The Homebrew Industrial Revolution : A Low Overhead Manifesto .

TheHomebrew IndustrialRevolution
ALowOverheadManifesto
CenterforaStatelessSociety
KEVINA.CARSON
BOOKSURGE
CopyrightKevinA.Carson2010 WoodyGuthriePublicLicense Maybereproducedwithoutlimit,withattribution. Anyonefoundcopyinganddistributingthisbookwithoutpermissionwillbe consideredamightygoodfriendofours,becausewedontgiveadurn. Seriously,TheHomebrewIndustrialRevolutionislicensedundera CreativeCommonsAttributionShareAlike3.0UnitedStatesLicense, andcanbecopiedwithoutlimitincludingforcommercialdistribution solongasitisattributedtoKevinCarson. Publishedby BookSurge ISBN9781439266991 Carson,KevinA. TheHomebrewIndustrialRevolution:ALowOverheadManifesto Includesbibliographicreferencesandindex 1.Technologysocialaspects.2.Productionmanagement. 3.Reengineering(Management)4.Anarchism.I.Title
Tomymother,RuthEmmaRickert, andthememoryofmyfather,AmosMorganCarson.
Contents
Dedication Contents Preface
A. Preface:MumfordsPeriodizationofTechnologicalHistory B. TheNeotechnicPhase C. AFunnyThingHappenedontheWaytotheNeotechnicRevolution Introduction A. InstitutionalFormstoProvideStability B. MassConsumptionandPushDistributiontoAbsorbSurplus C. StateActiontoAbsorbSurplus:Imperialism D. StateActiontoAbsorbSurplus:StateCapitalism E. Mene,Mene,Tekel,Upharsin(aCritiqueofSloanismsDefenders) F. ThePathologiesofSloanism G. MandatoryHighOverhead Introduction A. ResumptionoftheCrisisofOveraccumulation B. ResourceCrises(PeakOil) C. FiscalCrisisoftheState D. DecayoftheCulturalPseudomorph E. FailuretoCounteractLimitstoCaptureofValuebyEnclosureofthe DigitalCommons F. NetworkedResistance,Netwar,andAsymmetricWarfareAgainst CorporateManagement Appendix:ThreeWorksonAbundanceandTechnologicalUnemployment A. HomeManufacture B. RelocalizedManufacturing C. NewPossibilitiesforFlexibleManufacturing Sidebar:MarxistObjectionstoNonCapitalistMarkets:TheRelevanceofthe DecentralizedIndustrialModel
iii v 1
5 7 12
1. AWrongTurn
2. Moloch:TheSloanistMassProductionModel
25
25 35 43 51 53 61 63 70
3. BabylonisFallen
81 82 99 104 108 114 129 153 171 174 181 189
81
4. BacktotheFuture
171
5. TheSmallWorkshop,DesktopManufacturing,andHousehold Production
A. NeighborhoodandBackyardIndustry
191
191
vi
THEHOMEBREWINDUSTRIALREVOLUTION
B. TheDesktopRevolutionandPeerProductionintheImmaterialSphere C. TheExpansionoftheDesktopRevolutionandPeerProductionintothe PhysicalRealm 1. OpenSourceDesign:RemovalofProprietaryRentsfromtheDesign Stage,andModularDesign 2. ReducedTransactionCostsofAggregatingCapital 3. ReducedCapitalOutlaysforPhysicalProduction D. TheMicroenterprise Appendix:CaseStudiesintheCoordinationofNetworkedFabricationand OpenDesign 1. OpenSourceEcology/FactoreFarm 2. 100kGarages 3. Assessment
197 204 204 214 216 227 238 238 245 250
6. ResilientCommunitiesandLocalEconomies
A. LocalEconomiesasBasesofIndependenceandBuffersAgainstEconomic Turbulence B. HistoricalModelsofResilientCommunity C. Resilience,PrimarySocialUnits,andLibertarianValues D. LETSSystems,BarterNetworks,andCommunityCurrencies E. CommunityBootstrapping F. ContemporaryIdeasandProjects 1. JeffVailsHamletEconomy. 2. GlobalEcovillageNetwork 3. TheTransitionTownMovement 4. GlobalVillages 5. VentureCommunism 6. DecentralizedEconomicandSocialOrganization(DESO) 7. TheTripleAlliance A. NetworkedProductionandtheBypassingofCorporateNodes B. TheAdvantagesofValueCreationOutsidetheCashNexus C. MoreEfficientExtractionofValuefromInputs D. SeeingLikeaBoss E. TheImplicationsofReducedPhysicalCapitalCosts F. StrongIncentivesandReducedAgencyCosts G. ReducedCostsfromSupportingRentiersandOtherUselessEaters H. TheStigmergicNonRevolution I. TheSingularity Conclusion Appendix:TheSingularityintheThirdWorld
253
254 258 265 274 283 293 293 294 297 298 299 302 303
7. TheAlternativeEconomyasaSingularity
309
309 311 312 325 338 340 343 347 352 358 360
Bibliography Index AbouttheAuthor
363 389 393
Preface
nresearchingandwritingmylastbook,OrganizationTheory:ALibertarianPer spective,Iwasprobablymoreengagedandenthusiasticaboutworkingonmate rial related to micromanufacturing, the microenterprise, the informal economy, andthesingularityresultingfromthem,thanonjustaboutanyotherpartofthe book. When the book went to press, I didnt feel that I was done writing about thosethings.AsIcompletedthatbook,Iwasfocusedonseveralthemesthat,while theyrecurredthroughoutthebook,wereimperfectlytiedtogetheranddeveloped. InmyfirstpaperasresearchassociateatCenterforaStatelessSociety,1Iat tempted to tie these themes together and develop them in greater detail in the form of a short monograph. I soon found that it wasnt going to stop there, as I elaborated on the same theme in a series of C4SS papers on industrial history.2 AndasIwrotethosepapers,Ibegantoseethemasthebuildingblocksforastand alonebook. OneoftheimplicitthemesinOrganizationTheorywhichIhaveattemptedto developsince,andwhichiscentraltothisbook,isthecentralroleoffixedcosts initial capital outlays and other overheadin economics. The higher the fixed costs of an enterprise, the larger the income stream required to service them. Thats as true for the household microenterprise, and for the enterprise of the householditself,asformoreconventionalbusinesses.Regulationsthatimposear tificial capitalization and other overhead costs, the purchase of unnecessarily ex pensiveequipmentofasortthatrequireslargebatchproductiontoamortize,the use of standalone buildings, etc., increase the size of the minimum revenue streamrequiredtostayinbusiness,andeffectivelyruleoutparttimeorintermit tent selfemployment. When such restrictions impose artificially high fixed costs onthemeansofbasicsubsistence(housingandfeedingoneself,etc.),theireffectis to make cheap and comfortable subsistence impossible, and to mandate ongoing externalsourcesofincomejusttosurvive.AsCharlesJohnsonhasargued,
Kevin Carson, Industrial Policy: New Wine in Old Bottles, C4SS Paper No. 1 (1 Quarter2009)<http://c4ss.org/content/78>. 2 Carson, MOLOCH: Mass Production Industry as a Statist Construct, C4SS Paper No.3(July2009)<http://c4ss.org/content/888>;TheDeclineandFallofSloanism,C4SS Paper No. 4 (August 2009) <http://c4ss.org/content/category/ studies>; The Homebrew IndustrialRevolution,C4SSPaperNo.5(September2009)<http://c4ss.org/content/1148>; Resilient Communities and Local Economies, C4SS Paper No. 6 (4th Quarter 2009) <http://c4ss.org/content/1415>; The Alternative Economy as a Singularity, C4SS Paper No.7(4thQuarter2009)<http://c4ss.org/content/1523>.
st
Ifitistrue(asKevinhasargued,andasIarguedinScratchingBy )that,absent the state, most ordinary workers would experience a dramatic decline in the fixedcostsofliving,including(amongotherthings)considerablybetteraccessto individual ownership of small plots of land, no income or property tax to pay, and no zoning, licensing, or other government restraints on smallscale neigh borhoodhomebasedcrafts,cottageindustry,orlightfarming/heavygardening,I thinkyoudseealotmorepeopleinapositiontobeginedgingoutortodropout oflowincomewagelaborentirelyinfavorofmakingamodestlivinginthein 2 formalsector,bygrowingtheirownfood,orboth...
Ontheotherhand,innovationinthetechnologiesofsmallscaleproduction andofdailylivingreducetheworkersneedforacontinuingincomestream.Iten ables the microenterprise to function intermittently and to enter the market in crementally,withnooverheadtobeservicedwhenbusinessisslow.Theresultis enterprisesthatareleanandagile,andcansurvivelongperiodsofslowbusiness, atvirtuallynocost;likewise,suchincreasedefficiencies,byminimizingtheongo ingincomestreamrequiredforcomfortablesubsistence,havethesameliberating effectonordinarypeoplethataccesstolandonthecommondidfortheirances torsthreehundredyearsago. The more I thought about it, the more central the concept of overhead be cametomyanalysisofthetwocompetingeconomies.Alongwithsetuptime,fixed costsandoverheadarecentraltothedifferencebetweenagilityanditslack.Hence thesubtitleofthisbook:ALowOverheadManifesto. AgilityandResilienceareattheheartofthealternativeeconomysdifferences with its conventional predecessor. Its superiorities are summed up by a photo graphIfoundatWikimediaCommons,whichIconsideredusingasacoverimage; atinyteenageVietConggirlleadinganenormouscapturedAmericansoldier.Im obliged to Jerry Brown (via Reason magazines Jesse Walker) for the metaphor: guerrillasinblackpajamas,startingoutwithcapturedJapaneseandFrencharms, with a bicyclebased supply train, kicking the living shit out of the besttrained andhighesttechnologymilitaryforceinhumanhistory.
But Governor Brown was much more of a fiscal conservative than Governor Reagan, even if he made arguments for austerity that the Republican would never use. (At one point, to get across the idea that a lean organization could 3 outperformabloatedbureaucracy,heofferedtheexampleoftheVietCong.)
I since decided to go with the picture of the RepRap 3D printer which you see on the cover now, but a guerrilla soldier is still an appropriate symbol for all thecharacteristicsofthealternativeeconomyImtryingtogetacross.AsIwritein theconcludingchapterofthebook:
Running throughout this book, as a central theme, has been the superior effi ciencyofthealternativeeconomy:itslowerburdensofoverhead,itsmoreinten siveuseofinputs,anditsavoidanceofidlecapacity. Twoeconomiesarefightingtothedeath:oneofthemahighlycapitalized, highoverhead, and bureaucratically ossified conventional economy, the subsi dized and protected product of one and a half centurys collusion between big CharlesJohnson,ScratchingBy:HowGovernmentCreatesPovertyasWeKnowIt, The Freeman: Ideas on Liberty, December 2007 <http://www.thefreemanonline.org/ featured/scratchingbyhowgovernmentcreatespovertyasweknowit/>. 2 Johnson comment under Roderick Long, Amazon versus the Market, Austro Athenian Empire, December 13, 2009 <http://aaeblog.com/2009/12/13/amazonversusthe market/commentpage1/#comment354091>. 3 Jesse Walker, Five Faces of Jerry Brown, The American Conservative, November 1, 2009<http://www.amconmag.com/article/2009/nov/01/00012/>.
PREFACE
government and big business; the other a low capital, lowoverhead, agile and resilient alternative economy, outperforming the state capitalist economy de spitebeinghobbledanddrivenunderground. Thealternativeeconomyisdevelopingwithintheintersticesoftheoldone, preparingtosupplantit.TheWobblyphrasebuildingthestructureofthenew society within the shell of the old is one of the most fitting phrases ever con ceivedforsumminguptheconcept.
IdliketothankBradSpanglerandRoderickLongforprovidingmethevenue, at Center for a Stateless Society, where I wrote the series of essays this book is basedon.IcouldnthavewrittenthiswithoutallthevaluableinformationIgath eredasaparticipantin theP2PResearchemaillistandthe OpenManufacturing listatGoogleGroups.Myparticipation(nodoubtoftenclueless)wasentirelythat of a fanboy and enthusiastic layman, since I cant write a line of code and can barelyhammeranailstraight.ButIthankthemforallowingmetoplaytheroleof JaneGoodall.Andfinally,thankstoProfessorGaryChartierofLaSierraUniversity, for his beautiful job formatting the text and designing the cover, as well as his feedbackandkindpromotionofthisworkinprogress.
AWrongTurn
A.PREFACE:MUMFORDSPERIODIZATION OFTECHNOLOGICALHISTORY
ewisMumford,inTechnicsandCivilization,dividedtheprogressoftechnologi caldevelopmentsincelatemedievaltimesintothreeconsiderablyoverlapping periods(orphases):theeotechnic,paleotechnic,andneotechnic. The original technological revolution of the late Middle Ages, the eotechnic, wasassociatedwiththeskilledcraftsmenofthefreetowns,andeventuallyincor poratedthefruitsofinvestigationbytheearlyscientists.Itbeganwithagricultural innovations like the horse collar, horseshoe and crop rotation. It achieved great advances in the use of wood and glass, masonry, and paper (the latter including theprintingpress).Theagriculturaladvancesoftheearlysecondmillenniumwere furtherbuiltonbytheinnovationsofmarketgardenersinthesixteenthandseven teenth centurieslike, for example, raised bed horticulture, composting and in tensivesoildevelopment,andthehotbedsandgreenhousesmadepossiblebyad vancesincheapproductionofglass. In mechanics, in particular, its greatest achievements were clockwork ma chineryandtheintensiveapplicationofwaterandwindpower.Thefirstandmost importantprerequisiteofmachineproductionwasthetransmissionofpowerand control of movement by use of meshed gears. Clockwork, Mumford argued, was thekeymachineofthemodernindustrialage.Itwas
a new kind of powermachine, in which the source of power and the transmis sionwereofsuchanatureastoensuretheevenflowofenergythroughoutthe works and to make possible regular production and a standardized product. In its relationship to determinable quantities of energy, to standardization, to automatic action, and finally to its own special product, accurate timing, the clockhasbeentheforemostmachineinmoderntechnics....Theclock,moreo ver,servedasamodelformanyotherkindsofmechanicalworks,andtheanaly sis of motion that accompanied the perfection of the clock, with the various typesofgearingandtransmissionthatwereelaborated,contributedtothesuc 1 cessofquitedifferentkindsofmachine. If power machinery be a criterion, the modern industrial revolution began 2 inthetwelfthcenturyandwasinfullswingbythefifteenth.
Withthisfirstandlargesthurdlecleared,RenaissancetinkererslikeDaVinci quickly turned to the application of clockwork machinery to specific processes.3 Giventheexistenceofclockwork,thedevelopmentofmachineprocessesforevery
LewisMumford,TechnicsandCivilization(NewYork:Harcourt,Brace,andCompany, 1934),pp.1415. 2 Ibid.,p.112. 3 Ibid.,p.68.
1
imaginablespecifictaskwasinevitable.Regardlessoftheprimemoveratoneend, orthespecificprocessattheother,clockworktransmissionofpowerwasthede finingfeatureofautomaticmachinery.

Insolvingtheproblemsoftransmittingandregulatingmotion,themakers of clockwork helped the general development of fine mechanisms. To quote Usher once more: The primary development of the fundamental principles of applied mechanics was . . . largely based upon the problems of the clock. Clockmakers,alongwithblacksmithsandlocksmiths,wereamongthefirstma chinists: NicholasForq,theFrenchmanwhoinventedtheplanerin1751,wasaclock maker: Arkwright, in 1768, had the help of a Warrington clockmaker; it was Huntsman,anotherclockmaker,desirousofamorefinelytemperedsteelforthe watchspring, who invented the process of producing crucible steel: these are onlyafewofthemoreoutstandingnames.Insum,theclockwasthemostinflu ential of machines, mechanically as well as socially; and by the middle of the eighteenthcenturyithadbecomethemostperfect:indeed,itsinceptionandits perfectionprettywelldelimittheeotechnicphase.Tothisday,itisthepattern 1 offineautomatism.
Withtheuseofclockworktoharnessthepowerofprimemoversandtransmit ittomachineproductionprocesses,eotechnicindustryproliferatedwhereverwind orrunningwaterwasabundant.Theheartlandofeotechnicindustrywastheriver countryoftheRhinelandandnorthernItaly,andthewindyareasoftheNorthand Balticseas.2

Grindinggrainandpumpingwaterwerenottheonlyoperationsforwhich thewatermillwasused:itfurnishedpowerforpulpingragsforpaper(Ravens burg:1290):itranthehammeringandcuttingmachinesofanironworks(near Dobrilugk,Lausitz,1320):itsawedwood(Augsburg:1322):itbeathidesinthe tannery,itfurnishedpowerforspinningsilk,itwasusedinfullingmillstowork up the felts, and it turned the grinding machines of the armorers. The wire pullingmachineinventedbyRudolphofNrnbergin1400wasworkedbywater power.Inthe mining andmetal working operations Dr. GeorgBauer described the great convenience of waterpower for pumping purposes in the mine, and suggested that if it could be utilized conveniently, it should be used instead of horses or manpower to turn the underground machinery. As early as the fif teenthcentury,watermillswereusedforcrushingore.Theimportanceofwater powerinrelationtotheironindustriescannotbeoverestimated:forbyutilizing this power it was possible to make more powerful bellows, attain higher heats, uselargerfurnaces,andthereforeincreasetheproductionofiron. The extent of all these operations, compared with those undertaken today in Essen or Gary, was naturally small: but so was the society. The diffusion of powerwasanaidtothediffusionofpopulation:aslongasindustrialpowerwas representeddirectlybytheutilizationofenergy,ratherthanbyfinancialinvest ment,thebalancebetweenthevariousregionsofEuropeandbetweentownand countrywithinaregionwasprettyevenlymaintained.Itwasonlywiththeswift concentration of financial and political power in the sixteenth and seventeenth centuries, that the excessive growth of Antwerp, London, Amsterdam, Paris, 3 Rome,Lyons,Naples,tookplace.
With the excessive growth of Antwerp, London, Amsterdam, Paris, Rome, Lyons, Naples, came the triumph of a new form of industry associated with the concentrated power of those cities. The eotechnic phase was supplanted or
1
Ibid.,p.134. Ibid.,p.113. 3 Ibid.,pp.114115.

2
AWRONGTURN
crowdedoutintheearlymodernperiodbythepaleotechnicorwhatisreferred to,wrongly,inmostconventionalhistoriessimplyastheIndustrialRevolution. Paleotechnic had its origins in the new centralized state and the industries closelyassociatedwithit(mostnotablyminingandarmaments),andcenteredon mining,iron,coal,andsteampower.Togivesomeindicationofthelociofthepa leotechnicinstitutionalcomplex,thesteamenginewasfirstintroducedforpump ingwateroutofmines,anditsneedforfuelinturnreinforcedthesignificanceof thecoalindustry1;thefirstappearanceoflargescalefactoryproductionwasinthe armaments industry.2 The paleotechnic culminated in the dark satanic mills of thenineteenthcenturyandthegiantcorporationsofthelatenineteenthandearly twentieth. ThesocalledIndustrialRevolution,inconventionalparlance,conflatestwo distinct phenomena: the development of mechanized processes for specific kinds of production (spinning and weaving, in particular), and the harnessing of the steam engine as a prime mover. The former was a direct outgrowth of the me chanical science of the eotechnic phase, and would have been fully compatible with production in the small shop if not for the practical issues raised by steam power. The imperative to concentrate machine production in large factories re sulted, not from the requirements of machine production as such, but from the needtoeconomizeonsteampower. Althoughthepaleotechnicincorporatedsomecontributionsfromtheeotech nic period, it was a fundamental departure in direction, and involved the aban donment of a rival path of development. Technology was developed in the inter estsofthenewroyalabsolutists,mercantilistindustryandthefactorysystemthat grewoutofit,andthenewcapitalistagriculturists(especiallytheWhigoligarchy of England); it incorporated only those eotechnic contributions that were com patiblewiththenewtyrannies,andabandonedtherest. Butitssuccessor,theneotechnic,iswhatconcernsushere.
B.THENEOTECHNICPHASE
Much of the centralization of paleotechnic industry resulted, in addition to the authoritarian institutional culture associated with its origins, from the need (whichwesawabove)toeconomizeonpower.
.... the steam engine tended toward monopoly and concentration.... Twentyfour hour operations, which characterized the mine and the blast fur nace,nowcameintootherindustrieswhichhadheretoforerespectedthelimita tions of day and night. Moved by a desire to earn every possible sum on their investments, the textile manufacturers lengthened the working day.... The steamenginewaspacemaker.Sincethesteamenginerequiresconstantcareon the part of the stoker and engineer, steam power was more efficient in large units than in small ones: instead of a score of small units, working when re quired, one large engine was kept in constant motion. Thus steam power fostered the tendency toward large industrial plants already present in the subdivisionofthemanufacturingprocess.Greatsize,forcedbythenatureofthe steamengine,becameinturnasymbolofefficiency.Theindustrialleadersnot only accepted concentration and magnitude as a fact of operation, conditioned bythe steamengine:they came to believe in it by itself,asamarkofprogress. Withthebigsteamengine,thebigfactory,thebigbonanzafarm,thebigblast furnace, efficiency was supposed to exist in direct ratio to size. Bigger was an
Ibid.,pp.159,161. Ibid.,p.90.
ciency was supposed to exist in direct ratio to size. Bigger was another way of sayingbetter. [Gigantism] was ... abetted by the difficulties of economic power produc tion with small steam engines: so the engineers tended to crowd as many pro ductiveunitsaspossibleonthesameshaft,orwithintherangeofsteampressure throughpipeslimitedenoughtoavoidexcessivecondensationlosses.Thedriv ingoftheindividualmachinesintheplantfromasingleshaftmadeitnecessary tospotthemachinesalongtheshafting,withoutcloseadjustmenttothetopog 1 raphicalneedsoftheworkitself....
Steam power meant that machinery had to be concentrated in one place, in ordertogetthemaximumuseoutofasingleprimemover.Thetypicalpaleotech nicfactory,throughtheearly20thcentury,hadmachineslinedupinlongrows,a forestofleatherbeltsonearisingfromeachmachine,loopingaroundalongmetal shaftrunningthelengthoftheshop,alldependentonthefactoryscentralpower plant.2 The neotechnic revolution of the late nineteenth century put an end to all theseimperatives. Ifthepaleotechnicwasacoalandironcomplex,inMumfordsterminology, theneotechicwasanelectricityandalloycomplex.3Thedefiningfeaturesofthe neotechnic were the decentralized production made possible by electricity, and thelightweightandephemeralization(toborrowatermfromBuckminsterFuller) madepossiblebythelightmetals. The beginning of the neotechnic period was associated, most importantly, with the invention of the prerequisites for electrical powerthe dynamo, the al ternator,thestoragecell,theelectricmotorandtheresultingpossibilityofscal ing electrically powered production machinery to the small shop, or even scaling powertoolstohouseholdproduction. Electricitymadepossibletheuseofvirtuallyanyformofenergy,indirectly,as a prime mover for production: combustibles of all kinds, sun, wind, water, even temperature differentials.4 As it became possible to run freestanding machines withsmallelectricmotors,thecentralrationaleforthefactorysystemdisappeared. Ingeneral,asPaulGoodmanwrote,thechangefromcoalandsteamtoelectric ity and oil has relaxed one of the greatest causes for concentration of machinery aroundasingledrivingshaft.5 The decentralizing potential of smallscale, electrically powered machinery was a common theme among many writers from the late 19th century on. That, andthemergingoftownandvillageitmadepossible,werethecentralthemesof Kropotkins Fields, Factories and Workshops. With electricity distributed in the housesforbringingintomotionsmallmotorsoffromonequartertotwelvehorse power, it was possible to produce in small workshops and even homes. Freeing machinery up from a single prime mover ended all limits on the location of ma chineproduction.Theprimarybasisforeconomyofscale,asitexistedinthenine teenth century, was the need to economize on horsepowera justification that
Ibid.,p.224. William Waddell and Norman Bodek, The Rebirth of American Industry: A Study of LeanManagement(Vancouver,WA:PCSPress,2005),pp.119121. 3 Mumford,TechnicsandCivilization,p.110. 4 Ibid.,pp.214,221. 5 PaulandPercivalGoodman,Communitas:MeansofLivelihoodandWaysofLife(New York:VintageBooks,1947,1960),p.156.
2
AWRONGTURN
vanishedwhenthedistributionofelectricalpowereliminatedrelianceonasingle sourceofpower.1 William Morris seems to have made some Kropotkinian technological as sumptionsinhisdepictionofafuturelibertariancommunistsocietyinNewsFrom Nowhere:
What building is that? said I, eagerly; for it was a pleasure to see some thingalittlelikewhatIwasusedto:itseemstobeafactory. Yes,hesaid,IthinkIknowwhatyoumean,andthatswhatitis;butwe dontcallthemfactoriesnow,butBandedworkshops;thatis,placeswherepeo plecollectwhowanttoworktogether. Isuppose,saidI,powerofsomesortisusedthere? No,no,saidhe.Whyshouldpeoplecollecttogethertousepower,when they can have it at the places where they live or hard by, any two or three of 2 them,oranyone,forthematterofthat?...
The introduction of electrical power, in short, put smallscale machine pro ductiononanequalfootingwithmachineproductioninthefactory.
Theintroductionoftheelectricmotorworkedatransformationwithinthe plantitself.Fortheelectricmotorcreatedflexibilityinthedesignofthefactory: not merely could individual units be placed where they were wanted, and not merely could they be designed for the particular work needed: but the direct drive,whichincreasedtheefficiencyofthemotor,alsomadeitpossibletoalter thelayoutoftheplantitselfasneeded.Theinstallationofmotorsremovedthe beltswhichcutofflightandloweredefficiency,andopenedthewayfortherear rangement of machines in functional units without regard for the shafts and aislesoftheoldfashionedfactory:eachunitcouldworkatitsownrateofspeed, andstartandstoptosuititsownneeds,withoutpowerlossesthroughtheopera tionoftheplantasawhole. ... [T]he efficiency of small units worked by electric motors utilizing cur rent either from local turbines or from a central power plant has given small scaleindustryanewleaseonlife:onapurelytechnicalbasisitcan,forthefirst timesincetheintroductionofthesteamengine,competeoneventermswiththe larger unit. Even domestic production has become possible again through the useofelectricity:forifthedomesticgraingrinderislessefficient,fromapurely mechanical standpoint, than the huge flour mills of Minneapolis, it permits a nicertimingofproductiontoneed,sothatitisnolongernecessarytoconsume bolted white flours because whole wheat flours deteriorate more quickly and spoiliftheyaregroundtoolongbeforetheyaresoldandused.Tobeefficient, thesmallplantneednotremainincontinuousoperationnorneeditproducegi ganticquantitiesoffoodstuffsandgoodsforadistantmarket:itcanrespondto localdemandandsupply;itcanoperateonanirregularbasis,sincetheoverhead forpermanentstaffandequipmentisproportionatelysmaller;itcantakeadvan tageofsmallerwastesoftimeandenergyintransportation,andbyfacetoface contact it can cut out the inevitable redtape of even efficient large organiza 3 tions.
Mumfords comments on flour milling also anticipated the significance of smallscale powered machinery in making possible what later became known as lean production; its central principle is that overall flow is more important to costcutting than maximizing the efficiency of any particular stage in isolation.
PeterKropotkin,Fields,FactoriesandWorkshops:orIndustryCombinedwithAgricul ture and Brain Work with Manual Work (New York: Greenwood Press, Publishers, 1968 [1898]),pp.154.,179180. 2 William Morris, News From Nowhere: or, An Epoch of Rest (1890). Marxists.Org on linetext<http://www.marxists.org/archive/morris/works/1890/nowhere/nowhere.htm>. 3 Mumford,TechnicsandCivilization,pp.224225.
10
Themodestincreasesinunitproductioncostateachseparatestageareoffsetnot only by greatly reduced transportation costs, but by avoiding the large eddies in overall production flow (buffer stocks of goodsinprocess, warehouses full of goodssoldtoinventorywithoutanyorders,etc.)thatresultwhenproductionis notgearedtodemand.1 Neotechnicmethods,whichcouldbereproducedanywhere,madepossiblea societywheretheadvantagesofmodernindustry[would]bespread,notbytrans portas in the nineteenth centurybut by local development. The spread of technical knowledge and standardized methods would make transportation far lessimportant.2 Mumfordalsodescribed,inquiteKropotkinianterms,themarriageoftown andcountry,ofindustryandagriculture,thatcouldresultfromtheapplicationof further refined eotechnic horticultural techniques and the decentralization of manufacturingintheneotechnicage.3 Mumfordsawtheneotechnicphaseasacontinuationoftheprinciplesofthe eotechnic, with industrial organization taking the form it would have done if al lowedtodevelopdirectlyfromtheeotechnicwithoutinterruption.
The neotechnic, in a sense, is a resumption of the lines of development of the original eotechnic revolution, following the paleotechnic interruption. The neotechnic differs from the paleotechnic phase almost as white differs from black.Butontheotherhand,itbearsthesamerelationtotheeotechnicphaseas theadultformdoestothebaby. ....Thefirsthastysketchesofthefifteenthcenturywerenowturnedinto working drawings: the first guesses were now reenforced with a technique of verification:thefirstcrudemachineswereatlastcarriedtoperfectionintheex quisite mechanical technology of the new age, which gave to motors and tur binespropertiesthathadbutacenturyearlierbelongedalmostexclusivelytothe 4 clock.
Or as Ralph Borsodi put it, [t]he steam engine put the waterwheel out of business.Butnowthegasolineengineandtheelectricmotorhavebeendeveloped toapointwheretheyareputtingthesteamengineoutofbusiness.
Themodernfactorycameinwithsteam.Steamisasourceofpowerthatalmost necessitatesfactoryproduction.Butelectricitydoesnot.Itwouldbepoeticjus ticeifelectricitydrawnfromthemyriadsoflongneglectedsmallstreamsofthe 5 countryshouldprovidethepowerforanindustrialcounterrevolution.
Mumfordsuggestedthat,absenttheabruptbreakcreatedbythenewcentral izedstatesandtheir statecapitalistclients,theeotechnicmight haveevolveddi rectlyintotheneotechnic.Hadnottheeotechnicbeenabortedbythepaleotech nic, a fullscale modern industrial revolution would still almost certainly have come about had not a ton of coal been dug in England, and had not a new iron minebeenopened.6
Inthecaseofflour,accordingtoBorsodi,thecostofcustommilledflourfromalocal millwasabouthalfthatofflourfromagiantmillinMinneapolis,andflourfromasmall electrichouseholdmillwascheaperstill.ProsperityandSecurity:AStudyinRealisticEco nomics(NewYorkandLondon:Harper&BrothersPublishers,1938),pp.178181. 2 Ibid.,pp.388389. 3 Mumford,TechnicsandCivilization,pp.258259. 4 Mumford,TechnicsandCivilization,p.212. 5 Ralph Borsodi, This Ugly Civilization (Philadelphia: Porcupine Press, 1929, 1975), p. 65. 6 Mumford,TechnicsandCivilization,p.118.
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Theamountofworkaccomplishedbywindandwaterpowercomparedquite favorably with that of the steampowered industrial revolution. Indeed, the great advances in textile output of the eighteenth century were made with water powered factories; steam power was adopted only later. The Fourneyron water turbine,perfectedin1832,wasthefirstprimemovertoexceedthepoor5%or10% efficienciesoftheearlysteamengine,andwasalogicaldevelopmentofearlierwa terpowertechnologythatwouldlikelyhavefollowedmuchearlierinduecourse, had not the development of waterpower been sidetracked by the paleotechnic revolution.1 Hadthespoonwheeloftheseventeenthcenturydevelopedmorerapidlyinto Fourneyronsefficientwaterturbine,watermighthaveremainedthebackboneof thepowersystemuntilelectricityhaddevelopedsufficientlytogiveitawiderarea ofuse.2 TheeotechnicphasesurvivedlongestinAmerica,accordingtoMumford.Had itsurvivedabitlonger,it mighthavepasseddirectlyintotheneotechnic.InThe CityinHistory,hementionedabortiveapplicationsofeotechnicmeanstodecen tralizedorganization,unfortunatelyforestalledbythepaleotechnicrevolution,and speculatedatgreaterlengthontheKropotkiniandirectionsocialevolutionmight havetakenhadtheeotechnicpasseddirectlyintotheneotechnic.Ofthesocieties ofseventeenthcenturyNewEnglandandNewNetherlands,hewrote:
Thiseotechnicculturewasincorporatedinamultitudeofsmalltownsand villages,connectedbyanetworkofcanalsanddirtroads,supplementedafterthe middle of the nineteenth century by short line railroads, not yet connected up into a few trunk systems meant only to augment the power of the big cities. With wind and water power for local production needs, this was a balanced economy; and had its balance been maintained, had balance indeed been con sciously sought, a new general pattern of urban development might have emerged.... In Technics and Civilization I pointed out how the earlier invention of moreefficientprimemovers,Fourneyronswaterturbineandtheturbinewind mill,couldperhapshaveprovidedthecoalmineandtheironminewithserious technical competitors that might have kept this decentralized regime long enoughinexistencetotakeadvantageofthediscoveryofelectricityandthepro duction of the light metals. With the coordinate development of science, this might have led directly into the more humane integration of Fields, Factories, andWorkshopsthatPeterKropotkinwastooutline,oncemore,intheeighteen 3 nineties.
Borsodi speculated, along lines similar to Mumfords, on the different direc tion things might have taken had the eotechnic phase been developed to its full potentialwithoutbeingabortedbythepaleotechnic:
It is impossible to form a sound conclusion as to the value to mankind of this institution which the Arkwrights, the Watts, and the Stephensons had brought into being if we confine ourselves to a comparison of the efficiency of thefactorysystemofproductionwiththeefficiencyoftheprocessesofproduc tionwhichprevailedbeforethefactoryappeared. Averydifferentcomparisonmustbemade. We must suppose that the inventive and scientific discoveries of the past two centuries had not been used to destroy the methods of production which prevailedbeforethefactory. Ibid.,p.118. Ibid.,p.143. 3 Lewis Mumford, The City in History: Its Transformations, and Its Prospects (New York:Harcourt,Brace,&World,Inc.,1961),pp.33334.
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Wemustsupposethatanamountofthoughtandingenuitypreciselyequal tothatusedindevelopingthefactoryhadbeendevotedtothedevelopmentof domestic,custom,andguildproduction. We must suppose that the primitive domestic spinning wheel had been gradually developed into more and more efficient domestic machines; that primitivelooms,churns,cheesepresses,candlemolds,andprimitiveproductive apparatus of all kinds had been perfected step by step without sacrifice of the characteristicdomesticitywhichtheypossessed. Inshort,wemustsupposethatscienceandinventionhaddevoteditselfto makingdomesticandhandicraftproductionefficientandeconomical,insteadof devoting itself almost exclusively to the development of factory machines and factoryproduction. The factorydominated civilization of today would never have developed. Factories would not have invaded those fields of manufacture where other methodsofproductioncouldbeutilized.Onlytheessentialfactorywouldhave been developed. Instead of great cities, lined with factories and tenements, we should have innumerable small towns filled with the homes and workshops of neighborhoodcraftsmen.Citieswouldbepolitical,commercial,educational,and entertainment centers.... Efficient domestic implements and machines devel oped by centuries of scientific improvement would have eliminated drudgery 1 fromthehomeandthefarm.
And,wemightadd,thehomeproductionmachineryitselfwouldhavebeenmanu factured, not in Sloanist massproduction factories, but mainly in small factories andshopsintegratingpowermachineryintocraftproduction.
C.AFUNNYTHINGHAPPENEDONTHEWAY TOTHENEOTECHNICREVOLUTION
The natural course of things, according to Borsodi, was that the process of shiftingproductionfromthehomeandneighborhoodtothedistantlylocatedfac torywouldhavepeakedwiththeperfectionofthereciprocatingsteamengine, andthenleveledoffuntiltheinventionoftheelectricmotorreversedtheprocess andenabledfamiliesandlocalproducerstoutilizethepoweredmachineryprevi ously restricted to the factory.2 But it didnt happen that way. Instead, electricity wasincorporatedintomanufacturinginanutterlyperverseway. MichaelPioreandCharlesSabeldescribedaforkintheroad,basedonwhich of two possible alternative ways were chosen for incorporating electrical power into manufacturing. The first, more in keeping with the unique potential of the new technology, was to integrate electrically powered machinery into smallscale craftproduction:acombinationofcraftskillandflexibleequipment,ormecha nizedcraftproduction.
Its foundation was the idea that machines and processes could augment the craftsmans skill, allowing the worker to embody his or her knowledge in ever morevariedproducts:themoreflexiblethemachine,themorewidelyapplicable theprocess,themoreitexpandedthecraftsmanscapacityforproductiveexpres sion.
The other was to adapt electrical machinery to the preexisting framework of paleotechnicindustrialorganizationinotherwords,whatwastobecometwenti ethcenturymassproductionindustry.Thislatteralternativeentailedbreakingthe production process down into its separate steps, and then substituting extremely
1 2
Borsodi,ThisUglyCivilization,pp.6061. Borsodi,ProsperityandSecurity,p.182.
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expensive and specialized machinery for human skill. The more specialized the machinethefasteritworkedandthelessspecializeditsoperatorneededtobe thegreateritscontributiontocuttingproductioncosts.1 Thefirstpath,unfortunately,wasforthemostparttheonenottaken;ithas beenfollowedonlyinisolatedenclaves,particularlyinassortedindustrialdistricts in Europe. The most famous current example is Italys EmiliaRomagna region, whichwewillexamineinalaterchapter. Thesecond,massproductionmodelbecamethedominantformofindustrial organization.Neotechnicadvanceslikeelectricallypoweredmachinery,whichof feredthepotentialfordecentralizedproductionandwereideallysuitedtoafun damentally different kind of society, have so far been integrated into the frame workofmassproductionindustry. Mumford argued that the neotechnic advances, rather than being used to theirfullpotentialasthebasisforanewkindofeconomy,wereinsteadincorpo ratedintoapaleotechnicframework.Neotechnichadnotdisplacedtheolderre gimewithspeedanddecisiveness,andhadnotyetdevelopeditsownformand organization.
Emerging from the paleotechnic order, the neotechnic institutions have neverthelessinmanycasescompromisedwithit,givenwaybeforeit,losttheir identitybyreasonoftheweightofvestedintereststhatcontinuedtosupportthe obsoleteinstrumentsandtheantisocialaimsofthemiddleindustrialera.Paleo technic ideals still largely dominate the industry and the politics of the Western World.... To the extent that neotechnic industry has failed to transform the coalandiron complex, to the extent that it has failed to secure an adequate foundationforitshumanertechnologyinthecommunityasawhole,totheex tentthatithaslentitsheightenedpowerstotheminer,thefinancier,themilita 2 rist,thepossibilitiesofdisruptionandchaoshaveincreased. True:theindustrialworldproducedduringthenineteenthcenturyiseither technologicallyobsoleteorsociallydead.Butunfortunately,itsmaggotycorpse has produced organisms which in turn may debilitate or possibly kill the new 3 orderthatshouldtakeitsplace:perhapsleaveitahopelesscripple. The new machines followed, not their own pattern, but the pattern laid 4 downbypreviouseconomicandtechnicalstructures. ThefactisthatinthegreatindustrialareasofWesternEuropeandAmerica ...,thepaleotechnicphaseisstillintactandallitsessentialcharacteristicsare uppermost, even though many of the machines it uses are neotechnic ones or havebeenmadeoverasintheelectrificationofrailroadsystemsbyneotech nicmethods.Inthispersistenceofpaleotechnics...wecontinuetoworshipthe 5 twindeities,MammonandMoloch.... We have merely used our new machines and energies to further processes which were begun under the auspices of capitalist and military enterprise: we have not yet utilized them to conquer these forms of enterprise and subdue 6 themtomorevitalandhumanepurposes.... Notalonehavetheolderformsoftechnicsservedtoconstrainthedevelop mentoftheneotechniceconomy:butthenewinventionsanddeviceshavebeen
Michael S. Piore and Charles F. Sabel, The Second Industrial Divide: Possibilities for Prosperity(NewYork:HarperCollins,1984),pp.46,19. 2 Mumford,TechnicsandCivilization,pp.21213. 3 Ibid.,p.215. 4 Ibid.,p.236. 5 Ibid.,p.264. 6 Ibid.,p.265.
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frequently used to maintain, renew, stabilize the structure of the old social or 1 der.... Thepresentpseudomorphis,sociallyandtechnically,thirdrate.Ithasonly afractionoftheefficiencythattheneotechniccivilizationasawholemaypos sess,provideditfinallyproducesitsowninstitutionalformsandcontrolsanddi rectionsandpatterns.Atpresent,insteadoffindingtheseforms,wehaveapplied ourskillandinventioninsuchamannerastogiveafreshleaseoflifetomanyof theobsoletecapitalistandmilitaristinstitutionsoftheolderperiod.Paleotech nic purposes with neotechnic means: that is the most obvious characteristic of 2 thepresentorder.
MumfordusedSpenglersideaoftheculturalpseudomorphtoillustratethe process:...ingeology...arockmayretainitsstructureaftercertainelements havebeenleachedoutofitandbeenreplacedbyanentirelydifferentkindofma terial. Since the apparent structure of the old rock remains, the new product is calledapseudomorph.
A similar metamorphosis is possible in culture: new forces, activities, institu tions, instead of crystallizing independently into their own appropriate forms, may creep into the structure of an existing civilization.... As a civilization, we havenotyetenteredtheneotechnicphase....[W]earestillliving,inMatthew 3 Arnoldswords,betweentwoworlds,onedead,theotherpowerlesstobeborn.
For Mumford, Soviet Russia was a mirror image of the capitalist West in shoehorning neotechnic technology into a paleotechnic institutional framework. Despite the neotechnic promise of Lenins electrification plus Soviet power, the SovietaestheticidealwasthatoftheWesternmassproductionfactory:thewor shipofsizeandcrudemechanicalpower,andtheintroductionofamilitaristtech niqueinbothgovernmentandindustry....4ThatLeninsvisionofcommunism entailedawholesaleborrowingofthemassproductionmodel,understateowner ship,issuggestedforhisinfatuationwithTaylorismandhissuppressionofworker selfmanagementinthefactories.TheStalinistfetishforgigantism,withitsboasts ofhavingthebiggestfactory,powerplant,etc.intheworld,followedasamatterof course. Howwereexistinginstitutionalinterestsabletothwarttherevolutionarypo tential of electrical power, and divert neotechnic technologies into paleotechnic channels?Theansweristhatthestatetippedthebalance. Thestateplayedacentralroleinthetriumphofmassproductionindustryin theUnitedStates. The states subsidies to longdistance transportation were first and most im portant.Thereneverwouldhavebeenlargemanufacturingfirmsproducingfora national market, had not the federal government first created a national market withthenationalrailroadnetwork.Ahighvolumenationaltransportationsystem wasanindispensableprerequisiteforbigbusiness. WequotedMumfordsobservationabove,thattheneotechnicrevolutionof feredtosubstituteindustrializationbylocaleconomicdevelopmentforrelianceon longdistance transport. State policies, however, tipped the balance in the other direction:theyartificiallyshiftedthecompetitiveadvantagetowardindustrialcon centrationandlongdistancedistribution.
1
Ibid.,p.266. Ibid.,p.267. 3 Ibid.,p.265. 4 Ibid.,p.264.

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Alfred Chandler, the chief apostle of the large massproduction corporation, himselfadmittedasmuch:alltheadvantagesheclaimedformassproductionpre supposed a highvolume, highspeed, highturnover distribution system on a na tionalscale,withoutregardtowhetherthecostsofthelatterexceededthealleged benefitsoftheformer.
...[M]odernbusinessenterpriseappearedforthefirsttimeinhistorywhen the volume of economic activities reached a level that made administrative co 1 ordinationmoreefficientandmoreprofitablethanmarketcoordination. ...[Theriseofadministrativecoordinationfirst]occurredinonlyafewsec tors or industries where technological innovation and market growth created 2 highspeedandhighvolumethroughput.
William Lazonick, a disciple of Chandler, described the process as obtaining a large market share in order to transform the high fixed costs into low unit costs....3 Therailroadandtelegraph,soessentialtohighvolumeproductionanddis tribution, were in Chandlers view what made possible this steady flow of goods throughthedistributionpipeline.4 The primacy of such statesubsidized infrastructure is indicated by the very structure of Chandlers book. He begins with the railroads and telegraph system, themselvesthefirstmodern,multiunitenterprises.5Andinsubsequentchapters, herecountsthesuccessiveevolutionofanationalwholesalenetworkpiggybacking onthecentralizedtransportationsystem,followedbyanationalretailsystem,and only then by largescale manufacturing for the national market. A national long distancetransportationsystemledtomassdistribution,whichinturnledtomass production.
The revolution in the processes of distribution and production rested in largepartonthenewtransportationandcommunicationsinfrastructure.Mod ern mass production and mass distribution depend on the speed, volume, and regularityinthemovementofgoodsandmessagesmadepossiblebythecoming 6 oftherailroad,telegraphandsteamship. Thecomingofmassdistributionandtheriseofthemodernmassmarketers represented an organizational revolution made possible by the new speed and 7 regularityoftransportationandcommunication. ...Thenewmethodsoftransportationandcommunication,bypermittinga largeandsteadyflowofrawmaterialsintoandfinishedproductsoutofafactory, madepossibleunprecedentedlevelsofproduction.Therealizationofthispoten 8 tialrequired,however,theinventionofnewmachineryandprocesses.
In other words, the socalled internal economies of scale in manufacturing couldcomeaboutonlywhentheoffsettingexternaldiseconomiesoflongdistance distribution were artificially nullified by corporate welfare. Such economies can only occur given an artificial set of circumstances which permit the reduced unit
Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business(CambridgeandLondon:TheBelknapPressofHarvardUniversityPress,1977),p. 8. 2 Ibid.,p.11. 3 WilliamLazonick,BusinessOrganizationandtheMythoftheMarketEconomy(Cam bridge,1991),pp.198226. 4 Chandler,TheVisibleHand,p.79. 5 Ibid.,pp.79,96121. 6 Ibid.,p.209. 7 Ibid.,p.235. 8 Ibid.,p.240.
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costs of expensive, productspecific machinery to be considered in isolation, be cause the indirect costs entailed are all externalized on society. And if the real costs of longdistance shipping, highpressure marketing, etc., do in fact exceed thesavingsfromfasterandmorespecializedmachinery,thentheefficiencyisa falseone. ItsanexampleofwhatIvanIllichcalledcounterproductivity:theadoption ofatechnologybeyondthepoint,notonlyofdiminishingreturns,butofnegative returns.Illichalsousedthetermsecondwatershedtodescribethesameconcept: e.g.,inthecaseofmedicine,thefirstwatershedincludedsuchbasicthingsaspub lic sanitation, the extermination of rats, water purification, and the adoption of antibiotics; the second watershed was the adoption of skill and capitalintensive methodstothepointthatiatrogenic(hospitalordoctorinduced)illnessexceeded the health benefits. In other areas, the introduction of motorized transportation, beyondacertainpoint,producesartificialdistancebetweenthingsandgenerates congestionfasterthanitcanberelieved.1 Where Illich went wrong was in seeing counterproductivity as inevitable, if adoption of technologies wasnt restrained by regulation. In fact, when all costs andbenefitsofatechnologyareinternalizedbytheadopter,adoptionbeyondthe point of counterproductivity will not occur. Adoption beyond the point of coun terproductivityisprofitableonlywhenthecostsareexternalizedonsocietyoron thetaxpayer,andthebenefitsareappropriatedbyaprivilegedclass. As Chandler himself admitted, the greater efficiency of national wholesale organizationslayintheirevenmoreeffectiveexploitationoftheexistingrailroad andtelegraphsystems.2Thatis,theyweremoreefficientparasites.Buttheeffi cienciesofaparasiteareusuallyofazerosumnature. Chandleralsoadmitted,perhapsinadvertently,thatthemoreefficientnew productionmethodswereadoptedalmostasanafterthought,giventheartificially largemarketareasandsubsidizeddistribution:
... the nature of the market was more important than the methods of produc tionindeterminingthesizeanddefiningtheactivitiesofthemodernindustrial 3 corporation.
And finally, Chandler admitted that the new massproduction industry was not more efficient at producing in response to autonomous market demand. He himself helpfully pointed out, as we shall see in the next chapter, that the first large industrialists only integrated massproduction with massdistribution be causetheywereforcedto:Theydidsobecauseexistingmarketerswereunableto sellanddistributeproductsinthevolumetheywereproduced.4 Despiteallthis,Chandlerastonishinglyminimizedtheroleofthestatein creatingthesystemhesoadmired:
TheriseofmodernbusinessenterpriseinAmericanindustrybetweenthe1880s and World War I was little affected by public policy, capital markets, or entre preneurial talents because it was part of a more fundamental economic devel opment.Modernbusinessenterprise...wastheorganizationalresponsetofun IvanIllich,TheThreeDimensionsofPublicOpinion,inTheMirrorofthePast:Lec turesandAddresses,19781990(NewYorkandLondon:MarionBoyars,1992),p.84;Tools for Conviviality (New York, Evanston, San Francisco, London: Harper & Row, 1973), pp. xxiixxiii, 12, 3, 67, 8485; Disabling Professions (New York and London: Marion Boyars, 1977),p.28. 2 Chandler,TheVisibleHand,p.215. 3 Ibid.,p.363. 4 Ibid.,p.287.
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damentalchangesinprocessesofproductionanddistributionmadepossibleby theavailabilityofnewsourcesofenergyandbytheincreasingapplicationofsci entificknowledgetoindustrialtechnology.Thecomingoftherailroadandtele graphandtheperfectionofnewhighvolumeprocesses...madepossibleahis 1 toricallyunprecedentedvolumeofproduction.
Thecomingoftherailroad?InChandlerslanguage,therailroadsseemtobe aninevitableforceofnatureratherthantheresultofdeliberateactionsbypolicy makers. We cant let Chandler get by without challenging his implicit assumption (shared by many technocratic liberals) that paleotechnic industry was more effi cient than the decentralized, smallscale production methods of Kropotkin and Borsodi.Thepossibilityneveroccurredtohimthatmassivestateintervention,at the same time as it enabled the revolutions in corporate size and capital intensiveness, might also have tipped the balance between alternative forms of productiontechnology. Thenationalrailroadsystemsimplyneverwouldhavecomeintoexistenceon suchascale,withacentralizednetworkoftrunklinesofsuchcapacity,hadnotthe staterammedtheprojectthrough. Piore and Sabel describe the enormous capital outlays, and the enormous transactioncoststobeovercome,increatinganationalrailroadsystem.Notonly the startup costs of actual physical capital, but those of securing rights of way, werehuge:
It is unlikely that railroads would have been built as quickly and extensively as theywerebutfortheavailabilityofmassivegovernmentsubsidies.
Othertransactioncostsovercomebygovernment,increatingtherailroadsystem, included the revision of tort and contract law (e.g., to exempt common carriers fromliabilityformanykindsofphysicaldamagecausedbytheiroperation).2 AccordingtoMatthewJosephson,fortenyearsormorebefore1861,therail roads,especiallyintheWest,werelandcompanieswhichacquiredtheirprincipal rawmaterialthroughpuregrantsinreturnfortheirpromisetobuild,andwhose directors ... did a rushing land business in farm lands and town sites at rising prices.Forexample,underthetermsofthePacificRailroadbill,theUnionPacific (which built from the Mississippi westward) was granted twelve million acres of land and $27 million worth of thirtyyear government bonds. The Central Pacific (builtfromtheWestCoasteastward)receivedninemillionacresand$24million worthofbonds.3 Thefederalrailroadlandgrants,accordingtoMurrayRothbard,includedfif teenmiletractsoflandoneithersideoftheactualrightofway.Astherailroads werecompleted,thislandskyrocketedinvalue.Andasnewtownswerebuiltalong the railroad routes, every house and business was built on land sold by the rail roads.Thetractsincludedvaluabletimberland,aswell.4 TheodoreJudah,chiefengineerforwhatbecametheCentralPacific,assured potentialinvestorsthatitcouldbedoneifgovernmentaidwereobtained.Forthe cost would be terrible. Collis Huntington, the leading promoter for the project, engaged in a sordid combination of strategically placed bribes and appeals to
Ibid.,p.376. PioreandSabel,pp.6667. 3 Matthew Josephson, The Robber Barons: The Great American Capitalists 18611901 (NewYork:Harcourt,Brace&World,Inc.,1934,1962),pp.7778. 4 MurrayN.Rothbard,PowerandMarket:GovernmentandtheEconomy(MenloPark, Calif.:InstituteforHumaneStudies,Inc.,1970),p.70.
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communities fears of being bypassed, in order to extort grants of rights of way, terminal and harbor sites, and ... stock or bond subscriptions ranging from $150,000to$1,000,000fromalongstringoflocalgovernmentsthatincludedSan Francisco,Stockton,andSacramento.1 Absentthelandgrantsandgovernmentpurchasesofrailroadbonds,therail roads would likely have developed instead along the initial lines described by Mumford: many local rail networks linking communities into local industrial economies. The regional and national interlinkages of local networks, when they didoccur,wouldhavebeenfarfewerandfarsmallerincapacity.Thecomparative costsoflocalandnationaldistribution,accordingly,wouldhavebeenquitediffer ent.Inanationofhundredsoflocalindustrialeconomies,withlongdistancerail transport much more costly than at present, the natural pattern of industrializa tionwouldhavebeentointegratesmallscalepowermachineryintoflexiblemanu facturingforlocalmarkets. Instead,thestateartificiallyaggregatedthedemandformanufacturedgoods intoasinglenationalmarket,andartificiallyloweredthecostsofdistributionfor those serving that market. In effect, it created an artificial ecosystem to which largescale,massproductionindustrywasbestadapted. The first organisms to adapt themselves to this artificial ecosystem, as re countedbyChandler,werethenationalwholesaleandretailnetworks,withtheir dependence on high turnover and dependability. Then, piggybacked on them, were the large manufacturers serving the national market. But they were only more efficient in terms of their more efficient exploitation of an artificial envi ronmentwhichitselfwascharacterizedbytheconcealmentandexternalizationof costs.Withalltheconcealedandexternalizedcostsfullysubsumedintotheprice of massproduced goods, rather than shifted onto society or the taxpayer, it is likelythattheoverallcostofgoodsproducedflexiblyongeneralpurposemachin eryforlocalmarketswouldhavebeenlessthanthatofmassproducedgoods. Besidesalmostsinglehandedlycreatingtheartificiallyunifiedandcheapna tional market without which national manufacturers could not have existed, the railroad companies also actively promoted the concentration of industry through theirratepolicies.PioreandSabelarguethattherailroadspolicyoffavoringtheir largest customers, through rebates, was a central factor in the rise of the large corporation.Onceinplace,therailroadsbeingahighfixedcostindustryhad
atremendousincentivetousetheircapacityinacontinuous,stableway.Thisin centivemeant,inturn,thattheyhadaninterestinstabilizingtheoutputoftheir principal customersan interest that extended to protecting their customers fromcompetitorswhowereservedbyotherrailroads.Itisthereforenotsurpris ing that the railroads promoted merger schemes that had this effect, nor that theyfavoredtheresultingcorporationsortrustswithrebates.
Indeed,seeninthislight,theriseoftheAmericancorporationcanbeinterpreted moreastheresultofcomplexalliancesamongGildedAgerobberbaronsthanasa first solution to the problem of market stabilization faced by a massproduction economy.2AccordingtoJosephson,
whilethetillersofthesoilfeltthemselvessubjecttoextortion,theysawalsothat certain interests among those who handled the grain or cattle they produced, theelevators,millersandstockyards,orthosefromwhomtheypurchasedtheir necessities, the refiners of oil, the great merchanthouses, were encouraged by therailroadstocombineagainsttheconsumer.InthehearingsbeforetheHep
Josephson,pp.8384. PioreandSabel,pp.6667.
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burnCommitteein1879itwasrevealedthattheNewYorkCentral,likerailways all over the country, had some 6,000 secret rebate agreements, such as it had 1 madewiththeSouthImprovementCompany.... ... [T]he secret tactics of the rebate gave certain producing groups (as in petroleum,beef,steel)thoseadvantageswhichpermittedthemtooutstripcom petitorsandsoontoconducttheirbusinessuponaslargeascaleastherailways 2 themselves. ...Upontherefinedoil[Rockefeller]shippedfromClevelandhereceiveda rebateof50centsabarrel,givinghimanadvantageof25percentoverhiscom 3 petitors. In the meantime the political representatives whom the disabused settlers sentforthtoWashingtonortothestatelegislaturesseemednotonlyhelplessto aid them, but were seen after a time riding about the country wherever they 4 listedbyvirtueoffreepassesgenerouslydistributedtothem. 5 Therailroadsalsocapturedthestatelegislaturesandrailroadcommissions.
Among certain Objectivists and vulgar libertarians of the Right, this is com monly transformed into a morality play in which men of innovative genius built largebusinessesthroughsheereffortandentrepreneurship,andthepowerofsu periorefficiency.TheseheroicJohnGaltsthenchargedratesbasedonthenewrail roadsbenefitstocustomers,andwereforcedintopoliticallobbyingonlyasamat terofselfdefenseagainstgovernmentextortion.Thisisalie. Whathappenedwasnothingtodowithafreemarket,unlessonebelongsto therightwingstrainoflibertarianismforwhichfreemarketequatestobenefi cialtobigbusiness.Itwas,rather,acaseofthegovernmentinterveningtocreate anindustryalmostfromscratch,andbythesameactputtingitinacommanding height from which it could extort monopoly profits from the public. The closest modern analogy is the drug companies, which use unlimited patent monopolies grantedbythestatetochargeextortionatepricesfordrugsdevelopedentirelyor almostentirelywithgovernmentresearchfunds.ButthentheRandroidsandvul garlibertariansarealsofondofBigPharma. Ofcourse,therailroadswereonlythefirstofmanycentralizinginfrastructure projects.Theprocesscontinuedthroughthetwentiethcentury,withthedevelop ment of the subsidized highway system and the civil aviation system. But unlike therailroads,whosechiefsignificancewastheirroleincreatingthenationalmar ket in the first place, civil aviation and the automobileindustrial complex were arguably most important as sinks for surplus capital and output. They will be treatedinthenextchapter,accordingly,asexamplesofaphenomenondescribed by Paul Baran and Paul Sweezy in Monopoly Capitalism: government creation of newindustriestoabsorbthesurplusresultingfromcorporatecapitalismschronic tendenciestowardoverinvestmentandoverproduction. Second, the American legal framework was transformed in the mid nineteenth century in ways that made a more hospitable environment for large corporationsoperatingonanationalscale.Amongthechangesweretheriseofa generalfederalcommerciallaw,generalincorporationlaws,andthestatusofthe corporationasapersonundertheFourteenthAmendment.Thefunctionalsignifi canceofthesechangesonanationalscalewasanalogoustothelatereffect,ona global scale, of the Bretton Woods agencies and the GATT process: a centralized
1
Josephson,pp.250251. Ibid.,p.253. 3 Ibid.,p.265. 4 Ibid.,p.251. 5 Ibid.,p.252.

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legalorderwascreated,prerequisitefortheirstablefunctioning,coextensivewith themarketareasoflargecorporations. Thefederalizationofthelegalregimeisassociated,inparticular,withtherec ognitionofageneralbodyoffederalcommerciallawinSwiftv.Tyson(1842),and withtheapplicationoftheFourteenthAmendmenttocorporatepersonsinSanta ClaraCountyv.SouthernPacificRailroadCompany(1886). TheSantaClaradecisionwasfollowedbyaneraoffederaljudicialactivism,in which state laws were overturned on the basis of substantive due process. The roleofthefederalcourtsinthenationaleconomywassimilartotheglobalroleof thecontemporaryWorldTradeOrganization,withhighertribunalsempoweredto overridethelawsoflocaljurisdictionswhichwereinjurioustocorporateinterests. Inthefederalcourts,thedueprocessandequalprotectionrightsofcorpo rationsasjuristicpersonshavebeenmadethebasisofprotectionsagainstlegal action aimed at protecting the older common law rights of flesh and blood per sons. For example local ordinances to protect groundwater and local populations againsttoxicpollutionandcontagionfromhogfarms,toprotectpropertyowners fromunderminingandlandsubsidancecausedbycoalextractionsurelyindistin guishableinpracticefromthetortliabilityprovisionsofanyjustmarketanarchys libertarianlawcodehavebeenoverturnedasviolationsoftheequalprotection rightsofhogfactoryfarmsandminingcompanies. Still another component of the corporate legal revolution was the increased ease, under general incorporation laws, of forming limited liability corporations with permanent entity status apart (severally or collectively) from the sharehold ers. Arguably, as Robert Hessen and others have made a case, corporate entity status and limited liability against creditors could be achieved entirely through privatecontract.Whetherornotthatisso,thegovernmenthastiltedtheplaying field decisively toward the corporate form by providing a readymade and auto matic procedure for incorporation. In so doing, it has made the corporation the standard or default form of organization, reduced the transaction costs of estab lishing it relative to what would prevail were it negotiated entirely from scratch, and thereby reduced the bargaining power of other parties in negotiating the termsonwhichitoperates. Third,notonlydidthegovernmentindirectlypromotetheconcentrationand cartelizationofindustrythroughtherailroadsithadcreated,butitdidsodirectly throughpatentlaw.Asweshallseeinthenextchapter,massproductionrequires large business organizations capable of exercising sufficient power over their ex ternal environment to guarantee the consumption of their output. Patents pro moted the stable control of markets by oligopoly firms through the control, ex changeandpoolingofpatents. According to David Noble, two essentially new sciencebased industries (those that grew out of the soil of scientific rather than traditional craft knowl edge)emergedinthelate19thcentury:theelectricalandchemicalindustries.1 Intheelectricalindustry,GeneralElectrichaditsoriginsfirstinamergerbe tweenEdisonElectric(whichcontrolledallofEdisonselectricalpatents)andthe Sprague Electric Railway and Motor Company, and then in an 1892 merger be tween Edison General Electric and ThomasHoustonboth of them motivated primarilybypatentconsiderations.Inthelattercase,inparticular,EdisonGeneral ElectricandThomasHoustoneachneededpatentsownedbytheothersandcould
David F. Noble, America by Design: Science, Technology, and the Rise of Corporate Capitalism(NewYork:AlfredA.Knopf,1977),p.5.
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not develop lighting, railway or power equipment without fear of infringement suits and injunctions.1 From the 1890s on, the electrical industry was dominated bytwolargefirms:GEandWestinghouse,bothofwhichowedtheirmarketshares largelytopatentcontrol.Inadditiontothepatentswhichtheyoriginallyowned, theyacquiredcontroloverpatents(andhenceovermuchoftheelectricalmanu facturingmarket)throughacquisitionofthepatentrightsofindividualinventors, acquisitionofcompetingfirms,mergerswithcompetitors,andthesystematicand strategic development of their own patentable inventions. As GE and Westing housetogethersecuredadeadlockontheelectricalindustrythroughpatentacqui sition,competitionbetweenthembecameincreasinglyintenseanddisruptive.By 1896 the litigation cost from some three hundred pending patent suits was enor mous,andthetwocompaniesagreedtoformajointBoardofPatentControl.Gen eral Electric and Westinghouse pooled their patents, with GE handling 62.5% of thecombinedbusiness.2 Thestructureofthetelephoneindustryhadsimilarorigins,withtheBellPat entAssociationformingthenucleusofthefirstBellindustrialorganization(and eventually of AT&T) The National Bell Telephone Company, from the 1880s on, foughtvigorouslytooccupythefield(inthewordsofgeneralmanagerTheodore N. Vail) through patent control. As Vail described the process, the company sur roundeditself
with everything that would protect the business, that is the knowledge of the business,alltheauxiliaryapparatus;athousandandonelittlepatentsandinven tionswithwhichtodothebusinesswhichwasnecessary,thatiswhatwewanted tocontrolandgetpossessionof. To achieve this, the company early on established an engineering depart ment whose business it was to study the patents, study the development and studythesedevicesthateitherwereoriginatedbyourownpeopleorcameinto usfromtheoutside.Thenearlyin1879westartedourpatentdepartment,whose businesswasentirelytostudythequestionofpatentsthatcameoutwithaview to acquiring them, because ... we recognized that if we did not control these 3 devices,somebodyelsewould.
Thisapproachstrengthenedthecompanyspositionofcontroloverthemar ketnotonlyduringtheseventeenyearperiodofthemainpatents,but(asFreder ickFishputitinanaddresstotheAmericanInstituteofElectricalEngineers)dur ingthesubsequentseventeenyearsof

eachandeveryoneofthepatentstakenoutonsubsidiarymethodsanddevices inventedduringtheprogressofcommercialdevelopment.[Therefore]oneofthe first steps taken was to organize a corps of inventive engineers to perfect and improvethetelephonesysteminalldirections...thatbysecuringaccessoryin ventions, possession of the field might be retained as far as possible and for as 4 longatimeaspossible.
This method, preemptive occupation of the market through strategic patent acquisitionandcontrol,wasalsousedbyGEandWestinghouse. Even with the intensified competition resulting from the expiration of the original Bell patents in 1894, and before government favoritism in the grants of rightsofway and regulated monopoly status, the legacy effect of AT&Ts control ofthesecondarypatentswassufficienttosecureithalfthetelephonemarketthir
1
Ibid.,p.9. Ibid.,pp.910. 3 Ibid.,pp.1112. 4 Ibid.,p.12.

2
22
teenyearslater,in1907.1AT&T,anticipatingtheexpirationofitsoriginalpatents, had(toquoteVailagain)surroundedthebusinesswithalltheauxiliaryprotection that was possible. For example, the company in 1900 purchased Michael Pupins patentonloadingcoilsandin1907acquiredexclusivedomesticrightsforCooper Hewitts patents on the mercuryarc repeateressential technologies underlying AT&Tsmonopolyonlongdistancetelephony.2 BythetimetheFCCwasformedin1935,theBellSystemhadacquiredpatents tosomeofthemostimportantinventionsintelephonyandradio,andthrough variousradiopatentpoolagreementsinthe1920s...hadeffectivelyconsolidated itspositionrelativetotheothergiantsintheindustry.Insodoing,accordingto anFCCinvestigation,AT&Thadgainedcontroloftheexploitationofpotentially competitive and emerging forms of communication and preempt[ed] for itself newfrontiersoftechnologyforexploitationinthefuture....3 The radiopatent pools included AT&T, GE and Westinghouse, RCA (itself formed as a subsidiary of GE after the latter acquired American Marconi), and AmericanMarconi.4AlfredChandlershistoryoftheoriginsoftheconsumerelec tronics industry is little more than an extended account of which patents were held,andsubsequentlyacquired,bywhichcompanies.5Thisshouldgiveussome indication,bytheway,ofwhathemeantbyorganizationalcapability,atermof his that will come under more scrutiny in the next chapter. In an age where the requiredcapitaloutlaysforactualphysicalplantandequipmentarerapidlydimin ishinginmanyformsofmanufacturing,oneofthechieffunctionsofintellectual propertyistocreateartificialcomparativeadvantagebygivingaparticularfirm amonopolyontechnologiesandtechniques,andpreventtheirdiffusionthrough outthemarket. The American chemical industry, in its modern form, was made possible by the Justice Departments seizure of German chemical patents in WWI. Until the war, some 98% of patent applications in chemical industry came from German firms,andwereneverworkedintheU.S.AsaresulttheAmericanchemicalindus trywastechnicallysecondrate,largelylimitedtofinalprocessingofintermediate goods imported from Germany. Attorney General A. Mitchell Palmer, as Alien PropertyCustodianduringthewar,heldthepatentsintrustandlicensed735of themtoAmericanfirms;DuPontalonereceivedthreehundred.6 Moregenerally,patentsareaneffectivetoolforcartelizingmarketsinindus tryatlarge.Theywereusedintheautomobileandsteelindustriesamongothers, accordingtoNoble.7Ina1906article,mechanicalengineerandpatentlawyerEd winPrindledescribedpatentsasthebestandmosteffectivemeansofcontrolling competition.
Patentsaretheonlylegalformofabsolutemonopoly.Inarecentcourtdeci sionthecourtsaid,withinhisdomain,thepatenteeisczar....criesofrestraint oftradeandimpairmentofthefreedomofsalesareunavailing,becauseforthe promotion of the useful arts the constitution and statutes authorize this very monopoly. Ibid.,p.12. Ibid.,p.91. 3 Ibid.,p.92. 4 Ibid.,pp.9394. 5 Alfred Chandler, Jr., Inventing the Electronic Century (New York: The Free Press, 2001). 6 Noble,AmericabyDesign,p.16. 7 Ibid.,p.91.
2
AWRONGTURN
23
Thepowerwhichapatenteehastodictatetheconditionsunderwhichhis monopolymaybeexercisedhasbeenusedtoformtradeagreementsthroughout practically entire industries, and if the purpose of the combination is primarily tosecurebenefitfromthepatentmonopoly,thecombinationislegitimate.Un dersuchcombinationstherecanbeeffectiveagreementsastopricestobemain tained...;theoutputforeachmemberofthecombinationcanbespecifiedand enforced...andmanyotherbenefitswhichweresoughttobesecuredbytrade combinations made by simple agreements can be added. Such trade combina tions under patents are the only valid and enforceable trade combinations that 1 canbemadeintheUnitedStates.
And unlike purely private cartels, which tend toward defection and instability, patentcontrolcartelsbeingbasedonastategrantedprivilegecarryacredible andeffectivepunishmentfordefection. Through ttangible propertyheir Napoleonic concept of industrial warfare, withinventionsandpatentsasthesoldiersoffortune,andthroughtheresearch armofthepatentoffensive,manufacturingcorporationswereabletosecuresta blecontrolofmarketsintheirrespectiveindustries.2 Theseweretheconditionspresentattheoutsetofthemassproductionrevo lution, in which the development of the corporate industrial economy began. In theabsenceofthesenecessarypreconditions,theresimplywouldnothavebeena singlenationalmarketorlargeindustrialcorporationsservingit.Ratherthanbe ingadoptedintotheframeworkofthepaleotechnicfactorysystem,theintroduc tionofelectricalmachinerywouldlikelyhavefolloweditsnaturalcourseandlived uptoitsuniquepotential:poweredmachinerywouldhavebeenincorporatedinto smallscale production for local markets, and the national economy would have developedasahundredEmiliaRomagnas. Butthesewereonlythenecessaryconditionsattheoutset.Asweshallseein the next chapter, the growth of big government continued to parallel that of big business,introducingnewerandlargerscaleformsofpoliticalinterventiontoad dress the corporate economys increasing tendencies toward destabilization, and toinsulatethegiantcorporationfromthemarketforcesthatwouldotherwisehave destroyedit.
Ibid.,p.89. Ibid.,p.95.
Moloch:TheSloanistMass ProductionModel
INTRODUCTION
he massproduction model carried some strong imperatives: first, it required largebatch production, running the enormously expensive productspecific machineryatfullcapacity,tominimizeunitcosts(inAmoryLovinswords,ever fasteroncethroughflowofmaterialsfromdepletiontopollution1);andsecond,it requiredsocialcontrolandpredictabilitytoensurethattheoutputwouldbecon sumed,lestgrowinginventoriesandgluttedmarketscausethewheelsofindustry tostopturning.Utilizecapacity,utilizecapacity,thatisMosesandtheprophets. HeresLewisMumfordontheprinciple:
Asmechanicalmethodshavebecomemoreproductive,thenotionhasgrownup thatconsumptionshouldbecomemorevoracious.Inbackofthisliesananxiety lesttheproductivityofthemachinecreateaglutinthemarket....
Thisthreatisovercomebythedevicesofcompetitivewaste,ofshoddyworkman ship,andoffashion...2 AsdescribedbyMichaelPioreandCharlesSabel,theproblemwasthatprod uctspecific resources could not be reallocated when the market shifted; under suchconditions,thecostofmarketunpredictabilitywasunacceptablyhigh.Mar kets for the output of massproduction industry had to be guaranteed because highlyspecializedmachinerycouldnotbereallocatedtootheruseswithchanges indemand.Apieceofmodernmachinerydedicatedtotheproductionofasingle part cannot be turned to another use, no matter how low the price of that part falls,orhowhighthepriceofothergoodsrises.3
Mass production required large investments in highly specialized equip mentandnarrowlytrainedworkers.Inthelanguageofmanufacturing,thesere sources were dedicated: suited to the manufacture of a particular product often, in fact, to just one make or model. When the market for that particular productdeclined,theresourceshadnoplacetogo.Massproductionwasthere foreprofitableonlywithmarketsthatwerelargeenoughtoabsorbanenormous output of a single, standardized commodity, and stable enough to keep the re PaulHawken,AmoryLovins,andL.HunterLovins,NaturalCapitalism:Creatingthe NextIndustrialRevolution(Boston,NewYork,London:Little,Brown,andCompany,1999), p.81 2 Lewis Mumford, Technics and Civilization (New York: Harcourt, Brace, and Com pany,1934),pp.396397. 3 Michael J. Piore and Charles F. Sabel, The Second Industrial Divide: Possibilities for Prosperity(NewYork:HarperCollins,1984),p.50.
26
sources involved in the production of that commodity continuously employed. 1 Marketsofthiskind...didnotoccurnaturally.Theyhadtobecreated. .... It became necessary for firms to organize the market so as to avoid fluctuationsindemandandcreateastableatmosphereforprofitable,longterm 2 investment. ... [There were] two consequences of the Americans discovery that the profitabilityofinvestmentinmassproductionequipmentdependsonthestabi lizationofmarkets.Thefirst of these consequenceswas the construction, from the 1870s to the 1920s, of giant corporations, which could balance demand and supply within their industries. The second consequence was the creation, two decadeslater,ofaKeynesiansystemformatchingproductionandconsumption 3 inthenationaleconomyasawhole.
Ralph Borsodi argued that [w]ith serial production, ... man has ventured intoatopsyturvyworldinwhich
goodsthatwearoutrapidlyorthatgooutofstylebeforetheyhaveachanceto bewornoutseemmoredesirablethangoodswhicharedurableandendurable. Goodsnowhavetobeconsumedquicklyordiscardedquicklysothatthebuying ofgoodstotaketheirplacewillkeepthefactorybusy. Bytheoldsystemproductionwasmerelythemeanstoanend. 4 Bythenewsystemproductionitselfhasbecometheend. Withcontinuousoperationof[thefactorys]machinery,muchlargerquan titiesofitsproductsmustbesoldtothepublic.Thepublicbuysnormallyonlyas fast as it consumes the product. The factory is therefore confronted by a di lemma;ifitmakesthingswell,itsproductswillbeconsumedbutslowly,whileif itmakesthempoorly,itsproductswillbeconsumedrapidly. Itnaturallymakesitsproductsaspoorlyasitdares. 5 Itencouragesprematuredepreciation.
(Inafreemarket,ofcourse,firmsthatmadestuffwellwouldhaveacompeti tiveadvantage.Butinourunfreemarket,thestatessubsidiestoinefficiencycost, intellectual property laws, and other restraints on competition insulate firms fromthefullcompetitivedisadvantageofofferinginferiorproducts.) Becauseoftheimperativeforovercapitalizedindustrytooperateatfullcapac ity,onroundtheclockshifts,inordertospreadthecostofitsexpensivemachin eryoverthegreatestpossiblenumberofunitsofoutput,theimperativeofguaran teeing consumption of the output was equally great. As Benjamin Barber puts it, capitalismmanufacturesneedsforthegoodsitsproducingratherthanproducing goodsinresponsetoneeds.6 ThisisnotjustacaricaturebytheenemiesofSloanistmassproduction.Ithas beenaconstantthemeofthemodelsmostenthusiasticadvocatesanddefenders. They disagree with economic decentralists, not on the systemic requirements of themassproductionmodel,butonlyonwhetherornotithasonthewholebeena goodthing,andwhetherthereisanyviablealternative. In The New Industrial State, Galbraith wrote about the connection between capital intensiveness and the technostructures need for predictability and con trol:
Ibid.,p.49. Ibid.,p.54. 3 Ibid.,p.15. 4 RalphBorsodi,ThisUglyCivilization(Philadelphia:PorcupinePress,1929,1975),pp. 6465. 5 Ibid.,p.126. 6 Manufacture Goods, Not Needs, E. F. Schumacher Society Blog, October 11, 2009 <http://efssociety.blogspot.com/2009/10/manufacturegoodsnotneeds_11.html>.
2
MOLOCH:THESLOANISTMASSPRODUCTIONMODEL
27
... [Machines and sophisticated technology] require ... heavy investment ofcapital.Theyaredesignedandguidedbytechnicallysophisticatedmen.They involve,also,agreatlyincreasedlapseoftimebetweenanydecisiontoproduce andtheemergenceofasalableproduct. Fromthesechangescometheneedandtheopportunityforthelargeorga nization.Italonecandeploytherequisitecapital;italonecanmobilizethereq uisite skills.... The large commitment of capital and organization well in ad vanceofresultrequiresthattherebeforesightandalsothatallfeasiblestepsbe 1 takentoinsurethatwhatisforeseenwilltranspire. ... From the time and capital that must be committed, the inflexibility of this commitment, the needs of large organization and the problems of market performanceunderconditionsofadvancedtechnology,comesthenecessityfor 2 planning. The need for planning ... arises from the long period of time that elapses duringtheproductionprocess,thehighinvestmentthatisinvolvedandthein 3 flexiblecommitmentofthatinvestmenttotheparticulartask. Planning exists because [the market] process has ceased to be reliable. Technology, with its companion commitment of time and capital, means that theneedsoftheconsumermustbeanticipatedbymonthsoryears....[I]nad ditiontodecidingwhattheconsumerwillwantandwillpay,thefirmmustmake everyfeasiblesteptoseethatwhatitdecidestoproduceiswantedbythecon sumerataremunerativeprice....Itmustexercisecontroloverwhatissold.... 4 Itmustreplacethemarketwithplanning. ... The need to control consumer behavior is a requirement of planning. Planning, in turn, is made necessary by extensive use of advanced technology andcapitalandbytherelativescaleandcomplexityoforganization.Thesepro ducegoodsefficiently;theresultisaverylargevolumeofproduction.Asafur therconsequence,goodsthatarerelatedonlytoelementaryphysicalsensation that merely prevent hunger, protect against cold, provide shelter, suppress painhave come to comprise a small and diminishing part of all production. Mostgoodsserveneedsthatarediscoveredtotheindividualnotbythepalpable discomfortthataccompaniesdeprivation,butbysomepsychicresponsetotheir 5 possession....
ForGalbraith,theacceptedsequenceofconsumersovereignty(whatMises called dollar democracy), in which consumer demand determines what is pro duced, was replaced by a revised sequence in which oligopoly corporations de terminewhatisproducedandthendisposeofitbymanagingconsumerbehavior. In contemporary terms, the demandpull economy is replaced by a supplypush model. Alfred Chandler, like Galbraith, was thoroughly sold on the greater efficien cies of the large corporation. He argued that the modern multiunit enterprise arosewhenadministrativecoordinationpermittedgreaterefficiencies.6
Bylinkingtheadministrationofproducingunitswithbuyinganddistribut ingunits,costsforinformationonmarketsandsourcesofsupplywerereduced. Of much greater significance, the internalization of many units permitted the flowofgoodsfromoneunittoanothertobeadministrativelycoordinated.More
16
JohnKennethGalbraith,TheNewIndustrialState(NewYork:SignetBooks,1967),p.
Ibid.,p.28. Ibid.,p.31. 4 Ibid.,pp.3435. 5 Ibid.,pp.210212. 6 Alfred D.Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business(CambridgeandLondon:TheBelknapPressofHarvardUniversityPress,1977),p. 6.
3
28
effectiveschedulingofflowsachievedamoreintensiveuseoffacilitiesandper sonnel employed in the processes of production and so increased productivity 1 andreducedcosts. Organizationally,outputwasexpandedthroughimproveddesignofmanu facturing or processing plants and by innovations in managerial practices and proceduresrequiredtosynchronizeflawsandsupervisetheworkforce.Increases in productivity also depend on the skills and abilities of the managers and the workersandthecontinuingimprovementoftheirskillsovertime.Eachofthese factorsoranycombinationofthemhelpedtoincreasethespeedandvolumeof the flow, or what some processors call the throughput, of materials within a 2 singleplantorworks.... Integrationofmassproductionwithmassdistributionaffordedanopportu nityformanufacturerstolowercostsandincreaseproductivitythroughmoreef fectiveadministrationoftheprocessesofproductionanddistributionandcoor dination of the flow of goods through them. Yet the first industrialists to inte grate the two basic sets of processes did not do so to exploit such economies. Theydidsobecauseexistingmarketerswereunabletosellanddistributeprod 3 uctsinthevolumetheywereproduced.
Themassproductionfactoryachievedeconomiesofspeedfromgreatlyin creasing the daily use of equipment and personnel.4 (Of course, Chandler starts byassumingthegreaterinherentefficiencyofcapitalintensivemodesofproduc tion,whichthenrequireeconomiesofspeedtoreduceunitcostsfromtheexpen sivecapitalassets). What Chandler meant by economies of speed was entirely different from lean productions understanding of flow. Chandlers meaning is suggested by his celebration of the new corporate managers who developed techniques to pur chase,store,andmovehugestocksofrawandsemifinishedmaterials.Inorderto maintain a more certain flow of goods, they often operated fleets of railroad cars andtransportationequipment.5Inotherwords,boththestandardSloanistmodel of enormous buffer stocks of unfinished goods, and warehouses full of finished goodsawaitingordersandthefauxleanmodelinwhichinventoryissweptun dertherugandmovedintowarehousesonwheelsandincontainerships. (Thereadermaybepuzzledorevenannoyedbymyconstantuseoftheterm Sloanism.IgotitfromtheinsightfulcommentaryofEricHusmanatGrimReader blog, in which he treats the production and accounting methods of General Mo torsasparadigmaticof20thcenturyAmericanmassproductionindustry,andcon traststhemwiththeleanmethodspopularlyidentifiedwithTaichiOhnosToyota productionsystem.) Sloanismrefers,inparticular,tothemanagementaccountingsystemidenti fiedwithGeneralMotors.ItwasfirstdevelopedbyBrownatDuPont,andbrought toGMwhenDuPontacquiredacontrollingshareofthecompanyandputAlfred Sloan in charge. Browns management accounting system, whose perverse incen tivesaredissectedindetailbyWilliamWaddellandNormanBodekinRebirthof American Industry, became the prevailing standard throughout American corpo ratemanagement. In Sloanist management accounting, inventory is counted as an asset with thesameliquidityascash.Regardlessofwhetheracurrentoutputisneededtofill an order, the producing department sends it to inventory and is credited for it.
1
Ibid.,pp.67. Ibid.,p.241. 3 Ibid.,p.287. 4 Ibid.,p.244. 5 Ibid.,p.412.

2
29
Underthepracticeofoverheadabsorption,allproductioncostsarefullyincorpo ratedintothepriceofgoodssoldtoinventory,atwhichpointtheycountasan assetonthebalancesheet.

Withinventorydeclaredtobeanassetwiththesameliquidityascash,itdid not really matter whether the next cost center, department, plant, or division actuallyneededtheoutputrightawayinordertoconsummateoneofthesepa per sales. The producing department put the output into inventory and took 1 credit. ...Expensesgodown...,whileinventorygoesup,simplybymovingaskid fullofmaterialafewoperationsdownthestream.Infact,expensescangodown and ROI can improve even when the plant pays an overtime premium to work onmaterialthatisnotneeded;oriftheplantusesdefectivematerialinproduc 2 tionandalargepercentageoftheoutputfromproductionmustbescrapped.
Inotherwords,bytheSloanistaccountingprinciplespredominantinAmeri canindustry,the expenditure of moneyoninputsisbydefinitionthecreation of value.AsWaddelldescribeditathisblog,

companiescanmakeabunchofstuff,assignhugebucketsoffixedoverheadtoit and move those overheads over to the balance sheet, making themselves look moreprofitable.
Inotherwords,theyacceptcostasafaitaccompli....PaulGoodmansidea ofthecultureofcostplus(aboutwhichmorebelow)sumsitupperfectly.Andas Waddellpointsout,theGDPasametricdependsonthesameassumptionsasthe managementaccountingsystemusedbyAmericanindustry:itcountsexpenditure oninputs,bydefinition,asthecreationofwealth.3 Americanfactoriesfrequentlyhavewarehousesfilledwithmillionsofdollars worthofobsoleteinventory,whichisstilltheretoavoidhavingtoreduceprofits thisquarterbywritingitoff.Whenthecorporationfinallydoeshavetoadjustto reality,theresultiscostlywritedownsofinventory.

Itdidnottakemuchofamathematiciantofigureoutthat,ifallyoureally care about is the cost of performing one operation to a part, and you were al lowedtomakemoneybydoingthatsingleoperationascheaplyaspossibleand thencallingthepartiallycompleteproductanasset,itwouldbecheapertomake themabunchatatime. Itstoodtoreasonthatspreadingsetupcostsovermanypartswascheaper thanhavingtosetupforjustafewevenifitmeantmakingmorepartsthanyou neededforalongtime.Italsomadesense,ifyoucouldmakeenoughpartsallat once,tojustmakethemcheaply,andthensortoutthebadoneslater. Across the board, batches became the norm because the direct cost of batcheswascheapandtheycouldbeimmediatelyturnedintomoneyatleast asfarasMr.DuPontwasconcernedbyclassifyingthemasworkinprocessin 4 ventory.
William H. Waddell and Norman Bodek, Rebirth of American Industry: A Study of LeanManagement(Vancouver,WA:PCSPress,2005),p.75. 2 Ibid.,p.140. 3 William Waddell, The Irrelevance of the Economists, Evolving Excellence, May 6, 2009 <http://www.evolvingexcellence.com/blog/2009/05/theirrelevanceoftheeconomists. html>.PaulT.KiddanticipatedmuchofWaddellsandBodekscriticisminAgileManufac turing:ForgingNewFrontiers(Wokingham,England;Reading,Mass.;MenloPark,Calif.;New York; Don Mills, Ontario; Amsterdam; Bonn; Sydney; Singapore; Tokyo; Madrid; San Juan; Paris; Mexico City; Seoul; Taipei: AddisonWesley Publishing Company, 1994), especially ChapterFour. 4 WaddellandBodek,p.98.
30
Andtheeffectoftheseinventoriesoncostisenormous.Inthegarmentindus try,makingtoforecastratherthantoorder,andmaintaininglargeenoughinven torytoavoididlemachines,isestimatedtoaccountforsome25%ofretailprice.1 That means your clothes cost about a third more because of the efficiencies of Sloanistmassproduction. UndertheSloansystem,ifamachinecanberunatacertainspeed,itmustbe runatthatspeedtomaximizeefficiency.Andtheonlywaytoincreaseefficiencyis toincreasethespeedatwhichindividualmachinescanberun.2TheSloansystem focuses, exclusively, on labor savings perceived to be attainable only through fastermachines.Nevermindthatfastermachinesbuildinventoryfaster,aswell.3 The incredible bureaucratic inefficiencies resulting from these inventories is suggestedbyGMsbrilliantinnovationofMRPsoftwareinthe1960sacentral planning system that surely would have made the folks at Gosplan green with envy. Of course, as Toyota Production System father Taichi Ohno pointed out, MRPwouldbeuselesstoacompanyoperatingonzeroleadtimeandlotsizesof one.4ThepointofMRPisthatitallowseachcostcentertooperateatitsindivid ualoptimumwithoutregardtotheperformanceoftheothercostcenters.
If the machining department is having a good week, that supervisor can claimcreditforhisproductionperhapsevenexceedingtheschedule. Itdoesnotaffecthimatallthatthenextdepartmentupstreamassembly, for exampleis having major problems and will not come close to making schedule.... ...[MRPs]coreisthelogicandasetofalgorithmstoeanbleeachcompo nentofaproducttobeproducedatdifferentvolumesandspeeds;and,infact, thesamecomponentsofaproductgoingthroughdifferentoperationstobepro duced at different volumes and speeds, in order to optimum efficiency at each operation.Itisbasedontheassumptionthatmanufacturingisbestperformedin suchadisjointedmanner,anditassuresadequateinventorytobufferallofthis 5 unbalancedproduction.
Theleanapproachhasitsowneconomiesofspeed,buttheyarethedirect opposite of the Sloanist approach. The Sloanist approach focuses on maximizing economiesofspeedintermsoftheunitcostofaparticularmachine,withoutre gardtotheinventoriesofunfinishedgoodsthatmustaccumulateasbufferstocks as a result, and all the other enormous eddies in the flow of production. As the authorsofNaturalCapitalismputit,itattemptstooptimizeeachstepofthepro duction process in isolation, thereby pessimizing the entire system. A machine canreducethelaborcostofonestepbyrunningatenormousspeeds,andyetbe outofsyncwiththeoverallprocess.6WaddellandBodekgivetheexampleofErnie Breech,sentfromGMtosaveFord,demandingaplantmanagertellhimthecost ofmanufacturingthesteeringwheelsohecouldcalculateROIforthatstepofthe process.TheplantmanagerwasatalosstryingtofigureoutwhatBreechwanted: did he think steering wheel production was a bottleneck in production flow, or what?ButforBreech,iftheunitcostofthatmachineandthedirectcostofthela bor working it were low enough compared to the value of the steering wheels
RaphaelKaplinsky,FromMassProductiontoFlexibleSpecialization:ACaseStudyof Microeconomic Change in a SemiIndustrialized Economy, World Development 22:3 (March1994),p.346. 2 WaddellandBodek,p.122. 3 Ibid.,p.119. 4 Ibid.,p.xx. 5 Ibid.,pp.112114. 6 Lovinsetal,NaturalCapitalism,pp.12930.
31
soldtoinventory,thatwasallthatmattered.UndertheSloanaccountingsystem, producing a steering wheeleven in isolation, and regardless of what was done withitorwhethertherewasanorderforthecarit wasapartofwasamoney makingproposition.Creditforthatworkitlookslikeapaymentonthemanu facturing budgetis given for performing that simple task because it moves moneyfromexpensestoassets.1 Selling to inventory, under standard management accounting rules, is equivalenttotheincentivesystemsforproductionunderaFiveYearPlan:thereis noincentivetoproducegoodsthatwillactuallyworkorbeconsumed.Hencethe carloadsofrefrigerators,forwhichSovietfactorieswerecreditedtowardtheir5YP quotas, thrown off trains with no regard to whether they were damaged beyond repairintheprocess. The lean approach, in contrast, gears production flow to orders, and then sizes individual machines and steps in the production process to the volume of overall flow. Under lean thinking, its better to have a less specialized machine withalowerrateofoutput,inordertoavoidanindividualstepoutofproportion to the overall production flow. This is what the Toyota Production System calls takt:pacingtheoutputofeachstageofproductiontomeettheneedsofthenext stage,andpacingtheoverallflowofallthestagesinaccordancewithcurrentor ders.2InaSloanfactory,themanagementwouldselectmachinerytoproducethe entireproductionrunasfastastheyhumanlycould,thensortoutthepiecesand putthingstogetherlater.3 To quote the authors of Natural Capitalism again: The essence of the lean approachisthatinalmostallmodernmanufacturing,
the combined and often synergistic benefits of the lower capital investment, greater flexibility, often higher reliability, lower inventory cost, and lower ship ping cost of much smaller and more localized production equipment will far outweigh any modest decreases in its narrowly defined efficiency per process step. Its more efficient overall, in resources and time and money, to scale pro duction properly, using flexible machines that can quickly shift between prod ucts. By doing so, all the different processing steps can be carred out immedi atelyadjacenttooneanotherwiththeproductkeptincontinuousflow.Thegoal is to have no stops, no delays, no backflows, no inventories, no expediting, no 4 bottlenecks,nobufferstocks,andnomuda[waste].
The contrast is illustrated by a couple of examples from Natural Capitalism: anoverlyefficientgrindingmachineatPratt&Whitney,andacolabottlingma chinelikewiseoversizedinrelationtoitstask:
The worlds largest maker of jet engines for aircraft had paid $80 million for a monumentstateoftheartGermanroboticgrinderstomaketurbineblades. The grinders were wonderfully fast, but their complex computer controls re quiredaboutasmanytechniciansastheoldmanualproductionsystemhadre quired machinists. Moreover, the fast grinders required supporting processes that were costly and polluting. Since the fast grinders were meant to produce big,uniformbatchesofproduct,butPratt&Whitneyneededagileproductionof small,diversebatches,thetwelvefancygrinderswerereplacedwitheightsimple onescostingonefourthasmuch.Grindingtimeincreasedfrom3to75minutes, butthethroughputtimefortheentireprocessdecreasedfrom10daysto75min utes because the nasty supporting processes were eliminated. Viewed from the
WaddellandBodek,pp.89,92. Ibid.,pp.122123. 3 Ibid.,p.39. 4 Hawkenetal,pp.129130.

2
32
wholesystemperspectiveofthecompleteproductionprocess,notjustthegrind ing step, the big machines had been so fast that they slowed down the process toomuch,andsoautomatedthattheyrequiredtoomanyworkers.Therevised production system, using a highwage traditional workforce and simple ma chines, produced $1 billion of annual value in a single room easily surveyable from a doorway. It cost half as much, worked 100 times faster, cut changeover timefrom8hoursto100seconds,andwouldhaverepaiditsconversioncostsin 1 ayearevenifthesophisticatedgrindersweresimplyscrapped.
Inthecolaindustry,theproblemisthemismatchbetweenaverysmallscale operationdrinkingacanofcolaandaverylargescaleone,producingit.The most efficient largescale bottling machine creates enormous batches that are out of scale with the distribution system, and result in higher unit costs overall thanwouldmodestsizedlocalmachinesthatcouldimmediatelyscaleproduction todemandpull.Thereasonistheexcessinventoriesthatglutthesystem,andthe pervasivecostsandlossesofhandling,transport,andstoragebetweenalltheele phantinepartsoftheproductionprocess.Asaresult,thegiantcolacanningma chine may well cost more per delivered can than a small, slow, unsophisticated machine that produces the cans of cola locally and immediately on receiving an orderfromtheretailer.2 AsWomackandJonesputitinLeanThinking,machinesrapidlymakingun wantedpartsduringonehundredpercentoftheiravailablehoursandemployees earnestly performing unneeded tasks during every available minute are only pro ducingmuda.3Lovinsetalsumitupmorebroadly:
Theirbasicconclusion,fromscoresofpracticalcasestudies,isthatspecialized, largescale, highspeed, highly production departments and equipment are the keytoinefficiencyanduncompetitiveness,andthatmaximizingtheutilizationof 4 productivecapacity,theprideofMBAs,isnearlyalwaysamistake.
Rather,itsbettertoscaleproductivecapacitytodemand. In a genuine lean factory, managers are hounded in daily meetings about meeting the numbers for inventory reduction and reduction of cycle time, in the same way that theyre hounded on a daily basis to reduce direct labor hours and increaseROIinaSloanistfactory(includingtheAmericanexperimentswithlean production in firms still governed by Donaldson Browns accounting principles). JamesWomacketal.,inTheMachineThatChangedtheWorld,recountanamus ing anecdote about a delegation of lean production students from Corporate AmericatouringaToyotaplant.Readingaquestionontheirsurveyformastohow many days of inventory were in the plant, the Toyota manager politely asked whetherthetranslatorcouldhavemeantminutesofinventory.5 AsMumfordputit,Measuredbyeffectivework,thatis,humanefforttrans formedintodirectsubsistenceorintodurableworksofartandtechnics,therela tive gains of the new industry were pitifully small.6 The amount of wasted re sources and crystallized labor embodied in the enormous warehouses of Sloanist factories and the enormous stocks of goods in process, the mushrooming cost of
Ibid.,pp.128129. Ibid.,p.129. 3 James P. Womack and Daniel T. Jones, Lean Thinking: Banish Waste and Create WealthinYourCorporation(NewYork:SimonandSchuster,1996),p.60. 4 Lovinsetal.,NaturalCapitalism,p.127. 5 James P. Womack, Daniel T. Jones, Daniel Roos, The Machine That Changed the World(NewYork:MacmillianPublishingCompany,1990),p.80. 6 Mumford,TechnicsandCivilization,p.196.
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marketing,thewarehousesonwheels,andthemountainsofdiscardedgoodsin thelandfillsthatcouldhavebeenrepairedforatinyfractionofthecostofreplac ingthem,easilyoutweighthesavingsinunitcostsfrommassproductionitself.As Michael Parenti put it, the essence of corporate capitalism is the transformation of living nature into mountains of commodities and commodities into heaps of deadcapital.1Thecostsavingsfrommassproductionaremorethanoffsetbythe costsofmassdistribution. Chandlersmodelofproductionresultedintheadoptionofincreasinglyspe cialized,assetspecificproductionmachinery:
The large industrial enterprise continued to flourish when it used capital intensive, energyconsuming, continuous or largebatch production technology 2 toproduceformassmarkets. Theratioofcapitaltolabor,materialstolabor,energytolabor,andmanag erstolaborforeachunitofoutputbecamehigher.Suchhighvolumeindustries 3 soonbecamecapitalintensive,energyintensive,andmanagerintensive.
Of course this view is fundamentally wrongheaded. To regard a particular machineasmoreefficientbasedonitsunitcoststakeninisolationissheeridi ocy.Ifthecostsofidlecapacityaresogreatastoelevateunitcostsabovethoseof lessspecializedmachinery,atthelevelsofspontaneousdemandoccurringwithout pushmarketing,andifthemarketarearequiredforfullutilizationofcapacityre sultsindistributioncostsgreaterthantheunitcostsavingsfromspecializedma chinery, then the expensive productspecific machinery is, in fact, less efficient. ThebasicprinciplewasstatedbyF.M.Scherer:
Ball bearing manufacturing provides a good illustration of several product specific economies. If only a few bearings are to be custommade, the ring ma chiningwillbedoneongeneralpurposelathesbyaskilledoperatorwhohand positions the stock and tools and makes measurements for each cut. With this method, machining a single ring requires from five minutes to more than an hour, depending on the parts size and complexity and the operators skill. If a sizablebatchistobeproduced,amorespecializedautomaticscrewmachinewill be used instead. Once it is loaded with a steel tube, it automatically feeds the tube, sets the tools and adjusts its speed to make the necessary cuts, and spits outmachinedpartsintoahopperatarateoffromeightytoonehundredforty partsperhour.Asubstantialsavingofmachinerunningandoperatorattendance timeperunitisachieved,butsettingupthescrewmachinetoperformtheseop erations takes about eight hours. If only one hundred bearing rings are to be made,setuptimegreatlyexceedstotalrunningtime,anditmaybecheapertodo 4 thejobonanordinarylathe.
The Sloanist approach is to choose the specialized automatic machine and findawaytomakepeoplebuymorebearingrings. GalbraithandChandlerwriteasthoughtheadoptionofthemachinerywere enough to automatically increase efficiency, in and of itself, regardless of how muchmoneyhadtobespentelsewheretosavethatmoney. Butifweapproachthingsfromtheoppositedirection,wecanseethatflexible manufacturing with easily redeployable assets makes it feasible to shift quickly
1
Michael Parenti, Capitalisms SelfInflicted Apocalypse, Common Dreams, January 21,2009<http://www.commondreams.org/view/2009/01/209>. 2 Mumford,TechnicsandCivilization,p.347. 3 Ibid.,p.241. 4 F.M.SchererandDavidRoss,IndustrialMarketStructureandEconomicPerformance. 3rded(Boston:HoughtonMifflin,1990),p.97.
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fromproducttoproductinthefaceofchangingdemand,andthuseliminatesthe imperativeofcontrollingthemarket.AsBarrySteinsaid,
iffirmscouldrespondtolocalconditions,theywouldnotneedtocontrolthem. Iftheymustcontrolmarkets,thenitisareflectionoftheirlackofabilitytobe 1 adequatelyresponsive. ... Consumer needs, if they are to be supplied efficiently, call increasingly fororganizationsthataremoreflexiblyarrangedandinmoredirectcontactwith thosecustomers.Theessenceofplanning,underconditionsofincreasinguncer tainty,istoseekbetterwaysforthosewhohavetheneedstoinfluenceorcontrol theproductiveapparatusmoreeffectively,notless. Underconditionsofrapidenvironmentalchange,implementingsuchplan ning is possible only if the distance between those supplied and the locus of decisionmaking on the part of those producing is reduced.... But it can be shown easily in information theory that the feedbackinformation linking the environment and the organization attempting to service that environment necessarilybecomeslessaccurateorlesscompleteastherateofchangeofdata increases,orasthenumberofstepsintheinformationtransferprocesscontin ues.
Stein suggested that Galbraiths solution was to suppress the turbulence: to control the changes, in kind and extent, that the society will undergo.2 But far better,heargues,wouldbeavalueshiftthatintegratestheorganizationandthe environmentitserves.
Thisproblemistobesolvednotbythehopeofbetterplanningonalarge scale ..., but by the better integration of productive enterprises with the ele mentsofsocietyneedingthatproduction. Under conditions of rapid change in an affluent and complex society, the only means available for meeting differentiated and fluid needs is an array of producingunitssmallenoughtobeinclosecontactwiththeircustomers,flexi bleenoughtoproducefortheirdemands,andabletodosoinarelativelyshort time.... It is a contradiction in terms to speak of the necessity for units large enough to control their environment, but producing products which in fact no 3 onemaywant! As to the problem of planninglarge firms are said to be needed here be causetherequirementsofsophisticatedtechnologyandincreasinglyspecialized knowledge call for long lead times to develop, design, and produce products. Firms must therefore have enough control over the market to assure that the demandneededtojustifythattimeconsumingandcostlyinvestmentwillexist. Thisargumentrestsonafoundationofsand;first,becausetheneedsofsociety should precede, not follow, decisions about what to produce, and second, be cause the data do not substantiate the need for large production organizations exceptinrareandunusualinstances,likespaceflight.Onthecontrary,planning for social needs requires organizations and decisionmaking capabilities in whichthefeedbackand interplay between productive enterprisesandthemar ketinquestionisaccurateandtimelyconditionsmoreconsistentwithsmaller 4 organizationsthanlargeones.
Barry Stein, Size, Efficiency, and Community Enterprise (Cambridge: Center for CommunityEconomicDevelopment,1974),p.41. 2 Ibid.,p.43. 3 Ibid.,p.44. 4 Ibid.,p.58.
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A.INSTITUTIONALFORMSTOPROVIDESTABILITY
InkeepingwiththeneedforstabilityandcontrolGalbraithdescribedabove, the technostructure resorted to organizational expedients within the corporate enterprisetoguaranteereliableoutletsforproductionandprovidelongtermpre dictabilityintheavailabilityandpriceofinputs.Theseexpedientscanbesummed upasreplacingthemarketpricemechanismwithplanning.
Afirmcannotusefullyforeseeandschedulefutureactionorprepareforcontin genciesifitdoesnotknowwhatitspriceswillbe,whatitssaleswillbe,whatits costsincludinglaborandcapitalcostswillbeandwhatwillbeavailableatthese costs.... Much of what the firm regards as planning consists in minimizing or 1 gettingridofmarketinfluences.
Theres a reason for twentieth century liberalisms strong affinity for mass production industry (e.g. Michael Moores nostalgia for the consensus capitalism of the 50s, when the predominant mode of employment was a factory job with lifetime security). Twentieth century liberalism had its origins as the ideology of the managerial and professional classes, particularly the managers and engineers whoranthegiantmanufacturingcorporations.Andthecenterpieceoftheirideol ogywastoextendtosocietyoutsidethecorporationthesameplanningandcon trol, the same government by disinterested experts, that prevailed inside it. And this ideological affinity for social planning dovetailed exactly with mass production industrys need to reshape society as a whole to guarantee consump tionofitsoutput.2 Galbraith describes three institutional expedients taken by the technostruc turetocontroltheuncertaintiesofthemarketandpermitlongtermpredictabil ity:verticalintegration,theuseofmarketpowertocontrolsuppliersandoutlets, andlongtermcontractualarrangementswithsuppliersandoutlets.3 Inverticalintegration,[t]heplanningunittakesoverthesourceofsupplyor the outlet; a transaction that is subject to bargaining over prices and amounts is thusreplacedwithatransferwithintheplanningunit.4 One of the most important forms of vertical integration is the choice to makeratherthanbuycreditreplacingtheexternalcreditmarketswithinter nalfinancethroughretainedearnings.5Thetheorythatmanagementiscontrolled by outside capital markets assumes a high degree of dependence on outside fi nance.Butinfactmanagementsfirstlineofdefense,inmaintainingitsautonomy from shareholders and other outside interests, is to minimize its reliance on out side finance. Management tends to finance new investments as much as possible with retained earnings, followed by debt, with new issues of shares only as a last resort.6Issuesofstockareimportantsourcesofinvestmentcapitalonlyforstart ups and small firms undertaking major expansions.7 Most corporations finance a majorityoftheirnewinvestmentfromretainedearnings,andtendtolimitinvest
Galbraith,TheNewIndustrialState,p.37. SeeKevinCarson,OrganizationTheory:ALibertarianPerspective(Booksurge,2008), ChapterFour. 3 Galbraith,NewIndustrialState,p.38. 4 Ibid.,p.39. 5 Ibid.,pp.5051. 6 MartinHellwig,OntheEconomicsandPoliticsofCorporateFinanceandCorporate Control,inXavierVives,ed.,CorporateGovernance:TheoreticalandEmpiricalPerspectives (Cambridge:CambridgeUniversityPress,2000),pp.100101. 7 Ralph Estes, Tyranny of the Bottom Line: Why Corporations Make Good People Do BadThings(SanFrancisco:BerrettKoehlerPublishers,1996),p.51.
2 1
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ment to the highest priorities when retained earnings are scarce.1 As Doug Hen woodsays,inthelongrunalmostallcorporatecapitalexpendituresareinternally financed, through profits and depreciation allowances. Between 1952 and 1995, almost90%ofinvestmentwasfundedfromretainedearnings.2 Theprevailingrelianceoninternalfinancingtendstopromoteconcentration. Internally generated funds that exceed internal requirements are used to expand or diversify internal operations, or for horizontal and vertical integration, rather thanlendingitormakingotherkindsofarmslengthinvestments.3MartinHell wig, in his discussion of the primacy of finance by retained earnings, makes one especially intriguing observation, in particular. He denies that reliance primarily onretainedearningsnecessarilyleadstoarationingofinvestment,inthesense ofunderinvestment;internalfinancing,hesays,canjustaseasilyresultinoverin vestment, if the amount of retained earnings exceeds available opportunities for rational capital investment.4 This confirms Schumpeters argument that double taxation of corporate profits promoted excessive size and centralization, by en couraging reinvestment in preference to the issue of dividends. Of course it may resultinstructuralmisallocationsandirrationality,totheextentthatretentionof earningspreventsdividendsfromreturningtothehouseholdsectortobeinvested in other firms, so that overaccumulation in the sectors with excessive retained earnings comes at the expense of a capital shortage in other sectors.5 Doug Hen wood contrasts the glut of retained earnings, under the control of corporate bu reaucracies with a shortage of investment opportunities, to the constraints the capitalmarketsplaceonsmall,innovativefirmsthatneedcapitalthemost.6 Market control consists in reducing or eliminating the independence of ac tion of those to whom the planning unit sells or from whom it buys, while pre servingtheoutwardformofthemarket.Marketpowerfollowsfromlargesizein relationtothemarket.Adecisiontobuyornottobuy,asinthecaseofGeneral Motors and its suppliers, can determine the life or death of a firm. Whats more, largemanufacturersalwayshavetheoptionofverticalintegrationmakingapart themselvesinsteadofbuyingittodisciplinesuppliers.Theoptionofeliminating amarketisanimportantsourceofpowerforcontrollingit.7 Longterm contracting can reduce uncertainty by specifying prices and amountstobeprovidedorboughtforsubstantialperiodsoftime.Eachlargefirm createsamatrixofcontractsinwhichmarketuncertaintyiseliminated.8 Piore and Sabel mention Edison Electric as an example of using longterm contractstoguaranteestability,
inducing its customers to sign longterm future delivery contracts, under whichtheyhadtobuyspecifiedquantitiesofEdisonproductsatregularintervals overtenyears.Byassuringthedemandforoutput,thesecontractsenabledthe companytoinvestinlargeplants....AsoneEdisonexecutiveexplained: It is essential in order to make lamps at a minimum cost that the factory shouldberunconstantlyatasuniformanoutputaspossible.Ourfuturedelivery plan in lamps has been very successful [in this regard].... It is very expensive Hellwig,pp.101102,113. Doug Henwood, Wall Street: How it Works and for Whom (London and New York: Verso,1997),p.3. 3 PioreandSabel,pp.7071. 4 Hellwig,pp.114115. 5 Ibid.,p.117. 6 Henwood,WallStreet,pp.154155. 7 Galbraith,TheNewIndustrialState,pp.3940. 8 Ibid.,pp.4142.
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workchangingfromonerateofproductiontoanotherinfactories....Thebenefit ofthefuturedeliveryplanisapparentsincewecanmanufacturetostockknowing 1 thatallthestockistobetakenwithinacertaintime.
Unlikelean,demandpullproduction,whichminimizesinventorycostsbyproduc ingonlyinresponsetoorders,massproductionrequiressupplypushdistribution (guaranteeingamarketbeforeproductiontakesplace). Theuseofcontractstostabilizeinputavailabilityandpriceisexemplified,in particular, by the organizational expedients to stabilize wages and reduce labor turnover.Aftermixedsuccesswithavarietyofexperimentswithcompanyunions, the American Plan, and other forms of welfare capitalism, employers finally turned to the official organized labor regime under the Wagner Act to establish longterm predictability in the supply and price of labor inputs, and to secure managements control of production. Under the terms of consensus capitalism, thecomparativelysmallprofileoflaborcostsinthetotalcostpackageofcapital intensiveindustrymeantthatmanagementwaswillingtopaycomparativelyhigh wages and benefits (up to the point of gearing wages to productivity), to provide moreorlessneutralgrievanceprocedures,etc.,solongasmanagementspreroga tives were recognized for directing production. But the same had been true in many cases of the American Plan: it allowed for formalized grievance procedures and progressive discipline, and in some cases negotiation over rates of pay. The commongoalofallthesevariousattempts,howevermuchtheydisagreedintheir particulars, was by stabilizing wages and employment, to insulate the cost of a majorelementofproductionfromthefluxofamarketeconomy.2Frommanage ments perspective, the sort of bureaucratized industrial union established under Wagnerhadtheprimarypurposesofenforcingcontractsontherankandfileand suppressing wildcat strikes. The corporate liberal managers who were most open toindustrialunionisminthe1930swere,inmanycases,thesamepeoplewhohad previously relied on company unions and works councils. Their motivation, in bothcases,wasthesame.Forexample,GEsGerardSwope,oneofthemostpro gressiveofcorporateliberalsandthelivingpersonificationofthekindsofcorpo rate interests that backed FDR, had attempted in 1926 to get the AFLs William GreentorunGEsworkscouncilsystem.3 Another institutional expedient of Galbraiths technostructure is to regulate thepaceoftechnicalchange,withtheoligopolyfirmsinanindustrycolludingto introduceinnovationataratethatmaximizesreturns.BaranandSweezydescribed theregulationoftechnicalchange,asitoccursinoligopolymarketsundercorpo ratecapitalism:
Hereinnovationsaretypicallyintroduced(orsoontakenover)bygiantcorpora tionswhichactnotunderthecompulsionofcompetitivepressuresbutinaccor dancewithcarefulcalculationsoftheprofitmaximizingcourse.Whereasinthe competitivecasenoone,noteventheinnovatingfirmsthemselves,cancontrol therateatwhichnewtechnologiesaregenerallyadopted,thisceasestobetrue inthemonopolisticcase.Itisclearthatthegiantcorporationwillbeguidednot bytheprofitabilityofthenewmethodconsideredinisolation,butbythenetef fect of the new method on the overall profitability of the firm. And this means
PioreandSabel,p.58. Ibid.,p.65. 3 Ibid.,p.132.

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thatingeneraltherewillbeaslowerrateofintroductionofinnovationthanun 1 dercompetitivecriteria.
OrasPaulGoodmanputit,ahandfulofmanufacturerscontrolthemarket,com petingwithfixedpricesandslowlyspoonedoutimprovements.2 Besidesthesemicroeconomicstructurescreatedbythenominallyprivatecor porationtoprovidestability,thestateengagedinthepoliciesdescribedbyGabriel Kolkoaspoliticalcapitalism.

