cities where
> vertical agriculture can be developed more intensively. This form of
> agriculture uses diversity as its backbone and works with the most
> sophisticated feedback cycles of nature. It saves also human labour time.
> 4)      The seeds of the new financial
> system, based on increased socialization towards civil society, have been 
> developed
> in the last few decades: 1) sovereign wealth funds re-insert the public good in
> investment decisions; 2) Islamic banking and similar mechanisms avoids the
> hyper-leveraging that destroyed the Wall Street system; 3) microfinance
> broadens entrepreneurship and financing to the ‘base of the pyramid’; 4)
> crowdfunding mechanisms, social lending and various credit commons approaches
> expand the availability of credit; 5) flow money approaches through a
> circulation charge to discourage parasitic investments
> 5)      The periphery of newly emergent
> countries has been awakened and will in all likelihood lead to a dominance of
> the East-Asian region.   However,
> opportunities for other emergent players are still open, providing they find
> the appropriate local integration of the productive resources of the new long
> wave. In this context, we can see the emerging success of Brazil, while Russia
> has its enormous landmass as immense and under-exploited productive resource.
> Peer to peer and the new social contract
> A new long
> phase has been historically associated with an upsurge of the role of the state
> and the public sector, which alone can undertake the necessary investments
> which private investment cannot take up in the early phases.
> However, we
> need to be aware of one of the fundamental characteristics of the new period,
> which is a revival of the role of civil society. The internet is enabling the
> self-aggregation of civil society forces in the creation of common value, i.e.
> through peer production. Global communities have shown themselves capable to be
> hyper-productive in the creation of complex knowledge products, free and open
> source software, and increasingly, open design associated with distributed
> manufacturing.
> This means
> that a hybrid form of production has emerged that combines the existence
> of  global self-managed open design
> communities, for-benefit associations in the form of Foundations which manage
> the infrastructure of cooperation, and an ecology of associated businesses which
> benefit and contribute from this commons-based peer production. 
> (In Russia,
> the earlier dominance of centralized planning with the destructive effects of
> neoliberal shock therapy, have led to a relatively under-developed civil
> society. This however, opens the opportunity for the Russian state to play the
> role of the enabler of such processes. The lead that the Russian authorities
> have already undertaken in the development of free and open source software
> shows that it is entirely possible to envisage a pro-active role in this
> respect. What needs to be understood is that the pattern to promote software
> development can be generalized to the promotion of open design development,
> including applications in the field of farming and land use.)
> These
> companies, which enable and empower the social production of value, have become
> the seeds for the dominant companies of the future (Google, eBay, etc… ).
> Companies will need to open up to co-design and co-creation, while the
> distribution (miniaturization) of the means of physical production, liberates
> the possibilities for smaller more localized production units to play more
> essential roles. We believe that the role of solely profit driven multinational
> companies, without any roots in local communities, is reaching its historical
> end, and will be replaced increasingly by new models of entities combining
> profit with the realization of social and public goods. Socially-conscious
> investment, sovereign wealth funds, micro-finance, social entrepreneurship,
> fair trade and the emergence of for-benefit entities point to this new
> institutional future of entrepreneurship.  For the state form, this means 
> morphing from the welfare or neoliberal
> state models, to that of the Partner State, which enables and empowers social
> production.
> The new
> social contract therefore will mean:
> 1)      Expanding
> entrepreneurship to civil society and the base of the pyramid
> 2)      New
> institutions that do well by doing good
> 3)      Social
> financing mechanisms based on peer to peer aggregation 
> 4)      Mechanisms
> that sustain social innovation (co-design, co-creation) and peer production by
> civil society
> 5)      Focus
> on more localized precision-based physical production in small series, but
> linked to global open design communities
> ----- Original Message ----
> > From: John Hopkins 
> > To: idc at mailman.thing.net
> > Sent: Saturday, September 5, 2009 7:49:02 AM
> > Subject: Re: [iDC] Industry 2.0, the new network ecology of neocapitalism
> > 
> > Hi Michael
> > 
> > > Foundations), or they can be corporate platforms that have been opened up to
> > > external participants
> > 
> > Are you using the term 'corporate' to mean those legal entities which are 
> > independent of/legally separate from the participants in them?  I would think 
> we 
> > would have to significantly modify that particular brand of social relation in 
> > order for it to be reflexive of the social milieu that it arises in (at least, 
> > given our current experience of those legal/economic entities called 
> > corporations)...  A traditional corporate structure would seem to stand 
> against 
> > many of your core ideas.
> > 
> > Perhaps modifying the concept of responsibilities of the human participants, 
> or 
> > having some reflections on a concept of human obligations would be enough.  
> > Though I somehow doubt the humane efficacy of any such institutions operating 
> > within the legal framework (of especially the US)...
> > 
> > jh
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