Political capitalism is the utilization of political outlets to attain conditions of stability,predictability,andsecuritytoattainrationalizationintheeconomy. Stabilityistheeliminationofinternecinecompetitionanderraticfluctuationsin theeconomy.Predictabilityistheability,onthebasisofpoliticallystabilizedand secured means, to plan future economic action on the basis of fairly calculable expectations. By security I mean protection from the political attacks latent in any formally democratic political structure. I do not give to rationalization its frequentdefinitionastheimprovementofefficiency,output,orinternalorgani zation of a company; I mean by the term, rather, the organization of the econ omyandthelargerpoliticalandsocialspheresinamannerthatwillallowcorpo rations to function in a predictable and secure environment permitting reason 3 ableprofitsoverthelongrun.
Thestateplayedamajorroleincartelizingtheeconomy,toprotectthelarge corporationfromthedestructiveeffectsofpricecompetition.Atfirsttheeffortwas mainly private, reflected in the trust movement at the turn of the 20th century. Chandlercelebratedthefirst,privateeffortstowardconsolidationofmarketsasa steptowardrationality:
Americanmanufacturersbeganinthe1870stotaketheinitialsteptogrowthby way of mergerthat is, to set up nationwide associations to control price and production.Theydidsoprimarilyasaresponsetothecontinuingpricedecline, which became increasingly impressive after the panic of 1873 ushered in a pro 4 longedeconomicdepression.
The process was further accelerated by the Depression of the 1890s, with mergersandtrustsbeingformedthroughthebeginningofthenextcenturyinor dertocontrolpriceandoutput:themotiveformergerchanged.Manymorewere createdtoreplacetheassociationofsmallmanufacturingfirmsastheinstrument tomaintainpriceandproductionschedules.5 Fromtheturnofthetwentiethcenturyon,therewasaseriesofattemptsby J.P. Morgan and other promoters to create some institutional structure for the corporate economy by which price competition could be regulated and their re spectivemarketsharesstabilized.Itwasthen,PaulSweezywrote,
that U.S. businessmen learned the selfdefeating nature of pricecutting as a competitive weapon and started the process of banning it through a complex
Paul Baran and Paul Sweezy, Monopoly Capitalism: An Essay in the American Eco nomicandSo cialOrder(NewYork:MonthlyReviewPress,1966),pp.9394. 2 Paul Goodman, People or Personnel, in People or Personnel and Like a Conquered Province(NewYork:VintageBooks,1964,1966),p.58. 3 GabrielKolko.TheTriumphofConservatism:AReinterpretationofAmericanHistory 19001916(NewYork:TheFreePressofGlencoe,1963),p.3. 4 Chandler,TheVisibleHand,p.316. 5 Ibid.,p.331.
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networkoflaws(corporateandregulatory),institutions(e.g.,tradeassociations), 1 andconventions(e.g.,priceleadership)fromnormalbusinesspractice.
Chandlerscelebratoryaccountofthetrustmovement,asaprogressiveforce, ignoresonecentralfact:thetrustswerelessefficientthantheirsmallercompeti tors. They immediately began losing market share to less leveraged firms outside thetrusts.Thetrustmovementwasanunqualifiedfailure,asbigbusinessquickly recognized.Subsequentattemptstocartelizetheeconomy,therefore,enlistedthe state. As recounted by Gabriel Kolko,2 the main force behind the Progressive Era regulatoryagendawasbigbusinessitself,thegoalbeingtorestrictpriceandqual ity competition and to reestablish the trusts under the aegis of government. His thesiswasthat,contrarytotheconsensusofhistorians,itwasnottheexistenceof monopoly that caused the federal government to intervene in the economy, but thelackofit. Merelyprivateattemptsatcartelization(i.e.,collusivepricestabilization)be fore the Progressive Eranamely the socalled trustswere miserable failures, according to Kolko. The dominant trend at the turn of the centurydespite the effectsoftariffs,patents,railroadsubsidies,andotherexistingformsofstatism was competition. The trust movement was an attempt to cartelize the economy throughsuchvoluntaryandprivatemeansasmergers,acquisitions,andpricecol lusion. But the overleveraged and overcapitalized trusts were even less efficient than before, and steadily lost market share to their smaller, more efficient com petitors.StandardOilandU.S.Steel,immediatelyaftertheirformation,beganto losemarketshare. Inthefaceofthisresoundingfailure,bigbusinessactedthroughthestateto cartelizeitselfhence,theProgressiveregulatoryagenda.
Ironically, contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, 3 butthelackofit. Ifeconomicrationalizationcouldnotbeattainedbymergersandvoluntary economicmethods,agrowingnumberofimportantbusinessmenreasoned,per 4 hapspoliticalmeansmightsucceed.
The rationale of the Progressive Era regulatory state was stated in 1908 by GeorgePerkins,whomKolkodescribedasthefunctionalarchitect...ofpolitical capitalismduringRooseveltspresidency....Themoderncorporation
must welcome federal supervision, administered by practical businessmen, that shouldsaytostockholdersandthepublicfromtimetotimethatthemanage ments reports and methods of business are correct. With federal regulation, which would free business from the many states, industrial cooperation could 5 replacecompetition.
KolkoprovidedconsiderableevidencethatthemainforcebehindtheProgres siveEralegislativeagendawasbigbusiness.TheMeatInspectionAct,forinstance, waspassedprimarilyatthebehestofthebigmeatpackers.6Thispatternwasre

PaulSweezy.CompetitionandMonopoly,MonthlyReview(May1981),pp.116. Kolko,TriumphofConservatism. 3 Ibid.,p.5. 4 Ibid.,p.58. 5 Ibid.,p.129. 6 Ibid.,pp.98108.Inthe1880s,repeatedscandalsinvolvingtaintedmeathadresulted in U.S. firms being shut out of several European markets. The big packers had turned to thegovernmenttoinspectexportedmeat.Byorganizingthisfunctionjointly,throughthe state,theyremovedqualityinspectionasacompetitiveissuebetweenthem,andthegov
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peated, in its essential form, in virtually every component of the Progressive regulatoryagenda. Thevarioussafetyandqualityregulationsintroducedduringthisperiodalso worked to cartelize the market. They served essentially the same purpose as at tempts in the Wilson war economy to reduce the variety of styles and features available in product lines, in the name of efficiency. Any action by the state to impose a uniform standard of quality (e.g. safety), across the board, necessarily eliminatesthatfeatureasacompetitiveissuebetweenfirms.AsButlerShafferput it,thepurposeofwage,workingcondition,orproductstandardsistouniversal izecostfactorsandthusrestrictpricecompetition.1Thus,theindustryispartially cartelized,totheverysameextentthatwouldhavehappenedhadallthefirmsinit adoptedauniformqualitystandard,andagreedtostopcompetinginthatarea.A regulation, in essence, is a stateenforced cartel in which the members agree to cease competing in a particular area of quality or safety, and instead agree on a uniformstandardwhichtheyestablishthroughthestate.And unlike private car tels,whichareunstable,nomembercanseekanadvantagebydefecting. Although theoretically the regulations might simply put a floor on quality competitionandleavefirmsfreetocompetebyexceedingthestandard,inpractice corporationsoftentakeaharshviewofcompetitorsthatexceedregulatorysafety orqualityrequirements.AgoodexampleisMonsantos(oftensuccessful)attempts to secure regulatory suppression of commercial speech by competitors who label their milk rBGHfree; more generally, the frankenfoods industry relies on FDA regulations to prohibit the labeling of food as GMOfree. Another example is the beef industrys success at getting the government to prohibit competitors from voluntarilytestingtheircattleformadcowdiseasemorefrequentlythanrequired bylaw.2Sotheregulatoryfloorfrequentlybecomesaceiling. Moreimportantly,theFTCandClaytonActsreversedthelongtrendtoward competitionandlossofmarketshareandmadestabilitypossible.
Theprovisionsofthenewlawsattackingunfaircompetitorsandpricediscrimi nation meant that the government would now make it possible for many trade associationstostabilize,forthefirsttime,priceswithintheirindustries,andto 3 makeeffectiveoligopolyanewphaseoftheeconomy.
TheFederalTradeCommissioncreatedahospitableatmospherefortradeas sociationsandtheireffortstopreventpricecutting.4ButlerShaffer,inInRestraint
ernmentprovidedasealofapprovalinmuchthesamewayatradeassociationwould.The problemwiththisearlyinspectionregimewasthatonlythelargestpackerswereinvolved in the export trade, which gave a competitive advantage to the small firms that supplied onlythedomesticmarket.ThemaineffectofRooseveltsMeatInspectionActwastobring thesmallpackersintotheinspectionregime,andtherebyendthecompetitivedisabilityit imposed on large firms. Upton Sinclair simply served as an unwitting shill for the meat packingindustry. 1 Butler Shaffer, Calculated Chaos: Institutional Threats to Peace and Human Survival (SanFrancisco:AlchemyBooks,1985),p.143. 2 Associated Press, U.S. government fights to keep meatpackers from testing all slaughtered cattle for mad cow, International HeraldTribune, May 29, 2007 <http://www .iht.com/articles/ap/2007/05/29/america/NAGENUSMadCow.php>. Monsanto Declares War on rBGHfree Dairies, April 3, 2007 (reprint of Monsanto press release by Organic ConsumersAssociation)<http://www.organicconsumers.org/articles/article_4698.cfm>.Pa. barshormonefreemilklabels,USAToday,November13,2007<http://www.usatoday.com/ news/nation/20071113milklabels_N.htm>. 3 Kolko,TheTriumphofConservatism,p.268. 4 Ibid.,p.275.
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ofTrade,providesadetailedaccountofthefunctioningofthesetradeassociations, and their attempts to stabilize prices and restrict predatory price cutting, through assorted codes of ethics.1 Specifically, the trade associations established codesofethicsdirectlyunderFTCauspicesthathadtheforceoflaw:[A]searlyas 1919 the FTC began inviting members of specific industries to participate in con ferences designed to identify trade practices that were felt by the practically unanimous opinion of industry members to be unfair. The standard procedure, throughthe1920s,wasfortheFTCtoinvitemembersofaparticularindustrytoa conference, and solicit their opinions on trade practice problems and recom mendedsolutions.
TherulesthatcameoutoftheconferencesandwereapprovedbytheFTC fellintotwocategories:GroupIrulesandGroupIIrules.GroupIruleswerecon sideredbythecommissionasexpressionsoftheprevailinglawfortheindustry developingthem,andaviolationofsuchrulesbyanymemberofthatindustry whether that member had agreed to the rules or notwould subject the of fender to prosecution under Section 5 of the Federal Trade Commission Act as anunfairmethodofcompetition.... ContainedwithinGroupIwererulesthatdealtwithpracticesconsideredby mostbusinessorganizationstobethemoredisruptiveofstableeconomiccon ditions. Generally included were prohibitions against inducing breach of con tract; ... commercial bribery; ... price discrimination by secret rebates, exces siveadjustments,orunearneddiscounts;...sellingofgoodsbelowcostorbelow published list of prices for purpose of injuring competitor; misrepresentation of goods; ... use of inferior materials or deviation from standards; [and] falsifica 2 tionofweights,tests,orcertificatesofmanufacture[emphasisadded].
The two pieces of legislation accomplished what the trusts had been unable to:theyenabledahandfuloffirmsineachindustrytostabilizetheirmarketshare andtomaintainanoligopolystructurebetweenthem.
It was during the war that effective, working oligopoly and price and market agreements becameoperational in the dominant sectorsoftheAmericanecon omy.Therapiddiffusionofpowerintheeconomyandrelativelyeasyentryvir tuallyceased.Despitethecessationofimportantnewlegislativeenactments,the unity of business and the federal government continued throughout the 1920s andthereafter,usingthefoundationslaidintheProgressiveEratostabilizeand consolidate conditions within various industries. And, on the same progressive foundationsandexploitingtheexperiencewiththewaragencies,HerbertHoo verandFranklinRooseveltlaterformulatedprogramsforsavingAmericancapi talism. The principle of utilizing the federal government to stabilize the econ omy,establishedinthecontextofmodernindustrialismduringtheProgressive 3 Era,becamethebasisofpoliticalcapitalisminitsmanylaterramifications.
Theregulatorystateprovidedrationalityintwootherways:first,bytheuse of federal regulation to preempt potentially harsher action by populist govern mentsatthestateandlocallevel;andsecond,bypreemptingandoverridingolder common law standards of liability, replacing the potentially harsh damages im posed by local juries with a least common denominator of regulatory standards based on sound science (as determined by industry, of course). Regarding the first, whatever view one takes of the validity of the local regulations in and of themselves,itishardlylegitimateforacentralizedstatetoactonbehalfofcorpo
Butler Shaffer, In Restraint of Trade: The Business Campaign Against Competition, 19181938(Lewisburg:BucknellUniversityPress,1997). 2 Ibid.,pp.8284. 3 Kolko,TriumphofConservatism,p.287.
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rate interests, in suppressing unfriendly local regulations and overcoming the transactioncostsofoperatinginalargenumberofconflictingjurisdictions,allat taxpayerexpense.Freetradesimplymeansthestatedoesnothinderthoseunder itsownjurisdictionfromtradingwithanyoneelseonwhatevertermstheycanob tain on their ownnot that the state actually opens up markets. Regarding the second, it is interesting that so many selfdescribed libertarians support what theycalltortreform,whencivilliabilityfordamagesisinfactthelibertarianal ternativetotheregulatorystate.Muchofsuchtortreformamountstoindemni fyingbusinessfirmsfromliabilityforrecklessfraud,pollution,andotherexternal itiesimposedonthepublic. Thereisalsotheregulatorystatesfunction,whichwewillexaminebelowin more depth, of imposing mandatory minimum overhead costs and thus erecting barrierstocompetitionfromlowoverheadproducers. Statespendingservestocartelizetheeconomyinmuchthesamewayasregu lation.Justasregulationremovessignificantareasofqualityandsafetyasissuesin costcompetition,thesocializationofoperatingcostsonthestate(e.g.R&Dsubsi dies, governmentfunded technical education, etc.) allows monopoly capital to remove them as components of price in cost competition between firms, and places them in the realm of guaranteed income to all firms in a market alike. Transportation subsidies reduce the competitive advantage of locating close to onesmarket.Farmpricesupportsubsidiesturnidlelandintoanextremelylucra tiverealestateinvestment.Whetherthroughregulationsordirectstatesubsidies tovariousformsofaccumulation,thecorporationsactthroughthestatetocarry outsomeactivitiesjointly,andtorestrictcompetitiontoselectedareas. Anevergrowingportionofthefunctionsofthecapitalisteconomyhavebeen carried out through the state. According to James OConnor, state expenditures under monopoly capitalism can be divided into social capital and social ex penses.
Social capital is expenditures required for profitable private accumulation; it is indirectlyproductive(inMarxistterms,socialcapitalindirectlyexpandssurplus value). There are two kinds of social capital: social investment and social con sumption (in Marxist terms, social constant capital and social variable capi tal)....Socialinvestmentconsistofprojectsandservicesthatincreasethepro ductivity of a given amount of laborpower and, other factors being equal, in creasetherateofprofit....Socialconsumptionconsistsofprojectsandservices that lower the reproduction costs of labor and, other factors being equal, in crease the rate of profit. An example of this is social insurance, which expands the productive powers of the work force while simultaneously lowering labor costs. The second category, social expenses, consists of projects and services whicharerequiredtomaintainsocialharmonytofulfillthestateslegitimiza tion function.... The best example is the welfare system, which is designed 1 chieflytokeepsocialpeaceamongunemployedworkers.
AccordingtoOConnor,suchstateexpenditurescounteractthefallingdirect rateofprofitthatMarxpredictedinvolume3ofCapital.Monopolycapitalisable toexternalizemanyofitsoperatingexpensesonthestate;andsincethestatesex pendituresindirectlyincreasetheproductivityoflaborandcapitalattaxpayerex pense,theapparentrateofprofitisincreased.Inshort,monopolycapitalsocial izesmoreandmorecostsofproduction.2

1
67.
JamesOConnor,TheFiscalCrisisoftheState(NewYork:St.MartinsPress,1973),pp. Ibid.,p.24.
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(Infact,OConnormakestheunwarrantedassumptionthatthesubsidizedin crease in capitalintensiveness actually increases productivity, rather than simply subsidizingthecostofincreasingtheratioofcapitaltounitofoutputanddespite the inefficiency of more capitalintensive methods. The subsidized capital intensiveproductionmethodsare,infact,assurelyameansofdestroyingsurplus capitalassinkingitintheoceanwouldbe.) OConnorlistedseveralwaysinwhichmonopolycapitalexternalizesitsoper atingcostsonthepoliticalsystem:
Capitalist production has become more interdependentmore dependent on scienceandtechnology,laborfunctionsmorespecialized,andthedivisionofla bor more extensive. Consequently, the monopoly sector (and to a much lesser degreethecompetitivesector)requiresincreasingnumbersoftechnicalandad ministrative workers. It also requires increasing amounts of infrastructure (physical overhead capital)transportation, communication, R&D, education, andotherfacilities.Inshort,themonopolysectorrequiresmoreandmoresocial investment in relation to private capital.... The costs of social investment (or socialconstantcapital)arenotbornebymonopolycapitalbutratheraresocial 1 izedandfallonthestate.
The general effect of the states intervention in the economy, then, is to re moveeverincreasingspheresofeconomicactivityfromtherealmofcompetition inpriceorquality,andtoorganizethemcollectivelythroughorganizedcapitalasa whole.
B.MASSCONSUMPTIONANDPUSHDISTRIBUTIONTOABSORBSURPLUS
Aswehavealreadyseen,theuseofexpensiveproductspecificmachineryre quireslargebatchproductiontoachievehighthroughputandthusspreadproduc tion costs out over as many units as possible. And to do this, in turn, requires enormousexercisesofpowertoensurethatamarketexistedforthisoutput. First of all, it required the prior forms of intervention described in the last chapter and in the previous section of this chapter: state intervention to create a unifiednationalmarketandtransportationsystem,andstateinterventiontopro motetheformationofstableoligopolycartels. Butdespiteallthestateinterventionupfronttomakethecentralizedcorpo rateeconomypossible,stateinterventionisrequiredafterwardaswellasbeforein order to keep the system running. Large, massproduction industry is unable to survivewithoutthegovernmentguaranteeinganoutletforitsoverproduction,and insulating it from a considerable amount of market competition. As Paul Baran andPaulSweezyputit,monopolycapitalism
tendstogenerateevermoresurplus,yetitfailstoprovidetheconsumptionand investmentoutletsrequiredfortheabsorptionofarisingsurplusandhencefor thesmoothworkingofthesystem.Sincesurpluswhichcannotbeabsorbedwill not be produced, it follows that the normal state of the monopoly capitalist economyisstagnation.Withagivenstockofcapitalandagivencostandprice structure, the systems operating rate cannot rise above the point at which the amount of surplus produced can find the necessary outlets. And this means chronic underutilization of available human and material resources. Or, to put the point in slightly different terms, the system must operate at a point low enough on its profitability schedule not to generate more surplus than can be absorbed. Since the profitability schedule is always moving upward, there is a correspondingdowndriftoftheequilibriumoperatingrate.Lefttoitselfthat
Ibid.,p.24.
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istosay,intheabsenceofcounteractingforceswhicharenopartofwhatmaybe called the elementary logic of the systemmonopoly capitalism would sink 1 deeperanddeeperintoabogofchronicdepression.
Massproductiondivorcesproductionfromconsumption.Therateofproduc tionisdrivenbytheimperativeofkeepingthemachinesrunningatfullcapacityso astominimizeunitcosts,ratherthanbycustomerorders.Soinadditiontocon tractualcontrolofinputs,massproductionindustryfacestheimperativeofguar anteeing consumption of its output by managing the consumer. It does this through push distribution, highpressure marketing, planned obsolescence, and consumercredit. Massadvertisingservesasatoolformanagingaggregatedemand.According toBaranandSweezy,themainfunctionofadvertisingiswaging,onbehalfofthe producers and sellers of consumer goods, a relentless war against saving and in favorofconsumption.Andthatfunctionisintegrallyrelatedtoplannedobsoles cence:
Thestrategyoftheadvertiseristohammerintotheheadsofpeopletheun questioned desirability, indeed the imperative necessity, of owning the newest productthatcomesonthemarket.Forthisstrategytowork,however,producers havetopouronthemarketasteadystreamofnewproducts,withnonedaring tolagbehindforfearhiscustomerswillturntohisrivalsfornewness. Genuinely new or different products, however, are not easy to come by, eveninourageofrapidscientificandtechnologicaladvance.Hencemuchofthe newnesswithwhichtheconsumerissystematicallybombardediseitherfraudu lent or related trivially and in many cases even negatively to the function and 2 serviceabilityoftheproduct. .... In a society with a large stock of consumer durable goods like the UnitedStates,animportantcomponentofthetotaldemandforgoodsandserv ices rests on the need to replace a part of this stock as it wears out or is dis carded. Builtin obsolescence increases the rate of wearing out, and frequent stylechangesincreasetherateofdiscarding....Thenetresultisasteppingup intherateofreplacementdemandandageneralboosttoincomeandemploy ment.Inthisrespect,asinothers,thesaleseffortturnsouttobeapowerfulan tidotetomonopolycapitalismstendencytosinkintoastateofchronicdepres 3 sion.
Althoughsomewhatlessstatedependentthantheexpedientsdiscussedlater inthischapter,massadvertisinghadalargestatecomponent.Foronething,the foundersofthemassadvertisingandpublicrelationsindustrieswere,inlargepart, also the founders of the science of manufacturing consent used to manipulate AngloAmericanpopulationsintosupportforSt.Woodrowscrusade.EdwardBer naysandHaroldLasswell,whoplayedacentralroleintheCreelCommissionand other formative prowar propaganda efforts in WWI, went on to play similarly prominentrolesinthedevelopmentofpublicrelationsandmassconsumeradver tising. Foranother,thestatesownorgansofpropaganda(throughtheUSDA,school homeeconomicsclasses,etc.)reinforcedthemessageofadvertising,placinggreat emphasis on discrediting oldfashioned atavisms like homebaked bread and homegrown and canned vegetables, and promoting in their place the upto
Paul Baran and Paul Sweezy, Monopoly Capitalism : An Essay in the American Eco nomicandSo cialOrder(NewYork:MonthlyReviewPress,1966),p.108. 2 Ibid.,pp.128129. 3 Ibid.,p.131.
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datehousewifelypracticeofheatingstuffupoutofcansfromthemarket.1Jeffrey Kaplandescribedthis,inarecentarticle,asthegospelofconsumption:
[Industrialists] feared that the frugal habits maintained by most American familieswouldbedifficulttobreak.Perhapsevenmorethreateningwasthefact that the industrial capacity for turning out goods seemed to be increasing at a pacegreaterthanpeoplessensethattheyneededthem. ItwasthislatterconcernthatledCharlesKettering,directorofGeneralMo tors Research, to write a 1929 magazine article called Keep the Consumer Dis satisfied....Alongwithmanyofhiscorporatecohorts,hewasdefiningastra tegicshiftforAmericanindustryfromfulfillingbasichumanneedstocreating newones. Ina1927interviewwiththemagazineNationsBusiness,SecretaryofLabor JamesJ.DavisprovidedsomenumberstoillustrateaproblemthattheNewYork Timescalledneedsaturation.Davisnotedthatthetextilemillsofthiscountry canproducealltheclothneededinsixmonthsoperationeachyearandthat14 percent of the American shoe factories could produce a years supply of foot wear.Themagazinewentontosuggest,Itmaybethattheworldsneedsulti matelywillbeproducedbythreedaysworkaweek. Businessleaderswerelessthanenthusiasticabouttheprospectofasociety nolongercenteredontheproductionofgoods.Forthem,thenewlaborsaving machinery presented not a vision of liberation but a threat to their position at thecenterofpower.JohnE.Edgerton,presidentoftheNationalAssociationof Manufacturers, typified their response when he declared: Nothing ... breeds radicalismmorethanunhappinessunlessitisleisure. Bythelate1920s,Americasbusinessandpoliticalelitehadfoundawayto defusethedualthreatofstagnatingeconomicgrowthandaradicalizedworking classinwhatoneindustrialconsultantcalledthegospelofconsumptionthe notion that people could be convinced that however much they have, it isnt enough. President Herbert Hoovers 1929 Committee on Recent Economic Changesobservedinglowingtermstheresults:Byadvertisingandotherpromo tional devices . . . a measurable pull on production has been created which re leasescapitalotherwisetiedup.Theycelebratedtheconceptualbreakthrough: Economically we have a boundless field before us; that there are new wants 2 whichwillmakewayendlesslyfornewerwants,asfastastheyaresatisfied.
RightwinglibertarianslikeMurrayRothbardanswercritiquesofmassadver tisingbysayingtheydownplaytheroleoftheaudienceasanactivemoralagentin decidingwhattoacceptandwhattoreject,andfailtorecognizethatinformation hasacostandthattheressuchathingasrationalignorance.Interestingly,how ever,manyofRothbardsfollowersatMises.OrgandLewRockwell.Comshowno hesitancy whatsoever in attributing a cumulative sleeper effect to statist propa ganda in the public schools and stateallied media. No doubt they would argue that,inthelattercase,boththevolumeandthecontentofthepropagandaarear tificially shifted in the direction of a certain message, thus artificially raising the cost of defending against the propaganda message. But that is exactly my point concerning mass advertising. The state capitalist system makes massproduction industry for the national market artificially prevalent, and makes its need to dis pose of surplus output artificially urgent, thus subjecting the consumer to a bar rageofproconsumptionpropagandafargreaterinvolumethanwouldbeexperi encedinadecentralized,freemarketsocietyofsmallscalelocalcommoditypro duction.
StuartEwen,CaptainsofConsciousness:AdvertisingandtheSocialRootsofConsumer Culture(NewYork:McGrawHill,1976),pp.163,171172. 2 Jeffrey Kaplan, The Gospel of Consumption: And the better future we left behind, Orion,May/June2008<http://www.orionmagazine.org/index.php/articles/article/2962>.
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Chandlers model of highspeed, highthroughput, turning high fixed costs intolowunitcosts,andGalbraithstechnostructure,presupposeapushmodel ofdistribution.Thepushparadigm,accordingto,ischaracterizedbythefollowing assumptions:
Theresnotenoughtogoaround Elitesdothedeciding Organisationsmustbehierarchical Peoplemustbemolded Biggerisbetter Demandcanbeforecast Resourcescanbeallocatedcentrally 1 Demandcanbemet
Heres how push distribution was described by Paul and Percival Goodman notlongafterWorldWarII:
... in recent decades ... the center of economic concern has gradually shifted from either providing goods for the consumer or gaining wealth for the enter priser,tokeepingthecapitalmachinesatworkandrunningatfullcapacity;for thesocialarrangementshavebecomesocomplicatedthat,unlessthemachines are running at full capacity, all wealth and subsistence are jeopardized, invest mentiswithdrawn,menareunemployed.Thatis,whenthesystemdependson all the machines running, unless every kind of good is produced and sold, it is 2 alsoimpossibletoproducebread.
ThesameimperativewasattherootofthehypnopaedicsocializationinHux leys Brave New World: ending is better than mending; the more stitches, the lessriches.OrasGMdesignerHarleyEarlsaidinthe1950s,
Myjobistohastenobsolescence.Ivegotitdowntotwoyears;nowwhenIgetit 3 downtooneyear,Illhaveaperfectscore.
Along the same lines, Baran and Sweezy cite a New York investment banker on the disaster that would befall capitalism without planned obsolescence or branding:Clothingwouldbepurchasedforitsutilityvalue;foodwouldbebought onthebasisofeconomyandnutritionalvalue;automobileswouldbestrippedto essentialsandheldbythesameownersforthefulltentofifteenyearsoftheiruse ful lives; homes would be built and maintained for their characteristics of shel ter....4 The older economy that the push distribution system replaced was one in which most foods and drugs were what we would today call generic. Flour, ce real,andsimilarproductswerecommonlysoldinbulkandweighedandpackaged by the grocer (the ratio had gone from roughly 95% bulk to 75% package goods duringthetwentyyearsbeforeBorsodiwrotein1927);theproducersgearedpro duction to the level of demand that was relayed to them by the retailers orders. Drugs, likewise, were typically compounded by the druggist onpremises to the
John Hagel III, John Seely Brown, and Lang Davison, The Power of Pull: How Small Moves,SmartlyMade,CanSetBigThingsinMotion,quotedinJPRangaswami,Thinking aboutpredictability:MoremusingsaboutPushandPull,ConfusedofCalcutta,May4,2010 <http://confusedofcalcutta.com/2010/05/04/thinkingaboutpredictabilitymoremusings aboutpushandpull/>. 2 PaulandPercivalGoodman,Communitas:MeansofLivelihoodandWaysofLife(New York:VintageBooks,1947,1960),pp.18889. 3 Eric Rumble, Toxic Shocker, Up! Magazine, January 1, 2007 <http://www.up magazine.com/magazine/exclusives/Toxic_Shocker_3.shtml>. 4 BaranandSweezy,MonopolyCapital,p.124.
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physicians specifications, from generic components.1 Production was driven by ordersfromthegrocer,ascustomersuseduphisstockofbulkgoods. Under the new push system, the producers appealed directly to the con sumer through brandname advertising, and relied on pressure on the grocer to create demand for what they chose to produce. Brand loyalty helps to stabilize demand for a particular manufacturers product, and eliminate the fluctuation of demandthataccompaniespricecompetitioninpurecommodities.
Itispossibletoroughlyclassifyamanufacturerasbelongingeithertothosewho make products to meet requirements of the market, or as belonging to those who distribute brands which they decide to make. The manufacturer in the first class relies upon the natural demand for his product to absorb his output. He relies upon competition among wholesalers and retailers in maintaining at tractive stocks to absorb his production. The manufacturer in the second class creates a demand for his brand and forces wholesalers and retailers to buy and stockit.Inordertomarketwhathehasdecidedtomanufacture,hefiguratively 2 hastomakewaterrunuphill.
Theproblemwasthattheconsumer,underthenewregimeofEfficiency,paid about four times as much for trademarked flour, sugar, etc., as he had paid for bulk goods under the old inefficient system.3 Under the old regime, the grocer wasapurchasingagentforthecustomer;underthenew,hewasamarketingagent fortheproducer. Distributioncostsareincreasedstillfurtherbythefactthatlargerscalepro ductionandgreaterlevelsofcapitalintensivenessincreasetheunitcostsresulting fromidlecapacity,andthereby(aswesawinthelastchapter)greatlyincreasethe resourcesdevotedtohighpressure,pushformsofmarketing. BorsodisbookTheDistributionAgewasanelaborationofthefactthat,ashe stated in the Preface, production costs fell by perhaps a fifth between 1870 and 1920, even as the cost of marketing and distribution nearly tripled.4 The modest reduction in unit production cost was more than offset by the increased costs of distribution and highpressure marketing. [E]very part of our economic struc ture, he wrote, was being strained by the strenuous effort to market profitably whatmodernindustrycanproduce.5 Distribution costs are far lower under a demandpull regime, in which pro ductionisgearedtodemand.AsBorsodiargued,
... [I]t is still a fact ... that the factory which sells only in its natural field be cause that is where it can serve best, meets little salesresistance in marketing through the normal channels of distribution. The consumers of such a factory are so close to the manufacturer, their relations are so intimate, that buying from that factory has the force of tradition. Such a factory can make shipment promptly; it can adjust its production to the peculiarities of its territory, and it canmakeadjustmentswithitscustomersmoreintelligentlythanfactorieswhich are situated at a great distance. High pressure methods of distribution do not seemtemptingtosuchafactory.Theydonottemptitfortheverygoodreason thatsuchafactoryhasnoproblemtowhichhighpressuredistributionoffersa solution.
RalphBorsodi,TheDistributionAge(NewYorkandLondon:D.AppletonandCom pany,1929),pp.217,228. 2 Ibid.,p.110. 3 QuotedinIbid.,pp.16061. 4 Ibid.,p.v. 5 Ibid.,p.4.
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Itisthefactorywhichhasdecidedtoproducetrademarked,uniform,pack aged,individualized,andnationallyadvertisedproducts,andwhichhastoestab lishitselfinthenationalmarketbypersuadingdistributorstopayahigherthan normalpriceforitsbrand,whichhashadtoturntohighpressuredistribution. Suchafactoryhasasellingproblemofaverydifferentnaturefromthatoffacto ries which are content to sell only where and to whom they can sell most effi 1 ciently.
For those whose low overhead permits them to produce in response to con sumer demand, marketing is relatively cheap. Rather than expending enormous efforttomakepeoplebuytheirproduct,theycanjustfilltheordersthatcomein. When demand for the product must be created, the effort (to repeat Borsodis metaphor) is comparable to that of making water run uphill. Mass advertising is onlyasmallpartofit.Evenmorecostlyisdirectmailadvertisinganddoortodoor canvassingbysalesmentopressuregrocersinanewmarkettostockonesgoods, andcanvassingofgrocersthemselvesbysalesreps.2Thecostsofadvertising,pack aging, brand differentiation, etc., are all costs of overcoming sales resistance that onlyexistbecauseproductionisdivorcedfromdemandratherthandrivenbyit. Andthisincreasedmarginalcostofdistributionforoutputabovethenatural levelofdemandresults,inaccordancewithRicardoslawofrent,inhigheraverage priceforallgoods.Thismeansthatinthemarketasitexistsnow,thepriceofge nericandstorebrandgoodsisnotgovernedbyproductioncost,asitwouldbeif competinginacommoditymarket;itisgovernedbythebareamountitneedsto bemarkeddowntocompetewithbrandnamegoods.3 For those who can flexibly respond to demand, also, predictability of consumerdemanddoesntmatterthatmuch.Ofthegrocer,forexample,Borsodi pointedoutthatthecustomerwouldalwayshavetoeat,andwouldcontinuetodo sowithoutasinglepennyofhighpressuremarketing.Itwasthereforeamatterof indifference to the grocer whether the customer ate some particular product or brandname;hewouldstockwhatevergoodsthecustomerpreferred,ashisexist ing stocks were used up, and change his orders in keeping with changes in cus tomerpreference.Tothemanufacturer,ontheotherhand,itisofvitalimportance that the customer buy (say) mayonnaise in particularand not just mayonnaise, buthisparticularbrandofmayonnaise.4 Andtheproliferationofbrandnameswithloyalfollowingsraisesthecostof distribution considerably: rather than stocking generic cornflakes in bulk com modity form, and replacing the stock as it is depleted, the grocer must maintain largeenoughstocksofallthe(almostidentical)popularbrandstoensureagainst runningout,whichmeansslowerturnoverandmorewastedshelfspace.Inother words,pushdistributionresultsinthecostlydisruptionofflowbystagnanteddies andflows,intheformofubiquitousinventories.5 Theadvantageofbrandspecification,fromtheperspectiveoftheproducer,is thatitliftsaproductoutofcompetition:6theprevalenceofbrandspecification hasallbutdestroyedthenormalbasisuponwhichtruecompetitivepricescanbe established.7AsBarrySteindescribedit,brandingconvert[s]truecommoditiesto
1
Ibid.,pp.112113. Ibid.,p.136. 3 Ibid.,p.247. 4 Ibid.,pp.8384. 5 Ibid.,p.84. 6 Ibid.,p.162. 7 Ibid.pp.21617.

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apparent tailored goods, so as to avoid direct price competition in the market place.
The distinctions introducedelaborate packaging, exhortative advertising and promotion that asserts the presence of unmeasurable values, and irrelevant physical modification (colored toothpaste)do not, in fact, render these com petingproductsdifferentinanysubstantivesense,buttotheextentthatcon sumersareconvincedbythesedistinctionsandtreatthemasiftheywerediffer 1 ent,productloyaltyisgenerated.
Under the old regime, competition between identifiable producers of bulk goods enabled grocers to select the highest quality bulk goods, while providing themtocustomersatthelowestprice.Brandspecification,ontheotherhand,re lieves the grocer of the responsibility for standing behind his merchandise and turnshimintoamerestockerofshelveswiththemostdemandedbrands. Thechange,naturally,didnotgounremarkedbythoseprofitingfromit.For example,heresabitofcommentaryfromanadvertisingtradepaperin1925:
InthestatementtoitsstockholdersissuedrecentlybyTheAmericanSugar RefiningCompany,wefindthisstatement: Formerly, as is well known, household sugar was largely of bulk pricing. We have described the sale of package sugar and table syrup under the trade names of Domino and Franklin with such success that the volume of trade mark packages now constitutes roundly onehalf of our production that goes intohouseholds.... Thesefactsshouldbeofvitalinteresttoanyexecutivewhofacestheprob lem of marketing a staple product that is hard to control because it is sold in bulk. Twentyyearsagothesaleofsugarincardboardcartonsunderabrandname wouldhavebeenunthinkable.Tenyearshencethiskindofhistorywillhavere peated itself in connection with many other staple commodities now sold in 2 bulk....
The process went on, just as the paper predicted, untildecades laterthe very idea of a return to price competition in the production of goods, instead of brandname competition for market share, would strike manufacturers with hor ror. What Borsodi proposed, making [c]ompetition ... descend from the cloudy heights of sales appeals and braggadocio generally, to just one factorprice,3 is theworstnightmareoftheoligopolymanufacturerandtheadvertisingindustry:
At the annual meeting of the U.S. Association of National Advertisers in 1988, Graham H. Phillips, the U.S. Chairman of Ogilvy & Mather, berated the assem bledexecutivesforstoopingtoparticipateinacommoditymarketplacerather thananimagebasedone.Idoubtthatmanyofyouwouldwelcomeacommod ity marketplace in which one competed solely on price, promotion and trade deals, all of which can be easily duplicated by competition, leading to ever decreasingprofits,decay,andeventualbankruptcy.Othersspokeoftheimpor tance of maintaining conceptual valueadded, which in effect means adding nothingbutmarketing.Stoopingtocompeteonthebasisofrealvalue,theagen ciesominouslywarned,wouldspeednotjustthedeathofthebrand,butcorpo 4 ratedeathaswell. .
Stein,Size,Efficiency,andCommunityEnterprise,p.79. Advertising and Selling Fortnightly, February 25, 1925, in Borsodi, The Distribution Age,pp.15960. 3 StuartChaseandF.J.Schlink,TheNewRepublic,December30,1925,inIbid.,p.204. 4 NaomiKlein,NoLogo(NewYork:Picador,1999),p.14.
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Its telling that Chandler, the apostle of the great efficiencies of this entire system, frankly admitted all of these things. In fact, far from regarding it as an admission, he treated it as a feature of the system. He explicitly equated pros peritytotherateofflowofmaterialthroughthesystemandthespeedofproduc tionanddistributionwithoutanyregardtowhethertherateofflowwastwice asfastbecausepeoplewerethrowingstuffinthelandfillstwiceasfasttokeepthe pipelinesfromcloggingup.
The new middle managers did more than devise ways to coordinate the high volume flow from suppliers of raw materials to consumers. They invented and perfectedwaystoexpandmarketsandtospeeduptheprocessesofproduction anddistribution.ThoseatAmericanTobacco,Armour,andothermassproduc ersoflowpricedpackagedproductsperfectedtechniquesofproductdifferentia tion through advertising and brand names that had been initially developed by mass marketers, advertising agencies, and patent medicine makers. The middle managers at Singer wee the first to systematize personal selling by means of doortodoorcanvassing;thoseatMcCormickamongthefirsttohavefranchised dealers using comparable methods. Both companies innovated in installment 1 buyingandothertechniquesofconsumercredit.
In other words, the Sloanist system Chandler idealized was more efficient becauseitwasbetteratpersuadingpeopletothrowstuffawaysotheycouldbuy more,andbetteratproducingsubstandardshitthatwouldhavetobethrownaway inafewyears.Onlyamanofthemid20thcentury,writingattheheightofconsen sus capitalism, from the standpoint of an establishment liberalism was as yet ut terlyuntaintedbythethinnestveneerofgreenwash,couldwritesuchathingfrom thestandpointofanenthusiast. Increasedunitcostsfromidlecapacity,giventhehighoverheadoflargescale production,arethechiefmotivebehindthepushdistributionmodel.Evenso,the restrainedcompetitionofanoligopolymarketlimitsthecompetitivedisadvantage resulting from idle capacityso long as the leading firms in an industry are run ning at roughly comparable percentages of capacity, and can pass their overhead costs onto the customer. The oligopoly markup included in consumer price re flectsthehighcostsofexcesscapacity.
Itisdifficulttoestimatehowlargeapartofthenationsproductionfacilities are normally in use. One particularly able observer of economic tendencies, ColonelLeonardP.Ayres,usesthenumberofblastfurnacesinoperationasaba rometer of business conditions. When blast furnaces are in 60 per cent. opera tion,conditionsarenormal.... Itisobvious,if60percent.representsnormality,thatconsumersofsucha basiccommodityaspigironmustpaydividendsuponaninvestmentcapableof producingtwothirdsmorepigironthanthecountryusesinnormaltimes.
Borsodialsofoundthatflourmills,steelplants,shoefactories,coppersmelt ers, lumber mills, automobiles, and rayon manufacturers were running at similar orlowerpercentagesoftotalcapacity.2Eitherway,itistheconsumerwhopaysfor overaccumulation:bothforthehighmarketingcostsofdistributingoverproduced goods when industry runs at full capacity, and for the high overhead when the firms in an oligopoly market all run at low capacity and pass their unit costs on throughadministeredpricing. Socartelizationandhighcostsfromidlecapacity,alongsidepushdistribution and planned obsolescence, together constitute the twin pathologies of monopoly
1
Chandler,TheVisibleHand,p.411. Borsodi,TheDistributionAge,pp.4243.
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capitalism.Bothareexpedientsfordealingwiththeenormouscapitaloutlaysand overproduction entailed in massproduction industry, and both require that out side society be subordinated to the needs of the corporation and subjected to its control. Theworstcasescenario,fromourstandpoint,isthatbigbusinesswillattempt anendrunaroundtheproblemofexcesscapacityandunderconsumptionthrough measures like the abortive National Industrial Recovery Act of the New Deal era: cartelizinganindustryundergovernmentauspices,soallitsfirmscanoperateata fraction of full capacity indefinitely and use monopoly pricing to pass the cost of idlecapacityontotheconsumeronacostplusbasis.Anyonetemptedtoseethis asasolutionshouldbearinmindthatitremovesallincentivetocontrolcostsor to promote efficiency. For a picture of the kind of society that would result from suchanarrangement,oneneedonlywatchthemovieBrazil. The overall system, in short, was a solution in search of a problem. State subsidies and mercantilism gave rise to centralized, overcapitalized industry, which led to overproduction, which led to the need to find a way of creating de mandforlotsofcrapthatnobodywanted.
C.STATEACTIONTOABSORBSURPLUS:IMPERIALISM
TherootsofthecorporatestateintheU.S.,morethananythingelse,lieinthe crisisofoverproductionasperceivedbycorporateandstateelitesespeciallythe traumatic Depression of the 1890sand the requirement, also as perceived by them, for state intervention to absorb surplus output or otherwise deal with the problems of overproduction, underconsumption, and overaccumulation. Accord ing to William Appleman Williams, the Crisis of the 1890s raised in many sec tions of American society the specter of chaos and revolution.1 Economic elites sawitastheresultofoverproductionandsurpluscapital,andbelieveditcouldbe resolvedonlythroughaccesstoanewfrontier.Withoutstateguaranteedaccess toforeignmarkets,outputwouldfallbelowcapacity,unitcostswouldgoup,and unemploymentwouldreachdangerouslevels. Accordingly,thecenterpieceofAmericanforeignpolicytothepresentdayhas beenwhatWilliamscalledOpenDoorImperialism2:securingAmericanaccessto foreign markets on equal terms to the European colonial powers, and opposing attempts by those powers to divide up or close markets in their spheres of influ ence. Open Door Imperialism consisted of using U.S. political power to guarantee accesstoforeignmarketsandresourcesontermsfavorabletoAmericancorporate interests,withoutrelyingondirectpoliticalrule.Itscentralgoalwastoobtainfor U.S. merchandise, in each national market, treatment equal to that afforded any otherindustrialnation.Mostimportantly,thisentailedactiveengagementbythe U.S. government in breaking down the imperial powers existing spheres of eco nomicinfluenceorpreference.Theresult,inmostcases,wastotreatashostileto U.S. security interests any largescale attempt at autarky, or any other policy whose effect was to withdraw major areas of the world from the disposal of the U.S.corporateeconomy.Whenthepowerattemptingsuchpolicieswasanequal, like the British Empire, the U.S. reaction was merely one of measured coolness.
William Appleman Williams, The Tragedy of American Diplomacy (New York: Dell PublishingCompany,1959,1962)212. 2 Williams, The Contours of American History (Cleveland and New York: The World PublishingCompany,1961).
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Whenitwasperceivedasaninferior,likeJapan,theU.S.resortedtomoreforceful measures,aseventsofthelate1930sindicate.Andwhateverthedegreeofequality betweenadvancednationsintheiraccesstoThirdWorldmarkets,itwasclearthat ThirdWorldnationswerestilltobesubordinatedtotheindustrializedWestina collectivesense. Inthelate1930s,theAmericanpoliticalleadershipfearedthatFortressEurope andtheGreaterEastAsianCoProsperityspherewoulddeprivetheAmericancor porateeconomyofvitallyneededrawmaterials,nottomentionoutletsforitssur plusoutputandcapital;thatswhatmotivatedFDRtomaneuverthecountryinto anotherworldwar.TheStateDepartmentsinternalstudiesatthetimeestimated thattheAmericaneconomyrequired,ataminimum,theresourcesandmarketsof aGrandAreaconsistingofLatinAmerica,EastAsia,andtheBritishEmpire.Ja pan,meanwhile,wasconqueringmostofChina(homeoftheoriginalOpenDoor) and the tin and rubber of Indochina, and threatening to capture the oil of the DutchEastIndiesaswell.InEurope,theworstcasescenariowasthefallofBritain, followed by the German capture of some considerable portion of the Royal Navy and subsequently of the Empire. War with the Axis would have followed from theseperceivedthreatsasamatterofcourse,evenhadFDRnotsuccessfullyma neuveredJapanintofiringthefirstshot.1 WorldWarII,incidentally,alsowentalongwaytowardpostponingAmericas crises of overproduction and overaccumulation for a generation, by blowing up most of the capital in the world outside the United States and creating a perma nentwareconomytoabsorbsurplusoutput. The American policy that emerged from the war was to secure control over the markets and resources of the global Grand Area through institutions of global economic governance, as created by the postwar Bretton Woods system, and to make preventing defection from within by autarkic powers the center pieceofnationalsecuritypolicy. The problem of access to foreign markets and resources was central to U.S. postwarplanning.Giventhestructuralimperativesofexportdependentmonop olycapitalism,2thethreatofapostwardepressionwasveryreal.Theoriginaldrive toward foreign expansion at the end of the nineteenth century reflected the fact that industry, with state capitalist encouragement, had expanded far beyond the abilityofthedomesticmarkettoconsumeitsoutput.EvenbeforeWorldWarII,
LaurenceH.ShoupandWilliamMinter,ShapingaNewWorldOrder:TheCouncil on Foreign Relations Blueprint for World Hegemony, 19391945, in Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management (Boston:SouthEndPress,1980),pp.13556 2 Nowthepricethatbringsthemaximummonopolyprofitisgenerallyfarabovethe price that would be fixed by fluctuating competitive costs, and the volume that can be marketed at that maximum price is generally far below the output that would be techni callyandeconomicallyfeasible....[Thetrust]extricatesitselffromthisdilemmabypro ducingthefulloutputthatiseconomicallyfeasible,thussecuringlowcosts,andofferingin the protected domestic market only the quantity corresponding to the monopoly price insofar as the tariff permits; while the rest is sold, or dumped, abroad at a lower price....Joseph Schumpeter, Imperialism, in Imperialism, Social Classes: Two Essays by Joseph Schumpeter. Translated by Heinz Norden. Introduction by Hert Hoselitz (New York:MeridianBooks,1955)7980. JosephStromberg,bytheway,didanexcellentjobofintegratingthisthesis,generally identifiedwiththehistoricalrevisionismoftheNewLeft,intothetheoreticalframeworkof MisesandRothbard,inTheRoleofStateMonopolyCapitalismintheAmericanEmpire JournalofLibertarianStudiesVolume15,no.3(Summer2001),pp.5793.Availableonline at<http://www.mises.org/journals/jls/15_3/15_3_3.pdf>.
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the state capitalist economy had serious trouble operating at the level of output needed for full utilization of capacity and cost control. Militaryindustrial policy during the war exacerbated the problem of overaccumulation, greatly increasing thevalueofplantandequipmentattaxpayerexpense.Theendofthewar,iffol lowedbythetraditionalpatternofdemobilization,wouldhaveresultedinadras tic reduction in orders to that same overbuilt industry just as over ten million workerswerebeingdumpedbackintothecivilianlaborforce. Acentralfacetofpostwareconomicpolicy,asreflectedintheBrettonWoods agencies, was state intervention to guarantee markets for the full output of U.S. industry and profitable outlets for surplus capital. The World Bank was designed tosubsidizetheexportofcapitaltotheThirdWorld,byfinancingtheinfrastruc turewithoutwhichWesternownedproductionfacilitiescouldnotbeestablished there.AccordingtoGabrielKolkos1988estimate,almosttwothirdsoftheWorld Banksloanssinceitsinceptionhadgonetotransportationandpowerinfrastruc ture.1AlaudatoryTreasuryDepartmentreportreferredtosuchinfrastructurepro jects (comprising some 48% of lending in FY 1980) as externalities to business, andspokeglowinglyofthebenefitsofsuchprojectsinpromotingtheexpansionof business into large market areas and the consolidation and commercialization of agriculture.2TheVoltaRiverpowerproject,forexample,wasbuiltwithAmerican loans (at high interest) to provide Kaiser aluminum with electricity at very low rates.3
D.STATEACTIONTOABSORBSURPLUS:STATECAPITALISM
Government also directly intervened to alleviate the problem of overproduc tion,byitsincreasingpracticeofdirectlypurchasingthecorporateeconomyssur plus outputthrough Keynesian fiscal policy, massive highway and civil aviation programs, the militaryindustrial complex, the prisonindustrial complex, foreign aid,andsoforth.BaranandSweezypointtothegovernmentsrisingshareofGDP asanapproximateindexoftheextenttowhichgovernmentsroleasacreatorof effectivedemandandabsorberofsurplushasgrownduringthemonopolycapital istera.4
If the depressive effects of growing monopoly had operated unchecked, the United States economy would have entered a period of stagnation long before theendofthenineteenthcentury,anditisunlikelythatcapitalismcouldhave survived into the second half of the twentieth century. What, then, were the powerful external stimuli which offset these depressive effects and enabled the economy to grow fairly rapidly during the later decades of the nineteenth cen turyand,withsignificantinterruptions,duringthefirsttwothirdsofthetwenti ethcentury?Inourjudgment,theyareoftwokindswhichweclassifyas(1)ep ochmakinginnovations,and(2)warsandtheiraftermaths.
Gabriel Kolko, Confronting the Third World: United States Foreign Policy 19451980 (NewYork:PantheonBooks,1988),p.120. 2 United States Participation in the Multilateral Development Banks in the 1980s. De partmentoftheTreasury(Washingon,DC:1982),p.9. 3 L.S.Stavrianos,ThePromiseoftheComingDarkAge(SanFrancisco:W.H.Freeman andCo.1976),p.42. 4 BaranandSweezy,pp.146147.
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Byepochmakinginnovations,BaranandSweezyrefertothoseinnovations which shake up the entire pattern of the economy and hence create vast invest mentoutletsinadditiontothecapitalwhichtheydirectlyabsorb.1 As for wars, Emmanuel Goldstein described their function quite well. Even whenweaponsofwararenotactuallydestroyed,theirmanufactureisstillacon venient way of expending labor power without producing anything that can be consumed.Warisawayofshatteringtopieces,orpouringintothestratosphere, orsinkinginthedepthsofthesea,excessoutputandcapital.2 Earlier, we quoted Robin Marris on the tendency of corporate bureaucracies toemphasize,notthecharacterofgoodsproduced,buttheskillswithwhichtheir productionwasorganized.Thisisparalleledatasocietallevel.Theimperativeto destroy surplus is reflected in the GDP, which measures not the utility of goods andservicestotheconsumerbutthematerialsconsumedinproducingthem.The moreofBastiatsbrokenwindows,themoreinputsconsumedtoproduceagiven output,thehighertheGDP. Aswesaidinthelastchapter,thehighwayautomobilecomplexandthecivil aviation system were continuations of the process begun with the railroads and otherinternalimprovementsofthenineteenthcentury:i.e.,governmentsubsidy tomarketcentralizationandlargefirmsize.Butaswepointedoutthen,theyalso have special significance as examples of the phenomenon Paul Baran and Paul Sweezy described in Monopoly Capitalism: governments creation of entire new industriestosoakupthesurplusgeneratedbycorporatecapitalismschronicten denciestowardoverinvestmentandoverproduction. Of the automobilehighway complex, Baran and Sweezy wrote, [t]his com plexofprivateinterestsclusteringaroundoneproducthasnoequalelsewherein the economyor in the world. And the whole complex, of course, is completely dependent on the public provision of roads and highways.3 Not to mention the roleofU.S.foreignpolicyinguaranteeingaccesstocheapandabundantpetro leum.
Oneofthemajorbarrierstothefledglingautomobileindustryattheturnof the century was the poor state of the roads. One of the first highway lobbying groupswastheLeagueofAmericanWheelmen,whichfoundedgoodroadsas sociationsaroundthecountryand,in1891,beganlobbyingstatelegislatures.... TheFederalAidRoadsActof1916encouragedcoasttocoastconstructionof pavedroads,usuallyfinancedbygasolinetaxes(asymbioticrelationshipifever there was one). By 1930, the annual budget for federal road projects was $750 million. After 1939, with a push from President Franklin Roosevelt, limited 4 accessinterstatesbegantomakeruralareasaccessible.
It was this last, in the 1930s, that signified the most revolutionary change. Fromitsbeginning,themovementforanationalsuperhighwaynetworkwasiden tified, first of all, with the fascist industrial policy of Hitler, and second with the Americanautomotiveindustry.
The most powerful pressure group in Washington began in June, 1932, when GMPresident,AlfredP.Sloan,createdtheNationalHighwayUsersConference, Ibid.,p.219. GeorgeOrwell,1984.SignetClassicsreprint(NewYork:HarcourtBraceJovanovich, 1949,1981),p.157. 3 BaranandSweezy,pp.173174. 4 JimMotavalli,GettingOutofGridlock:ThankstotheHighwayLobby,NowWere Stuck in Traffic. How Do We Escape? E Magazine, March/April 2002 <http://www .emagazine.com/view/?534>.
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invitingoilandrubberfirmstohelpGMbankrollapropagandaandlobbyingef 1 fortthatcontinuestothisday.
One of the earliest depictions of the modern superhighway in America was the Futurama exhibit at the 1939 Worlds Fair in New York, sponsored by (who else?)GM.
The exhibit ... provided a nation emerging from its darkest decade since the CivilWaramesmerizingglimpseofthefutureafuturethatinvolvedlotsand lotsofroads.Bigroads.Fourteenlanesuperhighwaysonwhichcarswouldtravel at 100 mph. Roads on which, a recorded narrator promised, Americans would 2 eventuallybeabletocrossthenationinaday.
The Interstates association with General Motors didnt end there, of course. ItsactualconstructiontookplaceunderthesupervisionofDODSecretaryCharles Wilson, formerly the companys CEO. During his 1953 confirmation hearings, whenaskedwhetherhecouldmakeadecisioninthecountrysinterestthatwas contrarytoGMsinterest,
Wilsonshotbackwithhisfamouscomment,Icannotconceiveofonebecause foryearsIthoughtwhatwasgoodforourcountrywasgoodforGeneralMotors, 3 andviceversa.Thedifferencedidnotexist.Ourcompanyistoobig.
WilsonsroleintheInterstateprogramwashardlythatofameredisinterested technocrat.FromthetimeofhisappointmenttoDOD,hepushedrelentlesslyfor it.AndthechiefadministratoroftheprogramwasFrancisDuPont,whosefamily ownedthelargestshareofGMstock....4 Corporatepropaganda,assoofteninthetwentiethcentury,playedanactive roleinattemptstoreshapethepopularculture.

Helpingtokeepthedrivingspiritalive,DowChemical,producerofasphalt,en tered the PR campaign with a film featuring a staged testimonial from a grade school teacher standing up to her antihighway neighbors with quiet indigna tion. Cant you see this highway means a whole new way of life for the chil 5 dren?
Whateverthepoliticalmotivationbehindit,theeconomiceffectoftheInter statesystemshouldhardlybecontroversial.Virtually100%oftheroadbeddamage to highways is caused by heavy trucks. And despite repeated liberalization of maximumweightrestrictions,farbeyondtheheaviestconceivableweighttheIn terstateroadbedswereoriginallydesignedtosupport,
fueltaxesfailmiserablyatcapturingfrombigrigoperatorsthecostofexponen tial pavement damage caused by higher axle loads. Only weightdistance user chargesareefficient,buttruckershavebeensuccessfulatscrappingtheminall 6 butafewwesternstateswherethepushforrepealcontinues. MikeFerner,TakenforaRideontheInterstateHighwaySystem,MRZine(Monthly Review)June28,2006<http://mrzine.monthlyreview.org/ferner280606.html>. 2 JustinFox,TheGreatPavingHowtheInterstateHighwaySystemhelpedcreatethemo derneconomyandreshapedtheFORTUNE500.ReprintedfromFortune.CNNMoney.Com, January 26, 2004 <http://money.cnn.com/magazines/fortune/fortune_archive/2004/01/26/ 358835/index.htm>. 3 Edwin Black, Hitlers Carmaker: How Will Posterity Remember General Motors Conduct? (Part 4) History News Network, May 14, 2007 <http://hnn.us/articles/38829 .html>. 4 Ferner,TakenforaRide. 5 Ibid. 6 FrankN.Wilner,Givetruckersaninch,theylltakeatonmile:everyliberalization hasbeenalaunchingpadforfurtherincreasestruckingwantslongcombinationvehicle
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Soonlyabouthalftherevenueofthehighwaytrustfundcomesfromfeesor fueltaxesonthetruckingindustry,andtherestisexternalizedonprivateautomo biles. Even David S. Lawyer, a skeptic on the general issue of highway subsidies, onlyquestionswhetherhighwaysreceiveanetsubsidyfromgeneralrevenuesover andabovetotaluserfeesonbothtrucksandcars;heeffectivelyconcedesthesub sidyofheavytruckingbythegasolinetax.1 As for the civil aviation system, from the beginning it was a creature of the state. The whole physical infrastructure was built, in its early decades, with tax money.
Since1946,thefederalgovernmenthaspouredbillionsofdollarsintoairport development. In 1992, Prof. Stephen Paul Dempsey of the University of Denver estimatedthatthecurrentreplacementvalueoftheU.S.commercialairportsys temvirtually all of it developed with federal grants and taxfree municipal bondsat$1trillion. Not until 1971 did the federal government begin collecting user fees from airline passengers and freight shippers to recoup this investment. In 1988 the CongressionalBudgetOfficefoundthatinspiteofuserfeespaidintotheAirport andAirwaysTrustFund,thetaxpayersstillhadtotransfer$3billioninsubsidies peryeartotheFAAtomaintainitsnetworkofmorethan400controltowers,22 airtrafficcontrolcenters,1,000radarnavigationaids,250longrangeandtermi nal radar systems and its staff of 55,000 traffic controllers, technicians and bu 2 reaucrats.
(Andevenasidefromtheinadequacyofuserfees,eminentdomainremainscentral tothebuildingofnewairportsandexpansionofexistingones.) Subsidiestotheairportandairtrafficcontrolinfrastructureofthecivilavia tion system are only part of the picture. Equally important was the direct role of thestateincreatingtheheavyaircraftindustry,whoseheavycargoandpassenger jets revolutionized civil aviation after WWII. The civil aviation system is, many timesover,acreatureofthestate. InHarryTrumanandtheWarScareof1948,FrankKofskydescribedtheair craftindustryasspiralingintoredinkaftertheendofthewar,andonthevergeof bankruptcywhenitwasrescuedbyTrumansnewboutofColdWarspendingon heavy bombers.3 David Noble pointed out that civilian jumbo jets would never have existed without the governments heavy bomber contracts. The production runs for the civilian market alone were too small to pay for the complex and ex pensivemachinery.The747isessentiallyaspinoffofmilitaryproduction.4 The permanent war economy associated with the Cold War prevented the U.S. from relapsing into depression after demobilization. The Cold War restored the corporate economys heavy reliance on the state as a source of guaranteed sales. Charles Nathanson argued that one conclusion is inescapable: major firms withhugeaggregationsofcorporatecapitalowetheirsurvivalafterWorldWarII
restrictionsdropped,RailwayAge,May1997<http://findarticles.com/p/articles/mi_m1215/ is_n5_v198/ai_19460645>. 1 David S. Lawyer, Are Roads and Highways Subsidized? March 2004 <http://www .lafn.org/~dave/trans/econ/highway_subsidy.html>. 2 JamesCoston,AmtrakReformCouncil,2001,inAmericaslonghistoryofsubsidizing transportation <http://www.trainweb.org/moksrail/advocacy/resources/subsidies/transport .htm>. 3 Frank Kofsky, Harry Truman and the War Scare of 1948, (New York: St. Martins Press,1993). 4 Noble,AmericabyDesign,pp.67.
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to the Cold War.... 1 According to David Noble, employment in the aircraft in dustry grew more than tenfold between 1939 and 1954. Whereas military aircraft amounted to only a third of industry output in 1939. By 1953, military airframe weightproductionwas93%oftotaloutput.2Theadvancesinaerodynamics,met allurgy,electronics,andaircraftenginedesignwhichmadesupersonicflightareal itybyOctober1947wereunderwrittenalmostentirelybythemilitary.3 AsMarxpointedoutinVolumeThreeofCapital,theriseofmajornewforms of industry could absorb surplus capital and counteract the falling direct rate of profit.BaranandSweezy,likewise,consideredepochmakinginventionsaspar tial counterbalances to the everincreasing surplus. Their chief example was the rise of the automobile industry in the 1920s, which (along with the highway pro gram)wastodefinetheAmericaneconomyformostofthemid20thcentury.4The hightechboomofthe1990swasasimilarlyrevolutionaryevent.Itisrevealingto consider the extent to which both the automobile and computer industries, far morethanmostindustries,weredirectproductsofstatecapitalism. Besidescivilianjumbojets,manyotherentirelynewindustrieswerealsocre ated almost entirely as a byproduct of military spending. Through the military industrial complex, the state has socialized a major shareprobably the major ityof the cost of private businesss research and development. If anything the roleofthestateaspurchaserofsurpluseconomicoutputiseclipsedbyitsroleas subsidizer of research cost, as Charles Nathanson pointed out. Research and de velopmentwasheavilymilitarizedbytheColdWarmilitaryR&Dcomplex.Mili taryR&Doftenresultsinbasic,generalusetechnologieswithbroadcivilianappli cations.TechnologiesoriginallydevelopedforthePentagonhaveoftenbecomethe basisforentirecategoriesofconsumergoods.5Thegeneraleffecthasbeentosub stantially[eliminate]themajorriskareaofcapitalism:thedevelopmentofandex perimentationwithnewprocessesofproductionandnewproducts.6 Thisisthecaseinelectronicsespecially,wheremanyproductsoriginallyde veloped by military R&D have become the new commercial growth areas of the economy.7Transistorsandotherminiaturizedcircuitryweredevelopedprimarily with Pentagon research money. The federal government was the primary market forlargemainframecomputersintheearlydaysoftheindustry;withoutgovern ment contracts, the industry might never have had sufficient production runs to adoptmassproductionandreduceunitcostslowenoughtoentertheprivatemar ket. Overall, Nathanson estimated, industry depended on military funding for around 60% of its research and development spending; but this figure is consid erably understated by the fact that a significant part of nominally civilian R&D spendingisaimedatdevelopingcivilianapplicationsformilitarytechnology.8Itis alsounderstatedbythefactthatmilitaryR&Disoftenusedfordevelopingproduc
CharlesNathanson,TheMilitarizationoftheAmericanEconomy,inDavidHorow itz, ed., Corporations and the Cold War (New York and London: Monthly Review Press, 1969),p.214. 2 DavidF.Noble,ForcesofProduction:ASocialHistoryofAmericanAutomation(New York:AlfredA.Knopf,1984),pp.56. 3 Ibid.,p.6. 4 BaranandSweezy,MonopolyCapitalism,p.220. 5 TheMilitarizationoftheAmericanEconomy,p.208. 6 Ibid.,p.230. 7 Ibid.,p.230. 8 Ibid.,pp.22225.
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tion technologies that become the basis for production methods throughout the civiliansector. In particular, as described by Noble in Forces of Production, industrial auto mation, cybernetics and miniaturized electronics all emerged directly from the militaryfunded R&D of WWII and the early Cold War. The aircraft, electronics andmachinetoolsindustriesweretransformedbeyondrecognitionbythemilitary economy.1 Themodernelectronicsindustry,Noblewrites,waslargelyamilitarycrea tion. Before the war, the industry consisted largely of radio.2 Miniaturized elec tronicsandcyberneticswerealmostentirelytheresultofmilitaryR&D.
Miniaturization of electrical circuits, the precursorof modern microelectronics, was promoted by the military for proximity fuses for bombs.... Perhaps the mostsignificantinnovationwastheelectronicdigitalcomputer,createdprimar ilyforballisticscalculationsbutusedaswellforatomicbombanalysis.Afterthe war,theelectronicsindustrycontinuedtogrow,stimulatedprimarilybymilitary demandsforaircraftandmissileguidancesystems,communicationsandcontrol instruments, industrial control devices, highspeed electronic computers for air defensecommandandcontrolnetworks...,andtransistorsforallofthesede vices....In1964,twothirdsoftheresearchanddevelopmentcostsintheelec trical equipment industry (e.g., those of GE, Westinghouse, RCA, Raytheon, 3 AT&T,Philco,IBM,SperryRand_werestillpaidforbythegovernment.
The transistor, the outgrowth of wartime work on semiconductors, came outofBellLabsin1947.Despiteobstacleslikehighcostandreliability,andresis tance resulting from path dependency in the tubebased electronic industry, the transistorwonout
throughthelargescaleandsustainedsponsorshipofthemilitary,whichneeded the device for aircraft and missile control, guidance, and communications sys tems,andforthedigitalcommandandcontrolcomputersthatformedthecore 4 oftheirdefensenetworks.
Incybernetics,likewise,theelectronicdigitalcomputerwasdevelopedlargely in response to military needs. ENIAC, developed for the Army at the Universitys MooreSchoolofElectricalEngineering,wasusedforballisticscalculationsandfor calculationsintheatomicbombproject.5Despitethereducedcostandincreased reliability of hardware, and advances in computer language software systems, in the 1950s the main users remained government agencies and, in particular, the military.TheAirForceSAGEairdefensesystemalone,forexample,employedthe bulkofthecountrysprogrammers... SAGEproduced,amongotherthings,adigitalcomputerthatwasfastenough tofunctionaspartofacontinuousfeedbackcontrolsystemofenormouscomplex ity, which could therefore be used continuously to monitor and control a vast array of automatic equipment in real time.... These capabilities were key to lateradvancesindustrialautomation.6 Thesamepatternprevailedinthemachinetoolindustry,theprimaryfocusof ForcesofProduction.Theshareoftotalmachinetoolsinusethatwereunderten yearsoldrosefrom28%in1940to62%in1945.Attheendofthewar,threehun
1
Noble,ForcesofProduction,p.5. Ibid.,p.7. 3 Ibid.,pp.78. 4 Ibid.,pp.4748. 5 Ibid.,p.50. 6 Ibid.,p.52.

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dredthousandmachinetoolsweredeclaredsurplusanddumpedonthecommer cialmarketatfiresaleprices.Althoughthiscausedtheindustrytocontract(and consolidate),theColdWarresultedinarevivalofthemachinetoolsindustry.R&D expenditures in machine tools expanded eightfold from 1951 to 1957, thanks to militaryneeds.Intheprocess,themachinetoolindustrybecamedominatedbythe costpluscultureofmilitaryindustry,withitsguaranteedprofit.1 The specific technologies used in automated control systems for machine toolsallcameoutofthemilitaryeconomy:
... [T]he effort to develop radardirected gunfire control systems, centered at MITs Servomechanisms Laboratory, resulted in a range of remote control de vicesforpositionmeasurementandprecisioncontrolofmotion;thedrivetode velopproximityfusesformortarshellsproducedminiaturizedtransceivers,early integrated circuits, and reliable, rugged, and standardized components. Finally, bytheendofthewar,experimentationattheNationalBureauofStandards,as wellasinGermany,hadproducedmagnetictape,recordingheads(tapereaders), and tape recorders for sound movies and radio, as well as information storage 2 andprogrammablemachinecontrol.
In particular, World War II R&D for radardirected gunfire control systems were the primary impetus behind the development of servomechanisms and automaticcontrol,
pulsegenerators,toconveypreciselyelectricalinformation;transducers,forcon vertinginformationaboutdistance,heat,speed,andthelikeintoelectricalsig 3 nals;andawholerangeofassociatedactuating,controlandsensingdevices.
Industrialautomationwasintroducedinprivateindustrybythesamepeople who had developed the technology for the military economy. The first analog computercontrolledindustrialoperationswereintheelectricalpowerandpetro leumrefiningindustriesinthe1950s.By1959,TexacosPortArthurrefineryplaced productionunderfulldigitalcomputercontrol,andwasfollowedin1960byMon santosLouisianaammoniaplantandB.F.GoodrichsvinylplantinCalvert,Ken tucky. From there the revolution quickly spread to steel rolling mills, blast fur naces,andchemicalprocessingplants.Bythe1960s,computerizedcontrolevolved from openloop to closedloop feedback systems, with computers making adjust mentsautomaticallybasedonsensorfeedback.4 Numericallycontrolledmachinetools,inparticular,werefirstdevelopedwith AirForcemoney,andfirstintroduced(bothwithAirForcefundingandunderAir Forcepressure)intheaircraftandtheaircraftenginesandpartsindustries,andin USAFcontractorsinthemachinetoolindustry.5 Sothemilitaryeconomyandotherstatecreatedindustrieswereanenormous spongeforsurpluscapitalandsurplusoutput.Theheavyindustrialandhightech sectors were given a virtually guaranteed outlet, not only by U.S. military pro curement, but by grants and loan guarantees for foreign military sales under the MilitaryAssistanceProgram. Although apologists for the militaryindustrial complex have tried to stress the relatively small fraction of total production represented by military goods, it makesmoresensetocomparethevolumeofmilitaryprocurementtotheamount ofidlecapacity.Militaryproductionrunsamountingtoaminorpercentageoftotal
1
Ibid.,pp.89. Ibid.,p.47. 3 Ibid.,pp.4849. 4 Ibid.,pp.6061. 5 Ibid.,p.213.

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productionmightabsorbamajorpartoftotalidleproductioncapacity,andhavea hugeeffectonreducingunitcosts.Besides,therateofprofitonmilitarycontracts tendstobequiteabithigher,giventhefactthatmilitarygoodshavenostandard marketprice,andthefactthatpricesaresetbypoliticalmeans(asperiodicPenta gon budget scandals should tell us).1 So military contracts, small though they mightbeasaportionofafirmstotaloutput,mightwellmakethedifferencebe tweenprofitandloss. Seymour Melman described the permanent war economy as a privately owned, centrallyplanned economy that included most heavy manufacturing and hightechindustry.Thisstatecontrolledeconomywasbasedontheprinciplesof maximizationofcostsandofgovernmentsubsidies.2
Itcandrawonthefederalbudgetforvirtuallyunlimitedcapital.Itoperatesinan insulated, monopoly market that makes the statecapitalist firms, singly and jointly,impervioustoinflation,topoorproductivityperformance,topoorprod uct design and poor production managing. The subsidy pattern has made the statecapitalistfirmsfailureproof.Thatisthestatecapitalistreplacementforthe classic selfcorrecting mechanisms of the competitive, costminimizing, profit 3 maximizingfirm.
A great deal of what is called progress amounts, not to an increase in the volume of consumption per unit of labor, but to an increase in the inputs con sumedperunitofconsumptionnamely,theincreasedcostandtechnicalsophis ticationentailedinagivenunitofoutput,withnorealincreaseinefficiency. Thechiefvirtueofthemilitaryeconomyisitsutterunproductivity.Thatis,it doesnotcompetewithprivateindustrytosupplyanygoodforwhichthereiscon sumerdemand.Butmilitaryproductionisnottheonlysuchareaofunproductive government spending. NeoMarxist Paul Mattick elaborated on the theme in a 1956article.Theoverbuiltcorporateeconomy,hewrote,ranupagainsttheprob lemthat[p]rivatecapitalformation...findsitslimitationindiminishingmarket demand.TheStatehadtoabsorbpartofthesurplusoutput;butithadtodoso without competing with corporations in the private market. Instead, [g]overnmentinducedproductionischanneledintononmarketfieldsthepro ductionofnoncompetitivepublicworks,armaments,superfluitiesandwaste.4As anecessaryresultofthisstateofaffairs,
solongastheprincipleofcompetitivecapitalproductionprevails,steadilygrow ingproductionwillinincreasingmeasurebeaproductionforthesakeofpro duction,benefitingneitherprivatecapitalnorthepopulationatlarge. This process is somewhat obscured, it is true, by the apparent profitability ofcapitalandthelackoflargescaleunemployment.Likethestateofprosperity, profitability,too,isnowlargelygovernmentmanipulated.Governmentspending andtaxationaremanagedsoastostrengthenbigbusinessattheexpenseofthe economyasawhole.... Inordertoincreasethescaleofproductionandtoaccummulate[sic]capi tal,governmentcreatesdemandbyorderingtheproductionofnonmarketable goods, financed by government borrowings. This means that the government avails itself of productive resources belonging to private capital which would 5 otherwisebeidle. Nathanson,TheMilitarizationoftheAmericanEconomy,p.208. Seymour Melman, The Permanent War Economy: American Capitalism in Decline (NewYork:SimonandSchuster,1974),p.11. 3 Ibid.,p.21. 4 PaulMattick,TheEconomicsofWarandPeace,Dissent(Fall1956),p.377. 5 Ibid.,pp.378379.
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Such consumption of output, while not always directly profitable to private industry,servesafunctionanalogoustoforeigndumpingbelowcost,inenabling industrytooperateatfullcapacitydespitetheinsufficiencyofprivatedemandto absorbtheentireproductatthecostofproduction. Itsinterestingtoconsiderhowmanysegmentsoftheeconomyhaveaguar anteed market for their output, or a conscript clientele in place of willing con sumers.Themilitaryindustrialcomplexiswellknown.Buthowaboutthestates educationandpenalsystems?Howabouttheautomobiletruckinghighwaycom plex, or the civil aviation complex? Foreign surplus disposal (export dependant monopolycapitalism)anddomesticsurplusdisposal(governmentpurchases)are differentformsofthesamephenomenon.
E.MENE,MENE,TEKEL,UPHARSIN(ACRITIQUE OFSLOANISMSDEFENDERS)
AlthoughGalbraithandChandlercommonlyjustifiedthecorporationspower over the market in terms of its social benefits, they had things exactly backward. The technostructure can survive because it is enabled to be less responsive to consumer demand. An oligopoly firm in a cartelized industry, in which massive, inefficient bureaucratic corporations share the same bureaucratic culture, is pro tected from competition. The innovations Chandler so prized are made by a leadership completely out of touch with reality. These innovations succeed be causetheyaredeterminedbytheorganizationforitsownpurposes,andtheorga nizationhasthepowertoimposetopdownchangeonacartelizedmarket,with littleregardtoconsumerpreferences,insteadofrespondingflexiblytothem.In novativestrategiesarebased,notonfindingoutwhatpeoplewantandproviding it,butoninventingeverbiggerhammersandthenforcingustobenails.Thelarge corporateorganizationisnotmoreefficientataccomplishinggoalsreceivedfrom outside;itismoreefficientataccomplishinggoalsitsetsforitselfforitsownpur poses,andthenusingitspowertoadapttherestofsocietytothosegoals. So to turn to our original point, the apostles of mass production have all, at leasttacitly,identifiedthesuperiorefficiencyofthelargecorporationwithitscon trol over the external environment. Sloanist mass production subordinates the consumer,andtherestofoutsidesociety,totheinstitutionalneedsofthecorpora tion. Chandlerhimselfadmittedasmuch,indiscussingwhathecalledastrategyof productiveexpansion.Bigbusinessaddednewoutletsthatpermittedittomake morecompleteuseofitscentralizedservicesandfacilities.1Inotherwords,ef ficiencyisdefinedbytheexistenceofcentralizedfacilities,assuch;efficiencyis thenpromotedbyfindingwaystomakepeoplebuythestuffthecentralizedfacili tiescanproducerunningatfullcapacity. TheauthoritarianismimplicitinsuchthinkingisborneoutbyChandlerdis cipleWilliamLazonickscircularunderstandingoforganizationalsuccess,ashe discussesitinhissurveyofinnovativeorganizationsinPartIIIofBusinessOrga nization and the Myth of the Market Economy.2 The centralized, managerialist technostructure is the best vehicle for organizational successdefined as what best suits the interests of the centralized, managerialist technostructure. And of
Chandler,TheVisibleHand,p.487. WilliamLazonick,BusinessOrganizationandtheMythoftheMarketEconomy(Cam bridge,1991).
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course,suchorganizationalsuccesshaslittleornothingtodowithwhatsociety outsidethatorganizationmightdecide,onitsowninitiative,thatitwants.Indeed (as Galbraith argued), organizational success requires institutional mechanisms topreventoutsidesocietyfromdoingwhatitwants,inordertoprovidethelevels of stability and predictable demand that the technostructure needs for its long planninghorizons.Thesetheoriesamount,inpractice,toacircularargumentthat oligopoly capitalism is successful because it is most efficient at achieving the endsofoligopolycapitalism. Lazonicks model of successful capitalist development raises the question successful for whom? His innovative organization is no doubt successful for thepeoplewhomakemoneyoffitbutnotforthoseatwhoseexpensetheymake money.Itisonlysuccessifonepositsthegoalsandvaluesoftheorganizationas thoseofsociety,andacquiescesinwhateverorganizationalsupportsarenecessary toimposethosevaluesontherestofsociety. Hisuseoftheexpressionvaluecreatingcapabilitiesseemstohaveverylittle to do with the ordinary understanding of the word value as finding out what peoplewantandthenproducingitmoreefficientlythananyoneelse.Accordingto his(andChandlersandGalbraiths)versionofvalue,rather,theorganizationde cides what it wants to produce based on the interests of its hierarchy, and then uses its organizational power to secure the stability and control it needs to carry out its selfdetermined goals without interference from the people who actually buythestuff. This parallels Chandlers view of organizational capabilities, which he seemedtoidentifywithanorganizationspowerovertheexternalenvironment.A tellingexample,aswesawinChapterOne,isChandlersbookonthetechindus try.1ForChandler,organizationalcapabilitiesintheconsumerelectronicsindus tryamountedtotheartificialpropertyrightsbywhichthefirmwasabletoexer ciseownershiprightsovertechnologyandovertheskillandsituationalknowledge ofitsemployees,andtopreventthetransferoftechnologyandskillacrosscorpo rate boundaries. Thus, his chapter on the history of the consumer electronics in dustry through the mid20th century is largely an account of what patents were heldbywhichcompanies,andwhosubsequentlyboughtthem. TheinnovationChandlerandLazonicklionizemeans,inpractice,1)devel oping processes so capitalintensive and hightech that, if all costs were fully in ternalizedinthepriceofthegoodsproduced,consumerswouldprefersimplerand cheaper models; or 2) developing products so complex and prone to breakdown that, if cartelized industry werent able to protect its shared culture from outside competition,theconsumerwouldpreferamoredurableanduserfriendlymodel. Cartelized, overbuilt industry deals with overproduction through planned obso lescence,andthroughengineeringamassconsumerculture,andsucceedsbecause cartelizationrestrictstherangeofconsumerchoice. The innovative products that emerge from Chandlers industrial model, all toooften,arewhatengineerscallgoldplatedturds:horriblydesignedproducts with proliferating features piled one atop another with no regard to the users needs,easeofuse,dependabilityorreparability.Foragoodexample,comparethe acceptableWord2003totheutterlygodawfulWord2007.2
Alfred D. Chandler, Jr., Inventing the Electronic Century (New York: The Free Press, 2001),pp.1349. 2 Alan Coopers The Inmates are Running the Asylum: Why HighTech Products Drive UsCrazyandHowtoRestoretheSanity(Indianapolis:Sams,1999)isanexcellentsurveyof
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Chandlersversionofsuccessfuldevelopmentisaroaringsuccessindeed,if we start with the assumption that society should be reengineered to desire what thetechnostructurewantstoproduce. RobinMarrisdescribedthisapproachquitewell.Thebureaucraticcultureof thecorporation,hewrote,
is likely to divert emphasis from the character of the goods and services pro duced to the skill with which these activities are organized.... The concept of consumerneeddisappears,andtheonlyquestionofinterest...iswhetherasuf ficientnumberofconsumers,irrespectiveoftheirrealneedcanbepersuaded 1 tobuy[aproposednewproduct].
As the satirist John Gall put it, the large organization tends to redefine the consumptionofinputsasoutputs.
Agiantprogramtoconquercancerisbegun.Attheendoffiveyears,cancerhas notbeenconquered,butonethousandresearchpapershavebeenpublished.In addition, one million copies of a pamphlet entitled You and the War Against Cancerhavebeendistributed.Thesepublicationswillabsolutelyberegardedas Output rather than Input.A giant program to conquer cancer is begun. At the endoffiveyears,cancerhasnotbeenconquered,butonethousandresearchpa pershavebeenpublished.Inaddition,onemillioncopiesofapamphletentitled YouandtheWarAgainstCancerhavebeendistributed.Thesepublicationswill 2 absolutelyberegardedasOutputratherthanInput.
The marketing innovations Chandler trumpeted in Scale and Scopein foods, for example, the techniques for refining, distilling, milling, and process ing3were actually expedients for ameliorating the inefficiencies imposed by largescaleproductionandlongdistancedistribution:refinedwhiteflour,inferior in taste and nutrition to freshmilled local flour, but which would keep for long term storage; gasripened rubber tomatoes and other vegetables grown for trans portability rather than taste; etc. The standard American diet of refined white flour,hydrogenatedoils,andhighfructosecornsyrupisinlargepartatributeto Chandler.
F.THEPATHOLOGIESOFSLOANISM
Not only are the large and capitalintensive manufacturing corporations themselvescharacterizedbyhighoverheadandbureaucraticstyle;theirorganiza tional culture contaminates the entire system, becoming a hegemonic norm cop ied even by small organizations, laborintensive firms, cooperatives and non profits.Invirtuallyeveryfieldofendeavor,asGoodmanputit,thereisaneedfor amountsofcapitaloutofproportiontothenatureoftheenterprise.Everyaspect ofsociallifebecomesdominatedbythehighoverheadorganization. Goodmanclassifiesorganizationsintoaschema.CategoriesAandB,respec tively,areenterprisesextrinsicallymotivatedandinterlockedwiththeothercen tralizedsystems,andenterprisesintrinsicallymotivatedandtailoredtothecon
the tendency of American industry to produce goldplated turds without regard to the user. 1 QuotedinStein,Size,Efficiency,andCommunityEnterprise,p.55. 2 JohnGall,Systemantics:HowSystemsWorkandEspeciallyHowTheyFail(NewYork: PocketBooks,1975),p.74. 3 AlfredChandler,ScaleandScope:TheDynamicsofIndustrialCapitalism(Cambridge andLondon:TheBelknapPressofHarvardUniversityPress,1990),p.262.
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crete product or service. The two categories are each subdivided, roughly, into profitandnonprofitclasses. The interesting thing is that the large institutional nonprofits (Red Cross, PeaceCorps,publicschools,universities,etc.)arenotcounterweightstoforprofit culture. Rather, they share the same institutional culture: status salaries and ex pense accounts are equally prevalent, excessive administration and overhead are oftenmoreprevalent,andthereislesspressuretotrimcosts. Ratherthanthestateandlargenonprofitsactingasacountervailingpower onlargeforprofitenterprise,inGalbraithsschema,whathappensmoreoftenisa coalitionofthelargeforprofitandlargenonprofit:
... the militaryindustrial complex, the alliance of promoters, contractors, and government in Urban Renewal; the alliance of universities, corporations, and 1 governmentinresearchanddevelopment.Thisisthegreatdomainofcostplus.
Goodman contrasts the bureaucratic organization with the small, libertarian organization. What swell the costs in enterprises carried on in the interlocking centralizedsystemsofsociety,whethercommercial,official,ornonprofitinstitu tional,
are all the factors of organization, procedure, and motivation that are not di rectlydeterminedtothefunctionandtothedesiretoperformit.Thesearepat entsandrents,fixedprices,unionscales,featherbedding,fringebenefits,status salaries,expenseaccounts,proliferatingadministration,paperwork,permanent overhead,publicrelationsandpromotion,wasteoftimeandsillbydepartmen talizing taskroles, bureaucratic thinking that is pennywise and poundfoolish, inflexible procedure and tight scheduling that exaggerate contingencies and overtime. Butwhenenterprisescanbecarriedonautonomouslybyprofessionals,art ists, and workmen intrinsically committed to the job, there are economies all alongtheline.Peoplemakedoonmeans.Theyspendonvalue,notconvention. They flexibly improvise procedures as opportunity presents and they step in in emergencies.Theydonotwatchtheclock.Theavailableskillsofeachpersonare puttouse.Theyeschewstatusandinapinchacceptsubsistencewages.Admini stration and overhead are ad hoc. The task is likely to be seen in its essence ratherthanabstractly.
Insteadofexpensivecapitaloutlays,theadhocorganizationusessparecapac ityofexistingsmallscalecapitalgoodsitsmembersalreadyown,alongwithrecy cledorvernacularbuildingmaterials.Thestaffofasmallselfmanagedorganiza tionarefreetousetheirownjudgmentandingenuityinformulatingsolutionsto unforeseenproblems,cuttingcosts,andsoforth.Andbecausethestaffisoftenthe source of the capital investments, they are likely to be quite creative in finding waystosavemoney. A couple of things come to mind here. First, Friedrich Hayeks treatment of distributedknowledge:thosedirectlyengagedinataskareusuallythebestsource ofideasforimprovingitsefficiency.Andsecond,MiltonFriedmansrankingofthe relativeefficienciesachievedby1)peoplespendingotherpeoplesmoneyonother people;2)peoplespendingotherpeoplesmoneyonthemselves;3)peoplespend ingtheirownmoneyonotherpeople;and4)peoplespendingtheirownmoneyon themselves. Thestaffofasmall,selfdirectedundertakingcanaffordtothrowthemselves into maximizing their effectiveness, because they know the efficiency gains they produce wont be appropriated by absentee owners or senior management who
1
PaulGoodman,PeopleorPersonnel,pp.114115.
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simply use the higher productivity to skim more profit off the top or to lay off some of the staff. Most of the features of Weberian bureaucracy and hierarchical systemsofcontroljobdescriptions,trackingformsandcontrols,standardproce dures,andthelikeresultfromthefactthattheworkforcehasabsolutelynora tional interest in expending effort or working effectively, beyond the bare mini mumrequiredtokeeptheemployerinbusinessandtoavoidgettingfired. Goodmans chapter on Comparative Costs in People or Personnel is a long seriesofcasestudiescontrastingthecostofbureaucratictoadhocorganizations.1 Herefers,forexample,tothepracticesatalargecorporateTVstation(theusual featherbeddingofstagehandstoprovidetwochairs,orpayingtechnicianstwice $45toworktheneedleonaphonograph)jobsthatwouldbedonebythesmall permanent staff at a nonprofit station run out of City College of New York.2 The AmericanFriendsVoluntaryInternationalServiceAssignmentscarriedalmostno administrativecosts,comparedtothePeaceCorpsenormouscostofthousandsof dollarspervolunteer.3 TheHousingBoardsconventionalUrbanRenewalproposalinGreenwichVil lagewouldhavebulldozedaneighborhoodcontainingmanyusefulvillages,tobe replaced by the usual bureaucratically designed tall buildings, at a cost of $30 million and a net increase of 300 dwelling units. The neighborhood offered a counterproposal that ruled out demolishing anything salvageable or relocating anyoneagainsttheirwishes;itwouldhaveprovidedanetincreaseof475newunits atacostof$8.5million.Guesswhichonewaschosen?4 Mostoftheperpupilcostofconventionalurbanpublicschools,asopposedto alternativeorexperimentalschools,resultsfromadministrativeoverheadandthe immense cost of buildings and other materials built to a special set of specifica tionsatsomecentrallocationonsomeofthemostexpensiverealestateintown. Hishypotheticalcooperativeprepschoolcostaboutathirdasmuchperpupilas thetypicalhighschool.5ThisisathoughtexperimentIdrepeatedlyconductedfor myselflongbeforeeverreadingGoodman:figuringthecostfortwentyorsopar entstosetuptheirownschoolingcooperative,rentingahouseforclassroomspace andhiringafewparttimeinstructors,andthentryingtoimaginehowonecould possiblywasteenoughmoneytocomeupwiththe$8,000ormoreperpupilthat thepublicschoolstypicallyspend. In the nearby town of Siloam Springs, Ark., not long after voters rejected a millageincreasefortheschools,theadministrationannouncedthecancellationof itsplannedpurchaseofnewcomputersanditsdecisioninsteadtoupgradeexisting ones. The cost of adding RAM, it was said, would be a small fraction of replace mentandyetitwouldresultinnearlythesameperformanceimprovement.But itsasafeguesstheadministrationwouldneverhaveconsideredsuchathingifit hadntbeenforcedto. AnothersimilarcaseisGoodmanscontrastofthetuitioncostsofthetypical large,institutionalcollege,tothoseofanalternativeschoollikeBlackMountain College (run by the faculty, on the same scholars guild model as the medieval universities).Muchofthephysicalplantofthelatterwastheworkoffacultyand staff,andindeedforitsfirsteightyears(19331941)thecampusconsistedofbuild
1
Ibid.,pp.94122. Ibid.,pp.102104. 3 Ibid.,pp.107110. 4 Ibid.,pp.110111. 5 Ibid.,p.105.

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ings rented from a YMCA. Without any endowment or contributions, the tuition wasstillfarlowerthanthatofaconventionalcollege.1 A more contemporary example might be the enormous cost of conventional Web2.0firmscomparedtothatoftheirfreeculturecounterparts.ThePirateBays filesharingoperations,forexample,costonly$3,000amonthcomparedtoesti mateddailyoperatingcostsforYouTuberangingfrom$130,000toamillion!2 The contrasting styles of the ad hoc, selfmanaged organization and the bu reaucratic, institutional organization were brought home to me in my personal experiencewithtwolibraries. At the University of Arkansas (Fayetteville), until a few years ago, non studentswerediscouragedfromapplyingforlibrarycardsbyanapplicationform thataskedwhethertheirneedscouldnotbemetinsteadby,amongotherthings, relying on Interlibrary Loan services. Then the policy changed so that a library card(with$40annualfee)wasrequiredtouseInterlibraryLoan.Nevermindthat alibraryofficialprofessedunawareness(whilehardlybotheringtoconcealherdis belief),inherbestOceaniahasalwaysatwarwithEastasiamanner,thattheli braryhadeverpromotedInterlibraryLoanasanalternativetoalibrarycard.The interesting thing was that she justified the new card purchase requirement on groundsofequity:itcost,sheclaimed,some$25toprocesseveryInterlibraryLoan request.Iwasutterlydumbfounded.Ifthisweretrue,youdthinktheILLbureauc racywouldbeashamedtoadmitit.HowdoesAmazon.ComorAbeBooksmanage tostayinbusinesswhenbuyingausedbookandshippingitcrosscountryusually costs me less than thatshipping and handling included? The only answer must bethatthelibrarybureaucracyhasfarhigherlevelsofbureaucraticoverheadthan evenalargebureaucraticcorporation,forperformingananalogousfunction. AttheSpringdale,Ark.publiclibrary,Isubmittedawrittencomplainttotheir Technology Coordinator regarding the abysmally poor performance of their new desktop software after the recent upgrade, compared to what they had had be fore.
Comment: Please dont automatically upgrade the desktops to the latest versionofWindowsandotherMSaccessories. In general, if you already have something from Microsoft that works in a minimally acceptable manner, you should quit while youre ahead; if Bill Gates offersyousomethingnewandbetter,runintheoppositedirectionasfastas youcan. Sinceyouupgradedthecomputers,ifyoucancallitthat,usabilityhassuf fered a nosedive. I used to have no problem emailing myself attachments and openingthemupheretoworkon.NowifIwanttoprintsomethingout,Ihave toopenitasaGoogleDocumentandpasteitintoanewWordfile.Whatsmore, I cant edit the file here and save it to the desktop so I can email it to myself again.AnytimeIattempttosaveatextfileonyourcomputersImblockedfrom doingso. Inaddition,ifyoucompareWord2007totheWord2003youpreviouslyhad on the desktop menu, the former is a classic example of what engineers call a goldplatedturd.Itsgotsomanyproliferatingfeaturesthattheeditingdash boardhastobetabbedtofitthemallin. Tosummarize:yourcomputersworkedjustfineforallmypurposesbefore thesocalledupgrade,andnowtheyregodawful.Pleasesaveyourselvesmoney Ibid., p. 106; Black Mountain College, Wikipedia <http://en.wikipedia.org/wiki/ Black_Mountain_College>(capturedMarch30,2009). 2 JankoRoettgers,ThePirateBay:DistributingtheWorldsEntertainmentfor$3,000a Month,NewTeeVee.Com,July19,2009<http://newteevee.com/2009/07/19/thepiratebay distributingtheworldsentertainmentfor3000amonth/>.
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infutureandstickwithwhatworksinsteadofbeingtakeninbyMicrosoftslat estpoorlydesignedcrap.
TheCoordinator,C.M.,replied(ratherlamelyinmyopinion)thattherecent upgradetoMicroSoftOffice2007onboththeLibraryspublicandstaffcomputers isinlinewithwhatotherlibrariesandcompaniesacrossthecountrycurrentlyof fer/use as office productivity software. And the refusal to save files to desktop, whichtheprevioussoftwarehaddonewithoutaproblem,wasastandardsecurity feature. Now, this would be perfectly understandable from a grandma, who uses the computermainlytoreademailfromhergrandkids,andbuyshergranddaughtera PCwithVistaandWord2007installedbecauseIhearditsthelatestthing.But this was an IT officersomeone whos supposed to be at least vaguely aware of whatsgoingon. SoItoldherthesoftwarewasapieceofcrapthatdidntwork,andMs.C.M. (althoughImsureitwasntherintention)toldmewhyitwasapieceofcrapthat didntwork:Springdaleslibraryadopteditbecauseitwaswhatalltheotherlibrar iesandcorporationsuse.Ireplied,probablyalittletootestily:
...Imafraidthefactthatanupgradeinlinewithwhatotherlibrariesand companiesacrossthecountrycurrentlyoffer/useactuallymadethingsworsere flects unflatteringly on the institutional culture that predominates in organiza tionsacrossthecountry,andinmyopinionsuggeststhefollyofbeinggoverned bytheinstitutionalcultureofanindustryratherthanbottomupfeedbackfrom onesowncommunityofusers. Iveworkedinmorethanonejobwherecompanypolicyreflectedthecom mon institutional culture of the industry, and whatever best practice du jour the other CEOs solemnly assured our CEO was working like gangbusters. Had therebeenlesscommunicationbetweenthepeopleatthetopsofthepyramids, and more communication between the top of each pyramid with those below, thepeopleindirectcontactwiththesituationmighthavecutthroughthe...of ficialhappytalkandtoldthemwhatatotalclusterf***theirpolicieshadresulted in.
Forsomereason,Ineverheardback. Thestateanditsaffiliatedcorporatesystem,bymandatingminimumlevelsof overhead for supplying all human wants, creates what Ivan Illich called radical monopolies.
Ispeakaboutradicalmonopolywhenoneindustrialproductionprocessex ercisesanexclusivecontroloverthesatisfactionofapressingneed,andexcludes nonindustrialactivitiesfromcompetition.... Radical monopoly exists where a major tool rules out natural competence. Radical monopoly imposes compulsory consumption and thereby restricts per sonal autonomy. It constitutes a special kind of social control because it is en forced by means of the imposed consumption of a standard product that only 1 largeinstitutionscanprovide. Radical monopoly is first established by a rearrangement of society for the benefit of those who have access to the larger quanta; then it is enforced by compelling all to consume the minimum quantum in which the output is cur 2 rentlyproduced....
Ivan Illich, Tools for Conviviality (New York, Evanston, San Francisco, London: Harper&Row,1973),pp.5253. 2 Illich,EnergyandEquity(1973),ChapterSix(onlineeditioncourtesyofIraWoodhead andFrankKeller)<http://www.cogsci.ed.ac.uk/~ira/illich/texts/energy_and_equity/energy _and_equity.html>.
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Thegoodssuppliedbyaradicalmonopolycanonlybeobtainedatcompara blyhighexpense,requiringthesaleofwagelabortopayforthem,ratherthandi rect use of ones own labor to supply ones own needs. The effect of radical mo nopolyisthatcapital,credentialandtechintensivewaysofdoingthingscrowd out cheaper and more userfriendly, more libertarian and decentralist, technolo gies. The individual becomes increasingly dependent on credentialed profession als,andonunnecessarilycomplexandexpensivegadgets,foralltheneedsofdaily life. He experiences an increased cost of subsistence, owing to the barriers that mandatorycredentialingerectsagainsttransformingoneslabordirectlyintouse value(Illichsconvivialproduction),andtheincreasingtollsleviedbythelicens ingcartelsandothergatekeepergroups.
People have a native capacity for healing, consoling, moving, learning, building their houses, and burying their dead. Each of these capacities meets a need.Themeansforthesatisfactionoftheseneedsareabundantsolongasthey depend on what people can do for themselves, with only marginal dependence oncommodities.... These basic satisfactions become scarce when the social environment is transformed in such a manner that basic needs can no longer be met by abun dantcompetence.Theestablishmentofaradicalmonopolyhappenswhenpeo plegiveuptheirnativeabilitytodowhattheycandoforthemselvesandeach other, in exchange for something better that can be done for them only by a major tool. Radical monopoly reflects the industrial institutionalization of val ues....Itintroducesnewclassesofscarcityandanewdevicetoclassifypeople accordingtotheleveloftheirconsumption.Thisredefinitionraisestheunitcost ofvaluableservices,differentiallyrationsprivileges,restrictsaccesstoresources, 1 andmakespeopledependent.
The overall process is characterized by the replacement of general compe tence and satisfying subsistence activities by the use and consumption of com modities;
themonopolyofwagelaboroverallkindsofwork;redefinitionofneedsinterms ofgoodsandservicesmassproducedaccordingtoexpertdesign;finally,thear rangementoftheenvironment...[to]favorproductionandconsumptionwhile 2 theydegradeorparalyzeusevalueorientedactivitiesthatsatisfyneedsdirectly.
LeopoldKohrobservedthatwhathasactuallyrisenundertheimpactofthe enormouslyincreasedproductionofourtimeisnotsomuchthestandardofliving asthelevelofsubsistence.3OrasPaulGoodmanputit,decentpovertyisalmost impossible.4 Forexample:subsidizedfuel,freeways,andautomobilesgeneratedistancebe tween things, so that [a] city built around wheels becomes inappropriate for feet.5Thecarbecomesanexpensivenecessity;feetandbicyclearerenderedvirtu allyuseless,andtheworkingpoorareforcedtoearntheadditionalwagestoown andmaintainacarjusttobeabletoworkatall.
1
Illich,ToolsforConviviality,p.54. Illich,VernacularValues(1980),PartOne:TheThreeDimensionsofSocialChoice, online edition courtesy of The Preservation Institute <http://www.preservenet.com/ theory/Illich/Vernacular.html>. 3 Leopold Kohr, The Overdeveloped Nations: The Diseconomies of Scale (New York: SchockenBooks,1978,1979),pp.2728. 4 Goodman,CompulsoryMiseducation,inCompulsoryMiseducationandTheCommu nityofScholars(NewYork:Vintagebooks,1964,1966),p.108. 5 Illich,DisablingProfessions(NewYorkandLondon:MarionBoyars,1977),p.28.
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Radical monopoly has a builtin tendency to perpetuate itself and expand. Firstofall,thoserunninglargehierarchicalorganizationstendtosolvetheprob lemsofbureaucracybyaddingmoreofit.InthehospitalwhereIwork,thismeans thatproblemsresultingfromunderstaffingaresolvedbynewtrackingformsthat further reduce nurses available time for patient carewhen routine care already frequentlygoesundone,andnursesstayovertwoorthreehourspasttheendofa twelvehourshifttofinishpaperwork. They solve problems, in general, with a more of the same approach. In Il lichs excellent phrase, its an attempt to solve a crisis by escalation.1 Its what Einstein referred to as trying to solve problems at the same level of thinking we wereatwhenwecreatedthem.OrasE.F.Schumachersaysofintellectuals,tech nocratsalwaystendtotryandcureadiseasebyintensifyingitscauses.2 Thewaytheprocessworks,inPaulGoodmanswords,isthat[a]systemde stroys its competitors by preempting the means and channels and then proves thatitistheonlyconceivablemodeofoperating.3 The effect is to make subsistence goods available only through institutional providers, in return for money earned by wages, at enormous markup. As Good manputit,itmakesdecentpovertyimpossible.Totaketheneoliberalsstatistical gushingoverincreasedGDPandstanditonitshead,[p]eoplewhowerepoorand hadfoodnowcannotsubsistontenorfiftytimestheincome.4Everywhereone turns ... there seems to be a markup of 300 and 400 percent, to do anything or makeanything.5Andparadoxically,themoreefficientlyanorganizationisrun, themoreexpensiveitisperunitofnetvalue,ifwetakeintoaccountthetotalso ciallaborinvolved,boththeovertandthecovertoverhead.6 GoodmanpointstocountrieswheretheofficialGDPisonefourththatofthe U.S.,andyettheseunaffluentpeopledonotseemfourtimesworseoffthanwe, or hardly worse off at all.7 The cause lies in the increasing portion of GDP that goestosupportandoverhead,ratherthandirectconsumption.Mostofthecosts do not follow from the technical requirements of producing direct consumption goods themselves, but from the mandated institutional structures for producing andconsumingthem.
Itisimportanttonoticehowmuchthevariousexpensiveproductsandservices of corporations and government make people subject to repairmen, fees, com muting,queues,unnecessarywork,dressingjustforthejob;andthesethingsof 8 tenpreventsatisfactionaltogether.
A related phenomenon is what Kenneth Boulding called the non proportionalchangeprincipleofstructuraldevelopment:thelargeraninstitution grows, the larger the proportion of resources that must be devoted to secondary, infrastructureandsupportfunctionsratherthantheactualprimaryfunctionofthe institution.Asanystructuregrows,theproportionsofthepartsandofitssignifi cant variables cannot remain constant.... This is because a uniform increase in
Illich,ToolsforConviviality,p.9. E. F. Schumacher, Small is Beautiful: Economics as if People Mattered (New York, Hagerstown,SanFrancisco,London:Harper&Row,Publishers,1973),p.38. 3 Goodman,PeopleorPersonnel,p.70. 4 Ibid.,p.70. 5 Ibid.,p.120. 6 Goodman, The Community of Scholars, in Compulsory Miseducation and The Com munityofScholars,p.241. 7 Goodman,PeopleorPersonnel,p.120. 8 Ibid.,p.117.
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thelineardimensionsofastructurewillincreaseallitsareasasthesquare,andits volumeasthecube,oftheincreaseinthelineardimension....1 Leopold Kohr gave the example of a skyscraper: the taller the building, the larger the percentage of floorspace that must taken up with elevator shafts and stairwells,heatingandcoolingducts,andsoforth.Eventually,thebuildingreaches thepointwherethespaceonthelastflooraddedwillbecancelledoutbythein creasedspacerequiredforsupportstructures.Thisishardlytheoretical:Kohrgave the example in the 1960s of a $25 billion increase in GNP, $18 billion (or 72%) of whichwenttoadministrativeandsupportcostsofvarioussorts.2
G.MANDATORYHIGHOVERHEAD
Asapathology,thisphenomenondeservesaseparatesectionofitsown.Itisa pathology not only of the Sloanist massproduction economy, but also of local economies under the distorting effects of zoning, licensing, safety and health codes,andotherregulationswhoseprimaryeffectistoputafloorunderoverhead costs. Social regulations and commercial prohibitions, as Thomas Hodgskin said, compel us to employ more labour than is necessary to obtain the prohibited commodity, or to give a greater quantity of labour to obtain it than nature re quires,andputthedifferenceintothepocketsofprivilegedclasses.3 Suchartificialpropertyrightsenabletheprivilegedtoappropriateproductiv ity gains for themselves, rather than allowing their benefits to be socialized throughmarketcompetition. But they do more than that: they make it possible to collect tribute for the serviceofnotobstructingproduction.AsJohnR.Commonsobserved,thealleged service performed by the holder of artificial property rights, in contributing somefactortoproduction,isdefinedentirelybyhisabilitytoobstructaccessto it.AsIwroteinStudiesinMutualistPoliticalEconomy,marginalisteconomics
treatedtheexistingstructureofpropertyrightsoverfactorsasagiven,andpro ceeded to show how the product would be distributed among these factors accordingtotheirmarginalcontribution.Bythismethod,ifslaverywerestillex tant,amarginalistmightwithastraightfacewriteofthemarginalcontribution oftheslavetotheproduct(imputed,ofcourse,totheslaveowner),andofthe 4 opportunitycostinvolvedincommittingtheslavetooneoranotheruse. Suchprivileges,MauriceDobbargued,wereanalogoustoastategrantofauthorityto collect tolls, (much like the medieval robber barons who obstructed commerce between theirpettyprincipalities): Suppose that tollgates were a general institution, rooted in custom or ancient legalright.Coulditreasonablybedeniedthattherewouldbeanimportantsense in which the income of the tollowning class represented an appropriation of goodsproducedbyothersandnotpaymentforanactivitydirectedtothepro duction or transformation of economic goods? Yet tollcharges would be fixed incompetitionwithalternativeroadways,andhencewould,presumably,repre sentpricesfixedinanopenmarket....Wouldnottheopeningandshutting oftollgatesbecomeanessentialfactorofproduction,accordingtomostcurrent Kenneth Boulding, Beyond Economics (Ann Arbor: University of Michigan Press, 1968),p.75. 2 Kohr,TheOverdevelopedNations,pp.3637. 3 ThomasHodgskin,PopularPoliticalEconomy:FourLecturesDeliveredattheLondon MechanicsInstitution(London:PrintedforCharlesandWilliamTait,Edinburgh,1827),pp. 3334. 4 KevinCarson,StudiesinMutualistPoliticalEconomy(Blitzprint,2004),p.79.
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definitionsofafactorofproduction,withasmuchreasonatanyrateasmanyof the functions of the capitalist entrepreneur are so classed today? This factor, likeothers,couldthenbesaidtohaveamarginalproductivityanditspricebe regarded as the measure and equivalent of the service it rendered. At any rate, where is a logical line to be drawn between tollgates and propertyrights over 1 scarceresourcesingeneral?
Thorstein Veblen made a similar distinction between property as capitalized serviceability, versus capitalized disserviceability. The latter consisted of power advantages over rivals and the public which enabled owners to obstruct produc tion.2 Atthelevelofthenationalcorporateeconomy,acenttralfunctionofgovern ment is to artificially inflate the levels of capital outlay and overhead needed to undertakeproduction. Thesinglebiggestbarriertomodulardesignforcommonplatformsisproba bly intellectual property. If it were abolished, there would be no legal barrier against many small companies producing competing modular components or ac cessories for the same platform, or even big companies producing modular com ponentsdesignedforinteroperabilitywithothercompaniesproducts. Whatsmore,withthebarriertosuchcompetitionremoved,therewouldbea greatdealofcompetitiveadvantagefromdesigningonesproductsoastobecon ducive to production of modular components by other companies. In a market wheretheconsumerpreferredthehighestpossibledegreeofinteroperabilityand crosscompatibility, to maximize his own freedom to mix n match components, or to maximize his options for extending the lifetime of the product, a product that was designed with such consumer behavior in mind would have a leg up on competing products designed to be incompatible with other companies accesso riesandmodules.Inotherwords,productsdesignedtobeeasilyusedwithother peoplesstuffwouldsellbetter.Imagineif
Ford could produce engine blocks that were compatible with GM chasses, andviceversa; ifawholerangeofsmallmanufacturerscouldproducecompetingspareparts andmodularaccessoriesforFordorGMvehicles; suchsmallcompanies,individuallyorinnetworks,couldproduceentirecom petingcardesignsaroundtheGMorFordengineblock; or many small assembly plants sprang up to put together automobiles from engine blocks ordered from Ford or GM, combined with other components produced by themselves or a wide variety of other small companies on the EmiliaRomagnanetworkedmodel.
Under those circumstances, there would be no legal barrier to other compa nies producing entire, modularizationfriendly design platforms for use around FordorGMproducts,andFordandGMwouldfindittotheircompetitiveadvan tagetofacilitatecompatibilitywithsuchdesigns. InkeepingwithSloanismsemphasisonplannedobsolescencetogeneratear tificiallyhighlevelsofproductturnover,productsaredeliberatelydesignedtodis courageorimpederepairbytheuser.
...[A]nengineeringculturehasdevelopedinrecentyearsinwhichtheobjectis tohidetheworks,renderingtheartifactsweuseunintelligibletodirectinspec MauriceDobb,PoliticalEconomyandCapitalism:SomeEssaysinEconomicTradition, 2 rev.ed.(London:Routledge&KeganPaulLtd,1940,1960),p.66 2 ThorsteinVeblen,ThePlaceofScienceinModernCivilizationandotherEssays,p.352, inJohnR.Commons,InstitutionalEconomics(NewYork:Macmillan,1934),p.664.
nd
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tion....Thiscreepingconcealednesstakesvariousforms.Thefastenersholding smallappliancestogethernowoftenrequireesotericscrewdriversnotcommonly available,apparentlytopreventthecuriousortheangryfrominterrogatingthe innards. By way of contrast, older readers will recall that until recent decades, Sears catalogues included blownup parts diagrams and conceptual schematics for all appliances and many other mechanical goods. It was simply taken for 1 grantedthatsuchinformationwouldbedemandedbytheconsumer.
JulianSanchezgivesthespecificexampleofApplesiPhone.Thescenario,as hedescribesit,startswhen
1)Some minor physical problem afflicts my portable devicethe kind of thing that just happens sooner or later when youre carting around something meanttobeusedonthego.Inthiscase,thetopbuttononmyiPhonehadgot tenjammedin,renderingitnonfunctionalandmakingthephonerefusetoboot normallyunlesspluggedin. 2)ImakeaproformatriptotheputativeGeniusBaratanAppleStoreout inVirginia.Naturally,theyinformmethatsincethisdoesntappeartobethere sultofaninternaldefect,itsnotcovered.Buttheyllbeonlytoohappytoserv ice/replace it for something like $250, at which price I might as well just buy a newone.... 3)IasktheguyifhehasanytipsifImgoingtodoitmyselfanyadviceon openingit,thatsortofthing.Hesgotnoidea.... 4)Pullingoutacoupleoftinyscrewdrivers,Istartinonthesatanicpuzzle boxcasingApplelocksaroundallitshardware.Ifutzwithitforatleast15min utesbeforecrackingthetopenoughtogetattheinnerworks. 5)Oncethisisdone,ittakesapproximatelyfivesecondstoexecutethenec essaryrepairbyunwedgingthejammedbutton. I have two main problems with this. First, youve got whats obviously a simplephysicalproblemthatcanveryprobablyberepairedinallofaminuteflat withtherightsetoftools.Butinsteadoflettingtheirvauntedsupportguysgive this a shot, theyre encouraging customersmany of whom presumably dont know any betterto shell out a ludicrous amount of money to replace it and sendtheoldonein.Iappreciatethatitsnotalwaysobviousthataproblemcan bethiseasilyremediedonsite,butintheinstance,itreallyseemslikeacaseof exploitingconsumerignorance. Second, the iPhone itself is pointlessly designed to deter self service. Sure, the large majority of users are never going to want to crack their phone open. Then again, most users probably dont want to crack their desktops or laptops open,butwedontexpectmanufacturerstogooutoftheirwaytomakeitdiffi 2 culttodo.
TheiPhoneisatextbookexampleofablobject,theproductofindustrialde sign geared toward the cheap injectionmolding of streamlined plastic artifacts. EricHuntingwrites:
Blobjectsarealsooftendeliberatelyirreparableandunupgradeablesometimes to the point where they are engineered to be unopenable without being de stroyed in the process. This further facilitates planned obsolescence while also imposinglimitsontheconsumersownuseofaproductasawaytoprotectmar ketshareandtechnologypropriety.Generally,repairabilityofconsumergoodsis nowimpracticalaslaborcostshavemaderepairfrequentlymoreexpensivethan replacement,whereitisntalreadyimpossiblebydesign.Inthe90scarcompa niesactuallytoyedwiththenotionofweldingthehoodsofnewcarsshutonthe premisethattheengineeringofcomponentshadreachedthestatewherenoth MatthewB.Crawford,ShopClassasSoulcraft,TheNewAtlantis,Number13,Summer 2006,pp.724<http://www.thenewatlantis.com/publications/shopclassassoulcraft>. 2 JulianSanchez,Dammit,Apple,NotesfromtheLounge,June2,2008<http://www .juliansanchez.com/2008/06/02/dammitapple/>.
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ingintheenginecompartmentneededtobeserviceableoverapresumedtypi cal lifetime for a car. (a couple of years) This, of course, would have vastly in creasedthewholereplacementrateforcarsandallowedcompaniestohidealot 1 ofdirtylittlesecretsunderthatweldedhood.
Intellectual property in onboard computer software and diagnostic equip menthasessentiallythesameeffect.

Ascarsbecomevastlymorecomplicatedthanmodelsmadejustafewyears ago, [independent mechanic David] Baur is often turning down jobs and refer ring customers to auto dealer shops. Like many other independent mechanics, he does not have the thousands of dollars to purchase the online manuals and specializedtoolsneededtofixthecomputercontrolledmachines.... Accesstorepairinformationisattheheartofadebateoveracongressional billcalledtheRighttoRepairAct.Supportersoftheproposalsayautomakersare tryingtomonopolizethepartsandrepairindustrybyonlysharingcrucialtools anddatawiththeirdealershipshops.Thebill,whichhasbeensenttotheHouse CommitteeonEnergyandCommerce,wouldrequireautomakerstoprovideall informationtodiagnoseandservicevehicles. Automakerssaytheyspendmillionsinresearchanddevelopmentandarent willing to give away their intellectual property. They say the auto parts and re pairindustrywantsthebillpassedsoitcangetpatentedinformationtomakeits ownpartsandsellthemforless.... Many new vehicles come equipped with multiple computers controlling everything from the brakes to steering wheel, and automakers hold the key to diagnosingavehiclesproblem.Inmanyinstances,replacingapartrequiresre programmingthecomputersadifficulttaskwithoutthesoftwarecodesor diagramsofthevehicleselectricalwires.... Dealership shops may be reaping profits from the technological advance ments.AstudyreleasedinMarchbytheAutomotiveAftermarketIndustryAsso ciationfoundvehiclerepairscostanaverageof34percentmoreatnewcardeal ershipsthanatindependentrepairshops,resultingin$11.7billioninadditional costsforconsumersannually. The association, whose members include Autozone, Jiffy Lube and other companiesthatprovidereplacementpartsandaccessories,contendautomakers wantthebillrejectedsotheycancontinuechargingconsumersmoremoney. Youpayallthismoneyforyourcar,youshouldbeabletodecidewhereto getitrepaired,saidAaronLowe,theassociationsvicepresidentofgovernment affairs. Opponents of the bill counter that the information and tools to repair the 2 vehiclesareavailabletothosewillingtobuythem.
AsMikeMasnicksumsitup:
Basically,ascarsbecomemoresophisticatedandcomputerized,automakersare locking up access to those computers, and claiming that access is protected by copyrights.Mechanicsaretoldtheycanonlyaccessthenecessarydiagnosticsif theypayhugesumsmeaningthatmanymechanicssimplycantrepaircertain
EricHunting,OnDefiningaPostIndustrialStyle(1):fromIndustrialblobjectstopost industrial spimes, P2P Foundation Blog, November 2, 2009 <http://blog.p2pfoundation. net/ondefiningapostindustrialstyle1fromindustrialblobjectstopostindustrialspimes/ 2009/11/02>. 2 DaisyNguyen,Hightechvehiclesposetroubleforsomemechanics,NorthCounty Times,December26,2009<http://nctimes.com/news/stateandregional/article_4ea03fd6 090d5c2ebd91dfb5508495ef.html>.
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cars,andcarownersareforcedtogotodealers,whochargesignificantlyhigher 1 fees.
OneofMasnicksreadersatTechdirtpointedoutthataprimaryeffectofin tellectualpropertylawinthiscaseistogivemanufacturersanincentivetobuild crappy cars. If automakers have an exclusive right to fix their own products, they will turn repair operations into a cash cow. (Of course, thats exactly the same business model currently followed by companies that sell cheap platforms and make money off proprietary accessories and spare parts.) Suddenly, the moneymadefromrepairingautomobileswouldoutweighthecostofsellingthem. In a free market, of course, it wouldnt be necessary to pay for the informa tion,ortopayproprietarypricesforthetools,becausesoftwarehacksandgeneric versionsofthetoolswouldbefreelyavailablewithoutanylegalimpediment.That Congress is considering legislation to mandate the sharing of information pro tected by intellectual property law is a typical example of governments Rube Goldbergnature:allthatsreallyneededistoeliminatetheintellectualproperty inthefistplace. Oneeffectoftheshiftinimportancefromtangibletointangibleassetsisthat a growing portion of product prices consists of embedded rents on intellectual propertyandotherartificialpropertyrightsratherthanthematerialcostsofpro duction. Tom Peters cited former 3M strategic planner George Hegg on the in creasingportionofproductvaluemadeupofintellect(i.e.,theamountoffinal priceconsistingoftributetotheownersofintellectualproperty):Wearetrying tosellmoreandmoreintellectandlessandlessmaterials.Petersproducesalong stringofsuchexamples:
...MynewMinolta9xiisalumpyobject,butIsuspectIpaidabout$10for its plastic casing, another $50 for the fineground optical glass, and the rest, 2 about$640,foritsintellect... Itisasoftworld....Nikecontractsfortheproductionofitsspiffyfootwear infactoriesaroundtheglobe,butitcreatestheenormousstockvalueviasuperb design and, above all, marketing skills. Tom Silverman, founder of upstart TommyBoyRecords,saysNikewasthefirstcompanytounderstandthatitwas in the lifestyle business.... Shoes? Lumps? Forget it! Lifestyle. Image. Speed. 3 Valueviaintellectandpizazz. Microsofts only factory asset is the human imagination, observed The NewYorkTimesMagazinewriterFredMoody.InseminarsIveusedtheslideon which those words appear at least a hundred times, yet every time that simple sentencecomesintoviewonthescreenIfeelthehairsonthebackofmyneck 4 bristle. Afewyearsback,PhilipMorrispurchasedKraftfor$12.9billion,afairprice in view of its subsequent performance. When the accountants finished their work, it turned out that Philip Morris had bought $1.3 billion worth of stuff (tangibleassets)and$11.6billionofOther.Whatstheother,the116/129? ....Callitintangibles,goodwill(theU.S.accountantsterm),brandequity, 5 ortheideasintheheadsofthousandsofKraftemployeesaroundtheworld.
MikeMasnick,HowAutomakersAbuseIntellectualPropertyLawstoForceYoutoPay More For Repairs, Techdirt, December 29, 2009 <http://techdirt.com/articles/20091228/ 0345127515.shtml>. 2 TomPeters,TheTomPetersSeminar:CrazyTimesCallforCrazyOrganizations(New York:VantageBooks,1999),p.10. 3 Ibid.,pp.1011. 4 Ibid.,p.11. 5 Ibid.p.12.
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RegardingPetersMinoltaexample,asBenklerpointsoutthemarginalcostof reproducingitsintellectisvirtuallyzero.Soabout90%ofthepriceofthatnew Minoltacomesfromtollstocorporategatekeepers,whohavebeengrantedcontrol ofthatintellect. The same goes for Nikes sneakers. I suspect the amortization cost of the physicalcapitalusedtomanufacturetheshoesinthoseAsiansweatshops,plusthe costofthesweatshoplabor,islessthan10%ofthepriceoftheshoes.Thewagesof the workers could be tripled or quadrupled with negligible impact on the retail price. In an economy where software and product design were the product of peer networks, unrestricted by the intellectual property of old corporate dinosaurs, 90% of the products price would evaporate overnight. To quote Michael Perel man,
the socalled weightless economy has more to do with the legislated powers of intellectualpropertythatthegovernmentgrantedtopowerfulcorporations.For example, companies such as Nike, Microsoft, and Pfizer sell stuff that has high valuerelativetoitsweightonlybecausetheirintellectualpropertyrightsinsulate 1 themfromcompetition.
Intellectualpropertyplaysexactlythesameprotectionistroleforglobalcor porations that tariffs did for the old national industrial economies. Patents and copyrights are barriers, not to the movement of physical goods, but to the diffu sion of technique and technology. The one, as much as the other, constitutes a monopoly of productive capability. Intellectual property enables the transna tionalcorporationtobenefitfromthemoralequivalentoftariffbarriers,regardless ofwhereitissituated.Insodoing,itbreakstheoldlinkbetweengeographyand protectionism.Intellectualproperty,exactlyliketariffs,servestheprimaryfunc tionoflegallyrestrictingwhocanproduceagiventhingforagivenmarket.With an American tariff on a particular kind of good, the corporations producing that good have a monopoly on it only within the American market. With the tariff provided by a patent on the industrial technique for producing that good, the samecorporationshaveanidenticalmonopolyineverysinglecountryintheworld thatadherestotheinternationalpatentregime. Howmanyextrahoursdoestheaveragepersonworkeachweektopaytribute totheownersofthehumanimagination? TheConsumerProductSafetyImprovementAct(CPSIA)isagoodillustration ofhowregulationsputafloorunderoverhead.Toputitinperspective,firstcon siderhowthesmallapparelmanufactureroperates.AccordingtoEricHusman,an engineerwhoblogsonleanmanufacturingandwhosewifeisintheapparelindus try, a small apparel manufacturer comes up with a lot of designs, and then pro duceswhateverdesignssell,switchingbackandforthbetweenproductsastheor derscomein.NowconsidertheeffecttheCPSIAhasonthismodel.Itsmostoner ousprovisionisitsmandateofthirdpartytestingandcertification,notofmateri als,butofeverycomponentofeachseparateproduct.
The testing and certification requires that finished products be tested, not materials,andthateverycomponentofeveryitemmustbetestedseparately.A price quote from a CPSIAauthorized testing facility says that testing Learning Resources product Lets Tackle Kindergarten, a tackle box filled with learning toolsflashcards,shapes,countersandletterswillcost$6,144. MichaelPerelman,ThePoliticalEconomyofIntellectualProperty,MonthlyReview, January2003<http://www.monthlyreview.org/0103perelman.htm>.
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Items made from materials known not to contain lead, or items tested to othercomparablestandards,muststillbetested.Acertifiedorganiccottonbaby blanketappliqudwithfourfabricsmustbetestedforleadat$75percomponent material. Awardwinning German toy company Selecta Spielzeugwhose sus tainably harvested wood toys are colored with nontoxic paints, sealed with beeswax, and compliant with European testing standardspulled out of the UnitedStatesmarketattheendof2008,statingthatcomplyingwiththeCPSIA would require them to increase their retail prices by at least 50 percent. Other Europeancompaniesareexpectedtofollowsuit.
Thetotalcostoftestingcanrangefrom$100tothousandsofdollarsperprod uct.Withthislevelofmandatedoverheadperproduct,obviously,theonlywayto amortizesuchanenormouscapitaloutlayislargebatchproduction.Soproducing onajustintimebasis,withlowoverhead,usingsmallscalecapitalgoods,isforall intentsandpurposescriminalized.1 The Design Piracy Prohibition Act, which Sen. Charles Schumer recently in troducedforthefourthtime,wouldhaveasimilareffectonfashion.Essentiallya DMCAforthefashionindustry,itwouldrequirethousandsofdollarsinlegalfees tosecureCYAdocumentationoftheoriginalityofeachdesign.Notonlywouldit impose such fees on apparel producers of any scale, no matter how small, who producetheirowndesigns,butbecauseitfailstoindemnifyapparelmanufactur ers or retailersit would deter small producers and retailers from producing or sellingthedesignsofsmallindependentdesignerswhohadnotpaidforsuchale galinvestigation.2 NAIS,whichrequiressmallfamilyfarmstoIDchiptheirlivestockattheirown expense,operatesonthesameprinciple. At the local level, one of the central functions of socalled health and safetycodes,andoccupationallicensingistopreventpeoplefromusingidleca pacity(orsparecycles)ofwhattheyalreadyownanyway,andtherebytransform ing them into capital goods for productive use. Such regulations mandate mini mum levels of overhead (for example, by outlawing a restaurant run out of ones own home, and requiring the use of industrialsized ovens, refrigerators, dish washers,etc.),sothattheonlywaytoservicetheoverheadandremaininbusiness istoengageinlargebatchproduction. Youcantdojustafewthousanddollarsworthofbusinessayear,becausethe statemandatescapitalequipmentonthescalerequiredforalargescalebusinessif youengageinthebusinessatall.Consideralltheoverheadcostsimposedonthis chef,whowantedtoopenarestaurantonthefirstfloorofahotel:
Thatswhenthefunbegan. Isketchedsomeplansandhadthemdrawnupbyanarchitect($1000). IsubmittedthemforreviewtotheCountybuildingDept.($300). EverythingwasOK,exceptforthebathrooms.TheywerenotADAcompli ant.Newlybuiltbathroomsmusthavea5radiusturningspaceforawheelchair. Noproblem.ItriedeveryconfigurationIcouldthinkoftoaccomodatethelarger bathroom space without losing seating which would mean losing revenue. No luck.Iwouldhavetoeatintomystoragespaceandreplaceitwithaseparateex teriorwalkincooler($5,000).Iwouldalsohavetoreducethediningroomspace slightlysoIhadtoplanonbanquettesalongtheexteriorwalltoretainthesame Kathryn Geurin, Toybox Outlaws, Metroland Online, January 29, 2009 <http://www.metroland.net/back_issues/vol32_no05/features.html>. 2 Kathleen Fasanella, IP Update: DPPA & Fashion Law Blog, Fashion Incubator, March 10, 2010 <http://www.fashionincubator.com/archive/ipupdatedppafashionlaw blog/>.
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ImightaddthatIhadadviceinallthisfromaretiredexecutivewho volun teered his time (small donation to Toys 4 Tots gratefully accepted) through a groupthatconnectedus.Hesaidthatinhisopinionthatmyprojectbudgetedat $200Kwouldcostupwardof$1millioninNYCandperhapsSFduetohigherper mitsandfees.1 At the smaller end of the spectrum, consider restrictions on informal, unli censeddaycarecentersoperatedoutofpeopleshomes.
MIDDLEVILLE,Mich.(WZZM)AWestMichiganwomansaysthestateis threatening her with fines and possibly jail time for babysitting her neighbors children.
number of seats (banquettes vs. separate stand alone tables ($5,000) Revised plans($150).Rereview($100) Next came the Utility Dept. It seems the water main was insufficient even forthecurrentuse,a24suitehotel,andwouldneedtobereplaced($10,000). AlongcomestheHistoricalPreservationSociety,apurelyadvisorygroupof starched collar, pince nez wearing fuddyduddies (well, not literally) to offer their better take it or else advice, or maybe lose the Historic Status tax break forthehotel. It seems that the mushroom for the kitchen exhaust fan would be visible from the street, so could I please relocate it to the rear of the building? Pretty please?Extraductingandmorepowerfulfan($5,000). HelloFireDept!Myplansshoweda40seatdiningroom,2restrooms,ami croscopicoffice,andakitchen.Myfullstaffingduringtouristseasonwas4serv ers,1dishwasherand1seasonalcooktotaloccupancy47,myselfincluded. TheFireInspectorsaidthespacecouldaccomodate59.ButIonlyhave40 seats.Iwantluxuriousspacearoundthetables.Ipleaded.No.Itgoesbysquare footage.48seats,4servers,3cooks,onedishwasher,1personintheofficeand2 peopleintherestrooms.WhywouldIneed4cooksfor40seatswhenIamca pableofdoingthatalone?Andifthecooksarecooking,theserversareserving, theofficerisofficing,thedinersaredining,thenwhotheH#$%isinthebath rooms? Square footage. Code! And therefore it went from Class B to Class A, re quiringasprinklersystemforthediningroomandathirdexit($10,000)inaddi tion to the existing front door and the back kitchen door. It would have to be punchedthroughthesidewallandhavealitEXITsign. Coulditbebehindthescreenshieldingthepatronsfromviewingtheinside of the bathrooms every time the door opened? Oh, no! It might not be visible. The door would have to be located where 4 guests at the banquette plus their oppositecompanionswereseatedlossof20%ofseatingunlessIsqueezedthem intosmallertablesdestroyingthewholeplannedluxuriousambience. ProForma: $250Ksales. $75KFoodandBeveragepurchases $75KLaborcost $75KExpenses $25Knetbeforetaxes. Resultofaboveexperience=FuggetAboudIt!!! Losstocommunity$100Kincomeplustips+$20KSalestax. Another Gifte Shoppe went into the space and closed a month after the end of tourist season. When we left town 2 years later to go sailing the Carib bean,thespacewasstillvacant.
Quoted by Charles Hugh Smith, in The Travails of Small Business Doom the U.S. Economy, Of Two Minds, August 17, 2009 <http://charleshughsmith.blogspot.com/2009/ 08/hetravailsofsmallbusinessdoomus.html>.
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LisaSnyderofMiddlevillesaysherneighborhoodschoolbusstopisrightin front of her home. It arrives after her neighbors need to be at work, so she watchesthreeoftheirchildrenfor1540minutesuntilthebuscomes. The Department of Human Services received a complaint that Snyder was operatinganillegalchildcarehome.DHScontactedSnyderandtoldhertoget licensed,stopwatchingherneighborskids,orfacetheconsequences. Its ridiculous. says Snyder. We are friends helping friends! She added thatsheacceptsnomoneyforbabysitting. Mindy Rose, who leaves her 5yearold with Snyder, agrees. Shes a friend ...Itrusther. State Representative Brian Calley is drafting legislation that would exempt peoplewhoagreetocarefornondependentchildrenfromdaycarerulesaslong astheyrenotengagedinabusiness. We have babysitting police running around this state violating people, threatening to put them in jail or fine them $1,000 for helping their neighbor (that)istrulyoutrageoussaysRep.Calley. A DHS spokesperson would not comment on the specifics of the case but saystheyhavenochoicebuttocomplywithstatelaw,whichisdesignedtopro 1 tectMichiganchildren.
Anothergoodexampleisthemedallionsystemoflicensingtaxicabs,wherea licensetooperateacabcostsintothehundredsofthousandsofdollars.Theeffect ofthemedallionsystemistocriminalizethecountlessoperatorsofgypsycabserv ices. For the unemployed person or unskilled laborer, driving carless retirees around on their errands for an hourly fee seems like an ideal way to transform ones labor directly into a source of income without doing obesiance to the functionariesofsomecorporateHumanResourcesdepartment. The primary purpose of the medallion system is not to ensure safety. That couldbeaccomplishedjustaseasilybymandatinganannualvehiclesafetyinspec tion, a criminal background check, and a driving record check (probably all the licensed taxi firms do anyway, and with questionable results based on my casual observation of both vehicles and drivers). And it would probably cost under a hundred bucks rather than three hundred thousand. No, the primary purpose of the medallion system is to allow the owners of licenses to screw both the con sumerandthedriver. Local building codes amount to a nearasdammit lockin of conventional techniques,regulatingthepaceofinnovationinbuildingtechniquesinaccordance with the preferences of the consensus of contracting firms. As a result, building contractorsareprotectedagainstvigorouscompetitionfromcheap,vernacularlo cal materials, and from modular or prefab designs that are amenable to self building. Inthecaseofoccupationallicensing,agoodexampleistheentrybarriersto employmentasasurveyortoday,ascomparedtoGeorgeWashingtonsday.AsVin Suprynowiczpointsout,Washingtonhadnoformalschoolinguntilhewaseleven, onlytwoyearsofitthereafter,andstillwasabletolearnenoughgeometry,trigo nometryandsurveyingtogetajobpaying$100,000annuallyintodaysterms.
Howmuchgovernmentrunschoolingwouldayouthoftodaybetoldheneeds beforehecouldcontemplatemaking$100,000ayearasasurveyorajobwhich hasnotchangedexcepttogetsubstantiallyeasier,whatwithhandheldcomput
Jeff Quackenbush, Jessica Puchala , Middleville woman threatened with fines for watching neighbors kids, WZZM13.Com, September 24, 2009 <http://www.wzzm13.com/ news/news_story.aspx?storyid=114016&catid=14#>.
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ers, GPS scanners and laser rangefinders? Sixteen years, at least18, more 1 likely.
The licensing of retailers protects conventional retail establishments against competitionfrombuyingclubsandotherlowoverheadestablishmentsrunoutof peopleshomes,byrestrictingtheirabilitytoselltothegeneralpublic.Forexam ple,afamilyrunfoodbuyingcoopinLaGrange,Ohio,whosepurposewastoput local farmers into direct contact with local consumers, was raided by sheriffs deputiesforallegedlyoperatingasanunlicensedretailestablishment.
A spokeswoman at the Department of Agriculture said its officers were at the sceneinanadvisoryrole.Aspokeswomanatthecountyhealthagencyrefusedto comment except to explain it was a licensing issue regarding the familys 2 MannaStorehouse.
Never mind the illegitimacy of the legal distinction between a private bulk foodbuying club and a public retail establishment, or the licensing requirement forsellingtothegeneralpublic.Theraidwasatextbookentrapmentoperation,in whichandundercoveragenthadpersistentlybadgeredthefamilytosellhimeggs. Apparentlythefamilyhadgottenonthebadsideoflocalauthoritiesbyrespond ing in an inadequately deferential manner to peremptory accusations that they wererunningastore.
Theconfrontationbegandevelopingseveralyearsagowhenlocalhealthof ficialsdemandedthefamilyholdaretailfoodlicenseinordertoruntheircoop. Thompsonsaidthefamilywrotealetterquestioningthatrequirementandask ing for evidence that would suggest they were operating a food store and how theirprivatecoopwassimilartoaWalMart. TheStowersfamilymemberssimplytakeordersfrom(coop)members... thendivideupthefood,Thompsonexplained. Thehealthinspectordidntlikethetoneoftheletter,Thompsonsaid,and theresultwasthatlawenforcementofficialsplanned,stagedandcarriedoutthe Dec.1SWATstyleraidonthefamilyshome. Thompson said he discussed the developments of the case with the health inspectorpersonally. Hedidntthinkthetoneofthatletterwasappropriate,Thompsonsaid. Iveseentheletter.Theresnotanythingtherethatsbelligerent. Thompsonexplainedthegenesisoftheraidwasaseriesofvisitstothefam ilybyanundercoveragentforthestateagricultureagency. Heshowedup(attheStowersresidence)unannouncedoneday,Thomp sonexplained,andpretendedtobeinterestedinpurchasingfood. Thefamilyexplainedthecoopwasprivateandtheycouldntprovideserv icetothestranger. The agent then returned another day, stayed for two hours, and explained howhethoughthissickmotherwouldbehelpedbyeggsfromrangefedchick enstowhichtheStowershadaccess. Thefamilyrespondedthattheydidntsellfoodandcouldnthelp.Whenhe refused to leave, the family gave him a dozen eggs to hasten his departure, Thompsonexplained. Despite protests from the family, the agent left some money on a counter anddeparted. On the basis of that transaction, the Stowers were accused of engaging in theretailsaleoffood,Thompsonsaid.... Vin Suprynowicz, Schools guarantee there can be no new Washingtons, Review Journal,February10, 2008<http://www.lvrj.com/opinion/15490456.html>. 2 Bob Unruh, Food coop hit by SWAT raid fights back, WorldNetDaily, December 24,2008<http://www.wnd.com/index.php?fa=PAGE.view&pageId=84445>.
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Hesaidthestateagencycamefromnowhereandthenworkedtogetthe familyinvolvedinsomethingthatmightrequirealicense.... Pete Kennedy of the FarmtoConsumer Legal Defense Fund said the case was government overreaching and was designed more to intimidate and frightenpeopleintobelievingthattheycannotprovidefoodforthemselves. This is an example where, once again, the government is trying to deny peopletheirinalienable,fundamentalrighttoproduceandconsumethefoodsof their choice, said Gary Cox, general counsel for the FTCLDF. The purpose of 1 ourcomplaintistocorrectthatwrong.
As much as I love the local brew pub I visit on a weekly basis, I was taken abackbythemanagerscomplaintaboutstreethotdogvendorsbeingallowedto operateduringstreetfestivals.Itwasunfairforthecitytoallowit,hesaid,because anestablishedindoorbusinesswithallitsassociatedoverheadcostscouldntcom pete. Thesystemiseffectivelyriggedtoensurethatnobodycanstartasmallbusi nesswithoutbeingrich.Everyoneelsecangetbyonwagelaborandlikeit(andof course that works out pretty well for the people trying to hire wage labor on the mostadvantageousterms,dontyouthink?).RoderickLongasks,
In the absence of licensure, zoning, and other regulations, how many people wouldstartarestauranttodayifalltheyneededwastheirlivingroomandtheir kitchen? How many people would start a beauty salon today if all they needed wasachairandsomescissors,combs,gels,andsoon?Howmanypeoplewould startataxiservicetodayifalltheyneededwasacarandacellphone?Howmany peoplewouldstartadaycareservicetodayifabunchofworkingparentscould simplygettogetherandpooltheirresourcestopayafewoftheirnumbertotake careofthechildrenoftherest?Thesearenotthesortsofsmallbusinessesthat receive SBIR awards; they are the sorts of small businesses that get hammered downbythefullstrengthofthestatewhenevertheydaretomakeanappearance 2 withoutthreadingthelengthyandcostlymazeofthestatespermissionprocess.
BobUnruh,SWATraidonfoodcoopcalledentrapment,WorldNetDaily,Decem ber 26, 2008 <http://www.wnd.com/index.php?fa=PAGE.view&pageId=84594>. See also Andrea Zippay, Organic food coop raid sparks case against health department, ODA, FarmAndDairy.Com, December 19, 2008 <http://www.farmanddairy.com/news/organic foodcoopraidsparkscourtcaseagainsthealthdepartmentoda/10752.html>. 2 Roderick Long, Free Market Firms: Smaller, Flatter, and More Crowded, Cato Un bound, Nov. 25, 2008 <http://www.catounbound.org/2008/11/25/rodericklong/free marketfirmssmallerflatterandmorecrowded>.
BabylonisFallen
INTRODUCTION
fyouwatchthemainstreamcablenewsnetworksandSundaymorninginterview shows, youve no doubt seen, many times, talking head commentators rolling theireyesatanyproposalforreformthatstooradicallydifferentfromtheexisting institutional structure of society. That much of a departure would be completely unrealistic, they imply, because it is an imposition on all of the common sense people who prefer things the way they are, and because the way things are is a naturalstateofaffairsthatcameaboutbybeingrecognized,throughasortoftacit referendum of society at large, as selfevidently the most efficient way of doing things. But in fact the present system is, itself, radical. The corporate economy was createdinafewshortdecadesasaradicaldeparturefromwhatprevailedbefore. Anditdidnotcomeaboutbynaturalevolutionarymeans,orjusthappen;itsnot justthewaythingsare.Itwasimposedfromabove(aswesawinChapterOne) byaconscious,deliberate,radicalsocialengineeringeffort,withvirtuallynomean ingful democratic input from below. The stateimposed corporatization of the economyinthelatenineteenthcenturycouldbecomparedinscopeandseverity, withoutmuchexaggeration,toStalinscollectivizationofagricultureandthefirst Five Year Plan. Although the Period is sometimes called the Gilded Age or the GreatBarbecue,JohnCurlpreferstocallittheGreatBetrayal.1IntheTildenHayes dispute, Republicans ended military Reconstruction and handed the southern states back over to the planter class and segregation, in return for a free hand in imposingcorporateruleatthenationallevel. All social systems include social reproduction apparatuses, whose purpose is toproduceapopulaceschooledtoacceptthewaythingsareastheonlypossible world,andtheonlynaturalandinevitablewayofdoingthings.Sothepresentsys tem, once established, included a cultural, ideological and educational apparatus (lowerandhighereducation,themedia,etc.)runbypeoplewithexactlythesame ideology and the same managerial class background as those running the large corporationsandgovernmentagencies. All proposals for reform within the present system are designed to be im plementedwithinexistinginstitutionalstructures,bythesortsofpeoplecurrently runningthe dominant institutions.Anythingthatfundamentally weakenedoral tered the present pattern of corporatestate domination, or required eliminating the power of the elites running the dominant institutions, would beby defini tiontooradical.
JohnCurl,ForAllthePeople:UncoveringtheHiddenHistoryofCooperation,Coopera tiveMovements,andCommunalisminAmerica(Oakland,CA:PMPress,2009).
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Thesystemofpower,consequently,canonlybeunderminedbyforcesbeyond its control. Fortunately, it faces a mutually reinforcing and snowballing series of terminalcriseswhichrenderitunsustainable. Thepresentsystemsenculturationapparatusfunctionsautomaticallytopre sentitasinevitable,andtosuppressanyconsciousnessthatotherworldsarepos sible. But not only are other worlds possible; under the conditions of Sloanist massproductiondescribedinChapterTwo,theterminalcrisesofthepresentsys temmeanthatthisworld,increasingly,isbecomingimpossible.
A.RESUMPTIONOFTHECRISISOFOVERACCUMULATION
State capitalism, with industry organized along massproduction lines, has a chronic tendency to overaccumulation: in other words, its overbuilt plant and equipmentareunabletodisposeoftheirfulloutputwhenrunningatcapacity,and thesystemtendstogenerateasurplusthatonlyworsensthecrisisovertime. PaulBaranandPaulSweezy,foundersoftheneoMarxistMonthlyReview,de scribed the Great Depression as the normal outcome of the workings of the Americaneconomicsystem.Itwastheculminationofthestagnationisttenden cies inherent in monopoly capitalism, and far from being a deviation from eco nomic normality was the realization in practice of the theoretical norm toward whichthesystemisalwaystending.1 Fortunatelyforcorporatecapitalism,WorldWarTwopostponedthecrisesfor a generation or so, by blowing up most of the plant and equipment in the world outsidetheUnitedStates.WilliamWaddellandNormanBodek,inTheRebirthof American Industry, describe the wideopen field left for the American mass productionmodel:
GeneralMotors,Ford,GeneralElectricandtherestconvertedtowarproduction and were kept busy, if not prosperous, for the next four years. When the war ended, they had vast, fully functional factories filled with machine tools. They alsohadplentyofcash,oratleastapocketfullofgovernmentIOUs.Moreim portant,theyalsohadtheentireworldmarkettothemselves.Theotheremerg ing automobile makers, electric product innovators, consumer product compa 2 nies,andmachinetoolbuildersofEuropeandAsiawereinruins.
HarryMagdoffandPaulSweezyoftheMonthlyReviewgroupdescribedit,in similarterms,asavirtualrebirthofAmericancapitalism.
TheGreatDepressionwasended,notbyaspontaneousresurgenceoftheaccu mulationprocessbutbytheSecondWorldWar.And...thewaritselfbrought about vast changes in almost every aspect of the world capitalist system. Much capitalwasdestroyed;thediversionofproductiontowartimeneedsleftahuge backlogofunfilledconsumerdemand;bothproducersandconsumerswereable to pay off debts and build up unprecedented reserves of cash and borrowing power; important new industries (e.g., jet planes) grew from military technolo gies;drasticallychangedpowerrelationsbetweenandamongvictoriousandde feated nations gave rise to new patterns of trade and capital flows. In a real
PaulBaranandPaulSweezy,MonopolyCapital:AnEssayintheAmericanEconomic andSocialOrder(NewYork:MonthlyReviewPress,1966)p.240. 2 WilliamWaddellandNormanBodek,RebirthofAmericanIndustry:AStudyofLean Management(Vancouver,WA:PCSPress,2005)p.94.
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sense,worldcapitalismwasrebornonnewfoundationsandenteredaperiodin 1 importantrespectssimilartothatofitsearlychildhood.
Even so, the normal tendency was toward stagnation even during the early postwar Golden Age. In the period after WWII, actual GNP has equaled or ex ceededpotentialinonlytenyears.AndeightofthosewereduringtheKoreanand Vietnamconflicts.Theonlytwopeacetimeyearsinwhichtheeconomyreachedits potential,1956and1973,hadnotablyworselevelsofemploymentthan1929.2 The tendency postwar, as before it, was for the productive capacity of the economy to far outstrip the ability of normal consumption to absorb. The differ ence:
Whereas in the earlier period this tendency worked itself out in a catastrophic collapseofproductionduringthe1930sasawhole,unemploymentandutiliza tionofproductivecapacityaveraged18percentand63percentrespectivelyin the postwar period economic energies, instead of lying dormant, have increas inglybeenchannelledintoavarietyofwasteful,parasitic,andgenerallyunpro ductive uses.... [T]he point to be emphasized here is that far from having eliminated the stagnationist tendencies inherent in todays mature monopoly capitalist economy, this process has forced these tendencies to take on new 3 formsanddisguises.
ThedestructionofcapitalinWorldWarIIpostponedthecrisisofoveraccu mulationuntilaround1970,whentheindustrialcapacityofEuropeandJapanhad beenrebuilt.Bythattime,accordingtoPioreandSabel,Americandomesticmar ketsforindustrialgoodshadbecomesaturated.4 This saturation was simply a resumption of the normal process described by MarxinthethirdvolumeofCapital,whichWorldWarIIhadonlytemporarilyset back. Leaving aside more recent issues of technological development tunneling throughthecostfloorandreducingthecapitaloutlaysneededformanufacturing byoneormoreorders ofmagnitude (aboutwhichmorebelow),itisstill natural for investment opportunities to decline in mature capitalism. According to Mag doff and Sweezy, domestic opportunities for the extensive expansion of capitalist investment were increasingly scarce as the domestic noncapitalist environment shrunkinrelativesizeandtheservicesectorswereincreasinglyindustrialized.And quantitative needs for investment in producer goods decline steadily as industri alizationproceeds:
...[T]hedemandforinvestmentcapitaltobuildupDepartmentI,afactor thatbulkedlargeinthelaternineteenthandearlytwentiethcenturies,isofrela tivelyminorimportancetodayintheadvancedcapitalistcountries.Theyallhave highly developed capitalgoods industries which, even in prosperous times, normallyoperatewithacomfortablemarginofexcesscapacity.Theupkeepand modernization of these industriesand also of course of existing industries in
HarryMagdoffandPaulM.Sweezy,CapitalismandtheDistributionofIncomeand Wealth, Magdoff and Sweezy, The Irreversible Crisis: Five Essays by Harry Magdoff and PaulM.Sweezy(NewYork:MonthlyReviewPress,1988),p.38 2 John F. Walker and Harold G. Vattner, StagnationPerformance and Policy: A ComparisonoftheDepressionDecadewith19731974,JournalofPostKeynesianEconom ics,Summer1986,inMagdoffandSweezy,StagnationandtheFinancialExplosion,Mag doffandSweezy,TheIrreversibleCrisis,pp.1213. 3 MagdoffandSweezy,StagnationandtheFinancialExplosion,p.13. 4 PioreandSabel,TheSecondIndustrialDivide,p.184.
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Department II (consumer goods)is provided for by depreciation reserves and 1 generatesnonewnetdemandforinvestmentcapital. ... [T]he need for new investment, relative to the size of the system as a whole,hadsteadilydeclinedandhasnowreachedanhistoriclow.Thereproduc tion of the system is largely selffinancing (through depreciation reserves), and existingindustriesareforthemostpartoperatingatlowlevelsofcapacityutili zation. New industries, on the other hand, are not of the heavy capitalusing 2 typeandgeneratearelativelyminordemandforadditionalcapitalinvestment.
Upkeepandmodernizationofexistingindustryisfundedalmostentirelyby retainedearnings,andthoseretainedearningsareinfactoftenfarinexcessofin vestment needs. Corporate management generally finances capital expansion as much as possible through retained earnings, and resorts to bond issues or new stockonlyasalastresort.AndasMartinHellwigpointsout,thisdoesnotbyany means necessarily operate as a constraint on management resources, or force management to ration investment. If anything, the glut of retained earnings is morelikelytoleavemanagementatalossastowhattospenditallon.3 AndaswesawinChapterTwo,thetraditionalinvestmentmodel,inoligopoly industry,istacitcollusionbetweencartelizedfirmsinspooningoutinvestmentin new capital assets only as fast as the old ones wear out . Schumpeters creative destruction, in a free market, would lead to the constant scrapping and replace ment of functional capital assets. But cartelized firms are freed from competitive pressure to scrap obsolete machinery and replace it before it wears out. Whats more,asweshallseeinthenextchapter,intheeconomicallyuncertainconditions of the past thirty years, established industry has increasingly shifted new invest ment from expensive productspecific machinery in the massproduction core to farlessexpensivegeneralpurposecraftmachineryinflexiblemanufacturingsup pliernetworks. If anything, Magdoffs and Sweezys remarks on the reduced capital outlays requiredbynewindustrieswereradicallyunderstated,givendevelopmentsofthe subsequenttwentyyears.Newlyemergingformsofmanufacturing,asweshallsee inChapterFive,requirefarlesscapitaltoundertakeproduction.Thedesktoprevo lutionhasreducedthecapitaloutlaysrequiredformusic,publishingandsoftware bytwoordersofmagnitude;andthenewestopensourcedesignsforcomputerized machinetoolsarebeingproducedbyhardwarehackersforafewhundreddollars. The result, according to Magdoff and Sweezy, is that a developed capitalist systemsuchasthatoftheUnitedStatestodayhasthecapacitytomeettheneeds of reproduction and consumption with little or no net investment.4 From the early days of the industrial revolution, when the demand for investment capital seemed virtually unlimited, [and] the supply was narrowly restricted, mature capitalism has evolved to the point where the opposite is true: the overabundant supply of investment capital is confronted by a dearth of investment opportuni ties.5 Marx, in the third volume of Capital, outlined a series of tendencies that might absorb surplus investment capital and thereby offset the general trend to wardafallingdirectrateofprofitinmaturecapitalism.Andtheseoffsettingten
MagdoffandSweezy,CapitalismandtheDistributionofIncomeandWealth,p.31. Ibid.,p.39. 3 MartinHellwig,OntheEconomicsandPoliticsofCorporateFinanceandCorporate Control,inXavierVives,ed.,CorporateGovernance:TheoreticalandEmpiricalPerspectives (Cambridge:CambridgeUniversityPress,2000),pp.114115. 4 MagdoffandSweezy,CapitalismandtheDistributionofIncomeandWealth,p.32. 5 Ibid.,p.33.
2 1
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denciestheorizedbyMarxcoincidetoalargeextentwiththeexpedientsactually adopted under developed capitalism. According to Walden Bello the capitalist state,aftertheresumedcrisisofthe1970s,attemptedtoaddresstheresumedcrisis of overproduction with a long series of expedientsincluding a combination of neoliberalrestructuring,globalization,thecreationofthetechsector,thehousing bubble and intensified suburbanization, and the expansion of the FIRE economy (finance, insurance and real estate)as successive attempts to soak up surplus capital.1 Unfortunatelyforthestatecapitalists,theneoliberalmodelbasedonoffshor ingcapitalhasreacheditslimit;Chinaitselfhasbecomesaturatedwithindustrial capital.2TheexportorientedindustrializationmodelinAsiaishittingthewallsof bothPeakOilandcapitalsaturation. Thechoiceofexportorientedindustrializationreflectedadeliberatecalcula tionbyAsiangovernments,basedontherealizationthat
importsubstitutionindustrializationcouldcontinueonlyifdomesticpurchasing power were increased via significant redistribution of income and wealth, and thiswassimplyoutofthequestionfortheregionselites.Exportmarkets,espe ciallytherelativelyopenUSmarket,appearedtobeapainlesssubstitute.
Today,however,asgoodspileupinwharvesfromBangkoktoShanghai,and workersarelaidoffinrecordnumbers,peopleinEastAsiaarebeginningtorealize theyarentonlyexperiencinganeconomicdownturnbutlivingthroughtheendof anera.Theclearlessonisthattheexportorientedindustrialmodelisextremely vulnerabletobothincreasedshippingcostsanddecreasesinWesternpurchasing poweralessonthathasbanishedalltalkofdecouplingagrowingAsianecon omy from the stagnating West. Asias manufacturing sector is linked to debt financed, middleclass spending in the United States, which has collapsed.3 The Asianexporteconomy,asaresult,hasfallenthroughthefloor.
Worldwide, industrial production has ground to a halt. Goods are stacking up, but nobodys buying; the Washington Post reports that the world is suddenly awashinalmosteverything:flatpaneltelevisions,bulldozers,Barbiedolls,strip malls,Burberrystores.AHongKongbasedshippingbrokertoldTheTelegraph thathisfirmhadseentradeactivityfalloffacliff.AsiaEuropeisanunmitigated disaster.TheEconomistnotedthatonecannowshipacontainerfromChinato Europeforfreeyouonlyneedtopickupthefuelandhandlingcostsbuthalf emptyfreightersarethenormalongtheworldsbusiestshippingroutes.Global airfreight dropped by almost a quarter in December alone; Giovanni Bisignani, whoheadsashippingindustrytradegroup,calledthefreefallinglobalcargo 4 unprecedentedandshocking.
Ifgenuinedecouplingistotakeplace,itwillrequireareversalofthestrategic assessmentsandpolicydecisionswhichledtothechoiceofexportorientedindus trializationoverimportsubstitutioninthefirstplace.Itwillrequire,inparticular, rethinking the unthinkable: putting the issues of local income distribution and purchasing power back on the table. That means, in concrete terms, that Asian
Walden Bello, A Primer on Wall Street Meltdown, MR Zine, October 3, 2008 <http://mrzine.monthlyreview.org/bello031008.html>. 2 Ibid. 3 Walden Bello, Asia: The Coming Fury, Asia Times Online, February 11, 2009 <http://www.atimes.com/atimes/Asian_Economy/KB11Dk01.html>. 4 Joshua Holland, The Spectacular, Sudden Crash of the Global Economy, Alternet, February24,2009<http://www.alternet.org/module/printversion/128412/the_spectacular% 2C_sudden_crash_of_the_global_economy/>.
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manufacturers currently engaged in the Nike (outsource everything) model of distributed manufacturing must treat the Western corporate headquarters as nodes to be bypassed, repudiate their branding and other intellectual property, andreorientproductiontothedomesticmarketwithpricesthatreflectsomething like the actual cost of production without brandname markup. It also requires thatAsiangovernmentsceasetheirmoderndayreenactmentoftheprimitiveac cumulationofeighteenthcenturyBritain,restoregenuinevillagecontrolofcom munallands,andotherwiseendtheirobsessivefocusonattractingforeigninvest mentthroughpoliciesthatsuppressthebargainingpoweroflaboranddrivepeo pleintothefactorieslikewildbeasts.Inotherwords,thoseNikesneakerspilingup onthewharvesneedtobemarketedtothelocalpopulationminustheswoosh,at an 80% markdown. At the same time, agriculture needs to shift from cash crop production for the urban and export market to a primary focus on subsistence productionandproductionforthedomesticmarket. Bellopointsoutthat75%ofChinasmanufacturerswerealreadycomplaining of excess capacity and demand stagnation, even before the bubble of debtfueled demandcollapsed.Interestingly,healsonotesthattheChinesegovernmentistry ing to bolster rural demand as an alternative to collapsing demand in the export market,althoughhesquiteskepticalofthepolicysprospectsforsuccess.Theef forts to promote rural purchasing power, he argues, are too little and too late merelychippingattheedgesofa25yearpolicyofpromotingexportorientedin dustrialization on the back of the peasant. Chinas initial steps toward market liberalizationinthe1970swerecenteredontheprosperityofpeasantsmallholders. In the 80s, the policy shifted toward subsidizing industry for the export market, withalargeincreaseintheruraltaxburdenandasmanyasthreehundredmillion peasantsevictedfromtheirlandinfavorofindustrialuse.Butanyhopeatallfor Chinasindustrialeconomydependsonrestoringtheprosperityoftheagricultural sectorasadomesticsourceofdemand.1 Suburbanization,thankstoPeakOilandthecollapseofthehousingbubble, hasalsoceasedtobeaviableoutletforsurpluscapital. The stagnation of the economy from the 1970s onevery decade since the postwarpeakofeconomicgrowthinthe1960shasseenloweraverageratesofan nual growth in real GDP compared to the previous decade, right up to the flat growth of the present decadewas associated with a longterm trend in which demand was stimulated mainly by asset bubbles.2 In 1988, a year after the 1987 stock market crash and on the eve of the penultimate asset bubble (the dotcom bubbleofthe90s),SweezyandMagdoffsummedupthepreviouscourseoffinan cializationinlanguagethatactuallyseemsunderstatedinlightofsubsequentasset bubbles.
Amongtheforcescounteractingthetendencytostagnation,nonehasbeenmore important or less understood by economic analysts than the growth, beginning in the 1960s and rapidly gaining momentum after the severe recession of the mid1970s,ofthecountrysdebtstructure...atapacefarexceedingthesluggish expansionoftheunderlyingrealeconomy.Theresulthasbeentheemergence of an unprecedentedly huge and fragile financial superstructure subject to
WaldenBello,CanChinaSavetheWorldfromDepression?Counterpunch,May27, 2009<http://www.counterpunch.org/bello05272009.html>. 2 JohnBellamyFosterandFredMagdoff,FinancialImplosionandStagnation:Backto the Real Economy, Monthly Review, December 2008 <http://www.monthlyreview.org/ 081201fostermagdoff.php>.
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stresses and strains that increasingly threaten the stability of the economy as a whole.
Betweenthe1960sand1987,thedebttoGNPratiorosefrom1.5to2.25.1 Butitwasonlyafterthecollapseofthetechbubblethatfinancializationthe useofderivativesandsecuritizationofdebtassurpluscapitalspongestosoakup investmentcapitalforwhichnooutletexistedinproductiveindustryreallycame intoitsown.AsJoshuaHollandnoted,inmostrecessionsthefinancialsectorcon tractedalongwiththerestoftheeconomy;butafterthe2000techbustitjustkept growing,ballooninguptotenpercentoftheeconomy.2Wereseeingnowhowthat workedout. Financialization was a way of dealing with a surplus of productive capacity, whose output the population lacked sufficient purchasing power to absorba problemexacerbatedbythefactthatalmostallincreasesinproductivityhadgone to increasing the wealth of the upper class. Financialization enabled the upper classtolenditsincreasedwealthtotherestofthepopulation,atinterest,sothey couldbuythesurplusoutput. Conventionalanalystsandeditorialistsfrequentlysuggest,tothepointofcli che,thattheshiftfromproductiveinvestmenttospeculationinthefinancesector isthemaincauseofoureconomicills.ButasMagdoffandSweezypointout,its theotherwayaround.Theexpansionofinvestmentcapitalagainstthebackdropof asluggisheconomyledtoashiftininvestmenttofinancialassets,giventhelackof demandforfurtherinvestmentinproductivecapitalassets.
It should be obvious that capitalists will not invest in additional capacity when theirfactoriesandminesarealreadyabletoproducemorethanthemarketcan absorb. Excess capacity emerged in one industry after another long before the extraordinarysurgeofspeculationandfinanceinthe1970s,andthiswastruenot onlyintheUnitedStatesbutthroughouttheadvancedcapitalistworld.Theshift in emphasis from industrial to pecuniary pursuits is equally international in 3 scope.
In any case the housing bubble collapsed, government is unable to reinflate housingandother assetvaluesevenwithtrilliondollar taxpayerbailouts,andan alarmingportionofthepopulationisnolongerabletoservicethedebtsaccumu latedingoodtimes.Notonlyaretherenoinflatedassetvaluestoborrowagainst to fuel demand, but many former participants in the Ditech spending spree are nowbecomingunemployedorhomelessintheGreatDeleveraging.4 Besides,theproblemwithdebtinflatedconsumerdemandwasthattherewas barelyenoughdemandtokeepthewheelsrunningandabsorbthefullproductof overbuilt industry even when everyone maxed out their credit cards and tapped intotheirhomeequitytoreplaceeverythingtheyownedeveryfiveyears.Andwell neverseethatkindofdemandagain.Sotheresnogettingaroundthefactthata majorportionofexistingplantandequipmentwillberustinafewyears. State capitalism seems to be running out of safety valves. Barry Eichengreen andKevinORourkesuggestthat,giventhescaleofthedeclineinindustrialout
MagdoffandSweezy,StagnationandtheFinancialExplosion,pp.1314. Joshua Holland, Let the Banks Fail: Why a Few of the Financial Giants Should Crash, Alternet, December 15, 2008 <http://www.alternet.org/workplace/112166/let_the_ banks_fail%3A_why_a_few_of_the_financial_giants_should_crash_/>. 3 MagdoffandSweezy,StagnationandtheFinancialExplosion,p.23. 4 CharlesHughSmith,GlobalizationandChina:NeoliberalCapitalismsLastFix,Of Two Minds, June 29, 2009 <http://www.oftwominds.com/blogjune09/globalization06 09.html>.
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put and global trade, the term Great Recession may well be overoptimistic. Graphing the rate of collapse in global industrial output and trade from spring 2008 to spring 2009, they found the current rate of decline has actually been steeperthanthatof19291930.Fromappearancesinearly2009,itwasaDepres sionsizedevent,withtheworldcurrentlyundergoinganeconomicshockevery bitasbigastheGreatDepressionshockof192930.1 LeftKeynesianPaulKrugmanspeculatedthattheeconomynarrowlyescaped anotherGreatDepressioninearly2009.
Afewmonthsagothepossibilityoffallingintotheabyssseemedalltooreal. The financial panic of late 2008 was as severe, in some ways, as the banking panicoftheearly1930s,andforawhilekeyeconomicindicatorsworldtrade, world industrial production, even stock priceswere falling as fast as or faster thantheydidin192930. But in the 1930s the trend lines just kept heading down. This time, the plungeappearstobeendingafterjustoneterribleyear. So what saved us from a full replay of the Great Depression? The answer, almostsurely,liesintheverydifferentroleplayedbygovernment. Probably the most important aspect of the governments role in this crisis isntwhatithasdone,butwhatithasntdone:unliketheprivatesector,thefed 2 eralgovernmenthasntslashedspendingasitsincomehasfallen.
ThisisnottosuggestthattheKeynesianstateisadesirablemodel.Rather,it is made necessary by state capitalism. But make no mistake: so long as we have state capitalism, with state promotion of overaccumulation and the maldistribu tionofpurchasingpowerthatresultsfromprivilege,stateinterventiontomanage aggregatedemandisnecessarytoavertdepression.Givenstatecapitalism,wehave onlytwoalternatives:1)eliminatetheprivilegesandsubsidiestooveraccumulation thatresultinchroniccrisistendencies;or2)resorttoKeynesianstabilizingmeas ures. Frankly, I cant work up much enthusiasm for the mobs of teabaggers de manding an end to the Keynesian stabilizing measures, when those mobs reflect an astroturf organizing effort funded by the very people who benefit from the privilegesandsubsidiesthatcontributetochroniccrisistendencies. Andweshouldbearinmindthatitsfarfromcleartheworsthas,infact,been averted.KarlDenningerarguesthatthemainreasonGDPfellonly1%inthesec ond quarter of 2009, as opposed to 6% in the first, was increased government spending. As he points out, the fall of investment slowed in the second quarter; butgiventhatitwasalreadycutalmostinhalf,therewasntmuchfurtheritcould fall. Exports fell only 7% and imports 15.1%; but considering they had already fallen 29.9% and 36.4%, respectively, in the first quarter, this simply means that exportsandimportshavecollapsed.Consumerspendingfellinthesecondquar termorethaninthefirst,withasecondquarterincreaseintherateofsavings(or rather,ofpayingdowndebt).Iftherateofcollapseisslowing,itsbecausetheres somuchlessdistancetofall.Denningerstake:Therecessionisnoteasing,itis DEEPENING.3 The reduction in global trade is especially severe, considering that the very modestuptickinsummer2009stilllefttheshortfallfrombaselinelevelsfarlower intheGreatRecessionthanitwasatacomparablepointintheGreatDepression.
BarryEichengreenandKevinH.ORourke,ATaleofTwoDepressions,VoxEU.Org, June4,2009<http://www.voxeu.org/index.php?q=node/3421>. 2 Paul Krugman, Averting the Worst, New York Times, August 9, 2009 <http://www.nytimes.com/2009/08/10/opinion/10krugman.html>. 3 KarlDenninger,GDP:UuuuggghhhhUPDATED,TheMarketTicker,July31,2009 <http://marketticker.denninger.net/archives/1276GDPUuuuggghhhh.html>.
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Asoflatesummer2009,worldtradewassome20%belowtheprerecessionbase line,comparedtoonly8%thesamenumberofmonthsintotheDepression.Bear in mind that the collapse of world trade in the Depression is widely regarded as thecatastrophicresultoftheSmootHawleytariff,andtohavebeenamajorexac erbatingfactorinthecontinuingprogressionoftheeconomicdeclineintheearly 30s.Thecurrentreductioninvolumeofworldtrade,fargreaterthanthatofthe GreatDepression,hasoccurredwithoutSmootHawley!1 Stoneleigh,aformerwriterforTheOilDrumCanada,arguesthattheassetde flationhasbarelybegun:
Banks hold extremely large amounts of illiquid assets which are currently markedtomakebelieve. So long as largescale price discovery events can be avoided,thisfictioncancontinue.Unfortunately,alargescalelossofconfidence is exactly the kind of circumstance that is likely to result in a firesale of dis tressedassets.... A largescale marktomarket event of banks illiquid assets would reprice entire asset classes across the board, probably at pennies on the dollar. This would amount to a very rapid destruction of staggering amounts of putative value.Thisistheessenceofdeflation....
Thecurrentlycelebratedgreenshoots,whichshecallsgangrenous,arecompa rabletothesuckersstockmarketrallyof1930.2 In any case, if Keynesianism is necessary for the survival of state capitalism, were reaching a point at which it is no longer sufficient. If pessimists like Den ninger are wrong, and Keynesian policies have indeed turned the free fall into a slow motion collapse, the fact remains that they are insufficient to restore nor malcybecause normalcy is no longer an option. Keynesianism was sufficient duringthepostwarConsensusCapitalismperiodonlybecauseoftheworldwide destructionofplantandequipmentinWWII,whichpostponedthecrisisofover accumulationforagenerationorso. BellomakestheverygoodpointthatKeynesianismisnotalongtermsolution tothepresenteconomicdifficultiesbecauseitceasedtobeasolutionthefirsttime around.
The Keynesianinspired activist capitalist state that emerged in the postWorld WarIIperiodseemed,foratime,tosurmountthecrisisofoverproductionwith itsregimeofrelativelyhighwagesandtechnocraticmanagementofcapitallabor relations.However,withtheadditionofmassivenewcapacityfromJapan,Ger many,andthenewlyindustrializingcountriesinthe1960sand1970s,itsability to do this began to falter. The resulting stagflationthe coincidence of stagna 3 tionandinflationsweptthroughouttheindustrializedworldinthelate1970s.
ConventionalleftKeynesianeconomistsareatalosstoimaginesomebasison whichapostbubbleeconomycaneverbereestablishedwithanythinglikecurrent levelsofoutputandemployment.Thisisespeciallyunfortunate,giventhefocusof both the Bush and Obama administrations banking policies on restoring asset prices to something approaching their precollapse value, and the focus of their
Cassander, Its Hard Being a Bear (Part Three): Good Economic History, Steve Keens Debtwatch, September 5, 2009 <http://www.debtdeflation.com/blogs/2009/09/05/ it%E2%80%99shardbeingabearpartthreegoodeconomichistory/>. 2 October302009:AninterviewwithStoneleighThecasefordeflation,TheAuto matic Earth <http://theautomaticearth.blogspot.com/2009/10/october302009interview with.html>. 3 WaldenBello,Keynes:AManforThisSeason?SharetheWorldsResources,July9, 2009<http://www.stwr.org/globalization/keynesamanforthisseason.html>.
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economicpoliciesonatleastpartiallyreinflatingthebubbleeconomyasasource ofpurchasingpower,sothatasJamesKunstlersoeloquentlyputsit
the US public could resume a revolving credit wayoflife within an economy dedicatedtobuildingmoresuburbanhousesandsellingalltheneededaccesso riesfromsupersizedfamilycarstocappuccinomachines.Thiswouldkeepeve ryone employed at the jobs they were qualified forfinish carpenters, realtors, pool installers, mortgage brokers, advertising account executives, Williams Sonomaproductdemonstrators,showroomsalesagents,doctorsofliposuction, 1 andsoon.
BoththePaulsonandGeithnerTARPplansinvolvethesamekindofHamil tonianskullduggery:borrowingmoney,toberepaidbytaxpayerswithinterest,to purchasebadassetsfrombanksatsomethingmuchclosertofacevaluethancur rentmarketvalueinordertoincreasetheliquidityofbankstothepointthatthey mightlendmoneybacktothepublicshouldtheydeigntodosoatinterest.Or as Michael Hudson put it, TARP aims at putting in place enough new bank lendingcapacitytostartinflatingpricesoncreditalloveragain.2 CharlesHughSmithdescribestheparallelbetweenJapansLostDecadeand thecurrenteconomiccrisis:
UshinawaretajunenistheJapanesephraseforLostDecade.Thetermde scribes the 19912000 nogrowth decade in which Japan attempted to defeat debtliquidation deflationary forces with massive government borrowing and spending, and a concurrent bailout of zombie (insolvent) banks with govern mentfunds. Thecentralbanksreflationfailed.Byanymeasure,theLostDecadeisnow theLostDecades.JapanseconomyenjoyedabriefspurtfromAmericasreales tatebubbleandChinasneedforJapanesefactoryequipmentandmachinetools. Butnowthatthosetwosourcesofdemandhaveebbed,Japanisreturningtoits deflationarymalaise.... ...Itseemsthekeyparallelisthis:anassetbubbleinflatedwithhighlylev eraged debt pops and the value of real estate and stocks declines. But the high levelsofdebttakenontospeculateinstocksandhousingremain. Rather than let the privatesector which accepted the high risks and took the enormous profits take staggering losses and writedowns, the government and central bank shift the losses from the private sector to the public balance 3 sheetviabailoutsandoutrightpurchasesoftoxic/impairedprivatedebt.
The problem is that precollapse levels of output can only be absorbed by debtfinancedandbubbleinflatedpurchasingpower,andthatanotherbubbleon thescaleofthetechandrealestateboomsjustainthappening. Keynesianism might be viable as a longterm strategy if deficit stimulus spending were merely a way of bridging the demand shortfall until consumer spendingcouldberestoredtonormallevels,afterwhichitwouldusetaxrevenues in good times to pay down the public debt. But if normal levels of consumer spending wont come back, it amounts to the U.S. government borrowing $2 tril
James Kunstler, Note: Hope = Truth, Clusterfuck Nation, April 20, 2009 <http:// jameshowardkunstler.typepad.com/clusterfuck_nation/2009/04/notehopetruth.html>. 2 MichaelHudson,WhatWallStreetWants,Counterpunch,February11,2009<http: //www.counterpunch.org/hudson02112009.html> (see also expanded version, Obamas Awful Financial Recovery Plan, Counterpunch, February 12, 2009 <http://www. counterpunch.org/hudson02122009.html>). 3 Charles Hugh Smith, Welcome to Americas Lost Decade(s), Of Two Minds, Sep tember 18, 2009 <http://charleshughsmith.blogspot.com/2009/09/welcometoamericas lostdecades.html>.
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lionthisyeartoshoreupconsumerspendingforthisyearwithconsumerspend ingfallingbacktoDepressionlevelsnextyearifanother$2trillionisntspent.
We estimate that absent all the forms of government stimulus in the second quarter,realGDPwouldhavecontractedatadecidedlybrownshooty6%annual rateasopposedtotheposted1%decline.And,whileconsensusforecastsarecen teredaround3.03.5%forcurrentquartergrowth,againthepaceofeconomicac tivitywouldbeflattonegativeabsentCashforClunkers,governmentautopur chases, and firsttime homebuyer subsidies, not to mention the FHAs best ef 1 fortstorecreatethehousingandcreditbubble....
Socapitalismmightbesustainable,intermsofthedemandshortfalltakenin isolationif the state is prepared to run a deficit of $1 or $2 trillion a year, every singleyear,indefinitely.Buttherewillneveragainbeataxbasecapableofpaying fortheseoutlays,becausetheimplosionofproductioncostsfromdigitalproduc tionandsmallscalemanufacturingtechnologyisdestroyingthetaxbase.Whatwe callnormallevelsofdemandareathingofthepast.AsPaulKrugmanpointsout, asoflatefall2009stimulusspendingisstartingtorunitscourse,withnosignof sufficient selfsustaining demand to support increased industrial production; the increasingly likely result is a double dip recession with Part Two in late 2010 or 2011.2 So the crisis of overaccumulation exacerbates the fiscal crisis of the state (aboutwhichmorebelow). Itmightbepossibletosustainsuchspendingonapermanentbasisviasome thing like the Social Credit proposals of Major Douglas some eighty years ago (simply creating the money out of thin air instead of borrowing it or funding it withtaxes,anddepositingsomuchadditionalpurchasingpowerineverycitizens checkingaccounteachmonth).Butthatwouldunderminethebasiclogicofcapi talism,removingtheincentivetoacceptwagelaboronthetermsoffered,andfree ingmillionsofpeopletoretireonasubsistenceincomefromthestatewhilepar ticipatinginthenonmonetizedgiftorpeereconomy.Evenworse,itwouldcreate theeconomicbasisforcontinuingsubsidizedwasteandplannedobsolescenceun tiltheecosystemreachedabreakingpointastateofaffairsanalogoustothepos sibility, contemplated with horror by theologians, that Adam and Eve in their fallenstatemighthaveattainedimmortalityfromtheTreeofLife. Those who combine some degree of green sympathy with their Keynesian ism have a hard time reconciling the fundamental contradiction involved in the two sides of modern Progressivism. You cant have all the good Michael Moore stuffaboutfullemploymentandlifetimejobsecurity,withoutthebadstuffabout plannedobsolescenceandvulgarconsumerism.Krugmanisagoodcaseinpoint:
Imfairlyoptimisticabout2010. But what comes after that? Right now everyone is talking about, say, two years of economic stimuluswhich makes sense as a planning horizon. Too muchoftheeconomiccommentaryIvebeenreadingseemstoassume,however, that thats really all well needthat once a burst of deficit spending turns the economyaroundwecanquicklygobacktobusinessasusual. Infact,however,thingscantjustgobacktothewaytheywerebeforethe currentcrisis.AndIhopetheObamapeopleunderstandthat. Theprosperityofafewyearsago,suchasitwasprofitswereterrific,wages notsomuchdependedonahugebubbleinhousing,whichreplacedanearlier David Rosenberg, Lunch with Dave, September 4, 2009 <http://www.scribd.com/ doc/19430778/LunchWithDave090409>. 2 Paul Krugman, Double dip warning, Paul Krugman Blog, New York Times, Dec. 1, 2009<http://krugman.blogs.nytimes.com/2009/12/01/doubledipwarning/>.
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huge bubble in stocks. And since the housing bubble isnt coming back, the spendingthatsustainedtheeconomyintheprecrisisyearsisntcomingbackei ther. Tobemorespecific:theseverehousingslumpwereexperiencingnowwill end eventually, but the immense Bushera housing boom wont be repeated. Consumerswilleventuallyregainsomeoftheirconfidence,buttheywontspend the way they did in 20052007, when many people were using their houses as ATMs,andthesavingsratedroppednearlytozero. So what will support the economy if cautious consumers and humbled 1 homebuildersarentuptothejob?
(Iwouldaddthat,whatevernewstandardofpostbubblenormalcyprevails, intheageofPeakOilandabsentpreviouspathologicallevelsofconsumercredit, itsunlikelytheU.S.willeverseeareturntoautomobilesalesof18millionayear. If anything, the current output of ca. ten million cars is probably enormously in flated.)2 AndKrugmanhimself,itseems,isnotentirelyimmunetothedelusionthata sufficient Keynesian stimulus will restore the levels of consumer demand associ atedwithsomethinglikenormalcy. Krugman first compares the longer duration and greater severity of depres sions without countercyclical government policy to those with, and then cites Keynes as an authority in estimating the length of the current Great Recession withoutcountercyclicalstimulusspending:arecessionwouldhavetogoonuntil the shortage of capital through use, decay and obsolescence causes a sufficiently obviousscarcitytoincreasethemarginalefficiency.3 Butashehimselfsuggestedinhisearliercolumn,thepoststimuluseconomy mayhavemuchlowernormallevelsofdemandthantheprerecessioneconomy, inwhichcasetheonlyeffectofthestimuluswillbetopumpupartificiallevelsof demand so long as the money is still being spent. In that case, as John Robb ar gues,theeconomywilleventuallyhavetosettleintoanewequilibriumwithlevels ofdemandsetatmuchlowerlevels.
Theassumptionisthatnewhomeswilleventuallyneedtobebuilttoaccommo datepopulationgrowthandnewcarswillbesoldtoreplaceoldstock.However, whatifthereisasurgeinmultigenerationalhousing(thereis)orpeoplestartto drivemuchless(theyare)orkeeptheircarsuntiltheydrop(mostpeopleIknow are planning this). If that occurs, you have to revise the replacement level as sumptiontoafarlowerlevelthanbeforethestartofthedownturn.Whatsthat level? I suspect it is well below current sales levels, which means that there is 4 muchmoredownsidemovementpossible.
The truth of the matter is, the present economic crisis is not cyclical, but structural. There is excess industrial capacity that will be rust in a few years be causeweareenteringaperiodofpermanentlylowconsumerdemandandfrugal ity.AsPeterKirwanatWiredputsit,themainstreamtalkingheadsaremistaking
Paul Krugman, Life Without Bubbles, New York Times, January 6, 2009 <http://www.nytimes.com/2008/12/22/opinion/22krugman.html?ref=opinion>. 2 DespiteexuberanceinthepressoverCashforClunkers,autosaleswentflatinfact reachingalowfortheyearassoonastheprogramended.AssociatedPress,Retailsales fall after Cash for Clunkers ends, MSNBC, October 14, 2009 <http://www.msnbc.msn.com/id/33306465/ns/businessretail/>. 3 PaulKrugman,Use,Delay,andObsolescence,TheConscienceofaLiberal,February 13,2009<http://krugman.blogs.nytimes.com/2009/02/13/usedelayandobsolescence/>. 4 John Robb, Below Replacement Level, Global Guerrillas, February 20, 2009 <http://globalguerrillas.typepad.com/johnrobb/2009/02/belowreplacementlevel.html>.
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for a cyclical downturn what is really permanent structural change and indus trialcollapse.1 Both the bailout and stimulus policies, under the late Bush and Obama ad ministrations, have amounted to standing in the path of these permanent struc turalchangesandyellingStop!ThegoalofU.S.economicpolicyistopreventthe deflationofassetbubbles,andrestoresufficientdemandtoutilizetheidlecapacity ofmassproductionindustry.Butthisonlydelaystheinevitablestructuralchanges thatmusttakeplace,asRichardFloridapointsout:
The bailouts and stimulus, while they may help at the margins, also pose an enormousopportunitycosts[sic].Ontheonehand,theyimpedenecessaryand longdeferredeconomicadjustments.Theautoandautorelatedindustriessuffer from massive overcapacity and must shrink. The housing bubble not only helpedspurthefinancialcrisis,italsoproducedanenormousmisallocationof resources.Housingpricesmustcomealotfurtherdownbeforewecanresetthe economyand consumer demandfor a new round of growth. The financial and banking sector grew massively bloatedin terms of employment, share of GDP and wages, as the detailed research of NYUs Thomas Phillipon has 2 shownandlikewisehavetocomebacktoearth.
Thenewfrugality,totheextentthatitentailsmorecommonsenseconsumer behavior, threatens the prevailing Nike model of outsourcing production and charging a price consisting almost entirely of brandname markup. A Wall Street Journal article cites a Ms. Ball: After years of spending $17 on bottles of Matrix shampoo and conditioner, 28yearold Ms. Ball recently bought $5 Pantene in stead.... I dont know that you can even tell the difference. Procter & Gamble has been forced to scale back its prices considerably, and offer cheaper and less elaborateversionsofmanyofitsproducts.WilliamWaddellcomments:
GuesswhatP&GMs.Ballandmillionslikeherwillnotcomebacktoyourhol lowbrandsoncetheeconomycomesbacknowthatsheknowsthe$5stuffisex 3 actlythesameasthe$17stuff.
Apermanent,massshiftfrombrandnamegoodstoalmostidenticalgeneric andstorebrandgoodswoulddestroythebasisofpushdistributioncapitalism.We alreadysaw,inthepreviouschapter,quotesfromadvertisingindustryrepresenta tives stating in the most alarmist terms what would happen if their name brand goodshadtoengageindirectpricecompetitionlikecommodities.Theminrevolt against brandname goods during the downturn of the early 90sthe socalled MarlboroFridaywasadressrehearsalforjustsuchaneventuality.
On April 2, 1993, advertising itself was called into question by the very brands the industry had been building, in some cases, for over two centuries. That day is known in marketing circles as Marlboro Friday, and it refers to a suddenannouncementfromPhilipMorristhatitwouldslashthepriceofMarl borocigarettesby20percentinanattempttocompetewithbargainbrandsthat Peter Kirwan, Bad News: What if the moneys not coming back? Wired.Co.Uk, August7,2009<http://www.wired.co.uk/news/archive/200908/07/badnewswhatifthe money%27snotcomingback.aspx>. 2 Richard Florida, Are Bailouts Saving the U.S. from a New Great Depression,Crea tive Class, March 18, 2009 <http://www.creativeclass.com/creative_class/2009/03/18/are thebailoutssavingusfromanewgreatdepression/>. 3 Ellen Byron, Tide Turns Basic for P&G in Slump, WSJ online, August 6, 2009 <http://online.wsj.com/article/SB124946926161107433.html>;inWilliamWaddell,ButYou Cant Fool All the People All the Time, Evolving Excellence, August 25, 2009 <http://www.evolvingexcellence.com/blog/2009/08/butyoucantfooolallthepeopleall thetime.html>.
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wereeatingintoitsmarket.Thepunditswentnuts,announcinginfrenzieduni sonthatnotonlywasMarlborodead,allbrandnamesweredead.Thereasoning was that if a prestige brand like Marlboro, whose image had been carefully groomed, preened and enhanced with more than a billion advertising dollars, was desperate enough to compete with nonames, then clearly the whole con ceptofbrandinghadlostitscurrency.Thepublichadseentheadvertising,and thepublicdidntcare....TheimplicationthatAmericansweresuddenlythink ing for themselves en masse reverberated through Wall Street. The same day PhilipMorrisannounceditspricecut,stockpricesnosedivedforallthehouse holdbrands:Heinz,QuakerOats,CocaCola,PepsiCo,ProcterandGambleand RJRNabisco.PhilipMorrissownstocktooktheworstbeating. Bob Stanojev, national director of consumer products marketing for Ernst andYoung,explainedthelogicbehindWallStreetspanic:Ifoneortwopower houseconsumerproductscompaniesstarttocutpricesforgood,theresgoingto beanavalanche.Welcometothevaluegeneration.
As Klein went on to write, the Marlboro Man eventually recovered from his setback, and brand names didnt exactly become obsolete in the ensuing age of NikeandTheGap.Butevenifthepanicwasanoverstatedinstantconsensus,it wasneverthelessnotentirelywithoutcause.
ThepanicofMarlboroFridaywasnotareactiontoasingleincident.Rather, it was the culmination of years of escalating anxiety in the face of some rather dramatic shifts in consumer habits that were seen to be eroding the market share of householdname brands, from Tide to Kraft. Bargainconscious shop pers,hithardbytherecession,werestartingtopaymoreattentiontopricethan to the prestige bestowed on their products by the yuppie ad campaigns of the 1980s.Thepublicwassufferingfromabadcaseofwhatisknownintheindustry asbrandblindness. Studyafterstudyshowedthatbabyboomers,blindtothealluringimagesof advertising and deaf to the empty promises of celebrity spokespersons, were breaking their lifelong brand loyalties and choosing to feed their families with privatelabel brands from the supermarketclaiming, heretically, that they couldnttellthedifference...Itappearedtobeareturntotheproverbialshop keeperdishingoutgenericgoodsfromthebarrelinaprebrandedera. Thebargaincrazeoftheearlyninetiesshookthenamebrandstotheircore. Suddenlyitseemedsmartertoputresourcesintopricereductionsandotherin centives than into fabulously expensive ad campaigns. This ambivalence began to be reflected in the amounts companies were willing to pay for socalled brandenhanced advertising. Then, in 1991, it happened: overall advertising spending actually went down by 5.5 percent for the top 100 brands. It was the firstinterruptioninthesteadyincreaseofU.S.adexpendituressinceatinydipof 0.6percentin1970,andthelargestdropinfourdecades. Itsnotthattopcorporationswerentfloggingtheirproducts,itsjustthatto attract those suddenly fickle customers, many decided to put their money into promotions such as giveaways, contests, instore displays and (like Marlboro) price reductions. In 1983, American brands spent 70 percent of their total mar keting budgets on advertising, and 30 percent on these other forms of promo tion.By1993,theratiohadflipped:only25percentwenttoads,withtheremain 1 ing75percentgoingtopromotions.
AndMs.Ball,mentionedabove,mayprefigureamorepermanentshifttothe samesortofbehaviorinthelongeranddeeperGreatRecessionofthe21stcentury. WhileKrugmanlamelyfiddlesaroundwiththingslikeareductionoftheU.S. trade deficit as a possible solution to the demand shortfall, liberal blogger Mat
1
NaomiKlein,NoLogo(NewYork:Picador,2000,2002),pp.1214.
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thewYglesiashasamorerealisticideaofwhatasustainablepostbubbleeconomy mightactuallyentail.
Iwouldsaythatpartoftheanswermaywellinvolvetakingalargershareofour productivitygainsasincreasedleisureratherthanincreasedproductionandin comes.... A structural shift to lesswork, lessoutput dynamic could be cata strophicifthatmeansastructuralshifttoaveryhighrateofunemployment.But ifitmeansastructuralshifttowardsixweekvacationsandfewer60hourweeks 1 thenthatcouldbeagoodthing.
Exactly. But a better way of stating it would be a structural shift toward a lesswork, lessoutput, lessplannedobsolescence, and lessembeddedrentson IPandephemera dynamic, with no reduction in material standard of living. A structural dynamic toward working fewer hours to produce less stuff because it lastslongerinsteadofgoingtothelandfillafterabriefdetourinourlivingrooms, wouldindeedbeagoodthing. Michel Bauwens ventures a somewhat parallel analysis from a different per spective, that of Kondratievs longwave theory and neoMarxist theories of the socialstructureofaccumulation(particularlytheideaofanewsocialstructureof accumulationasnecessarytoresolvethecrisesofthepreviousstructure2).Accord ingtoBauwens,1929wasthesuddensystemicshockofthelastsystem,andfromit emerged the present system, based on Fordist massproduction and the New Deal/organizedlaborsocialcontract,theautomobile,cheapfossilfuelsyouknow the drill. The systems golden age lasted from WWII to the early 1970s, when its ownseriesofsystemicshocksbegan:theoilembargo,thesaturationofworldin dustrialcapital,andalltheothersystemiccriseswereconsideringinthischapter. AccordingtoBauwens,eachlongwaveischaracterizedbyanewenergysource,a handful of technological innovations (what the neoMarxists would call epoch making industries), a new mode of financial system, and a new social contract. Especially interesting, each long wave presents a new hyperproductive way to exploittheterritory,whichparallelshisanalysis(whichwewillexamineinlater chapters) of the manorial economy as a path of intensive development when the slave economy reached its limits of expansion, and of netarchical capitalism as a way to extract value intensively when extensive addition of capital inputs is no longerfeasible. According to Bauwens, the emerging long wave will be characterized by re newableenergyandgreentechnology,crowdsourcedcreditandmicrolending,re localized networked manufacturing, a version of smallscale organic agriculture thatappliesthelatestfindingsofbiologicalscience,andamodeofeconomicorga nizationcenteredoncivilsocietyandpeernetworks.3 However, to the extent that the capture of value through intellectual prop erty is no longer feasible (see below), it seems unlikely that any such new para digmcanfunctiononanythingresemblingthecurrentcorporatecapitalistmodel. Itsafairlysafebetwereinforaperiodofprolongedeconomicstagnationand decline, measured in conventional terms. The imploding capital outlays required
Matthew Yglesias, The Elusive PostBubble Economy, Yglesias/ThinkProgress.Org, December 22, 2008 <http://yglesias.thinkprogress.org/archives/2008/12/the_elusive_post_ bubble_economy.php>. 2 David Gordon, Stages of Accumulation and Long Economic Cycles, in Terence K. Hopkins and Immanuel Wallerstein, eds., Processes of the WorldSystem (Beverly Hills, Calif.:Sage,1980),pp.945. 3 MichelBauwens,ConditionsfortheNextLongWave,P2PFoundationBlog,May28, 2009<http://blog.p2pfoundation.net/conditionsforthenextlongwave/2009/05/28>.
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for manufacturing, thanks to current technological developments, mean that the needforinvestmentcapitalfallsshortofavailableinvestmentfundsbyatleastan order of magnitude. The increasing unenforcability of intellectual property means that attempts to put a floor under either mandated capital outlays, over head,orcommodityprice,assolutionstothecrisis,willfail.Establishedindustry will essentially cut off all net new investment in capital equipment and begin a prolongedprocessofdecay,withemploymentlevelssufferingaccordingly. Those who see this as leading to a sudden, catastrophic increase in techno logicalunemploymentareprobablyexaggeratingtherateofprogressionofthecri sis.WhatweremorelikelytoseeiswhatAlanGreenspancalledaGreatMalaise, gradually intensifying over the next couple of decades. Given the toolkit of anti deflationarymeasuresavailabletothecentralbankers,hearguedin1980,thecol lapseofassetbubbleswouldneveragainbeallowedtofollowitsnaturalcoursea cascading set of bankruptcies leading to a chain reaction of debt deflation. The centralbanks,hecontinued,wouldfloodtheworldseconomieswithpaperclaims atthefirstsignofaproblem,sothatafullfledgedcreditdeflationonthepat ternoftheearly1930scouldnothappen.Andindeed,SweezyandMagdoffargue, had the government not intervened following the stock market crash of 1987, its quitelikelytheaftermathwouldhavebeenadeflationarycollapselikethatofthe Depression. Greenspans successor Ben Helicopter Bernanke, whose nickname comes from his stated willingness to airdrop cash to maintain liquidity, made good on such guarantees in the financial crisis of Fall 2008. The federal government also movedfarmorequicklythaninthe1930s,aswesawabove,tousedeficitspending tomakeupasignificantpartofthedemandshortfall. Theupshotofthisisthatthecrisisofoveraccumulationandunderconsump tion is likely to be reflected, not in a sudden deflationary catastrophe, butin GreenspanswordsaGreatMalaise.
Thusintodayspoliticalandinstitutionalenvironment,areplayoftheGreatDe pressionistheGreatMalaise.Itwouldnotbeaperiodoffallingpricesanddou bledigitunemployment,butratheraneconomyrackedwithinflation,excessive unemployment (8 to 9 percent), falling productivity, and little hope for a more 1 benevolentfuture.
Thatkindofstagnationisessentiallywhathappenedinthelate30s,afterFDR succeededinpullingtheeconomybackfromthecliffoffullscaleDepression,but failedtorestoreanywherenearnormallevelsofoutput.From1936orsountilthe beginningofWWII,theeconomyseemeddestinedforlongtermstagnationwith unemploymentfluctuatingaround15%.IntodaysGreatMalaise,likewise,wecan expectlongtermunemploymentfrom10%to15%,andutilizationofindustrialca pacityinthe60%range,withasimultaneousupwardcreepingofparttimework andunderemployment,andtheconcealmentofrealunemploymentlevelsasmore peoplestoplookingforworkanddropfromtheunemploymentrolls. JoshuaCooperRamonotesthatemploymenthasfallenmuchmorerapidlyin the Great Recession than Okuns Law (which states the normal ratio of GDP de clinetojoblosses)wouldhavepredicted.Insteadofthe8.5%unemploymentpre dictedbyOkunsLaw,wereatalmost10%.
Something new and possibly strange seems to be happening in this reces sion. Something unpredicted by the experts. I dont think, Summers told the Greenspanremarksfrom1980,quotedbyMagdoffandSweezy,TheGreatMalaise, inMagdoffandSweezy,TheIrreversibleCrisis,pp.5860.
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PetersonInstitutecrowddeviatingagainfromhistextthatanyonefullyun derstandsthisphenomenon.Andthatraisessomeworryingquestions.Willcre ating jobs be that much slower too? Will doubledigit unemployment persist even after we emerge from this recession? Has the idea of full employment rathersuddenlybecomeantiquated?... When compiling the worst case for stresstesting American banks last winter, policymakers figured the most chilling scenario for unemployment in 2009 was 8.9%a figure we breezed past in May. From December 2007 to August2009,theeconomyjettisonednearly7millionjobs,accordingtotheBu reauofLaborStatistics.Thatsa5%decreaseinthetotalnumberofjobs,adrop that hasnt occurred since the end of World War II. The number of longterm unemployed,peoplewhohavebeenoutofworkformorethan27weeks,wasthe highestsincetheBLSbeganrecordingthenumberin1948.... America now faces the direst employment landscape since the Depression. Its troubling not simply for its sheer scale but also because the labor market, shapedbyglobalizationandtechnologyandfinancialmeltdown,maybefunda mentallydifferentfromanythingweveseenbefore.Andiftheresultisthatwere stuckwithpersistent9%to11%unemploymentforawhile...wemaybelook ingataproblemthatwilldefinethefirsttermofBarackObamaspresidency.... ThetotalnumberofnonfarmjobsintheU.S.economyisaboutthesamenow roughly 131 millionas it was in 1999. And the Federal Reserve is predicting moderategrowthatbest.Thatmeansmorethanadecadewithoutrealemploy 1 mentexpansion.
To put things in perspective, the employmenttopopulation ratiosince its peak of 64.7% in 2000has fallen to 58.8%.2 That means the total share of the populationwhichisemployedhasfallenbyaboutatenthoverthepastnineyears. Andtheemploymenttopopulationratioisastatisticthatsalothardertobullshit thanthecommonlyusedofficialunemploymentfigures.Theseverityofthelatter isgenerallyconcealedbydiscouragedjobseekersdroppingofftheunemployment rolls; the official unemployment figure is consistently understated because of shrinkageofthejobmarket,andcountsonlythosewhoarestillbotheringtolook for work. The reason unemployment only rose rose to 9.8% in September 2009, insteadof10%,isthat571,000discouragedworkersdroppedoutofthejobmarket thatmonth.Anotherstatistic,thehoursworkedindex,hasalsodisplayedarecord decline (8.6% from the prerecession peak, compared to only 5.8% in the 198082 recession).3 A much larger portion of total unemployed in this recession are longterm unemployed. 53% (or eight million) of the unemployed in August were not on temporarylayoff,andofthosefivemillionhadsoughtworkunsuccessfullyforsix months or moreboth record highs.4 Although total unemployment levels as of November2009haveyettoequaltheirpreviouspostwarpeakin1983,thepercent ageofthepopulationwhohavebeenseekingjobsforsixmonthsormoreisnow
Joshua Cooper Ramo, Jobless in America: Is DoubleDigit Unemployment Here to Stay? Time, September 11, 2009 <http://www.time.com/time/printout/0,8816,1921439,00. html>. 2 BradDeLong,AnotherBadEmploymentReport(IWishWeHadaRipcordtoPull Department), Grasping Reality with All Eight Tentacles, October 2, 2009 <http://delong. typepad.com/sdj/2009/10/anotherbademploymentreportiwishwehadaripcordto pulldepartment.html>. 3 Ibid. 4 U.S.SufferingPermanentDestructionofJobs,WashingtonsBlog,October5,2009 <http://www.washingtonsblog.com/2009/10/ussufferingpermanentdestructionof.html>
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2.3%comparedtoonly1.6%in1983.1TheBureauofLaborStatisticsannouncedin January2010thattherateoflongtermunemploymentwasthehighestsince1948, when it began measuring it; those who had been out of work for six months or longercomprised40%ofallunemployed.2 Andwefacethelikelyprospectthattheeconomywillcontinuetoshedjobs evenaftertheresumptionofgrowthinGDP;inotherwordsnotjustajoblessre covery, but a recovery with job losses.3 As J. Bradford DeLong points out, the economyissheddingjobsdespiteanincreaseindemandfordomesticallymanufac turedgoods.
RealspendingonAmericanmadeproductsisrisingatarateofabout3.5% peryearrightnowandhasbeensinceMay. ThepointisthateventhoughspendingonAmericanproductsisrising,em 4 ploymentinAmericaisstillfalling.
Threequartersafterrecoverybeganinthe1981recession,employmentwasup 1.5%. Three quarters into this recovery, its down 0.6%. The recent surge in em ployment, despite enthusiastic celebration in the press, is hardly enough to keep pace with population growth and prevent unemployment from worsening.5 And accordingtoNeilIrwin,themassivedebtdeleveragingwhichisyettocomemeans therewillbeinsufficientdemandtoputtheunemployedbacktowork.
American households are trying to reduce debt to stabilize finances. But theyaredoingsoslowly,withtotalhouseholddebtat94percentofgrossdomes ticproductinthefourthquarterdownjustslightlyfrom96percentwhenthere cessionbeganinlate2007. Bycontrast,thatratioofhouseholddebttoeconomicoutputwas70percent in2000.Togetbacktothatlevel,Americanswouldneedtopaydown$3.4tril lionindebtandiftheydo,thatmoneywouldntbeavailabletospendongoods 6 andservices.
Insuchaperiodofstagnation,capitalgoodsinvestmentislikelytolagfarbe hind even the demand for consumer goods; investment in plant and equipment, generally, tends to fall much lower than capacity utilization of consumer goods industryineconomicdownturns,andtobemuchslowerreboundingintherecov ery.Inthe1930s,investmentinplantandequipmentwascutby70%to80%.Ma chinetoolbuildersshutdownproductionforprolongedperiods,anddepreciated industrial capital stock was not replaced for years. In 1939, despite consumer de mand 12% over its peak in the 1920s, investment in plant and equipment was at
LongTerm Unemployment, Economists View, November 9, 2009 <http://economistsview.typepad.com/economistsview/2009/10/longterm unemployment.html>. 2 Ron Scherer, Number of longterm unemployed hits highest rate since 1948, Christian Science Monitor, January 8, 2010 <http://www.csmonitor.com/USA/2010/ 0108/Numberoflongtermunemployedhitshighestratesince1948>. 3 Quiddity, Jobloss recovery, uggabugga, October 25, 2009 <http://uggabugga. blogspot.com/2009/10/joblossrecoveryexpertssee.html#comments>. 4 DeLong,JoblessRecovery:QuiddityMissesthePoint,J.BradfordDeLongsGrasping Reality with All Eight Tentacles, October 25, 2009 <http://delong.typepad.com/sdj/2009/ 10/joblessrecoveryquidditymissesthepoint.html>. 5 Ezra Klein, A Fast Recovery? Or a Slow One? Washington Post, April 14, 2010 <http://voices.washingtonpost.com/ezra klein/2010/04/a_fast_recovery_or_a_slow_one.html>. 6 Neil Irwin, Economic data dont point to boom times just yet, Washington Post, April 13, 2010 <http://www.washingtonpost.com/wpdyn/content/article/2010/04/12/ AR2010041204236.html>.
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lessthan60%ofthe1929level.1Investmentinplantandequipmentonlybeganto comebackwithheavygovernmentLendLeasespending(themachineryindustry expanded output 30% in 1940).2 In the coming period, as we shall see below, we can expect a virtual freeze of investment in the old massproduction industrial core. Charles Hugh Smith expects a decadeslong period of structural unemploy ment in which there will not be enough jobs for tens of millions of citizens: the employmentrollswillgraduallyshrinkfromtheirpresentlevelof137millionto100 millionorso,andthenstagnateatthatlevelindefinitely.3EconomistMarkZandi of Moodys Economy.com predicts the unemployment rate will be permanently higher, or at least for the foreseeable future.4 Of course, its quite plausible that the harm will be mitigated to some extent by a greater shift to jobsharing, part timeworkbyallbutonememberofahousehold,orevenareductionofthestan dardworkweekto32hours. Thehopemyhopeisthattheseincreasinglevelsofunderemploymentand unemploymentwillbeoffsetbyincreasedeaseofmeetingsubsistenceneedsout sidetheofficialeconomy,bytheimplodingcostofgoodsmanufacturedinthein formalsector,andbytheriseofbarternetworksasthemeansofprovidinganin creasing share of consumption needs by direct production for exchange between producers in the informal sector. As larger and larger shares of total production disappear as sources of conventional wage employment, and cease to show up in theGDPfigures,thenumberofhoursitsnecessarytoworktomeetneedsoutside theinformalsectorwillalsosteadilydecline,andtheremaininglevelsofparttime employmentforamajorityofthepopulationwillbesufficienttomaintainaposi tiverealmaterialstandardofliving.
B.RESOURCECRISES(PEAKOIL)
Inrecentdecades,thecenterpieceofboththeenergypolicyandamajorpart of the national security policy of the U.S. government has been to guarantee cheap, safe and abundant energy to the corporate economy. It was perhaps ex emplifiedmostforcefullyintheCarterDoctrineof1980:Anattemptbyanyout sideforcetogaincontrolofthePersianGulfregionwillberegardedasanassault onthevitalinterestsoftheUnitedStatesofAmerica,andsuchanassaultwillbe repelledbyanymeansnecessary,includingmilitaryforce.5 Thisisnolongerpossible:thebasicideaofPeakOilisthattherateofextrac tion of petroleum has peaked, or is about to peak. On the downside of the peak, thesupplyofoilwillgraduallycontractyearbyyear.Althoughthetotalamountof oilreservesinthegroundmayberoughlycomparabletothoseextractedtodate, theywillbepoorerinquality,andmoreexpensiveinbothdollartermsandenergy toextract.
HarryMagdoffandPaulSweezy,TheEndofProsperity:TheAmericanEconomyinthe 1970s(NewYorkandLondon:MonthlyReviewPress,1977),pp.95,120121. 2 Ibid.,p.96. 3 Smith, Unemployment: The Gathering Storm, Of Two Minds, September 26, 2009 <http://charleshughsmith.blogspot.com/2009/09/unemploymentgatheringstorm.html>. 4 Uh,oh,higherjoblessratescouldbethenewnormal,NewYorkDailyNews,Octo ber 23, 2009 <http://www.nydailynews.com/money/work_career/2009/10/19/20091019_ uh_oh_higher_jobless_rates_could_be_the_new_normal.html>. 5 CarterDoctrine,Wikipedia,accessedDecember23,2009<http://en.wikipedia.org/ wiki/Carter_Doctrine>.
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All the panaceas commonly put forth for Peak Oiloil shale, tar sands, off shore drilling, algaeturn out to be pipe dreams. The issue isnt the absolute amountofoilinoffshorereservesortarsands,butthecostofextractingthemand the maximum feasible rate of extraction. In terms of the net energy surplus left over after the energy cost of extraction (Energy Return on Energy Investment, or EROEI),allthedrillbabydrillgimmicksarefarmorecostlycostfarmoreBTUs pernetBTUofenergyproducedthandidpetroleuminthegoodolddays.The maximum rate of extraction from all the newly discovered offshore oil bonanzas thepressreports,andfromunconventionalsourcesliketarsands,doesntbeginto compensateforthedailyoutputofoldwellsinplaceslikethePersianGulfthatwill goofflineinthenextfewyears.Andtheoilfromsuchsourcesisfarmorecostlyto extract,withmuchlessnetenergysurplus.1 Thelistoffalsepanaceasincludescoal,bytheway.Itssometimesarguedthat PeakCoalissometimeaway,andthatincreasedcoaloutput(e.g.Chinasmuch vauntedpolicyofbuildinganothercoalfiredgeneratoreveryweek)willcompen sate for decreased oil output in the intermediate term. But estimates of coal re serves have been revised radically downward in the last two decadesby some 55%,asamatteroffact.Invirtuallyeverycountrywherecoalreserveshavebeen reestimated since the 1990s, such a downward revision has recurred. Poland, the largestcoalproducerintheEU,haditsreserveestimatesdowngradedby50%,and Germany by 90%. UK reserve estimates were revised from 45 billion tons to 0.22 billion tons. And interestingly, the countries with some of the highest estimated coalreserves(e.g.China)arealsothecountrieswhoseestimatesaretheoldestand mostoutofdate.ThemostrecentfiguresforChina,foranestimated55yearsre serves, date back all the way to 1992and Chinese production since then has amountedtosome20%ofthosetotalreserves.
The Energy Watch Group report gives projected production profiles showing that China is likely to experience peak coal production in the next 1015 years, followed by a steep decline. It should also be noted that these production pro filesdonottakeintoaccountuncontrolledcoalfireswhichaccordingtosatel lite based estimatesadd around 510% to regular consumption. Since Chinas production dwarfs that of any other country (being almost double that of the secondlargestproducer,theUSA)theglobalcoalproductionpeakwillbeheav 2 ilyinfluencedbyChinasproductionprofile.
The Energy Watch Groups estimate for peak coal energy is 2025.3 And even assuming increased coal output for another decade or more, Richard Heinberg forecaststotalfossilfuelenergyproductionpeakingaround2010orso.4 Peak Oil skeptics frequently argue that a price spike like the one in 2008 is caused,notbyPeakOil,butinsteadbysomespecialcircumstancelikeaspecific supplydisruptionorspeculativebubble.Butthatmissesthepoint. The very fact that supply has reached its peak, and that price is entirely de termined by the amount of demand bidding for a fixed supply, means that the priceofoilisgovernedbythesamespeculativeboombustcycleHenryGeorgeob servedinland.Giventheprospectofafixedsupplyoflandoroil,therationalin
Rob Hopkins, The Transition Handbook: From Oil Dependency to Local Resilience (Totnes:GreenBooks,2008),p.23. 2 Chris Vernon, Peak CoalComing Soon? The Oil Drum: Europe, April 5, 2007 <http://europe.theoildrum.com/node/2396>. 3 Ibid. 4 RichardHeinberg,PeakEverything:WakingUptotheCenturyofDeclines(Gabriola Island,B.C.:NewSocietyPublishers,2007),p.12.
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terestoftheoilindustry,likethatofrealestatespeculators,willleadthemtohold greaterorlesserquantitiesoffthemarket,ordumpthemonthemarket,basedon theirestimateofthefuturemovementofprice.Hencetheinconvenientfact,dur ingthedrillheredrillnowfeveroftheMcCainPalincampaign,thattheoilcom panieswerealreadysittingonlargeoffshoreoilreservesthattheywerefailingto developinanticipationofhigherprices.

Theoilcompaniesalreadyhaveaccesstosome34billionbarrelsofoffshore oil they havent even developed yet, but ending the federal moratorium on off shoredrillingwouldprobablyaddonlyanother8billionbarrels(assumingCali forniastillblocksdrillingoffitscoast).Whothinksaddingunder100,000barrels a day in supply sometime after 2020some onethousandth of total supply would be more than the proverbial drop in the ocean? Remember the Saudis couldnt stop prices from rising now by announcing that they will add 500,000 barrelsofoiladaybytheendofthisyear! HereisthekeydatafromEIA: Lookclosely.Asof2003,oilcompanieshadavailableforleasinganddevel opment40.92billionbarrelsofoffshoreoilintheGulfofMexico.IaskedtheEIA analyst how much of that (estimated) available oil had been discovered in the lastfiveyears.Shewenttohercomputerandsaidabout7billionbarrelshave beenfound.Thatleavesabout34billionstilltofindanddevelop. Thefederalmoratoriumonlyblocksanother18billionbarrelsofoilfrombe 1 ingdeveloped.
Andgiventheprospectoffixedsuppliesofoil,thegreatertheanticipatedfu turescarcityvalueofoil,thegreaterwillbetherationalincentiveforterroriststo leverage their power by disrupting supply. The infrastructure for extracting and distributingoilisunprecedentedlyfragile,preciselybecauseofadeclineinproduc tivecapacity.Between1985and2001,OPECsexcessproductioncapacityfellfrom 25%ofglobaldemandto2%.In2003,theInternationalEnergyAgencyestimated availableexcesscapacitywasatitslowestlevelinthirtyyears.2 AccordingtoJeffVail,speculativehoardingofpetroleumandterroristactions against oil pipelines are not alternative explanations in place of Peak Oil, but the resultsofapositivefeedbackprocesscreatedbyPeakOilitself.
Itisquitecommontohearexpertsexplainthatthecurrenttightoilmar ketsareduetoabovegroundfactors,andnotaresultofaglobalpeakinginoil production.Itseemsmorelikelythatitisgeologicalpeakingthatisdrivingthe geopolitical events that constitute the most significant aboveground factors suchasthechaosinIraqandNigeria,thenationalizationinVenezuelaandBo livia, etc. Geological peaking spawns positive feedback loops within the geopo litical system. Critically, these loops are not separable from the geological eventstheyarepartofthebroadersystemofPeakOil. Existingpeakingmodelsarebasedonthelogisticscurvesdemonstratedby past peaking in individual fields or oil producing regions. Global peaking is an entirely different phenomenonthe geology behind the logistics curves is the same,butglobalpeakingwillcreatefargreatergeopoliticalsideeffects,evenin regions with stable or rising oil production. As a result, these geopolitical side effects of peaking global production will accelerate the rate of production de cline,aswellasincreasetheimpactofthatproductiondeclinebysimultaneously increasingmarginaldemandpressures.Theresult:therightsideoftheglobaloil production curve will not look like the left ... whatever logistics curve is fit to JosephRomm,McCainsCruelOffshoreDrillingHoax,CommonDreams.Org,July11, 2008<http://www.commondreams.org/archive/2008/07/11/10301>. 2 RichardHeinberg,Powerdown(GabriolaIsland,BritishColumbia:NewSocietyPub lishers,2004),pp.2728.
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theleftsideofthecurve(wherehistoricalproductionincreased),actualdeclines inthefuturewillbesharperthanthatcurvewouldpredict. Herearefivegeopoliticalprocesses,eachapositivefeedbackloop,andeach anaccelerantofdecliningoilproduction: 1. Return on Investment: Increased scarcity of energy, as well as increased prices, increase the return on investment for attacks that target energy infra structure.... 2. Mercantilism: To avoid the dawning bidding cycles between crude oil priceincreasesanddemanddestruction,NationStatesareincreasinglyreturning toamercantilistparadigmonenergy.Thisistheattitudeofthereisntenough of it to go around, and we cant afford to pay the market price, so we need to lockupourownsupply.... 3.ExportLandModel:JeffreyBrown,acommentatoratTheOilDrum,has proposedageopoliticalfeedbackloopthathecallstheexportlandmodel.Ina regimeofhighorrisingprices,astatesexistingoilexportsbringsingreatreve nues, which trickles into the states economy, and leads to increasing domestic oilconsumption.Thisisexactlywhatishappeninginmostoilexportingstates. The result, however, is that growth in domestic consumption reduces oil avail ableforexport.... 4. Nationalism: Because our Westphalian system is fundamentally broken, theterritoriesofnationsandstatesarerarelycontiguous.Asaresult,itisoften the case that a nation is cut out of the benefits from its host states oil ex ports....Asaresult,nationsorsectariangroupswithinstateswillincreasingly agitateforalargershareofthepie....Thisprocesswilldeveloplocalvariantson thetacticsofinfrastructuredisruption,aswellasdesensitizeenergyfirmstoever greaterrentsforthesecurityoftheirfacilitiesandpersonnelbothofwhichwill drivethenextloop.... 5. Privateering: Nationalist insurgencies and economies ruined by the downslide of the exportland effect will leave huge populations with no con ventionaleconomicprospects.Highoilprices,andthewillingnesstomakehigh protection payments, will drive those people to become energy privateers. We areseeingexactlythiseffectinNigeria,whereasubstantialportionoftheinfra structuredisruptionisnolongercarriedoutbypoliticallymotivatedinsurgents, 1 butbyprofitmotivatedgangs....
Mercantilism, in particular, probably goes a long way toward explaining AmericasinvasionofIraqandtheRussianAmericanGreatGameinCentralAsia in recent years. The United States post9/11 drive for basing rights in the former CentralAsianrepublicsoftheoldUSSR,andtheriseoftheShanghaiCooperation OrganizationasacounterweighttoAmericanpower,areclearlymoremeaningful inthelightoftheCaspianSeabasinoilreserves. Andtheevidenceisclearthatpricereallyisgovernedentirelybythefluctua tionofdemand,andthatsupplyatleastontheupwardsideisextremelyinelas tic.Justconsiderthemovementofoilsuppliesafterthepriceshockofthelate70s and early eighties to that of the past few years. As transition town movement founderRobHopkinspointsout,thesupplyofoilhasincreasedlittleifanysince 2005fluctuatingbetween84and87mbddespiterecordpricelevels.2 Peak Oil is likely to throw a monkeywrench into the gears of the Chinese model of statesponsored capitalism. China heavily subsidizes energy and trans portationinputs,pricingthematartificiallylowlevelstodomesticindustrialcon sumers,justasdidtheUSSR.Thisaccountinggimmickwontworkexternallythe Saudis want cash on the barrel head, at the price they set for crude petroleum
Jeff Vail, Five Geopolitical FeedbackLoops in Peak Oil, JeffVail.Net, April 23, 2007 <http://www.jeffvail.net/2007/04/fivegeopoliticalfeedbackloopsin.html>. 2 Hopkins,TheTransitionHandbook,p.22.
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andtheincreaseddemandforsubsidizedenergyinputsbywastefuldomesticChi neseproducerswilljustcauseChinatobankruptitselfbuyingoilabroad. Overall,theeffectofPeakOilislikelytobearadicalshorteningofcorporate supplyanddistributionchains,aresurrectionofsmallscalelocalmanufacturingin theUnitedStates,andareorientationofexistingmanufacturingfacilitiesinChina andotheroffshorehavenstowardproductionfortheirowndomesticmarkets. Thesameistrueofrelocalizedagriculture.Thelionsshareofinseasonpro duceisapttoshiftbacktolocalsourcing,andoutofseasonproducetobecomean expensiveluxury.AsJeffRubindescribesit,

AssoaringtransportcoststakeNewZealandlambandCaliforniablueberriesoff Toronto menus and grocerystore shelves, the price of locally grown lamb and blueberrieswillrise.Thehighertheyrise,themoretheywillencouragepeopleto raisesheepandgrowblueberries.Ultimately,thepricewillrisesohighthatnow unsaleablerealestateintheoutersuburbswillbeconvertedbackintofarmland. Thatnewfarmlandwillthenhelpstockthegroceryshelvesinmysupermarket, 1 justlikeitdidthirtyorfortyyearsago.
This was a common theme during the oil shocks of the 1970s, and has been revivedinthepastfewyears.Inthelate70sWarrenJohnson,inMuddlingToward Frugality,predictedthatrisingenergypriceswouldleadtoaradicalshorteningof industrialsupplychains,andtherelocalizationofmanufacturingandagriculture.2 Althoughhejumpedthegunbythirtyyears,hisanalysisisessentiallysoundinthe context of todays Peak Oil concerns. The most pessimistic (not to say cata strophic)PeakOilscenarioisthatofJamesKunstler,outlinednotonlyinTheLong EmergencybutfictionallyinWorldMadebyHand.3Kunstlersdepictionofaworld of candles and horsedrawn wagons, in my opinion, greatly underestimates the resilienceofmarketeconomiesinadjustingtoenergyshocks.BrianKallersreturn toMayberryscenarioismuchlessalarmist.
In fact, peak oil will probably not be a crash, a moment when everything fallsapart,butaseriesofsmallbreakdowns,pricehikes,andlocalcrises.... Take one of the more pessimistic projections of the future, from the Asso ciation for the Study of Peak Oil, and assume that by 2030 the world will have onlytwothirdsasmuchenergyperperson.Littlebreakdownscanfeedoneach other, so crudely double that estimate. Say that, for some reason, solar power, wind turbines, nuclear plants, tidal power, hydroelectric dams, biofuels, and newtechnologiesnevertakeoff.SaythatAmericansmakeonlyathirdasmuch money,ortheirmoneyisworthonlyathirdasmuch,andthereisonlyathirdas muchdriving.Assumethatextendedfamilieshavetomoveintogethertocon serveresourcesandthatwemustcutourflyingby98percent. Many would consider that a fairly clear picture of collapse. But we have been there before, and recently. Those are the statistics of the 1950snot re 4 memberedasabigtimeforcannibalism.
JeffRubin,WhyYourWorldisAbouttoGetaWholeLotSmaller:OilandtheEndof Globalization(RandomHouse,2009),p.220. 2 Warren Johnson, Muddling Toward Frugality (San Francisco: Sierra Club Books, 1978). 3 James Howard Kunstler, The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the TwentyFirst Century (Grove Press, 2006);Kunstler,WorldMadebyHand(GrovePress,2009). 4 BrianKaller,FuturePerfect:thefutureisMayberry,notMadMax,EnergyBulletin, February 27, 2009 (from The American Conservative, August 2008) <http://www .energybulletin.net/node/48209>.
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LikeKaller,JeffRubinpresentstheworldafterPeakOilaslargelyareturnto thepast...intermsofthereemergenceoflocaleconomies.1 But despite the differences in relative optimism or pessimism among these various Peak Oil thinkers, their analyses all have a common thread running throughthem:theradicalshorteningofindustrialsupplyanddistributionchains, andanendtoglobalizationbasedontheexportofindustrytolowwagesweatshop havenslikeChina. ToquoteaRubinarticlefromMay2008,twomonthsbeforeoilpricespeaked, risingtransportationcostshadmorethanoffsettheChinesewagedifferential.The costofshippingastandard40ftcontainer,hewrote,hadtripledsince2000,and could be expected to double again as oil prices approached $200/barrel.2 Whats more, the explosion in global transport costs has effectively offset all the trade liberalization efforts of the last three decades. A rise in oil prices from $20 to $150/barrelhasthesameeffectoninternationaltradeasanincreaseintariffsfrom 3%to11%i.e.,totheiraveragelevelinthe1970s.3AccordingtoRichardMilne,
Manufacturers are abandoning global supply chains for regional ones in a bigshiftbroughtaboutbythefinancialcrisisandclimatechangeconcerns,ac cordingtoexecutivesandanalysts. Companies are increasingly looking closer to home for their components, meaning that for their US or European operations they are more likely to use 4 MexicoandeasternEuropethanChina,aspreviously.
Domestically, sustained oil prices at or above mid2008 levels will cause a radical contraction in the trucking and airline industries. Estimates were wide spreadinthesummerof2008thatairlineswouldshutdown20%oftheirroutesin theneartermofoilpricesof$140/barrelormorepersisted,andlonghaultruckers wereundercomparablepressure.JosephRomm,anenergyanalyst,arguesthatthe airlineindustryisbarelyviableat$150/barrel.Sustainedoilpricesof$200/barrel willcauseairtraveltobecomealuxurygood(asinthedayswhenthosewhocould afforditwerereferredtoasthejetset).5
C.FISCALCRISISOFTHESTATE
Theoriginsofcorporatecapitalismandthemassproductioneconomyareas sociatedwithmassivegovernmentsubsidies;sincethenthetendencyofcorporate capitaltosocializeitsoperatingcostshasneverabated.Asamatterofbasiceco nomics, whenever you subsidize something and make it available to the user for lessthanitsrealcost,demandforitwillincrease.Americancapitalism,asaresult, has followed a pattern of expansion skewed toward extensive additions of subsi
David Parkinson, A coming world thats a whole lot smaller, The Globe and Mail, May19,2009<http://docs.google.com/Doc?id=dg5dgmrv_79hjb66vc3>. 2 JeffreyRubin,TheNewInflation,StrategEcon(CIBCWorldMarkets),May27,2008 <http://research.cibcwm.com/economic_public/download/smay08pdf>. 3 Jeffrey Rubin and Benjamin Tal, Will Soaring Transport Costs Reverse Globaliza tion?StrategEcon,May27,2008,p.4. 4 RichardMilne,Crisisandclimateforcesupplychainshift,FinancialTimes,August 9, 2009 <http://www.ft.com/cms/s/0/65a709ec850b11de9a6400144feabdc0.html>. See alsoFredCurtis,PeakGlobalization:Climatechange,oildepletionandglobaltrade,Eco logicalEconomicsVolume69,Issue2(December15,2009). 5 Sam Kornell, Will PeakOil Turn Flying into Something Only Rich People Can Af ford?Alternet,May7,2010<http://www.alternet.org/economy/146769/will_peak_oil_turn _flying_into_something_only_rich_people_can_afford>.
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dizedinputs,ratherthanmoreintensiveuseofexistingones.AsJamesOConnor describestheprocess,
Transportationcostsand hence the fiscal burden on the state arenotonly high but also continuously rising. It has become a standard complaint that the expansionofroadtransportfacilitiesintensifiestrafficcongestion.Thebasicrea son is that motor vehicle use is subsidized and thus the growth of the freeway 1 andhighwaysystemsleadstoanincreaseinthedemandfortheiruse. Thereisanotherreasontoexpecttransportationneeds(andbudgets)toex pand. The development of rapid transport and the modernization of the rail roads,togetherwiththeextensionoftherailroadsystems,willpushthesuburbs outevenfurtherfromurbancenters,puttingstillmoredistancebetweenplaces ofwork,residence,andrecreation.Farfromcontributingtoanenvironmentthat will free suburbanites from congestion and pollution, rapid transit will, no doubt,extendthetrafficjamsandairpollutiontothepresentperimetersofthe suburbs, thus requiring still more freeway construction, which will boost auto 2 mobilesales.
And the tendency of monopoly capitalism to generate surplus capital and outputalsoincreasestheamountofmoneythatthestatemustspendtoabsorbthe surplus. Monopolycapitalism,accordingtoOConnor,isthereforeplaguedbyafiscal crisis of the state. ... [T]he socialization of the costs of social investment and socialconsumptioncapitalincreasesovertimeandincreasinglyisneededforprof itableaccumulationbymonopolycapital.3
... [A]lthough the state has socialized more and more capital costs, the social surplus (including profits) continues to be appropriated privately.... The so cializationofcostsandtheprivateappropriationofprofitscreatesafiscalcrisis, orstructuralgap,betweenstateexpendituresandstaterevenues.Theresultisa tendency for state expenditures to increase more rapidly than the means of fi 4 nancingthem.
In short, the state is bankrupting itself providing subsidized inputs to big business,whilebigbusinesssdemandforthosesubsidizedinputsincreasesfaster thanthestatecanprovidethem.AsIvanIllichputit,
queueswillsoonerorlaterstoptheoperationofanysystemthatproducesneeds 5 fasterthanthecorrespondingcommodity.... ...[I]nstitutionscreateneedsfasterthantheycancreatesatisfaction,andin 6 theprocessoftryingtomeettheneedstheygenerate,theyconsumetheEarth.
Thedistortionofthepricesystem,whichinafreemarketwouldtiequantity demanded to quantity supplied, leads to everincreasing demands on state serv ices. Normally price functions as a form of feedback, a homeostatic mechanism muchlikeathermostat.Puttingacandleunderathermostatwillresultinanice cold house When certain hormonal feedback loops are distorted in an organism, yougetgigantism;thevictimdiescrushedbyhisownweight.Likewise,whenthe consumptionofsomefactorissubsidizedbythestate,theconsumerisprotected from the real cost of providing it, and unable to make a rational decision about
1
106.
JamesOConnor,TheFiscalCrisisoftheState(NewYork:St.MartinsPress,1973),p.
Ibid.,pp.109110. Ibid.,p.8. 4 Ibid.,p.9. 5 Illich,DisablingProfessions(NewYorkandLondon:MarionBoyars,1977),p.30. 6 Illich, Deschooling Society (New York, Evanston, San Francisco, London: Harper & Row,1973).
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how much to use. So the state capitalist sector tends to add factor inputs exten sively,ratherthanintensively;thatis,itusesthefactorsinlargeramounts,rather thanusingexistingamountsmoreefficiently.Thestatecapitalistsystemgenerates demands for new inputs from the state geometrically, while the states ability to providenewinputsincreasesonlyarithmetically.Theresultisaprocessofsnow balling irrationality, in which the states interventions further destabilize the sys tem, requiring yet further state intervention, until the systems requirements for stabilizinginputsfinallyexceedthestatesresources.Atthatpoint,thestatecapi talistsystemreachesabreakingpoint. Eventually, therefore, state capitalism hits a wall at which the state is no longerabletoincreasethesupplyofsubsidizedinputs.Statesapproachthecondi tiondescribedbyJohnRobbstermhollowstate:
The hollow state has the trappings of a modern nationstate (leaders, membership in international organizations, regulations, laws, and a bureauc racy) but it lacks any of the legitimacy, services, and control of its historical counterpart. It is merely a shell that has some influence over the spoils of the 1 economy. ...Ahollowstateisdifferentfromafailedstateinthatitcontinuestoexist ontheinternationalstage.Ithasallthestandardedificesofgovernancealthough most are heavily corrupted and in thrall to global corporate/monied elites. It continuestodeliverpoliticalgoods(albeittoavastlydiminishedgroup,usually aroundthecapital)andmaintainsamilitary.Further,insectionsofthecountry, thereisanappearanceofnormallife. However,despitethisfacade,thehollowstatehasabdicated(eitherexplic itlyasinLebanonscaseordefactoasinMexicos)vastsectionsofitsterritoryto networked tribes (global guerrillas). Often, these groups maintain a semblance oforder,asinrulesofSaoPaulosmilitiasortheTalibansapplicationofsharia. Despitethefactthatthesegroup[sic]control/manipulateexpliciteconomicac tivity and dominate the use/application of violence at the local level, these groups often grow the local economy. How? By directly connecting it to global supplychainsofillegalgoodsfrompeoplesmugglingtodrugstoarmstocopy thefttomoneylaundering. Thelongerthisstateofaffairspersists,themoredifficultitistoeradicate. The slate of alternative political goods delivered by these nonstate groups, in contrast to the ineffectiveness of the central government, sets the stage for a shiftinlegitimacy.Loyaltiesshift.Eitherexplicitlythroughmembershipintribal 2 networks,oracknowledgementoftheprimacyofthesenetworksoverdailylife.
TheententebetweenAmericanandIraqigovernmentmilitaryforces,onthe one hand, and the Sunni militias in Al Anbar province, on the other, is a recent example of a hollowed state coming to terms with Fourth Generation Warfare networksasdefactolocalgovernments.AnearlyexamplewastheRomanimperial state of the fifth century, delegating de facto territorial control to German tribal entitiesinreturnfordejurefealtytoRome. And of course, in Robbs preferred scenarioas we will see in Chapter Six loyaltiesshiftfromthestatetoresilientcommunities. If the state does not become completely hollowed out by Robbs criteria, it neverthelessisforcedtoretreatfromaneverincreasingshareof its formerfunc tionsowingtoitsshrinkingresources:acollapseofthevalueofofficialcurrency,
John Robb, Onward to a Hollow State, Global Guerrillas, September 22, 2009 <http://globalguerrillas.typepad.com/globalguerrillas/2008/09/onwardtoahol.html>. 2 Robb, HOLLOW STATES vs. FAILED STATES, Global Guerrillas, March 24, 2009 <http://globalguerrillas.typepad.com/globalguerrillas/2009/03/hollowstatesvsfailed states.html>.
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combined with a catastrophic decline in tax revenues. The state delegates more andmorefunctionstoprivateentitiesnominallyoperatingpursuanttostatepolicy butprimarilyintheinterestofselfaggrandizement,becomespreytokleptocrats, leaves unenforced more and more laws that are technically on the books, and abandons ever increasing portions of its territory to the black market and orga nizedcriminalgangs. In many ways, this is a positive development. Local sheriffs may decide that evicting mortgage defaulters and squatters, enforcing regulatory codes against household microenterprises, and busting drug users fall very low on their list of priorities, compared to dealing with murder and robbery. Governments may find themselveswithoutthemeansoffinancingcorporatewelfare. SomethinglikethishappenedinPolandinthe1980s,withGen.Jaruzelskiin aclassicexampleofjoiningemwhenyoucantbeatemfinallydecidingtolegal ize banned groups and hold open elections because Poland had become ungov ernable.SolidarityactivistWiktorKulerski,inwhatshouldbeanextremelysug gestive passage for those of us who dream of an unenforceable regime of patent andcopyright,zoningandlicensinglaws,wroteofhisvisionforahollowstatein Poland:
Thismovementshouldcreateasituationinwhichauthoritieswillcontrolempty stores,butnotthemarket;theemploymentofworkers,butnottheirlivelihood; theofficialmedia,butnotthecirculationofinformation;printingplants,butnot the publishing movement; the mail and telephones, but not communications; 1 andtheschoolsystem,butnoteducation.
Buttotheextentthatthecurrenteconomicstructureisheavilydependenton government activity, and adjustment to the withdrawal of subsidized infrastruc tureandservicesmaytaketime,anabruptretreatofstateactivitymayresultina catastrophicperiodofadjustment. ThefiscalcrisisdovetailswithPeakOilandotherresourcecrises,inamutu allyreinforcingmanner.Theimperativeofsecuringstrategicaccesstoforeignoil reserves,andkeepingthesealanesopen,resultsincostlywars.Theincreasedcost of asphalt intensifies the already existing tendency, of demand for subsidized transportationinfrastructuretooutstripthestatesabilitytosupplyit.Asthegap expands, the period between deterioration of roads and the appropriation of moneytorepairthemlengthens.Thenumberofmilesofhighvolumehighwaythe stateisabletokeepinareasonablestateofrepairfallsfromoneyeartothenext, and the state is continually forced to retreat and regroup and relegate an ever larger share of highways to secondtier status. As James Kunstler points out, a highwayiseitherkeptinrepair,oritquicklydeteriorates.
Anotherconsequenceofthedebtproblemisthatwewontbeabletomaintain the network of goldplated highways and lesser roads that was as necessary as thecarsthemselvestomakethemotoringsystemwork.Thetroubleisyouhave tokeepgoldplatingit,yearafteryear.Trafficengineersrefertothisaslevelof service.Theyvelearnedthatifthelevelofserviceislessthanimmaculate,the highwaysquicklyenteraspiralofdisintegration.Infact,theAmericanSocietyof Civil Engineers reported several years ago that the condition of many highway bridgesandtunnelswasattheDminuslevel,sowehadalreadyfallenfarbe
LawrenceW.Reed,ATributetothePolishPeople,TheFreeman:IdeasonLiberty, October 2009 <http://www.thefreemanonline.org/columns/ideasandconsequences/a tributetothepolishpeople/>.
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hindonahighwaysystemthathadsimplygrowntoolargetofixevenwhenwe 1 thoughtwewerewealthyenoughtokeepup.
It doesnt take many years of neglect before deterioration and axlebreaking pot holes render a highway unusable to heavy trucks, so that a growing share of the highwaynetworkwillforallintentsandpurposesbeabandoned.2 Soeachinputcrisisfeedstheother,andwehaveaperfectstormofterminal crises.AsdescribedbyIllich,
Thetotalcollapseoftheindustrialmonopolyonproductionwillbetheresultof synergyinthefailureofmultiplesystemsthatfeditsexpansion.Thisexpansion is maintained by the illusion that careful systems engineering can stabilize and harmonizepresentgrowth,whileinfactitpushesallinstitutionssimultaneously 3 towardtheirsecondwatershed.
D.DECAYOFTHECULTURALPSEUDOMORPH
WhatMumfordcalledtheculturalpseudomorph,aswesawitdescribedin ChapterOne,wasactuallyonlythefirststage.Ithassincedecayedintoasecond, muchweakerstage,unforeseenbyMumford,andshowssignsofitsfinaldownfall. Inthefirststage,asMumfordobserved,neotechnicmethods(i.e.,electricallypow ered machinery) were integrated into a massproduction framework fundamen tallyopposedtothetechnologysrealpotential.Butthisstagereacheditslimitby the1970s. Inthesecondstage,massproductionontheSloanmodelisbeingreplacedby flexible,networkedproductionwithgeneralpurposemachinery,withtheproduc tionprocessorganizedalonglinesmuchclosertotheoriginalneotechnicideal. PioreandSabeldescribetheleanrevolutionofrecentdecadesasthediscov ery,afteralonginterludeofmassproduction,oftheproperwayoforganizingan industrial economy. [T]he massproduction paradigm had unforeseen conse quences:ittookalmostacentury(fromabout1870to1960)todiscoverhowtoor ganizeaneconomytoreapthebenefitsofthenewtechnology.4 Accordingtothoseauthors,theshifttoleanproductioninAmericafromthe 1980sonwasinlargepartaresponsetotheincreasingenvironmentofmacroeco nomicuncertaintythatprevailedaftertheresumptionofthecrisisofoveraccumu lation,andtheoilshocksofthe70s.Massproductionindustryisextremelybrit tlei.e.,itdoesnotadjusteasilytomajorchangesinitsenvironment.Theques tionisnotjusthowindustrywillreacttoresourcedepletion,buthowitwillreact to wildly fluctuating prices and erratic supplies.5 Economic volatility and uncer tainty means mass production industry will be hesitant to invest in specialized production machinery that may be unpredictably rendered superfluous by changesinrawmaterialsprices,interestrates,andsoon.6AswesawinChapter Two, longterm capital investment in costly technologies requires predictability;
James Howard Kunstler, Lagging Recognition, Clusterfuck Nation, June 8, 2009 <http://kunstler.com/blog/2009/06/laggingrecognition.html> 2 Kunstler,TheLongEmergency,pp.264265. 3 Illich,ToolsforConviviality(NewYork,Evanston,SanFrancisco,London:Harper& Row,1973),p.103. 4 PioreandSabel,SecondIndustrialDivide,p.48. 5 Ibid.,p.192. 6 PioreandSabel,ItalianSmallBusinessDevelopment:LessonsforU.S.IndustrialPol icy, in John Zysman and Laura Tyson, eds., American Industry in International Competi tion:GovernmentPoliciesandCorporateStrategies(IthacaandLondon:CornellUniversity Press,1983),p.397.
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andtheenvironmentassociatedwithPeakOilandotherinputandcyclicalcrisesis just about the opposite of what conduces to the stability of massproduction in dustry. Conversely, though, the system prevailing in industrial districts like Emilia Romagna is called flexible manufacturing for a reason. It is able to reallocate dedicated capital goods and shift contractual relationships, and do so quite rap idly,inresponsetosuddenchangesintheenvironment. Although craft production has always tended to expand relative to mass production industry during economic downturns, it was only in the prolonged stagnationofthe1970sand80sthatitbeganpermanentlytobreakoutofitspe ripheralstatus.
Fromthesecondindustrialrevolutionattheendofthenineteenthcentury tothepresent,economicdownturnshaveperiodicallyenlargedthecraftperiph ery with respect to the massproduction corebut without altering their rela tionship. Slowdowns in growth cast doubt on subsequent expansion; in an un certain environment, firms either defer massproduction investments or else switch to craftproduction techniques, which allow rapid entry into whatever markets open up. The most straightforward example is the drift toward an in dustrialsubsistence, or repair, economy: as markets stagnate, the interval be tweenreplacementsofsoldgoodslengthens.Thislengthenedintervalincreases the demand for spare parts and maintenance services, which are supplied only byflexiblyorganizedfirms,usinggeneralpurposeequipment.The1930scrafts manwithatoolkitgoingdoortodoorinsearchofoddjobssymbolizesthede creaseddivisionoflaborthataccompanieseconomicretrocession:thereturnto craftmethods. But what is distinctive about the current crisis is that the shift toward greaterflexibilityisprovokingtechnologicalsophisticationratherthanregres siontosimpletechniques.Asfirmshavefacedtheneedtoredesignproductsand methodstoaddressrisingcostsandgrowingcompetition,theyhavefoundnew waystocutthecostsofcustomizedproduction....Inshort,crafthaschallenged 1 massproductionastheparadigm.
InthecaseofsmallJapanesemetalworkingfirms,Americanminimillsandthe Pratesetextileindustry,thesamepatternprevailed.Smallsubcontractorsoflarger manufacturing firms felt the increasing volatility of their clients markets; in re sponse, they adopted techniques that reduced the time and money involved in shifting from product to product, and that also increased the sophistication and qualityoftheoutput.2 IntheThirdItalyinparticular,largemassproductionfirmsoutsourcedanin creasing share of components to networks of small, flexible manufacturers. The smallfirms,initially,wereheavilydependentonthelargeonesasoutlets.Butnew techniques and machine designs made production increasingly efficient in the smallfirms.
Insomecases...thelargerequipmentisminiaturized.Inothercases,however, artisanliketechniquesofsmelting,enameling,weaving,cutting,orcastingmetal aredesignedintonewmachines,someofwhicharecontrolledbysophisticated microprocessors.
Atthesametime,smallfirmswhichpreviouslylimitedthemselvestosupply ing components to a large manufacturers blueprints instead began marketing productsoftheirown.3
1
PioreandSabel,SecondIndustrialDivide,p.207. Ibid.,p.218. 3 PioreandSabel,ItalianSmallBusinessDevelopment,pp.397398.

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Whilesmallmanufacturersinthelate1960swerestilldependentonafewor evenonelargeclient,therewasawholesaleshiftinthe1970s.
Tounderstandhowthisdependencewasbrokeninthecourseofthe1970s,anda newsystemofproductioncreated,imagineasmallfactoryproducingtransmis sionsforalargemanufactureroftractors.Ambition,thejoyofinvention,orfear thatheandhisclientswillbedevastatedbyaneconomicdownturnleadthearti sanwhoownstheshoptomodifythedesignofthetractortransmissiontosuit the need of a small manufacturer of highquality seeders.... But once the new transmission is designed, he discovers that to make it he needs precision parts not easily available on the market. If he cannot modify his own machines to maketheseparts,heturnstoafriendwithaspeciallathe,wholikehimselffears being too closely tied to a few large manufacturers of a single product. Soon more and more artisans with different machines and skills are collaborating to 1 makemoreandmorediverseproducts.
So a shift has taken place, with the work formerly done by vertically inte grated firms being outsourced to flexible manufacturing networks, and with a smallerandsmallershareofessentialfunctionsthatcanonlybeperformedbythe coremassproductionfirm.AsEricHuntingobserved:
In the year 2000 our civilization reached an important but largely unnoticed milestone. For the first time the volume of consumer goods produced in job shopfacilitiesmostlyinAsiaexceededthevolumeproduceintraditionalIn dustrial Age factories. This marks a long emerging trend of demassification of production capability driven by the trends in machinetool evolution (smaller, smarter, cheaper) that is producing a corresponding demassification of capital andahomogenizationoflaborvaluesaroundtheglobe.Globalizationhasgener ally sought profit through geographical spotmarket value differences in re sources and labor. But now those differences are disappearing faster the more theyre exploited and capital has to travel ever faster and farther in search of 2 shrinkingmargins.
Theorganizationofphysicalproduction,inboththeToyotaProductionSys temandintheEmiliaRomagnamodeloflocalmanufacturingnetworks,isbegin ningafter a long massproduction interludeto resemble the original neotech nicpromiseofintegratingpowermachineryintocraftproduction. Buttheneotechnic,eventhoughithasfinallybeguntoemergeasthebasisof a new, coherent production model governed by its own laws, is still distorted by the pseudomorph in a weaker form: the new form of production still takes place within a persistent corporate framework of marketing, finance and intellectual property. AndyRobinson,amemberoftheP2PResearchemaillist,arguedthatgiven recentstudiesshowingequalproductivityinfactoriesinNorthandSouth,
the central mechanism of coreperiphery exploitation has moved from techno logical inequality (high vs low value added) to rent extraction on IP. Since the loss of IP would make large companies irrelevant, they fight tooth and nail to preserve it, even beyond strict competitiveness, and behave in otherwise quite irrationalwaystopreventtheirownirrelevance(e.g.theMPAAandRIAAsal 3 ienatingofcustomers). Piore and Sabel, Italys HighTechnology Cottage Industry, Transatlantic Perspec tives7(December1982),p.7. 2 EricHunting,privateemail,August4,2008. 3 AndyRobinson,[p2presearch]CADfilesatthePirateBay?(Followup,October28, 2009 <http://listcultures.org/pipermail/p2presearch_listcultures.org/2009October/005403 .html>.
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Anddespitetheadmittedcontrolofdistributedmanufacturingwithinacor porateframework,basedoncorporateownershipofintellectualproperty,Robin sonsuggeststhatthegrowingdifficultyofenforcingIPwillcausethatframework toerodeinthenearfuture:

... [I]t may be more productive to look at the continuing applicability or en forceability of IP, rather than whether businesses will continue to use it. While this is very visible in the virtual and informational sphere (pirating and free duplication of games, software, console systems, music, film, TV, news, books, etc),itisalsoincreasinglythecaseintermsoftechnologicalhardware.Growing Southern economiesChina being especially notorioustend to have either limitedIPregimesorlaxenforcement,meaningthateverythingthataMNCpro ducesthere,willalsobecopiedorcounterfeitedatthesamequalityforthelocal market, and in some cases traded internationally. I have my suspicions that SouthernregimesareveryawareofthecentralityofIPtocoreperipheryexploi tationandtheirlaxityisquitedeliberate.But,inpartitalsoreflectsthelimitsof theSouthernstateintermsofcapacitytodominatesociety,andthegrowingso phistication of transnational networks (e.g. organised crime networks), which 1 canevade,penetrateandfightthestateveryeffectively.
Elsewhere, Robinson brilliantly drew the parallels between the decay of the pseudomorphintheindustrialandpoliticalrealms:
Ithinkpartofthecrisisofthe70shastodowithnetworksandhierarchies. The old system was highly hierarchical, but was suffering problems from cer tainkindsofstructuralweaknessesinrelationtonetworkstheAmericandefeat inVietnambeingespeciallyimportant....Andeversincethe70sthesystemhas beentryingtofindhybridsofnetworkandhierarchywhichwillharnessandcap turethepowerofnetworkswithoutleadingtochaosorsystembreakdown.We seethisacrossarangeoffields:justintimeproduction,outsourcinganddown sizing, use of local subsidiaries, contractingout, Revolution in Military Affairs, full spectrum dominance, indirect rule through multinational agencies, the Nixon Doctrine, joinedup governance, the growing importance of groups such as the G8 and G20, business networks, lifelong learning, global cities, and of coursethedevelopmentofnewtechnologiessuchastheInternet.... Inthemediumterm,thelossofpowertonetworksisprobablyirreversible, andcapitalandthestatewilleithergodownfightingorcreatemoreorlesssta ble intermediary forms which allow them to persist for a time. We are already seeingthebeginningsofthelatter,buttheformerismorepredominant.Theway Iseethecrisisdeepeningisthatlargeareaswilldriftoutsidestateandcapitalist control, integrated marginally or not at all (this is already happening at sites such as Afghanistan, NWFP, the Andes, Somalia, etc., and in a local way in shantytownsandautonomouscentres).Ialsoexpectthedeterritorialisedareas tospread,asaresultoftheconcentrationofresourcesinglobalcities,theeco logicaleffectsofextraction,theneoliberalclosingofmediationswhichformerly integrated, and the growing stratum of people excluded either because of the small number of jobs available or the growing set of requirements for confor mity.Eventuallythesemarginalspaceswillbecomesitesofaproliferationofnew forms of living, and a pole of attraction compared to the homogeneous, com 2 mandist,coercivecore.
Solongasthestatesuccessfullymanagestopropupthecentralizedcorporate economicorder,libertariananddecentralisttechnologiesandorganizationalforms will be incorporated into the old centralized, hierarchical framework. As the sys tem approaches its limits of sustainability, those elements become increasingly
Ibid. AndyRobinson,[p2presearch]Berardiessay,P2PResearchemaillist,May25,2009 <http://listcultures.org/pipermail/p2presearch_listcultures.org/2009May/003079.html>.
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destabilizingforceswithinthepresentsystem,andprefigurethesuccessorsystem. When the system finally reaches those limits, those elements will (to paraphrase Marx) break out of their state capitalist integument and become the building blocksofafundamentallydifferentsociety.Weare,inshort,buildingthefounda tionsofthenewsocietywithintheshelloftheold. And the second stage of the pseudomorph is weakening. For example, al though the Nike model of outsourcing everything and retaining corporate con trolofanarchipelagoofsmallmanufacturingshopsstillprevailstoaconsiderable extent among U.S.based firms, small subcontractors elsewhere have increasingly rebelled against the hegemony of their large corporate clients. In Italy and Japan the subcontractors have federated among themselves to create flexible manufac turing networks and reduce their dependence on any one outlet for their prod ucts.1Theresultisthatthecorporateheadquarters,increasingly,isbecomingare dundantnodeinanetworkaredundantnodethatcanbebypassed. Indeed, the Nike model is itself extremely vulnerable to such bypassing. As DavidPollardobserves:
In their famous treatise explaining the Internet phenomenon, Doc Searls, Dave Weinberger et al said that what made the Internet so powerful and so resilient wasthatithadnocontrolcentreandnohierarchy:Allthevaluewasadded,by millionsofpeople,attheends.Andifsomeonetriedtodisruptit,thesemillions of users would simply work around the disruption. There is growing evidence thatthesamephenomenonishappeninginbusinesses,whichhavelongsuffered from diseconomies of scale and bureaucracy that stifle innovation and respon siveness.Thinkofthisasakindofoutsourcingofeverything....Alreadycom panieslikeLeviStraussmakenothingatalltheysimplyaddtheirlabeltostuff made by other companies, and distribute it (largely through independent com 2 paniestheydontowneither).
If the people actually producing and distributing the stuff ever decide they havetherighttomarketanidenticalproduct,LeviStrausssownershipofthelabel notwithstanding,Levisisscrewed. As a general phenomenon, the shift from physical to human capital as the primary source of productive capacity in so many industries, along with the im plodingpriceandwidespreaddispersionofownershipofcapitalequipmentinso many industries, means that corporate employers are increasingly hollowed out andonlymaintaincontroloverthephysicalproductionprocessthroughlegalfic tions. When so much of actual physical production is outsourced to the small sweatshop or the home shop, the corporation becomes a redundant node that canbebypassed;theworkercansimplyswitchtoindependentproduction,cutout themiddleman,anddealdirectlywithsuppliersandoutlets. A good example of the weakness of the second stage of the pseudomorph is the relationship of the big automakers with parts suppliers today, compared to whenGalbraithwrotefortyyearsago.AsportrayedinTheNewIndustrialState,the relationshipbetweenlargemanufacturersandtheirsupplierswasoneofunilateral marketcontrol.Today,ToyotasAmericanfactoriesshareabouttwothirdsoftheir autopartssuppliers withtheDetroitThree.3AccordingtoDonTapscottandAn thony Williams, more than half of a vehicles value already consists of electrical
PioreandSabel,SecondIndustrialDivide,pp.226227. David Pollard, Ten Important Business Trends, How to Save the World, May 12, 2009<http://blogs.salon.com/0002007/2009/05/12.html#a2377>. 3 Dan Strumpf, Exec Says Toyota Prepared for GM Bankruptcy, Associated Press, April8,2009<http://abcnews.go.com/Business/wireStory?id=7288650>.
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systems, electronics and software rather than the products of mechanical engi neering,andby2015supplierswillconductmostR&Dandproduction.1 Takingintoaccountonlythetechnicalcapabilitiesofthesuppliers,itsquite feasible for parts suppliers to produce generic replacement parts in competition with the auto giants, to produce competing modular components designed for a GM or Toyota platform, or even to network to produce entirely new car designs piggybackedonaGMorToyotachassisandengineblock.Theonlythingstopping themistrademarkandpatentlaw. And in fact supplier networks are beginning to carry out design functions among themselves, albeit on contract to large corporate patrons. For example, Boeings designers used to do all the work of developing detailed specs for each separatepart,withsuppliersjustfillingtheordertotheletter;Boeingthenassem bledthepartsinitsownplant.Butnow,accordingtoDonTapscottandAnthony Williams, suppliers codesign airplanes from scratch and deliver complete subas semblies to Boeings factories.... Rather than retaining control of all R&D in house, Boeing is now handing significant responsibility for innovation over to suppliers....2 An early indication that things may be reaching a tipping point is Chinas quasiunderground shanzhai enterprises which, despite being commonly dis missedasmereproducersofknockoffs,areinfactextremelyinnovativenotonlyin technicaldesignbutinsupplychainefficiencyandthespeedoftheirreactionsto change.Theshanzhaieconomyresemblestheflexiblemanufacturingnetworksof the Third Italy. Significantly, supplier networks for transnational corporations have begun to operate underground to supply components for shanzhai enter prises.
Tapping into the supply chains of big brands is easy, producers say. Its really commonforfactoriestodoanightshiftforothercompanies,saysZhangHaiz hen,whorecentlyranashanzhaicompanyhere.Noonewillrefuseanorderifit 3 isover5,000mobilephones.
TheChinesemotorcycleindustryisagoodillustrationofthesetrends.Many ofitsmajordesignsarereverseengineeredfromJapaneseproducts,andtheindus trysR&Dmodelisbasedonnetworkedcollaborativedesigneffortsbetweenmany small,independentactors.Andthereverseengineeredbikesarenotsimplecopies oftheoriginalJapanesedesignsinalltheirmajordetails;theybuildontheoriginal designs that are in many ways superior to it. Rather than copy Japanese models precisely, suppliers take advantage of the loosely defined specifications to amend and improve the performance of their components, often in collaboration with othersuppliers.4 And recently, according to Bunnie Huang, there have been indications that nativeChineseautofirmshavebeenproducinganunauthorizedversionoftheCo rolla.HuangspottedwhatappearedtobeaToyotaCorollabearingthelogoofthe ChineseBYDautocompany.
SowhenIsawthis,IwasntsureifitwasastockCorollatowhichalocalenthu siast attached a BYD badge, or if it was a BYD copycat of our familiar brand nameToyotacar.Or,bysomebizarretwist,perhapsToyotaisnowusingBYDto Don Tapscott and Anthony D. Williams, Wikinomics: How Mass Collaboration ChangesEverything(NewYork:Portfolio,2006),p.231. 2 TapscottandWilliams,pp.217218. 3 DavidBarboza,InChina,KnockoffCellphonesareaHit,NewYorkTimes,April27, 2009<http://www.nytimes.com/2009/04/28/technology/28cell.html>. 4 TapscottandWilliams,pp.221222.
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OEM their cars in China through a legitimized business relationship. I dont know which is true, but according to the rumors I heard from people who saw thisphoto,thisisactuallyacopycatToyotamadeusingplanspurchasedonthe black market that were stolen from Toyota. Allegedly, someone in China who studiestheautomobileindustryhastakenoneoftheseapartandnotedthatthe welds are done by hand. In the original design, the welds were intended to be donebymachine.Sincethehandweldsarelessconsistentandoflowerquality than the robotic welds, the car no longer has adequate crash safety. There are alsootherdeviations,suchastheuseofcheapplasticlensesfortheheadlights. But, I could see that making a copycat Corolla is probably an effective exercise 1 forgivinglocalengineersacrashcourseinworldclasscarmanufacture.
Generallyspeaking,thecorporateheadquarterscontroloverthesupplierisgrow ing increasingly tenuous. As long ago as a decade ago, Naomi Klein pointed out thatthecompetinglabels...are oftenproducedsidebysideinthesamefacto ries,gluedbytheverysameworkers,stitchedandsolderedontheverysamema chines.2
E.FAILURETOCOUNTERACTLIMITSTOCAPTUREOFVALUEBY ENCLOSUREOFTHEDIGITALCOMMONS
AsMichelBauwensdescribesit,itisbecomingincreasinglyimpossibletocap ture value from the ownership of ideas, designs, and techniqueall the ephem era and intellect that Tom Peters writes about as a component of the price of manufacturedgoodsleadingtoacrisisofsustainabilityforcapitalism.Cognitive capitalismiscapitalsattempttoadjusttotheshiftfromphysicaltohumancapi tal, and to capture value from the immaterial realm. Bauwens cites McKenzie Warkstheorythatanewvectoralistclasshasarisenwhichcontrolsthevectors of information, i.e. the means through which information and creative products have to pass, for them to realize their exchange value. This describes the proc essesofthelast40years,saythepost1968period,whichsawafuriouscompeti tion through knowledgebased competition and for the acquisition of knowledge assets, which led to the extraordinary weakening of the scientific and technical commons.3 Cognitive capitalism arose as a solution to the unsustainability of the older pattern of capitalist growth, based on extensive addition of physical inputs and expansion into new geographical areas. Bauwens uses the analogy of the ancient slaveeconomy,whichbecameuntenablewhenavenuesofextensivedevelopment (i.e. expansion into new territory, and acquisition of new slaves) were closed off. Whentheslavesystemreacheditslimitsofexternalexpansion,itturnedtointen sivedevelopmentviathefeudalmanorsystem,transformingtheslaveintoapeas antwhohadanincentivetoworkthelandmoreefficiently.
Thealternativetoextensivedevelopmentisintensivedevelopment,ashappened inthetransitionfromslaverytofeudalism.Butnoticethattodothis,thesystem hadtochange,thecorelogicwasnolongerthesame.Thedreamofourcurrent economy is therefore one of intensive development, to grow in the immaterial Bunnie Huang, Copycat Corolla? bunnies blog, December 13, 2009 <http://www .bunniestudios.com/blog/?p=749>. 2 Klein,NoLogo,p.203. 3 MichelBauwens,P2PandHumanEvolution.Draft1.994(FoundationforP2PAlterna tives,June15,2005)<http://integralvisioning.org/article.php?story=p2ptheory1>;Although IvereadWark,hisabstrusepostmodernstylegenerallyobfuscateswhatBauwenssumma rizeswithgreatclarityclarifty.
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field,andthisisbasicallywhattheexperienceeconomymeans.Thehopethatit expressesisthatbusinesscansimplycontinuetogrowintheimmaterialfieldof 1 experience.
Andthestate,asenforcerofthetotalsurveillancesocietyandcopyrightlock down,iscentraltothisbusinessmodel.JohannSoderbergrelatesthecrisisofre alization under state capitalism to capitals growing dependence on the state to capturevaluefromsocialproductionandredistributeittoprivatecorporateown ers.Thistakestheformbothofintellectualpropertylaw,aswellasdirectsubsi dies from the taxpayer to the corporate economy. He compares, specifically, the wayphotocopiersweremonitoredintheoldUSSRtoprotectthepowerofelitesin that country, to the way the means of digital reproduction are monitored in this country to protect corporate power.2 The situation is especially ironic, Cory Doc torow notes, when you consider the pressure the U.S. has put on the postSoviet regime to enforce the global digital copyright regime: postSoviet Russia forgoes itshardwonfreedomofthepresstoprotectDisneyandUniversal!3Thatsdoubly ironic,consideringtheuseofthetermSamizdatpirateundertheSovietregime. James OConnors theme, of the everexpanding portion of the operating ex pensesofcapitalwhichcomefromthestate,isalsorelevanthere,consideringthe extent to which the technical prerequisites of the digital revolution were devel opedwithstatefinancing. The ability to capture value from efficiency increases, through artificial scar cityandartificialpropertyrights,iscentraltotheNewGrowthTheoryofPaulRo mer.ConsiderhisremarksinaninterviewwithReasonsRonBailey:
reason: Yet there is a mechanism in the market called patents and copy right,forquasipropertyrightsinideas. Romer: Thats central to the theory. To the extent that youre using the market system to refine and bring ideas into practical application, we have to create some kind of control over the idea. That could be through patents. It couldbethroughcopyright.Itmightevenbethroughsecrecy.Afirmcankeep secretalotofwhatitknowshowtodo....Soforrelyingonthemarketandwe dohavetorelyonthemarkettodevelopalotofideasyouhavetohavesome mechanisms of control and some opportunities for people to make a profit de velopingthoseideas. ... Romer:Therewasanold,simplisticnotionthatmonopolywasalwaysbad. Itwasbasedontherealmofobjectsifyouonlyhaveobjectsandyouseesome bodywhosecostissignificantlylowerthantheirprice,itwouldbeagoodideato break up the monopoly and get competition to reign freely. So in the realm of Michel Bauwens, Can the experience economy be capitalist? P2P Foundation Blog, September 27, 2007 <http://blog.p2pfoundation.net/cantheexperienceeconomybe capitalist/2007/09/27>. Joseph Tainters thesis, that the collapse of complex societies re sultsfromthe decliningmarginal productivity of increases in complexity orexpansion, is relevant here; The Collapse of Complex Societies (Cambridge, New York, New Rochelle, Melbourne,Sydney:CambridgeUniversityPress,1988).Inparticular,heechoesBauwens thesisthatclassicalcivilizationfailedasaresultoftheinabilitytocontinueextensiveaddi tionofinputsthroughterritorialexpansion.Aswewillseeshortlybelow,itistheinability tocapturesufficientmarginalreturnsonnewincrementsofcapitalinvestmentandinnova tion,inaneraofFree,thatisdestroyingtheexistingeconomicsystem. 2 Soderberg,HackingCapitalism,pp.144145. 3 CoryDoctorow,HappyMealToysversusCopyright:HowAmericaChoseHollywood and WalMart, and Why Its Doomed Us, and How We Might Survive Anyway, in Doc torow,Content:SelectedEssaysonTechnology,Creativity,Copyright,andtheFutureofthe Future(SanFrancisco:TachyonPublications,2008),p.39.
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things,ofphysicalobjects,thereisatheoreticaljustificationforwhyyoushould never tolerate monopoly. But in the realm of ideas, you have to have some de greeofmonopolypower.Therearesomeveryimportantbenefitsfrommonop oly,andtherearesomepotentialcostsaswell.Whatyouhavetodoisweighthe costsagainstthebenefits. Unfortunately,thatkindofbalancingtestissensitivetothespecifics,sowe donthavegeneralrules.Comparethecostsandbenefitsofcopyrightingbooks versusthecostsandbenefitsofpatentingthehumangenome.Theyrejustvery different, so we have to create institutions that can respond differentially in thosecases.
AlthoughRomercontraststherealmofsciencewiththerealmofthemar ket,andarguesthatthereshouldbesomehappymediumbetweentheirrespec tive open and proprietary cultures, its interesting that he identifies intellectual propertyasaninstitutionofthemarket. And Romer makes it clear that what he means by growth is economic growth,inthesenseofmonetizedexchangevalue:
Romer:....Now,whatdoImeanwhenIsaygrowthcancontinue?Idontmean growth in the number of people. I dont even mean growth in the number of physicalobjects,becauseyouclearlycantgetexponentialgrowthintheamount ofmassthateachpersoncontrols.WevegotthesamemasshereonEarththat we had 100,000 years ago and were never going to get any more of it. What I mean is growth in value, and the way you create value is by taking that fixed quantityofmassandrearrangingitfromaformthatisntworthverymuchintoa 1 formthatsworthmuchmore.
RomersthoughtisanotherversionofDanielBellspostindustrialismthesis. AssummarizedbyManuelCastells,thatthesisheldthat:
(1)The source of productivity and growth lies in the generation of knowl edge, extended to all realms of economic activity through information process ing. (2)Economic activity would shift from goods production to services deliv ery.... (3)Theneweconomywouldincreasetheimportanceofoccupationswitha highinformationalandknowledgecontentintheiractivity.Managerial,profes sional,andtechnicaloccupationswouldgrowfasterthananyotheroccupational 2 positionandwouldconstitutethecoreofthenewsocialstructure.
The problem is that postindustrialism is selfliquidating: technological pro gress destroys the conditions necessary for capturing value from technological progress. By their nature technological innovation and increased efficiency destroy growth.Anythingthatlowersthecostofinputstoproduceagivenoutput,inafree marketwithcompetitionunfetteredbyentrybarriers,willresultinthereduction of exchange value (i.e. price). And since GDP is an accounting mechanism that measures the total value of inputs consumed, increased efficiency will reduce the sizeoftheeconomy. RomersmodelisessentiallySchumpeterian.Recoupingoutlaysforinnovation requirespricesthatreflectaveragecostratherthanmarginalcost.HenceRomers Schumpeterian schema precludes pricetaking behavior in a competitive market;
RonaldBailey,PostScarcityProphet:EconomistPaulRomerongrowth,technologi calchange,andanunlimitedhumanfuture,Reason,December2001<http://reason.com/ archives/2001/12/01/postscarcityprophet/>. 2 Manuel Castells, The Rise of the Network Society (Blackwell Publishers, 1996), pp. 203204
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rather,itpresupposessomeformofmarketpower(monopolisticcompetition)by whichfirmscansetpricestocovercosts.Romerarguesthathismodelofeconomic growth based on innovation is incompatible with pricetaking behavior. A firm thatinvestedsignificantsumsininnovation,butsoldonlyatmarginalcost,could notsurviveasapricetaker.Itisnecessary,therefore,thatthebenefitsofinnova tioneven though nonrival by their naturebe at least partially excludable throughintellectualpropertylaw.1 Some rightwing libertarians mock big government liberals for a focus on jobsasanendinthemselves,ratherthanasameanstoanend.ButRomersfo cus on growth and increased income, rather than on the amount of labor re quiredtoobtainaconsumptiongood,isanexampleoftheverysamefallacy(and Baileycheershimon,ofcourse). Jeff Jarvis sparked a long chain of discussions by arguing that innovation, by increasingefficiency,resultsinshrinkageratherthangrowth.Themoneyleftin customerspockets,totheextentthatitisreinvestedinmoreproductivevenues, mayaffectthesmallbusinesssectorandnotevenshowupineconometricstatis tics.2 AntonSteinpilz,riffingoffJarvis,suggestedthatthereducedcapitalexpendi turesmightnotreappearasincreasedspendinganywhere,butmight(essentiallya twosided coin) be pocketed by the consumer in the form of increased leisure and/or forced on the worker in the form of technological unemployment.3 And Eric Reasons, writing about the same time, argued that innovation was being passedontoconsumers,resultinginmassivedeflationandlessmoneyinvolved overall.4 Reasons built on this idea, massive deflation resulting from increased effi ciency, in a subsequent blog post. The problem, Reasons argued, was that while thedeflationofpricesintheoldproprietarycontentindustriesbenefitedconsum ersbyleavingdollarsintheirpockets,manyofthoseconsumerswereemployeesof industriesmadeobsoletebythenewbusinessmodels.
Effectively,therestrictionsthatheldsupplyincheckforIPareslowlyfalling away.Aseffectivesupplyrises,priceplummets.Dontbelieveme?Youprobably spendlessmoneynowonmusicthanyoudid15yearsago,andyourcollectionis larger and more varied than ever. You probably spend less time watching TV news, and less money on newspapers than you did 10 years ago, and are better informed. I wont go so far as to say that the knowledge economy is going to be no economyatall,butitisashrinkingoneintermsofmoney,bothintermsofcost 5 totheconsumer,andintermsofthejobsproducedinit.
PaulM.Romer,EndogenousTechnologicalChange(December1989).NBERWork ingPaperNo.W3210. 2 Jeff Jarvis, When innovation yields efficiency, BuzzMachine, June 12, 2009 <http://www.buzzmachine.com/2009/06/12/wheninnovationyieldsefficiency/>. 3 Anton Steinpilz, Destructive Creation: BuzzMachines Jeff Jarvis on Internet Disin termediation and the Rise of Efficiency, Generation Bubble, June 12, 2009 <http:// generationbubble.com/2009/06/12/destructivecreationbuzzmachinesjeffjarvisoninternet disintermediationandtheriseofefficiency/>. 4 EricReasons,DoesIntellectualPropertyLawFosterInnovation?TheTinkersMind, June 14, 2009 <http://blog.ericreasons.com/2009/06/doesintellectualpropertylawfoster. html>. 5 Reasons, Intellectual Property and Deflation of the Knowledge Economy, The Tinkers Mind, June 21, 2009 <http://blog.ericreasons.com/2009/06/intellectualproperty anddeflationof.html>.
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And the issue is clearly shrinkage, not just a shift of superfluous capital and purchasingpowertonewobjects.Craigslistemploysfewerpeoplethantheindus triesitdestroyed,forexample.Theideal,Reasonsargued,isforunproductiveac tivity to be eliminated, but for falling work hours to be offset by lower prices, so that workers experience the deflation as a reduction in the ratio of effort to con sumption:
Given the amount of current consumption of intellectual property (copy righted material like music, software, and newsprint; patented goods like just abouteverythingelse),couldntwetakeadvantageofthisdeflationtohelpcush iontheblowoffallingwages?Howmuchofourincomeisdedicatedtointellec tual property, and its derived products? If wages decrease at the same time as costofliving decreases, are we really that bad off? Deflation moves in both di rections,asitwere.... EverybitofeconomicpolicycomingoutofWashingtonisbasedontrying to maintain a status quo that can not be maintained in a global marketplace. This can temporarily inflate some sectors of our economy, but ultimately will leave us with nothing but companies that make the wrong things, and people whoperformthewrongjobs.Youknowwhattheysay:AsGMgoes,sogoesthe 1 country.
Contrary to Free optimists like Chris Anderson and Kevin Kelley, Reasons suspectsthatreducedrentsonproprietarycontentcannotbereplacedbymoneti zation in other areas. The shrinkage of proprietary content industries will not be replaced by growth elsewhere, or the reduced prices offset by a shift of demand elsewhere,onaonetoonebasis.2 Mike Masnick, of Techdirt, praised Reasons analysis, but suggestedfrom a fairlyconventionalstandpointthatitwasincomplete:
Sothisisagreatwaytothinkaboutthethreatsideofthings.Unfortunately, I dont think Eric takes it all the way to the next side (the opportunity side), which we tried to highlight in that first link up top, here. Eric claims that this deflation makes the sector shrink, but I dont believe thats right. It makes companies who rely on business models of artificial scarcity to shrink, but it doesnt make the overall sector shrink if you define the market properly. Eco nomic efficiency may make certain segments of the market shrink (or disap pear),butitexpandstheoverallmarket. Why?Becauseefficiencygivesyoumoreoutputforthesameinput(bigger market!).Thetrickypartisthatitmaymovearoundwherethatoutputoccurs. And, when youre dealing with what Ive been calling infinite goods you can have a multiplicative impact on the market. Thats because a large part of the outputisnowinfinitelyreproduceableatnocost.Forthosewhostopthinking oftheseasgoodsthatarebeingcopiedagainstourwillandstartrealizingthat theyreinputsintoawidermarketwherewedonthavetopayforanyofthedis tributionorpromotion!therearemuchgreateropportunities.Itsjustthatthey 3 dontcomefromartificialscarcityanymore.Theycomefromabundance.
Reasons responded, in a comment below Masnicks post (aptly titled The glassistwicethesizeitneedstobe...),thatthisefficiencywillmaketheeco nomic markets they affect shrink in terms of economy and capital. It doesnt
1
Reasons,TheEconomicResetButton,TheTinkersMind,July2,2009<http://blog. ericreasons.com/2009/07/economicresetbutton.html>. 2 Reasons, Innovative Deflation, The Tinkers Mind, July 5, 2009 <http://blog. ericreasons.com/2009/07/innovativedeflation.html>. 3 Mike Masnick, Artificial Scarcity is Subject to Massive Deflation, Techdirt, <http://techdirt.com/articles/20090624/0253385345.shtml>.
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mean that the number of variation of the products available will shrink, just the capitalinvolved.1 HestatedthisassessmentinevensharpertermsinacommentunderMichel Bauwenssblogpostontheexchange:
WhileIcertainlywouldntwanttogotoetotoewithMikeMasnickonthesub ject,IdidtrytoclarifyincommentsthatitisntthatIdontseetheopportunity intheknowledgeeconomy,butsimplythatvaluecanbecreatedwherecapital cantbecapturedfromit.Thetrickistoreapthatvalue,anddistinguishwhere capitalcanandwhereitcannotaddvalue.Ofcoursetheresmoneytobemade in the knowledge economyask Google or Craigslistbut by introducing such profoundefficiencies,theydeflatethemarketstheytouchataratefarfasterthan thehumancapitalcanredeployitselfinothermarkets.Sincesomuchcapitalis dependentuponconsumerismgeneratedbythatidledhumancapital,deflation 2 follows.
Neoclassical economists would no doubt dismiss Reasons argument, and othertheoriesoftechnologicalunemployment,asvariationsonthelumpoflabor fallacy.Buttheirdismissalofit,underthattritelabel,itselfmakesanimplicitas sumptionthatshardlyselfevident:thatdemandisinfinitely,upwardlyelastic. That assumption is stated, in the most vulgar of terms, from an Austrian standpointbyawriteratLewRockwell.com:
Youknow,properlyspeaking,thecorrectlevelofunemploymentiszero.Theo retically,thedemandforgoodsandservicesisinfinite.Myowndesireforgoods and services has no limit, and neither does anyone elses. So even if everyone worked24/7,theycouldneversatisfyallthepotentialdemand.Itsjustamatter 3 ofallowingpeopletoworkatwagesthatothersarewillingandabletopay.
Aside from the fact that this implicitly contradicts Austrian arguments that increased labor productivity from capital investment are responsible for reduced workinghours(see,e.g.,GeorgeReisman,quotedelsewhereinthischapter),thisis almostcartoonishnonsense.Ifthedemandforgoodsandservicesisunconstrained by the disutility of labor, then it follows that absent a minimum wage people wouldbeworkingatleasteverypossiblewakinghourevenifnot24/7.Onthe otherhandifthereisatradeoffbetweeninfinitedemandandthedisutilityofla bor, then demand is not infinitely upwardly elastic. Some productivity increases will be lost through leakages in the form of increased leisure, rather than con sumption of increased output of goods. That means that the demand for labor, evenifsomewhatelastic,willnotgrowasquicklyaslaborproductivity. TomWalker(akaSandwichman),aneconomistwhohasdevotedmostofhis careertounmaskingthelumpoflaborcaricatureasacrudestrawman,confesses adegreeofpuzzlementastowhyorthodoxeconomistsaresostridentontheissue. After all, what they denounce as the lump of labor fallacy is based on what, [w]heneconomistsdoit,...isarcaneandlearnedceterisparibushokuspokus.4
Reasons comment under Ibid., The glass is twice the size it needs to be <http://techdirt.com/article.php?sid=20090624/0253385345#c257>. 2 CommentunderMichelBauwens,Thegreatinternet/p2pdeflation,P2PFoundation Blog, November 11, 2009 <http://blog.p2pfoundation.net/thegreatinternetp2pdeflation/ 2009/11/11>. 3 DougCaseyonUnemployment,LewRockwell.Com,January22,2010.Interviewedby LouisJames,editor,InternationalSpeculator<http://www.lewrockwell.com/casey/casey38. 1.html>. 4 Tom Walker, The Doppelganger Effect, EconoSpeak, January 2, 2010 <http://econospeak.blogspot.com/2010/01/doppelgeffect.html>.
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Givenexistinglevelsofdemandforconsumergoods,anyincreaseinlaborproduc tivitywillresultinareductionintotalworkhoursavailable. Ofcoursetheorthodoxeconomistwillarguethatceterisisneverparibus.But thatdemandfreedupbyreducedwageexpendituresinonesectorwillautomati callytranslate,onaonetoonebasis,intoincreaseddemand(andhenceemploy ment)inanothersectorisitselfbynomeansselfevident.Andanassumptionthat suchwilloccur,sostrongthatonefeelssufficientlyconfidenttoinventanewfal lacyforthosewhoargueotherwise,strikesmeasabeliefthatbelongsmoreinthe realmoftheologythanofeconomics. P.M.Lawrence,inadiscussionsparkedbyCaseysargument,expressedsimi larviewsinaprivateemail:
Ialwaysthoughtthatlumpreasoningwasperfectlysoundinanyareainanalys inginstantaneousresponses,astheresalagbeforeitchangeswhilesupplyand demandrespondwhichmeans,itsimportantformattersofsurvivaluntilthose longerruns,andalsoyoucanuseitinmathematicallyorverballymodellinghow 1 thelumpdoesinfactchangeovertime....
These shortcomings of Romers New Growth apply, more particularly, to the progressive and green strands of cognitive capitalism. Bill Gates and Richard
P. M. Lawrence, private email, January 25, 2010. Lawrence subsequently requested I addthefollowingexplanatorymaterial: ...peoplemightnotunderstandjusthowyoucanusetheideaofafixedvalue inintermediatecalculationsonthewaytogettingabetterdescriptionofhowit reallydoesvary. Soyoushouldprobablyreferpeopletomoredetailinthefootnote,particu larlyontheseareas: Successive relaxation; see http://en.wikipedia.org/wiki/Gauss%E2%80% 93Seidel_method. Related topics include accelerated convergence (see http://en.wikipedia.org/wiki/Series_acceleration),whichcanbecombineddi rectly with that in successive overrelaxation (see http://en.wikipedia.org/ wiki/Successive_overrelaxation). The method of perturbations; see http://en.wikipedia.org/wiki/ Perturbation_theory, which states This general procedure is a widely used mathematical tool in advanced sciences and engineering: start with a sim plifiedproblemandgraduallyaddcorrectionsthatmaketheformulathatthe corrected problem matches closer and closer to the formula that represents reality. (Successive relaxation is applying that general approach in one par ticular area.) The part of my email you cut read oversimplifying the tech niquejustalittle,asanengineeringapproximationyouassumeitsfixed,then yourunitthroughthefiguresinacircularwaytogetanewcontradictoryval ueandthatsthevalueitchangesto,afteracorrespondingtimestep;repeat indefinitelyforanumericalmodel,orworkoutthetimedependentequations that match that and solve them analytically. Your footnote should edit this andconnectittothesamegeneralapproach,bringingouttheideathatthe firstsimplificationistopretendthatthevalueisconstant(asinalumpofla bour, say), and saying that since the whole point is to use an incorrect de scription to get to a better description, incorrect doesnt mean invalid and,overashortenoughterm,eventhatfirstsimplificationofbeingfixedcan beusefulandmeaningfulaspeoplereallydohavetogetthroughthosevery shortterms. Simultaneousdifferentialequations,rigidlycoupledandotherwise.... IbroughtsomeoftheseissuesoutinanunpublishedlettertotheAustralianFi nancialReview,written6.7.98,availableat http://users.beagle.com.au/peterl/publicns.html#AFRLET3.
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Florida are typical of this tendency. Florida specifically refers to Romers New GrowthTheory,whichassignsacentralroletocreativityorideageneration.But heneverdirectlyaddressesthequestionofjusthowsuchideagenerationcanbe the source of economic growth, unless it is capitalized as the source of rents throughartificialpropertyrights.Hequotes,withoutseemingtograspitsrealsig nificance, this remark of Romers: We are not used to thinking of ideas as eco nomicgoods,buttheyaresurelythemostsignificantonesthatweproduce.Eco nomic goods are goods with exchange value; and ideas can only have exchange value when they are subject to monopoly. Florida continues to elaborate on Ro mers theory, arguing that an idea can be used over and over again, an in fact growsinvaluethemoreitisused.Itoffersnotdiminishingreturns,butincreasing returns.Thisdisplaysafailuretograspthedistinctionbetweenusevalueandex changevalue.Anideacan,indeed,resultinexponentialincreasesinourstandard of living the more they are used, by reducing the labor and material inputs re quired to produce a unit of consumption. But in so doing, it reduces exchange value and causes marginal returns to fall to zero. Innovation causes economic valuetoimplode.1 Floridahimself,forallhiscelebrationofnetworksandfreeagency,assumesa greatdealofcontinuitywiththeexistingcorporateeconomy.
Intracingeconomicshifts,Ioftensaythatoureconomyismovingfromanolder corporatecenteredsystemdefinedbylargecompaniestoamorepeopledriven one.Thisviewshouldnotbeconfusedwiththeunfoundedandsillynotionthat bigcompaniesaredyingoff.NordoIbuythefantasyofaneconomyorganized around small enterprises and independent free agents. Companies, including very big ones, obviously still exist, are still influential and probably always will 2 be. Arelatedmythisthattheageoflargecorporationsisoverthattheyhave outlivedtheirusefulness,theirpowerhasbeenbroken,andtheywilleventually fadeawayalongwithotherbigorganizationalforms.Theclassicmetaphoristhe lumbering dinosaur made obsolete and susurped by small, nimble mammals theusurpersinthiscasebeingsmall,nimblestartupcompanies.... But big companies are by no means going away. Microsoft and Intel con tinuetocontrolmuchofthesocalledinformationeconomy,alongwithOracle, Cisco,IBMandAOLTimeWarner.Bigindustrialconcerns,fromGeneralMotors toGeneralElectric,GeneralDynamicsandGeneralFoods,stillturnoutmostof thenationsgoods.Ourmoneyismanagednotbyupstartsbutbylargefinancial institutions. The resources that power our economy are similarly managed and controlledbygiantcorporations.... The economy, like nature, is a dynamic system. New companies form and helpustopropelitforward,withsomedyingoutwhileotherscarryontogrow quitelargethemselves,likeMicrosoftandIntel.Aneconomycomposedonlyof small, shortlived entities would be no more sustainable than an ecosystem 3 composedonlyofinsects.
Floridafailstoexplainjustwhylargeorganizationsarenecessary.Large,hier archical organizations originally came into existence as a result of the enormous capitaloutlaysrequiredforproduction,andtheneedtomanageandcontrolthose capitalassets.Whenphysicalcapitaloutlayscollapsebyoneortwoordersofmag nitudeformostkindsofproduction,whatfurtherneedisthereforthelargeorga nizations?ThelargesizeofMicrosoftandIntelresults,inmostcases(asidefrom the enormous capital outlay required for a microchip foundry, of course), from
1
RichardFlorida,TheRiseoftheCreativeClass(NewYork:BasicBooks,2002),p.36. Ibid.p.6. 3 Ibid.,pp.2627.

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patents on hardware, software copyrights, and the like, that artificially increase requiredcapitaloutlays,otherwiseraiseentrybarriers,andtherebylocktheminto anartificialpositionofcontrol. Andthepurportedinstabilitiesofaneconomyofsmallfirms,overwhichFlor idaraisessomuchalarm,areastrawman.Networkedindustrialecologiesofsmall firmsachievestabilityandpermanence,asweshallseeinChapterSix,frommodu lardesignforcommonplatforms.Theindividualproducersmaycomeandgo,but thecommonspecificationsandprotocolsliveon. Floridasfocusonindividualcareerpathsbasedonfreeagency,andoninter nalcorporateculturesofcreativity,attheexpenseofgenuinechangesininstitu tionalstructureandsize,remindmeofCharlesReichsapproachinTheGreening of America. The great transformation Reich envisioned amounted to little more thanleavingthegiantcorporationsandcentralgovernmentagenciesinplace,but staffingthementirelywithpeopleinbeadsandbellbottomswho,youknow,had theirheadsintherightplace,man. Butthisapproachisnowfailinginthefaceoftheincreasinginabilitytocap turevaluefromtheimmaterialrealm.Thestrategyofshiftingtheburdenofreali zationontothestateisuntenable.Strongencryption,coupledwiththeprolifera tionofbittorrentandepisodesliketheDeCSSuprising(seelaterinthischapter), haveshownthatintellectualpropertyisultimatelyunenforceable.J.A.Pouwelse andhiscoauthorsestimatethatthecontinuingexponentialadvanceoffilesharing technologywillmakecopyrightimpossibletoenforceby2010.1Inparticular,they mention
anonymousdownloading,uploading,andinjectionofcontentusingadarknet.A darknetinhibitsbothInternetcensorshipandenforcementofcopyrightlaw.The freenetproject.orghasin2000alreadyproducedadarknet,butitwasslow,diffi culttouse,andofferedlittlecontent.Darknetsstrugglewiththesecondcardinal featureofP2Pplatforms.Fullanonymitycostsbothextrabandwidthandisdiffi cult to combine with enforcement of resource contributions. By 2010 darknets shouldbeabletoofferthesameperformanceastraditionalP2Psoftwarebyex ploitingsocialnetworking.Noeffectivelegalortechnologicalmethodcurrently exits[sic]tostopdarknets,withtheexceptionofbanninggeneralpurposecom puting. Technologies such as secure computing and DRM are convincingly ar 2 guedtobeunabletostopdarknets.
Andinfact,asreportedbyArsTechnicabackin2007,attemptsbyuniversity administratorstobanP2PattheRIAAsbehesthavecausedstudentstomigrateto darknetsindroves.3 The rapid development of circumvention technology intersectspowerfully sowiththeculturalattitudesofagenerationforwhichindustryantisonglifting propagandaisasgutbustinglyhilariouslyasReeferMadness.Girlintraining,com mentingunderaSlashdotpost,hadthistosayofsuchpropaganda:
Iusedtoreadstufflikethisandgetupset.ButthenIrealizedthatmyentire generationknowsitsbaloney.Theycantexplainitintellectually.Theyhaveno realunderstandingofthesubtletiesofthelaw,orargumentsaboutartistsrights J.A. Pouwelse, P. Garbacki, D.H.J. Epema, and H.J. Sips, Pirates and Samaritans: a DecadeofMeasurementsonPeerProductionandtheirImplicationsforNetNeutralityand Copyright (The Netherlands: Delft University of Technology, 2008) <http://www.tribler .org/trac/wiki/PiratesSamaritans>.,p.20. 2 Ibid.,p.15. 3 Ken Fisher, Darknets live on after P2P ban at Ohio U, Ars Technica, Mqy 9, 2007 <http://arstechnica.com/techpolicy/news/2007/05/darknetsliveonafterp2pbanat ohiou.ars>.
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oranyofthat.Alltheyreallyunderstandisthereisarelargecorporationscharg ingprivatecitizenstens,ifnothundredsofthousandsofdollars,fordownload ingafewsongshereandthere.Anditsintuitivelyobviousthatitcantpossibly beworththat. An entire generation has disregarded copyright law. It doesnt matter whethercopyrightisusefulornotanymore.Theycouldreleaseattackdogsand blackhelicoptersanditwouldntreallychangepeoplesattitudes.Itwontmatter howmanywebsitestheyshutdownorhowmanylivestheyruin,theyvealready losttheculturewarbecausetheypushedtoohardandalienatedpeoplewhole sale.Theonlythingthesecorporationscandonowisshiftthecoststothegov ernment and other corporations under color of law in a desperate bid for rele vance.Andthatsexactlywhattheyredoing. Whatdoesthismeanfortheaverageperson?Itmeansthatwegoogleand floataroundtoaneverchanginglandscapeofsites.Wecommunicatebywordof mouthviaemail,instantmessaging,andsocialnetworkingsiteswherethelatest fix of free movies, music, and games are. If you dont make enough money to participate in the artificial marketplace of entertainment goodsyou dont ex cludeyourselffromit,yougotothegreymarketinstead.Allthetechnological, legal,andphilosophicalbarriersintheworldamounttonothing.Thereisasmall coreofpeoplethatunderstandtheimplicationsofwhattheseinterestsaredoing andcontinuallysearchforwaystoliberatetheirgoodsandservicesforsaleon thegreymarket.Itis(economicallyandpolitically)identicaltotheProhibition exceptthatinsteadofsmugglingliquorwearesmugglingdigitalfiles. Billions have been spent combating a singularily simple idea that was spawnedthirtyyearsagobyabunchofsociallyineptdisaffectedteenagerswork ingoutoftheirgarages:Informationwantstobefree.Exceptinformationhasno wantsitsthepeoplewhowanttobefree.Andwhilewecanchangeattitudes aboutsmokingwithaggressivemediacampaigns,orconvincethemtocasttheir votes for a certain candidate, selling people on goods and services they dont reallyneed,whatwecannotchangeisthefoundationsuponwhichageneration 1 hasbuiltanewsocietyoutof.
CoryDoctorow,notoverlyfondofthemoreideologicallydrivenwingofthe opensource movement (or as he calls them, patchouliscented infohippies), saysitisntaboutwhetherinformationwantstobefree.Rather,thesimplefact ofthematteristhatcomputersaremachinesforcopyingbitsandthatonceyou ... turn something into bits, they will get copied.... [I]f your business model is basedonbitsnotgettingcopiedyouarescrewed.2
Raiseyourhandifyourethinkingsomethinglike,ButDRMdoesnthaveto beproofagainstsmartattackers,onlyaverageindividuals!... ...IdonthavetobeacrackertobreakyourDRM.Ionlyneedtoknowhow tosearchGoogle,orKazaa,oranyoftheothergeneralpurposesearchtoolsfor 3 thecleartextthatsomeonesmarterthanmehasextracted. It used to be that copyprevention companies strategies went like this: Well make it easier to buy a copy of this data than to make an unauthorized copyofit.Thatway,onlytheubernerdsandthecashpoor/timerichclasseswill bothertocopyinsteadofbuy.ButeverytimeaPCisconnectedtotheInternet and its owner is taught to use search tools like Google (or The Pirate Bay), a thirdoptionappears:youcanjustdownloadacopyfromtheInternet.... As I write this, I am sitting in a hotel room in Shanghai, behind the Great FirewallofChina.Theoretically,Icantaccessbloggingservicesthatcarrynega
GirlintrainingcommentunderSoulskill,YourRightsOnline,Slashdot,January9,2010 <http://yro.slashdot.org/story/10/01/09/0341208/PoliticiansWorldwideAskingQuestions AboutACTA>. 2 Bascha Harris, A very long talk with Cory Doctorow, part 1, redhat.com, January 2006<http://www.redhat.com/magazine/015jan06/features/doctorow/>. 3 Doctorow,MicrosoftDRMResearchTalk,inContent,pp.78.
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tive accounts of Beijings doings, like WordPress, Blogger, and LiveJournal, nor theimagesharingsiteFlickr,norWikipedia.The(theoretically)omnipotentbu reaucrats at the local Minitrue have deployed their finest engineering talent to stopme.Well,thesecatsmaybeabletoorderpoliticalprisonersexecutedand theirorgansharvestedforPartymembers,buttheyvetotallyfailedtokeepChi nesepeople...offtheworldsInternet.TheWTOisrattlingitssabersatChina today,demandingthattheyfigureouthowtostopChinesepeoplefromlooking at Bruce Willis movies without permissionbut the Chinese government cant evenfigureouthowtostopChinesepeoplefromlookingatseditiousrevolution 1 arytractsonline.
Filesharingnetworksspringupfasterthantheycanbeshutdown.Assoonas Napsterwasshutdown,thepublicmigratedtoKazaaandGnutella.WhenKazaa wasshutdown,itsfounderswentontocreateSkypeandJoost.Otherfilesharing services also sprang up in Kazaas niche, like the Russian AllofMP3, which reap pearedunderanewnameassoonastheWTOkilledit.2 The proliferation of peer production and the opensource model, and the growingunenforceabilityoftheintellectualpropertyrulesonwhichthecapture of value depends, is creating a vast new information commons ..., which is in creasinglyoutofthecontrolofcognitivecapitalism.3Capital,asaresult,isinca pable of realizing returns on ownership in the cognitive realm. As Bauwens ex plainsit:
1)Thecreationofnonmonetaryvalueisexponential 2)Themonetizationofsuchvalueislinear Inotherwords,wehaveagrowingdiscrepancybetweenthedirectcreation ofusevaluethroughsocialrelationshipsandcollectiveintelligence...,[andthe factthat]onlyafractionofthatvaluecanactuallybecapturedbybusinessand money.Innovationisbecoming...anemergentpropertyofthenetworksrather thananinternalR&Daffairwithincorporations;capitalisbecominganaposte rioriinterventionintherealizationofinnovation,ratherthanaconditionforits occurrence.... What this announces is a crisis of value ..., but also essentially a crisis of accumulationofcapital.Furthermore,welackamechanismfortheexistingin stitutionalworldtorefundwhatitreceivesfromthesocialworld.Soontopof allofthat,wehaveacrisisofsocialreproduction....
Thus, while markets and private ownership of physical capital will persist, the core logic of the emerging experience economy, operating as it does in the worldofnonrivalexchange,isunlikelytohavecapitalismasitscorelogic.4 A good example is the way in which digital culture, according to Douglas Rushkoff,destroyedCaliforniaseconomy:
The fact is, most Internet businesses dont require venture capital. The beauty of these technologies is that they decentralize value creation. Anyone withaPCandbandwidthcanprogramthenextTwitterorFacebookplugin,the nextiPhoneapp,oreventhenextsocialnetwork.Whileafewthousanddollars might be nice, the hundreds of millions that venture capitalists want toneed toinvest,simplyarentrequired.... The banking crisis began with the dot.com industry, because here was a business sector that did not require massive investments of capital in order to grow. (I spent an entire night on the phone with one young entrepreneur who
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Doctorow,ItstheInformationEconomy,Stupid,Ibid.,p.60. Doctorow,WhyisHollywoodMakingaSequeltotheNapsterWars?inContent,p. Bauwens,P2PandHumanEvolution. Bauwens,Cantheexperienceeconomybecapitalist?
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secured $20 million of capital from a venture firm, trying to figure out how to possibly spend it. We could only come up with $2 million of possible expendi tures.)Whatsabanktodowhenitsmoneyisnolongerneeded?... So they fail, the tax base decreases, companies based more on their debt structures than their production fail along with them, and we get an economic crisis.Yes,theInternetdidallthis. Butthatsalsowhythecurrentcrisisshouldbeseenasacauseforcelebra tionaswell:theInternetactuallydidwhatitwassupposedtobydecentralizing ourabilitytocreateandexchangevalue. This was the real dream, after all. Not simply to pass messages back and forth,buttodisintermediateourexchanges.Tocutoutthemiddleman,andlet peopleengageandtransactdirectly. Thisis,quitesimply,cheapertodo.Thereslessmoneyinit.Notnecessarily lessmoneyforus,thepeopledoingtheexchanging,butlessmoneyfortheinsti tutionsthathavetraditionallyextractedvaluefromouractivity.IfIcancreatean application or even a Web site like this one without borrowing a ton of cash fromthebank,thenIamalsounderminingAmericasbiggestindustryfinance. While we rightly mourn the collapse of a states economy, as well as the manythataretofollow,wemustattheveryleastacknowledgetherealcul prit.Fordigitaltechnologynotonlykilledthespeculativeeconomy,butstands 1 readytobuildusarealone.
Theactualphysicalcapitaloutlaysrequiredfordigitalcreationaresimplyun abletoabsorbanythingliketheamountsofsurpluscapitalinsearchofaprofitable investment outletunless artificial property rights and artificial scarcity can be usedtoexcludeindependentproductionbyallbutthecorporateownersofintel lectual property, and mandate outlays totally unrelated to the actual physical capital requirements for production. Since such artificial property rights are, in fact, becoming increasingly unenforceable, corporate capital is unable either to combat the growing superfluity of its investment capital in the face of low overheadproduction,ortocapturevaluethroughartificialscarcitybysuppressing lowcostcompetition. Ifweviewthetransitionfromtheperspectiveofinnovatorsratherthanven turecapitalists,ofcourse,itsamuchmorepositivedevelopment.MichelBauwens described the collapse of the dotcom bubble and the rise of Web 2.0 as the de couplingofinnovationandentrepreneurshipfromcapital,andtheshiftofinnova tiontonetworkedcommunities.
Asaninternetentrepreneur,Ipersonallyexperiencedboththemanicphase, and the downturn, and the experience was life changing because of the impor tantdiscoveryIandothersmadeatthattime.Allthepunditswherepredicting, then as now, that without capital, innovation would stop, and that the era of high internet growth was over for a foreseeable time. In actual fact, the reality wastheveryopposite,andsomethingapparentlyverystrangehappened.Infact, almosteverythingweknow,theWeb2.0,theemergenceofsocialandparticipa torymedia,wasborninthecrucibleofthatdownturn.Inotherwords,innova tion did not slow down, but actually increased during the downturn in invest ment. This showed the following new tendency at work: capitalism is increas ingly being divorced from entrepreneurship, and entrepreneurship becomes a networkedactivitytakingplacethroughopenplatformsofcollaboration. Thereasonisthatinternettechnologyfundamentallychangestherelation shipbetweeninnovationandcapital.Beforetheinternet,intheSchumpeterian world,innovatorsneedcapitalfortheirresearch,thatresearchisthenprotected DouglasRushkoff,HowtheTechBoomTerminatedCaliforniasEconomy,FastCom pany,July10,2009<http://www.fastcompany.com/article/howtechboomterminated californiaseconomy?page=0%2C1>.
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throughcopyrightandpatents,andfurtherfundscreatethenecessaryfactories. Inthepostschumpeterianworld,creativesoulscongregatethroughtheinternet, createnewsoftware,oranykindofknowledge,createcollaborationplatformson thecheap,andparadoxically,onlyneedcapitalwhentheyaresuccessful,andthe servers risk crashing from overload. As an example, think about Bittorrent, the most important software for exchanging multimedia content over the internet, which was created by a single programmer, surviving through a creative use of somecreditcards,withzerofunding.Buttheinternetisnotjustforcreativein dividualsouls,butenableslargecommunitiestocooperateoverplatforms.Very importantly,itisnotlimitedtoknowledgeandsoftware,buttoeverythingthat knowledge and software enables, which includes manufacturing. Anything that needs to be physically produced, needs to be virtually designed in the first place. Thisphenomenaiscalledsocialinnovationorsocialproduction,andisin 1 creasinglyresponsibleformostinnovation.
AswewillseeinChapterFive,initialcapitaloutlayrequirementsforphysical productionareimplodinginexactlythesameway,whichmeansthatventurecapi talwilllosemostofitsoutletsinmanufacturingaswell. For this reason the Austrian dogma of von Mises, that the only way to raise realwagesistoincreasetheamountofcapitalinvested,isshowntorelyonafalse assumption:theassumptionthatthereissomenecessarylinkbetweenproductiv ity and the sheer quantity of capital invested. George Reisman displays this ten dencyatitscrudest.
Thetruth,whichrealeconomists,fromAdamSmithtoMises,haveelaborated,is that in a market economy, the wealth of the richof the capitalistsis over whelminglyinvestedinmeansofproduction,thatis,infactories,machineryand equipment,farms,mines,stores,andthelike.Thiswealth,thiscapital,produces thegoodswhichtheaveragepersonbuys,andasmoreofitisaccumulatedand raises the productivity of labor higher and higher, brings about a progressively 2 largerandevermoreimprovedsupplyofgoodsfortheaveragepersontobuy.
But it has been at the heart of most twentieth century assumptions about economy of scale, and an unquestioned assumption behind the work of liberal managerialistslikeChandlerandGalbraith. For the same reason that the Austrian fixation on the quantity of capital in vestment as a source of productivity is obsolete, Marxist theories of the social structureofaccumulationasanengineofgrowtharelikewiseobsolete.Technical innovation,insuchtheories,providesthebasisforanewlongwaveofinvestment tosoakupsurpluscapital.Thecreationofsomesortofnewinfrastructureisbotha longtermsinkforcapital,andthefoundationfornewlevelsofproductivity. GopalBalakrishnan,inNewLeftReview,correctlyobservescapitalismsinabil ity,thistimearound,togainanewleaseonlifethroughanewKondratiefflong wave cycle: i.e., a new sociotechnical infrastructure, to supersede the existing fixedcapitalgrid. But he mistakenly seesitas theresulteitherofaninabilityto beartheexpense(asifproductivitygrowthrequiredanenormouscapitaloutlay), or of technological stagnation. His claim of technological stagnation, frankly, is utterly astonishing. He equates the outsourced production in jobshops, on the flexible manufacturing model that prevails in various forms in Shenzhen, Emilia
Michel Bauwens, Asia needs a Social Innovation Stimulus plan, P2P Foundation Blog, March 23, 2009 <http://blog.p2pfoundation.net/asianeedsasocialinnovation stimulusplan/2009/03/23>. 2 George Reisman, Answer to Paul Krugman on Economic Inequality, The Webzine, March3,2006<http://thewebzine.com/articles/030306ReismanAnswer.html>.
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Romagna,andassortedcorporatesuppliernetworks,withalowerleveloftechno logicaladvancement.1Buttheshiftofproductionfromtheoldexpensive,capital intensive,productspecificinfrastructureofmassproductionindustrytojobshops isinfacttheresultofanamazingleveloftechnologicaladvance:namely,therise ofcheapCNCmachinetoolsscaledtosmallshopsthataremoreproductivethan the old massproduction machinery. By technological stagnation, apparently, Balakrishnansimplymeansthatlessmoneyisbeinginvestedinnewgenerationsof capital;butthecrisisofcapitalismresultspreciselyfromthefactthatnewformsof technologypermitunprecedentedlevelsofproductivitywithphysicalcapitalcosts an order of magnitude lower. Both the Austrians and the neoMarxists, in their equationofprogressandproductivitywiththemassofcapitalinvested,arestuck inthepaleotechnicage. ThisshowswhythecognitivecapitalismmodelofGates,Romer,etc.isun tenable.ThenaturaltendencyoftechnicalinnovationisnottoaddtoGDP,butto destroy it. GDP measures, not the utility of production outputs to the consumer, butthevalueofinputsconsumedinproduction.2Soanythingthatreducestheto tallaborandmaterialinputsrequiredtoproduceagivenunitofoutputshouldre duce GDP, unless artificial scarcity puts a floor under commodity price and pre ventspricesfromfallingtothenewcostofproduction. ThisisessentiallywhatwesawEricReasonspointoutabove.AsChrisAnder sonarguesinFree,MicrosoftslaunchofEncartaonCDRominthe1990sresulted in$100billioninsalesforEncartawhiledestroyingsome$600billioninsalesfor thetraditionalencyclopediaindustry.AndWikipedia,inturn,destroyedstillmore salesforbothtraditionalencyclopediasandEncarta.3 AsNiallCookdescribesit,enterprisesoftwarevendorsareexperiencingsimi lardeflationarypressure.
The design of business applications is more important than ever, says Joe Kraus,CEOofJobSpot.IfImabuyeratamanufacturingcompanyandImusing Google Earth to look at the plants of my competition, and the Siebel sales rep asksmetospend$2milliononglorifieddatabasesoftware,thatcausesarealdis connect. GopalBalakrishnan,SpeculationsontheStationaryState,NewLeftReview,Septem berOctober2009<http://www.newleftreview.org/A2799>. 2 Balakrishnan, in Ibid.,points toan interesting parallel between national accounting intheSovietblocandtheneoliberalWest: ...DuringtheheydayofReaganism,officialWesternopinionhadralliedtotheview that the bureaucratic administration of things was doomed to stagnation and decline be causeitlackedtheratioofmarketforces,coordinatingtransactionsthroughthediscipline ofcompetition.Yetitwasnottoolongafterthefinalyearsofwhatwasoncecalledsocial ism that an increasingly debt and speculationdriven capitalism began to go down the pathofaccountingandallocatingwealthinrecklessdisregardofanynotionallyobjective measureofvalue.Thebalancesheetsoftheworldsgreatestbanksareanimposingtesti monytothebreakdownofstandardsbywhichthewealthofnationswasoncejudged. Intheirownways,bothbureaucraticsocialismanditsvastlymoreaffluentneoliberal conqueror concealed their failures with increasingly arbitrary tableaux conomiques. By the 80s the gdrs reported national income was revealed to be a statistical artifact that grosslyinflateditscrampedstandardsofliving.Butinthesamedecade,anemergingcir cuitofglobal imbalances was beginning to generate considerableproblems for the meas urement of capitalist wealth. The coming depression may reveal that the national eco nomic statistics of the period of bubble economics were fictions, not wholly unlike those operativeintheoldSovietsystem. 3 ChrisAnderson,Free:TheFutureofaRadicalPrice(NewYork:Hyperion,2009),pp. 129130.
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Inthe1990ssomeenterprisesoftwarevendorswerebusytellingcustomers that even the simplest problems needed large, complex systems to solve them. Followingthedotcomcrashatthestartofthemillenniumfewofthesevendors survived,usurpedbycheapifnotfreealternatives.Thistrendcontinuesun abatedintheformofsocialsoftware.AsPeterMerholz...,presidentandfoun der of user expereince firm Adaptive Path, put it, enterprise software is being 1 eatenawayfrombelow.
The usual suspects proclaim that demand is upwardly elastic, and endlessly so,sothatareductionofcostsinoneindustrywillsimplyfreeupdemandforin creasedoutputelsewhere.Butitsunlikely,asReasonspointedout,thattherewill beaonetoonetransferofthedemandfreedupbylowerpricesfromfallingpro ductioncoststonewformsofconsumergoods,forthesamereasonthattheresa backwardbending supply curve for labor. What economists mean by this latter wonkishsounding term is that labor doesnt follow the upward sloping supply curveasmostnormalcommodities,withhigherwagesresultinginwillingnessto work longer hours. Rather, part of the increase in income from higher wages is likelytobeusedtoreduceworkhours;ratherthanworkersincreasingdemandfor new products to absorb the total increase, its more likely that total demand will growlessthanthewageincrease,anditwilltakefewerhourstoearnthedesired levelofconsumption.Thereasonisthattheexpenditureoflaborcarriesdisutility. For the same reason, rather than reduced production costs and prices in one in dustrysimplyfreeingupdemandforanequalvalueinnewproductselsewhere,its likely that total GDP, i.e. total expenditure of labor and material inputs, will de cline. Rushkoffsreferencetothecollapsingtaxbaseisespeciallyinteresting.Aswe havealreadyseen,inaneconomyofsubsidizedinputs,thedemandforsuchinputs growsexponentially,fasterthanthestatecanmeetthem.Thestatecapitalistsys temwillsoonreachapointatwhich,thankstothecollapseoftheportionofvalue comprisedofrentsonartificialproperty,thebaseoftaxablevalueisimplodingat the very time big business most needs subsidies to stay afloat. In the words of CharlesHughesSmith,
whatiftheendofpayingworkwillbringdowntheentirecredit/consumption dependent economy and the Federal government which depends on tax reve nuesfromallthatfinancialchurn?... What if the Web, which is busily (creatively) destroying print media, the music industry, the movie business, Microsoft and many other rentiertype en terprises, ends up destroying income and profitbased tax revenues? How can thegovernmentsupportastatusquowhichrequires$2trillioninnewborrowing 2 everyyearjusttokeepfromcollapsing?Whatifthatdebtloadisunsustainable?
SothefiscalcrisisofthestateisacceleratednotonlybyPeakOil,butbythe collapseofproprietaryinformationasasourceofvalue. Thegrowingimportanceofhumancapitalrelativetophysicalcapital,another effectoftheimplosionofmaterialoutlaysandoverheadforproduction,isalsocre atinggovernabilityproblemsforthestandardabsenteeowned,hierarchicalcorpo rateenterprise.Atthesametime,thereisagrowinginabilitytoenforcecorporate boundariesonhumancapitalbecauseoftheunenforceabilityofintellectualprop erty. Fifty years ago, enormous outlays on physical capital were the main struc
NiallCook,Enterprise2.0:HowSocialSoftwareWillChangetheFutureofWork(Bur lington,Vt.:Gower,2008),p.24. 2 Charles Hugh Smith, What if the (Debt Based) Economy Never Comes Back? Of TwoMinds,July2,2009<http://www.oftwominds.com/blogjuly09/whatif0709.html>.
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turalbasisforthecorporationasalocusofcontroloverphysicalassets.Today,for agrowingnumberofindustries,thephysicalcapitalrequirementsforenteringthe market have imploded, and intellectual property is the main structural support tocorporateboundaries. Inthisenvironment,theonlythingstandingbetweentheoldinformationand media dinosaurs and their total collapse is their socalled intellectual property rightsat least to the extent theyre still enforceable. Ownership of intellectual propertybecomesthenewbasisforthepowerofinstitutionalhierarchies,andthe primarystructuralbulwarkforcorporateboundaries.Withoutthem,inanyindus trywherethebasicproductionequipmentisaffordabletoall,andbottomupnet workingrendersmanagementobsolete,itislikelythatselfmanaged,cooperative productionwillreplacetheoldmanagerialhierarchies.Thenetworkrevolution,if itsfullpotentialisrealized,
will lead to substantial redistribution of power and money from the twentieth centuryindustrialproducersofinformation,culture,andcommunicationslike Hollywood, the recording industry, and perhaps the broadcasters and some of thetelecommunicationsgiantstoacombinationofwidelydiffusepopulations aroundtheglobe,andthemarketactorsthatwillbuildthetoolsthatmakethis populationbetterabletoproduceitsowninformationenvironmentratherthan 1 buyingitreadymade.
The same thing is true in the physical realm, of course. As we shall see in ChapterFive,therevolutionincheapCNCmachinetools(includinghomebrew3 Dprinters,cutting/routingtables,etc.,thatcostafewhundreddollarsinparts)is havingalmostasradicalaneffectonthecapitaloutlaysrequiredforphysicalpro ductionasthedesktoprevolutionhadontheimmaterialproduction.Andtheap proach of the old corporate dinosaurstrying to maintain artificial scarcity and avoidhavingtocompetewithfallingproductioncostsisexactlythesameinthe physicalasintheimmaterialrealm.
F.NETWORKEDRESISTANCE,NETWAR,ANDASYMMETRICWARFARE AGAINSTCORPORATEMANAGEMENT
Wealreadymentionedthecorporategovernanceissuescausedbythegrowing importanceofhumanrelativetophysicalcapital,andtheuntenabilityofintellec tual property as a legal support for corporate boundaries. Closely related is the vulnerability of corporate hierarchies to asymmetric warfare by networked com munitiesofconsumersandtheirownemployees.Centralized,hierarchicalinstitu tionsareincreasinglyvulnerabletoopensourcewarfare. In the early 1970s, in the aftermath of a vast upheaval in American political culture,SamuelHuntingtonwroteofacrisisofdemocracy;theAmericanpeople, he feared, were becoming ungovernable. In The Crisis of Democracy, he argued thatthesystemwascollapsingfromdemandoverload,becauseofanexcessofde mocracy. Huntingtons analysis is illustrative of elite thinking behind the neolib eralpolicyagendaofthepastthirtyyears. ForHuntington,Americasroleashegemonicpowerinasystemofworldor derdependedonadomesticsystemofpower;thissystemofpower,variouslyre ferred to in this work as corporate liberalism, Cold War liberalism, and the wel
JamesC.Bennett,TheEndofCapitalismandtheTriumphoftheMarketEconomy, from Network Commonwealth: The Future of Nations in the Internet Era (1998, 1999) <http://www.pattern.com/bennettjendcap.html>.
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farewarfarestate,assumedageneralpublicwillingnesstostayoutofgovernment affairs.1 And this was only possible because of a domestic structure of political authority in which the country was governed by the president acting with the supportandcooperationofkeyindividualsandgroupsintheExecutiveoffice,the federal bureaucracy, Congress, and the more important businesses, banks, law firms,foundations,andmedia,whichconstitutetheprivateestablishment.2 Americas position as defender of global capitalism required that its govern ment have the ability to mobilize its citizens for the achievement of social and political goals and to impose discipline and sacrifice upon its citizens in order to achieve these goals.3 Most importantly, this ability required that democracy be largely nominal, and that citizens be willing to leave major substantive decisions aboutthenatureofAmericansocietytoqualifiedauthorities.Itrequired,inother words, some measure of apathy and noninvolvement on the part of some indi vidualsandgroups.4 Unfortunately, these requirements were being gravely undermined by a breakdownoftraditionalmeansofsocialcontrol,adelegitimationofpoliticaland othermeansofauthority,andanoverloadofdemandsongovernment,exceeding itscapacitytorespond.5 The overload of demands that caused Huntington to recoil in horror in the early1970smusthaveseemedpositivelytamebythelate1990s.Thepotentialfor networked resistance created by the Internet exacerbated Huntingtons crisis of democracybeyondhiswildestimagining. Networkedresistanceisbasedonaprincipleknownasstigmergy.Stigmergy isatermcoinedbybiologistPierrePaulGrasseinthe1950stodescribetheprocess by which termites coordinated their activity. Social insects like termites and ants coordinatetheireffortsthroughtheindependentresponsesofindividualstoenvi ronmentaltriggerslikechemicaltrails,withoutanyneedforacentralcoordinating authority.6 Appliedbywayofanalogytohumansociety,itrefersprimarilytothekindsof networkedorganizationassociatedwithwikis,groupblogs,andleaderlessorga nizationsorganizedalongthelinesofnetworkedcells. MatthewElliottcontrastsstigmergiccoordinationwithsocialnegotiation.So cialnegotiationisthetraditionalmethodoforganizingcollaborativegroupefforts, through agreements and compromise mediated by discussions between individu als.Theexponentialgrowthinthenumberofcommunicationswiththesizeofthe group,obviously,imposesconstraintsonthefeasiblesizeofacollaborativegroup, beforecoordinationmustbeachievedbyhierarchyandtopdownauthority.Stig mergy, on the other hand, permits collaboration on an unlimited scale by indi viduals acting independently. This distinction between social negotiation and stigmergy is illustrated, in particular, by the contrast between traditional models
Samuel P. Huntington, Michael J. Crozier, Joji Watanuki, The Crisis of Democracy. ReportontheGovernabilityofDemocraciestotheTrilateralCommission:TrianglePaper8 (NewYork:NewYorkUniversityPress,1975),pp.1056. 2 Ibid.,p.92. 3 Ibid.,pp.78. 4 Ibid.,pp.1135. 5 Ibid.,pp.78. 6 MarkElliott,StigmergicCollaboration:TheEvolutionofGroupWork,M/CJournal, May2006<http://journal.mediaculture.org.au/0605/03elliott.php>.
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of coauthoring and collaboration in a wiki.1 Individuals communicate indirectly, viathestigmergicmedium.2 Thedistinctionbetweensocialnegotiationandstigmergiccoordinationparal lels Elliotts distinction, elsewhere, between discursive collaboration and stig mergic collaboration. The discursive elaboration of shared representations (ideas)isreplacedbytheannotationofmaterialanddigitalartefactsasembodi ments of these representations. Additionally, when stigmergic collaboration is extended by computing and digital networks, a considerable augmentation of processing capacity takes place which allows for the bridging of the spatial and temporallimitationsofdiscursivecollaboration,whilesubtlyshiftingpointsofne gotiationandinteractionawayfromthesocialandtowardsthecultural.3 There is a wide body of literature on the emergence of networked modes of resistanceinthe1990s,beginningwiththeRandstudiesonnetwarbyDavidRon feldt,JohnArquillaandotherwriters.Intheir1996paperTheAdventofNetwar, Arquilla and Ronfeldt wrote that technological evolution was working to the ad vantageofnetworksandthedetrimentofhierarchies.Althoughtheirfocuswason themilitaryaspect(whathassincebeencalledFourthGenerationWarfare),they alsomentionedgovernabilityconcernsincivilsocietymuchlikethoseHuntington raised earlier. Intellectual property pirates, militant singleissue groups and transnational social activists, in particular, were developing netwarlike attrib utes.
Now...thenewinformationtechnologiesandrelatedorganizationalinno vations increasingly enable civilsociety actors to reduce their isolation, build farflung networks within and across national boundaries, and connect and co ordinateforcollectiveactionasneverbefore.Asthistrenddeepensandspreads, itwillstrengthenthepowerofcivilsocietyactorsrelativetostateandmarketac torsaroundtheglobe.... Foryears,acuttingedgeofthistrendcouldbefoundamongleftleaningac tivistNGOsconcernedwithhumanrights,environmental,peace,andotherso cialissuesatlocal,national,andgloballevels.ManyoftheserelyonAPCaffili ates for communications and aim to construct a global civil society strong enoughtocountertherolesofstateandmarketactors.Inaddition,thetrendis spreadingacrossthepoliticalspectrum.Activistsontherightfrommoderately conservativereligiousgroups,tomilitantantiabortiongroupsarealsobuilding nationalandtransnationalnetworksbasedinpartontheuseofnewcommuni 4 cationssystems.
In Tribes, Institutions, Markets, Networks (1996) Ronfeldt focused on the specialsignificanceofthenetworkfornetworkedglobalcivilsociety.

...[A]ctorsintherealmofcivilsocietyarelikelytobethemainbeneficiar ies. The trend is increasingly significant in this realm, where issueoriented multiorganizationalnetworks of NGOsor, as some are called, nonprofit orga nizations (NPOs), private voluntary organizations (PVOs), and grassroots orga nizations (GROs)continue to multiply among activists and interest groups whoidentifywithcivilsociety.Overthelongrun,thisrealmseemslikelytobe Ibid. Mark Elliott, Some General OfftheCuff Reflections on Stigmergy, Stigmergic Collaboration, May 21, 2006 <http://stigmergiccollaboration.blogspot.com/2006/05/some generaloffcuffreflectionson.html>. 3 MarkElliott,StigmergicCollaboration:ATheoreticalFrameworkforMassCollabora tion. Doctoral Dissertation, Centre for Ideas, Victorian College of the Arts, University of Melbourne(October2007),pp.910 4 JohnArquillaandDavidRonfeldt,TheAdventofNetwarMR789(SantaMonica,CA: RAND,1996)<http://www.rand.org/pubs/monograph_reports/MR789/>.
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strengthened more than any other realm, in relative if not also absolute terms. Whileexamplesexistacrossthepoliticalspectrum,themostevolvedarefound amongprogressivepoliticaladvocacyandsocialactivistNGOse.g.,inregardto environmental,humanrights,andotherprominentissuesthatdependonus ingnewinformationtechnologieslikefaxes,electronicmail(email),andonline conferencingsystemstoconsultandcoordinate.Thisnascent,yetrapidlygrow ingphenomenonisspreadingacrossthepoliticalspectrumintonewcornersand issueareasinallcountries. The rise of these networks implies profound changes for the realm of civil society. In the eighteenth and nineteenth centuries, when most social theorists focused on state and market systems, liberal democracy fostered, indeed re quired,theemergenceofthisthirdrealmofactivity.PhilosopherssuchasAdam Ferguson,AlexisdeTocqueville,andG.W.F.Hegelviewedcivilsocietyasanes sential realm composed of all kinds of independent nongovernmental interest groupsandassociationsthatactedsometimesontheirown,sometimesincoali tions, to mediate between state and society at large. However, civil society was also considered to be a weaker realm than the state or the market. And while theoriststreatedthestateandthemarketassystems,thiswasgenerallynotthe casewithcivilsociety.Itwasnotseenashavingauniqueformoforganization equivalent to the hierarchical institution or the competitive market, although sometwentiethcenturytheoristsgavesuchranktotheinterestgroup. Now, the innovative NGObased networks are setting in motion new dy namicsthatpromisetoreshapecivilsocietyanditsrelationswithotherrealms atlocalthroughgloballevels.Civilsocietyappearstobethehomerealmforthe networkform,therealmthatwillbestrengthenedmorethananyothereither that, or a new, yettobenamed realm will emerge from it. And while classic definitions of civil society often encompassed state and marketrelated actors (e.g.,politicalparties,businessesandlaborunions),thisislessthecasewithnew and emerging definitionsthe separation of civil society from state and marketrealmsmaybedeepening. The network form seems particularly well suited to strengthening civil society actors whose purpose is to address social issues. At its best, this form maythusresultinvastcollaborativenetworksofNGOsgearedtoaddressingand helping resolve social equity and accountability issues that traditional tribal, state,andmarketactorshavetendedtoignoreorarenowunsuitedtoaddressing well. The network form offers its best advantages where the members, as often occursincivilsociety,aimtopreservetheirautonomyandtoavoidhierarchical controls, yet have agendas that are interdependent and benefit from consulta 1 tionandcoordination.
InTheZapatistaSocialNetwarinMexico,2Arquilla,Ronfeldtetalexpressed grave concern over the possibilities of decentralized netwar techniques for de stabilizing the political and economic order. They saw ominous signs of such a movementintheglobalpoliticalsupportnetworkfortheZapatistas.Loose,adhoc coalitionsofaffinitygroups,organizingthroughtheInternet,couldthrowtogether large demonstrations at short notice, and swarm the government and main stream media with phone calls, letters, and emails far beyond their capacity to cope. Ronfeldt and Arquilla noted a parallel between such techniques and the leaderless resistance ideas advocated by rightwing white supremacist Louis Beam,circulatinginsomeConstitutionalist/militiacircles.
David F. Ronfeldt, Tribes, Institutions, Markets, Networks P7967 (Santa Monica: RAND,1996)<http://www.rand.org/pubs/papers/P7967/>. 2 JohnArquilla,DavidRonfeldt,GrahamFuller,andMelissaFuller.TheZapatistaSo cialNetwarinMexicoMR994A(SantaMonica:Rand,1998)<http://www.rand.org/pubs/ monograph_reports/MR994/index.html>.
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The interesting thing about the Zapatista netwar, according to Ronfeldt and Arquilla,isthattoallappearancesitstartedoutasarunofthemillThirdWorld armys suppression of a runofthemill local insurgency. Right up until Mexican troops entered Chiapas, there was every indication the uprising would be sup pressedquickly,andthattheworldoutsideMexicowouldlittlenotenorlongre memberit.ItlookedthatwayuntilSubcommandanteMarcosandtheZapatistas made their appeal to global civil society and became the center of a networked movement that stirred activists the world over. The Mexican government was blindsidedbytheglobalreaction.1 Similarly, global corporations have been caught off guard when what once would have been isolated and easily managed conflicts become global political causes.
Naturalresourcecompanieshadgrownaccustomedtodealingwithactivists whocouldnotescapetheconfinesoftheirnationhood:apipelineorminecould spark a peasants revolt in the Philippines or the Congo, but it would remain contained, reported only by the local media and known only to people in the area. But today, every time Shell sneezes, a report goes out on the hyperactive shellnigeriaactionlistserve,bouncingintotheinboxesofallthefarflungor ganizers involved in the campaign, from Nigerian leaders living in exile to stu dentactivistsaroundtheworld.Andwhenagroupofactivistsoccupiedpartof ShellsU.K.HeadquartersinJanuary1999,theymadesuretobringadigitalcam era with a cellular linkup, allowing them to broadcast their sitin on the Web, evenafterShellofficialsturnedofftheelectricityandphones.... The Internet played a similar role during the McLibel Trial, catapulting Londons grassroots antiMcDonalds movement into an arena as global as the oneinwhichitsmultinationalopponentoperates.Wehadsomuchinformation aboutMcDonalds,wethoughtweshouldstartalibrary,DaveMorrisexplains, and with this in mind, a group of Internet activists launched the McSpotlight Website.Thesitenotonlyhasthecontroversialpamphletonline,itcontainsthe complete 20,000page transcript of the trial, and offers a debating room where McDonalds workers can exchange horror stories about McWork under the GoldenArches.Thesite,oneofthemostpopulardestinationsontheWeb,has beenaccessedapproximatelysixtyfivemilliontimes. ...[Thismediumis]lessvulnerabletolibelsuitsthanmoretraditionalme dia. [McSpotlight programmer] Ben explains that while McSpotlights server is locatedintheNetherlands,ithasmirrorsitesinFinland,theU.S.NewZealand andAustralia.ThatmeansthatifaserverinonecountryistargetedbyMcDon aldslawyers,thesitewillstillbeavailablearoundtheworldfromtheothermir 2 rors.
In Swarming & the Future of Conflict, Ronfeldt and Arquilla focused on swarming, in particular, as a technique that served the entire spectrum of net workedconflictincludingcivicorientedactions.3Despitetheprimaryconcern with swarming as a military phenomenon, they also gave some attention to net worked global civil societyand the Zapatista support network in particularas examplesofpeacefulswarmingwithwhichstateswereillequippedtodeal:
ArecentexampleofswarmingcanbefoundinMexico,atthelevelofwhat wecallactivistsocialnetwar(seeRonfeldtetal.,1998).Briefly,weseetheZa David Ronfeldt and Armando Martinez, A Comment on the Zapatista Netwar, in Ronfeldt and Arquilla, In Athenas Camp: Preparing for Conflict in th Information Age (SantaMonica:Rand,1997),pp.369371. 2 Klein,NoLogo,pp.393395. 3 ArquillaandRonfeldt,Swarming&theFutureofConflictDB311(SantaMonica,CA: RAND,2000),iii<http://www.rand.org/pubs/documented_briefings/DB311/>.
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patista movement, begun in January 1994 and continuing today, as an effort to mobilize global civil society to exert pressure on the government of Mexico to accede to the demands of the Zapatista guerrilla army (EZLN) for land reform and more equitable treatment under the law. The EZLN has been successful in engagingtheinterestofhundredsofNGOs,whohaverepeatedlyswarmedtheir mediaorientedfire(i.e.,sharpmessagesofreproach)againstthegovernment. TheNGOsalsoswarmedinforceatleastinitiallybysendinghundredsofac tivists into Chiapas to provide presence and additional pressure. The govern ment was able to mount only a minimal counterswarming fire of its own, in termsofcounterpropaganda.However,itdideventuallysucceedincurbingthe movementofactivistsintoChiapas,andtheMexicanmilitaryhasengagedinthe same kind of blanketing of force that U.S. troops employed in Haitiwith 1 similarsuccess. At present, our best understanding of swarmingas an optimal way for myriad,small,dispersed,autonomousbutinternettedmaneuverunitstocoordi nateandconductrepeatedpulsingattacks,byfireorforceisbestexemplified inpracticebythelatestgenerationofactivistNGOs,whichassembleintotrans national networks and use information operations to assail government actors overpolicyissues.TheseNGOsworkcomfortablywithinacontextofautonomy fromeachother;theyalsotakeadvantageoftheirhighconnectivitytointeract inthefluid,flexiblewayscalledforbyswarmtheory. The growing number of cases in which activists have used swarming in clude,inthesecurityarea,theZapatistamovementinMexicoandtheInterna tionalCampaigntoBanLandmines(ICBL).Theformerisaseminalcaseofso cial netwar, in which transnationally networked NGOs helped deter the Mexi cangovernmentandarmyfromattackingtheZapatistasmilitarily.Inthelatter case,anetwarlikemovement,aftergettingmostnationstosignaninternational antilandminetreaty,wonaNobelPeacePrize.Swarmingtacticshavealsobeen used,toalesserdegree,byprodemocracymovementsaimingtoputadictator shiponthedefensiveand/ortoalterU.S.tradeandotherrelationswiththatdic tatorship.Burmaisanexampleofthis. Socialswarmingisespeciallyontheriseamongactiviststhatopposeglobal trade and investment policies. Internetbased protests helped to prevent ap proval of the Multilateral Agreement on Investment (MAI) in Europe in 1998. Then,onJuly18,1999adaythatcametobeknownasJ18furiousanticapital ist demonstrations took place in London, as tens of thousands of activists con verged on the city, while other activists mounted parallel demonstrations in othercountries.J18waslargelyorganizedovertheInternet,withnocentraldi rectionorleadership.Mostrecently,withJ18asapartialblueprint,severaltens of thousands of activists, most of them Americans but many also from Canada and Europe, swarmed into Seattle to shut down a major meeting of the World Trade Organization (WTO) on opening day, November 30, 1999in an opera tion known to militant activists and anarchists as N30, whose planning began rightafterJ18.Thevigorofthesethreemovementsandtheeffectivenessofthe activistsobstructionismcameasasurprisetotheauthorities. TheviolentstreetdemonstrationsinSeattlemanifestedalltheconflictfor mations discussed earlierthe melee, massing, maneuver, and swarming. Moreover, the demonstrations showed that informationage networks (the NGOs)canprevailagainsthierarchies(theWTOandtheSeattlepolice),atleast for a while. The persistence of this Seattle swarming model in the April 16, 2000, demonstrations (known as A16) against the International Monetary Fund and the World Bank in Washington, D.C., suggests that it has proven effective enoughtocontinuetobeused. Fromthestandpointsofboththeoryandpractice,someofthemostinter esting swarming was conducted by blackmasked anarchists who referred to themselvescollectivelyastheN30BlackBloc,whichconsistedofanarchistsfrom
Ibid.,p.39.
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variousaffinitygroupsaroundtheUnitedStates.Aftermonthsofplanning,they took to the field individually and in small groups, dispersed but internetted by twoway radios and other communications measures, with a concept of collec tiveorganizationthatwasfluidanddynamic,butnonethelesstight.Theyknew exactly what corporate offices and shops they intended to damagethey had specifictargetlists.Andbyusingspottersandstayingconstantlyinmotion,they largely avoided contact with the police (instead, they sometimes clashed with peacekeepersamongtheprotesters).Whiletheirtacticswroughtphysicalde struction,theysawtheirlargerphilosophicalandstrategicgoalsindisruptivein formationalterms,asamountingtobreakingthespellofprivateproperty,cor poratehegemony,andcapitalismoversociety. InthesesocialnetwarsfromtheZapatistasin1994,throughtheN30activ ists and anarchists in 1999swarming appears not only in reallife actions but also through measures in cyberspace. Swarms of email sent to government fig uresareanexample.Butsomehacktivistsaimtobemoredisruptivepursuing electronic civil disobedience. One notable recent effort associated with a col lectivitycalledtheElectronicDisturbanceTheaterisactuallynamedSWARM.It seekstomovedigitalZapatismobeyondtheinitialemphasisofitscreatorson their FloodNet computer system, which has been used to mount massive ping attacks on government and corporate web sites, including as part of J18. Theaimofitsproponentsistocomeupwithnewkindsofelectronicpulsesys temsforsupportingmilitantactivism.Thisisclearlymeanttoenableswarming incyberspacebymyriadpeopleagainstgovernment,military,andcorporatetar 1 gets.
Swarmingin particular the swarming of public pressure through letters, phone calls, emails, and public demonstrations, and the paralysis of communica tions networks by such swarmsis the direct descendant of the overload of de mandsHuntingtonwroteofinthe1970s. Netwar, Ronfeldt and Arquilla wrote elsewhere, is characterized by the net worked organizational structure of its practitionerswith many groups actually beingleaderlessandthesupplenessintheirabilitytocometogetherquicklyin swarmingattacks.2 Jeff Vail discusses netwar techniques, in his A Theory of Power blog, using a term of his own: Rhizome. Vail predicts that the political struggles of the 21st centurywillbedefinedbythestructuralconflictbetweenrhizomeandhierarchy.
Rhizome structures, media and asymmetric politics will not be a means to supportorimproveacentralized,hierarchicaldemocracytheywillbeanalter nativetoit. Many groups that seek change have yet to identify hierarchy itself as the root cause of their problem ..., but are already beginning to realize that rhi 3 zomeisthesolution.
Manyopensourcethinkers,goingbacktoEricRaymondinTheCathedraland theBazaar,havepointedoutthenatureofopensourcemethodsandnetworkcul ture as forcemultipliers.4 Opensource design communities pick up the innova tions of individual members and quickly distribute them wherever they are needed, with maximum economy. By way of analogy, recall the argument from
Ibid.,pp.5052. John Arquilla and David Ronfeldt, Introduction, in Arquilla and Ronfeldt, eds., NetworksandNetwars:TheFutureofTerror,Crime,andMilitancyMR1382OSD(Santa Monica:Rand,2001)<http://www.rand.org/pubs/monograph_reports/MR1382/>ix. 3 Jeff Vail, A Theory of Power (iUniverse, 2004) <http://www.jeffvail.net/ atheoryofpower.pdf>. 4 Eric S. Raymond, The Cathedral and the Bazaar <http://catb.org/~esr/writings/homesteading>.
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Cory Doctorow we saw above: proprietary content ownerswho still dont get network culturethink if they only make DRM too difficult for the average con sumertocircumvent,thelossestohardcoregeekswhohavethetimeandskillsto get around it will be insignificant ( ... DRM doesnt have to be proof against smartattackers,onlyaverageindividuals!).Butnetworkculturemakesitunneces sary to figure out a way to route around DRM obstructions more than once; as soon as the first person does it, it becomes part of the common pool of intelli gence, available to anyone who can search The Pirate Bay (or whatever TPB suc cessorexistsatanygiventime). Australia, in fact, was recently the location of a literal geeks helping grand mas story, as geeks at The Pirate Party provided technical expertise to seniors wishingtocircumventgovernmentblockageofrighttodiewebsites:
ExitInternationalisanassistedsuicideeducationgroupinAustralia,whoseav eragememberisover70yearsold.TheExitInternationalwebsitehasbeenwill likely be blocked by the Great Firewall of Australia, so Exit International has turned to Australias Pirate Party and asked for help in producing a slideshow explaining firewall circumvention for seniors. Its a pretty informative slideshowteacherscouldjustasreadilyuseitforschoolkidsinclassinateach ing unit on getting access to legit educational materials thats mistakenly 1 blockedbyschoolcensorware.
Opensourceinsurgencyfollowsasimilardevelopmentmodel,witheachindi vidual innovation quickly becoming part of a common pool of intelligence. John Robbwrites:
The decentralized, and seemingly chaotic guerrilla war in Iraq demonstrates a patternthatwilllikelyserveasamodelfornextgenerationterrorists.Thispat ternshowsaleveloflearning,activity,andsuccesssimilartowhatweseeinthe open source software community. I call this pattern the bazaar. The bazaar solvestheproblem:howdosmall,potentiallyantagonisticnetworkscombineto conductwar?LessonsfromEricRaymondsTheCathedralandtheBazaarpro videsastartingpointforfurtheranalysis.Herearethefactorsthatapply(from theperspectiveoftheguerrillas): Release early and often. Try new forms of attacks against different types of targetsearlyandoften.Dontwaitforaperfectplan. Givenalargeenoughpoolofcodevelopers,anydifficultproblemwillbeseen asobviousbysomeone,andsolved.Eventuallysomeparticipantofthebazaar willfindawaytodisruptaparticularlydifficulttarget.Allyouneedtodois copytheprocesstheyused. Yourcodevelopers(betatesters)areyourmostvaluableresource.Theother guerrillanetworksinthebazaarareyourmostvaluableallies.Theywillinno vate on your plans, swarm on weaknesses you identify, and protect you by 2 creatingsystemnoise.
TomKnappprovidesagoodpracticalexampleoftheBazaarinoperationthe G20protestsinPhiladelphia:
During the G20 summit in the Pittsburgh area last week, police arrested twoactivists.Theseparticularactivistswerentbreakingwindows.Theywerent
CoryDoctorow,AustralianseniorsaskPiratePartyforhelpinaccessingrighttodie sites, Boing Boing, April 9, 2010 <http://www.boingboing.net/2010/04/09/australian seniorsa.html>. 2 John Robb, THE BAZAARS OPEN SOURCE PLATFORM, Global Guerrillas, September 24, 2004 <http://globalguerrillas.typepad.com/globalguerrillas/2004/09/bazaar _dynamics.html>.
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settingcarsonfire.Theywerentevenparadingaroundbrandishinggiantpup petsandchantinganticapitalistslogans. In fact, they were in a hotel room in Kennedy, Pennsylvania, miles away from unsanctioned protests in Lawrenceville ... listening to the radio and availingthemselvesofthehotelsWiFiconnection.Nowtheystandaccusedof hinderingapprehension,criminaluseofacommunicationfacilityandpossess inginstrumentsofcrime. Theradiotheywerelisteningtowas(allegedly)apolicescanner.Theywere (allegedly)usingtheirInternetaccesstobroadcastbulletinsaboutpolicemove mentsinLawrencevilletoactivistsattheprotests,usingTwitter.... Government as we know it is engaged in a battle for its very survival, and thatbattle,asIvementionedbefore,looksinkeyrespectsalotliketheRecord ing Industry Association of Americas fight with peertopeer filesharing net works.TheRIAAcanandiscrackingdownashardasitcan,ineverywayit can think of, but it is losing the fight and theres simply no plausible scenario under which it can expect to emerge victorious. The recording industry as we knowitwillchangeitsbusinessmodel,oritwillgounder. ThePittsburghTwoarewonderfullyanalogoustotheP2Pfolks.Theirarrest boils down, for all intents and purposes, to a public debugging session. Pitts burghTwo2.0willsettheirmonitoringstationsfurtherfromtheaction(across jurisdictionallines),usearelaysystemtogettheinformationtothosestationsin atimelymanner,thenretransmitthatinformationusingoffshoreandanonymiz ing proxies. The cops wont get within 50 miles of finding Pittsburgh Two 2.0, andanythingtheydotocounteritsefficacywillbecounteredinsubsequentver 1 sions.
TwomorerecentexamplesaretheuseofTwitterinMaricopaCountytoalert theLatinocommunitytoraidsbySherrifJoeArpaio,andtoalertdriverstosobri etycheckpoints.2 Oneespeciallyencouragingdevelopmentisthestigmergicsharingofinnova tionsinthetechnologiesofresistancebetweenmovementsaroundtheworld,aid ing each other across national lines and bringing combined force to bear against commontargets.TheFalunGonghasplayedacentralroleinthiseffort:
When these dissident Iranians chatted with each other and the outside world,theylikelyhadnoideathatmanyoftheirmissiveswerebeingguidedand guarded by 50 Falun Gong programmers spread out across the United States. Theseprogrammers,whoalmostallhavedayjobs,havecreatedprogramscalled Freegate and Ultrasurf that allow users to fake out Internet censors. Freegate disguisesthebrowsingofitsusers,reroutingtrafficusingproxyservers.Topre venttheIranianauthoritiesfromcrackingtheirsystem,theprogrammersmust constantlyswitchtheservers,apainstakingprocess. TheFalunGonghasproselytizeditssoftwarewithmorefervorthanitsspiri tualpractices.Itdistributesitsprogramsforfreethroughanorganizationcalled the Global Internet Freedom Consortium (GIFC), sending a downloadable ver sionofthesoftwareinmillionsofemailsandinstantmessages.InJuly2008,it introducedaFarsiversionofitscircumventiontool. While it is hardly the only group to offer such devices, the Falun Gongs programisparticularlypopularthankstoitssimplicityandrelativespeed....
ThomasL.Knapp,TheRevolutionWillNotBeTweeted,CenterforaStatelessSoci ety,October5,2009<http://c4ss.org/content/1179>. 2 KatherineManguWard,TheSheriffisComing!TheSheriffisComing!ReasonHit & Run, January 6, 2010 <http://reason.com/blog/2010/01/06/thesheriffiscomingthe sher>; Brad Branan, Police: Twitter used to avoid DUI checkpoints, Seattle Times, December 28, 2009 <http://seattletimes.nwsource.com/html/nationworld/2010618380_ twitterdui29.html>.
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Foralltheircleverness,[FalunGong]membersfoundthemselvesconstantly outmaneuvered.TheywoulddeviseastrategythatwouldbreakpastChinasfil tering tools, only to find their new sites quickly hacked or stymied. In 2002, though, theyhad their Freegate breakthrough. AccordingtoDavidTian,apro grammerwiththeGIFCandaresearchscientistatnasa,Freegatewasuniquebe cause it not only disguised the ISP addresses, or Web destinations, but also cloaked the traffic signatures, or the ways in which the Chinese filters deter minedwhetheraWebuserwassendinganemail,navigatingawebsite,sending an instant message, or using Skype. In the beginning, Freegate was rudimen tary,thenthecommunistsanalyzedthesoftware,theytriedtofigureouthowwe beatthem.TheystartedtoblockFreegate.Butthen,westartedhidingthetraffic signature,saysMr.Tian.Theyhavenotbeenabletostopitsince..... The Falun Gong was hardly alone in developing this kind of software. In fact,theresaCokePepsirivalrybetweenFreegateandtheothermainprogram for skirting the censors: The Onion Router, or TOR. Although TOR was devel opedbytheU.S.NavytoprotectInternetcommunicationamongitsvesselsit has become a darling of the libertarian left. The TOR project was originally bankrolled,inpart,bytheElectronicFrontierFoundation(EFF),thegroupthat firstsuedtheU.S.governmentforwarrantlesswiretapping.Manylibertariansare drawntoTORbecausetheyseeitasawayforcitizenstoshieldthemselvesfrom thepryingeyesofgovernment. TORusesanalgorithmtoroutetrafficrandomlyacrossthreedifferentproxy servers. This makes it slow but extremely secureso secure that both the FBI and international criminal gangs have been known to use it. Unlike the Falun Gong, the TOR programmers have a fetish for making their code available to anyone. TheresanironyintheEFFsembraceofTOR,sincetheprojectalsoreceives significantfundingfromthegovernment.TheVoiceofAmericahascontributed moneysothatitsbroadcastscanbeheardviatheInternetincountriesthathave blockedtheirsite,apointofenvyfortheGIFC.Forthepastfouryears,theFalun GonghasalsobeenurgingtheU.S.governmenttobackFreegatefinancially,go ing so far as to enlist activists such as Michael Horowitz, a Reagan administra tionveteran,andMarkPalmer,aformerambassadortoHungary,topressCon gress.(Neitherwaspaidforhiswork.)But,whenthetwofinallypersuadedCon gresstospend$15milliononanticensorshipsoftwarelastyear,themoneywas redirectedtoaprogramfortrainingjournalists.BothPalmerandHorowitzcon cludedthattheStateDepartmentdespisedtheideaoffundingtheFalunGong. Thats a reasonable conclusion. The Chinese government views the Falun Gong almost the way the United States views Al Qaeda. As Richard Bush, a ChinaexpertattheBrookingsInstitution,putsit,AnefforttouseU.S.govern ment resources in support of a Falun Gong project would be read in the worst possiblewaybytheChinesegovernment. Still,therewillnodoubtberenewedpressuretodirectmoneytothelikesof the GIFC and TOR. In the wake of the Iran demonstrations, three bills to fund anticensorship software are rocketing through Congress, with wide support. TomMalinowski,theWashingtondirectorforHumanRightsWatch,arguesthat suchsoftwareistohumanrightsworktodaywhatsmugglingmimeographma 1 chineswasbackinthe1970s,exceptitreachesmillionsmorepeople.
The last three paragraphs are suggestive concerning the internal contradic tionsofstatecapitalismanditsIPregime.Thedesireofwouldbehegemonstoaid each others internal resistance often leads to the creation of virally replicable technologies of benefit to their own internal resistance; on the other hand, this dangersometimessparksasenseofhonoramongthievesinwhichcompetinghe gemons refrain from supporting each others resistance. But overall, global inter
Eli Lake, Hacking the Regime, The New Republic, September 3, 2009 <http://www.tnr.com/article/politics/hackingtheregime>.
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stateconflictisasourceoftechnologiesthatcanbeexploitedbynonstateactors forinternalresistanceagainstthestate. Of course the conflict continuesbut the resistance seems to be capable of developingcountercountermeasuresbeforethestatescountermeasuresareeven implemented.
And,whiletheFalunGonghasmanagedtowintheupperhandinitsbattle withtheChinesegovernment,ithasreasontobelesssanguineaboutthefuture. TheChinesehavereturnedtothecybernannymodelthatU.S.librarieshavede ployed. This notorious project is called the Green Dam, or, more precisely, the GreenDamYouthEscort.UndertheGreenDam,everynewChinesecomputeris required to come with a stringent filter preinstalled and, therefore, nearly im possibletoremove.Asthefiltercollectsdataonusers,itreliesonagovernment databasetoblocksites.Ifanything,theGreenDamistoocomprehensive.Inits initialrun,thesoftwaregummedupcomputers,crashingbrowsersandprohibit ingvirtuallyeveryWebsearch.InAugust,Beijingannouncedthatitwoulddelay theprojectindefinitely.Still,Chinahadrevealedamodelthatcould,intheory, defeatnearlyeveryWebcircumventiontool. When I asked David Tian, the GIFC programmer, about Green Dam, he spokeaboutitwithamixofprideandhorror.Thepridecomesfromthefactthat theGIFCssuccesseshaveplacedtheChineseonthedefensive.Oneoftherea sonstheystartedthisGreenDambusinessandmovedthefiltertothecomputer isbecausetheycannotstopourproductswiththecurrentfilters,hesaid.Buthe concededthatGreenDamwillrenderFreegateuseless. Intheworldofproductdevelopmentandfreedomfightingyouinnovate ordie.TheFalunGongisdeterminednottogothewayoftheCommodore64 into technological irrelevance. It has released a beta version of a new piece of softwaretoovercometheGreenDam.Withoutarealchancetotestit,itshard totellwhetheritwillwork.Butithasovercomethefirsthurdleofproductde velopment.Ithasmarketeditsproductwithanamethatcapturestheswaggerof 1 theenterprise.ItiscalledGreenTsunami.
WewillexaminethegeneralprinciplesoftheBazaarandnetworkculture,as they relate to the superior agility and resilience of the alternative economy as a whole,inChapterSeven. Theconceptofnetworkedresistanceisespeciallyinteresting,fromourstand point, as it relates to two things: the kind of anticorporate culture jamming NaomiKleindescribesinNoLogo,andtolaborstruggleasaformofasymmetric warfare. In both cases, governments and corporations, hierarchies of all kinds, are learningtotheirdismaythat,inanetworkedage,itsimpossibletosuppressnega tive publicity. As Cory Doctorow put it, Paris Hilton, the Church of Scientology, andtheKingofThailandhavediscovered...[that]takingapieceofinformation off the Internet is like getting food coloring out of a swimming pool. Good luck withthat.2 ItssometimescalledtheStreisandeffect,inhonorofBarbraStreisand(whose roleinitsdiscoveryaboutwhichmorebelowwasanalogoustoSirIsaacNew tonsgettinghitontheheadbyanapple). OneoftheearliestexamplesofthephenomenonwastheMcLibelcaseinBrit ain,inwhichMcDonaldsattempttosuppressacoupleofembarrassingpamphlet eerswithaSLAPPlawsuitwoundupbringingthemfarworsepublicityasadirect result.Thepamphleteerswereindigentandrepresentedthemselvesincourtmuch ofthetime,andrepeatedlylostappealsintheBritishcourtsystemthroughoutthe
1 2
Ibid. Doctorow,ItstheInformationEconomy,Stupid,p.60.
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nineties(eventuallytheywonanappealintheEuropeanCourtofHumanRights). ButwidespreadcoverageofthecaseontheInternet,coupledwiththedefendants deliberate use of the courtroom as a bully pulpit to examine the factual issues, causedMcDonaldsoneoftheworstembarrassmentsinitshistory.1(NaomiKlein calleditthecorporateequivalentofacolonoscopy.)2 Twoimportantexamplesin2004,theSinclairMediaboycottandtheDiebold corporate emails, both decisively demonstrated the impossibility of suppressing online information in an age of mirror sites. A number of leftwing websites and liberal bloggers organized a boycott of Sinclair Media after its stations aired an antiKerrydocumentarybytheSwiftBoatcampaign.
Intheensuingboycottcampaign,advertisersweredelugedwithmoremailand phonecallsthantheycouldhandle.ByOctober13,somesponsorswerethreaten ing litigation, viewing unsolicited boycott emails as illegal SPAM. Nick Davis, creatorofoneoftheboycottsites,postedlegalinformationexplainingthatanti SPAMlegislationappliedonlytocommercialmessages,anddirectedthreatening sponsors to that information. At the same time, some Sinclair affiliates threat ened litigation against sponsors who withdrew support in response to the boy cott. Davis organized a legal support effort for those sponsors. By October 15, sponsorswerepullingadsindroves.ThepriceofSinclairstockcrashed,recover ingonlyafterSinclairreverseditsdecisiontoairthedocumentary.3
Diebold,similarly,attemptedtoshutdownwebsiteswhichhostedleakedcor porate emails questioning the security of the companys electronic voting ma chines.Butthedatawaswidelydistributedamongstudentandotheractivistdata bases,andthehostingsitesweremirroredinjurisdictionsallovertheworld.
InAugust,someoneprovidedacacheofthousandsofDieboldinternalemailsto WiredmagazineandtoBevHarris.Harrispostedtheemailsonhersite.Diebold threatenedlitigation,demandingthatHarris,herISP,andothersitesreproduc ing the emails take them down. Although the threatened parties complied, the emailshadbeensowidelyreplicatedandstoredinsomanyvariedsettingsthat Dieboldwasunabletosuppressthem.Amongothers,universitystudentsatnu merous campuses around the U.S. stored the emails and scrutinized them for evidence. Threatened by Diebold with provisions of the DMCA that required Webhostingcompaniestoremoveinfringingmaterials,theuniversitiesordered the students to remove the materials from their sites. The students responded withacampaignofcivildisobedience,movingfilesbetweenstudentsmachines, duplicatingthemonFreeNet(ananticensorshippeertopeerpublicationnet work) and other peertopeer filesharing systems.... They remained publicly availableatalltimes.4
AnattempttosuppressinformationontheWikileakshostingsite,in2007,re sultedinasimilardisaster.
AssociatedPress(viathefirstamendmentcenter)reportsthataneffortat (online) damage control has snowballed into a public relations disaster for a Swiss bank seeking to crack down on Wikileaks for posting classified informa tion about some of its wealthy clients. While Bank Julius Baer claimed it just wantedstolenandforgeddocumentsremovedfromthesite(ratherthancloseit down), instead of the information disappearing, it rocketed through cy
McDonalds Restaurants v Morris & Steele, Wikipedia <http://en.wikipedia.org/ wiki/McLibel_case>(accessedDecember26,2009). 2 Klein,NoLogo,p.330. 3 YochaiBenkler,TheWealthofNetworks:HowSocialProductionTransformsMarkets andFreedom(NewHavenandLondon:YaleUniversityPress,2006),pp.220223. 4 Ibid.,pp.227231.
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berspace,landingonotherWebsitesandWikileaksownmirrorsitesoutside theU.S.... The digerati call the online phenomenon of a censorship attempt backfiring into more unwanted publicity the Streisand effect. Techdirt Inc. chief executive Mike Masnick coined the term on his popular technology blogaftertheactressBarbraStreisands2003lawsuitseekingtoremovesatellite photosofherMalibuhouse.Thosephotosarenoweasilyaccessible,justlikethe bank documents. Its a perfect example of the Streisand effect, Masnick said. Thiswasareallysmallthingthatnooneheardaboutandnowitseverywhere andeveryonestalkingaboutit.1
ThesocalledDeCSSuprising,inwhichcorporateattemptstosuppresspubli cation of a code for cracking the DRM on DVDs failed in the face of widespread defiance, is one of the most inspiring episodes in the history of the free culture movement.
Journalist Eric Corleybetter known as Emmanuel Goldstein, a nom de plume borrowed from Orwells 1984posted the code for DeCSS (so called be causeitdecryptstheContentScramblingSystemthatencryptsDVDs)asapart of a story he wrote in November for the wellknown hacker journal 2600. The Motion Picture Association of America (MPAA) claims that Corley defied an ticircumventionprovisionsoftheDigitalMillenniumCopyrightAct(DMCA)by postingtheoffendingcode.... The whole affair began when teenager Jon Johansen wrote DeCSS in order toviewDVDsonaLinuxmachine.TheMPAAhassincebroughtsuitagainsthim inhisnativeNorwayaswell.JohansentestifiedonThursdaythatheannounced the successful reverse engineering of a DVD on the mailing list of the Linux Video and DVD Project (LiViD), a user resource center for video and DVD relatedworkforLinux.... Thejudgeinthecase,thehonorableLewisKaplanoftheUSDistrictCourt in southern New York, issued a preliminary injunction against posting DeCSS. Corleydulytookdownthecode,butdidnothelphisdefensebydefiantlylinking tomyriadsiteswhichpostDeCSS....
True to their hacker beliefs, Corley supporters came to the trial wearing the DeCSScodeontshirts.Therearealsoover300Websitesthatstilllinktothede cryptioncode,manybeyondthereachoftheMPAA.2 IntheUsmanovcaseofthesameyear,attemptstosuppressembarrassingin formationledtosimilarInternetwideresistance.
The Register, UK: Political websites have lined up in defence of a former diplomat whose blog was deleted by hosting firm Fasthosts after threats from lawyersactingforbillionaireArsenalinvestorAlisherUsmanov. FourdaysafterFasthostspulledtheplugonthewebsiterunbyformerUK ambassadortoUzbekistanCraigMurrayitremainsoffline.Severalotherpolitical andfreedomofspeechblogsintheUKandabroadhavepickedupthegauntlet however,andrepostedthearticlethatoriginallydrewthetakedowndemand. The complaints against Murrays site arose after a series of allegations he madeagainstUsmanov.... Afterbeingreleasedfromprison,andpardoned,Usmanovbecameoneofa smallgroupofoligarchstomakehayintheformerUSSRspostcommunistasset carveup.... Onhisbehalf,libellawfirmSchillingshasmovedagainstanumberofArse 1 nalfansitesandpoliticalbloggersrepeatingtheallegations.... PR disaster, Wikileaks and the Streisand Effect PRdisasters.com, March 3, 2007 <http://prdisasters.com/prdisasterviawikileaksandthestreisandeffect/>. 2 Deborah DurhamVichr. Focus on the DeCSS trial, CNN.Com, July 27, 2000 <http://archives.cnn.com/2000/TECH/computing/07/27/decss.trial.p1.idg/index.html>.
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That reference to [s]everal other political and freedom of speech blogs, by theway,islikesayingtheoceanisabitwet.AnarticleatChickenYoghurtblog providesalistofallthevenuesthathaverepublishedMurraysoriginalallegations, recovered from Googles caches of the sites or from the Internet Archive. It is a very,verylonglist2solong,infact,thatChickenYoghurthelpfullyprovidesthe html code with URLs already embedded in the text, so it can be easily cut and pastedintoablogpost.Inaddition,ChickenYoghurtprovidedtheIPaddressesof Usmanovs lawyers as a headsup to all bloggers who might have been visited by thoseaugustpersonages. AbadlyeditedphotoofawaifinaRalphLaurenad,whichmadethemodel appearnotjustemaciatedbutdeformed,washighlightedonthePhotoshopDisas terswebsite.LaurensentthesitelegalnoticesofDMCAinfringement,andgotthe sitesISPtotakeitdown.Intheprocess,though,thephotoandstorygotcircu latedallovertheInternet.DoctorowissuedhisdefianceatBoingBoing:
So,insteadofrespondingtotheirlegalthreatbysuppressingourcriticismof theirmarketingimages,weregonnamockthem.Hencethispost.... ...Andeverytimeyouthreatentosueusoverstufflikethis,wewill: a)Reproducetheoriginalcriticism,makingdamnedsurethatallourread ersgetagood,longlookatit,and; b)Publishyourspuriouslegalthreatalongwithcopiousmockery,sothatit becomes highly ranked in search engines where other people you threaten can finditandtakeheart;and 3 c)Offernourishingsoupandsandwichestoyourmodels.
The Trafigura case probably represents a new speed record, in terms of the duration between initial thuggish attempts to silence criticism and the company lawyersfinaldecisiontocave.TheTrafiguracorporationactuallysecuredacourt injunctionagainstTheGuardian,prohibitingitfromreportingaquestionbyanMP onthefloorofParliamentaboutthecompanysallegeddumpingoftoxicwastein Africa.WithoutspecificallynamingeitherTrafiguraortheMP,reporterAlanRus bridger was able to comply with the terms of the injunction and still include enoughhintsinhiscrypticstoryforreaderstoscourtheParliamentaryreportsand figureitoutforthemselves.Bythetimehefinishedworkthatday,Trafigurawas already the mostsearchedfor term on Twitter; by the next morning Trafiguras criminal actsplus their attempt at suppressing the storyhad become front pagenews,andbynoonthelawyershadthrowninthetowel.4 JohnRobbdescribesthetechnicalpotentialforinformationwarfareagainsta corporation, swarming customers, employees, and management with propaganda and disinformation (or the most potent weapon of all, I might addthe truth), andintheprocessdemoralizingmanagement.
As we move forward in this epochal many to many global conflict, and given manyearlyexamplesfromwidevarietyofhackingattacksandconflicts,weare ChrisWilliams,BlogosphereshoutsImSpartacusinUsmanovMurraycase:Uzbek billionaire prompts Blog solidarity, The Register, September 24, 2007 <http://www .theregister.co.uk/2007/09/24/usmanov_vs_the_internet/>. 2 Public Service AnnouncementCraig Murray, Tim Ireland, Boris Johnson, Bob Piper and Alisher Usmanov ... Chicken Yoghurt, September 20, 2007 <http://www.chickyog.net/2007/09/20/publicserviceannouncement/>. 3 Doctorow, The criticism that Ralph Lauren doesnt want you to see! BoingBoing, October6,2009<http://www.boingboing.net/2009/10/06/thecriticismthatr.html>. 4 AlanRusbridge,FirstRead:TheMutualizedFutureisBright,ColumbiaJournalism Review, October 19, 2009 <http://www.cjr.org/reconstruction/the_mutualized_future _is_brigh.php>.
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likelytoseeglobalguerrillascometoroutinelyuseinformationwarfareagainst corporations. These information offensives will use network leverage to isolate corporations morally, mentally, and physically.... Network leverage comes in threeforms: Highlyaccuratelistsoftargetsfromhackingblackmarketplaces.Theselists include all corporate employee email addresses and phone numbersboth atworkandathome.~<$0.25adossier(foraccuratelists). Lowcostemailspam.Messagescanberangefrominformationaltophishing attacks.<$0.1amessage. Low cost phone spam. Use the same voicetext messaging systems and call centersthatcanblankettargetlistswithperpetualcalls.Penniesacall.... In short, the same mechanisms that make spamming/direct marketing so easy andinexpensivetoaccomplish,canbeusedtobringtheconflictdirectlytothe employeesofatargetcorporationoritspartnercompanies(inthesupplychain). Executives and employees that are typically divorced/removed from the full range of their corporations activities would find themselves immediately en meshedintheconflict.Theobjectiveofthisinfowarwouldbetoincrease...: Uncertainty.Aninabilitytobecertainaboutfutureoutcomes.Iftheycando this, whats next? For example: a false/troll email or phone campaign from theCEOthatinformsemployeesatworkandathomethatitwilldivestfrom thetargetareaoradmitstoheinouscrimes. Menace.Anincrease[sic]personal/familialrisk.Theveryactofconnectingto directly to employee [sic] generates menace. The questions it should evoke: shouldIstayemployedheregiventhepotentialthreat? Mistrust.Amistrustofthecorporationsmoralandlegalstatus.Forexample: The dissemination of information on a corporations actions, particularly if theyaremorallyegregiousorcriminalinnature,throughaNGOcharityfund raisingdrive. Withanincreaseinuncertainty,menace,andmistrustwithinthetargetcorpora tionsranksandacrossthesupplychainpartnercompanies,thetargetsconnec tivity (moral, physical, and mental) is likely to suffer a precipitous fall. This re duction in connectivity has the potential to create noncooperative centers of gravity within the targets as cohesion fails. Some of these centers of gravity would opt to leave the problem (quit or annul contractual relationships) and 1 somewouldfightinternallytodivestthemselvesofthisproblem.
Moregenerally,hierarchicalinstitutionsarefindingthatthetraditionalmeans of suppressing communication, that worked as recently as twenty years ago, are useless.Takesomethingassimpleassuppressingaschoolnewspaperwhosecon tentviolatestheadministratorssensibilities.Anincreasinglycommonresponseis to set up an informal student newspaper online, and if necessary to tweak the hostingarrangementstothwartattemptsatfurthersuppression.2 Corporations are immensely vulnerable to informational warfare, both by consumersandbyworkers.ThelastsectionofNaomiKleinsNoLogodiscussesin depth the vulnerability of large corporations and brand name images to netwar campaigns.3Shepaysspecialattentiontoculturejamming,whichinvolvesriffing offofcorporatelogosandtherebytappingintothevastresourcesspenttomake
1
John Robb, INFOWAR vs. CORPORATIONS, Global Guerrillas, October 1, 2009 <http://globalguerrillas.typepad.com/globalguerrillas/2009/10/infowarvscorporations.html>. 2 Mike Masnick, Yet Another High School Newspaper Goes Online to Avoid District Censorship, Techdirt, January 15, 200 <http://www.techdirt.com/articles/20090112/ 1334043381.shtml>. 3 Klein,NoLogo,pp.279437.
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[a]logomeaningful.1AgoodexampleistheantisweatshopcampaignbytheNa tionalLaborCommittee,headedbyCharlesKernaghan.
Kernaghans formula is simple enough. First, select Americas most cartoonish icons,fromliteraloneslikeMickeyMousetovirtualoneslikeKathieLeeGifford. Next, create headon collisions between image and reality. They live by their image, Kernaghan says of his corporate adversaries. That gives you a certain 2 poweroverthem...thesecompaniesaresittingducks.
At the time she wrote, technological developments were creating unprece dentedpotentialforculturejamming.Digitaldesignandphotoeditingtechnology madeitpossibletomakeincrediblysophisticatedparodiesofcorporatelogosand advertisements.3 Interestingly, a lot of corporate targets shied away from taking culturejammerstocourtforfearapublicmightsidewiththejammersagainstthe corporate plaintiffs. The more intelligent corporate bosses understand that legal battles ... will clearly be fought less on legal than on political grounds. In the wordsofoneadvertisingexecutive,Noonewantstobeinthelimelightbecause theyarethetargetofcommunityprotestsorboycotts.4 KleinriffedoffofSaulAlinskystermpoliticaljujitsutodescribeusingone partofthepowerstructureagainstanotherpart.Culturejammingisaformofpo litical jujitsu that uses the power of corporate symbolssymbols deliberately de velopedtotapintosubconsciousdrivesandchannelthemindirectionsdesiredby thecorporationagainsttheircorporateowners.5
Anticorporate activism enjoys the priceless benefits of borrowed hipness andcelebrityborrowed,ironicallyenough,fromthebrandsthemselves.Logos thathavebeenburnedintoourbrainsbythefinestimagecampaignsmoneycan buy,...arebathedinaglow.... ... Like a good ad bust, anticorporate campaigns draw energy from the powerandmassappealofmarketing,atthesametimeastheyhurlthatenergy rightbackatthebrandsthathavesosuccessfullycolonizedoureverydaylives. You can see this jujitsu strategy in action in what has become a staple of manyanticorporatecampaigns:invitingaworkerfromaThirdWorldcountryto comevisitaFirstWorldsuperstorewithplentyofcamerasrolling.Fewnews casts can resist the madeforTV moment when an Indonesian Nike worker gaspsasshelearnsthatthesneakersshechurnedoutfor$2adaysellfor$120at 6 SanFranciscoNikeTown.
Theeffectofsully[ing]someofthemostpolishedlogosonthebrandscape, as Klein characterized Kernaghans efforts,7 is much like that of Piss Christ. He playsontheappealofthedogsin101Dalmatiansbycomparingthelivingcondi tionsoftheanimalsonthesettothoseofthehumansweatshopworkerswhopro ducethetieinproducts.Heshowsupforpublicappearanceswithhissignature shopping bag brimming with Disney clothes, Kathie Lee Gifford pants and other logo gear, along with pay slips and price tags used as props to illustrate the dis crepancybetweenworkerpayandretailprice.InElSalvador,hepullsitemsoutof thebagwithpricetagsattachedtoshowworkerswhattheirproductsfetchinthe U.S.AfterasimilardemonstrationofDisneyproductsinHaiti,workersscreamed withshock,disbelief,anger,andamixtureofpainandsadness,astheireyesfixed
1
Ibid.,p.281. Ibid.,p.351. 3 Ibid.p.285. 4 Ibid.,p.288. 5 Ibid.,p.281. 6 Ibid.,pp.349350. 7 Ibid.,p.351.

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on the Pocahontas shirta reaction captured in the film Mickey Mouse Goes to Haiti.1 Culture jamming is also an illustration of the effects of network culture. Al though corporate imagery is still created by people thinking in terms of oneway broadcast communication, the culture jammers have grown up in an age where audiencescantalkbacktotheadvertisementormockittooneanother.Thecon tentofadvertisingbecomesjustanotherbitofrawmaterialformashups,asprod ucts once transmitted on a oneway conveyor belt from giant factory to giant re tailer to consumer have now become raw material for hacking and reverse engineering.2 TheWobblyideaofdirectactiononthejobwasaclassicexampleofasym metric warfare. And modern forms of networked resistance are ideally suited to laborstruggle.Inparticular,networktechnologycreatespreviouslyunimaginable possibilitiesfortheWobblytacticofopenmouthsabotage.AsdescribedinHow toFireYourBoss:
Sometimessimplytellingpeoplethetruthaboutwhatgoesonatworkcan putalotofpressureontheboss.Consumerindustrieslikerestaurantsandpack ingplantsarethemostvulnerable.Andagain,asinthecaseoftheGoodWork Strike,youllbegainingthesupportofthepublic,whosepatronagecanmakeor breakabusiness. WhistleBlowingcanbeassimpleasafacetofaceconversationwithacus tomer, or it can be as dramatic as the P.G.&E. engineer who revealed that the blueprintstotheDiabloCanyonnuclearreactorhadbeenreversed.... Waiters can tell their restaurant clients about the various shortcuts and substitutionsthatgointocreatingthefauxhautecuisinebeingservedtothem. Just as Work to Rule puts an end to the usual relaxation of standards, Whistle 3 Blowingrevealsitforalltoknow.
The authors of The Cluetrain Manifesto are quite expansive on the potential forfrank,unmediatedconversationsbetweenemployeesandcustomersasawayof buildingcustomerrelationshipsandcircumventingtheconsumersingrainedhabit ofblockingoutcannedcorporatemessages.4Theycharacterizethetypicalcorpo ratevoiceassterilehappytalkthatinsultstheintelligence,thesoothing,humor less monotone of the mission statement, marketing brochure, and yourcallis importanttousbusysignal.5 When employees engage customers frankly about the problems they experi encewiththecompanysproduct,andofferusefulinformation,customersusually respondpositively. What the Cluetrain authors dont mention is the potential for disaster, from thecompanysperspective,whendisgruntledworkersseethecustomerasapoten tialallyagainstacommonenemy.Whatwouldhappenifemployeesdecided,not thattheywantedtohelptheircompanybyrescuingitfromthetyrannyofPRand the official line and winning over customers with a little straight talkbut that
Ibid.,p.353. Ibid.,p.294. 3 How to Fire Your Boss: A Workers Guide to Direct Action <http://www.iww.org/ organize/strategy/strikes.shtml>(originallyaWobblyPamphlet,itisreproducedinallits essentialsattheI.W.W.WebsiteundertheheadingofEffectiveStrikesandEconomicAc tionsalthoughtheWobbliesnolongerendorseitinitsentirety). 4 Markets are Conversations, in Rick Levine, Christopher Locke, Doc Searls and DavidWeinberger,TheCluetrainManifesto:TheEndofBusinessasUsual(PerseusBooks Group,2001)<http://www.cluetrain.com/book/index.html>. 5 95theses,inIbid.
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they hated the company and that its management was evil? What if, rather than simply responding to a specific problem with what the customer had needed to know,theydairedallthedirtylaundryaboutmanagementsassetstripping,gut tingofhumancapital,hollowingoutoflongtermproductivecapability,gamingof itsownbonusesandstockoptions,selfdealingonthejob,andlogrollingwithdi rectors? Corporate America, for the most part, still views the Internet as just an ex tensionofprecedingmassmedia,primarilytelevision.Corporatewebsitesarede signed on the same model as the old broadcast media: a onetomany, one directional communications flow, in which the audience couldnt talk back. But nowtheaudiencecantalkback.
Imagineforamoment:millionsofpeoplesittingintheirshutteredhomesat night, bathed in that ghostly blue television aura. Theyre passive, yeah, but morethanthat:theyreisolatedfromeachother. Now imagine another magic wire strung from house to house, hooking all these poor bastards up. Theyre still watching the same old crap. Then, during the touching love scene, some joker lobs an offcolor asideand everybody hearsit.Whoa!Whatwasthat?...Theaudienceissuddenlyconnectedtoitself. WhatwasonceTheShow,thehypnoticfocusandteeveeadvertisingcarrier wave,becomes...anexcusetogettogether....ThinkofJoelandthebotson MysteryScienceTheater3000.Thepointisnottowatchthefilm,buttooutdo eachothermakingfunofit. Andforsuchradicallyrealignedpurposes,somebloatedcorporateWebsite canserveasatargeteverybitaswellasGodzilla,KingoftheMonsters.... So heres a little story problem for ya, class. If the Internet has 50 million peopleonit,andtheyrenotallasdumbastheylook,butthecorporationstry ingtomakeafastbuckofftheirassesareasdumbastheylook,howlongbefore Joeislaughingashardaseveryoneelse? Thecorrectanswerofcourse:notlongatall.Andassoonashestartslaugh ing, hes not Joe SixPack anymore. Hes no longer part of some passive couch potatotargetdemographic.BecausetheNetconnectspeopletoeachother,and impassions and empowers through those connections, the media dream of the Webasanotheracquiescentmassconsumermarketisafigmentandafantasy. The Internet is inherently seditious. It undermines unthinking respect for centralizedauthority,whetherthatauthorityistheneatlyhomogenizedvoice 1 ofbroadcastadvertisingorthesmarmyrhetoricofthecorporateannualreport. ....LookathowthisalreadyworksintodaysWebconversation.Youwant tobuyanewcamera.Yougotothesitesofthethreecameramakersyourecon sidering.Youhastilyclickthroughthebrochurewarethevendorspaidthousands tohavedesigned,andyoufinallyfindapagethatactuallygivesstraightforward factualinformation.NowyougotoaUsenetdiscussiongroup,oryoufindane mail list on the topic. You read what real customers have to say. You see what questions are being asked and youre impressed with how well other buyers strangersfromaroundtheworldhaveansweredthem.... Comparethattothefeeblesputteringofanad.SuperDooperGlueHolds Anything! says your ad. Unless you flick it sidewaysas I found out with the handle of my favorite cup, says a little voice in the market. BigDisk Hard DrivesLifetimeGuarantee!saysthead.Aslongasyoucanproveyouoiledit three times a week, says another little voice in the market. What these little voicesusedtosaytoasinglefriendisnowaccessibletotheworld.Nonumberof ads willundo the wordsofthemarket.Howlongdoesittakeuntilthemarket conversationpuncturestheexaggerationsmadeinanad?Anhour?Aday?The 2 speedofwordofmouthisnowlimitedonlybyhowfastpeoplecantype....
ChapterOne.InternetApocalypso,inIbid. ChapterFour.MarketsAreConversations,inIbid.
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... Marketing has been training its practitioners for decades in the art of impersonating sincerity and warmth. But marketing can no longer keep up 1 appearances.Peopletalk.
Evenmoreimportantforourpurposes,employeestalk.Itsjustasfeasiblefor the corporations workers to talk directly to its customers, and for workers and customerstogethertoengageinjointmockeryofthecompany. In an age when unions have virtually disappeared from the private sector workforce, and downsizings and speedups have become a normal expectation of workinglife,thevulnerabilityofemployerspublicimagemaybetheonebitofreal leveragetheworkerhasoverhimanditsadoozy.Iftheygoafterthatimagere lentlesslyandsystematically,theyvegotthebossbytheshorthairs. Web2.0,thewriteableweb,isfundamentallydifferentfromthe1990svision ofaninformationsuperhighway(oneway,ofcourse),amorecomplexversionof theoldunidirectionalhubandspokearchitectureofthebroadcasteraorasTap scottandWilliamsputit,onebigcontentdeliverymechanismaconveyorbelt for prepackaged, payperuse content in which publishers ... exert control throughvariousdigitalrightsmanagementsystemsthatpreventusersfromrepur posingorredistributingcontent.2Mostlargecorporationsstillseetheirwebsites assalesbrochures,andInternetusersasapassiveaudience.ButundertheWeb2.0 model,theInternetisaplatforminwhichusersaretheactiveparty. Giventheeaseofsettingupanonymousblogsandwebsites(justthinkofany company and then look up the URL employernamesucks.com), the potential for usingcommentthreadsandmessageboards,thepossibilityofanonymoussatura tion emailing of the companys major suppliers and customers and advocacy groups concerned with that industry.... well, lets just say the potential for swarmingandnetwariscorporatemanagementsworstnightmare. Its already become apparent that corporations are quite vulnerable to bad publicityfromdissidentshareholdersandconsumers.Forexample,LuigiZingales writes,
shareholdersactivistRobertMonkssucceeded[in1995]ininitiatingsomemajor changes at Sears, not by means of the norms of the corporate code (his proxy fightfailedmiserably)butthroughthepressureofpublicopinion.Hepaidfora fullpageannouncementintheWallStreetJournalwhereheexposedtheidenti ties of Sears directors, labeling them the nonperforming assets of Sears.... Theembarrassmentforthedirectorswassogreatthattheyimplementedallthe 3 changesproposedbyMonks.
Theresnoreasontodoubtthatmanagementwouldbeequallyvulnerableto embarrassment by such tactics from disgruntled production workers, in todays networkedworld. For example, although WalMart workers are not represented by NLRB certifiedunions,inanybargainingunitintheUnitedStates,theassociateshave been quite successful at organized openmouth sabotage through Wake Up Wal Martandsimilaractivistorganizations. ConsiderthepublicrelationsbattleoverWalMartopenavailabilitypolicy. Corporate headquarters in Bentonville quickly moved, in the face of organized publiccriticism,tooverturntheharsherlocalpolicyannouncedbymanagementin Nitro,WestVirginia.
Ibid. TapscottandWilliams,p.271. 3 LuigiZingales,InSearchofNewFoundations,TheJournalofFinance,vol.lv,no.4 (August2000),pp.16271628.
2 1
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A corporate spokesperson says the company reversed the stores decision becauseWalMarthasnopolicythatcallsfortheterminationofemployeeswho areunabletoworkcertainshifts,theGazettereports. Itisunfortunatethatourstoremanagerincorrectlycommunicatedames sage that was not only inaccurate but also disruptive to our associates at the store, Dan Fogleman tells the Gazette. We do not have any policy that man 1 datestermination.
The WalMart Workers Association acts as an unofficial union, and has re peatedly obtained concessions from store management teams in several publicity campaignsdesignedtoembarrassandpressurethecompany.2AsEzraKleinnoted,
Thisis,ofcourse,entirelyafunctionofthepressureunionshaveexertedonWal Martpressureexerteddespitetheunionshavingalmostnohopeofactuallyun ionizing WalMart. Organized Labor has expended tens of millions of dollars over the past few years on this campaign, and while it hasnt increased union densityoneiota,ithasgivenahundredthousandWalMartworkershealthin surance, spurred WalMart to launch an effort to drive down prescription drug prices,drovethemintotheDividedWeFailhealthreformcoalition,andcon tributedtothecompanysfocusongreeningtheirstores(theyneededgoodpress 3 tocounteractallthebad).
Another example is the IWWaffiliated Starbucks union, which publicly em barrassed Starbucks Chairman Howard Schultz. It organized a mass email cam paign,notifyingtheCoopBoardofacoopapartmenthewasseekingtobuyinto ofhisunionbustingactivities.4 CharlesJohnsonpointstotheCoalitionofImolakeeWorkersasanexampleof an organizing campaign outside the Wagner framework, relying heavily on the openmouth:
TheyaremostlyimmigrantsfromMexico,CentralAmerica,andtheCarib bean; many of them have no legal immigration papers; they are pretty near all mestizo, Indian, or Black; they have to speak at least four different languages amongstthemselves;theyareoftenheavilyindebttocoyotesorlaborsharksfor the cost of their travel to the U.S.; they get no benefits and no overtime; they have no fixed place of employment and get work from day to day only at the pleasureofthegrowers;theyworkatmanydifferentsitesspreadoutanywhere from10100milesfromtheirhomes;theyoftenhavetomovetofollowworkover thecourseoftheyear;andtheyareextremelypoor(mosttomatopickersliveon about $7,500$10,000 per year, and spend months with little or no work when theharvestingseasonends).Butinthefaceofallthat,andacrosslinesofrace, culture, nationality, and language, the C.I.W. have organized themselves any way,througheffortsthatarenothingshortofheroic,andtheyhavedoneitasa wildcat union with no recognition from the federal labor bureaucracy and little outsidehelpfromtheorganizedlaborestablishment.Byusingcreativenonviolent tacticsthatwouldbecompletelyillegaliftheyweresubjecttothebureaucratic disciplineofthe TaftHartley Act,theC.I.W. has won major victories on wages andconditionsoverthepasttwoyears.Theyhavebypassedtheapprovedchan WalMart Nixes Open Availability Policy, Business & Labor Reports (Human Re sourcessection),June16,2005<http://hr.blr.com/news.aspx?id=15666>. 2 Nick Robinson, Even Without a Union, Florida WalMart Workers Use Collective ActiontoEnforceRights,LaborNotes,January2006.ReproducedatInfoshop,January3, 2006<http://www.infoshop.org/inews/article.php?story=20060103065054461>. 3 Ezra Klein, Why Labor Matters, The American Prospect, November 14, 2007 <http://www.prospect.org/ csnc/blogs/ezraklein_archive?month=11&year=2007&base_name=why_labor_matters>. 4 Say No to Schultz Mansion Purchase, Starbucks Union <http://www. starbucksunion.org/node/1903>.
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nels of collective bargaining between select union reps and the boss, and gone up the supply chain to pressure the tomato buyers, because they realized that they can exercise a lot more leverage against highly visible corporations with brands to protect than they can in dealing with a cartel of government subsidized vegetable growers that most people outside of southern Florida wouldntknowfromAdam. The C.I.W.s creative use of moral suasion and secondary boycott tactics have already won them agreements with Taco Bell (in 2005) and then McDon alds(thispastspring),whichalmostdoubledtheeffectivepieceratefortoma toes picked for these restaurants. They established a system for passthrough payments,underwhichparticipatingrestaurantsagreedtopayabonusofanad ditionalpennyperpoundoftomatoesbought,whichanindependentaccountant distributedtothepickersatthefarmthattherestaurantboughtfrom.Eachin dividual agreement makes a significant but relatively small increase in the workerseffectivewages...[,]buteachvictorywonmeansaconcreteincrease inwages,andaneasierroadtogettingthepassthroughsystemadoptedindus trywide,whichwouldintheendnearlydoubletomatopickersannualincome.
BurgerKingheldoutforawhileafterthis,followingTacoBellsearliersucces sivestrategiesofignoring,stonewalling,slickPR,slander(denouncingfarmwork ersasricherthanmostminimumwageworkers,consumerboycottsasextortion, andC.I.W.asscamartists),andfinallyevenanattemptatfederalprosecutionfor racketeering.1 AsJohnsonpredicted,thedirtytrickswereofnoavail.Hefolloweduponthis story in May 2008, when Burger King caved in. Especially entertaining, after the smearcampaignandotherdirtytrickscarriedoutbytheBurgerKingmanagement team,wasthispublicstatementbyBKCEOJohnChidsey:
We are pleased to now be working together with the CIW to further the com mon goal of improving Florida tomato farmworkers wages, working conditions and lives. The CIW has been at the forefront of efforts to improve farm labor conditions, exposing abuses and driving socially responsible purchasing and workpracticesintheFloridatomatofields.Weapologizeforanynegativestate mentsabouttheCIWoritsmotivespreviouslyattributedtoBKCoritsemploy 2 eesandnowrealizethatthosestatementswerewrong.
Ofcoursecorporationsarenotentirelyoblivioustothesethreats.Thecorpo rate world is beginning to perceive the danger of openmouth sabotage, as well. For example, one Pinkerton thug almost directly equates sabotage to the open mouth,tothenearexclusionofallotherformsofdirectaction.AccordingtoDar renDonovan,avicepresidentofPinkertonseasternconsultingandinvestigations division,
[w]ithsabotage,theresdefinitelyanattempttoundermineordisrupttheopera tion in some way or slander the company.... Theres a special nature to sabo tagebecauseoftheovertnessofitanditcanbeviolent....Companiescanre place windows and equipment, but its harder to replace their reputation.... I
CharlesJohnson,CoalitionofImolakeeWorkersmarchesinMiami,RadGeekPeo plesDaily,November30,2007<http://radgeek.com/gt/2007/11/30/coalition_of/>. 2 Coalition of Immokalee Workers. Burger King Corp. and Coalition of Immokalee Workers to Work Together, May 23, 2008 <http://www.ciwonline.org/BK_CIW_joint_ release.html>.CharlesJohnson,S,SePuede!VictoryfortheCoalitionofImolakeeWork ersintheBurgerKingpennyperpoundcampaign,RadGeekPeoplesDaily,May23,2008 <http://radgeek.com/gt/2008/05/23/si_se/>.
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thinkthatswhatHRexecsneedtobeawareofbecauseitisacrime,butitcanbe 1 differentfromstealingorfraud.
As suggested by both the interest of a Pinkerton thug and his references to crime,thereisamajorfocusinthecorporateworldonidentifyingwhistleblow ersandleakersthroughsurveillancetechnology,andonthecriminalizationoffree speechtocombatnegativepublicity. And if Birmingham Wragge is any indication, theres a market for corpora tionsthatseektodoaBigBrotheronanonymousdetractors.
Birminghamslargestlawfirmhaslaunchedanewteamtotrackdownpeo plewhomakeanonymouscommentsaboutcompaniesonline. TheCyberTracingteamatWragge&Cowassetuptodealwithwhatthe law firm said was a rising problem with people making anonymous statements thatdefamedcompanies,andpeoplesharingconfidentialinformationonline. And Wragge boasted the new team would ensure there was nowhere to hideincyberspace. ThefourstrongteamattheColmoreRowfirmisacombinationofITlitiga tionandemploymentlawspecialists. One of the members of the team said redundancies and other reorganisa tionscausedbytherecessionmeantthenumbersofdisgruntledemployeeslook ingtogettheirownbackonemployersorformeremployerswasalsoontherise. Adam Fisher said: Organisations are suffering quite a lot from rogue em ployeesatthemoment,partlybecauseofredundanciesorgeneraltroubles. Wehavehadanumberofproblematiccaseswherepeoplehavechosento putthingsonlineorhavesharedinformationontheircompanyemailaccess. HesaidmuchofthejobinvolvedtryingtogetInternetServiceProvidersto giveoutdetailsofcustomerswhohadmadecommentsonline.... AspokeswomanforWraggesaid:CourtscancompelInternetServicePro viders or telephone service providers to make information available regarding 2 registerednames,emailaddressesandotherkeyaccountholderinformation.
Butifcorporatemanagersthinkthiswillactuallywork,theyreevenstupider thanIthoughttheywere.FirmslikeBirminghamWragge,andpolicieslikeRIAA lawsuitsandthreestrikescutoffofISPs,willhaveonlyonesignificanteffect:the rapidmainstreamingofproxyserversandencryption. In late 2004 and 2005, the phenomenon of Doocing (the firing of bloggers for negative commentary on their workplace, or for the expression of other non approved opinions on their blogs) began to attract mainstream media attention, and exemplified a specialized case of the Streisand Effect. Employers, who fired disgruntledworkersoutoffearforthebadpublicitytheirblogsmightattract,were blindsidedbythefarworsepublicityfar,farworsethatresultedfromnewsofthe firing (the term Doocing itself comes from Dooce, the name of a blog whose ownerwasfired).Ratherthananinsularblogaudienceofafewhundredreading thatitsuckstoworkatEmployerX,orEmployerXgetsawaywithtreatingits customers like shit, it became a case of tens of millions of readers of the major newspapersofrecordandwireservicesreadingthatEmployerXfiresbloggerfor revealinghowbaditsuckstoworkatEmployerX.Again,thebossesarelearning that,forthefirsttimesincetheriseofthegiantcorporationandthebroadcastcul ture,workersandconsumerscantalkbackandnotonlyisthereabsolutelynoway
JenniferKock,EmployeeSabotage:DontBeaTarget!<http://www.workforce.com/ archive/features/22/20/88/mdexprinter.php>. 2 TomScotney,BirminghamWraggeteamtofocusononlinecommentdefamation,Bir mingham Post, October 28, 2009 <http://www.birminghampost.net/birmingham business/birminghambusinessnews/legalbusiness/2009/10/28/birminghamwraggeteamto focusononlinecommentdefamation6523325030203/>.
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to shut us up, but we actually just keep making more and more noise the more theytrytodoso.1 Theres a direct analogy between the Zapatista netwar and assymetrical war farebylaborandotheranticorporateactivists.TheZapatistasturnedanobscure andlowlevelmilitaryconfrontationwithinanisolatedprovinceintoaglobalpo litical struggle. They waged their netwar with the Mexican government mostly outside Chiapas, isolating the authorities and pitting them against the force of world opinion. Similarly, networked labor activists turn labor disputes within a corporation into societywide economic, political and media struggle, isolating corporatemanagementandexposingittoswarmingfromanunlimitednumberof directions.Netwarriorschoosetheirownbattlefield. The problem with authoritarianism like that of the Pinkertons and Birming hamWragge,fromthestandpointofthebossesandtheirstate,isthatbeforeyou canwaterboardopenmouthsaboteursatGitmoyouvegottocatchthemfirst.If the litigation over Diebolds corporate files and emails teaches anything, its that courtinjunctionsandsimilarexpedientsarevirtuallyuselessagainstguerrillanet war. The era of the SLAPP lawsuit is over, except for those cases where the of fenderisconsiderateenoughtovolunteerhishomeaddresstothetarget.Evenin the early days of the Internet, the McLibel case turned into the most expensive and most disastrous publicrelations exercise ever mounted by a multinational company.2 As we already noted, the easy availability of web anonymity, the writeable web in its various forms, the feasibility of mirroring shutdown web sites,andtheabilitytoreplicate,transfer,andstorehugevolumesofdigitalinfor mationatzeromarginalcost,meansthatitissimplyimpossibletoshutpeopleup. The wouldbe corporate information police will just wear themselves out playing whackamole.Theywillbeexhaustedanddestroyedinexactlythesamewaythat themosttechnicallyadvancedarmyintheworldwasdefeatedbyaguerrillaforce inblackpajamas. Whether it be disgruntled consumers, disgruntled workers, or networked publicadvocacyorganizations,thebasicprinciplesarethesame.JonHusband,of Wirearchyblog,writesofthepotentialthreatnetworkcultureandthefreeflowof informationposetotraditionalhierarchies.
Smart,interested,engagedandarticulatepeopleexchangeinformationwith eachotherviatheWeb,usinghyperlinksandwebservices.Oftenthisinforma tion ... is about something that someone in a position of power would prefer thatotherpeople(citizens,constituents,clients,colleagues)notknow.... The exchangedviahyperlinksandwebservices information is retrievable, reusable and when combined with other information (lets play connectthe dotshere)oftenshowsthepersoninapositionofpowertobealiaroraspinner, or irresponsible in ways that are not appropriate. This is the basic notion of transparency(whichdescribesakeyfacetofthegrowingawarenessofthepower oftheWeb).... Hyperlinks,thedigitalinfrastructureoftheWeb,thelastingretrievabilityof theinformationpostedtotheWeb,andthepervasiveuseoftheWebtopublish, distribute and transport information combine to suggest that there are large shifts in power ahead of us. We have already seen some of that . we will see muchmoreunlessthepowersthatbemanagetofindwaystocontrolthetoings andfroingsontheWeb. ToddWallack,Bewareifyourblogisrelatedtowork,SanFranciscoChronicle,January 25,2005<http://www.sfgate.com/cgibin.article.cgi?f=/c/a/2005/01/24/BIGCEAT1l01.DTL>. 2 270day libel case goes on and on ..., Daily Telegraph, June 28, 1996 <http://www.mcspotlight.org/media/thisweek/jul3.html>.
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....[T]hehoardingandprotectionofsensitiveinformationbyhierarchical 1 institutionsandpowerfulpeopleinthoseinstitutionsisundersiege....
ChrisDillow,ofStumblingandMumblingblog,argueswerenowatthestage where the leadership of large, hierarchical organizations has achieved negative credibility.Thepublic,inresponsetoapublicstatementbyGordonBrown,seem inglyactedontheassumptionthatthetruthwasthedirectopposite.
Coulditbethattherulingclassnowhasnegativecredibility?Maybepeople are now taking seriously the old Yes, Minister jokethat one should never be lieveanythinguntilitsofficiallydenied. If so, doesnt this have serious implications? It means not merely that the managerialclasshaslostoneoftheweaponsitcanusetocontrolus,butthatthe 2 weapon,whenused,actuallyfiresuponitsuser.
Thankstonetworkculture,thecostofmanufacturingconsentisrisingatan astronomicalrate.Thecommunicationssystemisnolongertheonedescribedby EdwardHerman,withthestateanditscorporatemediaalliescontrollingahandful of expensive centralized hubs and talking to us via oneway broadcast links. We canalltalkdirectlytoeachothernow,andvirallycirculateevidencethatcallsthe statespropagandaintodoubt.Foranoutlayofwellunder$1000,youcandowhat onlytheWhiteHousePressSecretaryoraCBSnewsanchorcoulddofortyyears ago.Theforcesoffreedomwillbeabletocontestthecorporatestatesdomination overpublicconsciousness,forthefirsttimeinmanydecades,oneventerms. Wehaveprobablyalreadypassedasingularity,apointofnoreturn,inthe useofnetworkedinformationwarfare.Ittooksometimeforemployerstoreacha consensusthattheoldcorporateliberallaborregimenolongerservedtheirinter ests, and to take note of and fully exploit the unionbusting potential of Taft Hartley. But once they began to do so, the implosion of Wagnerstyle unionism waspreordained.Likewise,itwilltaketimefortherealizationtodawnonworkers that things are only getting worse, that theres no hope in traditional unionism, and that in a networked world they have the power to bring the employer to his kneesbytheirowndirectaction.Butwhentheydo,theoutcomeisalsoprobably preordained. The twentieth century was the era of the giant organization. By the endofthetwentyfirst,thereprobablywontbeenoughofthemlefttobury.
JonHusband,HowHardisThistoUnderstand?Wirearchy,June22,2007<http:// blog.wirearchy.com/blog/_archives/2007/6/22/3040833.html>. 2 Chris Dillow, Negative Credibility, Stumbling and Mumbling, October 12, 2007 <http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2007/10/negative credib.html>.
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APPENDIX THREEWORKSONABUNDANCE ANDTECHNOLOGICALUNEMPLOYMENT

William M. Dugger and James T. Peach. Economic Abundance: An Introduction (Armonk,NewYorkandLondon,England:M.E.Sharpe,2009). Adam Arvidsson. The Makersagain: or the need for keynesian management of abundance,P2PFoundationBlog,February25,2010.1 Martin Ford. The Lights in the Tunnel: Automation, Accelerating Technology and theEconomyoftheFuture(AcculantPublishing,2009). Introduction Ivegroupedthesethreeauthorstogetherbecausetheirfocusoverlapsinone particular:theirapproachtoabundance,totheimplodingrequirementsforlabor and/or capital to produce a growing share of the things we consume, is in some waytoguaranteefullemploymentoftheidlelaborandcapital. Theyallshare,insomesense,ademandsidefocusontheproblemofabun dance: assuming that the prices of goods and services either will or should be proppedupdespitetheimplodingcostofproduction,andthenlookingforwaysto provide the population with sufficient purchasing power to buy those goods. My approach, which will gradually be developed below, is just the oppositea sup plysideapproach.Thatmeans,inpracticalterms,flushingartificialscarcityrents ofallkindsoutofthesystemsothatpeoplewillnolongerneedasmanyhoursof wagelabortopayforstuff.... I I get the impression that Dugger and Peach are influenced by Veblens The Engineers and the Price System, which likewise focused on the social and institu tionalbarrierstorunningindustryatthetechnicallimitsofitsoutputcapacityand thendistributingtheentireoutput.Themostimportanttaskfromtheirstandpoint istosolvetheproblemofinadequatedemand,inordertoeliminateidleindustrial capacityandunemployment.Theyacceptasnormal,forthemostpart,themass production industrial model of the midtwentieth century, and seek only to re movebarrierstodisposingofitsfullproduct. For Dugger and Peach, scarcity is a problem of either the incomplete em ployment of all available production inputs, or the unequal distribution of pur chasingpowerforproductionoutputs.Theirgoalistoachieveuniversalemploy ment.
Instead of the natural rate of unemployment or full employment, we propose drivingtheunemploymentratedowncloserandclosertoabsolutezero.Provide universal employment and the increased production will provide the where withaltoputabundancewithinourgrasp.
ThatsthekindofvisionIdidentifymorewithMichaelMoorethan,say,Chris Anderson: a society in which virtually everyone works a forty hour week, the wheelsofindustryrunatfullcapacitychurningoutendlessamountsofstuff,and peopleearnenoughmoneytokeepbuyingallthatstuff.
<http://blog.p2pfoundation.net/themakersagainortheneedforkeynesian managementofabundance/2010/02/25>
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But in our existing economy, the volume of stuff produced is mainly a re sponse to the problem of overaccumulation: the need to find new ways to keep peoplethrowingstuffawayandreplacingitsothatouroverbuiltindustrycankeep running at capacity. If goods were not designed to become obsolete, and it took muchsmallerindustrialcapacitytoproducewhatweconsume,somepeoplemight view it as silly to think up all sorts of new things to consume just so they could continue working forty hours a week and keep industry running at full capacity. They might prefer to liquidate a major portion of industrial capacity and work fewerhours,ratherthanchurningoutmoreandmoreproductstoearnthemoney tobuymoreandmoreproductstokeepthemselvesemployedproducingmoreand moreproductssotheycouldkeepconsumingmoreandmore,adnauseam. In failing to distinguish between natural and artificial scarcity, Dugger and Peachconflatethesolutionstotwodifferentproblems. When scarcity is naturali.e. where it costs money or effort to produce a goodthenthemainformofeconomicinjusticeisthebrokenlinkbetweeneffort and consumption. Privilege enables some people to consume at others expense. The peasant must work harder to feed a landlord in addition to himself, and the factoryworkermustproduceasurplusconsumedbytheidlerentier.Theproblem ofprivilege,andthezerosumrelationshipthatresultsfromit,isgenuine.Anditis almostentirelythefocusofDuggersandPeachsanalysis.Whatsmore,theirfo cusonthedistributionofclaimstotheproductasasolutionisentirelyappropriate in the case of natural scarcity. But natural scarcity and the unjust distribution of scarcegoodsarenothingnew;theyreproblemsthathaveexisted,inwhatamounts toitspresentform,fromthebeginningofclasssociety.Theiranalysis,whichtreats inequitabledistributionofnaturallyscarcegoodsasthewholeofscarcity,iscom pletelyirrelevanttotheproblemofartificialscarcityi.e.,artificiallyinflatedinput costsorpricesthatembodyrentsonartificialpropertyrights.Thesolutiontothis latterproblemisnottofindwaystokeepeveryoneonthetreadmillfortyhoursa week,buttoeliminatetheartificialscarcitycomponentofpricesothatpeoplecan workless. The real problem, in short, is not to achieve full employment, but to reduce theamountofemploymentittakestopurchaseourpresentstandardofliving. II Inthefirstinstallmentofthisreviewessay,IdealtwithEconomicAbundance byWilliamDuggerandJamesPeach.Ifounditonlytangentiallyrelated,atbest,to thepostscarcitytraditionwerefamiliarwith. AdamArvidssonandMartinFordbothwritefromsomethingmuchcloserto thattradition. Arvidsson,followinguponhisinitialreviewofMakersbyCoryDoctorow1,set outtoexplainthedifferencebetweenhisviewsandmine. InmyreviewofMakers2,Iarguedthatthecentralcauseoftheeconomiccrisis was (first) the excess capacity of massproduction industry, and (second) the su perfluousinvestmentcapitalwhichlackedanyprofitableoutletthankstotheim plodingcostofmicromanufacturingtechnology.Arvidssonresponded:
1
AdamArvidsson,Review:CoryDoctorow,TheMakers,P2PFoundationBlog,February 24,2010<http://blog.p2pfoundation.net/reviewcorydoctorowthemakers/2010/02/24>. 2 Kevin Carson, Cory Doctorow. Makers, P2P Foundation Blog, October 25, 2009 <http://blog.p2pfoundation.net/corydoctorowmakers/2009/10/25>.
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However an oversupply of capital is only that in relation to an insufficient de mand.Thereasonwhyhundredsofthousandsorevenmillionsofventurescan notprosperisthatthereisinsufficientdemandfortheirproducts.Thissuggests thataneconomyofabundance(alsoarelativeconcepttheoldindustrialecon omywassurelyaneconomyofabundanceinrelationtotheoldartisanalecon omy) needs a Keynesian regime of regulation. That is, the state or some other statelike actor must install a mechanism for the redistribution of value that guaranteesasustaineddemandfornewproducts.Toaccomplishthisentailstwo things. First, to redistribute the new value that is generated away from the re strictedflowsofcorporateandfinancialrentthatcirculateamongKettlewelland hisinvestorsandtolargerswatsofthepopulation(thusactivatingthemultiplier effect!). Since the Maker boom builds on highly socialized, or even ubiquitous productivity, it seems logical that such a redistribution takes the form of some kind of guaranteed minimum income. Second, the state (or statelike actor) mustguaranteeadirectionofmarketexpansionthatissustainableinthefuture. Inourpresentsituationthatwouldprobablymeantoofferincentivestochannel theproductivityofanewmakercultureintoprovidingsolutionstotheproblem of transitioning to sustainability within energy, transport and food production systems. This would, no doubt open up new sources of demand that would be abletosustaintheneweconomyofabundanceforalongtime,andafterthatwe cangointospace!WithoutsuchaKeynesiangovernance,afutureeconomyof abundanceisdoomedtocollapse,justliketheindustrialeconomyofabundance collapsedin1929.
Thismighthavebeentrueoftheexcessindustrialcapacityofthe1930s,when the primary problem was overinvestment and the maldistribution of purchasing powerratherthanarapiddeclineinthemoneypriceofcapitalgoods.Underthose circumstances, with the technical means themselves changing in a fairly gradual manner,thesizeofthegapbetweenexistingdemandanddemandonascalenec essary to run at full capacity might well be small enough to solve with a guaran teedincome,orsocialcredit,orsomesimilarexpedient. But the problem in Makers is entirely different. Its not simply excess indus trial capacity in an environment of gradual and stable technological advance. It takesplaceinanenvironmentinwhichthecostofcapitalgoodsrequiredforin dustrialproductionhasfallenahundredfold.Inthatenvironment,theonlywayto avoidsuperfluousinvestmentcapitalwithnoprofitableoutletwouldbeifdemand increasedahundredfoldinmaterialterms.Ifagivenconsumptiongoodproduced in a million dollar factory can now be produced in a $10,000 garage shop, that wouldmeanIdhavetobuyahundredofthatgoodwhereIdboughtonlyonebe fore,inordertocauseahundredtimesasmanygarageshopstobebuiltandsoak uptheexcesscapital.Eitherthat,orIdhavetothinkofahundredtimesasmany material goods to create sufficient demand to expand industrial capacity a hun dredfold.Idontthinkdemandisanywherenearthatupwardlyelastic.Theover supplyofcapitalinMakersismainlyinrelationtothecostofproducergoods. Sothesolution,inmyopinion,isagaintoapproachtheproblemfromthe supplyside.Allowtheembeddedscarcityrentsinthepricesofourgoodstoevapo rate, and the bubbleinflated values of real estate and other assets along with them,sothatittakeslessmoneyandfewerhoursofworktoobtainthethingswe need. III Ofthethreeworksconsideredinthisseriesofreviewessays,Fordspaysbyfar the most attention to the issue of technological unemployment. Its the central themeofhisbook.
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MembersoftheP2PResearchandOpenManufacturinglistsareprobablyfa miliar with the worstcase scenarios for technological unemployment frequently outlined in the posts of member Paul Fernhout. Coupled with draconian social controls and strong IP enforcement, its the scenario of Marshall Brains Manna. StillothersaresurelyfamiliarwithsimilarprojectionsinJeremyRifkinsTheEndof Work. Fordwritesverymuchinthesametradition. But there are significant mitigating features to technological unemployment whichFordfailstoaddressfeatureswhichIvealsoraisedonlistindebateswith Fernhout.Mostimportantistheimplodingpriceofmeansofproduction. Most discussions of technological unemployment by people like Rifkin and Ford implicitly assume a capitalintensive mass production model, using expen sive, productspecific machines: conventional factories, in other words, in just about every particular except the radically reduced need for people to work in them.TheyseemtobetalkingaboutsomethinglikeaGMfactory,withmicrocon trollers and servomotors in place of workers, like the Ithaca works in Vonneguts Player Piano. If such expensive, capitalintensive, massproduction methods con stitutedtheentireworldofmanufacturingemployment,astheywerein1960,then theRifkin/Fordscenariowouldindeedbeterrifying. Butthemassproductionmodelofmanufacturinginlargefactorieshasdrasti callyshrunkinsignificanceoverthepastthirtyyears,asdescribedbyMichelPiore and Charles Sabel in The Second Industrial Divide. Manufacturing corporations havealwaysdeferredinvestmentsinplantandequipmentineconomicdownturns, becauseasJohnKennethGalbraithpointedoutinTheNewIndustrialStatethe kinds of expensive productspecific machinery used in Sloanist mass production requirefullutilizationtoamortizefixedcosts,whichinturnrequiresahighdegree of confidence in the stability of demand before companies will invest in them. Duringrecessions,therefore,manufacturingcorporationstendtoexpandproduc tion when necessary by contracting out to the craft periphery. But the economic crisisofthe1970swasthebeginningofaprolongedperiodofeconomicstagnation, witheachdecadeseconomicgrowthslowerthanthepreviousandanemiclevelsof employmentanddemand.Anditwasalsothebeginningofalongtermstructural trend toward shifting production capacity from the massproduction core to the craft periphery. Around the turn of the century, the total share of industrial pro duction carried out in jobshops using general purpose machinery surpassed the amountstillcarriedoutinconventionalmassproductionindustry. Onpp.76and92,Fordarguesthatsomejobs,likeautomechanicorplumber, areprobablysafefromautomationforthetimebeingbecauseofthenatureofthe work:acombinationofcraftskillsandgeneralpurposemachinery.Butmanufac turing work, to the extent that it has shifted to small shops like those in Emilia Romagna and Shenzhen, using generalpurpose machinery for short production runs,hastakenonthesamecharacterinmanyinstances.Ifmanufacturingcontin uestobeorganizedprimarilyonaconventionalassemblylinemodelusingauto mated,highlyspecializedmachines,butwiththeadditionalstepofautomatingall handingoffofgoodsfromonesteptothenext,thenthethreatof100%automa tion will be credible. But if most manufacturing shifts to the small shop, with a craftsmansettingupgeneralpurposemachinesandsupplyingfeedstockbyhand, thenFordsautomechanic/housekeepermodelismuchmorerelevant. Indeed,theshifttowardleanproductionmethodsliketheToyotaProduction System have been associated with the conscious choice of generalpurpose ma chinery and skilled labor in deliberate preference to automated massproduction
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machinery. The kinds of productspecific machinery that are most conducive to automationaredirectlyatoddswiththeentireleanphilosophy,becausetheyre quiresubordinatingtheorganizationofproductionandmarketingtotheneedto keeptheexpensivemachinesrunningatfullcapacity.ConventionalSloanistmass productionoptimizedtheefficiencyofeachseparatestageintheproductionproc essbymaximizingthroughputtocutdowntheunitcostsoneachexpensiveprod uctspecificmachine;butitdidsoatthecostofpessimizingtheproductionproc ess as a whole (huge piles of inprocess inventory piled up between machines, waitingforsomebodydownstreamtoactuallyneedit,andwarehousespiledfullof finished goods awaiting orders). Lean production achieves sharp reduction in overallcostsbyusinglessefficient,moregeneralizedmachineryateachstagein theproductionprocess,inordertositeproductionascloseaspossibletothemar ket,scaletheoverallflowofproductiontoorders,andscalethemachinerytothe flowofproduction. Ford himself concedes that the high capital outlays for automating conven tional massproduction industry may delay the process in the medium term (p. 215).Andindeed,thepathologicalbehaviors(likeoptimizingtheefficiencyofeach stage at the expense of pessimizing the overall production flow we saw immedi atelyabove)thatresultfromthehighcostofautomatedproductspecificmachin ery, are precisely what Toyota pursued a different production model to avoid. Largescale,automated,productspecificmachinerycreatesfixedcoststhatinevi tablyrequirebatchproduction,largeinventoriesandpushdistribution. Whats more, Fords scenario of the motivation of the business owner in adopting automation technology to cut costs implicitly assumes a model of pro ductionandownershipthatmaynotbewarranted.Asthecostsofmachineryfall, theconventionaldistinctionsbetweenworkerandownerandbetweenmachinery andtoolsareeroding,andtheideaofthefirmasalargeagglomerationofabsen teeownedcapitalhiringwageworkerswillbecomelessandlessrepresentativeof therealworld.Accordingly,scenariosinwhichthebusinessowneristheprimary actordecidingwhethertobuyautomatedmachineryorhireworkersareapttobe less relevant. The more affordable and smaller in scale production tools become, the more frequently the relevant decisionmakers in the capital vs. labor tradeoff willbepeopleworkingforthemselves. BesidestheshiftthatsalreadytakenplaceundertheToyotaProductionSys tem and flexible manufacturing networks like EmiliaRomagna, the shift toward small scale, low cost, general purpose machinery is continuing with the ongoing micromanufacturingrevolutionasitscurrentlybeingworkedout insuchvenues asFactoreFarm,hackerspaces,FabLabs,techshops,Ponoko,and100kGarages. Technologicalunemployment,asdescribedinthevariousscenariosofRifkin, BrainandFord,ismeaningfulmainlybecauseofthedivorceofcapitalfromlabor whichresultedfromthehighpriceofproducergoodsduringthemassproduction era. Indeed, the very concept of employment and jobs, as the predominant sourceoflivelihood,wasahistoricalanomalybroughtaboutbytheenormouscost ofindustrialmachinery(machinerywhichonlytherich,orenterpriseswithlarge aggregations of rich peoples capital, could afford). Before the industrial revolu tion, the predominant producer goods were generalpurpose tools affordable to individual laborers or small shops. The industrial revolution, with the shift from affordabletoolstoexpensivemachinery,wasassociatedwithashiftfromanecon omybasedprimarilyonselfemployedfarmersandartisans,andsubsistencepro ductionfordirectuseinthehouseholdsector,toaneconomywheremostpeople
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were hired as wage laborers by the owners of the expensive machinery and pur chasedmostconsumptiongoodswiththeirwages. Butthethreatoftechnologicalunemploymentbecomeslessmeaningfulifthe means of production fall in price, and there is a retrograde shift from expensive machinery to affordable tools as the predominant form of producer good. And wereinthemiddleofjustsuchashift,asafewthousanddollarscanbuygeneral purposeCNCmachinetoolswiththecapabilitiesoncepossessedonlybyafactory costinghundredsofthousandsofdollars.Thesameforcesmakingmoreandmore jobs superfluous are simultaneously reducing barriers to the direct ownership of productiontoolsbylabor. So rather than Fords scenario of the conventional factory owner deciding whethertoinvest inautomatedmachinery orhireworkers,werelikelytoseean increasingshifttoascenarioinwhichthetypicalactorisagroupofworkersdecid ing to spend a few thousand workers to set up a garage factory to supply their neighborhood with manufactured goods in exchange for credit in the barter net work,andinturnpurchasingtheoutputofothermicromanufacturingshopsorthe fruit, vegetables, bread, cheese, eggs, beer, clothing, haircare services, unlicensed cabservice,etc.,availablewithinthesamenetwork.UnlikeFord,aswewillseein thenextsection,Iseeourprimarytaskaseliminatingthebarrierstothisstateof affairs. I do agree with Ford that weve been experiencing a longterm trend toward longer jobless recoveries and lower levels of employment (p. 134). Total employ ment has declined 10% since it peaked in 2000, for example. And despite all the Republican crowing over Obamas projection that unemployment would reach only8.5%in2009,thatsexactlythelevelofunemploymentthatOkunslawwould havepredictedwiththedeclineinGDPthatweactuallyexperienced.Ourconven tional econometric rules of thumb for predicting job losses with a given scale of economic downturn have become worthless because of the longterm structural reduction in demand for labor, and longterm unemployment is at the highest levelsincetheGreatDepression. But while some of this is probably due to technological change that reduces thelaborinputsrequiredforagivenunitofoutput,Ithinkthelionsshareofitis explainedbytheoveraccumulationthesisofneoMarxistslikePaulSweezy,Harry Magdoff, and other members of the Monthly Review group. The main reason for risingunemploymentiscorporatecapitalismssamechronictendenicestooverin vestment and underconsumption that caused the Great Depression. Cartelized state capitalist industry accumulates excessive surpluses and invests them in so muchplantandequipmentthatitcantdisposeofitsentireoutputrunningatca pacity. This crisis was postponed by WWII, which destroyed most plant and equipmentintheworldoutsidetheU.S.,andcreatedapermanentwarfarestateto absorbaportionofsurplusproduction.Butevenso,by1970JapanandEuropehad rebuilttheirindustrialeconomiesandglobalcapitalmarketsweresaturated.Since 1970,oneexpedientafteranotherhasbeenadoptedtoabsorbsurpluscapitalinan erawhenconsumerdemandisinsufficientforevenexistingplantandequipment tooperateprofitably. Ford is also correct that rising oil (and hence shipping) costs will provide a strong economic incentive to distributed manufacturing with factories located as close as possible to consumers, whichintersecting with trends to automation willleadtomuchsmallerandmoreflexiblefactorieslocatedindirectproximityto markets...(p.126)ButIthinkheunderestimatestheextenttowhichtheshiftin economiesofscalehedescribeshasalreadytakenplace.Theflexiblemanufactur
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ing trend has been toward small jobshops like those in Shenzhen described by TomIgoe,withevercheapergeneralpurposemachinery.Andthemodelofauto mationforsuchsmallscaleCNCmachineryismostconducivetocraftproduction usinggeneralpurposetools.Coupledwiththecuttingedgetrendtoevencheaper CNCmachineryaffordablebyindividuals,amajorpartoftherelocalizationofin dustryintheU.S.islikelytobeassociatedwithselfemployedartisanproducersor smallcooperativeshopschurningoutmanufacturedgoodsforneighborhoodmar ketareasofafewthousandpeople.Ofthosecheaptools,TomIgoewrites:
Cheaptools.Lasercutters,lathes,andmillingmachinesthatareaffordableby an individual or a group. This is increasingly coming true. The number of col leaguesIknowwhohavelasercuttersandmillsintheirlivingroomsisincreas ing....Therearesomenotableholesintheopenhardwareworldthatexistpar tially because the tools arent there. Cheap injection molding doesnt exist yet, but injection molding services do, and theyre accessible via the net. But when theyre next door (as in Shenzen), youve got a competitive advantage: your neighbor.
Fordalsoequatesautomationtoincreasingcapitalintensiveness(pp.131132). The traditional model presupposes that capitalintensive methods are more costly because capital equipment is expensive, and the most capitalintensive formsofproductionusethemostexpensive,productspecificformsofmachinery. Production is capitalintensive in the sense that expenditures are shifted from laborcompensationto machinery,andhightechnecessarilymeanshighcost. Butinfactthecurrenttrajectoryoftechnicalprojectinmanufacturinghardwareis toward drastically reduced cost, bringing new forms of micromanufacturing ma chinery affordable to average workers. This means that the term capital intensive,asconventionallyunderstood,becomesmeaningless. Hegoesontoarguethatmanufacturingwillbecometoocapitalintensiveto maintainexistinglevelsofemployment.
Beyondthisthresholdortippingpoint,theindustriesthatmakeupoureconomy will no longer be forced to hire enough new workers to make up for the job lossesresultingfromautomation;theywillinsteadbeabletomeetanyincrease indemandprimarilybyinvestinginmoretechnology.(p.133)
Butagain,thispresupposesthatcapitalequipmentisexpensive,andthatac cess to it is controlled by employers rich enough to afford it. And as the cost of machines fall to the point where they become affordable tools for workers, the jobbecomesmeaninglessforagrowingshareofourconsumptionneeds. Evenbeforetheriseofmicromanufacturing,therewasalreadyawiderangeof consumption goods whose production was within the competence of lowcost toolsintheinformalandhouseholdsector.AsRalphBorsodishowedasfarbackas the 1920s and 1930s, small electrically powered machinery scaled to household productioncouldmakeawiderangeofconsumergoodsatfarlowerunitcostthan thefactories.Althoughtheunitcostofproductionwassomewhatlowerforfactory goods, this was more than offset by drastic reductions in distribution cost when production was at or near the point of consumption, and by the elimination of supplypush marketing costs when production was directly driven by the con sumer.Vegetablesgrownandcannedathome,clothingproducedonahomesew ing machine from fabric woven on an efficiently designed power loom, bread baked in a kitchen oven from flour grown in a kitchen mill, all required signifi cantlylesslabortoproducethanthelaborrequiredtoearnthewagestobuythem at a store. Whats more, directly transforming ones own labor into consumption
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goodswithonesownhouseholdtoolswasnotsubjecttodisruptionbythelossof wageemployment. If anything, Borsodi underestimated the efficiency advantage. He assumed thatthehouseholdsubsistenceeconomywouldbeautarkic,witheachhousehold having not only its own basic food production, but weaving and sewing, wood shop, etc. He opposed the production of a surplus for external sale, because the termsofcommercialsalewouldbesodisadvantageousthatitwouldbemoreeffi cient to devote the same time to labor in the wage economy to earn foreign ex change to purchase things beyond the production capacity of the household. So forBorsodi,allconsumptiongoodswereeitherproducedbythehouseholdforit self,orfactorymadeandpurchasedwithwages.Hecompletelyneglectedthepos sibilityofadivisionoflaborwithintheinformaleconomy.Whensuchadivisionis takenintoaccount,efficienciesincreaseenormously.Insteadofeachhousehaving itsownsetofunderutilizedcapitalequipmentforallformsofsmallscaleproduc tion, a single piece of capital equipment can serve the neighborhood barter net workandbefullyutilized.Insteadofthehightransactioncostsandlearningcurve fromeachhouseholdlearninghowtodoeverythingwell,likeOdysseus,askilled seamstresscanconcentrateonproducingclothingfortheneighborsandaskilled bakercanconcentrateonbreadbutachievetheseefficiencieswhilestillkeeping their respective labors in the household economy, without the need either for a separate piece of commercial real estate or for expensive capital goods beyond thosescaledtotheordinaryhousehold. Most technological unemployment scenarios assume the automation of con ventional, massproduction industry, in a world where manufacturing machinery remainsextremelyexpensive.Butwhenthecostbarrierstoowningmanufacturing machineryarelowered,thethreatbecomesalotlessterrifying. Bywayofanalogy:IfaStarTrekstylematterreplicatorcanreplacehumanla borforproducingmostgoods,butitcostssomuchthatonlyalargecorporation can own it, then the threat of technological unemployment is real. But if anyone canownsuchareplicatorforafewhundreddollars,thenthewaywesupplyama jor part of our needs will simply shift from selling labor for wages to producing themforourselvesonacheapreplicator. Inaworldwheremostproductioniswithaffordabletools,employerswillno longerbeabletorestrictouraccesstothemeansofproduction.Itwillbecomefea sibletoproduceagrowingshareofourtotalconsumptionneedseitherdirectlyfor ourselves, or for exchange with other household producers, without the interme diationofthecorporatemoneyeconomy. Paul Fernhouts emails (which you probably read regularly if youre on the P2P Research or Open Manufacturing email list) include a quote in the sig line about todays problems resulting from an attempt to deal with abundance in a scarcity framework. Dugger and Peach, as we saw above, failed to recognize the natureofabundanceatall,anddespitetheiruseofthetermworkedfromanideo logicalframeworkentirelyadaptedtoscarcity.Ford,ontheotherhand,ishalfway there. He recognizes the new situation created by abundance of consumer goods andthefallingneedforlabortoproducethem.Buthissolutionisstilladaptedtoa framework in which, while consumer goods are abundant, means of production remainscarceandexpensive. Whenmeansofproductionarecheapandreadilyavailable,theneedforla bor becomes irrelevant. The need for labor is only relevant when the amount needed is determined by someone other than the worker who controls access to themeansofproduction.Bywayofanalogy,whenasubsistencefarmerfiguredout
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awaytocutinhalfthelaborrequiredtoperformsometaskonhisownfarm,he didntlamentthelossofwork.Hedidnttrytodothingsinawaythatrequired twicetheeffortinordertokeephimselfemployedorachievejobsecurity.He celebrated it because, being in a position to fully appropriate the benefits of his own productivity, everything came down to the ratio between his personal effort andhispersonalconsumption.Inyourownhome,youdontdeliberatelystorethe dishesinacupboardasfaraspossiblefromthesinkinordertoguaranteeyourself sufficientwork.Likewise,whentheworkerhimselfcanobtainthemeansofpro duction as cheap, scalable tools, and the cost of producing subsistence needs di rectly for oneself in the informal economy (or for exchange with other such pro ducers), the question of the amount of labor needed for a unit of output is as meaninglessasitwouldhavebeenforthefarmer. Ford also raises the question of how the increasingly plausible prospect of stagnating employment will destabilize longterm consumer behavior. As people cometoshareaconsensusthatjobswillbefewerandhardertogetinthefuture, and pay less, their propensity to spend will decrease. The same consumer pessi mismthatleadstothetypicalrecessionarydownwardwagedemandspiral,thanks to technological unemployment, will become a permanent structural trend. (p. 109) But this neglects the possibility that these trends will spur underemployed workerstomeetmoreoftheirconsumptionneedsthroughfreealternativesinthe informaleconomy.Evenastechnologicalchangereducestheneedforwagelabor, itissimultaneouslycausinganincreasingshareofconsumptiongoodstoshiftinto the realm of things either available for free, or by direct production in the infor malhousehold sector using lowcost tools. As a result, an increasing portion of whatweconsumeisavailableindependentlyofwagelabor. Ford argues that free market forces and automation, absent some govern ment intervention to redistribute purchasing power, will lead to greater and greater concentration of incomes and consequently a constantly worsening crisis of underconsumption. The ultimate outcome of skyrocketing productivity, cou pled with massive technological unemployment, is a society in which 95% of the population are impoverished and live on a subsistence level, while most income goestotheremaining5%(p.181).Butthisstateofaffairscouldnevercomeabout inagenuinefreemarket.Theenormouswealthandincomesoftheplutocracyre sultfromrentsonartificialscarcity;theyareonlyabletobecomesuperrichfrom technological innovation when artificial property rights like patents enable them to capitalize the increased productivity as a source of rents, rather than allowing thecompetitivemarkettosocializeitintheformoflowerpricestoconsumers. IndeedFordhimselfgoeson,inthepassageimmediatelyfollowing,toadmit the reality that this level of income polarization would never come about, be causetheeconomicdeclinefrominsufficientpurchasingpowerwouldcauseasset valuestocollapse.Exactly!Butmyproposal(inthenextsection)ispreciselytoal lowsuchcollapseofassetvalues,andallowthecollapseofthepriceofgoodsfrom the imploding marginal cost of production, so that it takes less wage income to buythem. The collapse of exchange value is a good thing, from the perspective of the underemployed worker, who experiences the situation Bruce Sterling wrote of (I suspectaboutthreequartersfacetiously,althoughitshardtotellwithhim):
*WaitingforthedayofrealizationthatInternetknowledgerichnessactively MAKES people economically poor. Gosh, Craigslist has such access to ultra cheapeverythingnow...heywaitasecond,wheredidmyjobgo?
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*SomedaytheInternetwillofferfreefoodandshelter.Atthatpoint,hordes simply walk away. They abandon capitalism the way a realestate bustee aban donsanunderwaterbuilding.
Ford draws a parallel between the mechanization of agriculture in the 20th century,andtheongoingautomationofmanufacturingandserviceindustries(pp. 124125).Buttheparallelworksagainsthim,inasense. Themechanizationofagriculturemay,toaconsiderableextent,haveresulted inamassiveandirreversibleeliminationofjobs.Thatis,ithaseliminatedagri cultureformanypeopleasawaytoearnmoneybyworkingandthentospendthat moneybuyingfood.Butithasnot,byanymeans,eliminatedthepossibilityofus ing our own labor to feed ourselves by growing food. Likewise, developments in manufacturingtechnology,atthesametimeastheyeliminatejobsinmanufactur ingasasourceofincometobuystuff,aremakingtoolsfordirectproductionmore affordable. In the particular case of agriculture, as Ralph Borsodi showed eighty years ago,thetotallaborrequiredtofeedourselvesgrowingandcanningourownfood athomeisconsiderablylessthanthatrequiredtoearnthemoneytobuyitatthe store.Andnobodycanfireyoufromthejoboffeedingyourselfwithyourown labor. Whatsmore,theallegedlysuperiorefficienciesofmechanizedlargescaleag riculturearetoalargeextentamythperpetuatedinthepropagandaofcorporate agribusiness and the USDA. The efficiencies of mechanization are legitimate for cereal crops, although economies of scale still top out on a family farm large enough to fully utilize one complete set of farming machinery. But cereal crops occupy a disproportionate share of the total food production spectrum precisely becauseofgovernmentsubsidiestocerealcropproductionattheexpenseoffruits andvegetables. Inthecaseofmostfruitsandvegetables,theeconomiesofmechanizationare largelyspurious,andreflect(again)anagitropcampaigntolegitimizegovernment subsidiestocorporateagribusiness.Evensmallscaleconventionalfarmingismore efficient in terms of output per acre, if not in terms of output per manhourto say nothing of soilintensive forms of raisedbed horticulture like that developed JohnJeavons(biointensivehorticulturecanfeedonepersononatenthofanacre). Andwhilelargescaleproductionmaybemoreefficientintermsoflaborinputsat thepointofproduction,itisprobablylessefficientinlabortermswhenthewages requiredtopaytheembeddedcostsofsupplypushmarketinganddistributionare included.Althoughitmaytakemorelaborformetogrowatomatothanittakesa factoryfarmtogrowit,itprobablytakeslesslaborformetogrowitmyselfthanto payforthecostsofshippingandmarketingitinadditiontofactoryfarmingit.So absentgovernmentsubsidiesandpreferencestolargescaleagribusiness,themost efficient method for producing a considerable portion of our food is probably somethinglikeFordshousekeepingorautorepairlabormodel. Likewise, its quite plausible that it would cost a decent home seamstress more in total labor time to earn the money to buy clothing even from a totally automatedtextilemill,whenthecostsofhighinventoriesandsupplypushdistri butionaretakenintoaccount,thantomakethemherself. Besides,ifImunemployedorworkingatwentyhourweek,laborissomething Ihaveplentyof,and(again)Icantbefiredfromusingmyownlabortofeedand clothemyself.Themoreformsofproductionthatcanbecarriedoutintheinfor malsector,usingourownlaborwithindividuallyaffordabletools,thelessofwhat we consume depends on a bosss whim. And the higher the levels of unemploy
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ment,thestrongertheincentiveswillbetoadoptsuchmethods.Justaseconomic downturns are associated with a shift of production from the massproduction coretothecraftperiphery,theyrealso(asJamesOConnordescribedinAccumu lationCrisis)associatedwithashiftofproductionfromwagelabortotheinformal sector. This is not meant, by any means, to gloss over or minimize the dislocations will occur in the meantime. Plummeting average housing prices dont mean that manywontbelefthomeless,orliveprecariousexistencesassquattersintheirown foreclosedhomesorinshantytowns.Thefallingpriceofsubsistencerelativetoan hourswagedoesntmeanmanywontlacksufficientincometoscrapeby.Getting from here to there will involve many human tragedies, and how to minimize the pain transition is a very real and open question. My only purpose here is to de scribethetrendsinplay,andtheendstatetheyrepointingtowardnottodeny thedifficultyofthetransition. SowhileFordarguesthatconsumption,ratherthanproduction,willeventu allyhavetobecometheprimaryeconomiccontributionmadebythebulkofaver age people (p. 105), I believe just the opposite: the shrinking scale and cost, and increasingproductivity,oftoolsforproductionwillturnthebulkofaveragepeople intogenuineproducersasopposedtoextensionsofmachinesmindlesslyobeying theordersofbossesforthefirsttimeinoveracentury. ThiswholediscussionparallelsasimilaroneIvehadwithMarxistslikeChris tianSiefkes.Competitivemarkets,heargues,havewinnersandlosers,sohowdo you keep the losers from being unemployed, bankrupt and homeless while the winners buy out their facilities and concentrate production in fewer and fewer hands? My answer, in that case as in the one raised by Ford, is that,with falling pricesofproducergoodsandtheriseofnetworkedmodelsofproduction,thedis tinctionbetweenwinnersandlosersbecomeslessandlessmeaningful.Theres noreasontohaveanypermanentlosersatall.Firstofall,theoverheadcostsareso low that its possible to ride out a slow period indefinitely. Second, in low overhead flexible production, in which the basic machinery for production is widely affordable and can be easily reallocated to new products, theres really no such thing as a business to go out of. The lower the capitalization required for entering the market, and the lower the overhead to be borne in periods of slow business,themorethelabormarkettakesonanetworked,projectorientedchar acterlike, e.g., peer production of software. In free software, and in any other industrywheretheaverageproducerownsafullsetoftoolsandproductioncen tersmainlyonselfmanagedprojects,thesituationislikelytobecharacterizednot somuchbytheentranceandexitofdiscretefirmsasbyaconstantlyshiftingbal ance of projects, merging and forking, and with free agents constantly shifting fromonetoanother. EducationhasaspecialplaceinFordsvisionoftheabundantsociety(p.173). Asitis,heisdismayedbytheprospectthattechnologicalunemploymentmaylead tolargescaleabandonmentofhighereducation,asknowledgeworkisdownsized andtheskilledtradesofferthebesthopesforstableemployment. Ontheotherhand,educationisoneofthecenterpiecesofFordspostscarcity agenda (about which more below) for dealing with the destabilizing effects of abundance. As part of his larger agenda of making an increasing portion of pur chasingpowerindependentofwagelabor,heproposespayingpeopletolearn(p. 174). Butformeoneoftheupsidesofpostscarcityisthatthesametechnological trendsaredecouplingtheloveoflearningfromcareerism,dismantlingtheentire
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educationalHR complex as a conveyor belt for human raw material, and ending education as a professionalized process shaping people for meritocratic ad vancementortransformingthemintomoreusefultools. Theoverheadcostsofthenetworkmodelofeducationarefalling,andeduca tion is becoming a free good like music or opensource software. MITs Open Coursewareproject,whichputscompletecoursesyllabusesonlinefortheuniver sitys entire catalog of courses, is only the most notable offering of its kind. Pro jectslikeGoogleBooks,ProjectGutenberg,specializedventuresliketheAnarchist Archives and Marxist.Org (which has digitized most of Marxs and Engels Col lectedWorksandthemajorworksofmanyotherMarxistthinkersfromLeninand Trotsky to CLR James), not to mention a whole host of unauthorized scanning projects, make entire libraries of scholarly literature available for free. Academi callyorientedemaildiscussionlistsofferunprecedentedopportunitiesfortheself educatedtoexchangeideaswithestablishedacademicians.Itsneverbeeneasierto contactascholarwithsomespecialquestionorproblem,byusingGoogletotrack downtheirdepartmentalemail. In short, there have never been greater opportunities for independent and amateurscholarstopursueknowledgeforitsownsake,ortoparticipateinfreely accessiblecommunitiesofscholarsoutsidebrickandmortaruniversities.TheIn ternet is creating, in the real world, something like the autonomous and self governing learning networks Ivan Illich described in Deschooling Society. But in stead of the local mainframe computer at the community center pairing lists of wouldbe learners with expert volunteers, or renting out taperecorded lectures, thetechnicalpossibilitiesoftodaysopeneducationinitiativestakingadvantageof communicationstechnologybeyondIllichsimaginingatthetimehewrote. Likewise, its becoming increasingly feasible to pursue a technical education bythesamemeans,inordertodeveloponesowncapabilitiesasaproducerinthe informaleconomy.Someonemight,say,usetheengineeringcurriculuminsome thing like MITs Open Courseware in combination with mentoring by peers in a hackerspace, and running questions past the membership of a list like Open Manufacturing.Openhardwareprojectsaretypicallypopulatedbypeopleteaching themselves programming languages or tinkering with hardware on the Edison model, who are at best tangentially connected to the official educational estab lishment. PhaedrusideaoftheChurchofReasoninZenandtheArtofMotorcycleMain tenance is relevant. He describes the typical unmotivated drifter who currently predominates in higher education, when deprived of the grades and meritocratic incentivesforgettingacareerorgoodjob,finallydroppingoutforlackofinter estormotivation.
The students biggest problem was a slave mentality which had been built into him by years of carrotandwhip grading, a mule mentality which said, If youdontwhipme,Iwontwork.Hedidntgetwhipped.Hedidntwork.And thecartofcivilization,whichhesupposedlywasbeingtrainedtopull,wasjust goingtohavetocreakalongalittleslowerwithouthim.... The hypothetical student, still a mule, would drift around for a while. He would get another kind of education quite as valuable as the one hed aban doned,inwhatusedtobecalledtheschoolofhardknocks.Insteadofwasting moneyandtimeasahighstatusmule,hewouldnowhavetogetajobasalow status mule, maybe as a mechanic. Actually his real status would go up. He wouldbemakingacontributionforachange.Maybethatswhathewoulddofor therestofhislife.Maybehedfoundhislevel.Butdontcountonit. Intime...sixmonths;fiveyears,perhaps...achangecouldeasilybeginto takeplace.Hewouldbecomelessandlesssatisfiedwithakindofdumb,dayto
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day shopwork. His creative intelligence, stifled by too much theory and too manygradesincollege,wouldnowbecomereawakenedbytheboredomofthe shop.Thousandsofhoursoffrustratingmechanicalproblemswouldhavemade himmoreinterestedinmachinedesign.Hewouldliketodesignmachineryhim self.Hedthinkhecoulddoabetterjob.Hewouldtrymodifyingafewengines, meet with success, look for more success, but feel blocked because he didnt have the theoretical information. He would discover that when before he felt stupidbecauseofhislackofinterestintheoreticalinformation,hednowfinda brand of theoretical information which hed have a lot of respect for, namely, mechanicalengineering. So he would come back to our degreeless and gradeless school, but with a difference. Hed no longer be a grademotivated person. Hed be a knowledge motivatedperson.Hewouldneednoexternalpushingtolearn.Hispushwould come from inside. Hed be a free man. He wouldnt need a lot of discipline to shapehimup.Infact,iftheinstructorsassignedhimwereslackingonthejobhe would be likely to shape them up by asking rude questions. Hed be there to learnsomething,wouldbepayingtolearnsomethingandtheydbettercomeup withit.
IV In this last installment, I will discuss [Fords] proposed agenda for dealing withabundance,andthenpresentmyowncounteragenda. Ford uses the term Luddite fallacy for those who deny the possibility of technologicalunemploymentinprinciple.
This line of reasoning says that, while technological progress will cause some workerstolosetheirjobsasaresultofoutdatedskills,anyconcernthatadvanc ing technology will lead to widespread, increasing unemployment is, in fact, a fallacy. In other words, machine automation will never lead to economywide, systemic unemployment. The reasoning offered by economists is that, as auto mationincreasestheproductivityofworkers,itleadstolowerpricesforproducts and services, and in turn, those lower prices result in increased consumer de mand. As businesses strive to meet that increased demand, they ramp up pro ductionandthatmeansnewjobs.(pp.9596)
The problem with their line of reasoning, as I argued here1 and I think Ford would agree, is that it assumes demand is infinitely, upwardly elastic, and that someoftheproductivityincreasewontbetakenintheformofleisure. My critique of Fords scenario is from a perspective almost directly opposite whathecallstheLudditefallacy.Ibelievethewholeconceptofemploymentwill becomelessmeaningfulasthefallingcostofproducergoodscausesthemtotake onanincreasinglytoollikecharacter,andasthefallingpriceofconsumergoods reducestheneedforwageincome. Fordreferstosomethinglikemyperspective,amongthehypotheticalobjec tionshelistsattheendofthebook:Inthefuture,wages/incomemaybeverylow becauseofjobautomation,buttechnologywillalsomakeeverythingplentifuland cheapso low income wont matter (pp. 220221). Or as \I would put it, the re ducedneedforlaborwillbeoffsetbylaborsreducedneedforemployment. Fordsresponseisthat,first,manufacturedgoodsareonlyasmallpercentage oftheaveragepersonstotalexpenditures,andthecostsofhousingandhealthcare would still require a significant income. Second, he points to intellectual prop ertythesourceofpricesthatareabovemarginalcost,evenatpresent,whentech nologyhasalreadyloweredproductioncosts,andarguesthatinthefutureintel
<http://blog.p2pfoundation.net/abundancecreatesutilitybutdestroysexchangevalue/ 2010/02/02>.
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lectual property will cause the prices of goods to exceed their marginal costs of production. Fordsobjections,ironically,pointdirectlytomyownagenda:tomakehous ingandhealthcarecheapaswellbyallowingassetpricestocollapse,eliminatethe artificial scarcities and cost floors that make healthcare expensive, and eliminate intellectualpropertyasasourceofartificiallyhighprices. WhereFordsupportsnewgovernmentpoliciestomaintainpurchasingpower, Iproposeeliminatingexistinggovernmentpoliciesthatputafloorunderproduct prices,assetprices,andthecostofmeansofproduction. Ford, like Fernhout and Arvidsson and many other postscarcity thinkers, proposes various government measures to provide individuals with purchasing powerindependentofwagelabor(p.161).Asasolutiontotheproblemofexternal ities,heproposesadifferentialingovernmentprovidedincomebasedonhowso cially responsible ones actions areessentially Pigovian taxation in reverse (p. 177). He also proposes shifting the tax base for the social safety net from current payroll taxes to taxes on gross margins that remain stable regardless of employ mentlevels(p.142). Such proposals have been common for solving the problems of overproduc tion and underconsumption, going back at least to Major Douglas and Social Credit. (Im surprised Ford didnt hit on the same idea as Douglas, and dispense withtheideaoftaxationaltogetherjustcreateenoughpurchasingpoweroutof thinairtofillthedemandgap,anddeposititintopeoplesbankaccounts.)Some thing like it is also popular with many Georgists and Geolibertarians: tax the site valueoflandandothereconomicrents,resourceextraction,andnegativeexternal itieslikepollutionandcarbonemissions,andthenusetherevenuetofundaciti zensdividendorguaranteedminimumincome. Interestingly,somewhoproposesuchanagendaalsofavorleavingpatentand copyrightlawinplaceandthentaxingitasarenttofundthebasicincome. Fordraisesthequestion,fromahypotheticalcritic,ofwhetherthisisnotjust RobinHoodsocialism:stealingfromtheproductiveinordertopaypeopletodo nothing(p.180).Idattackitfromtheothersideandarguethatitsinfacttheop positeofRobinHoodsocialism:itleavesscarcityrentsinplaceandthenredistrib utesthem,ratherthanallowingthecompetitivemarkettosocializethebenefitsof innovationthroughfreegoods. Ipreferjusttheoppositeapproach:whererentsandinflatedpricesresult,not from the market mechanism itself, but from governmentenforced artificial scar city, we should eliminate the artificial scarcity. And when negative externalities resultfromgovernmentsubsidiestowasteorinsulationfromtherealmarketcosts of pollution, we should simply eliminate the legal framework that promotes the negative externality in the first place. Rather than maintaining the purchasing powerneededtoconsumepresentlevelsofoutput,weshouldreducetheamount ofpurchasingpowerrequiredtoconsumethoselevelsofoutput.Weshouldelimi nateallartificialscarcitybarrierstomeetingasmanyofourconsumptionneedsas possibleoutsidethewageeconomy. AndFordseemstoaccepttheconventionalmassconsumptioneconomyasa given. The problem, he says, is really not that Americans have spent too much. The problem is that their spending has been sustained by borrowing rather than bygrowthinrealincome(p.161). Idisagree.Theproblemisthatamajorityofourspendinggoestopaytheem bedded costs of subsidized waste and artificial scarcity rents. Overbuilt industry couldrunatfullcapacity,beforethepresentdownturn,onlyatthecostoflandfills
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piled with mountains of discarded goods. Most of the money we spend is not on the necessary costs of producing the usevalue we consume, but on the moral equivalent of superfluous steps in a Rube Goldberg machine: essentially digging holesandfillingthembackin.Theyincludeamongmanyotherthingsrentson copyright and patents, longdistance shipping costs, planned obsolescence, the costs of large inventories and highpressure marketing associated with supply push distribution, artificial scarcity rents on capital resulting from government restraintsoncompetitioninthesupplyofcredit,andrentsonartificialpropertyin land (i.e. holding land out of use or charging tribute to the first user through governmentenforcedtitlestovacantandunimprovedland). Thewasteofresourcesinvolvedinproducingdisposablegoodsforthelandfill (after a brief detour through our living rooms), or shipping stuff across country thatcouldbemoreefficientlyproducedinasmallfactoryinthesametownwhere it was consumed, was motivated by the same considerations of surplus disposal that,asEmmanuelGoldsteinsBookdescribeditin1984,causedthesuperpowers to sink millions of tons of industrial output to the bottom of the ocean or blast themintothestratosphere.Itsmotivatedbythesameconsiderationsthatcaused Huxleys WorldState to indoctrinate every consumercitizen with tens of thou sands of hypnopaedic injunctions that ending is better than mending. Human beings have become living disposal units to prevent the wheels of industry from beingcloggedwithunwantedoutput. If all these artificial scarcity rents and subsidized inefficiencies were elimi nated, and workers werent deprived of part of the value of our labor by state enforcedunequalbargainingpower,rightnowwecouldpurchasealltheconsump tiongoodswecurrentlyconsumewiththewagesoffifteenortwentyhoursofla boraweek. Whatweneedisnottoguaranteesufficientpurchasingpowertoabsorbthe outputofoverbuiltindustry.Itistoeliminatetheexcesscapacitythatgoestopro ducingforplannedobsolescence. Aswithmassconsumption,Fordseemstoacceptthejobcultureasabulwark ofsocialstabilityandpurpose.Whathehasinmind,asIreadit,isthattheguar anteed income, as a source of purchasing power, be tied to some new moral equivalentofjobsthatwillmaintainasenseofnormalcyandfillthevoidleftby thereducedneedforwagelabor(pp.168169).Hisagendafordecouplingpurchas ing power from wage income involves, rather than the basic income proposals of theSocialCreditmovementandsomeGeolibertarians,theuseofgovernmentin comesubsidiesasatargetedincentiveorcarrottoencouragefavoredkindsofbe havior like continuing education, volunteering, and the like. If we cannot pay people to work, then we must pay them to do something else that has value (p. 194). Again, I disagree. The loss of the job as an instrument of social control is a goodthing. IshareClaireWolfesviewofthejobcultureasunnaturalfromthestandpoint oflibertarianvalues,andasahistoricalanomaly.FromanAmericanhistoricalper spective,thewholeideaofthejobwasaradicaldeparturefromthepreviousmain stream in which most people were selfemployed artisans and family farmers. It arose mainly because of the high cost of production machinery in the Industrial Revolution.Fromthatperspective,theideaofthejobasthemainsourceoflive lihood over the past 150200 yearsa situation in which the individual spends eighthoursadayasapoorrelationonsomeoneelsesproperty,andtakesorders
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fromanauthorityfigurebehindadeskinthesamewaythataschoolchildwould fromateacheroraprisonerwouldfromaguard,isjustplainweird. The generation after the American Revolution viewed standing armies as a threattoliberty,notprimarilybecauseoftheirpotentialforsuppressingfreedom by force, but because their internal culture inculcated authoritarian values that undermined the cultural atmosphere necessary for the preservation of political freedominsocietyatlarge.Atthetime,standingarmies(alongwithperhapsthe Post Office and ecclesiastical hierarchies like that of the Anglican Church) were justabouttheonlylargescalehierarchicalinstitutionsaround,inasocietywhere mostpeoplewereselfemployed.Assuch,theywereabreedinggroundforaper sonality type fundamentally at odds with the needs of a republican society people in the habit of taking orders from other people. And today, it seems self evident that people who spend eight hours a day taking orders, and serving the valuesandgoalsofpeoplewhoutterlyunaccountabletothem,areunlikelytore sistthedemandsofanyotherformofauthorityintheportionoftheirliveswhere theyrestilltheoreticallyfree. The shift to the prejob pattern of selfemployment in the informal sector promisestoeliminatethispathologicalcultureinwhichonesecureshislivelihood by winning the approval of an authority figure. In my opinion, therefore, we should take advantage of the opportunity to eliminate this pattern of livelihood, insteadofasFordproposesreplacingthebosswithabureaucratastheauthor ityfigureonwhosewhimsourlivelihooddepends.Thesoonerwedestroytheidea ofthejobasaprimarysourceoflivelihood,andreplacetheideaofworkassome thingweregivenwiththeideaofworkassomethingwedo,thebetter.Andthen weshouldsowthegroundwithsalt. Soheresmypostscarcityagenda:
1) Eliminatingallartificialscarcityrentsandmandatedartificiallevelsofover headforsmallscaleproduction,inordertoreducetheoverheadcostofeve rydaylife,andtoreducethehouseholdrevenuestreamnecessarytoserviceit. Thatmeans,amongotherthings: 1a)Eliminating intellectual property as a source of scarcity rents in informa tionalandculturalgoods,andembeddedrentsonpatentsasacomponentof thepriceofmanufacturedgoods.See,forexample,TomPetersenthusiastic descriptioninTheTomPetersSeminarthatninetypercentofthecostofhis new Minolta camera was intellect or ephemera rather than parts and la bor. 1b)An end to local business licensing, zoning laws, and spurious safety and healthcodesinsofarastheyprohibitoperatingmicroenterprisesoutoffam ily residences, or impose arbitrary capital outlays and overhead on such mi croenterprises by mandating more expensive equipment than the nature of thecaserequires.Itmeans,forexample,eliminatinglegalbarrierstorunning a microbakery out of ones own home using an ordinary kitchen oven and sellingthebreadoutofoneshomeorattheFarmersMarket(suchas,e.g., requirements to rent a standalone piece of commercial real estate, buy an industrialsizeovenanddishwasther,etc.). 1c)Likewise,anendtolocalbuildingcodeswhosemaineffectistolockincon ventionalbuildingtechniquesusedbyestablishedcontractors,andtocrimi nalize innovative practices like the use of new lowcost building techniques andcheapvernacularmaterials. 1d)Anendtooccupationallicensing,oratleastanendtoartificialrestrictionson the number of licenses granted and licensing fees greater than necessary to fundthecostsofadministration.Thiswouldmeanthat,inplaceofalimited number of NYC cab medallions costing hundreds of thousands of dollars apiece,medallionswouldbeissuedtoanyonewhomettheobjectivelicensing
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requirementsandthecostwouldbejustenoughtocoveradrivingrecordand criminalbackgroundcheckandavehicleinspection. 2) An end to government policies aimed at propping up asset prices, allowing therealestatebubbletofinishpopping. 3) Anincreaseinworksharingandshorterworkweekstoevenlydistributethe amount of necessary work that remains. Ford also calls for jobsharing (pp. 185186), and quotes Keynes 1930 essay on postscarcity on the principle spreadthebreadthinlyonthebuttertomakewhatworkthereisstilltobe donetobeaswidelysharedaspossible(p.190).Ourdisagreementseemsto relyinthis:Ibelievethat,absentartificialscarcityrentstodisruptthelinkbe tweeneffortandconsumption,theaverageindividualshareofavailablework wouldprovidesufficientincometopurchaseacomfortablestandardofliving. Fordexplicitlydeniesthataparttimeincomewouldbesufficienttopayfor the necessities of life (p. 191), but seems to operate on the assumption that mostofthemechanismsofartificialscarcitywouldcontinueasbefore. 4) Thedecouplingofthesocialsafetynetfrombothwageemploymentandthe welfarestate,through4a)anincreaseinextendedfamilyormultifamilyin comepoolingarrangements,cohousingprojects,urbancommunes,etc.,and 4b) a rapid expansion of mutuals (of the kind described by Kropotkin, E.P. Thompson, and Colin Ward) as mechanisms for pooling cost and risk. Ford alsorecognizestheimperativeofdecouplingthesafetynetfromemployment (p.191),althoughheadvocatesgovernmentfundingasasubstitute.Butliber tarianconsiderationsaside,governmentisincreasinglysubjecttowhatJames OConnor called the fiscal crisis of the state. And this crisis is exacerbated bythetendenciesDouglasRushkoffdescribedinCalifornia,astheimploding capitalcostsrequiredforproductionrenderedmostinvestmentcapitalsuper fluousanddestroyedthetaxbase.Thewholegrossmarginfromcapitalthat Fordpresupposesasapartialreplacementforpayrolltaxesisforthatreason becomingobsolete. 5) A shift of consumption wherever feasible, from the purchase of store goods withwageincome,tosubsistenceproductionorproductionforbarterinthe household economy using home workshops, sewing machines, ordinary kitchen food prep equipment, etc. If every unemployed or underemployed personwithasewingmachineandgoodskillsputthemtofulluseproducing clothing for barter, and if every unemployed or underemployed person turnedtosuchaproducerastheirfirstresortinobtainingclothing(andditto for all other forms of common home production, like baking, daycare serv ices, hairstyling, rides and running errands, etc.) the scale of the shift from thecapitalisteconomytotheinformaleconomywouldberevolutionary; 6) A rapid expansion in local alternative currency and barter networks taking advantageofthelatestnetworktechnology,asasourceofliquidityofdirect exchangebetweeninformal/householdproducers.
Puttingitalltogether,theagendacallsforpeopletotransferasmuchoftheir subsistenceneedsoutofthemoneyeconomyasitsfeasibletodorightnow,and tothatextenttorenderthemselvesindependentoftheoldlawsofeconomicvalue; and where scarcity and exchange value and the need for purchases in the money economy persist, to restore the linkages of equity between effort and purchasing power. Suppose that the amount of necessary labor, after technological unemploy ment, was only enough to give everyone a twentyhour work weekbut at the sametimetheaveragerentormortgagepaymentfellto$150/month,anyonecould join a neighborhood cooperative clinic (with several such cooperatives pooling theirresourcestofundahospitaloutofmembershipfees)fora$50monthlyfee, the price of formerly patented drugs fell 95%, and a microfactory in the commu nity was churning out quality manufactured goods for a fraction of their former
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price.Formostpeople,myselfincluded,Iwouldcallthatagreatlyimprovedstan dardofliving.
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ven with the decentralizing potential of electrical power neglected and side trackedintothepaleotechnicframework,andevenwiththediversionoftech nical development into the needs of massproduction industry, smallscale pro duction tools were still able to achieve superior productivityeven working with the crumbs and castoffs of Sloanist massproduction, and even at the height of Molochs glory. Two models of production have arisen within the belly of the Sloanist beast, and between them offer the best hopes for replacing the mass productionmodel:1)theinformalandhouseholdeconomy;and2)relocalizedin dustryusinggeneralpurposemachinerytoproduceinsmallbatchesforthelocal market,frequentlyswitchingbetweenproductionruns.
A.HOMEMANUFACTURE
First, even at the height of massproductionist triumphalism, the superior productivityofhomemanufacturewasdemonstratedinmanyfields.Inthe1920s and 1930s, the zenith of mass productions supposed triumph, Ralph Borsodi showed that with electricity most goods could be produced in small shops and eveninthehomewithanefficiencyatleastcompetitivewiththatofthegreatfac tories, once the greatly reduced distribution costs of smallscale production were takenintoaccount.Borsodislawthetendencyofincreaseddistributioncoststo offsetreducedunitcostsofproductionatarelativelysmallscaleappliesnotonly totherelativeefficienciesoflargeversussmallfactories,butalsotothecompara tive efficiencies of factory versus home production. Borsodi argued that for most lightgoodslikefood,textiles,andfurniture,theoverallcostswereactuallylower tomanufacturetheminonesownhome.Thereasonwasthattheelectricmotor put smallscale production machinery in the home on the same footing as large machinery in the factory. Although economies of largescale machine production exist,mosteconomiesofmachineproductionarecapturedwiththebareadoption of the machinery itself, even with household electrical machinery. After that, the downward production cost curve is very shallow, while the upward distribution costcurveissteep. Borsodis study of the economics of home production began with the home growntomatoeshiswifecanned.ExpressingsomedoubtsastoMrs.Borsodiscon fidencethatitpaidtodoit,hesystematicallyexaminedallthecostsgoinginto thetomatoes,includingthemarketvalueofthelabortheyputintogrowingthem and canning them, the cost of the household electricity used, etc. Even with all these things factored in, Bordodi still found the home product cost 2030% less than the canned tomatoes at the market. The reason? The home product, pro duced at the point of consumption, had zero distribution cost. The modest unit
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cost savings from largescale machinery were insufficient to offset the enormous costofdistributionandmarketing.1 Borsodiwentontoexperimentwithhomeclothingproductionwithloomand sewingmachine,andbuildingfurnitureinthehomeworkshop.
I discovered that more than twothirds of the things which the average family now buys could be produced more economically at home than they could be boughtfactorymade; thattheaveragemanandwomancouldearnmorebyproducingathome than by working for money in an office or factory and that, therefore, the less timetheyspentworkingawayfromhomeandthemoretimetheyspentworking athome,thebetterofftheywouldbe; finally,thatthehomeitselfwasstillcapableofbeingmadeintoaproduc tive and creative institution and that an investment in a homestead equipped with efficient domestic machinery would yield larger returns per dollar of in vestmentthaninvestmentsininsurance,inmortgages,instocksandbonds.... These discoveries led to our experimenting year after year with domestic appliancesandmachines.Webegantoexperimentwiththeproblemofbringing back into the house, and thus under our own direct control, the various ma chineswhichthetextilemill,thecanneryandpackinghouse,theflourmill,the clothingandgarmentfactory,hadtakenoverfromthehomeduringthepasttwo hundredyears.... Inthemaintheeconomiesoffactoryproduction,whicharesoobviousand whichhaveledeconomistssofarastray,consistofthreethings:(1)quantitybuy ingofmaterialsandsupplies;(2)thedivisionoflaborwitheachworkerinindus tryconfinedtotheperformanceofasingleoperation;and(3)theuseofpowerto eliminatelaborandpermittheoperationofautomaticmachinery.Ofthese,the use of power is unquestionably the most important. today, however, power is somethingwhichthehomecanusetoreducecostsofproductionjustaswellas canthefactory.Thesituationwhichprevailedinthedayswhenwaterpowerand steamengines furnished the only forms of power is at an end. As long as the only available form of power was centralized power, the transfer of machinery andproductionfromthehomeandtheindividual,tothefactoryandthegroup, wasinevitable.Butwiththedevelopmentofthegasengineandtheelectricmo tor, power became available in decentralized forms. The home, so far as power wasconcerned,hadbeenputinpositiontocompetewiththefactory. With this advantage of the factory nullified, its other advantages are in themselvesinsufficienttooffsettheburdenofdistributioncostsonmostprod ucts.... Theaveragefactory,nodoubt,doesproducefoodandclothingcheaperthan weproducethemevenwithourpowerdrivenmachineryontheBorsodihome stead. But factory costs, because of the problem of distribution, are only first costs. They cannot, therefore, be compared with home costs, which are final 2 costs.
Eventheinternaleconomiesofthefactory,itshouldbeadded,wereoffsetby the overhead costs of administration, and the dividends and interest on capital. Profliferatingdepartmentalizationentails
gangbosses,speedbosses,inspectors,repairbosses,planningdepartmentrepre sentativesandofcoursecorrespondingofficesupervisors:designers,planners, recordkeepersandcostclerks....thereareofficemanagers,personnelmanag ers, sales managers, advertising managers and traffic managers.... All tend to absorb the reductions in manufacturing costs which are made possible by the factorymachineryandfactorymethods. Ralph Borsodi, Flight From the City: An Experiment in Creative Living on the Land (NewYork,Evanston,SanFrancisco,London:Harper&Row,1933,1972),pp.1015. 2 Ibid.,pp.1719.
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These are only the costs within the factory. Above the factory, in a firm of numerousfactoriesandbranchoffices,comesanadditionallayerofadministrative overheadforthecorporateheadquarters. Andontopofallthat,therearethedistributioncostsofproducingforalarge market area: wholesaling transportation and warehousing costs, wholesaling ex penses,wholesalingprofits,retailingtransportationandwarehousingcosts,retail ingexpenses,retailingprofits.1 Since Borsodis time, the variety and sophistication of electrically powered small machinery has increased enormously. As we saw in Chapter One, after the invention of clockwork the design of machine processes for every conceivable functionwasnearlyinevitable.Likewiseonceelectricallypoweredmachinerywas introduced,thedevelopmentofsmallscaleelectricalmachineryforeverypurpose followedasamatterofcourse. Since first reading Borsodis account I have encountered arguments that his experience was misleading or atypical, given that he was a natural polymath and thereforeperhapsaquickerstudythanmost,andthereforefailedtoincludelearn ingtimeinhisestimateofcosts.Theseobjectionscannotbeentirelydismissed. One of Borsodis genuine shortcomings was his treatment of household pro ductioninlargelyautarkicterms.Hegenerallyarguedthatthehomesteadshould produceforitselfwhenitwaseconomicaltodoso,andbuyfromtheconventional money economy with wages when it was not, with little in between. The home steadershouldnotproduceasurplusforthemarket,hesaid,becauseitcouldonly be sold on disadvantageous terms in the larger capitalist economy and would wastelaborthatcouldbemoreefficientlyemployedeitherproducingothergoods forhomeconsumptionorearningwagesonthemarket.Hedidmentiontheuseof surplusesforgiftingandhospitality,butlargelyignoredthepossibilityofathriving informalandbartereconomyoutsidethecapitalistsystem. A relatively modest degree of division of labor in the informal and barter economy would be sufficient to overcome a great deal of the learning curve for craftproduction.Mostneighborhoodsprobablyhaveaskilledhomeseamstress,a bakerfamousforhishomemadebread,agoodhomebrewer,someonewithawell equippedwoodworkingormetalshop,andsoforth.Presentdayhomehobbyists, producing for barter, could make use of their existing skills. Whats more, in so doingtheywouldoptimizeefficiencyevenoverBorsodismodel:theywouldfully utilizethesparecapacityofhouseholdequipmentthatwouldhavebeenidlemuch ofthetimewithentirelyautarkicproduction,andspreadthecostsofsuchcapital equipment over a number of households (rather than, as in Borsodis model, du plicatingitineachhousehold). Oneofthemostimportanteffectsoflicensing,zoning,andassortedhealth andsafetycodes,atthelocallevel,istoprohibitproductiononascaleinterme diate between individual production for home consumption, and production for themarketinaconventionalbusinessenterprise.Suchregulationscriminalizethe intermediatecaseofthehouseholdmicroenterprise,producingeitherforthemar ket or for barter on a significant scale. This essentially mandates the level of autarkythatBorsodienvisioned,andenableslargercommercialenterprisestotake advantage of the rents resulting from individual learning curves. Skilled home producersarepreventedfromtakingadvantageofthesparecapacityoftheircapi tal equipment, and other households are forced either to acquire all the various specialtyskillsforthemselvesortobuyfromacommercialenterprise.
1
Borsodi,ThisUglyCivilization(Philadelphia:PorcupinePress,1929,1975),pp.3438.
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B.RELOCALIZEDMANUFACTURING
Borsodisothershortcomingwashisinadequaterecognitionofthepossibility of scales of manufacturing below the mass production factory. In Prosperity and Security,heidentifiedfourscalesofproduction:(I)familyproduction,(II)custom production,(III)factoryproduction,and(IV)socialproduction.1Heconfusedfac toryproductionwithmassproduction.Infact,customproductionfadesintofac tory production, with some forms of smallscale factory production that bear as much(ormore)resemblancetocustomproductionthantostereotypicallyAmeri can massproduction. In arguing that largescale factory production was more economicalonlyforahandfulofproductsautomobiles,motors,electricalappli ances,wire,pipe,andsimilargoodsheignoredthepossibilitythatevenmanyof those goods could be produced more economically in a small factory using gen eralpurposemachineryinshortproductionruns.2 In making serial production the defining feature of the factory, as opposed to the custom shop, he made the gulf between factory production and custom productiongreaterandmorefixedthanwasnecessary,andignoredtheextentto whichthelinebetweenthemisblurredinreality.
In the sense in which I use the term factory it applies only to places equipped withtoolsandmachinerytoproducegoods,waresorutensilsbyasystemin volvingserialproduction,divisionoflabor,anduniformityofproducts. ....Agaragedoinglargequantitiesofrepairworkonautomobilesismuch likeafactoryinappearance.Soisarailroadrepairshop.Yetneitheroftheselin ealdescendantsoftheroadsidesmithyistrulyafactory. Thedistinctiveattributeofthefactoryitselfisthesystemofserialproduc tion.Itisnot,asmightbethought,machineproductionnoreventheapplication of power to machinery.... Only the establishment in which a product of uni form design is systematically fabricated with more or less subdivision of labor 3 duringtheprocessisafactory. ....Butnoneoftheeconomiesofmassproduction,massdistribution,and massconsumptionispossibleifthefinishedproductispermittedtovaryinthis manner. Serial production in the factory is dependent at all stages upon uni formities: uniformities, of design, material and workmanship. Each article ex 4 actlyduplicateseveryother....
Inarguingthatsomeproducts(ofwhichcopperwireisoneexample)could bestbemade,ormademosteconomically,bythefactory,heneglectedtheques tion of whether such things as copper wire could be made more economically in much smaller factories with much less specialized machinery.5 Elsewhere, citing thesuperiorcostefficiencyofmillinggrainlocallyorinthehomeusingsmallelec tricmillsratherthanshippingboltedwhiteflourfromthemegamillsinMinnea polis, he appealed to the vision of a society of millions of household mills, along with a few factories making these domestic mills and supplying parts and re placements for them.... 6 This begs the question of whether a large, mass productionfactoryisbestsuitedtotheproductionofsmallappliances. In fact the possibility of an intermediate model of industrial production has been well demonstrated in industrial districts like EmiliaRomagna. As we men
Borsodi,ProsperityandSecurity:AStudyinRealisticEconomics(NewYorkandLon don:Harper&BrothersPublishers,1938),p.172. 2 Ibid.,p.181. 3 Borsodi,ThisUglyCivilization,pp.5657. 4 Ibid.,p.187. 5 Ibid.,p.78. 6 Ibid.,p.90.
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tioned in Chapter One, Sabels and Piores path not taken (integrating flexible, electrically powered machinery into craft production) was in fact taken in a few isolatedenclaves.Inthelate1890s,forexample,evenafterthetidehadturnedto ward massproduction industry, the German Franz Ziegler could still point to promisingexamplesofthetechnologicalrenovationofdecentralizedproductionin Remscheid,throughtheintroductionofflexiblemachinetools,poweredbysmall electricmotors.1 But with the overall economy structured around massproduction industry, the successful industrial districts were relegated mainly to serving niche markets inthelargerSloanisteconomy.Insomecases,liketheLyontextiledistrict(seebe low),thestateofficiallypromotedtheliquidationoftheindustrialdistrictandits absorption by the massproduction economy. In the majority of cases, with the predominance of largescale massproduction industry encouraged by the state andaneconomicenvironmentartificiallyfavorabletosuchformsoforganization, flexible manufacturing firms in the industrial districts were spontaneously ab sorbed into a larger corporate framework. The government having created an economy dominated by largescale, massproduction industry, the pattern of de velopment of smallscale producers was distorted by the character of the overall system.TwoexamplesofthelatterphenomenonweretheSheffieldandBirming hamdistricts,inwhichflexiblemanufacturersincreasinglytookontheroleofsup plyinginputstolargemanufacturers(theyweredrawnevermorecloselyintothe orbit of mass producers, in Piores and Sabels words), and as a result gradually losttheirflexibilityandtheirabilitytoproduceanythingbutinputsforthedomi nant manufacturer. Their product became increasingly standardized, and their equipment more and more dedicated to the needs of a particular large manufac turer.2 The smallscale machine tools of Remscheid, a decade after Ziegler wrote, wereseenasdoomed.3 ButallthishaschangedwiththedecayofMumfordsculturalpseudomorph, andtheadoptionofalternativestomassproduction(aswesawinChapterThree) asaresponsetoeconomiccrisis.Today,inbothToyotassingleminuteexchange of dies and in the flexible production in the shops of northcentral Italy, factory productiontakesonmanyofthecharacteristicsofcustomproduction.Withstan dardized,modularcomponentsandtheabilitytoswitchquickly between various combinations of features, production approaches a state of affairs in which every individualitemcomingoutofthefactoryisunique.Asmallfactoryorworkshop, frequentlyswitchingbetweenproducts,canstillobtainmostoftheadvantagesof Borsodisuniformitythroughthesimpleexpedientofmodulardesign.Leanpro ductionisasynthesisofthegoodpointsofmassproductionandcustomorcraft production. Leanproduction,broadlyspeaking,hastakentwoforms,typifiedrespectively bytheToyotaProductionSystemandEmiliaRomagna.RobertBeggetalcharac terizethem,respectively,astwowaysofgloballyorganizingflexiblespecialization: producerdriven commodity chains and consumerdriven commodity chains. The former,exemplifiedintheTPSandtosomeextentbymostglobalmanufacturing corporations, outsources production to small, networked supplier firms. Such firmsusuallybearthebruntofeconomicdownturns,andhave(becausetheymust competeforcorporatepatronage)havelittlebargainingpoweragainstthecorpo
Michael J. Piore and Charles F. Sabel, The Second Industrial Divide: Possibilities for Prosperity(NewYork:HarperCollins,1984),p.47. 2 Ibid.,p.37. 3 Ibid.,p.47.
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ratepurchasersoftheiroutput.Thelatter,exemplifiedbyEmiliaRomagna,entail cooperativenetworksofsmallfirmsforwhichalargecorporatepatronmostlikely doesnt even exist, and production is driven by demand.1 (Of course the large manufacturing corporations, in the former model, are far more vulnerable to bypassingbynetworkedsuppliersthantheauthorsdescriptionwouldsuggest.) TheinterestingthingabouttheToyotaProductionSystemisthatitscloserto custom production than to mass production. In many ways, its Craft Production 2.0. Craft production, as described by James Womack et al in The Machine That ChangedtheWorld,wascharacterizedby
A workforce that was highly skilled in design, machine operation, and fit ting.... Organizations that were extremely decentralized, although concentrated withina singlecity. Most parts and much of the vehicles design came from smallmachineshops.Thesystemwascoordinatedbyanowner/entrepreneur indirectcontactwitheveryoneinvolvedcustomers,employers,andsuppli ers. The use of generalpurpose machine tools to perform drilling, grinding, and otheroperationsonmetalandwood. 2 Averylowproductionvolume....
Thelastcharacteristic,lowvolume(PanhardetLevassorscustomautomobile operationproducedathousandorfewervehiclesayear)resultedfromtheinability tostandardizeparts,whichinturnresultedfromtheinabilityofmachinetoolsto cuthardenedsteel.Beforethiscapabilitywasachieved,itwouldhavebeenawaste of time to try producing to gauge; steel parts had to be cut and then hardened, whichdistortedthemsothattheyhadtobecustomfitted.Theoverwhelmingma jorityofproductiontimewastakenupbyfilingandfittingeachindividualpartto theotherpartson(say)acar. Most of the economies of speed achieved by Ford resulted, not from the as semblyline(althoughasasecondarymatteritmaybeusefulformaintainingpro ductionflow),butfromprecisionandinterchangeability.Fordwasthefirsttotake advantage of recent advances in machine tools which enabled them to work on prehardened metal. As a result, he was able to produce parts to a standardized gaugingsystemthatremainedconstantthroughoutthemanufacturingprocess.3In sodoing,heeliminatedtheoldjoboffitter,whichwastheprimarysourceofcost anddelayincustomproduction. But this most important innovation of Fordsinterchangeable parts pro duced to gaugecould have been introduced just as well into craft production, radicallyincreasingtheoutputandreducingthecostofcraftindustry.Fordman agedtoreducetaskcycletimeforassemblersfrom514minutesto2.3minutesby August 1913, before he ever introduced the moving assembly line. The assembly lineitselfreducedcycletimeonlyfrom2.3to1.19minutes.4 With this innovation, a craft producer might still have used generalpurpose machinery and switched frequently between products, while using precision ma chining techniques to produce identical parts for a set of standardized modular
RobertBegg,PoliRoukova,JohnPickles,andAdrianSmith,IndustrialDistrictsand CommodityChains:TheGarageFirmsofEmiliaRomagna(Italy)andHaskovo(Bulgaria), ProblemsofGeography(Sofia,BulgarianAcademyofSciences),12(2005),p.162. 2 JamesP.Womack,DanielT.Jones,andDanielRoos,TheMachineThatChangedthe World(NewYork,Toronto,London,Sydney:TheFreePress,1990and2007),p.22. 3 Ibid.,pp.2425. 4 Ibid.,pp.2526.
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designs. By radically reducing setup times and removing the main cost of fitting fromcraftproduction(allfilingandadjustingofpartshad...beeneliminated), craft producers would have achieved many of the efficiencies of mass production withnoneofthecentralizationcostswesawinChapterTwo. Inabrilliantillustrationofhistorystendencytoreappearasfarce,bytheway, GMs batchandqueue production resurrected the old job of fitter, supposedly eliminated forever by production to gauge, to deal with the enormous output of defectiveparts.AtGMsFraminghamplant,besidestheweeksworthofinventory piledamongtheworkstations,Waddellandhiscoauthorsfoundworkersstrug gling to attach poorly fitting parts to the Oldsmobile Ciera models they were building.1 Theothercostofcraftproductionwassetuptime:thecostandtimeentailed in skilled machinists readjusting machine tools for different products. Ford re ducedsetuptimethroughtheuseofproductspecificmachinery,foolproofedwith simplejigsandgaugestoensuretheyworkedtostandard.2Theproblemwasthat thisrequiredbatchproduction,thesourceofalltheinefficiencieswesawinChap terTwo. This second cost was overcome in the Toyota Production System by Taichi Ohnos singleminute exchange of dies (SMED), which reduced the changeover timebetweenproductsbyseveralordersofmagnitude.BythetimeofWorldWar II, in Americanstyle mass production, manufacturers were dedicating a set of presses to specific parts for months or even years at a time in order to minimize theunitcostsfromadayormoreofdowntimetochangedies.3Ohno,beginningin the late 1940s to experiment with used American machinery, by the late 1950s managed to reduce diechange time to three minutes. In so doing, he discovered that (thanks to the elimination of inprocess inventories, and thanks to the fact thatdefectsshowedupimmediatelyatthesource)itactuallycostlessperpartto make small batches of stampings than to run off enormous lots.4 In effect, he turnedmassproductionmachineryintogeneralpurposemachinery. In industrial districts like EmiliaRomagna, the problem of setup and changeover time was overcome by the development of flexible general purpose machinetools,particularlythesmallnumericallycontrolledmachinetoolswhich themicroprocessorrevolutionpermittedinthe1970s.Fordsinnovationsinpreci sion cutting of prehardened metal to gauge, and the elimination of setup time withsmallCNCtoolsinthe1970s,betweenthemmadeitpossibleforcraftproduc tiontocapturealltheefficienciesofmassproduction. Ohnossystemwasessentiallyareturntocraftproductionmethods,butwith the speed of Fords mass production assembly line. With the singleminute ex change of dies, factory machinery bore more of a functional resemblance to gen eralpurposemachinerythantothededicatedandinflexiblemachineryofGM.But with precision cutting capabilities and a few standardized, modular designs, it achievednearlythesameeconomiesofspeedasmassproduction. Wealreadydescribed,inChapterTwo,howSloanismseconomiesofspeed differfromthoseoftheToyotaProductionSystem.Theirony,accordingtoWad dell and Bodek, is that Toyota and other lean manufacturers reduce direct labor costs(supposedlytheraisondetreofSloanism)atratesthatleaveSloancompa niesinthedust.
1
Ibid.,p.78. Ibid.,p.33. 3 Ibid.,p.51. 4 Ibid.,p.52.

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Thecriticaltechnologytocuttingdirectlaborhoursbyfiftypercentormoreis betterthansixtyyearsold.Electricmotorssmallenoughandpowerfulenoughto drive a machine tool had a negligible impact on productivity in America, but a hugeimpactinJapan. Whenbeltdrivescameoffofmachines,andeachmachinewaspoweredby itsownelectricmotorthedooropeneduptoaproductivityimprovementequal tothatrealizedbyHenryFordwiththeadventoftheassemblyline.... ... [T]he day came in the evolution of electrical technology that each ma chine could be equipped with its own motor. Motors were powerful enough, smallenoughandcheapenoughforthebeltsandshaftstogobythewayside.... To American thinking, this was not much of an event. Sloans system was firmly entrenched by the time the shafts and belts were eliminated. Economy was perceived to result exclusively from running machines as fast as possible, making big batches at a time. There was still one man to one machine, for the mostpart,andmaximizingtheoutputfromthatmanslaborcostwastheobjec tive. Whether machines were lined up in rows, or scattered at random around thefactorydidnotmakemuchdifferencetotheresultsofthatequation. ShigeoShingopresentedapaperatatechnicalconferenceconductedbythe JapanManagementAssociationin1946entitledProductionMechanismofProc ess and Operation. It was based on the principle that optimizing the overall productionprocess...isthekeytomanufacturing.ToquoteShingo,Improve ment of process must be accomplished prior to improvement of operation. While the Americans saw manufacturing as a set of isolated operations, all linkedbysizeableinventories,theJapanesesawmanufacturingasaflow.Where the machines are is a big deal to people concerned about flow while it matters littletopeopleconcernedonlywithisolatedoperations.ToShingo,theflexibility toputmachinesanywherehewantedopenedthedoortofantasticproductivity 1 improvements.
In other words, lean manufacturingas Sabel and Piore put itamounts to thediscovery,afteracenturylongdeadend,ofhowtointegrateelectricalpower intomanufacturing. EmiliaRomagnaispartofalargerphenomenon,thesocalledThirdItaly(as distinguishedfromtheoldindustrialtriangleofMilanTurinGenoa,andthecash cropplantationagricultureoftheSouth):
a vast network of very small enterprises spread through the villages and small cities of central and Northeast Italy, in and around Bologna, Florence, Ancona, andVenice....Theselittleshopsrangeacrosstheentiresprectrumofthemod ernindustrialstructure,fromshoes,ceramics,textiles,andgarmentsononeside tomotorcycles,agriculturalequipment,automotiveparts,andmachinetoolson 2 theother.
Althoughthesesmallshops(quitesmallonaverage,withtenworkersorfewer notunusual)performanenormousvarietyoftheoperationsassociatedwithmass production,theydosousingartisansmethodsratherthanindustrialtechniques ofproduction.3 Atypicalfactoryishousedonthegroundfloorofabuilding,withtwoorthree floorsofapartmentsabovefortheseveralextendedfamiliesthatownit.

WaddellandBodek,pp.119122. PioreandSabel,ItalianSmallBusinessDevelopment:LessonsforU.S.IndustrialPol icy, in John Zysman and Laura Tyson, eds., American Industry in International Competi tion:GovernnmentPoliciesandCorporateStrategies(IthacaandLondon:CornellUniversity Press,1983). 3 Ibid,pp.392393.
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Theworkroomsarecleanandspacious.Anumberofhandoperationsareinter spersed with the mechanized ones. The machinery, however, is fully modern technologyanddesign;sometimesitisexactlythesameasthatfoundinamod ernfactory,sometimesareducedversionofasmallermachine.Theworkislaid outrationally:theworkpiecesflowalongminiatureconveyors,whosetwistsand 1 turnscreatetheimpressionofafactoryinadollhouse.
Atthesmallerendofthescale,productionisstillcenteredinthegarage... Despitehighproductivity,thepaceofworkistypicallyrelaxed,withproduc tion stopping daily for workers to retreat to their upstairs apartments for an ex tendedlunchorsiesta.2
Some[factories]recallturnofthecenturysweatshops....Butmanyoftheoth ersarespotless;theworkersextremelyskilledandthedistinctionbetweenthem andtheirsupervisorsalmostimperceptible;thetoolsthemostadvancednumeri cally controlled equipment of its type; the products, designed in the shop, so phisticated and distinctive enough to capture monopolies in world markets. If you had thought so long about Rousseaus artisan clockmakers at Neuchatel or Marxs idea of labor as joyful, selfcreative association that you had begun to doubt their possibility, then you might, watching these craftsmen at work, for giveyourselfthesuddenconvictionthatsomethingmoreutopianthanthepre 3 sentfactorysystemispracticalafterall.
ProductionontheEmiliaRomagnamodelisregulatedonademandpullba sis:generalpurposemachinerymakesitpossibletoproduceinsmallbatchesand switchfrequentlyandquicklyfromoneproductlinetoanother,asorderscomein. Further,withtheseparatestagesofproductionbrokendowninanetworkedrela tionship between producers, constant shifts in contractual relationships between suppliersandoutletsarefeasibleatrelativelylowcost.4 Whilethesmallsubcontractorsinasectorarezealousoftheirautonomyand often vigorously competitive, they are also quite likely to collaborate as they be comeincreasinglyspecialized,subcontractingtoeachotherorsharingthecostof aninnovationinmachinedesignthatwouldbetooexpensiveforoneproducerto orderbyhimself.Thereisatendencytowardcooperation,especially,becausethe network relationships betgween specialized firms may shift rapidly with changes indemand,withthesamefirmsalternatelysubcontractingtooneanother.5Piore andSabeldescribethefluidityofsupplychainsinanindustrialdistrict:
Thevariabilityofdemandmeantthatpatternsofsubcontractingwereconstantly rearranged. Firms that had underestimated a years demand would subcontract theoverflowtolesswellsituatedcompetitorsscramblingtoadapttothemarket. Butthenextyearthesituationmightbereversed,withwinnersintheprevious round forced to sell off equipment to last years losers. Under these circum stances, every employee could become a subcontractor, every subcontractor a 6 manufacturer,everymanufactureranemployee.
TheChineseshanzhaiphenomenonbearsastrikingresemblancetotheThird Italy.Theliteralmeaningofshanzhaiismountainfortress,butitcarriesthecon notationofaredoubtorstrongholdoutsidethestatescontrol,oraplaceofrefuge for bandits or rebels (much like the Cossack communities on the fringes of the
Ibid.,p.394. Ibid.,p.394. 3 Piore and Sabel, Italys HighTechnology Cottage Industry, Transatlantic Perspec tives7(December1982),p.6. 4 PioreandSabel,SecondIndustrialDivide,pp.2930. 5 PioreandSabel,ItalianSmallBusinessDevelopment,pp.400401. 6 PioreandSabel,SecondIndustrialDivide,p.32.
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RussianEmpire,ortheMerryMeninSherwoodForest).AndrewBunnieHuang writes:
The contemporary shanzhai are rebellious, individualistic, underground, and selfempowered innovators. They are rebellious in the sense that the shanzhaiarecelebratedfortheircopycatproducts;theyaretheproducersofthe notoriousknockoffsoftheiPhoneandsoforth.Theyindividualisticinthesense that they have a visceral dislike for the large companies; many of the shanzhai themselves used to be employees of large companies (both US and Asian) who departedbecausetheywerefrustratedattheinefficiencyoftheirformeremploy ers. They are underground in the sense that once a shanzhai goes legit and startsdoingbusinessthroughtraditionalretailchannels,theyarenolongercon sidered to be in the fraternity of the shanzai. They are selfempowered in the sensethattheyareuniversallytinyoperations,bootstrappedonminimalcapital, andtheyrunwiththeattitudeofifyoucandoit,thenIcanaswell. An estimate I heard places 300 shanzhai organizations operating in Shenzhen. These shanzai consist of shops ranging from just a couple folks to a fewhundredemployees;somejustspecializeinthingsliketooling,PCBdesign, PCBassembly,cellphoneskinning,whileothersarealittlebitbroaderincapa bility. The shanzai are efficient: one shop of under 250 employees churns out over 200,000 mobile phones per month with a high mix of products (runs as shortasafewhundredunitsispossible);collectivelyanestimateIheardplaces shanzhaiintheShenzhenareaproducingaround20millionphonespermonth. Thatsaneconomyapproachingabilliondollarsamonth.Mostofthesephones sellintothirdworldandemergingmarkets:India,Africa,Russia,andsoutheast Asia;IimagineifthismodelwereextendedtothePCspacetheshanzhaiwould easily accomplish what the OLPC failed to do. Significantly, the shanzai are al most universally bootstrapped on minimal capital with almost no additional fi nancingI heard that typical startup costs are under a few hundred thousand for an operation that may eventually scale to over 50 million revenue per year withinacoupleyears. Significantly,theydonotjustproducecopycatphones.Theymakeoriginal designphonesaswell....Theseoriginalphonesintegratewackyfeatureslike7.1 stereosound,dualSIMcards,afunctionalcigaretteholder,ahighzoomlens,or abuiltinUVLEDforcounterfeitmoneydetection.Theirabilitytonotjustcopy, buttoinnovateandriffoffofdesignsisverysignificant.Theyaredoingtohard ware what the web did for rip/mix/burn or mashup compilations.... Interest ingly, the shanzhai employ a concept called the open BOMthey share their billofmaterialsandotherdesignmaterialswitheachother,andtheyshareany improvements made; these rules are policed by community wordofmouth, to theextentthatifsomeoneisfoundcheatingtheyareostracizedbytheshanzhai ecosystem. To give a flavor of how this is viewed in China, I heard a local comment abouthowgreatitwasthattheshanzhaicouldnotonlymakeaniPhoneclone, they could improve it by giving the clone a userreplaceable battery. US law would come down on the side of this activity being illegal and infringing, but given the fecundity of mashup on the web, I cant help but wonder out loud if mashupinhardwareisallthatbad.... Inasense,Ifeelliketheshanzhaiarebrethrenoftheclassicwesternnotion of hackerentrepreneurs, but with a distinctly Chinese twist to them. My per sonalfavoriteshanzhaistoryisofthechapwhoownsahousethatImextraordi narilyenviousof.Hishousehasthreefloors:onthetop,ishisbedroom;onthe middlefloorisacompleteSMTmanufacturingline;onthebottomfloorisare tailoutlet,sellingtheproductsproducedaflooraboveanddesignedtwofloors above.HowcoolwoulditbetohaveyourveryownSMTlinerightinyourhome! ItwouldcertainlybeadisruptivechangetothewayIinnovatetoowninfrastruc turelikethatnotonlywouldIsaveonproductioncosts,reducemyprototyp ingtime,andturninventoryaggressively(therebyreducinginventorycapitalre quirements),Iwouldbeabletocutoutthe2050%minimumretailmargintypi
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callyrequiredbyUSretailers,assumingmyretailstoreisinahightrafficurban location. ....Ialwayshadatheorythatatsomepoint,theamountofknowledgeand thescaleofthemarketsintheareawouldreachacriticalmasswheretheChi nesewouldstopbeingsimplyworkersorcopiers,andwouldtakecontroloftheir own destiny and become creators and ultimately innovation leaders. I think it hasbegunthesestoriesImhearingoftheshanzhaiandthemashuptheypro ducearejustthebeginningofahockeystickthathasthepotentialtochangethe way business is done, perhaps not in the US, but certainly in that massive, un 1 tappedmarketoftenreferredtoastherestoftheworld.
AndliketheflexiblemanufacturingnetworksintheThirdItaly,Huangsays, the density and economic diversity of the environment in which shanzhai enter prisesfunctionpromotesflowandadaptability.
... [T]he retail shop on the bottom floor in these electronic market districts of China enables goods to actually flow; your neighbor is selling parts to you, the guyacrossthestreetsellsyourproductiontools,andtheentireblockisfocused onelectronicsproduction,consumptionordistributioninsomeway.Theturn overofgoodsishighsothatyourSMTanddesignshoponthefloorsabovecan 2 turnaprofit.
Thesuccessofshanzhaienterprisesresultsnotonlyfromtheirtechnicalinno vativeness,accordingtoVassarprofessorYuZhou,butfromhowtheyformsup plychainsandhowrapidlytheyreacttonewtrends.3
C.NEWPOSSIBILITIESFORFLEXIBLEMANUFACTURING
Considerablepossibilitiesexistedforincreasingtheefficiencyofcraftproduc tion through the use of flexible machinery, even in the age of steam and water power.TheJacquardloom,forexample,usedintheLyonsilkindustry,wasamuch lowertechprecursorofOhnosSingleMinuteExchangeofDies(SMED).Withthe loomcontrolledbyperforatedcards,thesetuptimeforswitchingtoanewpattern wasreducedsubstantially.Insodoing,itmadesmallbatchproductionprofitable thatwouldhavebeenoutofthequestionwithcostly,dedicatedmassproduction machinery.4 Lyon persisted as a thriving industrial district, by the way, until the French government killed it off in the 1960s: official policy being to encourage conversion to a more progressive, massproduction model through state sponsoredmergersandacquisitions,thelocalnetworkedfirmsbecamesubsidiar iesofFrenchbasedtransnationalcorporations.5 Suchindustrialdistricts,accordingtoPioreandSabel,demonstratedconsid erable technological vitality in the speed and sophistication with which they adaptedpowersourcestotheirneeds.
ThelargeAlsatiantextilefirmsnotonlymadeearlyuseofsteampowerbutalso becamethroughtheirsponsorshipofresearchinstitutesthenucleusofama jor theoretical school of thermodynamics. Small firms in SaintEtienne experi mented with compressed air in the middle of the nineteenth century, before turning,alongwithRemscheidandSolingen,tothecarefulstudyofsmallsteam Bunnie Huang, Tech Trend: Shanzhai, Bunnies Blog, February 26, 2009 <http://www.bunniestudios.com/blog/?p=284>. 2 Commentunderibid.<http://www.bunniestudios.com/blog/?p=284#comment415355>. 3 DavidBarboza,InChina,KnockoffCellphonesareaHit,NewYorkTimes,April28, 2009<http://www.nytimes.com/2009/04/28/technology/28cell.html>. 4 PioreandSabel,p.30. 5 Ibid.,p.36.
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andgasolineengines.After1890,whenthelongdistancetransmissionofelectric power was demontrated at Frankfurt, these three regions were among the first 1 industrialusersofsmallelectricmotors.
With the introduction of electric motors, the downscaling of power machin erytovirtuallyanykindofsmallscaleproductionwasnolongeramatteroftech nological possibilities. It was only a question of institutional will, in deciding whethertoallocateresearchanddevelopmentresourcesintolargeorsmallscale production.AswesawinChapterOne,thestatetippedthebalancetowardlarge scalemassproductionindustry,andproductionwithsmallscalepowermachinery wasrelegatedtoafewisolatedindustrialdistricts.Nevertheless,aswesawinear lierchapters,Borsodidemonstratedthatsmallscaleproductionevenstarvedfor developmentalresourcesandwithonehandtiedbehinditsbackwasabletosur passmassproductionindustryinefficiency. For the decades of Sloanist dominance, local industrial districts were islands inahostilesea. Butwiththedecayofthefirststageofthepaleotechnicpseudomorph,flexible manufacturinghasbecomethewaveofthefuturealbeitstillimprisonedwithina centralizedcorporateframework.Andbetteryet,networked,flexiblemanufactur ingshowsgreatpromiseforbreakingthroughthewallsoftheoldcorporatesystem andbecomingthebasisofafundamentallydifferentkindofsociety. Bythe1970s,anarchistMurrayBookchinwasproposingsmallgeneralpurpose machineryasthefoundationofadecentralizedsuccessortothemassproduction economy. In a 1970s interview with Mother Earth News, Borsodi repeated his general theme:thatwhendistributioncostsweretakenintoaccount,homeandsmallshop manufacturewerethemostefficientwaytoproducesometwothirdsofwhatwe consume. But he conceded that some goods, like electric wire or light bulbs, couldnotbeproducedverysatisfactorilyonalimitedscale.2 But as Bookchin and Kirkpatrick Sale pointed out, developments in produc tiontechnologysinceBorsodisexperimentshadnarrowedconsiderablytherange of goods for which genuine economies of scale existed. Bookchin proposed the adoption of multiplepurpose production machinery for frequent switching from oneshortproductionruntoanother.
Thenewtechnologyhasproducednotonlyminiaturizedelectroniccompo nents and smaller production facilities but also highly versatile, multipurpose machines.Formorethanacentury,thetrendinmachinedesignmovedincreas inglytowardtechnologicalspecializationandsinglepurposedevices,underpin ning the intensive division of labor required by the new factory system. Indus trialoperationsweresubordinatedentirelytotheproduct.Intime,thisnarrow pragmaticapproachhasledindustryfarfromtherationallineofdevelopment inproductionmachinery,observeEricW.LeaverandJohnJ.Brown.Ithasled to increasingly uneconomic specialization.... Specialization of machines in termsofendproductrequiresthatthemachinebethrownawaywhentheprod uct is no longer needed. Yet the work the production machine does can be re duced to a set of basic functionsforming, holding, cutting, and so onand thesefunctions,ifcorrectlyanalyzed,canbepackagedandappliedtooperateon apartasneeded.
Ibid.,p.31. Plowboy Interview (Ralph Borsodi), Mother Earth News, MarchApril 1974 <http:// www.soilandhealth.org/03sov/0303critic/Brsdi.intrvw/The%20PlowboyBorsodi%20Interview.htm>.
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Ideally, a drilling machine of the kind envisioned by Leaver and Brown would be able to produce a hole small enough to hold a thin wire or large enoughtoadmitapipe.... Theimportanceofmachineswiththiskindofoperationalrangecanhardly beoverestimated.Theymakeitpossibletoproducealargevarietyofproductsin a single plant. A small or moderatesized community using multipurpose ma chinescouldsatisfymanyofitslimitedindustrialneedswithoutbeingburdened with underused industrial facilities. There would be less loss in scrapping tools and less need for singlepurpose plants. The communitys economy would be morecompactandversatile,moreroundedandselfcontained,thananythingwe findinthecommunitiesofindustriallyadvancedcountries.Theeffortthatgoes intoretoolingmachinesfornewproductswouldbeenormouslyreduced.Retool 1 ingwouldgenerallyconsistofchangesindimensioningratherthanindesign.
AndSale,commentingonthispassage,observedthatmanyofBorsodisstipu latedexceptionscouldinfactnowbeproducedmostefficientlyinasmallcommu nity factory. The same plant could (say) finish a production run of 30,000 light bulbs, and then switch to wiring or other electrical productsthus in effect be comingasuccessionofelectricalfactories.Amachineshopmakingelectricvehi clescouldswitchfromtractorstoreaperstobicycles.2 Eric Husman, commenting on Bookchins and Sales treatment of multiple purposeproductiontechnology,pointsoutthattheywere1)toalargeextentrein venting the wheel, and 2) incorporating a large element of Sloanism into their model:
Human Scale (1980) was written without reference to how badly the Japa neseproductionmethods...werebeatingAmericanmassproductionmethods atthetime....WhatSalefailedtoappreciateisthattheJapanesemethod(... almost diametrically opposed to the Sloan method that Sale is almost certainly thinkingofasmassproduction)allowstheproductionofhigherqualityarticles atlowerprices.... ....TaichiOhnowouldlaughhimselfsillyatthethoughtofsomeonetoy ingwiththeidea[ofreplacinglargebatchproductiononspecializedmachinery withshorterrunsongeneralpurposemachinery]20yearsafterhehadperfected it.OhnosdevelopmentofToyotasJustInTimemethodwasbornexactlyoutof suchcircumstances,whenToyotawasasmall,intimatefactoryinabeatencoun tryandcouldnotaffordthevarietyandnumberofmachinesusedinsuchplaces as Ford and GM. Ohno pushed, and Shingo later perfected, the idea of JustIn TimebyusingSingleMinuteExchangeofDies(SMED),makingamockeryofa monthlong changeover. The idea is to use general machines (e.g. presses) in specializedways(differentdiesforeachstamping)andtovarytheproductmix ontheassemblylinesothatyoumakesomeofeveryproducteveryday. The Sale method (the slightly modified Sloan/GM method) would require extensive warehouses to store the massproduced production runs (since you run a years worth of production for those two months and have to store it for the remaining 10 months). If problems were discovered months later, the only recourse would be to wait for the next production run (months later). If too manylightbulbsweremade,ordesignswerechanged,allthosebulbswouldbe waste. Andof course youcan forget aboutproducing perishables this way. The JITmethodwouldbetorunafewlightbulbs,acoupleofirons,astove,andare frigeratoreveryhour,switchingbetweenthemascustomerdemanddictated.No warehouseneeded,justtakeitstraighttothecustomer.Ifproblemsarediscov ered,thenextbatchcanbehelduntiltheproblemsaresolved,andanewbatch MurrayBookchin,PostScarcityAnarchism(Berkeley,Ca.:TheRampartsPress,1971), pp.110111. 2 KirkpatrickSale,HumanScale(NewYork:Coward,McCann,&Geoghegan,1980),pp. 409410.
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will be forthcoming later in the shift or during a later shift. If designs or tastes 1 change,thereisnowastebecauseyouonlyproduceascustomersdemand.
SinceBookchinwrotePostScarcityAnarchism,incidentally,Japanesetechni cal innovations blurred even further the line between the production model he proposed above and the Japanese model of lean manufacturing. The numerically controlled machine tools of American massproduction industry, scaled down thanks to the microprocessor revolution, became suitable as a form of general purposemachineryforthesmallshop.AsdevelopedbytheJapanese,itwas
anewkindofmachinetool:numericallycontrolledgeneralpurposeequipment that is easily programmed and suited for the thousands of small and medium sizedjobshopsthatdomuchofthebatchproductioninmetalworking.Untilthe mid1970s, U.S. practice suggested that computercontrolled machine tools could be economically deployed only in large firms (typically in the aerospace industry);inthesefirmssuchtoolswereprogrammed,bymathematicallysophis ticated technicians, to manufacture complex components. But advances in the 1970s in semiconductor and computer technology made it possible to build a new generation of machine tools: numerically controlled (NC) or computer numericalcontrol (CNC) equipment. NC equipment could easily be pro grammedtoperformthewiderangeofsimpletasksthatmakeupthemajorityof machiningjobs.Theequipmentsbuiltinmicrocomputersallowedaskilledmet alworker to teach the machine a sequence of cuts simply by performing them once,orbytranslatinghisorherknowledgeintoaprogramthroughstraightfor 2 wardcommandsenteredviaakeyboardlocatedontheshopfloor.
According to Piore and Sabel, CNC machinery offers the same advantages over traditional craft productioni.e., flexibility with reduced setup costthat craftproductionofferedovermassproduction.
Efficiency in production results from adapting the equipment to the task at hand: the specialization of the equipment to the operation. With conventional technology, this adaptation is done by physical adjustments in the equipment; whenever the product is changed, the specialized machine must be rebuilt. In craft production, this means changing tools and the fixtures that position the workpiece during machining. In mass production, it means scrapping and re placing the machinery. With computer technology, the equipment (the hard ware) is adapted to the operation by the computer program (the software); therefore,theequipmentcanbeputtonewuseswithoutphysicaladjustments 3 simplybyreprogramming.
Themoresetuptimeandcostarereduced,andthelowerthecostofredeploy ing resources, the less significant both economies of scale and economies of spe cializationbecome.Hence,thewidertherangeofproductsitisfeasibletoproduce forthelocalorregionalmarket.4 Interestingly, as recounted by David Noble, numeric control was first intro ducedforlargebatchproductionwithexpensivemachineryinheavyindustry,and because of its many inefficiencies was profitable only with massive government subsidies.Butthesmallscalenumericallycontrolledmachinetools,madepossible bytheinventionofthemicroprocessor,wereideallysuitedtosmallbatchproduc tionbysmalllocalshops.
EricHusman,HumanScalePartIIMassProduction,GrimReaderblog,September 26, 2006 <http://www.zianet.com/ehusman/weblog/2006/09/humanscalepartiimass production.html>. 2 PioreandSabel,p.218. 3 Ibid.,p.260. 4 Ibid.,p.277.
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Thisisaperennialphenomenon,whichwewillexamineatlengthinChapter Seven:evenwhenthestatecapitalistsystemheavilysubsidizesthedevelopmentof technologies specifically suited to largescale, centralized production, decentral ized industry takes the crumbs from under the table and uses them more effi cientlythanstatecapitalistindustry.Consider,also,theroleofthestateincreating thetechnicalprerequisitesforthedesktopandInternetrevolutions,whicharede stroyingtheproprietarycultureindustriesandproprietaryindustrialdesign.State capitalismsubsidizesitsgravediggers. If Husman compared the BookchinSale method to the Toyota Production System,andfounditwanting,H.ThomasJohnsoninturnhassubjectedtheToy ota Production System to his own critique. As amazing as Ohnos achievements wereatToyota,introducinghisleanproductionmethodswithintheframeworkof atransnationalcorporationamountedtoputtingnewwineinoldbottles.Ohnos lean production methods, Johnson argued, are ideally suited to a relocalized manufacturing economy. (This is another example of the decay of the cultural pseudomorphdiscussedinthepreviouschapterthetemporaryimprisonmentof leanmanufacturingtechniquesintheoldcentralizedcorporatecocoon.) In his Foreword to Waddells and Bodeks The Rebirth of American Industry (something of a bible for American devotees of the Toyota Production System), Johnsonwrites:
Somepeople,Iamafraid,seeleanasapathwaytorestoringthelargemanu facturinggiantstheUnitedStateseconomyhasbeenfamousforinthepasthalf century. ... The cheap fossil fuel energy sources that have always supported such production operations cannot be taken for granted any longer. One proposal thathasgreatmeritisthatofrebuildingoureconomyaroundsmallerscale,lo callyfocused organizations that provide just as high a standard living [sic] as people now enjoy, but with far less energy and resource consumption. Helping tocreatethesustainablelocallivingeconomymaybethemostexcitingfrontier 1 yetforarchitectsofleanoperations.Timewilltell.
Thewarehousesonwheels(orcontainerships)distributionmodelusedby centralized manufacturing corporations, even lean ones like Toyota, is funda mentallyatoddswiththeprinciplesofleanproduction.Leanproductioncallsfor eliminatinginventorybygearingproductiontoordersonademandpullbasis.But long distribution chains simply sweep the huge factory inventories of Sloanism undertherug,andshiftthemtotrucksandships.Theresstillanenormousinven toryoffinishedgoodsatanygiventimeitsjustinmotion. Husman,whomwehavealreadyseenisanenthusiasticadvocateforleanpro duction,hashimselfpointedtowarehousesonwheelsasjustanoutsourcedver sionofSloanistinventories:
ForanotherviewofselfsufficiencyandIhatetobeatthisdeadhorse,but the parallel seems so strikingwe have the lean literature on local production. InLeanThinking,Womacketaldiscussthetravailsofthesimplealuminumsoda can. From the mine to the smelter to the rolling mill to the can maker alone takes several months of storage and shipment time, yet there is only about 3 hours worth of processing time. A good deal of aluminum smelting is done in Norwayand/orSweden,wherewidelyavailablehydroelectricpowermakesalu minum production from alumina very cheap and relatively clean. From there, thecansareshippedtobottlerswheretheysitforafewmoredaysbeforebeing filled,shipped,stored,bought,stored,anddrank.Alltold,ittakes319daystogo H.ThomasJohnson,Foreword,WilliamH.WaddellandNormanBodek,Rebirthof AmericanIndustry:AStudyofLeanManagement(Vancouver,WA:PCSPress,2005),p.xxi.
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from the mine to your lips, where you spend a few minutes actually using the can.Theprocessalsoproducesabout24%scrap(mostofwhichisrecycledatthe source)becausethecansaremadeatonelocationandshippedemptytothebot tlerandtheygetdamagedintransit.Itsanastoundingtaleofhowwastefulthe whole process is, yet still results in a product thatexternalities asidecosts very little to the end user. Could this type of thing be done locally? After all, everytownisawashinaseaofusedaluminumcans,andthereprocessingcostis much lower than the original processing cost (which is why Reynolds and AL COAbuyscrapaluminum). Takingthisproblemtotheobviousconclusion,BillWaddellandotherlean consultantshavebeentryingtoconvincemanufacturersthatiftheywouldonly fire the MBAs and actually learn to manufacture, they could do so much more cheaplylocallythantheycanbyoffshoringtheirproduction.Laborcostssimply arent the deciding factor, no matter what the local Sloan school is teaching: American labor may be more expensive then [sic] foreign labor, but it is also moreproductive.Further,allofthe(chimerical)gainstobemadefromgoingto cheaperlaborarelikelytobelostinshippingcosts.Thinkofthatflotillaofship ping containers on cargo ships between here and Asia as a huge warehouse on 1 theocean,warehousesthatnotonlychargerent,butalsoforfuel.
Regarding the specific example of aluminum cans, Womack et al speculate that the slow acceptance of recycling results from evaluating its efficiencies as a discretestep,ratherthanintermsofitseffectsontheentireproductionstream.If therateofrecyclingapproached100%,
interestingpossibilitieswouldemergefortheentirevaluestream.Minismelters withintegratedminirollingmillsmightbelocatednearthecanmakersinEng land,eliminatinginaflashmostofthetime,storage,anddistancesinvolvedto 2 dayinthestepsabovethecanmaker.
Asimilardynamicmightresultfromtheproliferationofminimillsscaledto local needs, with most of the steel inputs for smallscale industry supplied from recycledlocalscrap. AsWomacketalpointout,leanproductionproperlyunderstoodrequires notonlythescalingofmachinerytoproductionflowwithinthefactory.Italsore quiresscalingthefactorytolocaldemand,andsitingitascloseaspossibletothe pointofconsumption,inordertoeliminateasmuchaspossibleoftheinventory intrucksandships.Itisnecessarytolocatebothdesignandphysicalproduction intheappropriateplacetoservethecustomer.
Just as many manufacturers have concentrated on installing larger and faster machinestoeliminatethedirectlabor,theyvealsogonetowardmassivecentral ized facilities for product families ... while outsourcing more and more of the actualcomponentpartmakingtoothercentralizedfactoriesservingmanyfinal assemblers.Tomakemattersworse,theseareoftenlocatedonthewrongsideof theworldfromboththeirengineeringoperationsandtheircustomers...tore ducethecostperhouroflabor. Husman,HumanScalePartIIISelfSufficiency,GrimReaderblog,October2,2006 <http://www.zianet.com/ehusman/weblog/2006/10/humanscalepartiiiself sufficiency.html>. 2 James P. Womack and Daniel T. Jones, Lean Thinking: Banish Waste and Create Wealth in Your Corporation (Simon & Schuster, 1996), p. 43. In addition, recyclings slow takeoffmayreflectacoststructuredeterminedbythekindofstandard,highoverheadbu reaucraticorganizationwhichwesawdissectedbyPaulGoodmaninChapterTwo.Asre counted by Karl Hess and David Morris in Neighborhood Power, a neighborhood church groupwhichsetuparecyclingcenteroperatedbylocalresidentsfoundtheycouldsortout trashthemselvesandreceive$2050aton(thiswasinthemid70s).KarlHessandDavid Morris,NeighborhoodPower:TheNewLocalism(Boston:BeaconPress,1975),p.139.
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Theproductionprocessintheseremotelylocated,highscalefacilitiesmay evenbeinsomeformofflow,but...theflowoftheproductstopsattheendof the plant. In the case of bikes, its a matter of letting the finished product sit while a whole sea container for a given final assemblers warehouse in North America is filled, then sending the filled containers to the port, where they sit some more while waiting for a giant container ship. After a few weeks on the ocean,thecontainersgobytrucktooneofthebikefirmsregionalwarehouses, wherethebikeswaituntilaspecificcustomerorderneedsfillingoftenfollowed by shipment to the customers warehouse for more waiting. In other words, theres no flow except along a tiny stretch of the total value stream inside one isolatedplant. The result is high logistics costs and massive finished unit inventories in transitandatretailerwarehouses....Whencarefullyanalyzed,thesecostsand revenue losses are often found to more than offset the savings in production costs from low wages, savings which can be obtained in any case by locating smaller flow facilities incorporating more of the total production steps much 1 closertothecustomer. Toachievethescaleneededtojustifythisdegreeofautomationitwilloften benecessarytoservetheentireworldfromasinglefacility,yetcustomerswant togetexactlytheproducttheywantexactlywhentheywantit....Itfollowsthat oceansandleanproductionarenotcompatible.Webelievethat,inalmostevery case,locatingsmallerandlessautomatedproductionsystemswithinthemarket of sale will yield lower total costs (counting logistics and the cost of scrapped 2 goodsnoonewantsbythetimetheyarrive)andhighercustomersatisfaction.
Husman,incidentally,describesalocalizedopensourceproductionmodel, with numerous small local machine shops networked to manufacture a product according to opensource design specifications and then to manufacture replace mentpartsanddorepairsonanasneededbasis,asalmostanideallyLeanmanu facturingprocess.Dozensofsmallshopslocatedneartheircustomers,eachbuild ingoneatatime.3 TheauthorsofNaturalCapitalismdevoteaseparatechaptertoleanproduc tion. And perhaps not surprisingly, their description of the lean approach seems almosttailormadeforrelocalizedmanufacturingontheEmiliaRomagnamodel:
Theessenceoftheleanapproachisthatinalmostallmodernmanufacturing,the combinedandoftensynergisticbenefitsofthelowercapitalinvestment,greater flexibility,oftenhigherreliability,lowerinventorycost,andlowershippingcost ofmuchsmallerandmorelocalizedproductionequipmentwillfaroutweighany modestdecreasesinitsnarrowlydefinedefficiencyperprocessstep.Itsmore efficientoverall,inresourcesandtimeandmoney,toscaleproductionproperly, usingflexiblemachinesthatcanquicklyshiftbetweenproducts.Bydoingso,all the different processing steps can be carried out immediately adjacent to one anotherwiththeproductkeptincontinuousflow.Thegoalistohavenostops, nodelays,nobackflows,noinventories,noexpediting,nobottlenecks,nobuffer 4 stocks,andnomuda[i.e.,wasteorsuperfluity].
Decentralizingtechnologiesunderminedtherationaleforlargescalenotonly in massproduction industries, but in continuousprocessing industries. In steel, forexample,theintroductionoftheminimillwithelectricarcfurnaceeliminated

Womack,LeanThinking,p.64. Ibid.,p.244. 3 Husman,OpenSourceAutomobile,GrimReader,March3,2005<http://www.zianet .com/ehusman/weblog/2005/03/opensourceautomobile.html>. 4 PaulHawken,AmoryLovins,andL.HunterLovins,NaturalCapitalism:Creatingthe NextIndustrialRevolution(Boston,NewYork,London:Little,BrownandCompany,1999), pp.129130.
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theneedforoperatingonalargeenoughscaletokeepablastfurnaceincontinu ousoperation.Notonlydidtheminimillmakeitpossibletoscalesteelproduction to the local industrial economy, but it processed scrap metal considerably more cheaplythanconventionalblastfurnacesprocessedironore.1
PioreandSabel,p.209.
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SIDEBAR MARXISTOBJECTIONSTONONCAPITALISTMARKETS:THERELEVANCE OFTHEDECENTRALIZEDINDUSTRIALMODEL

In opposing a form of socialism centered on cooperatives and noncapitalist markets,astandardargumentofMarxistsandothernonmarketsocialistsisthatit wouldbeunsustainableanddegenerateintofullblowncapitalism:Whathappens to the losers? Noncapitalist markets would eventually become capitalistic, through the normal operation of the laws of the market. Heres the argument as statedbyChristianSiefkes,aGermanMarxistactiveintheP2Pmovement,onthe PeertoPeerResearchList:
Yes, they would trade, and initially their trading wouldnt be capitalistic, since labor is not available for hire. But assuming that trade/exchange is their primarywayoforganizingproduction,capitalismwouldultimatelyresult,since someoftheproducerswouldgobankrupt,theywouldlosetheirdirectaccessto themeansofproductionandbeforcedtoselltheirlaborpower.Ifnoneofthe otherproducersisrichenoughtohirethem,theywouldbeunluckyandstarve (orbeforcedtoturntootherwaysofsurvivalsuchasrobbery/thievery,prostitu tioingwhichiswhatwealsosawasalargescalephenomenonwiththeemer gence of capitalism, and which we still see in socalled developing countries where there is not enough capital to hire all or most of the available labor power).Butifthereareotherproducers/peoplewouldcanhirethem,theseedof capitalismwithitscapitalist/workerdivideislaid. Ofcourse,theemergingclassofcapitalistswontbejustpassivebystanders watching this process happen. Since they need a sufficiently large labor force, andsinceindependentproducersareunwantedcompetitionforthem,theyllac tively try to turn the latter into the former. Means for doing so are enclo sure/privatizationlawsthatdeprivetheindependentproducersoftheirmeansof productions,technicalprogressthatmakesitharderforthemtocompete(esp.if expensive machines are required which they simple lack the money to buy), other laws that increase the overhead for independent producers (e.g. high bookkeepingrequirements),creationofbigsalespointsthatnoncapitalistpro ducersdonthaveaccessto(departmentstoresetc.),simpleoverproductionthat drivessmallscaleproducers(whocantstandhugelosses)outofthemarket,etc. But even if they were passive bystanders (which is an unrealistic assumption), theconversionofindependentproducersintoworkersforcedtoselltheirlabor powerwouldstilltakeplacethroughthesimplelawsofthemarket,whichcause someproducerstofailandgobankrupt. So whenever you start with trade as the primary way of production, youll 1 soonerorlaterendupwithcapitalism.Itsnotacontradiction,itsaprocess.
Oneanswer,intheflexibleproductionmodel,isthattheresnoreasontohave anypermanentlosers.Firstofall,theoverheadcostsaresolowthatitspossibleto rideoutaslowperiodindefinitely.Second,inlowoverheadflexibleproduction,in which the basic machinery for production is widely affordable and can be easily reallocatedtonewproducts,theresreallynosuchthingasabusinesstogoout of.Thelowerthecapitalizationrequiredforenteringthemarket,andthelowerthe overheadtobeborneinperiodsofslowbusiness,themorethelabormarkettakes on a networked, projectoriented characterlike, e.g., peer production of soft
Christian Siefkes, [p2presearch] Fwd: Launch of Abundance: The Journal of Post Scarcity Studies, preliminary plans, Peer to Peer Research List, February 25, 2009 <http://listcultures.org/pipermail/p2presearch_listcultures.org/2009 February/001555.html>.
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ware.Infreesoftware,andinanyotherindustrywheretheaverageproducerowns a full set of tools and production centers mainly on selfmanaged projects, the situationislikelytobecharacterizednotsomuchbytheentranceandexitofdis cretefirmsas bya constantly shiftingbalanceofprojects, mergingandforking, and with free agents constantly shifting from one to another. The same fluidity prevails,accordingtoPioreandSabel,inthebuildingtradesandthegarmentin dustry.1 Anotherpoint:inasocietywheremostpeopleowntheroofsovertheirheads and can meet a major part of their subsistence needs through home production, workers who own the tools of their trade can afford to ride out periods of slow business, and to be somewhat choosy in waiting to contract out to the projects most suited to their preference. Its quite likely that, to the extent some form of wageemploymentstillexistedinafreeeconomy,itwouldtakeupamuchsmaller shareofthetotaleconomy,wagelaborwouldbehardertofind,andattractingit would require considerably higher wages; as a result, selfemployment and coop erative ownership would be much more prevalent, and wage employment would bemuchmoremarginal.Totheextentthatwageemploymentcontinued,itwould be the province of a class of itinerant laborers taking jobs of work when they neededabitofsupplementaryincomeortobuildupsomesavings,andthenperi odically retiring for long periods to a comfortable life living off their own home steads.Thispatternlivingoffthecommonandacceptingwagelaboronlywhen itwasconvenientwaspreciselywhattheEnclosureswereintendedtostampout. For the same reason, the standard model of unemployment in American stylemassproductionindustryisinfactquiteplacebound,andlargelyirrelevant toflexiblemanufactureinEuropeanstyleindustrialdistricts.Insuchdistricts,and toaconsiderableextentintheAmericangarmentindustry,worksharingwithre duced hours is chosen in preference to layoffs, so the dislocations from an eco nomic downturn are far less severe. Unlike the American presumption of a fixed and permanent shop as the central focus of the labor movement, the industrial districtassumesthesolidaristiccraftcommunityastheprimarylongtermattach mentfortheindividualworker,andthejobsiteatanygiventimeasapassingstate ofaffairs.2 Andfinally,inarelocalizedeconomyofsmallscaleproductionforlocalmar kets, where most money is circulated locally, there is apt to be far less of a ten dencytowardboombustcyclesorwildfluctuationsincommodityprices.Rather, thereislikelytobeafairlystablelongtermmatchingofsupplytodemand. Inshort,theMarxistobjectionassumesthehighoverheadindustrialproduc tionmodelasnormal,andjudgescooperativeandpeerproductionbytheirabil itytoadapttocircumstancesthatalmostcertainlywouldntexist.
PioreandSabel,TheSecondIndustrialDivide,pp.117118. Ibid.,pp.120121.
TheSmallWorkshop, DesktopManufacturing, andHouseholdProduction

A.NEIGHBORHOODANDBACKYARDINDUSTRY
A recurring theme among early writers on decentralized production and the informalandhouseholdeconomiesisthecommunityworkshop,anditsuseinpar ticular for repair and recycling. Even in the 1970s, when the price of the smallest machinetoolswasmuchhigherinrealterms,itwasfeasiblebymeansofcoopera tiveorganizationtospreadthecapitaloutlaycostoveralargepoolofusers. Kirkpatrick Sale speculated that neighborhood recycling and repair centers would put back into service the almost endless supply of defunct appliances cur rentlysittinginclosetsorbasementsaswellasservingasremanufacturingcen tersfor(say)dieselenginesandrefrigerators.1 Writingalongsimilarlines,ColinWardsuggestedthepoolingofequipment inaneighborhoodgroup.
Suppose that each member of the group had a powerful and robust basic tool,whilethegroupasawholehad,forexample,abenchdrill,lathesandasaw bench to relieve the members from the attempt to cope with work which re quired these machines with inadequate tools of their own, or wasting their re sources on underused individuallyowned plant. This in turn demands some kindofbuildingtohousethemachinery:theCommunityWorkshop. But is the Community Workshop idea nothing more than an aspect of the 2 leisureindustry,acompensationforthetediumofwork?
In other words, is it just a hobby? Ward argued, to the contrary, that it wouldbridgethegrowinggapbetweentheworldsofworkandleisurebymaking productiveactivityinonesfreetimeasourceofrealusevalue.
Could[theunemployed]makealivelihoodforthemselvestodayinthecommu nityworkshop?Iftheworkshopisconceivedmerelyasasocialserviceforcrea tiveleisuretheansweristhatitwouldprobablybeagainsttherules....Butif theworkshopwereconceivedonmoreimaginativelinesthananyexistingven tureofthiskind,itspotentialitiescouldbecomeasourceoflivelihoodinthetru estsense.InseveraloftheNewTownsinBritain,forexample,ithasbeenfound necessary and desirable to build groups of small workshops for individuals and small businesses engaged in such work as repairing electrical equipment or car bodies, woodworking and the manufacture of small components. The Commu
406.
KirkpatrickSale,HumanScale(NewYork:Coward,McCann,&Geoghegan,1980),p. ColinWard,AnarchyinAction(London:FreedomPress,1982),p.94.
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nity Workshop would be enhanced by its cluster of separate workplaces for gainfulwork.Couldnttheworkshopbecomethecommunityfactory,providing workoraplaceforworkforanyoneinthelocalitywhowantedtoworkthatway, notasanoptionalextratotheeconomyoftheaffluentsocietywhichrejectsan increasing proportion of its members, but as one of the prerequisites of the workercontrolledeconomyofthefuture? Keith Paton ..., in a farsighted pamphlet addressed to members of the ClaimantsUnion,urgedthemnottocompeteformeaninglessjobsintheecon omy which has thrown them out as redundant, but to use their skills to serve theirowncommunity.(Oneofthecharacteristicsoftheaffluentworldisthatit deniesitspoortheopportunitytofeed,clothe,orhousethemselves,ortomeet their own and their families needs, except from grudgingly doledout welfare payments).Heexplainsthat: ... [E]lectrical power and affluence have brought a spread of inter mediatemachines,someofthemverysophisticated,toordinarywork ingclasscommunities.Eveniftheydonotownthem(asmanyclaim antsdonot)thepossibilityexistsofborrowingthemfromneighbours, relatives, exworkmates. Knitting and sewing machines, power tools and other doityourself equipment comes in this category. Garages can be converted into little workshops, homebrew kits are popular, partsandmachinerycanbetakenfromoldcarsandothergadgets.If theysawtheiropportunity,trainedmetallurgistsandmechanicscould getintoadvancedscraptechnology,recyclingthemetalwastesofthe consumer society for things which could be used again regardless of whethertheywouldfetchanythinginashop.Manyhobbyenthusiasts 1 couldbegintoseetheirinterestsinanewlight.
Karl Hess also discussed community workshopsor as he called them, sharedmachineshopsinCommunityTechnology.

Themachineshopshouldhaveenoughbasictools,bothhandandpower,to makethebuildingofdemonstrationmodelsortestfacilitiesapracticalandeve rydayactivity.Thesharedshopmightjustbepartofsomeotherpublicfacility, usedinitsoffhours.Ortheshopmightbeseparateandstockedwithcastoffin dustrial tools, with tools bought from government surplus through the local school system ... Work can, of course, be done as well in home shops or in commercialshopsofpeoplewholikethecommunitytechnologyapproach.... Thinkingofsuchasharedworkshopinaninnercity,youcanthinkofitsuse ... for the maintenance of appliances and other household goods whose re placementmightrepresentarealeconomicburdenintheneighborhood.... ... The machine shop could regularly redesign castoff items into useful ones.Discardedrefrigerators,forinstance,suggestaninfinityofnewuses,from fishtanks,afterremovingdoors,tonumeroussmallpartsaseachdiscardedone isstrippedforitscomponents,whichincludesmallcompressors,coppertubing, 2 heattransferarrays,andsoon.Thesamegoesforwashingmachines....
Hessschoiceofwords,bytheway,evidencedafailuretoanticipatetheextent towhichflexiblenetworkedmanufacturingwouldblurthelinebetweendemon strationmodelsortestfacilitiesandserialproduction. Sharingisawayofmaximizingtheutilizationofidleproductivegoodsowned byindividuals.Justaboutanytoolorapplianceyouneedforacurrentproject,but lack, is probably gathering dust on the shelf of someone within a few blocks of where you live. If the pooling of such idle resources doesnt seem like much of a dealforthepersonwiththeunusedappliances,keepinmindfirstthatheisntget
KeithPaton,TheRighttoWorkortheFighttoLive?(StokeonTrent,1972),inWard, AnarchyinAction,pp.108109. 2 KarlHess,CommunityTechnology,pp.9697.
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tinganythingatalloutofthemnow,secondthathemaytradeaccesstothemfor access to other peoples tools that he needs, and third that the arrangement may increasethevarietyofgoodsandserviceshehastochoosefromoutsidethewage system. The same idea has appeared in the San Francisco Bay area, albeit in a com mercialratherthancommunitarianform,asTechShop:1
TechShop is a 15,000 squarefoot membershipbased workshop that pro vides members with access to tools and equipment, instruction, and a creative and supportive community of likeminded people so you can build the things youhavealwayswantedtomake.... TechShopprovidesyouwithaccesstoawidevarietyofmachineryandtools, includingmillingmachinesandlathes,weldingstationsandaCNCplasmacut ter,sheetmetalworkingequipment,drillpressesandbandsaws,industrialsew ingmachines,handtools,plasticandwoodworkingequipmentincludinga4x 8ShopBotCNCrouter,electronicsdesignandfabricationfacilities,Epiloglaser cutters,tubingandmetalbendingmachines,aDimensionSST3Dprinter,elec trical supplies and tools, and pretty much everything youd ever need to make justaboutanything.
Hesslinkedhisideaforasharedmachineshoptoanotheridea,[s]imilarin spirit,thesharedwarehouse:
Acommunitydecisiontoshareaspaceinwhichdiscardedmaterialscanbe stored, categorized, and made easily available is a decision to use an otherwise wastedresource.... Thesharedwarehouse...shouldcollectatroveofbitsandpiecesofbuild ingmaterials....Therealwaysseemstobeabundleofwoodattheendofany projectthatistoogoodtoburn,toojunkytosell,andtooinsignificanttostore. Put a lot of those bundles together and the picture changes to more and more practicalpossibilitiesofbuildingmaterialsforthepublicspace. Sparepartsarefairgameforthecommunitywarehouse.Thusitcanserveas apartscabinetforthecommunitytechnologyexperimenter.... A problem common to many communities is the plight of more resources leaving than coming back in.... The shared work space and the shared ware house space involve a community in taking a first look at this problem at a 2 homelyandnonideologicallevel.
ThistiesincloselywithJaneJacobsrecurringthemesofthedevelopmentof local,diversifiedeconomiesthroughthediscoveryofcreativeusesforlocallygen erated waste and byproducts, and the use of such innovative technologies to re placeimports.3 E. F. Schumacher recounted his experiences with the Scott Bader Common wealth, encouraging (often successfully) the workerowners to undertake such ventures as a community auto repair shop, communally owned tools and other support for household gardening, a community woodworking shop for building andrepairingfurniture,andsoforth.Theeffectofsuchmeasureswastotakeoff some of the pressure to earn wages, so that workers might scale back their work hours.4
<http://techshop.ws/>. KarlHess,CommunityTechnology(NewYork,Cambridge,Hagerstown,Philadelphia, SanFrancisco,London,MexicoCity,SaoPaulo,Sydney:Harper&Row,Publishers,1979), pp.9698. 3 JaneJacobs,TheEconomyofCities(NewYork:VintageBooks,1969,1970) 4 E. F. Schumacher, Good Work (New York, Hagerstown, San Fransisco, London: Harper&Row,1979),pp.8083.
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The potential for such common workspaces increases by an order of magni tude, of course, with the kinds of small, cheap, computerized machine tools we willconsiderlaterinthischapter. Thebuilding,bottomup,oflocaleconomiesbasedonsmallscaleproduction withmultiplepurposemachinerymightwelltakeplacepiecemeal,beginningwith suchsmallshops,atfirstengagedprimarilyinrepairandremanufactureofexisting machineryandappliances.AsPeakOilandthedegradationofthenationaltrans portation system cause corporate logistic chains for spare parts to dry up, small garage and backyard machine shops may begin out of sheer necessity to take up the slack, custommachining the spare parts needed to keep aging appliances in operation.Fromthis,thenaturalprogressionwouldbetofarmingouttheproduc tionofcomponentsamonganumberofsuchsmallshops,andperhapsdesigning and producing simple appliances from scratch. (An intermediate step might be mass customization, the custom design of modular accessories for mass produced platforms.) In this manner, networked production of spare parts by smallshopsmightbethefoundationforanewindustrialrevolution. As Jacobs described it, the Japanese bicycle industry had its origins in just suchnetworkingbetweencustomproducersofspareparts.
To replace these imports with locally made bicycles, the Japanese could haveinvitedabigAmericanorEuropeanbicyclemanufacturertoestablishafac tory in Japan ... Or the Japanese could have built a factory that was a slavish imitation of a European or American bicycle factory. They would have had to import most or all of the factorys machinery, as well as hiring foreign produc tionmanagersorhavingJapaneseproductionmanagerstrainedabroad.... ... [Instead], shops to repair [imported bicycles] had sprung up in the big cities.... Imported spare parts were expensive and broken bicycles were too valuabletocannibalizetheparts.Manyrepairshopsthusfounditworthwhileto make replacement parts themselvesnot difficult if a man specialized in one kindofpart,asmanyrepairmendid.Inthisway,groupsofbicyclerepairshops were almost doing the work of manufacturing entire bicycles. That step was takenbybicycleassemblers,whoboughtparts,oncontract,fromrepairmen:the 1 repairmenhadbecomelightmanufacturers.
KarlHessandDavidMorris,inNeighborhoodPower,suggestedaprogression fromretailtorepairtomanufacturingasthenaturalmodelforatransitiontorelo calized manufacturing. They wrote of a process by which repair shops begin to transform themselves into basic manufacturing facilities ... 2 Almost directly echoing Jacobs, they envisioned a bicycle collectives retail shop adding mainte nancefacilities,andthen:
Afteranumberofpeoplehavelearnedtheskillsinrepairsinaneighborhood,a factory could be initiated to produce a few vital parts, like chains or wheels or tires. Finally, if the need arises, fullscale production of bicycles could be at tempted.
Interestinglyenough,DonTapscottandAnthonyWilliamsdescribejustsuch aprocesstakingplaceinmicromanufacturingfacilities(aboutwhichmorebelow) whichhavebeenintroducedintheThirdWorld.Indianvillagersareusingfablabs
Jacobs,EconomyofCities,pp.6364. KarlHessandDavidMorris,NeighborhoodPower:TheNewLocalism(Boston:Beacon Press,1975),p.69.

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(again, see below) to make replacement gears for outof date copying ma chines....1 Thesameprocesscouldbereplicatedinmanyareasofproduction.Retailcol lectives might support communitysupported agriculture as a primary source of supply,followedbyasmallcanningfactoryandthenbyaglassrecyclingcenterto tradebrokenbottlesandjarsforusableonesonanarrangementwiththebottling companies.2Again,theparallelswithJaneJacobsarestriking:
Citiesthatreplaceimportssignificantlyreplacenotonlyfinishedgoodsbut,con currently, many, many items of producers goods and services. They do it in swiftlyemerging,logicalchains.Forexample,firstcomesthelocalprocessingof fruitpreservesthatwereformerlyimported,thentheproductionofjarsorwrap pingsformerlyimportedforwhichtherewasnolocalmarketofproducersuntil thefirststephadbeentaken.Orfirstcomestheassemblyofformerlyimported pumps for which, once the assembly step has been taken, parts are imported; then the making of parts for which metal is imported; then possibly even the smeltingofmetalfortheseandotherimportreplacements.Theprocesspaysfor itselfasitgoesalong.WhenTokyowentintothebicyclebusiness,firstcamere pair work cannibalizing imported bicycles, then manufacture of some of the parts most in demand for repair work, then manufacture of still more parts, fi nallyassemblyofwhole,Tokyomadebicycles.AndalmostassoonasTokyobe ganexportingbicyclestootherJapanesecities,therearoseinsomeofthosecus tomercitiesmuchthesameprocessofreplacingbicyclesimportedfromTokyo, 3 ...ashadhappenedwithmanyitemssentfromcitytocityintheUnitedStates.
A directly analogous process of import substitution can take place in the in formal economy, with production for barter at the household and neighborhood levelusinghouseholdcapitalgoods(aboutwhichmorebelow)replacingthepur chaseofconsumptiongoodsinthewageeconomy. PaulandPercivalGoodmanwrote,inCommunitas,ofthepossibilityofdecen tralizedmachiningofpartsbydomesticindustry,giventheuniversalavailabilityof powerandtheingenuityofsmallmachinery,coupledwithassemblyatacentral izedlocation.Itis,theywrote,almostalwayscheapertotransportmaterialthan men.4 AgoodexampleofthisphenomenoninpracticeistheJapaneseshadowfac toriesduringWorldWarII.Smallshopsattachedtofamilyhomesplayedanim portant role in the Japanese industrial economy, according to Nicholas Wood. Manycomponentsandsubprocesseswerefarmedoutforhouseholdmanufacture, inhomeshopsconsistingofperhapsafewlathes,drillpressesormillingmachines. In the war, the government had actively promoted such shadow factories, dis tributing machine tools in workers homes in order to disperse concentrated in dustryandreduceitsvulnerabilitytoAmericanstrategicbombing.5Afterthewar, the government encouraged workers to purchase the machinery.6 As late as the latefifties,suchhomemanufacturerswerestilltypicallytiedtoparticularcompa nies,inwhatamountedtoindustrialserfdom.ButaccordingtoWood,bythetime
Don Tapscott and Anthony D. Williams, Wikinomics: How Mass Collaboration ChangesEverything(NewYork:Portfolio,2006),p.213. 2 HessandMorris,p.142. 3 Jacobs,CitiesandtheWealthofNations:PrinciplesofEconomicLife(NewYork:Vin tageBooks,1984),p.38. 4 p.83. 5 NicholasWood,TheFamilyFirmBaseofJapansGrowingEconomy,TheAmeri canJournalofEconomicsandSociology,vol.23no.3(1964),p.316. 6 Ibid.,p.319.
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ofhiswriting(1964),manyhomemanufacturershadbecomefreeagents,contract ingouttowhateverfirmmadethebestoffer.1Theoverheadcostsofhomeproduc tion,afterthewar,werereducedbystandardizationandmodulardesign.Forex ample, household optical companies found it impossible at first to produce and stockthemanysizesoflensesandprismsforthemanydifferentmodels.Butsub sequentlyallJapanesecompaniesstandardizedtheirdesignstoafewmodels.2 A similar shadow factory movement emerged in England during the war, as described by Goodman: Home manufacture of machined parts was obligatory in Englandduringthelastwarbecauseofthebombings,anditsucceeded.3 The Chinese pursued a system of localized production along roughly similar lines in the 1970s. According to Lyman van Slyke, they went a long way toward meetingtheirsmallmachineryneedsinthisway.Thiswaspartofapolicyknown as the Five Smalls, which involved agricultural communes supplying their own needslocally(hydroelectricenergy,agrochemicals,cement,ironandsteelsmelt ing, and machinery) in order to relieve largescale industry of the burden. In the caseofmachinery,specifically,vanSlykegivestheexampleofthehandtractor:
...[O]neofthemostcommonlyseenpiecesoffarmequipmentisthehand tractor, which looks like a large rototiller. It is driven in the field by a person walking behind it.... This particular design is common in many parts of Asia, notsimplyinChina.Now,atthesmallscalelevel,itisimpossiblefortheserela tivelysmallmachineshopsandmachineryplantstomanufactureallpartsofthe tractor. In general, they do not manufacture the engine, the headlights, or the tires, and these are imported from other parts of China. But the transmission andthesheetmetalworkandmanyoftheothercomponentsmaywellbemanu facturedatthesmallplants.Waterpumpsofavarietyoftypes,bothgasolineand electric,areoftenmadeinsuchplants,asareavarietyofotherfarmimplements, rightdowntosimplehandtools.Inaddition,inmanyoftheseshops,aportion of plant capacity is used to build machine tools. That is, some lathes and drill presseswerebeingusednottomakethefarmmachinerybuttomakeadditional lathes and drill presses. These plants were thus increasing their own future ca pabilitiesatthelocallevel.Equallyimportantisamachineryrepaircapability.It iscrucial,inacountrywherethereisntaFordagencyjustdowntheroad,that thelocalunitbeabletomaintainandrepairitsownequipment.Indeed,inthe busyagriculturalseasonmanysmallfarmmachineryplantsclosedowntempo rarily, and the work force forms mobile repair units that go to the fields with sparepartsandtoolsinordertorepairequipmentonthespot. Finally,averyimportantelementisthetrainingfunctionplayedinallparts of the smallscale industry spectrum, but particularly in the machinery plants. Countless times we saw two people on a machine. One was a journeyman, the regular worker, and the second was an apprentice, a younger person, often a 4 youngwoman,whowaslearningtooperatethemachine.
It should be stressed that this wasnt simply a repeat of the disastrous Great LeapForward,whichwasimposedfromaboveinthelate1950s.Itwas,rather,an exampleoflocalingenuityinfillingavacuumleftbythecentrallyplannedecon omy.Ifanything,inthe1970sasopposedtothe1950sthepolicywasconsidered apainfulconcessiontonecessity,tobeabandonedassoonaspossible,ratherthan
Ibid.,p.317. Ibid.,p.318. 3 Paul Goodman, People or Personnel, in People or Personnel and Like a Conquered Province(NewYork:VintageBooks,1965,1967,1968),p.95. 4 Lyman P. van Slyke, Rural SmallScale Industry in China, in Richard C. Dorf and YvonneL.Hunter,eds.,AppropriateVisions:TechnologytheEnvironmentandtheIndivid ual(SanFrancisco:Boyd&FraserPublishingCompany,1978)pp.193194.
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a vision pursued for its own sake. Van Slyke was told by those responsible for smallscale industry, over and over again, that their goals were to move from smalltolarge,fromprimitivetomodern,andfromhereandtheretoeverywhere.1 AiminChenreportedin2002thatthegovernmentwasactuallycrackingdownon localproductionundertheFiveSmallsinordertoreduceidlecapacityinthebe leagueredstatesector.2Thecentrallyplannedeconomyunderstatesocialism,like thecorporateeconomy,canonlysurvivebysuppressingsmallscalecompetition. Therawmaterialsforsuchrelocalizedproductionarealreadyinplaceinmost neighborhoods,toalargeextent,intheformofunusedorunderusedappliances, powertoolsgatheringdustinbasementsandgarages,andthelike.Itsalljustwait ingtobeintegratedontoalocaleconomy,assoonasproducerscanbehookedup toneeds,andpeoplerealizethateveryneedmetbysuchmeansreducestheirde pendence on wage labor by an equal amountand probably involves less labor and more satisfaction than working for the money. The problem is figuring out whatslyingaround,whohaswhatskills,andhowtoconnectsupplytodemand. AsHessandMorrisputit,
In one block in Washington, D.C., such a survey uncovered plumbers, electri cians, engineers, amateur gardeners, lawyers, and teachers. In addition, a vast numberoftoolswerediscovered;completeworkshops,incompletemachinetool shops,andextendedfamilyrelationshipswhichaddedtotheneighborhoodsin ventoryanuncleinthehardwarebusiness,anauntinthecosmeticsindustry,a brotherteachingbiologydowntown.Theorganizingofadirectoryofhumanre 3 sourcescanbeanorganizingtoolitself.
Arguably the neighborhood workshop and the household microenterprise (whichwewillexaminelaterinthischapter)achieveanoptimaleconomyofscale, determinedbythethresholdatwhichahouseholdproducergoodisfullyutilized, buttheoverheadforapermanenthiredstaffandastandalonededicatedbuilding isnotrequired. Thevariousthinkersquotedabovewroteoncommunityworkshopsatatime when the true potential of smallscale production machinery was just starting to emerge.
B.THEDESKTOPREVOLUTIONANDPEERPRODUCTION INTHEIMMATERIALSPHERE
Since the desktop revolution of the 1970s, computers have promised to be a decentralizing force on the same scale as electrical power a century earlier. The computer,accordingtoMichelPioreandCharlesSabel,isamachinethatmeets Marxsdefinitionofanartisanstool:itisaninstrumentthatrespondstoandex tendstheproductivecapacitiesoftheuser.
Itisthereforetemptingtosumtheobservationsofengineersandethnographers totheconclusionthattechnologyhasendedthedominationofspecializedma chinesoverunandsemiskilledworkers,andredirectedprogressdownthepath
Ibid.,p.196. AiminChen,ThestructureofChineseindustryandtheimpactfromChinasWTO entry, Comparative Economic Studies (Spring 2002) <http://www.entrepreneur.com/ tradejournals/article/print/86234198.html>. 3 HessandMorris,NeighborhoodPower,p.127.
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ofcraftproduction.Theadventofthecomputerrestoreshumancontroloverthe 1 productionprocess;machineryagainissubordinatedtotheoperator.
AsJohanSoderbergargues,[t]heuniversallyapplicablecomputerrunonfree softwareandconnectedtoanopennetwork...have[sic]insomerespectsleveled theplayingfield.Throughtheglobalcommunicationnetwork,hackersarematch ingthecoordinatingandlogisticcapabilitiesofstateandcapital.2 Indeed, the computer itself is the primary item of capital equipment in a growingnumberofindustries,likemusic,desktoppublishingandsoftwaredesign. Thedesktopcomputer,supplementedbyassortedpackagesofincreasinglycheap printingorsoundeditingequipment,iscapableofdoingwhatpreviouslyrequired aminimuminvestmentofhundredsofthousandsofdollars. Thegrowingimportanceofhumancapital,andtheimplosionofcapitaloutlay costs required to enter the market, have had revolutionary implications for pro ductionintheimmaterialsphere.Intheolddays,theimmenseoutlayforphysical assetswastheprimarybasisforthecorporatehierarchyspower,andinparticular foritscontroloverhumancapitalandotherintangibleassets. AsLuigiZingalesobserves,thedecliningimportanceofphysicalassetsrelative to human capital has changed this. Physical assets, which used to be the major source of rents, have become less unique and are not commanding large rents anymore. And the demand for process innovation and quality improvement ... canonlybegeneratedbytalentedemployees,whichincreasestheimportanceof humancapital.3ThisisevenmoretruesinceZingaleswrote,withtheriseofwhat has been variously called the wikified workplace,4 the hyperlinked organization,5 etc.WhatNiallCookcallsEnterprise2.06istheapplicationofthenetworkedplat formtechnologies(blogs,wikis,etc.)associatedwithWeb2.0totheinternalorga nization of the business enterprise. It refers to the spread of selfmanaged peer network organization inside the corporation, with the internal governance of the corporation increasingly resembling the organization of the Linux developer community. TomPetersremarkedinquitesimilarlanguage,somesixyearsearlierinThe Tom Peters Seminar, on the changing balance of physical and human capital. Of Inc.magazines500topgrowthcompanies,whichincludedagoodnumberofin formation, computer technology and biotech firms, 34% were launched on initial capital of less than $10,000, 59% on less than $50,000, and 75% on less than $100,000.7Theonlyreasonthosecompaniesremainviableisthattheycontrolthe valuecreatedbytheirhumancapital.Andtheonlywaytodothatisthroughthe ownershipofartificialpropertyrightslikepatents,copyrightsandtrademarks.
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PioreandSabel,p.261. JohanSoderberg,HackingCapitalism:TheFreeandOpenSourceSoftwareMovement (NewYorkandLondon:Routledge,2008),p.2. 3 LuigiZingales,InSearchofNewFoundations,TheJournalofFinance,vol.lv,no.4 (August2000),pp.16411642. 4 Don Tapscott and Anthony D. Williams, Wikinomics: How Mass Collaboration ChangesEverything(NewYork:Portfolio,2006),pp.239267. 5 Chapter Five, The Hyperlinked Organization, in Rick Levine, Christopher Locke, DocSearlsand David Weinberger.The CluetrainManifesto:TheEnd ofBusinessasUsual (PerseusBooksGroup,2001)<http://www.cluetrain.com/book/index.html>. 6 NiallCook,Enterprise2.0:HowSocialSoftwareWillChangetheFutureofWork(Bur lington,Vt.:Gower,2008). 7 TomPeters.TheTomPetersSeminar:CrazyTimesCallforCrazyOrganizations(New York:VintageBooks,1994),p.35.
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Inmanyinformationandcultureindustries,theinitialoutlayforenteringthe marketinthebroadcastdayswasinthehundredsofthousandsofdollarsormore. Theoldbroadcastmassmedia,forinstance,weretypifiedbyhighcosthubsand cheap,ubiquitous,receptiononlysystemsattheend.Thisledtoalimitedrangeof organizational models for production: those that could collect sufficient funds to setupahub.1Thesamewastrueofprintperiodicals,withtheincreasingcostof printingequipmentfromthemidnineteenthcenturyonservingasthemainentry barrierfororganizingthehubs.Between1835and1850,thetypicalstartupcostofa newspaperincreasedfrom$500to$100,000orfromroughly$10,000to$2.38mil lionin2005dollars.2 The networked economy, in contrast, is distinguished by network architec tureandthe[low]costofbecomingaspeaker.
The first element is the shift from a hubandspoke architecture with unidirec tionallinkstotheendpointsinthemassmedia,todistributedarchitecturewith multidirectionalconnectionsamongallnodesinthenetworkedinformationen vironment.Thesecondisthepracticaleliminationofcommunicationscostsasa barriertospeakingacrossassociationalboundaries.Together,thesecharacteris ticshavefundamentallyalteredthecapacityofindividuals,actingaloneorwith others, to be active participants in the public sphere as opposed to its passive 3 readers,listeners,orviewers.
In the old days, the owners of the hubsCBS News, the Associated Press, etc.decidedwhatyoucouldhear.Todayyoucansetupablog,orrecordapod cast,andanybodyintheworldwhocaresenoughtogotoyourURLcanlookatit freeofcharge(andanyonewhoagreeswithitorwantstotearitapartcanpro videahyperlinktohisreaders). Thecentralchangethatmakesthesethingspossibleisthatthebasicphysical capital necessary to express and communicate human meaning is the connected personalcomputer.
The core functionalities of processing, storage, and communications are widely ownedthroughoutthepopulationofusers....Thehighcapitalcoststhatwerea prerequisitetogathering,working,andcommunicatinginformation,knowledge, and culture, have now been widely distributed in the society. The entry barrier theyposednolongeroffersacondensationpointforthelargeorganizationsthat 4 oncedominatedtheinformationenvironment.
ThedesktoprevolutionandtheInternetmeanthattheminimumcapitalout layforenteringmostoftheentertainmentandinformationindustryhasfallentoa fewthousanddollarsatmost,andthemarginalcostofreproductioniszero.Ifany thing that overstates the cost of entry in many cases, considering how rapidly computervaluedepreciatesandtherelativelyminisculecostofbuyingafiveyear oldcomputerandaddingRAM. The networked environment, combined with endless varieties of cheap soft ware for creating and editing content, makes it possible for the amateur to pro duceoutputofaqualityonceassociatedwithgiantpublishinghousesandrecord ingcompanies.5Thatistrueofthesoftwareindustry,desktoppublishing,andtoa
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YochaiBenkler,TheWealthofNetworks:HowSocialProductionTransformsMarkets andFreedom(NewHavenandLondon:YaleUniversityPress,2006),p.179. 2 Ibid.,p.188. 3 Ibid.,pp.21213. 4 Ibid.,pp.3233. 5 Ibid.,p.54.
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certainextenteventofilm(aswitnessedbyaffordableeditingtechnologyandthe successofSkyCaptain). Inthecaseofthemusicindustry,thankstocheapequipmentandsoftwarefor high quality recording and sound editing, the costs of independently producing and distributing a highquality album have fallen through the floor. Bassist Steve Lawsonwrites:
... [T]he recording processstudio time and expertise used to be hugely expensive.Butthecostofrecordingequipmenthasplummeted,justasthequal ityofthesamehassoared.Sure,expertiseisstillchargeable,butitsnolongera nonnegotiablepartofthedeal.Asmartbandwithafastcomputercannowreal istically make a release quality albumlength body of songs for less than a grand.... What does this actually mean? Well, it means that for meand the hun dredsofthousandsofotherslikemetheprocessofmakingandreleasingmusic hasneverbeeneasier.Thetaskoffindinganaudience,ofseedingthediscovery process,hasnevercostlessorbeenmorefun.Itsnowpossibleformetoupdate myaudienceandfriends(thecrossoverbetweenthetwoishappeningonadaily basis thanks to social media tools) about what Im doingmusically or other wiseandtohearfromthem,togetinvolvedintheirlives,andformymusicto beinspiredbythem.... So,ifthingsaresogreatfortheindies,doesthatmeanloadsofpeopleare makingloadsofmoney?Notatall.Butthefalsenotionthereisthatanymusi cianswerebefore!Wehaventmovedfromanageofrichesinmusictoanageof povertyinmusic.Wevemovedfromanageofmassivedebtandnocreativecon 1 trolinmusictoanageofsolvencyandcreativeautonomy.Itreallyiswin/win.
As Tom Coates put it, the gap between what can be accomplished at home and whatcanbeaccomplishedinaworkenvironmenthasnarroweddramaticallyover thelasttentofifteenyears.2 Podcasting makes it possible to distribute radio and television program ming,atvirtuallynocost,toanyonewithabroadbandconnection.Asradiohisto rianJesseWalkernotes,satelliteradioslackadaisicaleconomicperformancedoes ntmeanpeopleprefertostickwithAMandFMradio;itmeans,rather,thatthe ipod has replaced the transistor radio as the primary portable listening medium, andthatdownloadedfileshavereplacedthelivebroadcastastheprimaryformof content.3 A network of amateur contributors has peerproduced an encyclopedia, Wikipedia,whichBritannicaseesasarival. Its also true of news, with everexpanding networks of amateurs in venues like Indymedia, with alternative new operations like those of Robert Parry, Bob Giordano and Greg Palast, and with natives and American troops blogging news firsthand from Iraqall at the very same time the traditional broadcasting net worksarerelegatingthemselvestothestenographicregurgitationofpressreleases andpressconferencestatementsbycorporateandgovernmentspokespersons,and reporting on celebrity gossip. Even conceding that the vast majority of shoe leatherreportingoforiginalnewsisstilldonebyhiredprofessionalsfromatradi tional journalistic background, blogs and other news aggregators are increasingly
SteveLawson,TheFutureofMusicis...Indie!Agit8,September10,2009<http:// agit8.org.uk/?p=336>. 2 Tom Coates, (Weblogs and) The Mass Amateurisation of (Nearly) Everything ... Plasticbag.org, September 3, 2003 <http://www.plasticbag.org/archives/2003/09/weblogs_ and_the_mass_amateurisation_of_nearly_everything>. 3 Jesse Walker, The Satellite Radio Blues: Why is XM Sirius on the verge of bank ruptcy?,Reason,February27,2009<http://reason.com/news/show/131905.html>.
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becomingthenewnewspapers,makingbetteruseofreportergeneratedcontent thantheold,highoverheadnewsorganizations.Butinfactmostofthetraditional medias original content consists of verbatim conveyance of official press re leases, which could just as easily be achieved by bloggers and news aggregators linkingdirectlytothepressreleasesattheoriginalinstitutionalsites.Genuinein vestigative reporting consumes an ever shrinking portion of news organizations budgets. Thenetworkrevolutionhasdrasticallyloweredthetransactioncostsoforgan izing education outside the conventional institutional framework. In most cases, theindustrialmodelofeducation,basedontransportinghumanrawmaterialtoa centrally located learning factory for processing, is obsolete. Over thirty years ago Ivan Illich, in Deschooling Society, proposed decentralized community learn ing nets that would put people in contact with the teachers they wished to learn from, and provide an indexed repository of learning materials. The Internet has madethisarealitybeyondIllichswildestdreams.MITsOpenCoursewareproject wasoneearlystepinthisdirection.Butmostuniversities,eveniftheydonthavea fulldatabaseoflectures,atleasthavesomesortofonlinecoursecatalogwithbare bonessyllabiandassignedreadingsformanyindividualcourses. Amorerecentproprietaryattemptatthesamethingistheonlineuniversity StraighterLine.1 Critics like to point to various human elements of the learning process that students are missing, like individualized attention to students with problems grasping the material. This criticism might be valid, if StraighterLine were competing primarily with the intellectual atmosphere of small liberal arts colleges, with their low studenttoinstructor ratios. But StraighterLines primary competition is the community college and state university, and its catalog2 is weighted mainly toward the kinds of mandatory first and secondyear introduc tory courses that are taught by overworked grad assistants to auditoriums full of freshmen and sophomores.3 The cost, around $400 per course,4 is free of the conventional universitys activity fees and all the assorted overhead that comes fromtryingtomanagethousandsofpeopleandphysicalplantatasinglelocation. Whatsmore,StraighterLineofferstheoptionofpurchasinglivetutorials.5Wash ingtonMonthlydescribesthethinkingbehindthebusinessmodel:
Evenasthecostofeducatingstudentsfell,tuitionroseatnearlythreetimes the rate of inflation. Webbased courses werent providing the promised price competitionin fact, many traditional universities were charging extra for on line classes, tacking a technology fee onto their standard (and rising) rates. Rather than trying to overturn the status quo, big, publicly traded companies like Phoenix were profiting from it by cutting costs, charging rates similar to thoseattraditionaluniversities,andpocketingthedifference. This,Smithexplained,waswhereStraighterLinecamein.Thecostofstor ingandcommunicatinginformationovertheInternethadfallentoalmostnoth ing. Electronic course content in standard introductory classes had become a lowcostcommodity.Theonlyexpensivethingleftinhighereducationwasthe labor,thepriceofhiringasmart,knowledgeablepersontohelpstudentswhen only a person would do. And the unique Smarthinking callcenter model made thatmuchcheaper,too.Byputtingthesethingstogether,Smithcouldofferin <http://www.straighterline.com/>. <http://www.straighterline.com/courses/>. 3 KevinCarey,Collegefor$99aMonth,WashingtonMonthly,September/October2009 <http://www.washingtonmonthly.com/college_guide/feature/college_for_99_a_month.php>. 4 <http://www.straighterline.com/costs/>. 5 <http://smarthinking.com/static/sampleTutorials/>.
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troductorycollegecourseslacarte,atapricethatseemedtobemissingadigit ortwo,orthree:$99permonth,bysubscription.Economicstellsusthatprices fall to marginal cost in the long run. Burck Smith simply decided to get there first.
StraighterLine,heargues,threatenstodotouniversitieswhatCraigslistdidto newspapers.Freshmanintrocourses,withauditoriumsstuffedlikecattlecarsand lowpaid grad students presiding over the operation, are the cash cow that sup portstheexpensivestufflikeupperlevelandgradcourses,nottomentionalot of administrative perks. If the cash cow is killed off by cheap competition, it will havethesameeffectonuniversitiesthatCraigslistishavingonnewspapers.1 OfcourseStraighterLineisfarcostlierandlessuserfriendlythanitmightbe, if it were peerorganized and opensource. Imagine a similar project with open sourcetextbooks(orwhichassigned,withawinkandanudge,digitizedproprie tarytextsavailableviaafilesharingnetwork),freelecturematerialslikethoseof MITsOpenCourseware,andthecreativeuseofemaillists,blogsandwikisforthe student community to help each other (much like the use of social networking toolsforproblemsolvingamongusercommunitiesforvariouskindsofcomputers orsoftware). Forthatmatter,unauthorizedcourseblogsandemaillistscreatedbystudents mayhavethesameeffectonStraighterLinethatitishavingonthetraditionaluni versityjustasWikipediadidtoEncartawhatEncartadidtothetraditionalency clopediaindustry. Thesamemodeloforganizationcanbeextendedtofieldsofemploymentout side the information and entertainment industriesparticularly laborintensive serviceindustries,wherehumancapitallikewiseoutweighsphysicalcapitalinim portance.Thebasicmodelisapplicableinanyindustrywithlowrequirementsfor initial capitalization and low or nonexistent overhead. Perhaps the most revolu tionarypossibilitiesareinthetempindustry.Inmyownworkexperience,Iveseen that hospitals using agency nursing staff typically pay the staffing agency about three times what the agency nurse receives in pay. Cutting out the middleman, perhaps by means of some sort of cross between a workers coop and a long shoremens union hiring hall, seems like a nobrainer. An AFLCIO organizer in theSanFranciscoBayareahasattemptedjustsuchaproject,asrecountedbyDan ielLevine.2 Thechiefobstacletosuchattemptsisnoncompetitionagreementssignedby temp workers at their previous places of employment. Typically, a temp worker signsanagreementnottoworkindependentlyforanyofthefirmsclients,orwork for them through another agency, for some period (usually three to six months) after quitting. Of course, this can be evaded fairly easily, if the new cooperative firmhasalargeenoughpoolofworkerstodirectparticularassignmentstothose who arent covered by a noncompetition clause in relation to that particular cli ent. And as we shall see in the next section, the implosion of capital outlay re quirements even for physical production has had a similar effect on the relative importanceofhumanandphysicalcapital,inaconsiderableportionofmanufac turing,andontheweakeningoffirmboundaries. These developments have profoundly weakened corporate hierarchies in the informationandentertainmentindustries,andcreatedenormousagencyproblems
Carey,Collegefor$99aMonth. Daniel S. Levine, Disgruntled: The Darker Side of the World of Work (New York: BerkleyBoulevardBooks,1998),p.160.
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as well. As the value of human capital increases, and the cost of physical capital investments needed for independent production by human capital decreases, the powerofcorporatehierarchiesbecomeslessandlessrelevant.Asthevalueofhu manrelativetophysicalcapitalincreases,theentrybarriersbecomeprogressively lowerforworkerstotaketheirhumancapitaloutsidethefirmandstartnewfirms undertheirowncontrol.ZingalesgivestheexampleoftheSaatchiandSaatchiad vertisingagency.Thelargestblockofshareholders,U.S.fundmanagerswhocon trolled 30% of stock, thought that gave them effective control of the firm. They attempted to exercise this perceived control by voting down Maurice Saatchis proposed increased option package for himself. In response, the Saatchi brothers tooktheirhumancapital(inactualitythelionsshareofthefirmsvalue)elsewhere tostartanewfirm,andleftahollowshellownedbytheshareholders.1
Interestingly,in1994afirmlikeSaatchiandSaatchi,withfewphysicalassetsand alotofhumancapital,couldhavebeenconsideredanexception.Notanymore. The wave of initial public offerings of purely human capital firms, such as con sultantfirms,andeventechnologyfirmswhosemainassetsarethekeyemploy ees,ischangingtheverynatureofthefirm.Employeesarenotmerelyautomata inchargeofoperatingvaluableassetsbutvaluableassetsthemselves,operating 2 withcommoditylikephysicalassets.
Inanother,similarexample,theformerheadofSalomonBrothersbondtrad inggroupformedanewgroupwithformerSalomontradersresponsiblefor87%of thefirmsprofits.

... if we take the standpoint that the boundary of the firm is the point up to whichtopmanagementhastheabilitytoexercisepower...,thegroupwasnot anintegralpartofSalomon.Itmerelyrentedspace,Salomonsname,andcapital, 3 andturnedoversomeshareofitsprofitsasrent.
MarjorieKellygavethebreakupoftheChiat/Dayadagencyasanexampleof thesamephenomenon.
...Whatisacorporationworthwithoutitsemployees? Thisquestionwasactedout...inLondon,withtherevolutionarybirthof St. Lukes ad agency, which was formerly the London office of Chiat/Day. In 1995,theownersofChiat/DaydecidedtosellthecompanytoOmniconwhich meantlayoffswereloomingandAndyLawintheLondonofficewantednoneof it.Heandhisfellowemployeesdecidedtorebel.Theyphonedclientsandfound them happy to join the rebellion. And so at one blow, London employees and clientswereleaving. Thus arose a fascinating question: What exactly did the owners of the Londonofficenowown?Afewdesksandfiles?Withoutemployeesandclients, whatwastheLondonbranchworth?Onedollar,itturnedout.Thatwasthepur chase priceplus a percentage of profits for seven yearswhen Omnicon sold theLondonbranchtoLawandhiscohortsafterthemerger.TheyrenameditSt. Lukes....Allemployeesbecameequalowners...Everyyearnowthecompany 4 isrevalued,withnewsharesawardedequallytoall.
Zingales,InSearchofNewFoundations,p.1641. Ibid.,p.1641. 3 RaghuramRajanandLuigiZingales,TheGovernanceoftheNewEnterprise,inXa vier Vives, ed., Corporate Governance: Theoretical and Empirical Perspectives (Cambridge: CambridgeUniversityPress,2000),pp.211212. 4 MarjorieKelly,TheCorporationasFeudalEstate(anexcerptfromTheDivineRight of Capital) Business Ethics, Summer 2001. Quoted in GreenMoney Journal, Fall 2008 <http://greenmoneyjournal.com/article.mpl?articleid=60&newsletterid=15>.
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DavidPrychitkoremarkedonthesamephenomenoninthetechindustry,the socalledbreakawayfirms,asfarbackas1991:
Old firms act as embryos for new firms. If a worker or group of workers is not satisfiedwiththeexistingfirm,eachhasaskillwhichheorshecontrols,andcan leavethefirmwiththoseskillsandestablishanewone.Intheinformationageit isbecomingmoreevidentthatabosscannotcontroltheworkersasonedidin the days when the assembly line was dominant. People cannot be treated as workhorsesanylonger,forthevalueoftheproductionprocessisbecomingin creasingly embodied in the intellectual skills of the worker. This poses a new threattothetraditionalfirmifitdeniesparticipatoryorganization. Theappearanceofbreakawaycomputerfirmsleadsonetoquestiontheex tenttowhichourexistingsystemofpropertyrightsinideasandinformationac tually protects bosses in other industries against the countervailing power of workers. Perhaps our current system of patents, copyrights, and other intellec tual property rights not only impedes competition and fosters monopoly, as someAustriansargue.Intellectualpropertyrightsmayalsoreducethelikelihood of breakaway firms in general, and discourage the shift to more participatory, 1 cooperativeformats.
C.THEEXPANSIONOFTHEDESKTOPREVOLUTIONANDPEER PRODUCTIONINTOTHEPHYSICALREALM
Although peer production first emerged in the immaterial realmi.e., infor mationindustrieslikesoftwareandentertainmentitstransferabilitytotherealm ofphysicalproductionisalsoamatterofgreatinterest. 1.OpenSourceDesign:RemovalofProprietaryRentsfrom theDesignStage,andModularDesign Oneeffectoftheshiftinimportancefromtangibletointangibleassetsisthe growing portion of product prices that reflects embedded rents on intellectual propertyandotherartificialpropertyrightsratherthanthematerialcostsofpro duction. The radical nature of the peer economy, especially as intellectual property becomes increasingly unenforceable, lies in its potential to cause the portion of existingcommoditypricethatresultsfromsuchembeddedrentstoimplode. Opensourcehardwarerefers,atthemostbasiclevel,tothedevelopmentand improvementofdesignsforphysicalgoodsonanopensourcebasis,withnopar ticularmodeofphysicalproductionbeingspecified.Thedesignstageceasestobe asourceofproprietaryvalue,butthephysicalproductionstageisnotnecessarily affected.TotakeitinRichardStallmansterms,freespeechonlyaffectsthepor tion of beers price that results from the cost of a proprietary design phase: open sourcehardwaremeansthedesignisfreeasinfreespeech,notfreebeer.Although themanufacturerisnothinderedbypatentsonthedesign,hemuststillbearthe costsofphysicalproduction.EdyFerreiradefinedopensourcehardwareas
any piece of hardware whose manufacturing information is distributed using a licensethatprovidesspecificrightstouserswithouttheneedtopayroyaltiesto the original developers. These rights include freedom to use the hardware for anypurpose,freedomtostudyandmodifythedesign,andfreedomtoredistrib utecopiesofeithertheoriginalormodifiedmanufacturinginformation....
David L Prychitko, Marxism and Workers SelfManagement: The Essential Tension (NewYork;London;Westport,Conn.:GreenwoodPress,1991),p.121n.
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Inthecaseofopensourcesoftware(OSS),theinformationthatissharedis software code. In OSH, what is shared is hardware manufacturing information, 1 suchas...thediagramsandschematicsthatdescribeapieceofhardware.
Atthesimplestlevel,apeernetworkmaydevelopaproductdesignandmake it publicly available; it may be subsequently built by any and all individuals or firmswiththenecessaryproductionmachinery,withoutcoordinatingtheirefforts with the original designer(s). A conventional manufacturer may produce open sourcedesigns,withfeedbackfromtheusercommunityprovidingthemainsource ofinnovation. Karim Lakhani describes this general phenomenon, the separation of open source design from an independent production stage, as communities driving manufacturersoutofthedesignspace,with
users innovating and developing products that can out compete traditional manufacturers.Butthiseffectisnotjustlimitedtosoftware.Inphysicalproducts ...,usershavebeenshowntobethedominantsourceoffunctionallynovelin novations.Communities can superchargethis innovation mechanism. And may ultimatelyforcecompaniesoutoftheproductdesignspace.Justthinkaboutit for any given companythere are more people outside the company that have smarts about a particular technology or a particular use situation then [sic] all the R&D engineers combined. So a community around a product category may havemoresmartpeopleworkingontheproductthen[sic]thefirmitself.Soin the end manufacturers may end up doing what they are supposed to 2 manufactureandthedesignactivitymightmove...intothecommunity.
As one example, Vinay Gupta has proposed a largescale library of open sourcehardwaredesignsasanaidtointernationaldevelopment:
An open library of designs for refrigerators, lighting, heating, cooling, motors, and other systems will encourage manufacturers, particularly in the developing world,toleapfrogdirectlytothemostsustainabletechnologies,whicharemuch cheaper in the long run. Manufacturers will be encouraged to use the efficient designsbecausetheyarefree,whileinefficientdesignsstillhavetobepaidfor. Thelibrarycouldalsoincludegreenchemistryandbiologicalsolutionstoindus trychallenges....Thislibraryshouldbefreeofallintellectualpropertyrestric 3 tionsandopenforusebyanymanufacturer,inanynation,withoutcharge.
One item of his own design, the Hexayurt, is a refugee shelter system that uses an approach based on autonomous building to provide not just a shelter, but a comprehensive family support unit which includes drinking water purifica tion,compostingtoilets,fuelefficientstovesandsolarelectriclighting.4Thebasic constructionmaterialsforthefloor,wallsandroofcostabout$200.5
Open Source Hardware, P2P Foundation Wiki <http://www.p2pfoundation.net/ Open_Source_Hardware>. 2 KarimLakhana,CommunitiesDrivingManufacturersOutoftheDesignSpace,The FutureofCommunitiesBlog,March25,2007<http://www.futureofcommunities.com/2007/ 03/25/communitiesdrivingmanufacturersoutofthedesignspace/>. 3 Vinay Gupta, Facilitating International Development Through Free/Open Source, <http://guptaoption.com/5.open_source_development.php> Quoted from Beatrice Anarow, Catherine Greener, Vinay Gupta, Michael Kinsley, Joanie Henderson, Chris Page and Kate Parrot, Rocky Mountain Institute, WholeSystems Framework for Sustainable Consumption and Production. Environmental Project No. 807 (Danish Environmental Protection Agency, Ministry of the Environment, 2003), p. 24. <http://files.howtolivewiki.com/A%20Whole% 20Systems%20Framework%20for%20Sustainable%20Production%20and%20Consumption.pdf> 4 <http://www.p2pfoundation.net/Hexayurt>. 5 <http://hexayurt.com/>.
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Michel Bauwens, of the P2P foundation, provides a small list of some of the moreprominentopendesignprojects:
The Grid Beam Building System, at http://www.p2pfoundation.net/Grid_ Beam_Building_Syste TheHexayurt,athttp://www.p2pfoundation.net/Hexayurt Movisi Open Design Furniture, at http://www.p2pfoundation.net/Movisi_ Open_Design_Furniture Open Cores, at http://www.p2pfoundation.net/Open_Cores and other Open ComputingHardware,athttp://www.p2pfoundation.net/Open_Hardware Open Source Green Vehicle, at http://www.p2pfoundation.net/Open_ Source_Green_Vehicle OpenSourceScooterhttp://www.p2pfoundation.net/Open_Source_Scooter The Ronja Wireless Device at http://www.p2pfoundation.net/Twibright_ Ronja_Open_Wireless_Networking_Device Open Source Sewing patterns, at http://www.p2pfoundation.net/Open_ Source_Sewing_Patterns Velomobiles http://www.p2pfoundation.net/Open_Source_Velomobile_Development_ Project Open Energy http://www.p2pfoundation.net/SHPEGS_Open_Energy_ 1 Project
OneofthemostambitiousattemptsatsuchanopendesignprojectisOpen SourceEcology,whichisdevelopinganopensource,virallyreproducible,vernacu lar technologybased Open Village Construction Set in its experimental site at FactorEFarm.2(OfcourseOSEisalsodirectlyinvolvedinthephysicalimplemen tationofitsowndesigns;itisamanufacturingaswellasadesignnetwork.) Amorecomplexscenarioinvolvesthecoordinationofanopensourcedesign stagewiththeproductionprocess,withtheseparatestagesofproductiondistrib utedandcoordinatedbythesamepeernetworkthatcreatedthedesign.DavePol lardprovidesoneexample:
SupposeIwantachairthathastheattributesofanAeronwithoutthe$1800 pricetag,oronewithsomeadditionalattribute(e.g.alaptopholder)thebrand namedoesntoffer?IcouldgoonlinetoaPeerProductionsiteandcreateanin stantmarket,contributingthespecifications...,and,perhapsamaximumprice Iwouldbewillingtopay.Peoplewithsomeoftheexpertiseneededtoproduceit couldindicatetheircapabilitiesandselforganizeintoaconsortiumthatwould keep talking and refining until they could meet this price.... Other potential buyerscouldchimein,offeringmoreorlessthanmysuggestedprice.Basedon the number of orders at each price, the Peer Production group could then ac ceptordersandstartmanufacturing.... As [Erick] Schonfeld suggests, the intellectual capital associated with this instantmarketbecomespartofthemarketarchive,availableforeveryonetosee, strippingthisintellectualcapitalcost,andtheexecutivesalaries,dividendsand corporateoverheadoutofthecostofthisandothersimilarproductrequestsand fulfillments,sothatallthatisleftisthelowestpossiblecostofmaterial,labour
Michel Bauwens, What kind of economy are we moving to? 3. A hierarchy of en gagement between companies and communities, P2P Foundation Blog, October 5, 2007 <http://blog.p2pfoundation.net/whatkindofeconomyarewemovingto3ahierarchy ofengagementbetweencompaniesandcommunities/2007/10/05>. 2 Marcin Jakubowski, Clarifying OSE Vision, Factor E Farm Weblog, September 8, 2008<http://openfarmtech.org/weblog/?p=325>.
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anddeliverytofilltheorder.Andtheorderisexactlywhatthecustomerwants, 1 nottheclosestthinginthemassproducerswarehouse.
Inanycase,theremovalofproprietarycontrolovertheimplementationofde signs means that the production phase will be subject to competitive pressure to adoptthemostefficientproductionmethodsamarkeddeparturefromthepre sent, where intellectual property enables privileged producers to set prices as a costplusmarkupbasedonwhateverinefficientproductionmethodstheychoose. Themostambitiousexampleofanopensourcephysicalproductionprojectis theopensourcecar,orOScar.
Canopensourcepracticesandapproachesbeappliedtomakehardware,to createtangibleandphysicalobjects,includingcomplexones?Say,tobuildacar? ... Markus Merz believes they can. The young German is the founder and maintainer (thats the title on his business card) of the OScar project, whose goalistodevelopandbuildacaraccordingtoopensource(OS)principles.Merz and his team arent going for a superaccessorized SUVtheyre aiming at de signingasimpleandfunctionallysmartcar.And,possibly,alongtheway,rein 2 venttransportation.
As of June 2009, the unveiling of a prototypea twoseater vehicle powered byhydrogenfuelcellswasscheduledinLondon.3 Well,actuallytheresafictionalexampleofanopensourceprojectevenmore ambitious than the OScar: the opensource moon project, a volunteer effort of a peernetworkofthousands,inCraigDeLancysOpenshot.Theprojectsship(the Stallman), built largely with Russian space agency surplus, beats a corporate fundedproprietaryprojecttothemoon.4 A slightly less ambitious opensource manufacturing project, and probably morerelevanttotheneedsofmostpeopleintheworld,isOpenSourceEcologys opensource tractor (LifeTrac). Its designed for inexpensive manufacture, with modularity and easy disassembly, for lifetime service and low cost repair. It in cludes, among other things, a welldrilling module, and is designed to serve as a prime mover for machinery like OSEs Compressed Earth Block Press and saw mill.5 Whenphysicalmanufacturingisstrippedofthecostofproprietarydesignand technology,andtheconsumerdriven,pullmodelofdistributionstripsawaymost of the immense marketing cost, we will find that the portion of price formerly madeupofsuchintangibleswillimplode,andtheremainingpricebasedonactual productioncostwillbeasmuchasanorderofmagnitudelower. Just as importantly, opensource design reduces cost not only by removing proprietary rents from intellectual property, but by the substantive changes in designthatitpromotes.Eliminatingpatentsremoveslegalbarrierstothecompeti tivepressureforinteroperabilityandreparability.Andinteroperabilityandrepara
Dave Pollard, Peer Production, How to Save the World, October 28, 2005 <http:// blogs.salon.com/0002007/2005/10/28.html#a1322>. 2 Bruno Giussani, Open Source at 90 MPH, Business Week, December 8, 2006 <http://www.businessweek.com/innovate/content/dec2006/id20061208_509041.htm?>.See alsotheOSCarwebsite,<http://www.theoscarproject.org/>. 3 Lisa Hoover, Riversimple to Unveil Open Source Car in London This Month, Ostatic, June 11, 2009 <http://ostatic.com/blog/riversimpletounveilopensourcecarin londonthismonth>. 4 CraigDeLancey,Openshot,Analog,December2006,pp.6474. 5 LifeTrac, Open Source Ecology wiki <http://openfarmtech.org/index.php?title= LifeTrac>.
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bility promote the kind of modular design that is most conducive to networked production,withmanufactureofcomponentsdistributedamongsmallshopspro ducingacommondesign. Theadvantagesofmodulardesignofphysicalgoodsareanalogoustothosein theimmaterialrealm.
Current thinking says peer production is only suited to creating informa tionbasedgoodsthosemadeofbits,inexpensivetoproduce,andeasilysubdi videdintosmalltasksandcomponents.Softwareandonlineencyclopediashave thisproperty.Eachhassmalldiscretetasksthatparticipantscanfulfillwithvery littlehierarchicaldirection,andbothcanbecreatedwithlittlemorethananet workedcomputer. While its true that peer production is naturally suited to bit products, its alsotruethatmanyoftheattributesandadvantagesofpeerproductioncanbe replicated for products made of atoms. If physical products are designed to be modulari.e., they consist of many interchangeable parts that can be readily swappedinoroutwithouthamperingtheperformanceoftheoverallproduct then, theoretically at least, large numbers of lightly coordinated suppliers can engageindesigningandbuildingcomponentsfortheproduct,muchlikethou 1 sandsofWikipediansaddtoandmodifyWikipediasentries.
Thisishardlymeretheory,butisreflectedintherealworldrealityofChinas motorcycle industry: The Chinese approach emphasizes a modular motorcycle architecturethatenablessupplierstoattachcomponentsubsystems(likeabraking system) to standard interfaces.2 And in an opensource world, independent pro ducerscouldmakeunauthorizedmodularcomponentsoraccessories,aswell. Costsfromoutlaysonphysicalcapitalarenotaconstant,andmodulardesign isonefactorthatcancausethosecoststofallsignificantly.Itenablesapeernet work to break a physical manufacturing project down into discrete subprojects, withmanyoftheindividualmodulesperhapsservingascomponentsinmorethan onelargerappliance.AccordingtoChristianSiefkes,
Productsthataremodular,thatcanbebrokendownintosmallermodules or components which can be produced independently before being assembled intoawhole,fitbetterintothepeermodeofproductionthancomplex,convo lutedproducts,sincetheymakethetaskstobehandledbyapeerprojectmore manageable.Projectscanbuilduponmodulesproducedbyothersandtheycan set as their own (initial) goal the production of a specific module, especially if components can be used standalone as well as in combination. The Unix phi losophyofprovidinglotsofsmallspecializedtoolsthatcanbecombinedinver satile ways is probably the oldest expression in software of this modular style. Thestrongeremphasisonmodularityisanotherphenomenonthatfollowsfrom the differences between market production and peer production. Market pro ducershavetopreventtheircompetitorsfromcopyingorintegratingtheirprod uctsandmethodsofproductionsoasnottolosetheircompetitiveadvantage.In thepeermode,reuse by others is good and should be encouraged, since itin creases your reputation and the likelihood of others giving something back to you.... Modularity not only facilitates decentralized innovation, but should also help to increase the longevity of products and components. Capitalism has de velopedathrowawayculturewherethingsareoftendiscardedwhentheybreak (insteadofbeingrepaired),orwhenoneaspectofthemisnolongeruptodate or in fashion. In a peer economy, the tendency in such cases will be to replace justasinglecomponentinsteadofthewholeproduct,sincethiswillgenerallybe
TapscottandWilliams,pp.219220. Ibid.,p.222.
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themostlaborefficientoption(comparedtogettinganewproduct,butalsoto 1 manuallyrepairingtheoldone).
Siefkes is wrong only in referring to producers under the existing corporate system as market producers, since absent intellectual property as a legal bul warktoproprietarydesign,themarketincentivewouldbetowarddesigningprod uctsthatwereinteroperablewithotherplatforms,andtowardcompetitioninthe design of accessories and replacement parts tailored to other companies plat forms.Andgiventheabsenceoflegalbarrierstotheproductionofsuchinteroper ableaccessories,themarketincentivewouldbetodesigningplatformsasbroadly interoperableaspossible. This process of modularization is already being promoted within corporate capitalism, although the present system is struggling mightilyand unsuccess fullytokeepitselffrombeingtornapartbytheresultingincreaseinproductive forces.AsEricHuntingargues,thehighcostsoftechnicalinnovation,thedifficulty ofcapturingvaluefromit,andthemasscustomizationorlongtailmarket,taken together, create pressures for common platforms that can be easily customized between products, and for modularization of components that can be used for a widevarietyofproducts.AndHuntingpointsout,aswealreadysawinregardto flexiblemanufacturingnetworksinChaptersFourandFive,thatthepredominant outsource everything and contract manufacturing model increasingly renders corporate hubs obsolete, and makes it possible for contractees to circumvent the previouscorporateprincipalsandundertakeindependentproductionontheirown account.
Industrial ecologies are precipitated by situations where traditional indus trialageproductdevelopmentmodelsfailinthefaceofveryhightechnologyde velopmentoverheadsorveryhighdemassificationindesigndrivenbydesirefor personalization/customizationproducingLongTailmarketphenomenon[sic].A solution to these dilemmas is modularization around common architectural platforms in order to compartmentalize and distribute development cost risks, the result being ecologies of many small companies independently and com petitively developing intercompatible parts for common product platforms suchastheIBMPC. Themoreverticalthemarketprofileforaproductthemorethistrendpene tratestowardproductiononanindividualleveldue[to]highproductsophistica tioncoupledtosmallervolumes....Competitivecontractingregulationsinthe defense industry (when theyre actually respected ... ) tend to, ironically, turn many kinds of military hardware into open platforms by default, offering small businessesapotentialtocompetewithlargercompanieswhereproductionvol umesarentallthatlargetobeginwith.Consequently,todaywehaveasituation wherekeycomponentsofsomemilitaryvehiclesandaircraftareproducedona garageshopproductionlevelbycompanieswithfewerthanadozenemployees. Allthisrepresentsanintermediatelevelofindustrialdemassificationthatis underwaytodayandnotnecessarilydependentuponopensourcetechnologyor peertopeeractivitybutwhichcreatesafertilegroundforthatintheimmediate future and drives the complementary trend in the miniaturization of machine 2 tools.
ChristianSiefkes,FromExchangetoContributions:GeneralizingPeerProductioninto thePhysicalWorldVersion1.01(Berlin,October2007),pp.104105. 2 Hunting comment under Michel Bauwens, Phases for implementing peer produc tion: Towards a Manifesto for Mutually Assured Production, P2P Foundation Forum, August30,2008<http://p2pfoundation.ning.com/forum/topics/2003008:Topic:6275>.
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Inotherwords,thefurtherproductioncostfallsrelativetothecostsofdesign, thegreatertheeconomicincentivetomodulardesignasawayofdefrayingdesign costsoverasmanyproductsaspossible. InanemailtotheOpenManufacturinglist,Huntingsummeduptheprocess moresuccinctly.Industrialrelocalization

compelsthemodularizationofproductdesign,whichresultsinthereplacement of designs by platforms and the competitive commoditization of their compo nents. Today, automobiles are produced as whole products made with large highcapitalcost machinery using materialsand a small portion of premade componentstransportedlongdistancestoacentralproductionsitefromwhich the end product is shipped with a very poor transportation efficiency to local sales/distribution points. In the future automobiles may be assembled on de mand in the car dealership from modular components which ship with far greaterenergyefficiencythanwholecarsandcancomefrommanylocations.By modularizingthedesignofthecartoallowforthis,thatdesignischangedfrom aproducttoaplatformforwhichmanycompetitors,usingmuchsmallerlessex pensive means of production, can potentially produce parts to accommodate customers desire for personalization and to extend the capabilities of the auto mobilebeyondwhatwasoriginallyanticipated.Endusersaremoreeasilyableto experiment in customization and improvement and pursue entrepreneurship basedonthisinnovationatmuchlowerstartupcosts.Thismakesitpossibleto implement technologies for the automobilelike alternative energy technol ogyearlierautocompaniesmaynothavebeenwillingtoimplementbecauseof a lack of competition and because their capital costs for their large expensive productiontoolsandfacilitiestakesolong(20years,typically)toamortize.THIS isthereasonwhycomputers,basedonplatformsformodularcommoditycom ponents, have evolved so rapidly compared to every other kind of industrial productandwhythesinglemostadvanceddevicethehumanracehaseverpro ducedisnowsomethingmostanyonecanaffordandwhichachildcanassemble 1 inminutesfrompartssourcedaroundtheworld.
Thebeautyofmodulardesign,Huntingwriteselsewhere(inthespecificcase of modular prefab housing), is that the bulk of research and development man hoursareincorporatedintothecomponentsthemselves,whichcanbeduplicated acrossmanydifferentproducts.Thecomponentsaresmart,butthecombinations are dumbeddown and user friendly. A platform is a way to spread the develop mentcostsofasinglecomponentoverasmanyproductsaspossible.
Butunderneaththerearetheseopenstructuralsystemsthataredoingforhouse constructionwhatthestandardizedarchitectureoftheIBMPCdidforpersonal computing,encodingalotofengineeringandpreassemblylaborintosmalllight modularcomponentscreatedinanindustrialecologysothat,atthehighlevelof the enduser, its like Lego and things go together intuitively with a couple of handtools.InthecaseoftheJerikoandiThousesbasedonTslotprofiles,thisis just about a defacto public domain technology, which means a zillion compa nies around the globe could come in at any time and start making compatible hardware.Weretantalizinglyclosetofactoringouttheexpertsinbasichousing constructionjustlikewedidwiththePCwheretheengineersarealldowninthe subcomponents,companiesdontactuallymanufacturecomputerstheyjustdo designandassembleondemand,andnowkidscanbuildcomputersinminutes withpartsmadeallovertheworld.Within20yearsyoullbegoingtoplaceslike IKEA and Home Depot and designing your own home by picking parts out of catalogs or showrooms, having them delivered by truck, and then assembling Eric Hunting, [Open Manufacturing] Re: Why automate? and opinions on Energy Descent? Open Manufacturing, September 22, 2008 <http://groups.google.com/group/ openmanufacturing/browse_thread/thread/1f40d031453b94eb>.
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mostofthemyourselfwithaboutthesameeaseyouputinfurnitureandhome 1 appliances.
More recently, Hunting wrote of the role of modularized development for commonplatformsinthishistoryofthecomputerindustry:
Wecommonlyattributetherapidshrinkinginscaleofthecomputertothe advanceofintegratedcircuittechnology.Butthatsjustasmallpartofthestory thatdoesntexplaintheeconomyandubiquityofcomputers.Therealforcebe hind that was a radically different industrial paradigm that emerged moreor lessspontaneouslyinresponsetothestrugglecompaniesfacedinmanagingthe complexity of the new technology. Put simply, the computer was too compli cated for any one corporation to actually develop independentlynot even for multinational behemoths like IBM that once prided itself on being able to do everything. A radically new way of doing things was needed to make the com puterpractical. Thelargesizeofearlycomputerswasaresultnotsomuchoftheprimitive natureofthetechnologyofthetimebutonthefactthatmostofthatearlytech nology was not actually specific to the application of computers. It was repur posedfromelectroniccomponentsthatwereoriginallydesignedforotherkinds of machines. Advancing the technology to where the vast diversity of compo nents needed could be made and optimized specifically for the computer de manded an extremely high development investment more than any one com panyintheworldcouldactuallyafford.Theresimplywasntabigenoughcom putermarkettojustifythecostofdevelopmentofverysophisticatedpartsexclu sively for computers. While performing select R&D on key components, early computer companies began to position themselves as systems integrators for components made by subcontractracted suppliers rather than manufacturing everythingthemselves.Whilecollectivelythedevelopmentofthefullspectrum of components computers needed was astronomically expensive, individually they were quite within the means of small businesses and once the market for computers reached a certain minimum scale it became practical for such com paniestodeveloppartsfortheseotherlargercompaniestouseintheirproducts. This was aided by progress in other areas of consumer, communications, and military digital electronicsa general shift to digital electronicsthat helped create larger markets for parts also suited to computer applications. The more optimized for computer use subcomponents became, the smaller and cheaper thecomputerasawholebecameandthesmallerandcheaperthecomputerthe larger the market for it, creating more impetus for more companies to get in volved in computerspecific parts development. ICs were, of course, a very key breakthroughbutthenatureoftheirextremelyadvancedfabricationdemanded extremelylargeproductmarketstojustify.Theideaofamicroprocessorchipex clusivetoanyparticularcomputerisactuallyaratherrecentphenomenoneven forthepersonalcomputerindustry.CompanieslikeIntelnowhostalargerfam ily of concurrently manufactured and increasingly usespecialized microproces sorsthanwaseverimaginablejustadecadeago. Forthisevolutiontooccurthenatureofthecomputerasadesignedprod ucthadtobeverydifferentfromotherproductscommontoindustrialproduc tion.Mostindustrialproductsaremonolithicinthesensethattheyaredesigned to be manufactured whole from raw materials and very elemental parts in one centralmassproductionfacility.Butthedesignofacomputerisntkeyedtoany oneresultingproduct.Ithasanarchitecturethatisindependentofanyphysical form.Asetofcomponentfunctionandinterfacestandardsthatdefinetheelec tronicsofacomputersystembutnotnecessarilyanyparticularphysicalconfigu ration.Unlikeothertechnologies,electronicsisverymutable.Thereareaninfi Hunting,[OpenManufacturing]Re:Vivarium,OpenManufacturing,March28,2009 <http://groups.google.com/group/openmanufacturing/browse_thread/thread/a891d6f7224 3436d/e58d837ac4022484?hl=en&q=vivarium+hunting#>.
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nite variety of potential physical configurations of the same electronic circuit. This is why electronics engineering can be based on iconographic systems akin to mathematicssomething seen in few other industries to a comparable level of sophistication. (chemical engineering) So the computer is not a product but ratheraplatformthatcanassumeaninfinitevarietyofshapesandaccommodate an infinite diversity of component topologies as long as their electronic func tionsconformtothearchitecture.But,ofcourse,onehastodrawthelinesome whereandwithcomputerpartsthisisusuallyderivedfromthetopologyofstan dardized component connections and the most common form factors for com ponents. Working from this a computer designer develops configurations of componentsintegratedthroughacommonmotherboardthatlargelydefinesthe overall shape possible for the resulting computer product. Though companies likeApplestilldefythetrend,evenmotherboardsandenclosuresarenowcom monlystandardized,whichhasironicallyactuallyencourageddiversityintheva rietyofcomputerformsandenclosuredesignseveniftheircoretopologicalfea turesaremoreorlessstandardizedanduniform. Thusthecomputerindustryevolvedintoanewkindofindustrialentity;an IndustrialEcologyformedofafoodchainofinterdependenciesbetweenlargely independent,competitive,andgloballydispersedcompaniesdefinedbycompo nent interfaces making up the basis of computer platform architectures. This foodchainextendsfromdiscreteelectronicscomponentsmakers,throughvari ous tiers of subsystem makers, to the computer manufacturers at the top thoughinfacttheyarentmanufacturinganythinginthetraditionalsense.They just cultivate the platforms, perform systems integration, customer support, marketing,anddecreasinglyaseventhisisoutsourcedtocontractjobshops assemblethefinalproducts. ForanIndustrialEcologytoexist,anunprecedenteddegreeofinformation must flow across this food chain as no discrete product along this chain can hope to have a market unless it conforms to interface and function standards communicated downward from higher up the chain. This has made the com puterindustrymoreopenthananyotherindustrypriortoit.Despitetheobses sions with secrecy, propriety, and intellectual property among executives, this wholesystemdependsonanopenflowofinformationaboutarchitectures,plat forms, interfaces standards, software, firmware, and so oncommunicated through technical reference guides and marketing material. This information flowexiststoanextentseennowhereelseintheIndustrialAgeculture.... Progressive modularization and interoperability standardization tends to consolidate and simplify component topologies near the top of the food chain. Thisiswhyapersonalcomputeris,today,sosimpletoassemblethatachildcan doitorforthatmatteranenduseroranycompetitortothemanufacturersat thetop.Allthatultimatelyintegratesapersonalcomputerintoaspecificphysi cal form is the motherboard and the only really exclusive aspect of that is its shapeanddimensionsandanarrangementofpartswhich,duetothenatureof electronics, is topologically mutable independent of function. There are innu merablepossiblemotherboardformsthatwillstillworkthesameasfarassoft wareisconcerned.ThismadethePCanincrediblyeasyarchitecturetoclonefor anyonewhocouldcomeupwithsomeminorvariantofthatmotherboardtocir cumventcopyrights,acompetitiveoperatingsystem,aworkaroundtheproprie taryaspectsoftheBIOS,andcoulddipintothatsamefoodchainandbuyparts involume.Onceanindustrialecologyreachesacertainscale,eventhefolksat the top become expendable. The community across the ecology has the basic knowledgenecessarytoinventplatformsofitsown,establishitsownstandards bottomup,andseekoutnewwaystoreachtheendusercustomer.Andthisis whathappenedtoIBMwhenitstupidlyalloweditselftobecomeabottleneckto theprogressofthepersonalcomputerintheeyesofeveryoneelseinitsecology. Thatecology,forsakeofitsowngrowth,simplytookthearchitectureofthePC from IBM and established its own derivative standards independent of IBM andtherewasnothingeventhatcorporategiantcouldultimatelydoaboutit....
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... Again, this is all an astounding revolution in the way things are sup posedtoworkintheIndustrialAge.Agreatdemassificationofindustrialpower and control. Just imagine what the car industry would be like if things worked likethisaswelloneshouldasthisis,infact,coming.Increasingly,themodelof the computer industry is finding application in a steadily growing number of other industries. Bit by bit, platforms are superceding products and Industrial 1 Ecologiesareemergingaroundthem.
Thesizelimitationsoffabricationinthesmallshop,andthelackoffacilities forplasticinjectionmoldingorsheetmetalstampingofverylargeobjects,consti tuteafurtherimpetustomodulardesign.

By virtue of the dimensional limits resulting from the miniaturization of fabricationsystems,PostIndustrialdesignfavorsmodularityfollowingastrategy ofmaximumdiversityoffunctionfromaminimumdiversityofpartsandmateri alsMinAMax.... Postindustrial artifacts tend to exhibit the characteristic of perpetual de mountability, leading to ready adaptive reuse, repairability, upgradeability, and recyclability. By extension, they compartmentalize failure and obsolescence to discrete demountable components. A large PostIndustrial artifact can poten tiallyliveforaslongasitsplatformcanevolvepotentiallyforever. Ascaryprospectfortheconventionalmanufacturerbankingonthepractice 2 ofplannedobsolescence....
OnespecificexampleHuntingcitesistheautomobile.Itwas,morethanany thing, the invention of pressed steel welded unibody construction in the 1930s, with its requirement for shaping sheet metal in enormous multistory stamping presses, that ruled out modular production by a cooperative ecology of small manufacturers.Againstthatbackground,HuntingsetstheabortiveAfricarproject of the 1980s, with a modular design suitable for networked production in small shops.3TheAfricarhadajeeplikebodydesign;butinsteadofpressedsheetmetal, its surface was put together entirely from components capable of being cut from flat materials (sheet metal or plywood) using subtractive machinery like cutting tables,attachedtoastructuralframeofcutorbentsteel. A more recent modular automobile design project is Local Motors. Its an opendesigncommunitywithallofitsthousandsofdesignssharedunderCreative Commonslicenses.Allofthemaredesignedaroundacommonlightweightchas sis, which is meant to be produced economically in runs of as little as two thou sand. Engines, brakes, batteries and other components are modular, so as to be interchangeable between designs. Components are produced in networks of mi crofactories.ThetotalcapitaloutlayrequiredtoproduceaLocalMotorsdesignis alittleoveramilliondollars(comparedtohundredsofmillionsforaconventional auto plant), with minimal inventories and turnaround times a fifth those of con ventionalDetroitplants.4
Hunting,OnDefiningaPostIndustrialStyle(1):fromIndustrialblobjectstopostindustrial spimes,P2PFoundationBlog,November2,2009<http://blog.p2pfoundation.net/ondefininga postindustrialstyle1fromindustrialblobjectstopostindustrialspimes/2009/11/02>. 2 On Defining a PostIndustrial Style (2): some precepts for industrial design, P2P Foundation Blog, November 3, 2009 <http://blog.p2pfoundation.net/ondefiningapost industrialstyle2somepreceptsforindustrialdesign/2009/11/03>. 3 On Defining a PostIndustrial Style (3): Emerging examples, P2P Foundation Blog, November 4, 2009 <http://blog.p2pfoundation.net/ondefiningapostindustrialstyle3 emergingexamples/2009/11/04>. 4 JayRogers:IChallengeYoutoMakeCoolCars,AlphachimpStudioInc.,November 10, 2009 <http://www.alphachimp.com/poptechart/2009/11/10/jayrogersichallengeyou tomakecoolcars.html>;LocalMotorswebsiteat<http://www.localmotors.com>.
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Michel Bauwens, in commenting on Huntings remarks, notes among the underlyingtrends...supportingtheemergenceofpeerproductioninthephysi calworld,
the distribution of production capacity, i.e. lower capital requirements and modularisation making possible more decentralized and localized production, 1 whichmayeventuallyberealizedthroughthefreeselfaggregationofproducers.
Modular design is an example of stigmergic coordination. Stigmergy was originallyaconceptdevelopedinbiology,todescribethecoordinationofactions between a number of individual organisms through the individual response to markers, without any common decisionmaking process. Far from the stereotype ofthehivemind,antstheclassicexampleofbiologicalstigmergycoordinate theirbehaviorentirelythroughtheindividualsreadingofandreactiontochemical markersleftbyotherindividuals.2AsdefinedintheWikipediaentry,stigmergyis
a mechanism of spontaneous, indirect coordination between agents or actions, wherethetraceleftintheenvironmentbyanactionstimulatestheperformance ofasubsequentaction,bythesameoradifferentagent.Stigmergyisaformof selforganization.Itproducescomplex,apparentlyintelligentstructures,without needforanyplanning,control,orevencommunicationbetweentheagents.As such it supports efficient collaboration between extremely simple agents, who 3 lackanymemory,intelligenceorevenawarenessofeachother.
Thedevelopmentoftheplatformisaselfcontainedandentirelyselfdirected actionbyanindividualorapeerdesigngroup.Subsequentmodulesaredeveloped withreferencetotheplatform,butthedesignofeachmoduleislikewiseentirely independentandselfdirected;nocoordinationwiththeplatformdeveloperorthe developers of other modules takes place. The effect is to break design down into numerousmanageableunits. 2.ReducedTransactionCostsofAggregatingCapital Wewillconsider the cheapeningofactualphysicaltools inthenextsection. But even when the machinery required for physical production is still expensive, the reduction of transaction costs involved in aggregating funds is bringing on a rapidreductioninthecostofphysicalproduction.Inaddition,networkedorgani zationincreasestheefficiencyofphysicalproductionbymakingitpossibletopool moreexpensivecapitalequipmentandmakeuseofsparecycles.Thispossibility washintedatbyproposalsforpoolingcapitaloutlaysthroughcooperativeorgani zationevenbackinthe1970s,aswesawinthefirstsection.Buttheriseofnetwork culturetakesittoanewloevel(which,again,wewillconsiderinthenextsection). Asaresult,Stallmansdistinctionbetweenfreespeechandfreebeeriseroding evenwhentoolsthemselvesarecostly.MichelBauwenswrites:
P2Pcanarisenotonlyintheimmaterialsphereofintellectualandsoftware production, but wherever there is access to distributed technology: spare com putingcycles,distributedtelecommunicationsandanykindofviralcommunica tormeshwork.
MichelBauwens,Contractmanufacturingasdistributedmanufacturing,P2PFoun dation Blog, September 11, 2008 <http://blog.p2pfoundation.net/contractmanufacturing asdistributedmanufacturing/2008/09/11>. 2 JohnRobb,StigmergicLeaningandGlobalGuerrillas,GlobalGuerrillas,July14,2004 <http://globalguerrillas.typepad.com/globalguerrillas/2004/07/stigmergic_syst.html>. 3 Stigmergy, Wikipedia <http://en.wikipedia.org/wiki/Stigmergy> (accessed Septem ber29,2009).
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P2Pcanarisewhereverotherformsofdistributedfixedcapitalis[sic]avail able:suchisthecaseforcarpooling,whichisthesecondmodeoftransportation intheU.S.... P2Pcanarisewhereverfinancialcapitalcanbedistributed.Initiativessuch astheZOPAbankpointinthatdirection.Cooperativepurchaseanduseoflarge 1 capitalgoodsareapossibility....
Asthereferencetodistributedfinancialcapitalindicates,theavailabilityof crowdsourcedanddistributedmeansofaggregatingdispersedcapitalisasimpor tantastheimplosionofoutlaycostsforactualphysicalcapital.Agoodexampleof such a system is the Open Source Hardware Bank, a microcredit network orga nizedbyCaliforniahardwarehackerstopoolcapitalforfundingnewopensource hardwareprojects.2 Theavailability(orunavailability)ofcapitaltoworkingclasspeoplewillhave a significant effect on the rate of selfemployment and small business formation. The capitalist credit system, in particular, is biased toward largescale, conven tional,absenteeownedfirms.DavidBlanchflowerandAndrewOswald3foundthat childhoodpersonalitytraitsandtestscoreshadalmostnovalueinpredictingadult entrepreneurship.Ontheotherhand,accesstostartupcapitalwasthesinglebig gest factor in predicting selfemployment. There is a strong correlation between selfemployment and having received an inheritance or a gift.4 NSS data indicate thatmostsmallbusinesseswerebegunnotwithbankloansbutwithownorfamily money....5Theclearimplicationisthatthereareundesirableimpedimentsto themarketsupplyofentrepreneurship.6Inshort,thebiasofthecapitalistcredit systemtowardconventionalcapitalistenterprisemeansthattherateofwageem ployment is higher, and selfemployment is lower, than their likely free market values.Thelowerthecapitaloutlaysrequiredforselfemployment,andtheeasier it is to aggregate such capital outside the capitalist credit system, the more self employmentwillgrowasashareofthetotallabormarket. Jed Harris, at Anomalous Presumptions blog, reiterates Bauwens point that peerproductionmakesitpossibletoproducewithoutaccesstolargeamountsof capital.Thechangethatenableswidespreadpeerproductionisthattoday,anen tity can become selfsustaining, and even grow explosively, with very small amountsofcapital.Asaresultitdoesntneedtotradeownershipforcapital,and soitdoesntneedtoprovideanyreturnoninvestment.7 CharlesJohnsonaddsthat,becauseofthenewpossibilitiestheInternetpro vides for lowering the transaction costs entailed in networked mobilization of capital,peerproductioncantakeplaceevenwhensignificantcapitalinvestments arerequiredwithoutrelyingonfinancebylargescalesourcesofventurecapital:
itsnotjustamatterofprojectsbeingabletoexpandorsustainthemselveswith littlecapital....Itsalsoamatterofthewayinwhichbothemergingdistributed Bauwens, The Political Economy of Peer Production, CTheory, December 2005 <http://www.ctheory.net/articles.aspx?id=499>. 2 PriyaGanapati,OpenSourceHardwareHackersStartP2PBank,Wired,March18, 2009<http://www.wired.com/gadgetlab/2009/03/opensourcehar/>. 3 David G. Blanchflower and Andrew J. Oswald, What Makes an Entrepreneur? <http://www2.warwick.ac.uk/fac/soc/economics/staff/faculty/oswald/entrepre.pdf>. Later appearedinJournalofLaborEconomics,16:1(1998),pp.2660. 4 Ibid.,p.2. 5 Ibid.,p.28. 6 Ibid.,p.3. 7 Jed Harris, Capitalists vs. Entrepreneurs, Anomalous Presumptions, February 26, 2007<http://jed.jive.com/?p=23>.
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technologiesingeneral,andpeerproductionprojectsinparticular,facilitatethe aggregationofdispersedcapitalwithoutithavingtopassthroughasinglecapi talist chokepoint, like a commercial bank or a venture capital fund.... Mean while, because of the way that peer production projects distribute their labor, peerproductionentrepreneurscanalsotakeadvantageofsparecyclesonexist ing,widelydistributedcapitalgoodstoolslikecomputers,facilitieslikeoffices and houses, software, etc. which contributors own, which they still would have ownedpersonallyorprofessionallywhetherornottheywerecontributingtothe peer production project.... So its not just a matter of cutting total aggregate costsforcapitalgoods...;itsalso,importantly,amatterofnewmodelsofag gregatingthecapitalgoodstomeetwhatevercostsyoumayhave,sothatsmall bits of available capital can be rounded up without the intervention of money 1 menandotherintermediaries.
Sonetworkorganizationnotonlylowersthetransactioncostsofaggregating capital for the purchase of physical means of production, but also increases the utilizationofthemeansofproductionwhentheyareexpensive. 3.ReducedCapitalOutlaysforPhysicalProduction As described so far, the opensource model only removes proprietary rents fromtheportionoftheproductionprocessthedesignstagethathasnomate rialcost,andfromtheprocessofaggregatingcapital.AsRichardStallmanputit,to repeat, its about free speech rather than free beer. Simply removing proprie taryrentsfromdesign,andremovingalltransactioncostsfromthefreetransferof digitaldesignsforautomatedproduction,willhavearevolutionaryeffectbyitself. MarcinJakubowski,ofFactorEFarm,writes:
The unique contribution of the information age arises in the proposition that dataatonepointinspaceallowsforfabricationatanother,usingcomputernu mericalcontrol(CNC)offabrication.Thissoundslikeanexpensiveproposition, butthatisnotsoifopensourcefabricationequipmentismadeavailable.With lowcostequipmentandsoftware,oneisabletoproduceoracquiresuchequip mentatapproximately$5kforafullyequippedlabwithmetalworking,cutting, 2 casting,andelectronicsfabrication,assistedbyopensourceCNC.
OrasJanneKyttnendescribesit:
Im trying to do for products what has already happened to music and digital photography, money, literatureto store them as information and be able to sendthedatafilesaroundtheworldtobeproduced.Bydoingthis,youcanre ducethewasteoftheplanet,thelaborcost,transportation...itsgoingtohave ahugeimpactinthenextcoupleofdecadesforthemanufacturingofgoods;we believe its a new industrial revolution. We will be able to produce products withoutusingtheoldmassproductioninfrastructurethatsbeenaroundfortwo 3 hundredyearsandisfullyoutofdate.
Jakubowskisreferencetothedecliningcostoffabricationequipmentsuggests that the revolution in opensource manufacturing goes beyond the design stage, andpromisestochangethewayphysicalproductionitselfisorganized.ChrisAn
CharlesJohnson,Dumptherentiersoffyourback,RadGeekPeoplesDaily,May29, 2008<http://radgeek.com/gt/2008/05/29/dump_the/>. 2 Marcin Jakubowski, OSE ProposalTowards a World Class Open Source Research and Development Facility, v0.12, January 16, 2008 <http://openfarmtech.org/OSE_ Proposal.doc>(accessedAugust25,2009). 3 Quoted in Diane Pfeiffer, Digital Tools, Distributed Making and Design. Thesis submittedtothefacultyoftheVirginiaPolytechnicInstituteandStateUniversityinpartial fulfillmentoftherequirementsforMasterofScienceinArchitecture,2009,p.36.
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dersonisnotthefirst,andprobablywontbethelast,topointtotheparallelsbe tween what the desktop computer revolution did to the information and culture industries,andwhatthedesktopmanufacturingrevolutionwilldointhephysical realm:
Thetoolsoffactoryproduction,fromelectronicsassemblyto3Dprinting, are now available to individuals, in batches as small as a single unit. Anybody with an idea and a little expertise can set assembly lines in China into motion withnothingmorethansomekeystrokesontheirlaptop.Afewdayslater,apro totypewillbeattheirdoor,andonceitallchecksout,theycanpushafewmore buttonsandbeinfullproduction,makinghundreds,thousands,ormore.They canbecomeavirtualmicrofactory,abletodesignandsellgoodswithoutanyin frastructureoreveninventory;productscanbeassembledanddropshippedby contractorswhoservehundredsofsuchcustomerssimultaneously. Today, microfactories make everything from cars to bike components to bespoke furniture in any design you can imagine. The collective potential of a milliongaragetinkerersisabouttobeunleashedontheglobalmarkets,asideas go straight into production, no financing or tooling required. Three guys with laptopsusedtodescribeaWebstartup.Nowitdescribesahardwarecompany, too. Hardwareisbecomingmuchmorelikesoftware,asMITprofessorEricvon Hippel puts it. Thats not just because theres so much software in hardware these days, with products becoming little more than intellectual property wrapped in commodity materials, whether its the code that drives the offthe shelf chipsin gadgets or the 3D design files thatdrive manufacturing. Its also because of the availability of common platforms, easytouse tools, Webbased collaboration,andInternetdistribution. Weveseenthispicturebefore:Itswhathappensjustbeforemonolithicin dustriesfragmentinthefaceofcountlesssmallentrants,fromthemusicindus trytonewspapers.Lowerthebarrierstoentryandthecrowdpoursin.... Agaragerenaissanceisspillingoverintosuchphenomenaasthebooming Maker Faires and local hackerspaces. Peer production, open source, crowd sourcing,usergeneratedcontentallthesedigitaltrendshavebeguntoplayout intheworldofatoms,too.TheWebwasjusttheproofofconcept.Nowtherevo lutionhitstherealworld. 1 Inshort,atomsarethenewbits.
The distinction, not only between being in business and out of business, butbetweenworkerandowner,isbeingeroded.Thewholeconceptoftechnologi calemploymentassumesthefactoryparadigminwhichmeansofproductionare extremelyexpensive,andtheonlyaccesstoworkformostpeopleisemployment bythoserichenoughtoownthemachinerywillcontinueunaltered.Buttheim plodingpriceofismakingthatparadigmobsolete.NeilGerschenfeld,likeAnder son,drawsaparallelbetweenhardwaretodayandsoftwarethirtyyearsago:
Thehistoricalparallelbetweenpersonalcomputationandpersonalfabrica tionprovidesaguidetowhatthosebusinessmodelsmightlooklike.Commer cialsoftwarewasfirstwrittenbyandforbigcompanies,becauseonlytheycould affordthemainframecomputersneededtorunit.WhenPCscamealonganyone couldbecomeasoftwaredeveloper,butabigcompanywasstillrequiredtode velop and distribute big programs, notably the operating systems used to run other programs. Finally, the technical engineering of computer networks com binedwiththesocialengineeringofhumannetworksalloweddistributedteams of individual developers to collaborate on the creation of the most complex software.... ChrisAnderson,IntheNextIndustrialRevolution,AtomsAretheNewBits,Wired, January25,2010<http://www.wired.com/magazine/2010/01/ff_newrevolution/all/1>.
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Similarly, possession of the means for industrial production has long been thedividinglinebetweenworkersandowners.Butifthosemeansareeasilyac quired,anddesignsfreelyshared,thenhardwareislikelytofollowtheevolution ofsoftware.Likeitssoftwarecounterpart,opensourcehardwareisstartingwith simple fabrication functions, while nipping at the heels of complacent compa niesthatdontbelievepersonalfabricationtoyscandotheworkoftheirreal machines. That boundary will recede until todays marketplace evolves into a continuum from creators to consumers, servicing markets ranging from one to 1 onebillion.
Diane Pfeiffer draws a comparison to the rise of desktop publishing in the 1980s.2 Wealreadysaw,inChapterThree,whatallthismeantfromthestandpointof investors:theyresufferingfromthesuperfluityofmostinvestmentcapital,result ing from the emerging possibility of small producers and entrepreneurs owning theirownfactories.Fromtheperspectiveofthesmallproducerandentrepreneur, thesametrendisagoodthingbecauseitenablesthemtoowntheirownfactories without any dependency on finance capital. Innovations not only in smallscale manufacturingtechnology,butinnetworkedcommunicationstechnologyfordis tributionandmarketing,areincreasinglyfreeingproducersfromtheneedforlarge amountsofcapital.CharlesHughSmithwrites:
WhatIfindradicallyappealingisnotsomuchthetechnicalaspectsofdesk top/workbench production of parts which were once out of financial reach of small entrepreneursthough that revolution is the enabling technologyit is the possibility that entrepreneurs can own the means of production without re sortingtovulture/bankinvestors/loans. Anyone who has been involved in a tech startup knows the drillin years past,atechstartuprequiredmillionsofdollarstodevelopanewproductorthe IP(intellectualproperty).Toraisethecapitalrequired,theentrepreneurshadto sell their souls (and company) to venture capital (vulture capital) investors whosimplytookORPM(otherrichpeoplesmoney)andputittowork,taking much of the value of new promising companies in trade for their scarce and costlycapital. The only alternative were banks, who generally shunned speculative in vestments(unlesstheywereinthebillionsandrelatedtoderivatives,heh). So entrepreneurs came up with the ideas and did all the hard work, and thenvulturecapitalswoopedintorakeofftheprofits,allthewhilecryingbitter tearsaboutthegreatriskstheyweretakingwithotherrichpeoplessparecash. Now that these production tools are within reach of small entrepreneurs, the vulture capital machine will find less entrepreneural fodder to exploit. The entrepreneursthemselvescanown/rentthemeansofproduction. ThatisafineoldMarxistphraseforthetoolsandplantwhichcreatevalue andwealth.Ownthatandyoucreateyourownwealth. In the postindustrial economies of the West and Asia, distribution chan nelsactedasmeansofwealthcreationaswell:youwanttomakemoneyselling booksormusic,forinstance,well,youhadtosellyourproducttotheownersof the distribution channels: the record labels, film distributors, book publishers and retail cartels, all of whom sold product through reviews and adverts in the mainstreammedia(anothercartel). The barriers to entry were incredibly high. It took individuals of im mense wealth (Spielberg, et al.) to create a new film studio from scratch (DreamWorks)afewyearsago.Nowanyartistcanselltheirmusic/booksviathe Web,completelybypassingthegatekeepersanddistributionchannels. Neil Gerschenfeld, Fab: The Coming Revolution on Your DesktopFrom Personal ComputerstoPersonalFabrication(NewYork:BasicBooks,2005),pp.1415. 2 Pfeiffer,DigitalTools,pp.3335.
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Inagreatirony,publishersandlabelsarenowturningtotheWebto selltheirproduct.IfalltheyhaveistheWeb,thenwhatvaluecantheyadd?I fullyexpectfilmakerstogodirectlytotheaudienceviatheWebincomingyears andbypasstheentirefilmdistributioncartelentirely. Why go to WalMart to buy a DVD when you can download hundreds of newfilmsofftheWeb? Boththesupplychainanddistributioncartelsarebeingblownapart bytheWeb.Notonlycanentrepreneursown/rentthemeansofproductionand arrangetheirownsupply/assemblychains,theycanalsoowntheirowndistribu tionchannels. Thelargescalefactory/distributionmodelissimplynolongerneeded formanyproducts.Asthebarrierstoowningthemeansofproductionanddis tribution fall, a Renaissance in smallscale production and wealth creation be 1 comesnotjustpossiblebutinevitable.
Even without the latest generation of lowcost digital fabrication machinery, thekindofflexiblemanufacturingnetworkthatexistsinEmiliaRomagnaorShen zenisideallysuitedtotheopenmanufacturingphilosophy.TomIgoewrites:
Therearesomeobviousparallelshere[intheshanzhaimanufacturersofChina seeChapterFour]totheopenhardwarecommunity.BusinesseslikeSparkFun, Adafruit,EvilMadScientist,Arduino,SeeedStudio,andothersthrivebytaking existing tools and products, recombining them and repackaging them in more usable ways. We borrow from each other and from others, we publish our files for public use, we improve upon each others work, and we police through li censes such as the General Public License, and continual discussion between competitors and partners. We also revise products constantly and make our businesses based on relatively small runs of products tailored to specific audi 2 ences.
Theintersectionoftheopenhardwareandopenmanufacturingphilosophies with the current model of flexible manufacturing networks will be enabled, Igoe argues,bytheavailabilityof
Cheaptools.Lasercutters,lathes,andmillingmachinesthatareaffordableby an individual or a group. This is increasingly coming true. The number of col leaguesIknowwhohavelasercuttersandmillsintheirlivingroomsisincreas ing(andtheirasthmaisworsening,nodoubt).Therearesomenotableholesin the open hardware world that exist partially because the tools arent there. Cheapinjectionmoldingdoesntexistyet,butinjectionmoldingservicesdo,and theyreaccessibleviathenet.Butwhentheyrenextdoor(asinShenzen),youve 3 gotacompetitiveadvantage:yourneighbor.
(Actually handpowered, smallscale injection molding machines are now availableforaround$1500,andKennermarketedafullyfunctionaltoyinjection moldingmachineformakingtoysoldiers,tanks,andthelikebackinthe1960s.)4 And the flexible manufacturing network, unlike the transnational corporate environment,isactivelyconducivetothesharingofknowledgeanddesigns.
Open manufacturing information. Manufacturers in this scenario thrive on adapting existing products and services. Call them knockoffs or call them new CharlesHughSmith,TheFutureofManufacturingintheU.S.oftwominds,Febru ary 5, 2010 <http://charleshughsmith.blogspot.com/2010/02/futureofmanufacturingin us.html>. 2 TomIgoe,Idlespeculationontheshanzhaiandopenfabrication,helloblog,Sep tember4,2009<http://www.tigoe.net/blog/category/environment/295/>. 3 Ibid. 4 Joseph Flaherty, Desktop Injection Molding, Replicator, February 1, 2020 <http:// replicatorinc.com/blog/2010/02/desktopinjectionmolding>.
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hybrids,theybothinvolvereverseengineeringsomethingandmakingitfityour market.Reverseengineeringtakestimeandmoney.Whenyoureamom&pop shop,thatmattersalotmoretoyou.Ifyouvegotafriendoravendorwhoswill ingtodoitforyouasaservice,thathelps.Butiftheplansfortheproductyoure adapting are freely available, thats even better. In a multinational world, open source manufacturing is anathema. Why would Nokia publish the plans for a phone when they could dominate the market by doing the localization them selves?Butinaworldofnetworkedsmallbusinesses,itspursbusiness.Youmay not have the time or interest in adapting your product for another market, but someoneelsewill,andiftheyvegotaccesstoyourplans,theyllbegrateful,and 1 willreturnthefavor,formallyorinformally.
Theavailabilityofmodestlypriceddesktopmanufacturingtechnology(about whichwewillseemoreimmediatelybelow),coupledwiththepromiseofcrowd sourcedmeansofaggregatingcapital,hasledtoaconsiderableshiftinopinionin thepeertopeercommunity,asevidencedbyMichelBauwens:

Iusedtothinkthatthemodelofpeerproductionwouldessentiallyemerge in the immaterial sphere, and in those cases where the design phase could be splitfromthecapitalintensivephysicalproductionsphere.... However,asIbecomemorefamiliarwiththeadvancesinRapidManuctur ing [sic] ... and Desktop Manufacturing ..., Im becoming increasingly con vincedofthestrongtrendtowardsthedistributionofphysicalcapital. If we couple this with the trend towards the direct social production of money(i.e.thedistributionoffinancialcapital...)andthedistributionofen ergy ... ; and how the two latter trends are interrelated ..., then I believe we have very strong grounds to see a strong expansion of p2pbased modalities in 2 thephysicalsphere.
Theconditionsofphysicalproductionhave,infact,experiencedatransforma tionalmostasgreatasthatwhichdigitaltechnologyhasbroughtaboutonimma terialproduction.Thephysicalproductionsphereitselfhasbecomefarlesscapi talintensive.Ifthedigitalrevolutionhascausedanimplosioninthephysicalcapi tal outlays required for the information industries, the revolution in garage and desktop production tools promises an analogous effect almost as great on many kinds of manufacturing. The radical reduction in the cost of machinery required formanykindsofmanufacturinghaserodedStallmansdistinctionbetweenfree speechandfreebeer.OrasChrisAndersonputit,Atomswouldliketobefree, too,buttheyrenotsopushyaboutit.3 Thesameproductionmodelsweepingtheinformationindustries,networked organization of people who own their own production tools, is expanding into physicalmanufacturing.Arevolutionincheap,generalpurposemachinery,anda revolution in the possibilities for networked design made possible by personal computersandnetworkculture,accordingtoJohannSoderberg,isleadingto
anextensionofthedreamthatwaspioneeredbythemembersoftheHomebrew ComputerClub[i.e.,acheapcomputerabletorunonthekitchentable].Itisthe visionofauniversalfactoryabletorunonthekitchentable....[T]hedesirefor a desktop factory amounts to the same thing as the reappropriation of the 4 meansofproduction.
Igoe,op.cit. Michel Bauwens post to Institute for Distributed Creativity email list, May 7, 2007. <https://lists.thing.net/pipermail/idc/2007May/002479.html> 3 Chris Anderson, Free: The Future of a Radical Price (New York: Hyperion, 2009), p. 241. 4 Soderberg,HackingCapitalism,pp.185186.
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Clearly, the emergence of cheap desktop technology for custom machining partsinsmallbatcheswillgreatlylowertheoverallcapitaloutlaysneededfornet workedphysicalproductionoflightandmediumconsumergoods. Wevealreadyseentheimportanceofthefallingcostsofsmallscaleproduc tion machinery made possible by the Japanese development of small CNC ma chines in the 1970s. That is the technological basis of the flexible manufacturing networksweexaminedinthelastchapter. When it comes to the Homebrew dream of an actual desktop factory, the most promising current development is the Fab Lab. The concept started with MITsCenterforBitsandAtoms.TheoriginalversionoftheFabLabincludedCNC laser cutters and milling machines, and a 3D printer, for a total cost of around $50,000.1 Opensource versions of the machines in the Fab Lab have brought the cost downtoaround$25,000. One important innovation is the multimachine, an opensource, multiple purposemachinetoolthatincludesdrillpress,latheandmillingmachine;itcanbe modifiedforcomputerizednumericcontrol.Themultimachinewasoriginallyde veloped by Pat Delaney, whose YahooGroup has grown into a design community andsupportnetworkofcurrentlyoverfivethousandpeople.2 AssuggestedbythesizeofDelaneysYahooGroupmembership,themultima chinehasbeentakenupindependentlybyopensourcedevelopersallaroundthe world.TheOpenSourceEcologydesigncommunity,inparticular,envisionsaFab Lab which includes a CNC multimachine as the central tool piece of a flexible workshop ... eliminating thousands of dollars of expenditure requirement for similarabilitiesandservingasthecenterpiecesenablingthefabricationofelec tric motor, CEB, sawmill, OSCar, microcombine and all other items that require processesfrommillingtodrillingtolathing.3
It is a high precision milldrilllathe, with other possible functions, where the precision is obtained by virtue of building the machine with discarded en gineblocks.... ThecentralfeatureoftheMultimachineistheconceptthateitherthetool ortheworkpiecerotateswhenanymachiningoperationisperformed.Assuch,a heavyduty,precisionspindle(rotor)istheheartoftheMultimachineformill ing,drillingandlathingapplications.Theprecisionarisesfromthefactthatthe spindleissecuredwithintheabsolutelypreciseboreholesofanengineblock,so precisionisguaranteedsimplybybeginningwithanengineblock. IfonecombinestheMultimachinewithaCNCXYorXYZmovableworking 4 platformsimilar to ones being developed by the Iceland Fab Lab team , 5 6 RepRap , CandyFab 4000 team, and othersthen a CNC milldrilllathe is the result. At least Factor 10 reduction in price is then available compared to the competition. The milldrilllathe capacity allows for the subtractive fabrication ofanyallowable shape,rotor, or cylindricallysymmetric object.Thus, the CNC Multimachine can be an effective cornerstone of high precision digital fabrica tiondownto2thousandthsofaninch. MITCenterforBitsandAtoms,FabLabFAQ<http://fab.cba.mit.edu/about/faq/> (accessedAugust31,2009). 2 Multimachine, Wikipedia <http://en.wikipedia.org/wiki/Multimachine> (accessed August31,2009>;<http://groups.yahoo.com/group/multimachine/>. 3 Multimachine & Flex FabOpen Source Ecology <http://openfarmtech.org/index. php?title=Multimachine_%26_Flex_Fab>. 4 <http://smari.yaxic.org/blag/2007/11/14/theroutingtable/>(noteinquotedtext). 5 <http://reprap.org/bin/view/Main/RepRap>.(noteinquotedtext). 6 <http://www.makingthings.com/projects/CandyFab4000>(noteinquotedtext).
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Interesting features of the Multimachine are that the machines can be scaledfromsmallonesweighingatotalof~1500lbtolargeonesweighingseveral tons,toentirefactoriesbasedontheMultimachinesystem.TheCNCXY(Z)ta blescanalsobescaledaccordingtotheneed,ifattentiontothispointisconsid eredindevelopment.Thewholemachineisdesignedfordisassembly.Moreover, other rotating tool attachments can be added, such as circular saw blades and grinding wheels. The overarm included in the basic design is used for metal formingoperations. Thus,theMultimachineisanexampleofappropriatetechnology,wherethe user is in full control of machine building, operation, and maintenance. Such appropriate technology is conducive to successful small enterprise for local communitydevelopment,viaitslowcapitalizationrequirement,easeofmainte nance,scaleabilityandadaptability,andwiderangeofproductsthatcanbepro duced.Thisisrelevantbothinthedevelopingworldandinindustrializedcoun 1 tries.
Themultimachine,accordingtoDelaney,canbebuiltbyasemiskilledme chanicusingjustcommonhandtools,fromdiscardedengineblocks,andcanbe scaledfromaclosetsizeversiontoonethatwouldweigh4or5tons.2 Indevelopingcountries,inparticular,thekindsofproductsthatcanbebuilt withamultimachineinclude:

AGRICULTURE: Buildingandrepairingirrigationpumpsandfarmimplements. WATERSUPPLIES: Makingandrepairingwaterpumpsandwaterwelldrillingrigs. FOODSUPPLIES: Building steelrollingandbending machines for making fuel efficient cook stovesandothercookingequipment. TRANSPORTATION: Anything from making cart axles to rebuilding vehicle clutch, brake, and otherparts.... JOBCREATION: A group of specialized but easily built MultiMachines can be combined to form a small, very low cost, metal working factory which could also serve as a trade school. Students could be taught a single skill on a specialized machine and be paid as a worker while learning other skills that they could take else 3 where.
Moregenerally,aFabLab(i.e.adigitalflexiblefabricationfacilitycenteredon the CNC multimachine along with a CNC cutting table and opensource 3D printer like RepRap) can produce virtually anythingespecially when coupled withtheabilityofsuchmachinerytorunopensourcedesignfiles.
Flexiblefabricationreferstoaproductionfacilitywhereasmallsetofnon specialized, generalfunction machines (the 5 items mentioned [see below]) is capableofproducingawiderangeofproductsifthosemachinesareoperatedby skilled labor. It is the opposite of mass production, where unskilled labor and specializedmachineryproducelargequantitiesofthesameitem(seesectionII, Economic Base). When one adds digital fabrication to the flexible fabrication mixthentheskilllevelonpartoftheoperatorisreduced,andtherateofpro ductionisincreased. Digital fabrication is the use of computercontrolled fabrication, as in structedbydatafilesthatgeneratetoolmotionsforfabricationoperations.Digi
Jakubowski,OSEProposal. <http://groups.yahoo.com/group/multimachine/?yguid=234361452>. 3 <http://opensourcemachine.org/node/2>.

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tal fabrication is an emerging byproduct of the computer age. It is becoming more accessible for small scale production, especially as the influence of open source philosophy is releasing much of the knowhow into nonproprietary hands.Forexample,theMultimachineisanopensourcemilldrilllathebyitself, butcombinedwithcomputernumericalcontrol(CNC)oftheworkpiecetable,it becomesadigitalfabricationdevice. Itshouldbenotedthatopenaccesstodigitaldesignperhapsintheforma globalrepositoryofsharedopensourcedesignsintroducesauniquecontribu tiontohumanprosperity.Thiscontributionisthepossibilitythatdataatonelo cationintheworldcanbetranslatedimmediatelytoaproductinanyotherloca tion. This means anyone equipped with flexible fabrication capacity can be a producerofjustaboutanymanufacturedobject.Theramificationsforlocaliza tionofeconomiesareprofound,andleavetheaccesstorawmaterialfeedstocks 1 astheonlynaturalconstrainttohumanprosperity.
Open Source Ecology, based on existing technology, estimates the cost of producingaCNCmultimachinewiththeirownlaborat$1500.2TheCNCmultima chine is only one part of a projected Fab Lab, whose total cost of construction willbeafewthousanddollars.
1. CNCMultimachineMill,drill,lathe,metalforming,othergrinding/cutting. This constitutes a robust machining environment that may be upgraded for open source computer numerical control by OS software, which is in devel 3 opment. 2. XYZcontrolled torch and router tablecan accommodate an acetylene torch,plasmacutter,router,andpossiblyCO2lasercutterdiodes 3. Metalcastingequipmentallkindsofcastpartsfromvariousmetals 4. Plastic extruderextruded sheet for advanced glazing, and extruded plastic partsortubing 5. Electronicsfabricationoscilloscope,circuitetching,othersforalltypesof electronicsfrompowercontroltowirelesscommunications. This equipment base is capable of producing just about anythingelectronics, electromechanicaldevices,structures,andsoforth.TheOSFabLabiscrucialin 4 thatitenablestheselfreplicationofallthe16technologies.
(The 16 technologies refers to Open Source Ecologys entire line of sixteen products, including not only construction and energy generating equipment, a tractor,andagreenhouse,butusingtheFabLabtoreplicatethefiveproductsin theFabLabitself.SeethematerialonOSEintheAppendix.) Another major component of the Fab Lab, the 3D printer, sells at a price startingatover$20,000forcommercialversions.TheRepRap,anopensource3D printer project, has reduced the cost to around $500.5 MakerBot6 is a closely re lated commercial 3D printer project, an offshoot of RepRap that shares much of
Jakubowski,OSEProposal. Marcin Jakubowski, Rapid Prototyping for Industrial Swadeshi, Factor E Farm Weblog, August 10, 2008 <http://openfarmtech.org/weblog/?p=293>. Open Source Fab Lab, Open Source Ecology wiki (accessed August 22, 2009) <http://openfarmtech.org/ index.php?title=Open_Source_Fab_Lab>. 3 Open source CNC code is being developed by Smari McCarthy of the Iceland Fab Lab,<http://smari.yaxic.org/blag/2007/11/14/theroutingtable/>. 4 Jakubowski,OSEProposal. 5 RepRap site <http://reprap.org/bin/view/Main/WebHome>; RepRap Project, Wikipedia<http://en.wikipedia.org/wiki/RepRap_Project>(accessedAugust31,2009). 6 <http://makerbot.com/>
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itsstaffincommon.1Makerbothasamorestreamlined,finished(i.e.,commercial looking) appearance. Unlike RepRap, it doesnt aim at total selfreplicability; rather,mostofitspartsaredesignedtobebuiltwithalasercutter.2 3D printers are especially useful for making casting molds. Antique car en thusiast Jay Leno, in a recent issue of Popular Mechanics, described the use of a combination3Dscanner/3Dprintertocreatemoldsforoutofproductionparts foroldcarslikehis1907WhiteSteamer.
The3Dprintermakesanexactcopyofapartinplastic,whichwethensend outtocreateamold.... The NextEngine scanner costs $2995. The Dimension uPrint Personal 3D printerisnowunder$15,000.Thatsnotcheap.Butthistechnologyusedtocost 3 10timesthatamount.AndIthinkthepricewillcomedownevenmore.
Well, yeahespecially considering RepRap can already be built for around $500inparts.EventheDesktopFactory,acommercial3Dprinter,sellsforabout $5,000.4 Automated production with CNC machinery, Jakubowski argues, holds out some very exciting possibilities for producing at rates competitive with conven tionalindustry.
Itshouldbepointedoutthataparticularlyexcitingenterpriseopportunity arises from automation of fabrication, such as arises from computer numerical control.Forexample,thesawmillandCEBdiscussedabovearemadelargelyof DfD,bolttogethersteel.ThislendsitselftoafabricationprocedurewhereaCNC XYZtablecouldcutoutallthemetal,includingboltholes,fortheentiredevice, inafractionofthetimethatitwouldtakebyhand.Assuch,completesawmillor CEB kits may be fabricated and collected, ready for assembly, on the turn aroundtimescaleofdays.... The digital fabrication production model may be equivalent in production 5 ratestothatofanylargescale,hightechfirms. TheconceptofaCNCXYZtableispowerful.Itallowsonetoprepareallthe metal,suchasthatforaCEBpressortheboundarylayerturbine,withthetouch ofabuttonifadesignfileforthetoolpathisavailable.Thisindicatesondemand fabrication capacity, at production rates similar to that of the most highly capitalizedindustries.Withmoderntechnology,thisisdoableatlowcost.With accesstolowcostcomputerpower,electronics,andopensourceblueprints,the capital needed for producing a personal XYZ table is reduced merely to struc turalsteelandafewothercomponents:itsaprojectthatrequiresperhaps$1000 6 tocomplete.
(SomeonesactuallydevelopedaCNCXYZcuttingtablefor$100inmaterials, althoughthebugsarenotyetcompletelyworkedout.)7 Smallscale fabrication facilities of the kind envisioned at Factor E Farm, based on CNC multimachines, cutting tables and 3D printers, can even produce
Keith Kleiner, 3D Printing and SelfReplicating Machines in Your Living Room Seriously, Singularity Hub, April 9, 2009 <http://singularityhub.com/2009/04/09/3d printingandselfreplicatingmachinesinyourlivingroomseriously/>. 2 What is the relationship between RepRap and Makerbot? Hacker News <http:// news.ycombinator.com/item?id=696785>. 3 JayLeno,JayLenos3DPrinterReplacesRustyOldParts,PopularMechanics,July2009 <http://www.popularmechanics.com/automotive/jay_leno_garage/4320759.html?page=1>. 4 <http://www.desktopfactory.com/>. 5 Jakubowski,OSEProposal. 6 Ibid. 7 CNC machine v2.0aka Valkyrie, Lets Make Robots, July 14, 2009 <http:// letsmakerobots.com/node/9006>.
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motorizedvehicleslikepassengercarsandtractors,whentheheavyengineblock isreplacedwithlightelectricmotor.Suchelectricvehicles,infact,arepartofthe totalproductpackageatFactorEFarm.

Thecentralpartofacarisitspropulsionsystem.Fig.6showsafuelsource feeding a heat generator, which heats a flash steam generator heat exchanger, which drives aboundary layer turbine, which drives awheel motor operating as an electrical generator. The electricity that is generated may either be fed into batterystorage,orcontrolledbypowerelectronicstodrive4separatewheelmo tors.Thisconstitutesahybridelectricvehicle,with4wheeldriveinthisparticu larimplementation. This hybrid electric vehicle is one of intermediate technology design that maybefabricatedinasmallscale,flexibleworkshop.Thepointisthatacompli cated power delivery system (clutchtransmissiondrive shaftdifferential) has beenreplacedbyfourelectricalwiresgoingtothewheelelectricalmotors.This simplificationresultsinhighlocalizationpotentialofcarmanufacturing. Thefirststepinthedevelopmentofopensource,Hypercarlikevehiclesis thepropulsionsystem,forwhichtheboundarylayerturbinehybridsystemisa candidate. Our second step will be structural optimization for lightweight car 1 design.
The CubeSpawn project is also involved in developing a series of modular desktopmachinetools.Thefirststageisacubical3axismillingmachine(ormill ing cell). The next step will be to build a toolchanger and head changer so the samecubicalframeworkandmovementcontrolscanbeusedfora3Dprinter.2
Itstartsbyofferingasimpledesignfora3axis,computercontrolledmilling machine. With this resource, you have the ability to make a significant subset of all thepartsinexistence!So,partsforadditionalmachinescanbemadeonthemill, allowingthesystemtoaddtoitself,allbasedonstandardstopromoteinteroper ability.... Thepracticalconsequenceisaselfexpandingfactorythatwillfitinawork shoporgarage.... Crosspollenizationwithotheropensourceprojectsisinevitableandbenefi cial although at first, commercial products will be used if no open source product exists. This has already begun, and CubeSpawn uses 5 other open source+projectsasbuildingblocksinitsdesignsTheseareelectronicsfromthe Sanguino/RepRapspecificbranchoftheArduinoproject,Makerbeamforcubes ofsmalldimensions,andtheEMCcontrolsoftwareforaninterfacetoindividual cells.ThereisananticipateduseofSKDBforpartversionandcuttinggeometry fileretrieval,withDebianLinuxasacentralhostforthesystemDB.... By offering a standardized solution to the problems of structure, power connections,dataconnections,intercelltransport,andcontrollanguage,wecan bringaboutaneasiertouseframeworktocollaborateon.Therapidadoptionof opensourcehardwareshouldletusbuildthebetterworldindustryhastoldus 3 aboutforover100years.
Withstillotherheads,thesameframeworkcanbeusedasacuttingtable. If these examples are not enough, the P2P Foundations Product Hacking pageprovides,undertheheadingofProduction/Machinery,alonglistofopen sourceCNCrouter,cuttingtable,3Dprinter,modularelectronics,andotherpro
Jakubowski,OSEProposal. <http://www.cubespawn.com/>. 3 CubeSpawn, An open source, Flexible Manufacturing System (FMS) <http://www .kickstarter.com/projects/1689465850/cubespawnanopensourceflexible manufacturing>.
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jects.1 DIYLILCNC is a cheap homebrew 3axis milling machine that can be built withbasicshopskillsandtoolaccess.2 One promising early attempt at distributed garage manufacturing is 100kGarages,whichwewillexamineinsomedetailintheAppendix.100kGarages isajointeffortoftheShopBot3axisroutercompanyandthePonokoopendesign network (which itself linked a library of designs to local Makers with CNC laser cutters). BesidesPonoko,anumberofothercommercialfirmshaveappearedrecently whichofferproductionofcustompartstothecustomersdigitaldesignspecifica tions,atamodestprice,usingsmallscale,multipurposedesktopmachinery.Two of the most prominent are Big Blue Saw3 and eMachineShop.4 The way the latter works,inparticular,isdescribedinaWiredarticle:
The concept is simple: Boot up your computer and design whatever object you canimagine,pressabuttontosendtheCADfiletoLewisheadquartersinNew Jersey, and two or three weeks later hell FedEx you the physical object. Lewis launchedeMachineShopayearandahalfago,andcustomersareusinghisserv ice to create engineblock parts for hot rods, gears for homebrew robots, tele 5 scopemountsevenspecialsolesfortapdanceshoes.
Another project of the same general kind was just recently announced: CloudFab, which offers access to a network of jobshops with 3D printers.6 Also promisingismobilemanufacturing(FactoryinaBox).7 Buildingonourearlierspeculationaboutnetworkedsmallmachineshopsand hobbyist workshops, new desktop manufacturing technology offers an order of magnitude increase in the quality of work that can be done for the most modest expense. KevinKellyarguesthattheactualcostsofphysicalproductionareonlyami norpartofthecostofmanufacturedgoods.
.... material industries are finding that the costs of duplication near zero, so theytoowillbehavelikedigitalcopies.Mapsjustcrossedthatthreshold.Genet ics is about to. Gadgets and small appliances (like cell phones) are sliding that way.Pharmaceuticalsarealreadythere,buttheydontwantanyonetoknow.It 8 costsnothingtomakeapill.
If, as Kelley suggests, the cheapness of digital goods reflects the imploding cost of copying them, it follows that the falling cost of copying physical goods willfollowthesamepattern. Thereisacommonthreadrunningthroughallthedifferenttheoriesofthein terfacebetweenpeerproductionandthematerialworld:astechnologyforphysical
<http://p2pfoundation.net/Product_Hacking#Production.2FMachinery>. <http://diylilcnc.org/>. 3 <http://www.bigbluesaw.com/saw/>. 4 <http://www.emachineshop.com/>(seealso<www.barebonespcb.com/!BB1.asp>). 5 Clive Thompson, The Dream Factory, Wired, September 2005 <http://www.wired .com/wired/archive/13.09/fablab_pr.html>. 6 The CloudFab Manifesto, Ponoko Blog, September 28, 2009 <http://blog.ponoko. com/2009/09/28/thecloudfabmanifesto/>. 7 CarinStillstromandMatsJackson,TheConceptofMobileManufacturing,Journal ofManufacturingSystems26:34(July2007)<http://www.sciencedirect.com/science?_ob= ArticleURL&_udi=B6VJD4TK3FG86&_user=108429&_rdoc=1&_fmt=&_orig=search&_sort= d&view=c&_version=1&_urlVersion=0&_userid=108429&md5=bf6e603b5de29cdfd026d5d00 379877c>. 8 Kevin Kelly, Better Than Free, The Technium, January 31, 2008 <http://www.kk. org/thetechnium/archives/2008/01/better_than_fre.php>.
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production becomes feasible on increasingly smaller scales and at less cost, and thetransactioncostsofaggregatingsmallunitsofcapitalintolargeonesfall,there willbelessandlessdisconnectbetweenpeerproductionandphysicalproduction. Its worth repeating one last time: the distinction between Stallmans free speechandfreebeeriseroding.Totheextentthatembeddedrentsonintellec tualpropertyareasignificantportionofcommodityprices,freespeech(inthe senseofthefreeuseofideas)willmakeourbeer(i.e.,thepriceofmanufactured commodities) at least a lot cheaper. And the smaller the capital outlays required for physical production, the lower the transaction costs for aggregating capital, andthelowertheoverhead,thecheaperthebeerbecomesaswell. If,aswesawSabelandPioresayabove,thecomputerisatextbookexampleof an artisans tooli.e., an extension of the users creativity and intellectthen smallscale, computercontrolled production machinery is a textbook illustration ofE.F.Schumachersprinciplesofappropriatetechnology:
cheapenoughthattheyareaccessibletovirtuallyeveryone; suitableforsmallscaleapplication;and compatiblewithmansneedforcreativity.
D.THEMICROENTERPRISE
We have already seen, in Chapter Four, the advantages of low overhead and small batch production that lean, flexible manufacturing offers over traditional massproductionindustry.Thehouseholdmicroenterpriseofferstheseadvantages, butincreasedbyanotherorderofmagnitude.AswesawCharlesJohnsonsuggest above, the use of spare cycles of capital goods people own anyway results in enormouscostefficiencies. Consider, for example, the process of running a small, informal brew pub or restaurantoutofyourhome,underagenuinefreemarketregime.Buyingabrew ingvatanda fewsmall fermentersforyourbasement,usingafewtablesinare modeledspareroomasapublicrestaurantarea,etc.,wouldrequireasmallbank loan for at most a few thousand dollars. And with that capital outlay, you could probablymakepaymentsonthedebtwiththemarginfromonecustomeraday.A fewcustomerseveningsandweekends,probablyfoundmainlyamongyourexist ingcircleofacquaintances,wouldenableyoutoinitiallyshiftsomeofyourwork inghoursfromwagelabortoworkintherestaurant,withthepossibilityofgradu allyphasingoutwagelaboraltogetherorscalingbacktoparttime,asyoubuiltup acustomerbase.Inthisandmanyotherlinesofbusiness(forexampleaparttime gypsycabserviceusingacarandcellphoneyouownanyway),theminimalentry costs and capital outlay mean that the minimum turnover required to pay the overheadandstayinbusinesswouldbequitemodest.Inthatcase,alotmorepeo plewouldbeabletostartsmallbusinessesforsupplementaryincomeandgradu allyshiftsomeoftheirwageworktoselfemployment,withminimalriskorsunk costs. But thats illegal. You have to buy an extremely expensive liquor license, as wellashavinganindustrialsizedstove,dishwasher,etc.Youhavetopayrentona separate,dedicatedcommercialbuilding.Andthatlevelofcapitaloutlaycanonly bepaidoffwithalargediningroomandalargekitchen/waitingstaff,whichmeans youhavetokeeptheplacefilledortheoverheadcostswilleatyoualiveinother words,ChapterEleven.Thesehighentrycostsandtheenormousoverheadarethe reasonyoucantaffordtostartoutreallysmallandcheap,andthereasonrestau rantshavesuchahighfailurerate.Itsillegaltousethesurpluscapacityoftheor
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dinaryhouseholditemswehavetoownanywaybutremainidlemostofthetime (including smallscale truck farming): e.g. RFID chip requirements and bans on unpasteurizedmilk,highfeesfororganiccertification,etc.,whichmakeitprohibi tivelyexpensivetosellafewhundreddollarssurplusamonthfromthehousehold economy.AsRoderickLongputit,
In the absence of licensure, zoning, and other regulations, how many people wouldstartarestauranttodayifalltheyneededwastheirlivingroomandtheir kitchen? How many people would start a beauty salon today if all they needed wasachairandsomescissors,combs,gels,andsoon?Howmanypeoplewould startataxiservicetodayifalltheyneededwasacarandacellphone?Howmany peoplewouldstartadaycareservicetodayifabunchofworkingparentscould simplygettogetherandpooltheirresourcestopayafewoftheirnumbertotake careofthechildrenoftherest?Thesearenotthesortsofsmallbusinessesthat receive SBIR awards; they are the sorts of small businesses that get hammered downbythefullstrengthofthestatewhenevertheydaretomakeanappearance 1 withoutthreadingthelengthyandcostlymazeofthestatespermissionprocess.
Shawn Wilbur, an anarchist writer with half a lifetime in the bookselling business, describes the resilience of a lowoverhead business model: My little storewasenormouslyefficient,inthesensethatitcouldweatherlongperiodsof lowsales,andstillgenerallyprovidenewspecialorderbooksinthesameamount of time as a Big Book Bookstore. The problem was that, with the stateimposed paperworkburdenassociatedwithhiringhelp,itwaspreferablei.e.lesscompli catedto work sixtyhour weeks.2 The stateimposed administrative costs in volvedinthecooperativeorganizationoflaboramounttoanentrybarrierthatcan onlybehurdledbythebigguy.Aftersometimeoutofthebusinessofindependent booksellingandworkinganumberofwagelaborgigsinchainbookstores,Wilbur has recently announced the formation of Corvusa micropublishing operation thatoperatesonaprintondemandbasis.3Inresponsetomyrequestforinforma tiononhisbusinessmodel,Wilburwrote:
Ingeneral...,CorvusEditionsisahandmedownlaptopandacomputer thatshouldprobablyhavebeenretiredfiveyearsago,andwhichhasmorethan paidforitself in myprevious business, some software, all of which I previously ownedandnoneofwhichisparticularlyneworspiffy,a$20stapler,a$150laser printer, a handful of external storage devices, an old flatbed scanner, the usual computerrelatedoddsandends,andthefruitsofthousandsofhoursofarchival researchandsiftingthroughdigitalsources(allofwhichfitsonasingleportable harddrive.)Theonlinepresencedidnotinvolveanyadditionalexpense,beyond the costs of the free archive, except for a new domain name. My hosting costs, including holding some domain registrations for friendly projects, total around $250/year,buttheCorvussiteandshopcouldbehostedfor$130. Because Portland has excellent resources for computer recycling and the like,Isuspect a similaroperation,minus the archive, using free Linux software tools,couldalmostcertainlybeputtogetherforlessthan$500,includingasmall startingstockofpaperandtonerandperhapsmorelike$300. Roderick Long, Free Market Firms: Smaller, Flatter, and More Crowded, Cato Un bound, November 25, 2008 <http://www.catounbound.org/2008/11/25/rodericklong/free marketfirmssmallerflatterandmorecrowded/>. 2 Comment under Shawn Wilbur, Who benefits most economically from state centralizationIntheLibertarianLabyrinth,December9,2008<http://libertarianlabyrinth .blogspot.com/2008/12/whobenefitsmosteconomicallyfrom.html>. 3 ShawnWilbur,TakingWing:CorvusEditions,IntheLibertarianLabyrinth,July1,2009 <http://libertarianlabyrinth.blogspot.com/2009/07/takingwingcorvuseditions.html>; Cor vusDistributionwebsite<http://www.corvusdistribution.org/shop/>.
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Thecostofmaterialsissome20%ofWilbursretailpriceonaverage,withthe rest of the price being compensation free and clear for his labor: the service of printing, folding, stapling and shipping.... There are no proprietary rents be causethepdffilesarethemselvesfreefordownload;Wilburmakesmoneyentirely from the conveniencevalue of his doing those printing, etc., services for the reader.1 Asanexampleofamorepurelyserviceorientedmicroenterprise,SteveHer rickdescribesthetranslatorscooperativehesapartof:
... We effectively operate as a job shop. Work comes in from clients, and ourcoordinatorpoststheofferonemail.Peopleoffertotakeitastheyreavail able. So far, the supply and demand have been roughly equal. When multiple people are available, members take priority over associates, and members who havetakenlessworkrecentlytakepriorityoverthosewhohavetakenmore. Wehavesevenmembers,pluseightortenassociates,whohavenotpaida buyin and who are not expected to attend meetings. They do, however, make thesamepayforthesamework. Interpreting and translating are commonly done alone. So, why have a co op?First,weallhatedoingthepaperworkandaccounting.Wedratherbedoing our work. A coop lets us do that. The other reason is brand ing/marketing/reputation. Clients cant keep track of the contact info for a dozenpeople,buttheycanremembertheemailandphonenumberforourco ordinator,whocanquicklycontactusall.Also,withus,theygetaknownentity, evenifitsanewperson.(Unlikemostotherservicesanorganizationmightcon tract for, clients dont usually know how well their interpreters are doing for theirpay.Withus,theyworryaboutthatalotless.) Wekeepouroptionsopenbytakingmanykindsofwork.Wedontcompete withthelocalmedicalandcourtinterpretersystems(andsomeofusalsowork inthem),butthatleavesalotofworktodo:weworkforschoolsanduniversi ties, nonprofits, small businesses, individuals, unions, and so on. Weve pon dered whether there are clients we would refuse to work for, but so far, that hasntbeenanissue. Wehavealmostnooverhead.Weareworkingongettinganaccountant,but wedontanticipatehavingtopaymorethanafewhoursamonthforthat.Our books arent that complicated. We also pay rent to the nonprofit we spun off from,butthatssetupasapercentageofourincome,notafixedamount,soit cantputusunderwater.Italsoservesasanincentiveforthemtosenduswork! Other than that, we really have no costs. As a coop, taxes are passthrough, meaningthecoopitselfpaysnotaxes;wepaytaxesonourincomefromtheco op.Wewillbedoingsomemarketingsoon,butwereinvestigatingverylowcost waystoreachourtargetmarket,likeinkindwork.Andwehavenocapitalcosts, apartfromourinterpretingmicandearpieces,whichweinheritedfromthenon profit.Occasionally,wehavetobuybatteries,butImgoingtoproposewebuy rechargables,soeventhatwontbearecurringcost.Andfinally,werelookingin tojoiningourlocalTimeBank. Whatthismeansisthatwecanoperateataverylowvolume.Asaballpark figure, Id say we average an hour of work per member per week. Thats not muchmorethanaglorifiedhobby.Evenso,2009broughtinconsiderablymore workthan2008,whichsawtwiceasmuchworkas2007(again,withessentially nomarketing).Werenotlookingforittoincreasetoorapidly,becauseeachof ushasatleastoneotherjob,andsixofthesevenofushavekids(rangingfrom
Shawn Wilbur, Re: [AnarchyList] Turnin rebellion into money (or not ... your choice), email to Anarchy List, July 17, 2009 <http://lists.anarchylist.org/private.cgi/ anarchylistanarchylist.org/2009July/003406.html>.
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mineatthreeweekstoonememberwithschoolagegrandkids).Aslow,steady 1 increasewouldbegreat.
Moregenerally,thisbusinessmodelappliestoawiderangeofserviceindus trieswhereoverheadrequirementsareminimal.Anoutofworkplumberorelec trician can work out of his van with parts from the hardware store, and cut his pricesbytheamountthatformerlywenttocommercialrent,managementsalaries andofficestaff,andsoforthnottomentionworkingforacashdiscount.Like Herricks translator cooperative, one of the main functions of a nursing or other temporary staffing agency is brandingproviding a common reference point for accountability to clients. But the actual physical capital requirements dont go muchbeyondaphonelineandmaildrop,andmaybeascanner/fax.Thebusiness consists, in essence, of a personnel list and a way of contacting them. The main entry barrier to cooperative selfemployment in this field is noncompetition agreements(whenyouworkforaclientofacommercialstaffingagency,youagree nottoworkforthatclienteitherdirectlyorthroughanotheragencyforsomepe riodusually three monthsafter your last assignment there). But with a large enoughpoolofworkersinthecooperativeagency,itshouldbepossibletodirect assignments to those who havent worked for a particular client, until the non competitionperiodexpires. The lower capital outlays and fixed costs fall, the more meaningless the dis tinctionbetweenbeinginbusinessandoutofbusinessbecomes. Anotherpotentialwaytoincreasetheutilizationofcapacityofcapitalgoods in the informal and household economy is through sharing networks of various kinds.Thesharingoftoolsthroughneighborhoodworkshops,discussedearlier,is one application of the general principle. Other examples include ridesharing, timesharingoneanothershomesduringvacations,gifteconomieslikeFreeCycle, etc.Regardingridesharinginparticular,DilbertcartoonistScottAdamsspeculates quiteplausiblyonthepotentialfornetworktechnologiesliketheiPhonetofacili tatesharinginwaysthatprevioustechnologycouldnot,byreducingthetransac tion costs of connecting participants. The switch to network connections by mo bile phone increases flexibility and capability for shortterm changes and adjust ments to plans by an order of magnitude over desktop computers. Adams de scribeshowsuchasystemmightwork:
...[T]heapplicationshoulduseGPStodrawamapofyourlocation,with blipsforthecarsavailableforridesharing.Youselectthenearestblipandabio comesuptellingyousomethingaboutthedriver,includinghisprimaryprofes sion,age,aphoto,andapictureofthecar.Ifyoudontlikesomethingaboutthat potentialride,moveontothenextnearestblip.Again,youhaveasenseofcon trol.Likewise,thedrivercouldrejectyouasapassengerafterseeingyourbio. After you select your driver, and he accepts, you can monitor his progress towardyourlocationbythemovingbliponyouriPhone.... I also imagine that all drivers would have to pass some sort of friend of a friendtest,intheFacebooksense.Inotherwords,youcanonlybearegistered rideshare driver if other registered drivers have recommended you. Drivers wouldberatedbypassengersaftereachride,againbyiPhone,soeverynetwork offriendswouldcarryacombinedrating.Thatwouldkeepthegooddriversfrom recommending bad drivers because the bad rating would be included in their own network of friends average.... And the same system could be applied to potential passengers. As the system grew, you could often find a ride with a
SteveHerrick,privateemail,December10,2009.
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tentialpassengers.Asthesystemgrew,youcouldoftenfindaridewithafriend 1 ofafriend.
Historicallytheprevalenceofsuchenterpriseshasbeenassociatedwitheco nomicdownturnandunemployment. Theshifttovalueproductionoutsidethecashnexusinthetecheconomyhas becomeacommonsubjectofdiscussioninrecentyears.Wealreadydiscussedat length, in Chapter Three, how technological innovation has caused the floor to drop out from beneath capital outlay costs, and thereby rendered a great deal of venture capital superfluous. Although this was presented as a negative from the standpointofcapitalismscrisisofoveraccumulation,wecanalsoseeitasaposi tivefromthestandpointofopportunitiesforthegrowthofaneweconomyoutside thecashnexus. MichelBauwensdescribesthewaymostinnovation,sincethecollapseofthe dotcombubble,hasshiftedtothesocialrealmandbecomeindependentofcapital.
To understand the logic of this promise, we can look to a less severe, but nevertheless serious crisis: that of the internet bubble collapse in 20001. As an internet entrepreneur, I personally experienced both the manic phase, and the downturn, and the experience was life changing because of the important dis covery I and others made at that time. All the pundits where [sic] predicting, then as now, that without capital, innovation would stop, and that the era of high internet growth was over for a foreseeable time. In actual fact, the reality wastheveryopposite,andsomethingapparentlyverystrangehappened.Infact, almosteverythingweknow,theWeb2.0,theemergenceofsocialandparticipa torymedia,wasborninthecrucibleofthatdownturn.Inotherwords,innova tion did not slow down, but actually increased during the downturn in invest ment. This showed the following new tendency at work: capitalism is increas ingly being divorced from entrepreneurship, and entrepreneurship becomes a networkedactivitytakingplacethroughopenplatformsofcollaboration. Thereasonisthatinternettechnologyfundamentallychangestherelation shipbetweeninnovationandcapital.Beforetheinternet,intheSchumpeterian world,innovatorsneedcapitalfortheirresearch,thatresearchisthenprotected throughcopyrightandpatents,andfurtherfundscreatethenecessaryfactories. Inthepostschumpeterianworld,creativesoulscongregatethroughtheinternet, createnewsoftware,oranykindofknowledge,createcollaborationplatformson thecheap,andparadoxically,onlyneedcapitalwhentheyaresuccessful,andthe servers risk crashing from overload. As an example, think about Bittorrent, the most important software for exchanging multimedia content over the internet, which was created by a single programmer, surviving through a creative use of somecreditcards,withzerofunding.Buttheinternetisnotjustforcreativein dividualsouls,butenableslargecommunitiestocooperateoverplatforms.Very importantly,itisnotlimitedtoknowledgeandsoftware,buttoeverythingthat knowledge and software enables, which includes manufacturing. Anything that needs to be physically produced, needs to be virtually designed in the first place. Thisphenomena[sic]iscalledsocialinnovationorsocialproduction,andis increasinglyresponsibleformostinnovation.... ButwhatdoesthisallmeanfortheAsianeconomiccrisisandtheplightof theyoungpeoplethatwetoucheduponatthebeginning?Thegoodnewsisthis: first, the strong distinction between working productively for a wage, and idly waiting for one, ismelting.All the technical and intellectual tools are available to allow young people, and older people for that matter, to continue being en gage[sic]invalueproduction,andhencealsotocontinuetobuildtheirexperi ence (knowledge capital), their social life (relationship capital) and reputation. Scott Adams, Ridesharing in the Future, Scott Adams Blog, January 21, 2009 <http://dilbert.com/blog/entry/ridesharing_in_the_future/>.
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Allthreeofwhichwillbecrucialinkeepingthemnotjustemployable,butwill actually substantially increase their potential and capabilities. The role of busi nessmustbeclear:itcan,ontopoftheknowledge,softwareordesigncommons created by social production, create added value services that are needed and demandedbythemarketofusersofsuchproducts(whichincludesotherbusi nesses),andcaninturnsustainthecommonsfromwhichitbenefits,makingthe ecology sustainable. While the full community of developers create value for businessestobuildupon,thebusinessesintermhelpsustaintheinfrastructure 1 ofcooperationwhichmakescontinueddevelopmentpossible.
The shift of valuecreation outside the cash nexus provoked an interesting blogosphericdiscussionbetweenTylerCowenandJohnQuiggin.Cowenraisedthe possibility that much of the productivity growth in recent years has taken place outside of the usual cash and revenuegenerating nexus.2 Quiggin, in an article appropriatelytitledTheendofthecashnexus,tooktheideaandranwithit:
Therehasbeenahugeshiftinthelocationofinnovation,withmuchofitei therderivingfrom,ordependenton,publicgoodsproducedoutsidethemarket andgovernmentsectors,whichmaybereferredtoassocialproduction.... If improvements in welfare are increasingly independent of the market, it would make sense to shift resources out of market production, for example by reducingworkinghours.Thefinancialcrisisseemscertaintoproduceatleasta temporarydropinaveragehours,buttheexperienceoftheDepressionandthe 3 Japaneseslowdownofthe1990ssuggestthattheeffectmaybepermanent....
Michel Bauwens, as we saw in Chapter Three, draws a parallel between the currentcrisisofrealizationincapitalismandpreviouscriseslikethatoftheRoman slave economy. When the system hits limits to extensive development, it instead turnstointensivedevelopmentinwaysthatleadtoaphasetransition.Butthereis another parallel, Bauwens argues: each systemic decline and phase transition is associatedwithanexodusoflabor:
Thefirsttransition:Rometofeudalism At some point in its evolution (3rd century onwards?), the Roman empire ceases to expand (the cost of of maintaining empire and expansion exceeds its benefits).Noconquestsmeansadryingupofthemostimportantrawmaterialof aslaveeconomy,i.e.theslaves,whichthereforebecomemoreexpensive.Atthe sametime,thetaxbasedriesup,makingitmoreandmoredifficulttomaintain bothinternalcoercionandexternaldefenses.ItisinthiscontextthatPerryAn dersonmentionsforexamplethatwhenGermanictribeswereabouttolaysiege toaRomancity,theywouldoffertofreetheslaves,leadingtoanexodusofthe city population. This exodus and the set of difficulties just described, set of a reorientationofsomeslaveowners,whoshifttothesystemofcoloni,i.e.serfs. I.e.slavesarepartiallyfreed,canhavefamilies,canproducefromthemselvesand havevillages,givingthesurplustothenewdomainholders. Hence, the phase transition goes something like this: 1) systemic crisis ; 2) exodus3)mutualreconfigurationoftheclasses.... Hypothesisofathirdtransition:capitalismtopeertopeer
Michel Bauwens, Asia needs a Social Innovation Stimulus plan, P2P Foundation Blog, March 23, 2009 <http://blog.p2pfoundation.net/asianeedsasocialinnovation stimulusplan/2009/03/23>. 2 Tyler Cowen, Was recent productivity growth an illusion? Marginal Revolution, March 3, 2009 <http://www.marginalrevolution.com/marginalrevolution/2009/03/was recentproductivitygrowthanillusion.html>. 3 John Quiggin, The End of the Cash Nexus, Crooked Timber, March 5, 2009 <http://crookedtimber.org/2009/03/05/theendofthecashnexus>.
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Again,wehaveasystemfacedwithacrisisofextensiveglobalization,where nature itself has become the ultimate limit. Its way out, cognitive capitalism, showsitselftobeamirage. Whatwehavethenisanexodus,whichtakesmultipleforms:precarityand flightfromthesalariedconditions;disenchantementwiththesalariedcondition and turn towards passionate production. The formation of communities and commonsaresharedknowledge,codeanddesignwhichshowthemselvestobea superiormodeofsocialandeconomicorganization. The exodus into peer production creates a mutual reconfiguration of the classes. A section of capital becomes netarchical and empowers and enables peer production, while attempting to extract value from it, but thereby also 1 buildingthenewinfrastructuresofcooperation.
If, as we saw in earlier chapters, economic downturns tend to accelerate the expansion of the custom industrial periphery at the expense of the mass productioncore,suchdownturnsalsoacceleratetheshiftfromwagelabortoself employment or informal production outside the cash nexus. James OConnor de scribedtheprocessintheeconomicstagnationofthe1970sand1980s:theaccu mulationofstocksofmeansandobjectsofreproductionwithinthehouseholdand communitytooktheedgeofftheneedforalienatedlabor.
Laborpower was hoarded through absenteeism, sick leaves, early retire ment, the struggle to reduce days worked per year, among other ways. Con servedlaborpowerwasthenexpendedinsubsistenceproduction....Theliving economybasedonnonandanticapitalistconceptsoftimeandspacewentun derground:inthereconstitutedhousehold;thecommune;cooperatives;thesin gleissue organization; the selfhelp clinic; the solidarity group. Hurrying along thedevelopmentofthealternativeandundergroundeconomieswasthegrowth of underemployment ... and mass unemployment associated with the crisis of the 1980s. Regular employment and unionscale work contracted, which be cameanincentivetodevelopalternative,localizedmodesofproduction.... ...Newsocialrelationshipsofproductionandalternativeemployment,in cluding the informal and underground economies, threatened not only labor discipline, but also capitalist markets.... Alternative technologies threatened capitals monopoly on technological development ... Hoarding of laborpower threatened capitals domination of production. Withdrawal of laborpower un 2 derminedbasicsocialdisciplinarymechanisms....
And back in the recession of the early eighties, Samuel Bowles and Herbert Gintisspeculatedthatthereservearmyoftheunemployedwaslosingsomeofits powertodepresswages.Theyattributedthistothepartialdeproletarianizationof wagelabor(i.e.thereducedprofileofwagelaboraloneasthebasisofhousehold subsistence).BowlesandGintisidentifiedthisreduceddependencylargelyonthe welfare state, which seems rather quaint for anyone who since lived through the Reagan and Clinton years.3 But the partial shift in value creation from paid em ploymenttothehouseholdandsocialeconomies,whichwehaveseeninthepast decade,fullyaccordswiththesameprinciple. DanteGabryellMonsonspeculatedonthepossibilitythattheopenmanufac turing movement was benefiting from the skills of corporate tech people under
1
Michel Bauwens, Three Times Exodus, Three Phase Transitions, P2P Foundation Blog, May 2, 2010 <http://blog.p2pfoundation.net/threetimesexodusthreephase transitions/2010/05/02>. 2 JamesOConnor,AccumulationCrisis(NewYork:BasilBlackwell,1984),pp.184186. 3 SamuelBowlesandHerbertGintis,TheCrisisofLiberalDemocraticCapitalism:The CaseoftheUnitedStates,PoliticsandSociety11:1(1982),pp.7984.
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employedinthecurrentdownturn,orevenfromtheirdeliberatechoicetohoard labor:
*Is there a potential scenario for a brain drain from corporations to inten tionalpeerproducingnetworks?*.... Canparttime,nonpaid(inmainstreammoney)hobbyworkinopen,diy, collaborative convergence spaces become an *argument for long term material securityoftheparticipatingpeer*towardshes/herfamily? Hacker spaces seem to be convergence spaces for open source program mers, and possibly more and more other artists, open manufacturing, diy per maculture,...? Can we expect a Massive Corporate Dropout ... to drain into such diy convergenceandinteractionspaces? *CanCorporateDropoutshelpfinancingnewopenp2pinfrastructures?* Is there an increase of parttime Corporates, working part time in open p2p? Would such a transition, potentially part time coworking / coliving spacebeaconvergencemodelandscenariosomeofuswouldconsiderworking on?... Ipersonallyobservesomeofmyfriendsworkingformoneyaslittleaspos sible,sometimesonortwomonthsayear,andspendtherestoftheirtimework 1 ingontheirownprojects.
The main cause for the apparently stabilizing level of unemployment in the presentrecession,despiteadecreaseinthenumberofemployed,isthatsomany discouragedworkershavedisappearedfromtheunemploymentrollsaltogether. Atthesametime,numbersforselfemploymentarecontinuingtorise.
We [Canadians] lost another 45,000 jobs in July, but the picture is much worse on closer examination. There were 79,000 fewer workers in paid jobs comparedtoJune,whileselfemploymentroseby35,000.Thiswasontopofan otherbigjumpinselfemploymentof37,000lastmonth. Putitalltogetherandthepictureisoflargelossesinpaidjobs,withtheim pact on the headline unemployment rate cushioned by workers giving up the 2 searchforjobsorturningtoselfemployment.
Arecentarticleinthe ChristianScienceMonitordiscussed the rapid growth oftheinformaleconomy,evenastheformaleconomyandemploymentwithinit shrink(FriedrichSchneider,ascholarwhospecializesintheshadoweconomy,ex pectsittogrowatleastfivepercentthisyear).Informalenterpriseismushrooming among the unemployed and underemployed of the American underclass: street vendorsofallkinds(includingclothingretail),unlicensedmovingservicesconsist ingofapickuptruckandcellphone,peoplesellingfoodoutoftheirhomes,etc. Andtraditionalsmallbusinessesinpermanentbuildingsresentthehelloutof it(ifyoueversawthatepisodeofTheAndyGriffithShowwhereestablishedretailer BenWeavertriestoshutdownEmmettspushcart,yougettheidea).
Competition is competition, says Gene Fairbrother, the lead small business adviser in Dallas for the National Association for the SelfEmployed. Butcompetitionfromproducerswhodontpaytaxesandlicensingfeesisntfair tothemanystrugglingsmallbusinesseswhoplaybytherules.
DanteGabryell Monson, [p2presearch] trends ? : Corporate Dropouts towards Open diy ? ..., P2P Research, October 13, 2009 <http://listcultures.org/pipermail/ p2presearch_listcultures.org/2009October/005128.html>. 2 Andrew Jackson, Recession Far From Over, The Progressive Economics Forum, August 7, 2009 <http://www.progressiveeconomics.ca/2009/08/07/recessionfarfrom over/>.
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Mr. Fairbrother says hes seen an increase in the number of callers to his Shop Talk show who ask about starting a homebased business, and many say theyreworkinginasalonandwouldratherworkoutoftheirhomesorthatthey wanttostartsellingfoodfromtheirkitchens.Businessesfacingthispricepres sure should promote the benefits of regulation, he advises, instead of trying to getoutfromunderit.
Uhhuh.Greatbenefitsifyoureoneoftheestablishedbusinessesthatuses theenormouscapitaloutlaysforrentondedicatedcommercialrealestate,indus trialsized ovens and dishwashers, licensing fees, etc., to crowd out competitors. Notsogreatifyoureoneofthewouldbemicroentrepreneursforcedtopayartifi cially inflated overhead on such unnecessary costs, or one of the consumers who must pay a price with such overhead factored in. Parasitism generally has much betterbenefitsforthetapewormthanfortheownerofthecolon. Fortunately, in keeping with our themes of agility and resilience throughout thisbook,microentrepreneurstendtooperateonasmallscalebeneaththeradar ofthegovernmentstaxing,regulatoryandlicensingauthorities.Inmostcases,the cost of catching a small operator with a small informal client network is simply morethanitsworth.
TheInternalRevenueServiceorlocaltaxauthoritieswouldhavetotrackdown thousands of elusive small vendors and follow up for payment to equal, by one estimate, the $100 million a year that the US could gain by taxing several hun 1 dredholdersofSwissandotherforeignbankaccounts.
Sowecanexpectthelongtermstructuralreductioninemploymentandthe shortage of liquidity, in the current Great Recession or Great Malaise, to lead to rapid growth of an informal economy based on the kinds of household microen terpriseswedescribedabove.CharlesHughSmith,afterconsideringtheenormous fixedcostsofconventionalbusinessesandtheinevitabilityofbankruptcyforbusi nesseswithsuchhighoverheadinaperiodoflowsales,drawstheconclusionthat businesseswithlowfixedcostsarethewaveofthefuture.Hereishisvisionofthe growinginformalsectorofthefuture:
The recession/Depression will cut down every business paying high rent and other fixed costs like a razorsharp scythe hitting dry corn stalks.... ... [H]igh fixed costs will take down every business which cant re makeitselfintoalowfixedcostfirm.... For the former employees, the landscape is bleak: there are no jobs anywhere,atanywage.... SohowcananyoneearnalivinginTheEndofWork?LooktoAsiafor the answer. The MSM snapshot of Asia is always of glitzy office towers in Shanghai or a Japanese factory or the docks loaded with containers: the export machine. But if you actually wander around Shanghai (or any city in Japan, Korea, southeastAsia,etc.)thenyoufindthenumberofpeopleworkingintheglitzyof fice tower is dwarfed bythe number of people making alivingoperatinginfor malbusinesses. Even in hightech, wealthy Japan, tiny businesses abound. Wander aroundaresidentialneighborhoodandyoullfindasmallstallfrontingahouse staffedbyaretiredpersonsellingcigarettes,candyandsoftdrinks.Maybethey onlysellafewdollarsworthofgoodsaday,butitssomething,andinthemean timetheproprietorisreadingamagazineorwatchingTV. Taylor Barnes, Americas shadow economy is bigger than you thinkand growing, Christian Science Monitor, November 12, 2009 <http://features.csmonitor.com/ economyrebuild/2009/11/12/americasshadoweconomyisbiggerthanyouthinkandgrowing>.
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InoldShanghai,entirestreetsarelinedwithinformalvendors.Some aretheessenceofenterprise:aguybuysamelonfor40cents,cutsitinto8slices andthensellstheslicesfor10centseach.Grossprofit,40cents. InBangkok,suchareasactuallyhavetwoshiftsofstreetvendors:one for the morning traffic, the other for the afternoon/evening trade. The morningvendorsareupearly,sellingcoffee,breakfasts,ricesoup,etc.towork ersandschoolkids.By10oclockorso,theyvefoldedupandgonehome. Thatclearsthewayforthelunchvendors,whohavepreparedtheirfoodat homeandbroughtittosell.Insomeavenues,athirdshiftcomesinlatertosell cold drinks, fruit and meat sticks as kids get out of school and workers head home. Fixedcostsofthesethrivingenterprises:asmallfeetosomeauthor ity,anoldcartandumbrellaandmaybeabatteredwokoricechest. SothisiswhatIenvisionhappeningastheDepressiondrivesstandardissue highfixedcostformalenterprisesoutofbusinessintheU.S.: 1.Themechanicwhousedtotuneyour(used)vehiclefor$300atthedealer ship(nowgone)tunesitupinhishomegaragefor$120partsincluded. 2.Thegalwhocutyourhairfor$40atthesalonnowcutsitatyourhouse for$10. 3. The chef who used to cook at the restaurant that charged $60 per meal nowdeliversagourmetplatetoyourdoorfor$10each. 4.Theneighborkidslemonadestandisnowapermanentfeature;youpay 50centsforalemonadeorsoftdrinkinsteadof$3atStarbucks. 5. Used book sellers spread their wares on the sidewalk, or in foldup booths; for reasons unknown, one street becomes the place to go buy used books. 6.Theneighborhoodjazzguy/galsetsupandplayswithhis/herpalsinthe backyard;donationswelcome. 7.TheneighborhoodchipsinafewbuckseachtomakeitworthalocalIraqi Warvetstimetokeepaneyeonthings. 8.WhenyourpieceofcrapIkeadeskbusts,youcallaguywhocanfixitfor $10(glue,clamps,afewledgerstripsandscrews)ratherthangoblow$50onan otherparticleboardP.O.C.whichwillbustanyway.(oh,andyoudonthavethe $50anyway.) 9.TheguywithaDishrunscablestotheotherapartmentsinhisbuilding forafewbuckseach. 10. One person has an unlimited Netflix account, and everyone pays him/herabuckaweektogetasmanymoviesastheywant(he/sheburnsacopy ofcourse). 11. The couple with the carefully tended peach or apple tree bakes 30 pies 1 andtradesthemforvegtables,babysitting,etc. Thecrushingcostsofformalbusiness(Stateandlocalgovernmenttaxesand junk fees rising to pay for unaffordable pensions, etc.) and the implosion of the debtbubbleeconomywilldrivemillionsintotheinformaleconomyofbarter,trade andunderground(cash)work. As small businesses close their doors and corporations lay off thou sands, the unemployed will of necessity shift their focus from finding a new formal job (essentially impossible for most) to fashioning a liveli hoodintheinformaleconomy. One example of the informal economy is online businessespeople who makealivingsellinguseditemsoneBayandothervenues.Suchbusinessescan be operated at home and do not require storefronts, rent to commercial land lords, employees, etc., and because they dont require a formal presence then theyalsoflybeneathallthegovernmentjunkfeesimposedonformalbusinesses. Charles Hugh Smith, End of Work, End of Affluence III: The Rise of Informal Businesses, Of Two Minds, December 10, 2009 <http://www.oftwominds.com/blogdec08/ informal1208.html>.
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Ihavementionedsuchinformalbusinessesrecently,andtheeasiestwayto grasptherangeofpossibilitiesisthis:whateversomeonedidformally,theycan doinformally. Chef had a high fixedcost restaurant which bankrupted him/her? Now he/she prepares meals at home and delivers them to neighbors/old customers for cash. No restaurant, no skyhigh rent, no employees, no payroll taxes, no businesslicenses,inspectionfees,nosalestax,etc.Everydimebeyondthecost offoodandutilitiestopreparethemealsstaysinChefspocketratherthangoing tothecommerciallandlordsandlocalgovernmentviataxesandfees. Allthecustomerswhocouldntafford$30mealsattherestaurantcanafford $10.Everybodywinsexceptcommerciallandlords(soontobebankrupt)andlo calgovernment(soontobeinsolvent).Howcanyoubankruptallthebusinesses andnotgobankruptyourself? AslongasChefreportsnetincomeonScheduleC,he/sheisgoodtogowith FederalandStatetaxauthorities.[AndifChefdoesnt,fuckem.] Now run the same scenario for mechanics, accountants, therapists, even autosalesjustrentahousewithabigyardoranapartmentwithabigparking lot and away you go; the savvy entrepreneur who moves his/her inventory can stockafewvehiclesatatime.Noneedforahugelot,highoverhead,employees orjunkfees.Itscashandcarry. Lumberyard?Cometomybackyardlot.WhateverIdonthaveIcanorder fromajobberandhavedeliveredtoyoursite. This is the result of raising the fixed costs of starting and running a small 1 businesstosuchabackbreakinglevelthatfewformalbusinessescansurvive.
Smith, Trends for 2009: The Rise of Informal Work, Of Two Minds, December 30, 2009<http://www.oftwominds.com/blogdec08/riseofinformal1208.html>.
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APPENDIX CASESTUDIESINTHECOORDINATIONOF NETWORKEDFABRICATIONANDOPENDESIGN

1.OpenSourceEcology/FactoreFarm OpenSourceEcology,withitsexperimentaldemositeatFactoreFarm,isfo cused on developing the technological building blocks for a resilient local econ omy.
Weareactivelyinvolvedindemonstratingtheworldsfirstreplicable,post industrialvillage.Wetakethewordreplicableveryseriouslywedonotmeana topdown funded showcasebut one that is based on ICT, open design, and digital fabricationin harmony with its natural life support systems. As such, thiscommunityisdesignedtobeselfreliant,highlyproductive,andsufficiently transparent so that it can truly be replicated in many contextswhether its parts of the package or the whole. Our next frontier will be education to train 1 VillageBuildersjustaswerelearninghowtodoitfromthegroundup.
Open Source Ecologys latest core message is Building the worlds firstreplicable,opensource,modernoffgridglobalvillagetotranscend survivalandevolvetofreedom.... Replicablemeansthattheentireoperationcanbecopiedandrepli catedatanotherlocationatlowcost.
Opensourcemeansthattheknowledgeofhowitworksandhowtomakeit isdocumentedtothepointthatotherscanmakeitfromscratch.Itcanalsobe changedandaddedtoasneeded.... Permafacture:Acarisatemporarilyusefulconsumerproducteventuallyit breaks down and is no longer useful as a car. The same is true for almost any consumerproducttheyaretemporary,andwhentheybreakdowntheyareno longerusefulfortheirintendedpurpose.Theycomefromfactoriesthatusere sources from trashing ecosystems and using lots of oil. Even the green ones. Mostconsumerfoodisgrownonfactoryfarmsusingsimilarprocesses,andre sultinginsimilareffects.Whentheresourcesorfinancingforthosefactoriesand factory farms dries up they stop producing, and all the products and food they madestopflowingintotheconsumerworld.Consumersaredependentonthese productsand food for their very survival, and every productandfoodtheybuy from these factories contributes to the systems that are destroying the ecosys temsthat they will needto survive when finances or resourcesare interrupted. Themoretheconsumersbuy,themoredependenttheyareonthefactoriescon suming and destroying the last of the resources left in order to maintain their currenteasyanddependentsurvival.Thesefactoriesaredistributedalloverthe world, and need large amounts of cheap fuel to move the products to market through the global supply and production chain, trashing ecosystems all along theway.Theconsumptionoftheproductsandfoodiscompletelydisconnected fromtheirproductionandsoconsumersdonotactuallyseeanyoftheseconnec tions or their interruptions as the factories and supply chains try hard to keep thingsflowingsmoothly,untilthingsreachtheirbreakingpointandthesupply ofproductstoconsumersissuddenlyinterrupted.OpenSourceEcologyaimsto createthemeansofproductionandreuseonasmalllocalscale,sothatwecan producethemachinesandresourcesthatmakesurvivaltrivialwithoutbeingde
Marcin Jakubowski, Clarifying OSE Vision, Factor e Farm Weblog, September 8, 2008<http://openfarmtech.org/weblog/?p=325>.
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pendent on global supply and production chains, trashing ecosystems, and 1 cheapoil.
ThefocusofOSEistosecurerightlivelihood,accordingtofounderMarcin Jakubowski,whocitesVinayGuptasTheUnpluggedasamodelforachievingit:
ThefocusofourGlobalVillageConstructionprogramistodeploycommuni ties that live according to the intention of right livelihood. We are considering the ab initio creation of nominally 12 person communities, by networking and marketingthisBuyOutattheBottom(BOAB)package,atafeeofapproximately $5ktoparticipants.BuyingOutattheBottomisatermthatIborrowedfromVi nay Gupta in his article about The Unpluggedwhere unplugging means the creationofanindependentlifesupportinfrastructureandfinancialarchitecture asocietywithinsocietywhichallowedanybodywhowantedtobuyouttobuy outatthebottomratherthanbuyingoutatthetop. OurGlobalVillageConstructionprogramisanimplementationofTheUn pluggedlifestyle.With12peoplebuyingoutat$5keach,thatis$60kseedinfra structurecapital. We have an option to stop feeding invading colonials, from our own em pirebuilding governments to slave goods from China. Structurally, the more selfsufficientweare,thelesswehavetopayforourownenslavementthrough education that dumbs us down to producers in a global workforcethrough taxationthatfundsrichpeopleswarsofcommercialexpansionthroughsocie talengineeringandPRthatmakesthequestforanhonestlifedishonorableifwe 2 cantkeepupwiththeJoneses.
Several of the most important projects interlock to form an OSE Product Ecology.3ForexampletheLifeTracOpenSourceTractoractsasprimemoverfor Fabrication (i.e., the machine shop, in which the MultiMachine features promi nently),andtheCompressedEarthBlockPressandtheSawmill,whichinturnare thebasictoolsforhousingconstruction.TheLifeTracalsofunctions,ofcourse,as atractorforhaulingandpoweringfarmmachinery. Like LifeTrac, the PowerCubea modular powertransmission unitis a multipurposemechanismdesignedtoworkwithseveraloftheotherprojects.
Power Cube is our open source, selfcontained, modular, interchangeable, hydraulicpowerunitforallkindsofpowereguipment.Ithasan18hpgasoline enginecoupledtoahydraulicpump,anditwilllaterbebepoweredbyaflexible fuel steam engine. Power Cube will be used to power MicroTrac (under con struction)anditisthepowersourcefortheforthcomingCEBPressPrototype2 adventures.ItisdesignedasageneralpowerunitforalldevicesatFactoreFarm, fromtheCEBpress,powertakeoff(PTO)generator,heavydutyworkshoptools, eventotheLifeTractractoritself.PowerCubewillhaveaquickattachment,soit can be mounted readily on the quick attach plate of LifeTrac. As such, it can serveasabackuppowersourceiftheLifeTracenginegoesout.... The noteworthy features are modularity, hydraulic quickcouplers, lifetime design, and designfordisassembly. Any device can be plugged in readily throughthequickcouplers. Itcanbemaintainedeasilybecauseofitstransparencyofdesign,readyac cesstoparts,anddesignfordisassembly.Itisamajorsteptowardsrealizingthe
Jeremy Mason, What is Open Source Ecology? Factor e Farm Weblog, March 20, 2009<http://openfarmtech.org/weblog/?p=595>. 2 Organizational Strategy, Open Source Ecology wiki, February 11, 2009 <http:// openfarmtech.org/index.php?title=Organizational_Strategy>(accessedAugust28,2009). 3 MarcinJakubowski,CEBProposalCommunitySupportedManufacturing,Factore Farmweblog,October23,2008<http://openfarmtech.org/weblog/?p=379>.
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true,lifesizeErectorSetorLegoSetofheavyduty,industrialmachineryinthe 1 styleofIndustrialSwadeshi. A universal mechanical power source is one of the key components of the GlobalVillageConstrucgtionSetthesetofbuildingblocksforcreatingresilient communities.Thebasicconceptisthatinsteadofusingadedicatedengineona particular powered devicewhich means hundreds of engines required for a completeresilientcommunity,youneedone(orafew)powerunit.Ifthissingle power unit can be coupled readily to the powered device of interest, then we havethepossibilityofthissinglepowerunitbeinginterchangeablebetweenan unlimitednumberofdevices.OurimplementationofthisisthehydrauilicPow erCubewhosepowercanbetappedsimplybyattaching2hydraulichosestoa deviceofinterest.A3/4hydraulichose...cantransferupto100horsepowerin 2 theformofusablehydraulicfluidflow.
Among projects that have reached the prototype stage, the foremost is the Compressed Earth Block Press, which can be built for $5000some 20% of the priceofthecheapestcommercialcompetitor.3Infieldtesting,theCEBPressdem onstrated the capability of producing a thousand blocks in eighthours, on a day withbadweather(theexpectednormingoodweatheris1500aday).4OnAugust 20, 2009, Factor e Farm announced completion of a second model prototype, its mostimportantnewfeaturebeinganextendablehopperthatcanbefeddirectlyby atractorloader.Fieldtestingisexpectedtobeginshortly.5
ThespeedoftheCEBPresswasrecentlyaugmentedbytheprototypingofa complementaryproduct,theSoilPulverizer. Initialtestingachieved5tonperhoursoilthroughput,whileTheLiberator CEBpressrequiresabout1.5tonsofsoilperhour.... Stationarysoilpulverizerscomparableinthroughputtoourscostover$20k. Ourscost$200inmaterialswhichisnotbadintermsof100foldpricereduc tion.Thetricktothisfeatismodulardesign.Weareusingcomponentsthatare already part of our LifeTrac infrastructure. The hydraulic motor is our power takeoff(PTO)motor,therotoristhesametillerthatwemadelastyearwith the tiller tines replaced by pulverizer tines. The bucket is the same standard loaderbucketthatweuseformanyotherapplications.... It is interesting to compare this development to our CEB work from last yeargivenourlessonthatsoilmovingisthemainbottleneckinearthbuilding. It takes 16 people, 2 walkbehind rototillers, many shovels and buckets, plus backbreaking laborto load our machine as fast as it can produce bricks. We cannowreplacethisnumberofpeoplewith1personbymechanizingtheearth moving work with the tractormounted pulverizer. In a sample run, it took us about2minutestoloadthepulverizerbucketwithsoilsufficientforabout30 bricks. Our machine produces 5 bricks per minuteso we have succeeded in removingthesoilloadingbottleneckfromtheequation. ThisisamajormilestoneforourabilitytodoCEBconstruction.Ourresults 6 indicatethatwecanpress2500bricksinan8hourdaywith3people. Jakubowski,PowerCubeCompleted,FactoreFarmWeblog,June29,2009<http:// openfarmtech.org/weblog/?p=814>. 2 Jakubowski,PowerCubeonLifeTrak,FactoreFarmWeblog,April26,2010<http:// openfarmtech.org/weblog/?p=1761>. 3 Jakubowski,CEBPhase1Done,FactoreFarmWeblog,December26,2007<http:// openfarmtech.org/weblog/?p=91>. 4 Jakubowski, The Thousandth Brick: CEB Field Testing Report, Factor e Farm We blog,Nov.16,2008<http://openfarmtech.org/weblog/?p=422>. 5 Jakubowski, CEB Prototype II Finished, Factor e Farm Weblog, August20, 2009 <http://openfarmtech.org/weblog/?p=1025>. 6 Jakubowski, Soil Pulverizer Annihilates Soil Handling Limits, Factor e Farm We blog,September7,2009<http://openfarmtech.org/weblog/?p=1063>.
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In October Jakubowski announced plans to release the CEB Beta Version 1.0 on November 1, 2009. The product as released will have a five block per minute capacityandincludeautomaticcontrols(thesoftwareforwhichisbeingreleased onanopensourcebasis).1Theproductwasreleased,onschedule,onNovember1.2 Shortlythereafter,OSEwasconsideringoptionsforcommercialproductionofthe CEBPressasasourceofrevenuetofundnewdevelopmentprojects.3 TheMicroTrac,awalkbehindtractor,hasalsobeenprototyped.Itsparts,in cludingthePowerCube,wheel,quickattachmotorandcylinderareinterchange ablewithLifeTracandothermachines.WecantakeoffthewheelmotorfromMi croTrac,anduseittopowershoptools.4 OSEsplannedfacilitiesforreplicationandmachiningareespeciallyexciting, includinga3DprinterandaMultiMachinewithaddedCNCcontrols.
Thereisasignificantsetofopensourcetechnologiesavailableforrapidpro totyping in small workshops. By combining 3D printing with lowcost metal casting, and following with machining using a computer controlled Multima chine, the capacity arises to make rapid prototypes and products from plastic and metal. This still does not address the feedstocks used, but it is a practical steptowardsthepostcentralist,participatory,distributiveeconomywithindus trialswadeshionaregionalscale.... Theinterestingpartisthatthebudgetis$500forRepRap,$200forthecast ing equipment, and $1500 for a Multimachine with CNC control added. Using available knowhow, this can be put together in a small workshop for a total of about$2200forfull,LinuxCNCcomputercontrolledrapidfabricationinplastic andmetal.Designsmaybedownloadedfromtheinternet,andlocalproduction cantakeplacebasedonglobaldesign. Thisrapidfabricationpackageisoneofournearterm(oneyear)goals.The researchprojectinthisareainvolvesthefabricationandintegrationoftheindi vidualcomponentsasdescribed.... Suchaprojectisinterestingfromthestandpointoflocalizedproductionin the context of the global economyfor creating significant wealth in local economies. This is what we call industrial swadeshi. For example, I see this as thekeytocastingandfabricatinglowcoststeamengines($300for5hp)forthe 5 SolarTurbineasoneexampleofGandhismassproductionphilosophy.
The entire Fab Lab project aims to produce the following equipment infra structure,inorderofpriorities...:
300lb/hoursteelmeltingFoundry$1000 Multimachinebased Lathe, mill, and drill, with addition of CNC control $1500 CNCTorchTable(plasmaandoxyacetylene),adaptabletoaroutertable RepRaporsimilar3Dprinterforprintingcastingmolds$400 Circuitfabricationprecisexyzroutertable
Jakubowski,ExcitingTimes:NearingProductRelease,FactoreFarmWeblog,Octo ber10,2009<http://openfarmtech.org/weblog/?p=1168>. 2 Jakubowski,Product,FactoreFarmWeblog,November4,2009<http://openfarm tech.org/weblog/?p=1224>. 3 Jakubowski,CEBSales:RocketFuelforPostScarcityEconomicDevelopment?Fac toreFarmWeblog,November282009<http://openfarmtech.org/weblog/?p=1331>. 4 Jakubowski, MicroTrac Completed, Factor e Farm Weblog, July 7, 2009 <http:// openfarmtech.org/weblog/?p=852>. 5 Jakubowski, Rapid Prototyping for Industrial Swadeshi, Factor e Farm Weblog, August10,2008<http://openfarmtech.org/weblog/?p=293>.
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OpenSourceWireFeedWelder
InAugust2009,LawrenceKincheloemovedtoFactoreFarminAugust2009 under contract to build the torch table in August and September.2 He ended his visitinOctoberwithworkonthetableincomplete,owingtoahostoffinetuning andtechnicaldifficultieswhichallhavesolutionsbutwerenotaddressableinthe time left.3 Nevertheless, the table was featured in the January issue of MAKE MagazineasRepTab(thenamereflectsthefactthatasidefrommotorsandmi crocontrollersitcanreplicateitself):
Oneoftheinteresting features of RepTab is that the cuttingheadisinter changeable(router,plasma,oxyacetylene,laser,waterjet,etc.),makingitversa tileandextremelyuseful. Other machines make that difficult without major modifications, says Marcin Jakubowski, the groups founder and director. We can make up to 10 footlongwindmillbladesifwemodifythetableasaroutertable.Thatspretty 4 useful.
Sincethen,FactoreFarmhasundertakentodevelopanopensourcelathe,as wellasa100tonironworkerpunching/shearing/bendingmachine;Jakubowskies timatesanopensourceversioncanbebuiltforafewhundreddollarsinmaterials, comparedto$10,000foracommercialversion.5 InDecember2009Jakubowskiannouncedthatadonorhadcommitted$5,000 toaprojectfordevelopinganopensourceinductionfurnaceforsmelting,andso licitedbidsforthedesigncontract.

You may have heard us talk about recasting civilization from scrap metal. Metal is the basis of advanced civilization. Scrap metal in refined form can be mined in abundance from heaps of industrial detritus in junkyards and fence rows. This can help us produce new metal in case of any unanticipated global supply chain disruptions. This will have to do until we can take mineral re sourcesdirectlyandsmeltthemtopuremetal. Ilookforwardtothedaywhenourinductionfurnacechewsupourbroken tractorsandcarsandspitsthemoutinfluidform.Thisleadstocastinguseful parts, using molds printed by open source ceramic printersthese exist. This alsoleadstohotmetalprocessing,thesimplestofwhichisbashinguponanan vilandthemorerefinedofwhichisrolling.Canwedothistogeneratemetal bar and sheet in a 4000 square foot workshop planned for Factor e Farm? We better. Technology makes that practical, though this is undeardof outside of centralized steel mills. We see the induction furnace, hot rolling, forging, cast ing,andotherprocessescriticaltothefabricationcomponentoftheGlobalVil lageConstructionSet.
Open Source Fab lab, Open Source Ecology wiki (accessed August 22, 2009) <http://openfarmtech.org/index.php?title=Open_Source_Fab_Lab>. 2 Marcin Jakubowski, Moving Forward, Factor e Farm Weblog, August 20, 2009 <http://openfarmtech.org/weblog/?p=1020>; Lawrence Kincheloe Contract, OSE Wiki <http://openfarmtech.org/index.php?title=Lawrence_Kincheloe_Contract>; Torch Table Build, Open Source Ecology wiki (accessed August 22, 2009 <http:// openfarmtech.org/ index.php?title=Torch_Table_Build>. 3 LawrenceKincheloe,FirstDedicatedProjectVisitComestoaClose,FactoreFarm Weblog,October25,2009<http://openfarmtech.org/weblog/?p=1187>(seeespeciallycom mentno.5underthepost). 4 Abe Connally, Open Source SelfReplicator, MAKE Magazine, No. 21 <http://www.makedigital.com/make/vol21/?pg=69>. 5 Jakubowski, CEB Sales; Ironworkers, Open Source Ecology Wiki <http:// openfarmtech.org/index.php?title=Ironworkers>.AccessedDecember10,2009.
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1
Wejustgota$5kcommitmenttoopensourcethistechnology.
In January, Jacubowski reported initial efforts to build a lathedrillmill mul timachine(notCNC,apparently)poweredbytheLifeTracmotor.2 In addition to the steel casting functions of the Foundry, Jakubowski ulti mately envisions the production of aluminum from clay as a key source of feed stock for relocalized production. As an alternative to hightemperature, energy intensive smelting processes involving aluminum oxide (bauxite), he proposes extractingaluminumfromclaysusingbakingfollowedbyanacidprocess.3 OSEsflexibleanddigitalfabricationfacilityisintendedtoproduceabasicset of sixteen products, five of which are the basic set of means of fabrication them selves:
Boundarylayerturbinesimplerandmoreefficientalternativetomostexter nalandinternalcombustionenginesandturbines,suchasgasolineanddiesel engines, Stirling engines, and air engines. The only more efficient energy conversiondevicesarebladedturbinesandfuelcells. Solar concentratorsalternative heat collector to various types of heat gen erators,suchaspetrochemicalfuelcombustion,nuclearpower,andgeother malsources 4 Babington and other fluid burnersalternative heat source to solar energy, internalcombustionengines,ornuclearpower Flashsteamgeneratorsbasisofsteampower Wheelmotorslowspeed,hightorqueelectricmotors Electric generatorsfor generating the highest grade of usable energy: elec tricity Fuelalcoholproductionsystemsprovenbiofuelofchoicefortemperatecli mates Compressed wood gasproven technology; cooking fuel; usable in cars if compressed CompressedEarthBlock(CEB)presshighperformancebuildingmaterial Sawmillproductionofdimensionallumber Aluminumfromclayproductionofaluminumfromsubsoilclays
Meansoffabrication:
CNCMultimachine mill,drill,lathe,metalforming,othergrinding/cutting XYZcontrolled torch and router tablecan accommodate an acetylene torch,plasmacutter,router,andpossiblyCO2lasercutterdiodes Metalcastingequipmentvariousmetalparts 6 Plasticextruder plasticglazingandotherapplications Electronicsfabricationoscilloscope,multimeter,circuitfabrication;specific power electronics products include battery chargers, inverters, converters,
5
Jakubowski,OpenSourceInductionFurnace,FactoreFarmWeblog,December15, 2009<http://openfarmtech.org/weblog/?p=1373>. 2 Jakubowski,InitialStepstotheOpenSourceMultimachine,FactoreFarmWeblog, January26,2010<http://openfarmtech.org/weblog/?p=1408>. 3 Jakubowski,OSEProposalTowardsaWorldClassOpenSourceResearchandDe velopment Facility v0.12, January 16, 2008 <http://openfarmtech.org/OSE_Proposal.doc> (accessedAugust25,2009). 4 http://www.aipengineering.com/babington/Babington_Oil_Burner_HOWTO.html 5 <http://opensourcemachine.org/>. 6 See Extruder_doc.pdf at <http://www.fastonline.org/CD3WD_40/CD3WD/INDEX .HTM>.
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transformers,solarchargecontrollers,PWMDCmotorcontrollers,multipole 1 motorcontrollers.
The Solar Turbine, as it was initially called, uses the suns heat to power a steamdriven generator, as an alternative to photovoltaic electricity.2 It has since been renamed the Solar Power Generator, because of the choice to use a simple steamengineastheheatengineinsteadofaTeslaturbine.3 TheSteamEngine,stillinthedesignstage,isbasedonasimpleandefficient designfora3kwengine,withanestimatedbillofpartsof$250.4 TheSawmill,whichcanbebuiltwithunder$2000inparts(aFactor10cost reduction),hasthehighestproductionrateofanysmall,portablesawmills.5 OSEsstrategyistousethecommercialpotentialofthefirstproductsdevel oped to finance further development. As we saw earlier, Jakubowski speculates that a fully equipped digital fabrication facility could turn out CEB presses or sawmillswithproductionratescomparabletothoseofcommercialmanufacturing firms, cutting out all the metal parts for the entire product with a turnaround timeofdays.TheCEBsandsawmillscouldbesoldcommercially,inthatcase,to financedevelopmentofotherproducts.6 And in fact, Jakubowski has made a strategic decision to give priority to de velopingtheCEBPressasrapidlyaspossible,inordertoleveragethepublicityand commercialpotentialasasourceoffuturefundingfortheentireproject.7 OSEsgoalofreplicability,oncethefirstsiteiscompletedwithafullrangeof productionmachineryandfullproductline,involveshostinginternswhowishto replicate the original experiment at other sites, and using fabrication facilities to produce duplicate machinery for the new sites.8 Jakubowski recently outlined a moredetailedtimeline:
Based on our track record, the schedule may be off by up to twenty years. Thus,theproposedtimelinecanbetakenaseitherentertainmentorastatement ofintentdependingonhowmuchonebelievesintheproject. 2008modularityandlowcostfeaturesofopensourceproductshavebeen demonstratedwithLifeTracandCEBPressprojects 2009Firstproductrelease 2010TEDFellowsorequivalentpublicrelationsfellowshiptopropelOSE tohighvisibility 2011$10k/monthfundinglevelsachievedforscalingproductdevelopment effort 2012GlobalVillageConstructionSetfinished 2013Firsttruepostscarcitycommunitybuilt Jakubowski,OSEProposal[NoteOSElaterdecidedtoreplacetheboundarylayer turbine with a simple steam engine as their primary heat engine. Also Babington oil burner,compressedfuelgasproduction,andfuelalcoholproductionhavenowbeensuper seded by pelletized biomassfueled steam engines. (Marcin Jakubowski, private email, January22,2010)] 2 Solar TurbineOpen Source Ecology <http://openfarmtech.org/index.php?title= Solar_Turbine>. 3 Marcin Jakubowski, Factor e Live DistillationsPart 8Solar Power Generator, FactoreFarmWeblog,February3,2009<http://openfarmtech.org/weblog/?p=507>. 4 Nick Raaum, Steam Dreams, Factor e Farm weblog, January 22, 2009 <http:// openfarmtech.org/weblog/?p=499>. 5 Jeremy Mason, Sawmill Development, Factor e Farm weblog, January 22, 2009 <http://openfarmtech.org/weblog/?p=498>. 6 Jakubowski,OSEProposal. 7 Ibid. 8 OrganizationalStrategy.
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2014OSE University (immersion training) established, to be competitive withhighereducationbutwithanappliedfocus 2015OSE Fellows program started (the equivalent of TED Fellows, but withexplicitfocusofsolvingpressingworldissues) 2016First productive recursion completed (components can be produced locallyanywhere) 2017Full meterial [sic] recursion demostrated (all materials become pro duciblelocallyanywhere) 2018Ready selfreplicability of resilient, postscarcity communities dem onstrated 2019First autonomous republic created, along the governance principles ofLeashless 1 2020Readyreplicabilityofautonomousrepublicsdemonstrated
InAugust2009,someseriouslongtimetensionscametoaheadatOSE,asthe result of personality conflicts beyond the scope of this work, and the subsequent departureofmembersBenDeVriesandJeremyMason. Sincethen,theprojecthasgivencontinuingsignsofbeingfunctionalandon track. As of early October 2009, Lawrence Kincheloe had completed torch table Prototype1(pursuanttohiscontractdescribedabove),andwaspreparingtopro duceadebuggedPrototype2(withthemajorportionofitscomponentsproduced withPrototype1).2Asrecountedabove,OSEalsowentintoserialproductionofthe CEB Press and has undertaken new projects to build the opensource lathe and ironworker. 2.100kGarages Another very promising open manufacturing project, besides OSEs, is 100kGaragesa joint effort of ShopBot and Ponoko. ShopBot is a maker of CNC routers.3Ponokoisbothanetworkofdesignersandacustommachiningservice, that produces items as specified in customer designs uploaded via Internet, and shipsthembymail,andalsohasalargepreexistinglibraryofmemberproductde signsavailableforproduction.4100kGaragesisanationwideAmericannetworkof fabbersaimedatdistributedproductioningaragesandsmallworkshops5:linking separate shops with partial tool sets together for the division of labor needed for networked manufacturing, enabling shops to contract for the production of spe cific components, or putting customers in contact with fabbers who can produce theirdesigns.PonokoandShopBot,inajointannouncement,describeditashelp ing20,000creatorsmeet6,000fabricators,andspecificallyputtingthemintouch withfabricatorsintheirowncommunities.6Asdescribedatthe100kGaragessite:
100kGarages.com is a place for anyone who wants to get something made (Makers) to link up with those having tools for digital fabrication (Fabbers) Jakubowski, TED Fellows, Factor e Farm Weblog, September 22, 2009 <http://openfarmtech.org/weblog/?p=1121>. 2 Lawrence Kincheloe, One Month Project Visit: Take Two, Factor e Farm Weblog, October4,2009<http://openfarmtech.org/weblog/?p=1146>. 3 <http://www.shopbottools.com/>. 4 <http://www.ponoko.com/>. 5 Whats Digital Fabrication? 100kGarages website <http://100kgarages.com/digital_ fabrication.html>. 6 Ted Hall (ShopBot) and Derek Kelley (Ponoko), Ponoko and ShopBot announce part nership:Morethan20,000onlinecreatorsmeetover6,000digitalfabricators,jointpressre lease, September 16, 2009. Posted on Open Manufacturing email list, September 16, 2009 <http://groups.google.com/group/openmanufacturing/browse_thread/thread/fdb7b4d562f 5e59d?hl=en>.
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usedtomakepartsorprojects....Atthemoment,thestructureisinplacetofor [sic]MakerstofindFabbersandtopostjobstotheFabbercommunity....Were workinghardtoprovidesoftwareandtrainingresourcestohelpthosewhowant to design for Fabbers, whether doing their own oneoff projects or to use the network of Fabbers for distributed manufacturing of products (as done by the currentgalleryofdesignersonthePonokosite). Inthefirstfewweekstherehavebeenabout40Fabberswhovejoinedup.In the beginning, we are sticking to Fabbers who are ShopBotters. This makes it possibletohavesomeconfidenceinthecredibiltyandcapabilityoftheFabber, withoutwastingenormouseffortsoncertification....Butbeforelong,weexpect toopenup100kGarages.comtoalldigitalfabricationtools,whetheradditiveor subtractive.WerehopingtogrowtoacoupleofhundredFabbersoverthenext fewmonths,andthisshouldprovideageographicaldistributionthatbringsfab 1 ricationcapabilitiesprettyclosetoeveryoneandhelpsgetthesystemenergized. As we all are becoming environmentally aware, we realize that our envi ronmentjustcanthandletransportingallourrawmaterialsacrossthecountry or around the world, just to ship them back as finished products. These new technologies make practical and possible doing more of our production and manufacturinginsmalldistributedfacilities,assmallasourgarages,andcloseto wheretheproductisneeded.Mostimportantlyournewmethodsforcollabora tionandsharingmeansthatwedonthavetodoitallbyourselves...thatde signerswithcreativeideasbutwithoutthecapabilitytoseetheirdesignsbecome real can work with fabricators that might not have the design skills that they needbutdohavetheequipmentandtheskillsandorientationthatsneededto turnideasintoreality...thatthosewhojustwanttogetstuffmadeorgettheir ideasrealizedcanworkwiththeMakers/designerswhocanhelpthemcreatethe plansandthelocalfabricatorswhofulfillthem. TogetthisstartedShopBotTools,Makersofpopulartoolsfordigitalfabri cationandPonoko,whoarereinventinghowgoodsaredesigned,madeanddis tributed, are teamingup to create a network of workshops and designers, with resourcesandinfrastructuretohelpfacilitaterollingupoursleevesandgetting to work. Using grass roots enterprise and ingenuity this community can help getusbackinaction,whetheritstomodernizeschoolbuildingsandinfrastruc ture, develop energysaving alternatives, or simply produce great new products forourhomesandbusinesses. There are thousands of ShopBot digitalfabrication (CNC) tools in garages and small shops across the country, ready to locally fabricate the components neededtoaddressourenergyandenvironmentalchallengesandtolocallypro duce items needed to enhance daily living, work, and business. Ponokos web methodologies offer people who want to get things made an environment that integrates designers and inventors with ShopBot fabricators. Multiple paths for getting from idea to object, part, component, or product are possible in a dy namic network like this, where ideas can be realized in immediate distributed productionandwhereproductionactivitiescanprovidefeedbacktoimprovede 2 signs.
AlthoughallShopBotCNCroutermodelsarequiteexpensivecomparedtothe reverseengineered stuff produced by hardware hackers (most models are in the $1020,000range,andthetwocheapestarearound$8,000),ShopBotsrecentopen sourcingofitsCNCcontrolcodereceivedmuchfanfareintheopenmanufacturing community.3
100KGarages founder Ted Hall, 100kGarages is Open: A Place to Get Stuff Made, Open Manufacturing email list, September 15, 2009 <http://groups.google.com/group/ openmanufacturing/browse_thread/thread/ae45b45de1d055a7?hl=en#>. 2 OurBigIdea!100kGaragessite<http://100kgarages.com/our_big_idea.html>. 3 Gareth Branwyn, ShopBot OpenSources Their Code, Makezine, April 13, 2009 <http://blog.makezine.com/archive/2009/04/shopbot_opensources_their_code.html>.
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And as the 100kGarages site says, they plan to open up the network to ma chinesotherthanrouters,andtohomebrewroutersotherthanShopBot,asthe projectdevelops.Ponokoalreadyhadasimilarnetworkingprojectamongowners ofCNClasercutters.1Asafirststeptowarditsintentiontoexpandtoallkindsof digitalfabricationtools,inOctoberShopBotorderedaMakerBotkitwithaview to investigating the potential for incorporating additive fabrication into the mix.2 100kGaragesannouncedinJanuary2010ithadsignedup150Fabbers,andwasstill developingplanstoaddotherdigitaltoolslikecuttingtablesand3Dprintersto its network.3 In February they elaborated on their plans, specifying that 100kGarages would add the owners of other digitally controlled tools, with the samecertificationmechanismforreliabilitytheyalreadyusedfortheShopBot:
The plan weve come up with is to work with other Digital Fabrication Equip ment manufacturers and let them do the same sort of ownership verification steps that ShopBot has done with the original Fabbers. If a person with a Thermwood (or an EZRouter, Universal Laser, etc) wants to join 100kGarages theycanhavethemanufactureroftheirtoolverifythattheyareanowner.Well workoutasimpleprocessforthisverificationandwillworktodeveloprelation shipswithothermanufacturersovertimetomaketheprocessaspainlessaspos sibleandtoletthemgetinvolvediftheywouldlike.
Plans to incorporate homebrew tools are also in the works, although much lessfaralongthanplansforcommerciallymanufacturedtools.
ItalsoleavesaquestionofthehomemadeandhomebrewFabbers.Weappreci atethatsomeofthesetoolscanbeprettygood.Theremaybeotherkindsofuser organizationsforsometypesoftoolsthatcouldhelpwithcertification,butweve gottoadmitthatwedontknowexactlyhowwelldealwithityet.Itmaybeas simpleassendusapictureofyourself,yourmachine,andaportfolioofwork, orwemayhavetodevelopsomesortofcertificationmethodinvolvingcuttinga sample. Well let you know when we come up with something, but well try to 4 makeitaspainlessforyou(andforus)aspossible.
Interestingly, this was almost identical to the relocalized manufacturing modeldescribedbyJohnRobb:

It is likely that by 2025, the majority of the consumer goods you pur chase/acquire, will be manufactured locally. However, this doesnt likely mean whatyouthinkitmeans.Theprocesswilllooklikethis: 1.You will purchase/trade for/build a design for the product you desire through online trading/sharing systems. That design will be in a standard file formatandthevolumeofavailabledesignsforsale,trade,orsharedopenlywill becountedinthebillions. 2.You or someone you trust/hire will modify the design of the product to ensure it meets your specific needs (or customize it so it is uniquely yours). Manyproductswillbesmart(inthattheyincludehardware/softwarethatmakes themresponsive),andprogrammedtoyourprofile. 3.Therefinedproductdesignwillbedownloadedtoasmalllocalmanufac turingcompany,cooperative,orequippedhomeforproduction.Basicfeedstock materialswillbeusedinitsconstruction(frommetaltoplasticpowdersderived fromgenericsources,recycling,etc.).Deliveryislocalandnearlycostless. WhatsDigitalFabrication? 100kGarages is Building a MakerBot, 100kGarages, October 17, 2009 <http://blog .100kgarages.com/2009/10/17/100kgaragesisbuildingamakerbot/>. 3 What are we working on? 100kGarages, January 8, 2010 <http://blog .100kgarages.com/2010/01/08/whatareweworkingon/>. 4 Whats Next for 100kGarages? 100kGarages News, February10, 2010 <http://blog .100kgarages.com/2010/02/10/whatsnextfor100kgarages/>.
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The relocalization of manufacturing will be promoted among other things, Robbsays,bythefactthat

[l]ocalfabricationwillgetcheapandeasy.Thecostofmachinesthatcanprint, lathe,etch,cutmaterialstoproducethreedimensionalproductswilldroptoaf fordablelevels(including consumer level versions). Thissectoris about to pass 1 outofitshomebrewcomputerclubphaseandrockettoglobalacceptance.
Its impossible to underestimate the revolutionary significance of this devel opment.AsLloydAlterputit,Thisreallydoeschangeeverything.2 BackinJanuary,EricHuntingconsideredtheslowtakeoffintheopenmanu facturing/MakingmovementontheOpenManufacturingemaillist.
Thereseemtobeanumberofreoccurringquestionsthatcomeupopenlyor in the back of peoples minds seeming to represent key obstacles or stumbling blocksintheprogressofopenmanufacturingorMakerculture.... WhyareMakersstillfoolingaroundwithtoysandmashupsandnotmak ing serious things? (short answer; like early computer hackers lacking offthe shelf media to study, theyre still stuck reverse engineering the offtheshelf productsofexistingindustrytolearnhowthetechnologyworksandhackingis easierthanmakingsomethingfromscratch) Why are Makers rarely employing many of the modular building systems thathavebeenaroundsincethestartofthe20thcentury?Whydosofewtech savvy people seem to know what Tslot is when its ubiquitous in industrial automation? Why little use of Box Beam/Grid Beam when its cheap, easy, and hasbeenaroundsincethe1960s?Whydoesnooneintheworldseemtoknow theoriginandnameoftherodandclampframingsystemusedintheRepRap? (shortanswer:nodefinitivesourcesofinformation) WhyarerecipesinplaceslikeMakeandInstructiblesmost[sic]aboutarti factsandrarelyabouttoolsandtechniques?(shortanswer;knowledgeofthese arebeingdisseminatedadhoc) Whyisitsohardtocollectivizesupportandinterestforopensourceartifact projectsandwhyareforumslikeOpenManufacturespendingmoretimeindis cussionoftheoryratherthannuts&boltsmaking?(shortanswer;noequivalent ofSourceForgeforaformaldefinitionofhardwareprojectsthoughthisisten tatively being developedand no generally acknowledged definitive channel of communicationaboutopenmanufacturingactivity) Why are Fab Labs not selfreplicating their own tools? (short answer; no comprehensivebodyofopensourcedesignsforthosetoolsandnoorganizedef forttoreverseengineerofftheshelftoolstocreatethoseopensourceversions) Why is there no definitive users manual for the Fab Lab, its tools, and commontechniques?(shortanswer;noonehasbotheredtowriteityet) Why is there no Fab Lab in my neighborhood? Why so few university Fab Labssofar?WhyisitsohardtofindsupportforFabLabincertainplaceseven inthewesternworld?(shortanswer;99%ofeventheeducatedpopulationstill doesntknowwhatthehellaFabLabisorwhatthetoolsitsbasedonare) Why do key PostIndustrial cultural concepts remain nascent in the con temporaryculture,failingtocoalesceintoaculturalcriticalmass?Whyareen trepreneurship,cooperativeentrepreneurship,andcommunitysupportnetworks stillleftlargelyoutofthepopulardiscussiononrecoveryfromthecurrenteco nomic crash? Why do advocates of PostIndustrial culture and economics still often hang their hopes on nanotechnology when so much could be done with John Robb, The Switch to Local Manufacturing, Global Guerrillas, July 8, 2009 <http://globalguerrillas.typepad.com/globalguerrillas/2009/07/journaltheswitchtolocal manufacturing.html>. 2 Lloyd Alter, Ponoko + ShopBot = 100kGarages: This Changes Everything in Downloadable Design, Treehugger, September 16, 2009 <http://www.treehugger.com/ files/2009/09/ponokoshopbot.php>.
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the technology athand? (short answer; no complete or documented working modelstodemonstratepotentialwith) Areyou,asIam,startingtoseeapatternhere?ItseemsliketheresaMiss ingLinkintheformofakindofcommunicationsormediagap.ThereisMaker mediathankslargelytotheculturalphenomenontriggeredbyMakemagazine. Butitsdominatedbyadhocindividualmediaproducedandpublishedonline to communicate the designs for individual artifacts while largely ignoring the tools.Peoplearelearningbymaking,buttheyneverseemtogetthewholepic ture of what they potentially could make because they arent getting the com pletepictureofwhatthetoolsareandwhattheyrecapableof. We seem to basically be in the MITS Altair, Computer Shack, Computer Faire,CreativeComputing,2600eraofindependentindustry.AHackerera.Re member the early days of the personal computer? You had these fairs, users groups, and computer stores like Computer Shack basically acting like ad hoc ashramsofthenewtechnologybecausetherewerenootherdefinitivesourcesof knowledge.ThisisexactlywhatMakerfairs,FabLabs,andforumslikethisone aredoing.... Therearealotofparallelsheretotheearlypersonalcomputerera,except foracoupleofthings;theresnoequivalentofApple(yet.),noequivalentofthe 1 OReilyNutshellbookseries,no#####ForDummiesbooks.
100kGaragesisamajorsteptowardthecriticalmassHuntingwroteabout.Al thoughtheresasyetnoAppleofCNCtools(inthesenseoftheCADfileequiva lentofauserfriendlygraphicuserinterface),thereisnowanorganizednetwork ofentrepreneurswithalargerepositoryofopendesigns.AsMichelBauwensputs it,Suddenly,anyonecanpickoneof20,000PonokoDesigns(orbuildonethem selves)andgetitcutoutandbuiltjustaboutanywhere.2Thisisessentiallywhat Marcin Jakubowski referred to above, when he speculated on distributed open source manufacturing shops linked to a global repository of shared open source designs.TogetbacktoLloydAlterstheme(Thischangeseverything):
Ponoko is the grand idea of digital design and manufacture; they make it possible for designers to meet customers, where creators, digital fabricators, materials suppliers and buyers meet to make (almost) anything. It is a green idea, producing only when something is wanted, transporting ideas instead of physicalobjects. ExcepttherewasntacomputerizedrouterorCNCmachineoneveryblock, no3DKinkoswhereyoucouldgoandprintoutyourobjectlikeacoupleofpho tocopies. Until now, with the introduction of 100K Garages, a joint venture be tweenPonokoandShopBot,acommunityofoversixthousandfabricators. Suddenly, anyone can pick one of 20,000 Ponoko Designs (or build one 3 themselves)andgetitcutoutandbuiltjustaboutanywhere.
TheanswertoHuntingsquestionaboutcooperativeentrepreneurshipseems tohavecometoalargeextentfromoutsidetheopenmanufacturingmovement,as such. And ShopBot and Ponoko, if not strictly speaking part of the committed openmanufacturingmovement,havegrafteditontotheirbusinessmodel.Thisis anextensiontothephysicalrealmofaphenomenonBauwensremarkedoninthe realmofopensourcesoftware:
1
Eric Hunting, Toolbook and the Missing Link, Open Manufacturing, January 30, 2009<http://groups.google.com/group/openmanufacturing/msg/2fccdde02f402a5b>. 2 Michel Bauwens, A milestone for distributed manufacturing: 100kGarages, P2P Foundation Blog, September 19, 2009 <http://blog.p2pfoundation.net/amilestonefor distributedmanufacturing100kgarages/2009/09/19>. 3 Alter,op.Cit.
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... [M]ost peer production allies itself with an ecology of businesses. It is notdifficulttounderstandwhythisisthecase.Evenatverylowcost,communi ties need a basic infrastructure that needs to be funded. Second, though such communities are sustainable as long as they gain new members to compensate thelossofexistingcontributors;freelycontributingtoacommonprojectisnot sustainableinthelongterm.Inpractice,mostpeerprojectsfollowa11099rule, withaonepercentconsistingofverycommittedcoreindividuals.Ifsuchacore cannot get funded for its work, the project may not survive. At the very least, suchindividualsmustbeabletomovebackandforthfromthecommonstothe marketandbackagain,iftheirengagementistobesustainable. Peerparticipatingindividualscanbepaidfortheirworkondevelopingthe firstiterationofknowledgeorsoftware,torespondtoaprivatecorporateneed, even though their resulting work will be added to the common pool. Finally, evenonthebasisofafreelyavailablecommons,manyaddedvalueservicescan beadded,thatcanbesoldinthemarket.Onthisbasis,cooperativeecologiesare created.Typicalintheopensourcefieldforexample,isthatsuchcompaniesuse aduallicensingstrategy.Apartfromprovidingderivativeservicessuchastrain ing,consulting,integrationetc.,theyusuallyofferanimprovedprofessionalver sionwithcertainextrafeatures,thatarenotavailabletononpayingcustomers. Therulehereisthatonepercentofthecustomerspayfortheavailabilityof99% ofthecommonpool.Suchmodelalsoconsistsofwhatiscalledbenefitsharing practices,inwhichopensourcecompaniescontributetothegeneralinfrastruc tureofcooperationoftherespectivepeercommunities. Nowweknowthattheworldoffreesoftwarehascreatedaviableeconomy of open source software companies, and the next important question becomes: Canthismodelbeexported,wholesaleorwithadaptations,totheproductionof 1 physicalgoods?
Ithinkitsinprocessofbeingdonerightnow. Jeff Vail expressed some misgivings about Ponoko, wondering whether it couldgobeyondtheproductionoftrinketsandproduceprimarygoodsessentialto dailyliving.100kGaragespartnershipwithPhysicalDesignCo2(agroupofMITar chitects who design digitally prefabricated houses), announced in early October, maygoaconsiderablewaytowardaddressingthatconcern.PhysicalDesignCowill henceforthcontractthemanufactureofallitsdesignsto100kGarages.3 3.Assessment FranzNahrada,oftheGlobalVillagemovement,hascriticizedFactoreFarm intermsofitsrelationshiptoalarger,surroundingnetworkedeconomy.However, he downplayed the importance of autarky compared to that of crosslinking be tweenOSEandtherestoftheresilientcommunitymovement.
Ireallythinkweenteraperiodofdensificationandintensivecrosslinking between various projects. I would like to consider Factor_E_Farm the flagship project for the Global Village community even though I am not blind to some shortcomings. I talked to many people and they find and constantly bring up some points that are easy to critisize [sic]. But I want to make clear: I also see thesepointsandtheyallcanbedealtwithandareIMHOofminorimportance. the site itself seems not really being locally embedded in regional devel opmentinitiatives,butratheraspaceshipfromMarsforthesurroundingpopu Bauwens,TheEmergenceofOpenDesignandOpenManufacturing,WeMagazine, vol. 2 <http://www.wemagazine.net/wevolume02/theemergenceofopendesignand openmanufacturing/>. 2 <http://www.physicaldesignco.com/>. 3 PhysicalDesignCoteamsupwith100kGarages,100kGaragesNews,October4,2009 <http://blog.100kgarages.com/2009/10/04/physicaldesigncoteamsupwith100kgarages/>.
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lation.ThesameoccuredtomeinTamera10yearsagowhenIstayedataneigh boring farmhouse with a very benevolent Portuguese lady who spoke perfect German(becauseshewasthewidowofaGermandiplomat).Shewashelpfulim [sic]mediating,butstillIsawthecommunitythroughthelensesofoutsiders and I saw how much damage too much cultural isolation can do to a village buildingeffortandhowmanyopportunitiesaremissedthatway.Wemustcon sider the local and the regional as equally important as the global, in fact the global activates the local and regional potential. It makes us refocus on our neighbors because we bring in a lot of interesting stuff for themand they mightdothesameforus.... the overall OSE project is radically geared towards local autonomy somethingwhichsometimesseeminglycutsdeeplyintoefficiencyandespecially lifequality.IthinkthatinmanyrespectstheFactoreFarmzeal,thebackbreak ingheroismoflabor,thechoiceofthehardbottomupapproach,ismoreasym bolicstatementandtheendresultwilldifferalot.Intheend,wemighthave regional cooperatives, sophisticated regional division of labor and a size of op erations that might still be comparable to small factories; especially when it comestometalparts,standardpartsofallkinds,modulesofthetoolkitetc.But thestatementwecandoitourselvesisanimportantantidotetotodaysabso lutelydistortedsystemoftechnologyandcompetences. Wecannotreallyfigureoutwhatisthethresholdwherethisdemonstration effort becomes unmanageable; I think that it is important to start with certain aspectsofautarky,withtheideaofpartialautarkyandselfreliance,butnotwith theideaoftotalselfsufficiency.Thisdemonstrationofaspectualautarkyisim portant in itself and gives a strong message: we can build our own tractor. we can produce our own buidling materials. we can even build most of our own 1 houses.
So OSE is performing a valuable service in showing the outer boundaries of whatcanbedonewithinaresilient,selfsufficientcommunity.Inatotalsystemic collapse,without(forexample)anymicrochipfoundries,theCNCtoolsintheFab Lab willobviouslybe unsustainable on a longterm basis. But assuming that such resilient communities are part of a larger network with some of Nahradas regional division of labor and small factories (including, perhaps, a decentral ized,recyclingbasedrubberindustry),OSEstoolkitwillresultindrasticincreases in the degree of local independence and the length of periods a resilient local economycanweatheronitsownresources. 100kGarages and OSE may be converging toward a common goal from radi callydifferentstartingpoints.Thatis,100kGaragesmaybecomplementarytoOSE intermsofNahradascriticism.If100kGaragesnetworkeddistributedmanufactur ing infrastructure is combined with OSEs opensource design ecology, with de signs aimed specifically at bootstrapping technologies for maximum local resil ienceandeconomyautonomy,thesynergiesarepotentiallyenormous.Imagineif OSEproductsliketheLifeTractractor/primemover,sawmill,CEB,etc.,werepart of the library of readily available designs that could be produced through 100kGarages.
Quoted in Michel Bauwens, Strategic Support for Factor e Farm and Open Source Ecology, P2P Foundation Blog, June 19, 2009 <http://blog.p2pfoundation.net/strategic supportforfactorefarmandopensourceecology/2009/06/19>.
ResilientCommunities andLocalEconomies
ealreadysaw,inChapterFive,theeconomyofnetworkedmicromanufactur ingthatslikelytoemergefromthedeclineofthestatecapitalistsystem.We furthersawinChapterThreethatthereisacyclicaltendencyofindustrialproduc tion to shift from the massproduction core to the craft periphery in economic downturns.Andwevewitnessedjustsuchalongtermstructuralshiftduringthe stagnationofthepastthirtyyears. There is a similar historic connection between severe economic downturns, with significant periods of unemployment, and the formation of barter networks and resilient communities. If the comparison to manufacturing holds, given the cumulativeeffectofallofstatecapitalismscrisesofsustainabilitywhichweexam inedinPaperNo.4,wecanexpecttoseealongtermstructuralshifttowardresil ient communities and relocalized exchange. John Robb suggests that, given the severity of the present Great Recession, it may usher in a phase transition in whichthenewsocietycrystallizesaroundresilientcommunitiesasabasicbuilding block;resilientcommunitieswillplaythesameroleinresolvingthecurrentTime ofTroublesthattheKeynesianstatedidinresolvingthelastone.
Historically, economic recessions that last longer than a year have dura tions/severitiesthatcanbeplottedaspowerlawdistributions....Giventhatwe arealreadyoverayearintothisrecession,itimpliesthatwearereallyintoblack swanterritory(unknownandextremeoutcomes)inregardstoourglobalecon omyscurrentdownturnandthatnoestimatesofrecoverytimesorultimatese veritybasedonhistoricaldataofpastrecessionsapplyanymore.Thisalsomeans that the system has exceeded its ability to adapt using standard methods (that shouldntbenewstoanyone). Itmaybeevenmoreinterestingthanthat.Theapparentnonlinearityand turbulence of the current situation suggests we may be at a phase transition (akintotheshiftinthenaturalworldfromicetowater).... Asaresult,anewcontrolregimemayemerge.Togetaglimpseofwhatisin storeforus,weneedtolookatthesourcesofemergingorder(newlyconfigured dissipativeandselforganizingsystems/networks/orgsthatarebetteradaptedto thenewnonlineardynamicsoftheglobalsystem). In[theGreatDepression]thesourcesofemergingorganizationalorderwere reconfigurednationstatesthattookamoreactiveroleineconomics(totalwar economiesduringpeacetime).Inthissituation,weareseeingemergingorderat thelocallevel:smallresilientnetworks/communitiesreconfiguredtohandlethis level of systemic environmental nonlinearity and survive/thrive.... Further, it appearsthattheseemergingcommunitiesandnetworksarewellsuitedtodraw ingonagreatbehavioralshiftoccurringattheindividuallevel,alreadyevident inalleconomicstatistics,thatemphasisthrift/investmentratherthanconsump tion/gambling(themiddleclassconsumerisbecomingextinct).
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So what does this mean? These new communities will eventually start to linkup,eitherphysicallyorvirtually...,intonetworkclusters.IFthenumberof linksinthelargestclusterreachessomecriticalproportionoftheentiresystems nodes ..., there will be a phase transition as entire system shifts to the new modeofoperation.Inotherwords,resilientcommunitiesmightbecomethenew 1 configurationoftheglobaleconomicsystem.
RobbsphasetransitionresemblesJeffVailsdescriptionofthegraduallyshift ing correlation of forces between the old legacy system and his Diagonal Econ omy:
Thediagonaleconomymightriseamidstthedeclineofourcurrentsystemthe Legacy System. Using America as an example (but certainly translatable to other regions and cultures), more and more people will gradually realize that there the plausible promise once offered by the American nationstate is no longer plausible. A decent education and the willingness to work 40 hours a weekwillnolongerprovidetheLeaveittoBeaverquidproquoofacomfort able suburban existence and a secure future for ones children. As a result, our collectivewillingnesstoagreetotheconditionssetbythisLegacySystem(will ingparticipationinthesysteminexchangeforthisonceplausiblepromise)will wane.Pioneersandthisiscertainlyalreadyhappeningwillrejectthesecondi tionsinfavorofaformofnetworkedcivilizationalentrepreneurship.Whilethis is initially composed of professionals, independent sales people, internet businesses,andafewmarketgardeners,itwillgraduallytransitiontotakeona decidedly third world flavor of local selfsufficiency and importreplacement (leveraging developments in distributed, opensource, and peertopeer manu facturing)inthefaceofgrowingecologicalandresourcepressures.Peoplewill, tovaryingdegrees,recognizethattheycannotrelyonthecradletocradleprom ise of lifetime employment by their nation state. Instead, they will realize that theyareallentrepreneursinatleastthreeandpossiblymanymoreseparate enterprises: ones personal brand in interaction with the Legacy System (e.g. yourconventionaljob),ones localized selfsufficiency business (ranging from a back yard tomato plant to suburban homesteads and garage workshops), and ones community entrepreneurship and network development. As the constitu tionalbasisofouralreadyillusoryNationStatesystem...erodefurther,thefo cus on #2 (localized selfsufficiency) and #3 (community/networking) will gradually spread and increase in importance, though it may take much more than my lifetime to see them rise to general prominence in replacement of the 2 NationStatesystem.
In this chapter we will examine the general benefits of resilient local econo mies, consider some notable past examples of the phenomenon, and then survey some current experiments in resilient community which are especially promising asbuildingblocksforapostcorporatesociety.
A.LOCALECONOMIESASBASESOFINDEPENDENCEANDBUFFERS AGAINSTECONOMICTURBULENCE
Onevirtueofthelocaleconomyisitsinsulationfromtheboombustcycleof thelargermoneyeconomy. PaulGoodmanwrotethatatightlocaleconomywasessentialformaintain ingacloserelationbetweenproductionandconsumption,
John Robb, Viral Resilience, Global Guerrillas, January 12, 2009 <http:// globalguerrillas.typepad.com/globalguerrillas/2009/01/journalphaset.html>. 2 JeffVail,DiagonalEconomy1:Overview,JeffVail.Net,August24,2009<http://www .jeffvail.net/2009/08/diagonaleconomy1overview.html>.
RESILIENTCOMMUNITIESANDLOCALECONOMIES
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foritmeansthatpricesandthevalueoflaborwillnotbesosubjecttothefluc tuations of the vast general market. A mans work, meaningful during produc tion, will somewhat carry through the distribution and what he gets in return. Thatis,withinlimits,thenearerasystemgetstosimplehouseholdeconomy,the more it is an economy of specific things and services that are bartered, rather 1 thananeconomyofgeneralizedmoney.
The greater the share of consumption needs met through informal (barter, householdandgift)economies,thelessvulnerableindividualsaretothevagaries ofthebusinesscycle,andthelessdependentonwagelaboraswell. Theabilitytomeetonesownconsumptionneedswithonesownlabor,using onesownlandandtools,issomethingthatcantbetakenawaybyarecessionora corporatedecisiontooffshoreproductiontoChina(orjusttodownsizethework force and speed up work for the survivors). The ability to trade ones surplus for othergoods,withaneighboralsousinghisownlandandtools,isalsomuchmore securethanajobinthecapitalisteconomy. RalphBorsodidescribedthecumulativeeffectoftheconcatenationofuncer taintiesinaneconomyoflargescalefactoryproductionforanonymousmarkets:
Surelyitisplainthatnomancanaffordtobedependentuponsomeotherman forthebarenecessitiesoflifewithoutrunningtheriskoflosingallthatismost precioustohim.Yetthatispreciselyandexactlywhatmostofusaredoingto day.Everybodyseemstobedependentuponsomeoneelsefortheopportunity toacquiretheessentialsoflife.Thefactoryworkerisdependentupontheman whoemployshim;bothofthemaredependentuponthesalesmenandretailers whosellthegoodstheymake,andallofthemaredependentupontheconsum ingpublic,whichmaynotwant,ormaynotbeable,tobuywhattheymayhave 2 made.
Imagine,ontheotherhand,anorganictruckfarmerwhobartersproducefor clothingfromahomeseamstresslivingnearby.Neitherthefarmernortheseam stresscandisposeofherfulloutputinthismanner,ormeetallofhersubsistence needs.Butbothtogetherhaveasecureandreliablesourceforalltheirsewingand vegetableneeds,andareliableoutletfortheportionoftheoutputofeachthatis consumed by the other. The more trades and occupations brought into the ex changesystem,thegreatertheportionoftotalconsumptionneedsofeachthatcan bereliablymetwithinastablesubeconomy.Atthesametime,thelessdependent eachpersonisonoutsidewageincome,andthemorepreparedtoweatherapro longedperiodofunemploymentintheoutsidewageeconomy. Subsistence,barter,andotherinformaleconomies,byreducingtheinterme diate steps between production and consumption, also reduce the contingency involvedinconsumption.Iftherealizationofcapitalfollowsacircuit,asdescribed byMarxinCapital,thesameisalsotrueoflabor.Andthemorestepsinthecircuit, themorelikelythecircuitistobebroken,andtherealizationoflabor(thetrans formationoflaborintousevalue,throughtheindirectmeansofexchangingones own labor for wages, and exchanging those wages for usevalue produced by someone elses labor) is to fail. Marx, in The Poverty of Philosophy, pointed out longagothatthedisjunctionofsupplyfromdemand,whichresultedintheboom bustcycle,wasinevitablegiventhelargescaleproductionunderindustrialcapital ism:
PaulandPercivalGoodman,Communitas:MeansofLivelihoodandWaysofLife(New York:VintageBooks,1947,1960),p.170. 2 Ralph Borsodi. Flight from the City: An Experiment in Creative Living on the Land (NewYork,Evanston,SanFrancisco,London:Harper&Row,1933,1972),p.147.
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...[Thistrueproportionbetweensupplyanddemand]waspossibleonlyat atimewhenthemeansofproductionwerelimited,whenthemovementofex change took place within very restricted bounds. With the birth of largescale industrythistrueproportionhadtocometoanend,andproductionisinevita blycompelledtopassincontinuoussuccessionthroughvicissitudesofprosper ity,depression,crisis,stagnation,renewedprosperity,andsoon. Those who ... wish to return to the true proportion of production, while preserving the present basis of society, are reactionary, since, to be consistent, theymustalsowishtobringbackalltheotherconditionsofindustryofformer times. Whatkeptproductionintrue,ormoreorlesstrue,proportions?Itwasde mandthatdominatedsupply,thatprecededit.Productionfollowedcloseonthe heelsofconsumption.Largescaleindustry,forcedbytheveryinstrumentsatits disposaltoproduceonaneverincreasingscale,cannolongerwaitfordemand. 1 Productionprecedesconsumption,supplycompelsdemands.
In drawing the connection between supplypush distribution and economic crisis,Marxwasquiteperceptive.Wherehewentwrongwashisassumptionthat largescale industry, and production that preceded demand on the push model, werenecessaryforahighstandardofliving(thepresentbasisofsociety). Leopold Kohr, in the same vein, compared local economies to harbors in a storm in their insulation from the business cycle and its extreme fluctuations of demand.2 Ebenezer Howard, in his vision of Garden Cities, argued that the overhead costsofriskanddistribution(aswellasrent,giventhecheaprurallandonwhich thenewtownswouldbebuilt)wouldbefarlowerforbothindustryandretailers servingthelessvolatilelocalmarkets.
Theymightevensellconsiderablybelowtheordinaryrateprevailingelsewhere, butyet,havinganassuredtradeandbeingableveryaccuratelytogaugedemand, theymightturntheirmoneyoverwithremarkablefrequency.Theirworkingex penses,too,wouldbeabsurdlysmall.Theywouldnothavetoadvertiseforcus tomers,thoughtheywoulddoubtlessmakeannouncementstothemofanynov elties;butallthatwasteofeffortandofmoneywhichissofrequentlyexpended bytradesmeninordertosecurecustomersortopreventtheirgoingelsewhere, 3 wouldbequiteunnecessary.
Hispictureoftheshortcycletimeandminimaloverheadresultingfromthe gearingofsupplytodemand,bytheway,isalmostawordforwordanticipationof leanprinciples. Wesaw,inpreviouschapters,thewaythatleanproductionovercomesbottle necksinsupplybyscalingproductiontodemandandsitingproductionascloseas possibletothemarket.Thesmallneighborhoodshopandthehouseholdproducer applythesameprinciple,onanevenhigherlevel.Sothemoredecentralizedand relocalizedthescaleofproduction,theeasieritistoovercomethedivorceofpro duction from demandthe central contradiction of mass production. These re marksbyGandhiarerelevant:
Question:Doyoufeel,Gandhiji,thatmassproductionwillraisethestan dardoflivingofthepeople? KarlMarx,ThePovertyofPhilosophy,MarxandEngelsCollectedWorks,vol.6(New York:InternationalPublishers,1976). 2 Leopold Kohr, The Overdeveloped Nations: The Diseconomies of Scale (New York: SchockenBooks,1977),p.110. 3 EbenezerHoward,ToMorrow:APeacefulPathtoRealReform.Facsimileoforiginal 1898 edition, with introduction and commentary by Peter Hall, Dennis Hardy and Colin Ward(LondonandNewYork:Routledge,2003),pp.100,102[facsimilepp.7778].
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Idonotbelieveinitatall,thereisatremendousfallacybehindMr.Fords reasoning.Withoutsimultaneousdistributiononanequallymassscale,thepro ductioncanresultonlyinagreatworldtragedy. Massproductiontakesnonoteoftherealrequirementoftheconsumer.If mass production were in itself a virtue, it should be capable of indefinite multiplication. But it can be definitely shown that mass production carries within it its own limitations. If all countries adopted the system of mass production, there would not be a big enough market for their products. Mass productionmustthencometoastop. Iwouldcategoricallystatemyconvictionthatthemaniaformassproduc tion is responsible for the world crises. If there is production and distribution bothintherespectiveareaswherethingsarerequired,itisautomaticallyregu lated,andthereislesschanceforfraud,noneforspeculation.... Question:HaveyouanyideaastowhatEuropeandAmericashoulddoto solvetheproblempresentedbytoomuchmachinery? Yousee,answeredGandhiji,thatthesenationsareabletoexploittheso calledweakerorunorganizedracesoftheworld.Oncethoseracesgainthisele mentaryknowledgeanddecidethattheyarenomoregoingtobeexploited,they willsimplybesatisfiedwithwhattheycanprovidethemselves.Massproduction, then,atleastwherethevitalnecessitiesareconcerned,willdisappear.... Question:Buteventheseraceswillrequiremoreandmoregoodsastheir needsmultiply. Theywillthem[sic]produceforthemselves.Andwhenthathappens,mass production,inthetechnicalsenseinwhichitisunderstoodintheWest,ceases. Question:Youmeantosayitbecomeslocal? Whenproductionandconsumptionbothbecomelocalized,thetemptation tospeedupproduction,indefinitelyandatanyprice,disappears. Question:Ifdistributioncouldbeequalized,wouldnotmassproductionbe sterilizedofitsevils? No,Theevilisinherentinthesystem.Distributioncanbeequalizedwhen production is localized; in other words, when the distribution is simultaneous with production. Distribution will never be equal so long as you want to tap othermarketsoftheworldtodisposeofyourgoods. Question:Then,youdonotenvisagemassproductionasanidealfutureof India? Ohyes,massproduction,certainly,Butnotbasedonforce.Afterall,the message of the spinning wheel is that. It is mass production, but mass produc tioninpeoplesownhomes.Ifyoumultiplyindividualproductiontomillionsof times,woulditnotgiveyoumassproductiononatremendousscale?ButIquite understandthatyourmassproductionisatechnicaltermforproductionbythe fewestpossiblenumberthroughtheaidofhighlycomplicatedmachinery.Ihave saidtomyselfthatthatiswrong.Mymachinerymustbeofthemostelementary typewhichIcanputinthehomesofthemillions.Undermysystem,again,itis labourwhichisthecurrentcoin,notmetal.Anypersonwhocanusehislabour hasthatcoin,haswealth.Heconvertshislabourintocloth,heconvertshisla bour into grain. If he wants paraffin oil, which he cannot himself produce, he useshissurplusgrainforgettingtheoil.Itisexchangeoflabouronfree,fairand equal termshence it is no robbery. You may object that this is a reversion to theprimitivesystemofbarter.Butisnotallinternationaltradebasedonthebar tersystem? 1 Concentrationofproductionadinfinitumcanonlyleadtounemployment.
Gandhis error was assuming that localized and household production equatedtolowtechmethods,andthattechnologicaladvancementwasinevitably
1
Mahatma Gandhi on Mass Production (1936), TinyTech Plants <http://www .tinytechindia.com/gandhiji2.html>(punctuationinoriginal).
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associated with large scale and capital intensiveness. As we saw in Chapter Five, nothingcouldbefurtherfromthetruth. Communitiesoflocallyownedsmallenterprisesaremuchhealthiereconomi callythancommunitiesthatarecolonizedbylarge,absenteeownedcorporations. For example, a 1947 study compared two communities in California: one a com munityofsmallfarms,andtheotherdominatedbyafewlargeagribusinessopera tions. The small farming community had higher living standards, more parks, morestores,andmorecivic,socialandrecreationalorganizations.1 Bill McKibben made the same point in Deep Economy. Most money thats spent buying stuff from a national corporation is quickly sucked out of the local economy,whilemoneythatsspentatlocalbusinessescirculatesrepeatedlyinthe localeconomyandleaksmuchmoreslowlytotheoutside.Accordingtoastudyin Vermont, substituting local production for only ten percent of imported food wouldcreate$376millioninneweconomicoutput,including$69millioninwages atover3600newjobs.AsimilarstudyinBritainfoundthemultipliereffectoften pounds spent at a local business benefited the local economy to the tune of 25 pounds,comparedtoonly14forthesameamountspentatachainstore.
Thefarmerbuysadrinkatthelocalpub;thepubownergetsacartuneupatthe local mechanic; the mechanic brings a shirt to the local tailor; the tailor buys somebreadatthelocalbakery;thebakerbuyswheatforbreadandfruitformuf finsfromthelocalfarmer.Whenthesebusinessesarenotownedlocally,money 2 leavesthecommunityateverytransaction.
B.HISTORICALMODELSOFRESILIENTCOMMUNITY
The prototypical resilient community, in the mother of all Times of Trou bles,wastheRomanvillaasitemergedinthelateEmpireandearlyDarkAges.In Republicantimes,villashadbeenestatesonwhichthecountryhomesoftheSena torial class were located, often selfsufficient in many particulars and resembling villages in their own right. During the stresses of the long collapse in the fifth century,andintheDarkAgesfollowingthefalloftheWesternEmpire,thevillas becamestockadedfortresses,oftenwithvillagesofpeasantsattached. Since the rise of industrial capitalism, economic depression and unemploy ment have been the central motive forces behind the creation of local exchange systemsandthedirectproductionforbarterbyproducers. AgoodexampleistheOwenitesuseofthesocialeconomyasabaseofinde pendencefromwagelabor.AccordingtoE.P.Thompson,[n]otonlydidthebene fit societies on occasion extend their activities to the building of social clubs or almshouses; there are also a number of instances of preOwenite trade unions whenonstrike,employingtheirownmembersandmarketingtheproduct.3G.D. H.Coledescribesthesamephenomenon:
AstheTradeUnionsgrewafter1825,Owenismbegantoappealtothem,and especially to the skilled handicraftsmen.... Groups of workers belonging to a particular craft began to set up Cooperative Societies of a different type societies of producers which offered their products for sale through the Co L.S.Stavrianos,ThePromiseoftheComingDarkAge(SanFrancisco:W.H.Freeman andCompany,1976),p.41. 2 Bill McKibben, Deep Economy: The Wealth of Communities and the Durable Future (NewYork:TimesBooks,2007),p.165. 3 E.P.Thompson,TheMakingoftheEnglishWorkingClass(NewYork:VintageBooks, 1963,1966),p.790.
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operativeStores.IndividualCraftsmen,whowereSocialists,orwhosawawayof escapefromtheexactionsofthemiddlemen,alsobroughttheirproductstothe 1 storestosell. ...[Thispatternoforganizationwascharacterizedby]societiesofproduc ers,aimingatcooperativeproductionofgoodsandlookingtotheStorestopro videthemwithamarket.Thesenaturallyarosefirstintradesrequiringcompara tively little capital or plant. They appealed especially to craftsmen whose inde pendence was being threatened by the rise of factory production or sub contractingthroughcapitalistmiddlemen. Themostsignificantfeatureoftheyearswearediscussingwastherapidrise ofthis...typeofCooperativeSocietyandthedirectentryoftheTradesUnions intoCooperativeproduction.MostoftheseSocietieswerebaseddirectlyupon oratleastverycloselyconnectedwiththeUnionsoftheirtrades,...whichtook up production as a part of their Union activityespecially for giving employ 2 menttotheirmemberswhowereoutofworkorinvolvedintradedisputes....
The aims and overall vision of such organization were well expressed in the rulesoftheRippondenCooperativeSociety,formedin1832inaweavingvillagein thePennines:
Theplanofcooperationwhichwearerecommendingtothepublicisnotavi sionaryonebutisacteduponinvariouspartsoftheKingdom;wealllivebythe produceoftheland,andexchangelabourforlabour,whichistheobjectaimedat by all Cooperative societies. We labourers do all the work and produce all the comfortsoflife;whythenshouldwenotlabourforourselvesandstrivetoim 3 proveourconditions.
Cooperative producers need for an outlet led to Labour Exchanges, where workmen and cooperatives could directly exchange their product so as to dis pense altogether with either capitalist employers or capitalist merchants. Ex changewasbasedonlabortime.OwensLabourNotesforatimenotonlypassed current among members of the movement, but were widely accepted by private shopkeepersinpaymentforgoods.4 Theprincipleoflaborbasedexchangewasemployedonalargescale.In1830 theLondonSocietyopenedanExchangeBazaarforexchangeofproductsbetween cooperative societies and individuals.5 The Cooperative Congress, held at Liver poolin1832,includedalonglistoftradesamongitsparticipants(theBsalonehad eleven). The National Equitable Labour Exchange, organized in 183233 in Bir mingham and London, was a venue for the direct exchange of products between craftsmen,usingLabourNotesasamediumofexchange.6 TheKnightsofLabor,inthe1880s,undertookalargescaleeffortatorganiz ing worker cooperatives. Their fate is an illustration of the central role of capital outlay requirements in determining the feasibility of selfemployment and coop erativeemployment. Thefirstmajorwaveofworkercooperatives,accordingtoJohnCurl,wasun der the auspices of the National Trades Union in the 1830s.7 Like the Owenite tradeunioncooperativesinBritain,theyweremostlyundertakenincraftemploy
G.D.H. Cole, A Short History of the British Working Class Movement (17891947) (London:GeorgeAllen&Unwin,1948),p.76. 2 Ibid.,p.78. 3 Ibid.,pp.793794. 4 Ibid.,pp.7879. 5 Ibid.,p.76. 6 Thompson,MakingoftheEnglishWorkingClass,p.791. 7 JohnCurl,ForAllthePeople:UncoveringtheHiddenHistoryofCooperation,Coopera tiveMovements,andCommunalisminAmerica(Oakland,CA:PMPress,2009),p.4
1
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mentsforwhichthebasictoolsofthetradewererelativelyinexpensive.Fromthe beginning,workercooperativeswereafrequentresortofstrikingworkers.In1768 twentystrikingjourneymantailorsinNewYork,thefirststrikingwageworkersin Americanhistory,setuptheirowncooperativeshop.Journeymancarpentersstrik ingforatenhourdayinPhiladelphia,in1761,formedacooperative(withtheten hour day they sought) and undercut their masters price by 25%; they disbanded thecooperativewhentheywentbacktowork.Thesamewasdonebyshoemakers in Baltimore, 1794, and Philadelphia, 1806.1 This was a common pattern in early American labor history, and the organization of cooperatives moved from being purelyastriketactictoprovidinganalternativetowagelabor.2Itwasfeasiblebe cause most forms of production were done by groups of artisan laborers using handtools. By the 1840s, the rise of factory production with expensive machinery had largely put an end to this possibility. As the prerequisites of production became increasinglyunafforable,themajorityofthepopulationwasrelegatedtowagela borwithmachineryownedbysomeoneelse.3 Most attempts at workerorganized manufacturing, after the rise of the fac torysystem,failedonaccountofthecapitaloutlaysrequired.Forexample,when manufacturersrefusedtosellfarmmachinerytotheGrangersatwholesaleprices, theNebraskaGrangeundertookitsowndesignandmanufacturingofmachinery. (Hows that for a parallel to modern P2P ideas?) Its first attempt, a wheat head reaper,soldathalfthepriceofcomparablemodelsanddrovedownpricesonfarm machineryinNebraska.TheNationalGrangeplannedacompletelineoffarmma chinery,butmostGrangemanufacturingenterprisesfailedtoraisethelargesums ofcapitalneeded.4 TheKnightsofLaborcooperativeswereonshakygroundinthebestoftimes. Manyofthemwerefoundedduringstrikes,startedwithlittlecapitalandobsoles centmachinery,andlackedthecapitaltoinvestinmodernmachinery.Subjected to economic warfare by organized capital, the network of cooperatives disinte gratedduringthepostHaymarketrepression.5
Ibid.,p.33. Ibid.,p.34. 3 Ibid.,pp.35,47. 4 Ibid.,p.77. 5 Ibid.,p.107. ThefateoftheKofLcooperatives,resultingfromthehighcapitalizationrequirements for production, is a useful contrast to the potential for smallscale production today. The economytodayisexperiencingarevolutionasprofoundasthecorporatetransformationof thelate19thcentury.Themaindifferencetodayisthat,formaterialreasons,themonopo lies on which corporate rule depends are becoming unenforceable. Another revolution, based on P2P and micromanufacturing, is sweeping society on the same scale as did the corporaterevolutionof150yearsago.Butthelargecorporationstodayareinthesamepo sitionthattheGrangeandKnightsofLaborwereintheGreatUpheavalbackthen,fighting a desperate, futile rearguard action, and doomed to be swept under by the tidal wave of history. The worker cooperatives organized in the era of artisan labor paralleled, in many ways, the forms of work organization that are arising today. Networked organization, crowdsourcedcreditandtheimplosionofcapitaloutlaysrequiredforphysicalproduction, takentogether,arerecreatingthesameconditionsthatmadeartisancooperativesfeasible inthedaysbeforethefactorysystem.Intheartisanmanufactoriesthatprevailedintothe early19thcentury,mostofthephysicalcapitalrequiredforproductionwasownedbythe work force; artisan laborers could walk out and essentially take the firm with them in all but name. Likewise, today, the collapse of capital outlay requirements for production in
2
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EbenezerHowardsGardenCitieswereawayofbuyingoutatthebottom(a phrase coined by Vinay Guptaabout whom more later): building the cities on cheaprurallandandusingitwithmaximumefficiency.Theideawasthatworkers wouldtakeadvantageoftherentdifferentialbetweencityandcountry,makemore efficientuseofunderusedlandthanthegreatlandlordsandcapitalistscould,and usethesurplusincomefromproductioninthenewcities(collectedasasingletax onthesitevalueofland)forquicklypayingofftheoriginalcapitaloutlays.1How ard also anticipated something like countereconomics: working people living withinhisgardencities,workingthroughbuildingsocieties,friendlysocieties,mu tuals, consumer and worker cooperatives, etc., would find ways to employ them selvesandeachotheroutsidethewagesystem.
It is idle for workingmen to complain of this selfimposed exploitation, and to talkofnationalizingtheentirelandandcapitalofthiscountryunderanexecu tive of their own class, until they have first been through an apprenticeship at the humbler task of organising men and women with their own capital in con structive work of a less ambitious character.... The true remedy for capitalist oppression where it exists, is not the strike of no work, but the strike of true work,andagainstthislastblowtheoppressorhasnoweapon.Iflabourleaders spent half the energy in cooperative organisation that they now waste in co operative disorganisation, the end of our present unjust system would be at 2 hand.
Howard,heavilyinfluencedbyKropotkinsvisionofthedecentralizedproduc tion made possible by smallscale electrically powered machinery,3 wrote that [t]own and country must be married, and out of this joyous union will spring a newhope,anewlife,anewcivilization.4Largemarkets,warehouses,andindustry wouldbelocatedalongaringroadontheouteredgeofeachtown,withmarkets andindustryservingtheparticularwardinwhichitscustomersandworkerslived.5 Aclusterofseveralindividualtowns(thesocialcityofaroundaquartermillion populationinanareaofroughlytenmilessquare)wouldultimatelybelinkedto gether by [r]apid railway transit, much like the old mixeduse railroad suburbs whichtodaysNewUrbanistsproposetoresurrectandlinktogetherwithlightrail. Largerindustriesineachtownwouldspecializeintheproductionofcommodities fortheentirecluster,inwhichgreatereconomiesofscalewerenecessary. In the Great Depression, the same principles used by the Owenites and KnightsofLaborwereappliedintheHomesteadUnitprojectintheDaytonarea, an experiment with household and community production in which Borsodi playedaprominentorganizingrole.Despitesomeearlysuccess,itwaseventually
theculturalandinformationfields(software,desktoppublishing,music,etc.)hascreateda situationinwhichhumancapitalisthesourceofmostbookvalueformanyfirms;conse quently, workers are able to walk out with their human capital and form breakaway firms, leaving their former employers as little more than hollow shells. And the rise of cheap garage manufacturing machinery (a Fab Lab with homebrew CNC tools costing maybetwomonthswagesforasemiskilledworker)is,initsessence,areturntothedays whenlowphysicalcapitalcostsmadeworkercooperativesaviablealternativetowagela bor. The first uprising against corporate power, in the late 19th century, was defeated by theneedforcapital.Thepresentonewilldestroytheoldsystembymakingcapitalsuper fluous. 1 Howard,ToMorrow,pp.32,42[facsimilepp.13,2021]. 2 Ibid.,pp.108,110[facsimilepp.8586]. 3 ColinWard,CommentatorsintroductiontoIbid.,p.3. 4 Ibid.,p.28[facsimilep.10]. 5 Ibid.,p.14[facsimilep.34].
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killedoffbyHaroldIckes,atechnocraticliberalwhowantedtorunthehomestead project along the same centralist lines as the Tennessee Valley Authority. The HomesteadUnitswerebuiltoncheaplandinthecountrysidesurroundingDayton, withacombinationofthreeacrefamilyhomesteadsandsomedivisionoflaboron other community projects. The family homestead included garden, poultry and other livestock, and a small orchard and berry patch. The community provided woodlotandpasture,inaddition.1AUnitCommitteevicepresidentintheproject describedtheeconomicsecurityresultingfromsubsistenceproduction:
Therearefewcitieswheretheindependenceofacertainsortofcitizenhas notbeenbroughtintoreliefbythegeneraldifficultiesofthedepression.Inthe environsofallcitiesthereisthesoillovingsuburbanite.Insomecasestheseare smallfarmers,marketgardenersandpoultryraiserswhotrytomaketheirentire livingfromtheirlittleacres.Moreoftenandmoresuccessfulthereisacombina tion of rural and city industry. Some member of the family, while the others growtheircrops,willhaveajobintown.Alittlemoney,wherewagesarejoined totheproduceofthesoil,willgoalongway.... Whenthedepressioncamemostofthesemembersofthesesuburbanfami lieswhoheldjobsintownwerecutinwagesandhours.Inmanycasestheyen tirelylosttheirjobs.What,then,didtheydo?....Thesoilandtheindustriesof theirhomeprovidedthem...workandaliving,howeverscant.Exceptforthe comparatively few dollars required for taxes and a few other items they were able,undertheirownsail,torideoutthestorm.Thesailingwasrough,perhaps; butnottobecomparedwiththatinthewreckstrewntown.... Farming as an exclusive business, a full means of livelihood, has col lapsed....Laboringasanexclusivemeansoflivelihoodhasalsocollapsed.The citylaborer,whollydependentonajob,isofallmenmostprecariouslyplaced. Who,then,isforthemomentsafeandsecure?Thenearesttoitisthishomeand 2 acresowningfamilyinbetween,whichcombinesthetwo.
An interesting experiment in restoring the circuit of labor through barter exchangewasDepressioneraorganizationsliketheUnemployedCooperativeRe liefOrganizationandUnemployedExchangeAssociation:
... The real economy was still thereparalyzed but still there. Farmers werestillproducing,morethantheycouldsell.Fruitrottedontrees,vegetables inthefields.InJanuary1933,dairymenpouredmorethan12,000gallonsofmilk intotheLosAngelesCitysewerseveryday. The factories were there too. Machinery was idle. Old trucks were in side lots,needingonlyalittlerepair.Allthatcapacityontheonehand,legionsofidle menandwomenontheother.Itwasthefinancialcasinothathadfailed,notthe workersandmachines.Onstreetcornersandaroundbarekitchentables,people started to put two and two together. More precisely, they thought about new waysofputtingtwoandtwotogether.... Inthespringof1932,inCompton,California,anunemployedWorldWarI veteranwalkedouttothefarmsthatstillringedLosAngeles.Heofferedhisla bor in return for a sack of vegetables, and that evening he returned with more thanhisfamilyneeded.Thenextdayaneighborwentoutwithhimtothefields. Withintwomonths500familiesweremembersoftheUnemployedCooperative ReliefOrganization(UCRO).
RalphBorsodi,TheNation,April19,1933;reproducedinFlightFromtheCity,pp.154 59.Incidentally,theNewTownprojectinGreatBritainwassimilarlysabotaged,firstunder thecentralizingsocialdemocratictendenciesofLabourafterWWII,andthenbyThatcher itelooting(er,privatization)inthe1980s.Wardcommentary,Howard,ToMorrow,p.45. 2 EditorialbyWalterLockeinTheDaytonNews,quotedbyBorsodiinFlightFromthe City,pp.17071.
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Thatgroupbecameoneof45unitsinanorganizationthatservedtheneeds ofsome150,000people. It operated a large warehouse, a distribution center, a gas and service sta tion, a refrigeration facility, a sewing shop, a shoe shop, even medical services, alloncooperativeprinciples.Memberswereexpectedtoworktwodaysaweek, andbenefitswereallocatedaccordingtoneed.... The UCRO was just one organization in one city. Groups like it ultimately involvedmorethan1.3millionpeople,inmorethan30states.Ithappenedspon taneously,withoutexpertsorblueprints.Mostoftheparticipantswerebluecol lar workers whose formal schooling had stopped at high schools. Some groups evolvedakindofmoneytocreatemoreflexibilityinexchange.Anexamplewas the Unemployed Exchange Association, or UXA, based in Oakland, Califor nia....UXAbeganinaHooverville...calledPipeCity,neartheEastBaywa terfront. Hundreds of homeless people were living there in sections of large sewerpipethatwereneverlaidbecausethecityranoutofmoney.Amongthem wasCarlRhodehamel,amusicianandengineer. RhodehamelandothersstartedgoingdoortodoorinOakland,offeringto dohomerepairsinexchangeforunwanteditems.Theyrepairedtheseandcircu lated them among themselves. Soon they established a commissary and sent scouts around the city and into the surrounding farms to see what they could scavengeorexchangelaborfor.Withinsixmonthstheyhad1,500members,and a thriving subeconomy that included a foundry and machine shop, woodshop, garage,soap,factory,printshop,woodlot,ranches,andlumbermills.Theyre built18trucksfromscrap.AtUXAspeakitdistributed40tonsoffoodaweek. Itallworkedonatimecreditsystem....Memberscouldusecreditstobuy food and other items at the commissary, medical and dental services, haircuts, and more. A council of some 45 coordinators met regularly to solve problems anddiscussopportunities. One coordinator might report that a saw needed a new motor. Another knewofamotorbuttheownerwantedapianoinreturn.Athirdmemberknew of a piano that was available. And on and on. It was an amalgam of enterprise and cooperationthe flexibility and hustle of the market, but without the en coded greed of the corporation or the stifling bureaucracy of the state.... The 1 memberscalleditareciprocaleconomy.....
Stewart Burgess, in a 1933 article, described a days produce intake by the warehouse of Unit No. 1 in Compton. It included some fifteen different kinds of fruitsandvegetables,includingtwotonsofcabbageandseventyboxesofpears,all thewaydowntoasinglecrateofbeetsnottomentionasackofsalt.Theproduc tion facilities and the waste materials it used as inputs foreshadow the ideas of ColinWard,KirkpatrickSaleandKarlHessoncommunitywarehousesandwork shops,discussedinthelastchapter:
In this warehouse is an auto repair shop, a shoerepair shop, a small printing shopforthenecessaryslipsandforms,andtheinevitablewoodpilewherecast off railroad ties are sawed into firewood. Down the street, in another building, womenaremakingoverclothingthathasbeenbarteredin.Inanothertheyare canningvegetablesandfruitBoyScoutsoftheBurbankUnitbroughtinempty 2 jarsbythewagonload.
Such ventures, like the Knights of Labor cooperatives, were limited by the capital intensiveness of so many forms of production. The bulk of the labor per formedwithinthebarternetworkswaseitherinreturnforsalvagegoodsinneed ofrepair,forrepairingsuchgoods,orinreturnforunsoldinventoriesofconven
Jonathan Rowe, Entrepreneurs of Cooperation, Yes!, Spring 2006 <http://www. yesmagazine.org/article.asp?ID=1464>. 2 J.StewartBurgess,LivingonaSurplus,TheSurvey68(January1933),p.6.
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tional businesses. When the supply of damaged machinery was exhausted by housetohouse canvassing, and local businesses disposed of their accumulated inventory,barterassociationsreachedtheirlimit.Theycouldcontinuetofunction at a fairly low volume, directly undertaking for barter such lowcapital forms of production as sewing, gardening on available land, etc., and trading labor for whatever percentage of output from otherwise idle capacity that conventional businesseswerewillingtobarterforlabor.Butthatlevelwasquitelowcompared totheinitialgainsfromabsorbingexcessinventoryandsalvageablemachineryin theearlydaysofthesystem.Atmost,oncebarterreacheditssustainablelimits,it wasgoodasapartialmitigationoftheneedforwagelabor. But as production machinery becomes affordable to individuals independ ently of large employers, such direct production for barter will become increas inglyfeasibleforlargerandlargersegmentsoftheworkforce. The Great Depression was a renaissance of local barter currencies or emer gency currencies, adopted around the world, which enabled thousands of com munitiestoweathertheeconomiccalamitywiththemediumofexchangeneces saryfortheiractivities,togiveeachotherwork.1 The revival of barter on the Internet coincides with a new economic down turn, as well. A Craigslist spokesman reported in March 2009 that bartering had doubledonthesiteoverthepreviousyear.
ProposedswapslistedontheWashingtonareaCraigslistsitethisweekincluded accountingservicesinreturnforfood,andawomanofferingaweekinherHil tonHead,S.C.,vacationhomefordentalworkforherhusband.
Barterwebsitesforexchanginggoodsandserviceswithoutcashareproliferat ingaroundtheworld.
WithunemploymentintheUnitedStatesandBritainclimbing,somepeople saidbarteringistheonlywaytomakeendsmeet. ImusingbarterWebsitesjusttoseewhatwecandotosurvive,saidZedd Epstein, 25, who owned a business restoring historic houses in Iowa until May, whenhewasforcedtocloseitastheeconomysoured. Epstein, in a telephone interview, said he has not been able to find work since,andheandhiswifemovedtoCaliforniainsearchofjobs. Epstein said he has had several bartering jobs he found on Craigslist. He drywalledaroominexchangeforsometools,hepouredaconcreteshedfloorin returnforhavinganewstartermotorinstalledinhiscar,andhehelpedsome onesetuptheirTVandstereosysteminreturnforahotmeal. Rightnow,thisiswhatpeoplearedoingtogetalong,saidEpstein,whois studyingforanelectricalengineeringdegree. If you need your faucet fixed and you know auto mechanics, theres defi nitelyaplumberouttherewhosoutofworkandhassomethingonhiscarthat 2 needstobefixed,hesaid.
Bernard Lietaer, The Future of Money: A New Way to Create Wealth, Work and a WiserWorld(London:Century,2001),p.148.Inpp.151157,hedescribesexamplesfromall overtheworld,includingseveralthousandexamplesoflocalscripfromeverystateinthe Union. 2 Kevin Sullivan, As Economy Plummets, Cashless Bartering Soars on the Internet, Washington Post, March 14, 2009 <http://www.washingtonpost.com/wp dyn/content/article/2009/03/13/AR2009031303035_pf.html>.
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C.RESILIENCE,PRIMARYSOCIALUNITS,ANDLIBERTARIANVALUES
As the crisis progresses, and with it the gradually increasing underemploy mentandunemploymentandthepartialshiftofvalueproductionfromwagelabor totheinformalsector,wecanprobablyexpecttoseeseveralconvergingtrends:a longterm decoupling of health care and the social safety net from both state based and employerbased provision of benefits; shifts toward shorter working hours and jobsharing; and the growth of all sorts of incomepooling and cost spreadingmechanismsintheinformaleconomy. Theselatterpossibilitiesincludearestoredemphasisonmutualaidorganiza tionsofthekinddescribedbyleftlibertarianwriterslikePyotrKropotkinandE.P. Thompson.AsCharlesJohnsonwrote:
Itslikelyalsothatnetworksofvoluntaryaidorganizationswouldbestrategically importanttoindividualflourishinginafreesociety,inwhichtherewouldbeno expropriative welfare bureaucracy for people living with poverty or precarity to fall back on. Projects reviving the bottomup, solidaritarian spirit of the inde pendentunionsandmutualaidsocietiesthatflourishedinthelate19thandearly 20thcenturies,beforetheriseofthewelfarebureaucracy,maybeessentialfora flourishing free society, and one of the primary means by which workers could take control of their own lives, without depending on either bosses or bureau 1 crats.
More fundamentally, they are likely to entail people coalescing into primary social units at the residential level (extended family compounds or multifamily householdincomepoolingunits,multihouseholdunitsattheneighborhoodlevel, urban communes and other cohousing projects, squats, and standalone inten tionalcommunities),asawayofpoolingincomeandreducingcosts.Asthestates socialsafetynets comeapart,suchprimarysocialunitsandextendedfederations between them are likely to become important mechanisms for pooling cost and riskandorganizingcarefortheagedandsick.Oneearlysignofatrendinthatdi rection:multigenerationalorextendedfamilyhouseholdsareatafiftyyearhigh, growing five percent in the first year of the Great Recession alone.2 Heres how JohnRobbdescribesit:
Mysolutionistoformatriballayer.Resilientcommunitiesthatareconnectedby anetworkplatform(adarknet).Adecentralizedanddemocraticsystemthatcan provide you a better interface with the dominant global economic system than anythingelseIcanthinkof.Notonlywouldthistribeprotectyoufromshocks and predation by this impersonal global system, it would provide you with the toolsandcommunitysupportnecessarytoradicallyimprovehowyouandyour 3 familydoes[sic]acrossallmeasuresofconsequence.
Charles Johnson, Liberty, Equality, Solidarity: Toward a Dialectical Anarchism, in RoderickT.LongandTiborR.Machan,eds.,Anarchism/Minarchism:IsaGovernmentPart of a Free Country? (Hampshire, UK, and Burlington, Vt.: Ashgate Publishing Limited, 2008).Quotedfromtextfileprovidedbyauthor. 2 DonnaSt.George,Pewreportshows50yearhighpointformultigenerationalfam ily households, Washington Post, March 18, 2010 <http://www.washingtonpost.com/wp dyn/content/article/2010/03/18/AR2010031804510.html>. 3 John Robb, You Are In Control, Global Guerrillas, January 3, 2010 <http://globalguerrillas.typepad.com/ globalguerrillas/2010/01/youareincontrol.html>. Forawonderfulfictionalaccountofthegrowthofasocietyofresilientcommunitieslinked in a darknet, and its struggle with the host society, I strongly recommend two novels by Daniel Suarez: Daemon (Signet, 2009), and its sequel Freedom(TM) (Dutton, 2010). I re viewed them here: Kevin Carson, Daniel Suarez: Daemon and Freedom, P2P Foundation
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Poul Anderson, in the fictional universe of his Maurai series, envisioned a postapocalypsesocietyinthePacificNorthwestcoalescingaroundtheoldfrater nal lodges, with the Northwestern Federation (a polity extending from Alaska throughBritishColumbiadowntonorthernCalifornia)centeredonlodgesrather than geographical subdivisions as the component units represented in its legisla ture.Thelodgeemergedasthecentralsocialinstitutionduringthesocialdisinte grationfollowingthenuclearwar,muchasthevillabecamethebasicsocialunitof thenewfeudalsocietyinthevacuumleftbythefallofRome.Itwastheprincipal andnormalmeansfororganizingbenefitstothesickandunemployed,aswellas theprimarybaseforprovidingpublicserviceslikepoliceandfireprotection.1 Itstobehopedthat,absentathermonuclearwar,thetransitionwillbeabit less abrupt. Upwardcreeping unemployment, the exhaustion of the states social safetynet,andtheexplosionofaffordabletechnologiesforsmallscaleproduction andnetworkorganization,takentogether,willlikelyencounteranenvironmentin which the incentives for widespread experimentation are intense. John Robb speculatesononewaythesetrendsmaycometogether:
Inordertobuildoutresilientcommunitiesthereneedstobeabusinessmecha nismthatcanfinanciallypowertheinitialrollout.Herearesomemarketsthat maybeservicedbyresilientcommunityformation: Analreadylargeandgrowinggroupofpeoplethatarelookingforaresilient communitywithinwhichtoliveiftheglobalorUSsystembreaksdown(ala thecollapseoftheUSSR/Argentinaorworse).Frankly,aviableplacetoliveis a lot better than investing in gold that may not be valuable (gold assumes peoplearewillingtopartwithwhattheyhave). Alargerandgrowingnumberofprospectivestudentsthatwanttolearnhow tobuildandoperateresilientcommunities(ratherthancampusexperiments andstandardclassroomblather). Alargeandgrowinggroupofyoungpeoplethatwanttoworkandlivewithin aresilientcommunity.Arealjobafterschoolends. Triangulatingthesemarketsyieldsthefollowingbusinessopportunity: Theabilityofprospectiveresidentsofresilientcommunitiestoinvestapor tionoftheirIRA/401Kand/orongoingcontributionsintheconstructionand operationofaresilientcommunityinexchangeforhomeandconnectionsto resilient systems (food, energy, local manufacturing, etc.) within that com munity. An educational program, like Gaia Universitys collaboration with Factor e Farm, that allows students to get a degree while building out a resilient community (active permaculture/acquaculture plots, micro manufactories, local energy production, etc.). This allows access to government sponsored studentdebt. AworkstudyprogramthatallowsstudentsoftheUniversitytopayofftheir studentdebtandmakealivingdoingovera5year(flexible)period.IFthey wanttodothat. Isuspectthereisagoodwaytoconstructalegalbusinessframeworkthatallows thistohappen.Whatwouldmakethisevenmoreinterestingwouldbetocom bine this with a Freedom network/darknet that allows ideas to flow freely via anopensourceapproachbetweenactiveresilientcommunitiesonthenetwork. The network would also allow goods and services to flow between sites (via an internal trading mechanism) and also allow these goods and intellectual prop erty(protectedbyphalanxesoflawyers)tobesoldtotheoutsideworld(viaan Blog, April 26, 2010 <http://blog.p2pfoundation.net/danielsuarezdaemonand freedom/2010/4/26>. 1 PoulAnderson,OrionShallRise(NewYork:PocketBooks,1983).
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AliBabaapproach).Atsomepoint,ifitisdesignedcorrectly,thisnetworkcould becomeselfsustainingandabletogeneratetheincomenecessarytocontinuea 1 globalrolloutbyitself.
(Allexcepttheintellectualpropertypart.) An article by Reihan Salam in Time Magazine, of all places, put a compara tivelyupbeatspinonthepossibilities:
Imagine a future in which millions of families live off the grid, powering their homes and vehicles with dirtcheap portable fuel cells. As industrial agri culturesputtersunderthestrainofthespiralingcostsofwater,gasolineandfer tilizer,networksoffarmersusingsophisticatedtechniquesthatcombinecutting edge green technologies with ancient Mayan knowhow build an alternative fooddistribution system. Faced with the burden of financing the decadeslong retirement of aging boomers, many of the young embrace a new underground economy, a largely untaxed archipelago of communes, coops, and kibbutzim thatpassivelyresistthepowerofthegrannystatewhilebuildingtheirownlittle utopias. Rather than warehouse their children in factory schools invented to instill obedience in the future mill workers of America, bourgeois rebels will educate theirkidsinvirtualschoolstailoredtodifferentlearningstyles.Whereasonly1.5 million children were homeschooled in 2007, we can expect the number to ex plodeinfutureyearsasdistanceeducationblowspastthetraditionalvarietyin cost and quality. The cultural battle lines of our time, with red America pitted againstblue,willbescrambledasBuddhistveganmilitiamembersandevangeli cal anarchist squatters trade tips on how to build selfsufficient vertical farms from scrapheap materials. To avoid the tax man, dozens if not hundreds of stronglyencrypteddigitalcurrenciesandbarterschemeswillcropup,leavingan underresourcedIRStoplaywhackamolewithsavvylibertarianhacktivists. Work and life will be remixed, as oldstyle jobs, with long commutes and longhoursspentstaringatblinkingcomputerscreens,vanishthankstoeverin creasing productivity levels. New jobs that we can scarcely imagine will take their place, only theyll tend to be homebased, thus restoring life to bedroom suburbsthattodayareghosttownsfrom9to5.Privatehomeswillincreasingly give way to cohousing communities, in which singles and nuclear families will buildmakeshiftkinshipnetworksinsharedkitchensandcommonareasandon neighborhoodwatchduty.Gatedcommunitieswillgrowlargerandmoreelabo rate, effectively seceding from their municipalities and pursuing their own vi sions of the good life. Whether this future sounds like a nightmare or a dream cometrue,itscoming. Thistransformationwillbenotsomuchpoliticalasantipolitical.Thedeci siontoturnawayfrombrokenandbrittleinstitutions,likeconventionalschools andconventionaljobs,willrepresentaturntowardwhatmilitarytheoristJohn Robb calls resilient communities, which aspire to selfsufficiency and inde pendence.Theleftwillreturntoitsrootsasthechampionofmutualaid,coop erativelivingandwhatyoumightcallbroadbandsocialism,inwhichlocalgov ernmentstakeonthetaskofbuildinghightechinfrastructureownedbytheen tirecommunity.Assumingtodayslibertarianrevivalendures,itseasytoimag inetherightdefendingtheprerogativesofstateandlocalgovernmentsandalso ofprivatecitizensincludingtheweirdones.Thisnewindividualismontheleft and the right will begin in the spirit of cynicism and distrust that we see now, thesensethatweasasocietyareincapableofsolvingpressingproblems.Itwill
John Robb, An Entrepreneurs Approach to Resilient Communities, Global Guer rillas, February 22, 2010 <http://globalguerrillas.typepad.com/globalguerrillas/2010/02/ turningresilientcommunitiesintoabusinessopportunity.html>.
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evolveintoanewconfidencethatcitizensworkingincommoncanchangetheir 1 livesandindoingsocanchangetheworldaroundthem.
Istronglysuspectthat,inwhateverformofcivilsocietystabilizesattheendof ourlongcollapse,thetypicalpersonwillbebornintoaworldwhereheinheritsa possessoryrighttosomedefinedshareinthecommunallandofanextendedfam ilyorcohousingunit,andtosomeminimallevelofsupportfromtheprimaryso cialunitintimesofoldageandsicknessorunemploymentinreturnforacustom arilydefinedcontributiontothecommonfundinhisproductiveyears.Itwillbea world in which the Amish barnraiser and the sick benefit societies of Kropotkin andE.P.ThompsonplayamuchmoreprominentrolethanPrudentialortheanar chocapitalistprotectionagency. Gettingfromheretotherewillinvolveafundamentalparadigmshiftinhow most people think, and the overcoming of centuries worth of ingrained habits of thought. This involves a paradigm shift from what James Scott, in Seeing Like a State, calls social organizations that are primarily legible to the state, to social organizations that are primary legible or transparent to the people of local com munitiesorganizedhorizontallyandopaquetothestate.2 Thelatterkindofarchitecture,asdescribedbyKropotkin,waswhatprevailed inthenetworkedfreetownsandvillagesoflatemedievalEurope.Theprimarypat tern of social organization was horizontal (guilds, etc.), with quality certification and reputational functions aimed mainly at making individuals reliability trans parenttooneanother.Tothestate,suchlocalformationswereopaque. Withtheriseoftheabsolutestate,theprimaryfocusbecamemakingsociety transparent(inScottsterminologylegible)fromabove,andhorizontaltranspar encywasatbesttolerated.Thingslikethesystematicadoptionoffamilysurnames that were stable across generations (and the 20th century followup of citizen ID numbers),thesystematicmappingofurbanaddressesforpostalservice,etc.,were allforthepurposeofmakingsocietytransparenttothestate.Toputitcrudely,the statewantstokeeptrackofwhereitsstuffis,sameaswedoandwereitsstuff. Beforethistransformation,forexample,surnamesexistedmainlyforthecon venienceofpeopleinlocalcommunities,sotheycouldtelleachotherapart.Sur names were adopted on an ad hoc basis for clarification, when there was some dangerofconfusion,andrarelycontinuedfromonegenerationtothenext.Ifthere were multiple Johns in a village, they might be distinguished by trade (John the Miller), location (John of the Hill), patronymic (John Richards Son), etc. By contrast, everywhere there have been family surnames with crossgenerational continuity, they have been imposed by centralized states as a way of cataloguing and tracking the populationmaking it legible to the state, in Scotts terminol ogy.3 Toaccomplishashiftbacktohorizontaltransparency,itwillbenecessaryto overcomeapowerfulresidualculturalhabit,amongthegeneralpublic,ofthinking of such things through the minds eye of the state. E.g., if we didnt have some wayofverifyingcompliancewiththisregulationorthat,somebusinesssomewhere might be able to get away with something or other. We must overcome six hun dredyearsorsoofalmostinbredhabitsofthought,bywhichthestateistheall
Reihan Salam, The Dropout Economy, Time, March 10, 2010 <http://www.time .com/time/specials/packages/printout/0,29239,1971133_1971110_1971126,00.html>. 2 James Scott, Seeing Like a State (New Haven and London: Yale University Press, 1998). 3 Ibid.,pp.6473.
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seeingguardianofsocietyprotectingusfromthepossibilitythatsomeone,some wheremightdosomethingwrongiftheauthoritiesdontpreventit. Inplaceofthishabitofthought,wemustthinkinsteadofourselvescreating mechanisms on a networked basis, to make us as transparent as possible to each otherasprovidersofgoodsandservices,topreventbusinessesfromgettingaway withpoorbehaviorbyinformingeachother,topreventeachotherfromsellingde fective merchandise, to protect ourselves from fraud, etc. In fact, the creation of such mechanismsfar from making us transparent to the regulatory statemay well require active measures to render us opaque to the state (e.g. encryption, darknets, etc.) for protection against attempts to suppress such local economic selforganizationagainsttheinterestsofcorporateactors. Inotherwords,weneedtolosethecenturieslonghabitofthinkingofsoci etyasahubandspokemechanismandviewingtheworldfromtheperspectiveof the hub, and instead think of it as a horizontal network in which we visualize things from the perspective of individual nodes. We need to lose the habit of thoughtbywhichtransparencyfromaboveeverevenbecameperceivedasanissue inthefirstplace. This will require, more specifically, overcoming the hostility of conventional liberalswhoareinthehabitofreactingviscerallyandnegatively,andonprinciple, toanythingnotbeingdonebyqualifiedprofessionalsortheproperauthorities. Arguablyconventionalliberals,withtheirthoughtsystemoriginatingasitdid astheideologyofthemanagersandengineerswhoranthecorporations,govern mentagencies,andothergiantorganizationsofthelate19thandearly20thcentury, haveplayedthesameroleforthecorporatestatenexusthatthepolitiquesdidfor theabsolutestatesoftheearlymodernperiod. This is reflected in a common thread running through writers like Andrew Keene,JaronLanier,andChrisHedges,aswellasdocumentaryproducerslikeMi chael Moore. They share a nostalgia for the consensus capitalism of the early postwar period, in which the gatekeepers of the Big Three networks controlled whatwewereallowedtoseeanditwasjustfineforGMtoownthewholedamned economyjust so long as everyone had a lifetime employment guarantee and a UAWcontract. PaulFussell,inBad,ridiculesthewholeDoitYourselfethosasanendlessSa haraoftheSqualid,withbluecollarschmoesbusilyuglifyingtheirhomesbytak inguponthemselvesprojectsthatshouldbelefttoalltogethernowtheProp erlyQualifiedProfessionals. Keith Olbermann routinely mocks exhortations to charity and selfhelp, reachingforshitkickingimageryofthenineteenthcenturybarnraiserforwantof anyothercomparisiontosufficientlygetacrossjusthowbackwardandridiculous thatkindofthingreallyis.Helpingyourneighboroutdirectly,orparticipatingina localselforganizedfriendlysocietyormutual,isallrightinitsownway,ifnothing elseisavailable.Butitcarriestheinescapabletaint,notonlyofthequaint,butof the provincial and the picayunevery much like the perception of homemade bread and homegrown veggies promoted in corporate advertising in the early twentiethcentury,cometothinkofit.Peoplewhohelpeachotherout,ororganize voluntarilytopoolrisksandcosts,aretobepraisedgrudginglyandwithahintof condescensionfor doing the best they can in an era of relentlessly downscaled socialservices.Butthatpeopleareforcedtoresorttosuchexpedients,ratherthan meetingalltheirsocialsafetynetneedsthroughonestopshoppingattheMinistry ofCentralServicesofficeinagiantmonumentalbuildingwithastatueofwinged victory in the lobby, a la Brazil, is a damning indictment of any civilized society.
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The progressive society is a society of comfortable and wellfed citizens, compe tently managed by properly credentialed authorities, happily milling about like ants in the shadows of mileshigh buildings that look like they were designed by AlbertSpeer.AndthatkindofH.G.Wellsutopiasimplyhasnoroomforthebarn raiserorthesickbenefitsociety. Aestheticsensibilitiesaside,suchcriticsarenodoubtmotivatedtosomeex tent by genuine concern that networked reputational and certifying mechanisms just wont take up the slack left by the disappearance of the regulatory state. ThingslikeConsumerReports,AngiesListandtheBetterBusinessBureauareall wellandgood,foreducatedpeoplelikethemselveswhohavethesenseandknow how to check around. But Joe Sixpack, God love him, will surely just go out and buy magic beans from the first disreputable salesman he encountersand then likelyputthemrightuphisnose. Seriously, snark aside, such reputational systems really are underused, and most people really do take inadequate precautions in the marketplace on the as sumptionthattheregulatorystateguaranteessomeminimumacceptablelevelof quality. But liberal criticism based on this state of affairs reflects a remarkably staticviewofsociety.Itignoresthewholeideaofcrowdingout,aswellasthepos sibility that even the Great Unwashed may be capable of changing their habits quiterapidlyinthefaceofnecessity.Becausepeoplearenotpresentlyinthehabit of automatically consulting such reputational networks to check up on people theyreconsideringdoingbusinesswith,andareinthehabitofunconsciouslyas sumingthegovernmentwillprotectthem,conventionalliberalsassumethatpeo plewillnotshiftfromonetotheotherinthefaceofchangingincentives,andscoff attheideaofasocietythatreliesprimarilyonnetworkedratingsystems. Butinasocietywherepeopleareawarethatmostlicensingandsafety/quality codesarenolongerenforceable,andcaveatemptorisnolongerjustacliche,it would be remarkable if things like Angies list, reputational certification by local guilds,customerwordofmouth,etc.,didnotrapidlygrowinimportanceformost people. They were, after all, at one time the main reputational mechanism that peopledidrelyonbeforetheriseoftheabsolutestate,andasingrainedapartof ordinaryeconomicbehaviorasrelianceontheregulatorystateistoday. Peoples habits change rapidly. Fifteen years ago, when even the most basic surveyofaresearchtopicbeganwithanobligatorypainfulcrawlthroughthecard catalog,ReadersGuideandSocialScienceIndexandwhentheaveragepersons investigations were limited to the contents of his $1000 set of Britannicawho couldhaveforeseenhowquicklyGoogleandSSRNsearcheswouldbecomesecond nature? In fact, if anything the assumption that they couldnt sell it if it wasnt OK, becauseitsillegalleavespeopleespeciallyvulnerable,becauseitcreatesanunjus tified confidence and complacency regarding what they buy. The standards of safety and quality, based on current science, are set primarily by the regulated industriesthemselves,andthoseindustriesarefrequentlyabletocriminalizevol untary safety inspections with more stringent standardsor advertising that one adheres to such a higher standardon the grounds that it constitutes disparage ment of the competitors product. For example, Monsanto frequently goes after grocers who label their milk rBGH free, and some federal district courts have ar guedthatitsanunfaircompetitivepracticetotestonesbeefcattleforMadCow Disease more frequently than the mandated industry standard. We have people slathering themselves with lotion saturated with estrogenmimicing parabens, on the assumption that they couldnt sell it if it was dangerous. So in many cases,
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thisallseeing central authoritywecountontoprotectus is likea shepherd that putsthewolvesinchargeoftheflock. Asanindividualistanarchist,Imoftenconfrontedwithissuesofhowsocieties organized around such primary social units would affect the libertarian values of selfownershipandnonaggression. First, its extremely unlikely in my opinion that the collapse of centralized stateandcorporatepowerwillbedrivenby,orthatthepostcorporatestatesoci etythatreplacesitwillbeorganizedaccordingto,anysinglelibertarianideology (althoughIamhopeful,forreasonsdiscussedlaterinthissection,thattherewill be a significant number of communities organized primarily around such values, andthatthosevalueswillhaveasignificantleaveningeffectonsocietyasawhole). Second, although the kinds of communal institutions, mutual aid networks and primary social units into which people coalesce may strike the typical right wing flavor of free market libertarian as authoritarian or collectivist, a society inwhichsuchinstitutionsarethedominantformoforganizationisbynomeans necessarilyaviolationofthesubstantivevaluesofselfownershipandnonaggres sion. Ikeepnoticing,withouteverreallybeingabletoputitinjusttherightwords, that most conventional libertarian portrayals of an ideal free market society, and particularly the standard anarchocapitalist presentation of a conceptual frame work of individual selfownership and nonaggression, seem implicitly to assume anatomizedsocietyofindividualsliving(atmost)innuclearfamilies,withallodial ownershipofahouseandquarteracrelot,andwithmostessentialsofdailyliving purchasedviathecashnexusfromforprofitbusinessfirms. Butitseemstomethatthelibertarianconceptsofselfownershipandnonag gressionareentirelyconsistentwithawidevarietyofvoluntarysocialframeworks, while at the same time the practical application of those concepts would vary widely.Imagineasocietylikemostoftheworldbeforetheriseofthecentralized territorialstate,wheremostultimate(orresidual,orreversionary)landownership wasvestedinvillagecommunes,eventhoughtheremightbeagreatdealofindi vidual possession. Or imagine a society like the free towns that Kropotkin de scribedinthelateMiddleAges,wherepeopleorganizedsocialsafetynetfunctions throughtheguildorotherconvivialassociations.Now,itmightbeentirelypermis sible for an individual family to sever its aliquot share of land from the peasant commune, and choose not to participate in the cooperative organization of sea sonallaborlikespringplowing,hayingortheharvest.Itmightbepermissible,in ananarchistsociety,forsomebodytostayoutsidetheguildandtakehischances onunemploymentorsickness.Butinasocietywheremembershipintheprimary social unit was universally regarded as the best form of insurance, such a person would likely be regarded as eccentric, like the individualist peasants in anarchist Spain who withdrew from the commune, or the propertarian hermits in Ursula LeGuinsTheDispossessed.Andforthemajorityofpeoplewhovoluntarilystayed insuchprimarysocialunits,mostofthesocialregulationsthatgovernedpeoples daily lives would be irrelevant to the Rothbardian conceptual framework of self ownershipvs.coercion. By way of comparison, for the kinds of mainstream free market libertarians conventionally assigned to the Right, the currently predominating model of em ployment in a business firm is treated as the norm. Such libertarians regard the wholeselfownershipvs.aggressionparadigmasirrelevanttolifewithinthatorga nizationalframeworksolongasparticipationintheframeworkisitselfvoluntary. Aha!butbythesametoken,whenpeoplearebornintoaframeworkinwhichthey
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are guaranteed a share in possession of communal land and are offered social safetynetprotectionsintheeventofillnessoroldage,inreturnforobservanceof communalsocialnorms,thesameprincipleapplies. And for most of human history, before the state started actively suppressing voluntaryassociation,anddiscouragedaselforganizedsocialsafetynetbasedon voluntary cooperation and mutual aid, membership in such primary social units was the norm. Going all the way back to the first homo sapiens huntergatherer groups,altruismwasverymuchconsistentwithrationalutilitymaximizationasa formofinsurancepolicy.Whentheresnosuchthingasunemploymentcompen sation,foodstamps,orSocialSecurity,itmakesawholelotofsenseforthemost skillfulorluckyhunter,orthefarmerwiththebestharvest,tosharewiththeold, sickandorphanedandnottobeadickaboutitorrubitintheirfaces.Suchbe havior is almost literally an insurance premium to guarantee your neighbors will takecareofyouwhenyoureinasimilarposition.ConsiderSamBowlestreatment ofthealtruisticethosintheweightlessforagereconomy:
Networkwealthisthecontributionmadebyyoursocialconnectionstoyour wellbeing.Thiscouldbemeasuredbyyournumberofconnections,orbyyour centralityindifferentnetworks.Asimplewaytothinkaboutthisisthenumber ofpeoplewhowillsharefoodwithyou.... Thecultureoftheforagingbandemphasizesgenerosityandmodesty.There arenormsofsharing.Youdepricatewhatyoucatch,describingitasnotasbig as a mouse, or not even worth cooking, even when youve killed a large ani mal.IntheAchepeopleofEasternParaguay,huntersareprohibitedfromeating theirowncatch.Therescomplexsanctioningofindividuallyassertivebehavior, particularly those that disturb or disrupt cooperation and group stability. This makes senseif hunters cant expect that theyll be fed by other hunters particularly by a hunter who suddenly develops a taste for eating his own 1 catchthesocietycollapsesrapidly.
Before states began creating social safety nets, functions comparable to un employmentcompensation,foodstamps,andSocialSecuritywerealmostuniver sallyorganizedthroughprimarysocialunitsliketheclan,thevillagecommune,or theguild. The irony is that the mainstream of market anarchism, particularly right leaning followers of Murray Rothbard, are pushing for a society where theres no state to organize unemployment compensation, food stamps or Social Security. I supposetheyjustassumethisfunctionwillbetakenoverbyPrudential,butIsus pectthatwhatfillsthevoidafterthedisintegrationofthestatewillbealotcloser to Poul Andersons abovementioned society of lodges in the Northwest Federa tion. ItseemslikelytheRothbardiansareneglectingtheextenttowhichthekinds of commercialized business relations they use as a preferred social model are, themselves,aproductofthestatismthattheyreactagainst.Thecentralstatethat theywanttodoawaywithplayedalargeroleindismantlingorganicsocialinstitu tionslikeclans,villagecommunes,extendedfamilies,guilds,friendlysocieties,and soforth,andreplacingthemwithanatomizedsocietyinwhicheverybodysellshis labor,buysconsumablesfromthestore,andisprotectedeitherbythedepartment ofhumanservicesorPrudential.
1
Ethan Zuckerman, Samuel Bowles Introduces Kudunomics, My Hearts in Accra, November 17, 2009 <http://www.ethanzuckerman.com/blog/2009/11/17/samuelbowles introduceskudunomics/>.
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GaryChartier(aprofessorofethicsandphilosophyatLaSierraUniversity),in discussingsomeoftheseissueswithme,raisedsomeseriousquestionsaboutmy comparison between the rightlibertarian view of civil rights in the employment relation, and the rights of the individual in the kinds of communal institutions I broughtup.Oneofthecentralthemesofthicklibertarianismisthatasocialen vironment can have an unlibertarian character, and that nominally private and primaryformsofexploitationandunfairnesscanexist,evenwhennoformalinjus ticehastakenplaceintermsofviolationofthenonaggressionprinciple.1 Cultural authoritarianism in the workplace, especially, is a central focus for manythicklibertarians.ClaireWolfe,awriterwithimpeccablelibertariancreden tialsandGadsdenFlagwavernonpareil,haspointedoutjusthowinconsistentthe authoritarian atmosphere of the workplace is with libertarian cultural values.2 At theotherendofthespectrumarepeoplelikeHansHermannHoppe,whoactively celebratethepotentialforculturalauthoritarianismwheneverysquarefootofthe Earth has been appropriated and there is no such thing as a right of way or any other form of public space. Their ideal world is one in which the letter of self ownershipandnonaggressionisadheredto,butinwhichonecannotmovefrom PointAtoPointBanywhereintheworldwithoutencounteringarequestforIhre Papiere,bitte!fromtheprivategendarmerie,orstoppingforthebiometricscan ners,ofwhoeverownsthebitofspacetheyrestandingonatanygivenmomemt. Socouldnotanorganiclocalcommunityanditscommunalinstitutions,like wise,createanenvironmentthatwouldbeconsideredauthoritarianbythickliber tarian norms, even when selfownership and nonaggression were formally re spected?Chartiercontinues:
I think the interesting question, for a left libertarian whos interested in mini mizing negative social pressure on minority groups of various sorts and who doesntwanttoseepeoplepushedaround,is,Whatkindsofsocialarrangements would help to ensure that the social regulation that governed peoples daily livesdidntreplicatestatisminakindler,gentlerfashion?(Wantaccesstothe communalwatersupply?IdbetternotseeyouworkinginyourfieldontheSab bath....)Ostracismiscertainlyahellofalotbetterthanjail,butpettytyran niesarestillpettytyrannies.Whatsthebestway,doyouthink,tokeepthings likezoningregulationsfromcreepinginthebackdoorviasystemsofpersistent social pressure? Id rather not live in a Hoppe/Tullock condominium commu nity. Onewayofgettingatthismightbetonotethat,as[Michael]Taylorplausi bly suggests, small scale communities are probably good at preventing things like workplace injustices and the kinds of abuses that are possible when there are vast disparities in wealth and so in social influence. But Im less clear that theyregoodatavoidingabuses,notintheeconomicrealm,butinthesocialor culturalrealm.Immoreofalocalistthananumberoftheparticipantsinthere centdiscussionsofthesematters,butIthinkpeoplelikeAster[AsterFrancesca, pen name of Jeanine Ring, a prolific and incisive writer on issues of social and culturalfreedom]aresurelyrightthattheverysolidaritythatcanpreventpeople See, for example, Roderick Long and Charles Johnson, Libertarian Feminism: Can This Marriage Be Saved? May 1, 2005 <http://charleswjohnson.name/essays/libertarian feminism/>; Johnson, Libertarianism Through Thick and Thin, Rad Geek Peoples Daily, October 3, 2008 <http://radgeek.com/gt/2008/10/03/libertarianism_through/>; Matt MacKenzie, Exploitation: A Dialectical Anarchist Perspective, Upaya: Skillful Means to Liberation, March 20, 2007 <http://upaya.blogspot.com/2007/03/exploitation.html>. (link defunctretrievedthroughInternetArchive). 2 Claire Wolfe, Insanity, the Job Culture, and Freedom, Loompanics Catalog 2005 <http://www.loompanics.com/Articles/insanityjobculture.html>.
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inacloseknitcommunityfromgoinghungryorbeingarbitrarilyfiredcanalso keep them from being open about various kinds of social nonconformity. (My ownsocialworldincludesalotofpeoplewhoneedtoavoidlettingotherswith whomtheyworkorworshipknowthattheydrinkwineatdinnerorlearnabout theirsexualbehavior;agenerationago,theydhavealsoavoidedlettinganyone knowtheywenttomovies.) Selfownership vs. aggression neednt be immediately relevant to commu nitylifeanymorethanitmightbetothefirm.Butthesamesortsofobjections tointrafirmhierarchywouldpresumablystillapplytosomekindsofsocialpres 1 sureatthecommunitylevel,yes?
OnethingthatsrelevantissuggestedbyMichaelTaylors2treatmentofhippie communalism as a way of reinventing community. To the extent that a reaction against the centralized state and corporate power is motivated by anti authoritarian values, and rooted in communities like filesharers, potsmokers, hippiebacktothelanders,etc.(andeventotheextentthatittakesplaceinami lieu corrupted by the American MYOB ethos), there will be at least a sizeable minority of communities in a poststate panarchy where community is seen as a safety net and a place for voluntary interaction rather than a straitjacket. And in America, at least, the majority of communities will also probably be leavened to some extent by the MYOB ethos, and by private access to the larger world via a network culture that its difficult for the community to snoop on. (Ive seen ac counts of the monumental significance of netconnected cell phones to Third World teens who live in traditional patriarchal cultures without even their own privateroomsimmenselyliberating). The best thing leftlibertarians can do is probably try to strengthen ties be tween local resilience movements of various sorts and culturally left movements like opensource/filesharing, the greens, and all the other hippiedippy stuff. The biggestdangerfromthatdirectionisthat,asintheratherunimaginativelyPCen vironmentsofalotofleftwingurbancommunesandsharedhousingprojectsto day,peoplemighthavetohidethefactthattheyateanonvegandinner. Asforcommunitiesthatreactagainststateandcorporatepowerfromthedi rection of cultural conservatism, the Jim Bob Duggar types (a revolt of Jihad againstMcWorld),probablythebestwecanhopeforis1)theleaveningcultural effects of the American MYOB legacy and even surreptitious connection to the largerworld,2)thepowerofexitasanindirectsourceofvoice,and3)thewilling nessofsympatheticpeopleinothercommunitiestointerveneonbehalfofvictims ofthemostegregiousformsofbluestockingismandMrs.Grundyism.
D.LETSSYSTEMS,BARTERNETWORKS,ANDCOMMUNITYCURRENCIES
Localcurrencies,barternetworksandmutualcreditclearingsystemsareaso lutiontoabasicproblem:aworldinwhichthereisalotofworktobedone,but thereissimplynomoneyaroundtobringthepeopleandtheworktogether.3 Unconventional currencies are buffers against unemployment and economic downturn.TsutomuHotta,thefounderoftheHureaiKippu(CaringRelationship
Gary Chartier, private email, January 15, 2010. The discussion took place in the con textofmyremarksonMichaelTaylorsbookCommunity,AnarchyandLiberty(Cambridge, UK:CambridgeUniversityPress,1982).ToputthereferencestotheSabbathandotheris suesofpersonalmoralityincontext,ChartierisfromaSeventhdayAdventistbackgrounds andteachesatauniversityaffiliatedwiththatdenomination. 2 Taylor,pp.161164(seenoteimmediatelyabove). 3 Lietaer,p.112.
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Tickets,abartersysteminwhichparticipantsaccumulatecreditsinahealthcare time savings account by volunteering their own time), estimated that such un conventionalcurrencieswouldreplaceathirdtoahalfofconventionalmonetary functions. As a result, the severity of any recession and unemployment will be significantlyreduced.1 One barrier to local barter currencies and crowdsourced mutual credit is a misunderstandingofthenatureofmoney.Forthealternativeeconomy,moneyis notprimarilyastoreofvalue,butanaccountingsystemtofacilitateexchange.Its function is not to store accumulated value from past production, but to provide liquiditytofacilitatetheexchangeofpresentandfutureservicesbetweenproduc ers. Thedistinctionisaveryoldone,aptlysummarizedbySchumpeterscontrast between the money theory of credit and the credit theory of money. The for mer,whichSchumpeterdismissesasentirelyfallacious,assumesthatbankslend money(inthesenseofgivingupuseofit)whichhasbeenwithdrawnfromprevi oususesbyanentirelyimaginaryactofsavingandthenlentoutbyitsowners.Itis muchmorerealistictosaythatthebankscreatecredit.,thantosaythattheylend the deposits that have been entrusted to them.2 The credit theory of money, on theotherhand,treatsfinancesasaclearingsystemthatcancelsclaimsanddebts andcarriesforwardthedifference....3 Thomas Hodgskin, criticizing the Ricardian wage fund theory from a per spective something like Schumpeters credit theory of money, utterly demolished any moral basis for the creative role of the capitalist in creating a wage fund through abstention, and instead made the advancement of subsistence funds from existing production a function that workers could just as easily perform for oneanotherthroughmutualcredit,weretheavenuesofdoingsonotpreempted.
The only advantage of circulating capital is that by it the labourer is en abled, he being assured of his present subsistence, to direct his power to the greatestadvantage.Hehastimetolearnanart,andhislabourisrenderedmore productive when directed by skill. Being assured of immediate subsistence, he can ascertain which, with his peculiar knowledge and acquirements, and with referencetothewantsofsociety,isthebestmethodoflabouring,andhecanla bour in this manner. Unless there were this assurance there could be no con tinuousthought,aninvention,andnoknowledgebutthatwhichwouldbenec essaryforthesupplyofourimmediateanimalwants.... Thelabourer,therealmakerofanycommodity,derivesthisassurancefrom aknowledgehehasthatthepersonwhosethimtoworkwillpayhim,andthat withthemoneyhewillbeabletobuywhatherequires.Heisnotinpossession ofanystockofcommodities.Hasthepersonwhoemploysandpayshimsucha stock?Clearlynot.... A great cotton manufacturer ... employs a thousand persons, whom he paysweekly:doeshepossessthefoodandclothingreadypreparedwhichthese personspurchaseandconsumedaily?Doesheevenknowwhetherthefoodand clothingtheyreceivearepreparedandcreated?Infact,arethefoodandclothing which his labourers will consume prepared beforehand, or are other labourers busilyemployedinpreparingfoodandclothingwhilehislabourersaremaking cottonyarn?DoallthecapitalistsofEuropepossessatthismomentoneweeks foodandclothingforallthelabourerstheyemploy?...
Ibid.,pp.2324. Joseph Schumpeter, History of Economic Analysis. Edited from manuscript by Eliza bethBoodySchumpeter(NewYork:OxfordUniversityPress,1954),p.1114. 3 Ibid.,p.717.
2
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...Asfarasfood,drinkandclothingareconcerned,itisquiteplain,then, thatnospeciesoflabourerdependsonanypreviouslypreparedstock,forinfact no such stock exists; but every species of labourer does constantly, and at all 1 times,dependforhissuppliesonthecoexistinglabourofsomeotherlabourers. ...Whenacapitalisttherefore,whoownsabrewhouseandalltheinstru ments and materials requisite for making porter, pays the actual brewers with thecoinhehasreceivedforhisbeer,andtheybuybread,whilethejourneymen bakersbuyporterwiththeirmoneywages,whichisafterwardspaidtotheowner ofthebrewhouse,isitnotplainthattherealwagesofboththesepartiesconsist of the produce of the other; or that the bread made by the journeyman baker pays for the porter made by the journeyman brewer? But the same is the case withallothercommodities,andlabour,notcapital,paysallwages.... Infactitisamiserabledelusiontocallcapitalsomethingsaved.Muchofit isnotcalculatedforconsumption,andneverismadetobeenjoyed.Whenasav age wants food, he picks up what nature spontaneously offers. After a time he discoversthataboworaslingwillenablehimtokillwildanimalsatadistance, andheresolvestomakeit,subsistinghimself,ashemustdo,whiletheworkisin progress.Hesavesnothing,fortheinstrumentneverwasmadetobeconsumed, thoughinitsownnatureitismoredurablethandeersflesh.Thisexamplerep resentswhatoccursateverystageofsociety,exceptthatthedifferentlaboursare performed by different personsone making the bow, or the plough, and an other killing the animal or tilling the ground, to provide subsistence for the makers of instruments and machines. To store up or save commodities, except forshortperiods,andinsomeparticularcases,canonlybedonebymorelabour, and in general their utility is lessened by being kept. The savings, as they are called,ofthecapitalist,areconsumedbythelabourer,andthereisnosuchthing 2 asanactualhoardingupofcommodities.
Whatpoliticaleconomyconventionallyreferredtoasthelaborfund,andat tributedtopastabstentionandaccumulation,resultedratherfromthepresentdi visionoflaborandthecooperativedistributionofitsproduct.Capitalisaterm forarightofpropertyinorganizinganddisposingofthispresentlabor.Thesame basic cooperative functions could be carried out just as easily by the workers themselves, through mutual credit. Under the present system, the capitalist mo nopolizes these cooperative functions, and thus appropriates the productivity gainsfromthesocialdivisionoflabor.
Betwixt him who produces food and him who produces clothing, betwixt him whomakesinstrumentsandhimwhousesthem,instepsthecapitalist,whonei ther makes nor uses them, and appropriates to himself the produce of both. Withasniggardahandaspossiblehetransferstoeachapartoftheproduceof theother,keepingtohimselfthelargeshare.Graduallyandsuccessivelyhashe insinuatedhimselfbetwixtthem,expandinginbulkashehasbeennourishedby their increasingly productive labours, and separating them so widely from each other that neither can see whence that supply is drawn which each receives through the capitalist. While he despoils both, so completely does he exclude onefromtheviewoftheotherthatbothbelievetheyareindebtedhimforsub 3 sistence.
Franz Oppenheimer made a similar argument in A Post Mortem on Cam bridgeEconomics:

1
ThomasHodgskin,LabourDefendedAgainsttheClaimsofCapital(NewYork:Augus tusM.Kelley,1969[1825]),pp.3640. 2 Hodgskin,PopularPoliticalEconomy:FourLecturesDeliveredattheLondonMechan icsInstitution(NewYork:AugustusM.Kelley,1966[1827]),p.247. 3 Hodgskin,LabourDefended,p.71.
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THEJUSTIFICATIONOFPROFIT,torepeat,restsontheclaimthattheen tire stock of instruments of production must be saved during one period by privateindividualsinordertoserveduringalaterperiod.Thisproof,ithasbeen asserted, is achieved by a chain of equivocations. In short, the material instru ments,forthemostpart,arenotsavedinaformerperiod,butaremanufactured inthe same period in which they are employed. What issavediscapitalin the othersense,whichmaybecalledforpresentpurposesmoneycapital.Butthis capitalisnotnecessaryfordevelopedproduction. Rodbertus, about a century ago, proved beyond doubt that almost all the capital goods required in production are created in the same period. Even RobinsonCrusoeneededbutonesinglesetofsimpletoolstobeginworkswhich, likethefabricationofhiscanoe,wouldoccupyhimforseveralmonths.Amod ernproducerprovideshimselfwithcapitalgoodswhichotherproducersmanu facturesimultaneously,justasCrusoewasabletodiscardanoutworntool,occa sionally, by making a new one while he was building the boat. On the other hand,moneycapitalmustbesaved,butitisnotabsolutelynecessaryfordevel oped technique. It can be supplanted by cooperation and credit, as Marshall correctly states. He even conceives of a development in which savers would be glad to tend their savings to reliable persons without demanding interest, even payingsomethingthemselvesfortheaccommodationforsecurityssake.Usually, it is true, under capitalist conditions, that a certain personallyowned money capitalisneededforundertakingsinindustry,butcertainlyitisneverneededto thefullamounttheworkwillcost.Theinitialmoneycapitalofaprivateentre preneurplays,ashasbeenaptlypointedout,merelytherleoftheairchamber inthefireengine;itturnstheirregularinflowofcapitalgoodsintoaregularout 1 flow.
Oscar Ameringer illustrated the realworld situation in a humorous socialist pamphlet,SocialismfortheFarmerWhoFarmstheFarm,writtenin1912.Ariver divided the nation of Slamerica into two parts, one inhabited by farmers and the otherbymakersofclothing.Thebridgebetweenthemwasoccupiedbyafatman namedPloot,whochargedthefarmersfourpigsforasuitofclothesandthetailors foursuitsforapig.Thedifferencewascompensationfortheserviceheprovided in letting them across the bridge and providing them with work. When a radical crankproposedthefarmersandtailorsbuildtheirownbridge,Plootwarnedthat by depriving him of his share of their production they would drive capital out of thelandandputthemselvesoutofworkthreequartersofthetime(whilegetting thesamenumberofsuitsandpigs,ofcourse).2 Schumpeterdistinctionbetweenmoneytheoriesofcreditandcredittheories ofmoneyisusefulhere.Critiquingtheformer,hewrotethatitwasmisleadingto treatbankcreditasthelendingoffundswhichhadbeenwithdrawnfromprevi oususesbyanentirelyimaginaryactofsavingandthenlentoutbytheirowners. Itismuchmorerealistictosaythatthebankscreatecredit...,thantosaythat theylendthedepositsthathavebeenentrustedtothem.3Thelatter,incontrast, treatfinancesasaclearingsystemthatcancelsclaimsandcarriesforwardthedif ference.4 E. C. Riegel argues that issuing money is a function of the individual within the market, a sideeffect of his normal economic activities. Currency is issued by
Franz Oppenheimer, A Post Mortem on Cambridge Economics (Part Three), The AmericanJournalof EconomicsandSociology,vol.3,no.1(1944),pp,122123,[115124] 2 OscarAmeriger.SocialismfortheFarmerWhoFarmstheFarm.RipSawSeriesNo. 15(SaintLouis:TheNationalRipSawPublishingCo.,1912). 3 Schumpeter,HistoryofEconomicAnalysis,p.1114. 4 Ibid.,p.717.
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the buyer by the very act of buying, and its backed by the goods and services of theseller.
Money can be issued only in the act of buying, and can be backed only in theactofselling.Anybuyerwhoisalsoasellerisqualifiedtobeamoneyissuer. Government,becauseitisnotandshouldnotbeaseller,isnotqualifiedtobea 1 moneyissuer.
Moneyissimplyanaccountingsystemfortrackingthebalancebetweenbuy ersandsellersovertime.2 Andbecausemoneyisissuedbythebuyer,itcomesintoexistenceasadebit. Thewholepointofmoneyistocreatepurchasingpowerwhereitdidnotexistbe fore:...[N]eedofmoneyisaconditionprecedenttotheissuethereof.Toissue money,onemustbewithoutit,sincemoneyspringsonlyfromadebitbalanceon thebooksoftheauthorizingbankorcentralbookkeeper.3

IFMONEYisbutanaccountinginstrumentbetweenbuyersandsellers,andhas nointrinsicvalue,whyhasthereeverbeenascarcityofit?Theansweristhatthe producerofwealthhasnotbeenalsotheproducerofmoney.Hehasmadethe 4 mistakeofleavingthattogovernmentmonopoly.
Moneyissimplynumberaccountancyamongprivatetraders.5OrasRiegels discipleThomasGrecoargues,currenciesarenotvalueunits(inthesenseofbe ingstoresofvalue).Theyaremeansofpaymentdenominatedinvalueunits.6 In fact, as Greco says, barter systems are more accurately conceived as creditclearingsystems.Inamutualcreditclearingsystem,ratherthancashingin officialstatecurrencyforalternativecurrencynotes(asisthecaseintoomanylo cal currency systems), participating businesses spend the money into existence by incurring debits for the purchase of goods within the system, and then earning creditstooffsetthedebitsbysellingtheirownserviceswithinthesystem.Thecur rencyfunctionsasasortofIOUbywhichaparticipantmonetizesthevalueofhis future production.7 Its simply an accounting system for keeping track of each membersbalance:
Yourpurchaseshavebeenindirectlypaidforwithyoursales,theservicesorla boryouprovidedtoyouremployer. Inactuality,everyoneisbothabuyerandaseller.Whenyousell,yourac countbalanceincreases;whenyoubuy,itdecreases.
Itsessentiallywhatacheckingaccountdoes,exceptaconventionalbankdoes not automatically provide overdraft protection for those running negative bal ances,unlesstheypayahighpriceforit.8
1
E. C. Riegel, Private Enterprise Money: A NonPolitical Money System (1944), Intro duction<http://www.newapproachtofreedom.info/pem/introduction.html>. 2 Ibid.,ChapterSeven<http://www.newapproachtofreedom.info/pem/chapter07.html>. 3 Riegel,TheNewApproachtoFreedom:togetherwithEssaysontheSeparationofMoney andState.EditedbySpencerHeathMacCallum(SanPedro,California:TheHeatherFounda tion,1976),ChapterFour<http://www.newapproachtofreedom.info/naf/chapter4.html>. 4 Riegel, The Money Pact, in Ibid. <http://www.newapproachtofreedom.info/naf/ essay1.html>. 5 Spencer H. MacCallum, E. C. Riegel on Money (January 2008) <http://www. newapproachtofreedom.info/documents/AboutRiegel.pdf>. 6 ThomasGreco,MoneyandDebt:ASolutiontotheGlobalCrisis(1990),PartIII:Seg regated Monetary Functions and an Objective, Global, Standard Unit of Account <http://circ2.home.mindspring.com/Money_and_Debt_Part3_lo.PDF>. 7 Greco, The End of Money and the Future of Civilization (White River Junction, Ver mont:ChelseaGreenPublishing,2009),p.82. 8 Ibid.,p.102.
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Theres no reason businesses cannot maintain a mutual creditclearing system betweenthemselves,withouttheintermediaryofabankoranyotherthirdparty currency or accounting institution. The businesses agree to accept each others IOUsinreturnfortheirowngoodsandservices,andperiodicallyusetheclearing 1 processtosettletheiraccounts.
Andagain,sincesomeoftheparticipantsrunnegativebalancesforatime,the systemofferswhatamountstointerestfreeoverdraftprotection.Assuchasystem starts out, members are likely to resort to fairly frequent settlements of account, andputfairlylowlimitsonthenegativebalancesthatcanberun,asaconfidence building measure. Negative balances might be paid up, and positive balances cashedout,everymonthorso.Butasconfidenceincreases,Grecoargues,thesys temshouldideallymovetowardastateofaffairswhereaccountsareneversettled, solongasnegativebalancesarelimitedtosomereasonableamount.
An account balance increases when a sale is made and decreases when a pur chaseismade.Itispossiblethatsomeaccountbalancesmayalwaysbenegative. Thatisnotaproblemsolongastheaccountisactivelytradingandthenegative balance does not exceed some appropriate limit. What is a reasonable basisfor decidingthatlimit?...Justasbanksuseyourincomeasameasureofyourabil itytorepayaloan,itisreasonabletosetmaximumdebitbalancesbasedonthe amountofrevenueflowingthroughanaccount....[Onepossibleruleofthumb is] that a negative account balance should not exceed an amount equivalent to 2 threemonthsaveragesales.
ItsinterestinghowGrecosproposedlimitonnegativebalancesdovetailswith the credit aspect of the local currency system. His proposed balance limit, a de factointerestfreeloan,issufficienttofundtheminimumcapitaloutlaysformany kinds of lowoverhead microenterprise. Even at the average wages of unskilled labor,threemonthsincomeissufficienttoacquirethebasicequipmentforaFab Lab(atleasttheopensourceversionsdescribedinChapterSix).Anditsfarmore thansufficienttomeetthecapitaloutlaysneededforamicrobakeryormicrocab. Grecorecountsanexperimentwithonesuchlocalcreditclearingsystem,the TucsonTraders.Itsfairlytypicalofhisexperience:initialenthusiasm,followedby gradual decline and dwindling volume, as the dwindling number of goods and services and the inconvenience of traveling between the scattered participating businessestaketheirtoll.3 Thereasonforsuchfailure,innormaleconomictimes,isthatlocalcurrency systemsarecrowdedoutbytheofficialcurrencyandthestatesupportedbanking system. For a credit clearing system to thrive, it must offer a valued alternative to those who lack sources of money in the conventional economy. That means it must have a large variety of participating goods and services, participating busi nessesmustfinditavaluablesourceofbusinessthatwouldnototherwiseexistin the conventional economy, and unemployed and underemployed members must find it a valuable alternative for turning their skills into purchasing power they wouldnototherwisehave.SowecanexpectLETSorcreditclearingsystemstoin creaseinsignificanceinperiodsof economicdownturn,andevenmoresointhe structuraldeclineofthemoneyandwageeconomythatiscoming.
Ibid.pp.106107 Ibid.,p.134. 3 Greco,TheEndofMoney,pp.139141.

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Karl Hess and David Morris cite Alan Watts illustration of the absurdity of sayingitsimpossibleforwillingproducers,facedwithwillingconsumers,topro duceforexchangebecausetheresnotenoughmoneygoingaround:
RemembertheGreatDepressionoftheThirties?Onedaytherewasaflourishing consumereconomy,witheveryoneontheupandup;andthenext:poverty,un employment and breadlines. What happened? The physical resources of the countrythe brain, brawn, and raw materialswere in no way depleted, but therewasasuddenabsenceofmoney,asocalledfinancialslump.Complexrea sonsforthiskindofdisastercanbeelaboratedatlengthsbyexpertsinbanking and high finance who cannot see the forest for the trees. But it was just as if someonehadcometoworkonbuildingahouseand,onthemorningoftheDe pression,thatbosshadtosay,Sorry,baby,butwecantbuildtoday.Noinches. Whaddya mean, no inches? We got wood. We got metal. We even got tape measures.Yeah,butyoudontunderstandbusiness.Webeenusingtoomany 1 inches,andtheresjustnomoretogoaround.
The point of the mutual credit clearing system, as Greco describes it, is that twopeoplewhohavegoodsandservicestoofferbutnomoneyareabletouse their goods and services to buy other goods and services, even when theres no money.2Sowecanexpectalternativecurrencysystemstocomeintoplayprecisely atthosetimeswhenpeoplefeelthelackofinches.Basedoncasestudiesinthe WIRsystemandtheArgentinesocialmoneymovement,Grecosays,complemen tary currencies will take hold most easily when they are introduced into markets that are starved for exchange media.3 The widespread proliferation of local cur rencies in the Depression suggests that when this condition holds, the scale of adoptionwillfollowasamatterofcourse.Andasweenteranew,longtermpe riodofstagnationintheconventionaleconomy,itseemslikelythatlocalcurrency systemswillplayagrowingroleintheaveragepersonsstrategyforeconomicsur vival. There has been a new revival of local currency systems starting in the 1990s withtheIthacaHourssystemandspreadingtoagrowingnetworkofLETScurren cies. But Ted Trainer, a specialist on relocalized economies who writes at The SimplerWaysite,pointsoutthatLETSsystemsare,bythemselves,largelyworth less.TheproblemwithLETSsystems,bythemselves,isthat
mostpeopledonothavemuchtheycansell,i.e.,theydonothavemanyproduc tiveskillsorthecapitaltosetupafirm.ItisthereforenotsurprisingthatLET Systemstypicallydonotgrowtoaccountformorethanaverysmallproportion ofatownseconomicactivity....WhatisneededandwhatLETSystemsdonot createisproductivecapacity,enterprises.Itwillnotsetupacooperativebakery in which many people with little or no skill can be organised to produce their ownbread. So the crucial element becomes clear. Nothing significant can be achieved unless people acquire the capacity to produce and sell things that others want. Obviously, unless one produces and sells to others one cant earn the money withwhichtopurchasethingsoneneedsfromothers.Sothequestionwehave tofocusonishowcantheintroductionofanewcurrencyfacilitatethissetting up of firms that will enable those who had no economic role to start producing, selling,earningandbuying.Thecrucialtaskistocreateproductiveroles,notto
KarlHessandDavidMorris,NeighborhoodPower:TheNewLocalism(Boston:Beacon Press,1975),pp.154155. 2 Greco,TheEndofMoney,p.116. 3 Ibid.,p.158.
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create a currency. The new currency should be seen as little more than an ac countingdevice,necessarybutnotthecrucialfactor. Itisobviousherethatwhatmattersinlocaleconomicrenewalisnotredis tributionofincomeorpurchasingpower.Whatmattersisredistributionofpro 1 ductionpower. It is ridiculous that millions of people are been unable to trade with each othersimplybecausetheydonothavemoney,i.e.,tokenswhichenablethemto keep track of who owes what amount of goods and work to whom. LETS is a greatsolutiontothiselementaryproblem. However it is very important to understand that a LETSystem is far from sufficient.InfactaLETSonitsownwillnotmakeasignificantdifferencetoalo cal economy. The evidence is that on average LETS transactions make up less than5%oftheeconomicactivityoftheaveragememberofascheme,letaloneof theregion.(SeeR.Douthwaite,ShortCircuit,1996,p.76.)[[Lookup]] LETSmemberssoonfindthattheycanonlymeetasmallproportionoftheir needs through LETS, i.e., that there is not that much they can buy with their LETScredits,andnotthatmuchtheycanproduceandsell.Everydaytheyneed manybasicgoodsandservicesbutveryfewoftheseareofferedbymembersof thesystem.Thisisthecentralprobleminlocaleconomicrenewal;theneedfor ways of increasing the capacity of local people to produce things local people need.Thecoreprobleminotherwordsishowtosetupviablefirms.... Thecoretaskintowneconomicrenewalistoenable,indeedcreateawhole new sector of economic activity involving the people who were previously ex cluded from producing and earning and purchasing. This requires much more than just providing the necessary money; it requires the establishment of firms 2 inwhichpeopleacanproduceandearn.
Ashewriteselsewhere,themainpurposeoflocalcurrencysystemsistocon tribute to getting the unused productive capacity of the town into action, i.e., stimulating/enablingincreaseinoutputtomeetneeds.Thereforethecreationofa localcurrencysystemissecondarytocreatingfirmsbywhichtheunemployedand underemployedcanearnthemeansofexchange.3 Forthatreason,TrainerproposesCommunityDevelopmentCooperativesasa waytopromotethekindsofnewenterprisesthatenablepeopletoearnlocalcur rencyoutsidethewagesystem.
The economic renewal of the town will not get far unless its CDC actively worksonthisproblemofestablishingproductiveventureswithinthenewmoney sectorwhichwillenablethatsectortosellthingstotheoldfirmsinthetown.In thecaseofrestaurantstheCDCsbestoptionwouldprobablybetosetuporhelp otherssetupgardenstosupplytherestaurantswithvegetables.Thosewhorun thegardenswouldpaytheworkersinnewmoney,sellthevegetablestotheres taurants for new money, and use their new money incomes to buy meals from therestaurants. TheCommunityDevelopmentCooperativemustworkhardtofindandset up whatever other ventures it can because the capacity of the previously poor andunemployedgroupofpeopleinthetowntopurchasefromnormal/oldfirms isstrictlylimitedbythevolumethatthatgroupisabletoselltothosefirms.Get ting these productive ventures going is by far the most important task of the CommunityDevelopmentCooperative,muchmoreimportantthanjustorganis inganewcurrencyinwhichtheexchangescantakeplace. Ted Trainer, Local Currencies (September 4, 2008), The Simpler Way <http://ssis.arts.unsw.edu.au/tsw/localcurrency.html>. 2 Trainer,WeNeedMoreThanLETS,TheSimplerWay<http://ssis.arts.unsw.edu.au/ tsw/D11WeNdMreThLETS2p.html>. 3 Trainer,TheTransitionTownsMovement;itshugesignificanceandafriendlycriti cism,(We)candobetter,July30,2009<http://candobetter.org/node/1439>.
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The other very important thing the Community Development Cooperative mustdoisenablelowskilledandlowincomepeopletocooperative[sic]produce many things for themselves. A considerable proportion of people in any region do not have the skills to get a job in the normal economy. This economy will condemn them to poverty and boredom. Yet they could be doing much useful work, especially work to produce many of the things they need. But again this willnothappenunlessitisorganised.ThustheCommunityDevelopmentCoop erativemustorganisegardensandworkshopsandenterprises(suchasfurniture repair, house renovation and fuel wood cutting) whereby this group of people canworktogethertoproducemanyofthethingstheyneed.Theymightbepaid in new money according to time contributions, or they might just share goods 1 andincomefromsalesofsurpluses.
Trainers critique of standalone LETS systems makes a lot of sense. When peopleearnofficialdollarsinthewageeconomy,andthentradetheminforlocal currencynotesatthelocalbankthatcanonlybespentinlocalbusinesses,theyre tradingdollarstheyalreadyhaveforsomethingthatslessuseful;localcurrency,in those circumstances, becomes just another greenwashed yuppie lifestyle choice financedbyparticipationinthelargercapitalisteconomy.AsGrecoputsit,
acommunitycurrencythatisissuedonthebasisofpaymentofanationalcur rency(e.g.,alocalcurrencythatissoldfordollars),amountstoagiftcertificate orlocalized travelers check. It amounts to prepayment for the goodsor serv icesoffered bythe merchantsthat agreeto accept the currency. That approach provides some limited utility in encouraging the holder of the currency to buy locally...[But]thatsortofissuancerequiresthatsomeonehavedollarsinorder 2 forthecommunitycurrencytocomeintoexistence.
Localcurrencyshouldbeatoolthatsmoreusefulthanthealternative,giving people who are outside the wage system and who lack official dollars a way to transformtheirskillsintopurchasingpowertheywouldotherwisenothave.Aunit of local currency shouldnt be something one obtains by earning official money throughwageemploymentandthentradingitinforfeelgoodmoneyatthebank tospendonestablishmentMainStreetbusinesses.Itshouldbeanaccountingunit for barter by the unemployed or underemployed person, establishing new mi croenterprisesoutoftheirownhomesandexchanginggoodsandservicesdirectly withoneanother. Trainersmainlimitationishisfocusonlargescalecapitalinvestmentincon ventional enterprises as the main source of employment. In examining the need forcapitalforsettingupviablefirms,heignorestheenormousamountsofcapital thatalreadyexist. The capital exists in the form of the ordinary household capital goods that mostpeoplealreadyown,sittingidleintheirownhomes:theordinarykitchenov ens that might form the basis of household microbakeries producing directly for credit in the barter network; the sewing machines that might be used to make clothesforcreditinthenetwork;thefamilycarandcellphonethatmightbeused toprovidecabserviceforthenetworkinexchangeforcredittowardothermem bers goods and services; etc. The unemployed or underemployed carpenter, plumber, electrician, auto mechanic, etc., might barter his services for credit to purchase tomatoes from a market gardener within the network, for the mi crobakers bread or the seamstresss shirts, and so forth. The hobbyist with a wellequippedworkshopinhisbasementorbackyardmightcustommachinere placementpartstokeepthehomeappliancesofthebaker,marketgardener,and
1 2
Trainer,WeNeedMoreThanLETS. Greco,TheEndofMoney,p.81.
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seamstress working, in return for their goods and services. Eventually hobbyist workshopsandsmalllocalmachineshopsmightbeginnetworkedmanufacturing for the barter network, perhaps even designing their own opensource products withCADsoftwareandproducingthemwithCNCmachinetools. HernandodeSoto,inTheMysteryofCapital,pointedtothehomesandplots ofland,towhichsomanyordinarypeopleintheThirdWorldholdinformaltitle, asanenormoussourceofunrealizedinvestmentcapital.Likewise,thesparecapac ityofpeoplesordinaryhouseholdcapitalgoodsisapotentiallyenormoussource ofplantandequipmentforlocalalternativeeconomiescenteredontheinformal andhouseholdsector. Thereisprobablyenoughidleovencapacityinthehouseholdsoftheaverage neighborhood or small town to create the equivalent of a hundred cooperative bakeries.Whywastetheadditionaloutlaycost,andconsequentoverhead,forrelo catingthiscapitaltoastandalonebuilding? Anotherthingtorememberisthat,evenwhenaparticularkindofproduction requires capital investment beyond the capabilities of the individual of average means, new infrastructures for crowdsourced, distributed creditmicrocredit make it feasible to aggregate sizable sums of investment capital from many dis persed small capitals, without paying tribute to a capitalist bank for performing the service. Thats why its important for a LETS system to facilitate not only the exchange of present goods and services, but the advance of credit against future goodsandservices. Suchcrowdsourcedcreditmightbeusedbymembersofabarternetworkto form their own community or neighborhood workshops in cheap rental space, perhaps (again) contributing the unused tools sitting in their garages and base ments. Ofcourse theidle capacityofconventionallocalbusinesses shouldntbe en tirelydownplayed.Conventionalenterpriseswithexcesscapacitycanoftenusethe sparecapacitytoproduceatmarginalcostsafractionofthenormalcost,forbarter against similar surpluses of other businesses. For instance, vacant hotel rooms in theoffseasonmightbeexchangedfordiscountedmealsatrestaurantsduringthe slowpartoftheday,matineeticketsatthetheater,etc.Andlocalnonprofitorga nizationsmightpayvolunteersincommunitycurrencyunitsgoodforsuchsurplus productionatlocalbusinesses.InMinneapolis,forexample,volunteersarepaidin CommunityServiceDollars,whichcanbeusedforuptohalfthepriceofarestau rantmealbefore7p.m.,or90%ofamatineemovieticket.Thisenableslocalbusi nesses to utilize idle capacity to produce goods sold at cost, and enables the un employedtoturntheirtimeintopurchasingpower.1 As we already saw above, barter associations like UXA frequently exchanged theirmembersskillsforthesurplusinventoryofconventionalbusinesses.
E.COMMUNITYBOOTSTRAPPING
The question of economic development in apparently deadend areas has beenofwidespreadinterestforalongtime.Ofonesucharea,thesocalledArkan sas Delta region (the largely rural, black, cash crop southeastern portion of the state)wasrecentlythesubjectofacolumnbyJohnBrummett:
Lietaer,pp.207209.
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BackwhenthenGov.MikeHuckabeewastryingtoconsolidatehighschools for better educational opportunities, I was among dozens openly agreeing with him. Peopleinsmalltownscriedoutthatlosingtheirhighschoolswouldmean losingtheirtowns.OnlyoncedidIworkupthenervetowritethatatownhad noinalienablerighttoexistandthatitwasntmuchofatownifallithadwasa school. Thiscommentwasnotwellreceivedinsomequarters.Iwascalledanelitist enemyofthewholesomerurallife. Butthatwasntso.Iwasntanenemyoftheblissfuladvantagesofabucolic eden;Iwasonlyagainstinefficientlysmallschoolsgettingproppedupillogically in little incorporated spots on the road, anachronistic remnants of an olden time. So imagine my reaction last week when I read Rex Nelsons idea. It is to abandon, more or less, whole towns in the Delta and consolidate people from those towns in other towns that Nelson termed worth saving on account of havingcriticalmass. PresumablyyoudgointoGouldandMariannaandMarvellandElaineand Clarendon and Holly Grove and say something like this: Yall need to get out; comeon,getpacked;gettoPineBlufforHelenaorForrestCity,becausethats where the government money for schools and hospitals and infrastructure and suchisgoingtogofromnowon.Wecantaffordtokeepmessingwiththisdead little town that doesnt have any remote hope of getting better. We dont have enoughmoneytosendadoctoraroundtoyourlittlehealthcliniconceaweek. Wevegottogetyouovertothetownwherehelivesandwheretheyhaveahos pitalthatcanprovidehimequipmentandaliving.Thisisforyourowngood. Nelson,formerpressaidetoTommyRobinsonandHuckabeebutadecent sort anyway, has just left a Republicanrewarded patronage job with the Delta RegionalAuthority.Thatsaneightstatecompactspendingfederalgrantsinthe fastdyingDeltaregionalongbothsidesoftheMississippiRiver. NewlyrelocatedtoanadvertisingagencyinLittleRock,Nelsongaveanin terviewtoafriendlynewspapercolumnistand,aftersomediscussionofhislik ing Southern food and culture, shared his valedictory thoughts on what in the wideworldwemightdofortheDelta. Soherestheidea:Youpickoutcommunitieswithhospitalsandschoolsand decentmassesofpopulationandgivethemmorefederalgrantsthanyougiveall theseproliferatingandtinydeadcommunities.Youtrytocorrectallthischronic dissipationofeffortandresources. Its school consolidation writ large. Its an attempt at redistribution of the population.Itseminentdomainonsteroids. Itscold.Itsdifficult.Anditsabsolutelyright. WhatwecalltheDeltaregionofeasternArkansasisamechanizedfarmre gion, vast acreage of soybeans and rice, with pointless towns dotted at every crossroad. These onetime commerce centers thrived before farming was mechanized. Jobs for humans were to be had through the first half of the last century.Nowtheyrehometoboardedwindowsandpeopletrappedintragiccy 1 clesofpovertywithouthopeofjobsbecausenoneisleftandnoneiscoming.
DespiteBrummetsassumptions,thereisnoshortageofexamplesofbuilding an alternative economy almost scratch, a bit at a time, in an impoverished area. The Antigonish movement in Nova Scotia and the Mondragon cooperatives in Spain are two such examples. Both movements were sparked by radical Catholic priestsservingimpoverishedareas,andheavilyinfluencedbytheDistributistideas ofG.K.ChestertonandHilaireBelloc.TheAntigonishmovement,foundedbyFr. MosesCoady,envisionedstartingwithcreditunionsandconsumerretailcoopera
John Brummett, Delta Solution: Move, The Morning News of Northwest Arkansas, June14,2009<http://arkansasnews.com/2009/06/14/deltasolutionmove/>.
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tives,which wouldobtaingoodsfromcooperativewholesalesocieties,andwhich wouldinturnbesuppliedbyfactoriesownedbythewholemovement.Theresult wouldbeanintegratedcooperativeeconomyasabaseofindependencefromcapi talism.1InthespecificexampleofLarrysRiver,thecommunitybeganbybuilding acooperativesawmill;theywentontobuildacooperativelobstercannery,acredit union,acooperativestore,ablueberrycannery,andafishprocessingplant.2Mon dragonfounded in the Basque country by Fr. Don Jose Maria Arizmendiarri ettastarted similarly with a small factory, gradually adding a trade school, a creditunion,andanotherfactoryatatime,untilitbecameanenormousfederated system with its own finance arm and tens of thousands of memberowners em ployedinitsenterprises.3 Morerecently,thepeopleoftheSalinasregionoftheEcuadorianAndescre ated a similar regional economy by essentially the same process, as recounted by Massimo de Angelis of the editors blog.4 The Salinas area, a region centering on thevillageofthesamename,includessomethirtycommunitiescomprisingatotal ofaroundsixthousandpeople.Theareaeconomyisanetworkofcooperativeen terprises, commonly called the organization, that includes some 95% of the population.
The organization is in reality a quick name for several associations, founda tions, consortia and cooperatives, ranging from cheese producers to textile, ce ramic and chocolate making, herbal medicine and trash collection, a radio sta tionanhotel,ahostel,andaofficeofcommunitytourism.
TheoriginoftheorganizationisreminiscentofacoupleofAntigonishand Mondragon.TheSalinasareawasoriginallythetypicaldomainofapatron,under theLatinAmericanhaciendasystem.MostlandbelongedtotheCordovezfamily, whocollectedrentspursuanttoaSpanishcrowngrant,andtheCordovezfamilys salt mine was the main nonagricultural employer. Like Antigonish and Mon dragon,theorganizationstartedoutwithasinglecooperativeenterpriseandfrom there grew by mitosis into an entire federated network of cooperatives. The first cooperative, formed in the 1970s, was a credit union created as a source of inde pendence from the loan sharks who preyed on the poor. (This initial nucleus, likeagainAntigonish and Mondragon, was the project of an activist Catholic priest, the Italian immigrant Fr. Antonio Polo). The credit cooperative offered to buy the Cordovez family lands. With the encouragement of Fr. Polo, the village subsequently organized one cooperative enterprise after another to provide em ploymentafterthesaltmineclosed. Asignificantsocialsafetynetoperatesinthevillage,fundedbythesurpluses of various cooperative enterprises, on a gift economy basis. And its possible to earn exchange value outside of wage labor by contributing to something like a timebank.
However,attheendoftheyear,themonetarysurplus[ofthecheesefactory]is notdistributedamongcoopmembersonthebasisoftheirmilkcontribution,but is shared among them for common projects: either buying new equipment, or transferredtocommunityfunds.Thisway,asourguidetoldus,thefarmerwho has10cowsishelpingthefarmerthathasonlyonecow,allowingforsomere RaceMatthews,JobsofOurOwn:BuildingaStakeholderSocietyAlternativestothe Market&theState(Annandale,NSW,Australia:PlutoPress,1999),pp.125172. 2 Ibid.,pp.151152;p.47. 3 Ibid.,pp.173190. 4 MassimodeAngelis,Branding+Mingas+Coops=Salinas,theeditorsblog,March 26,2010<http://www.commoner.org.uk/blog/?p=239>.
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distribution. Another example is the use of Mingas. Minga is a quechua word used by various ethnical groups throughout the Andes and refer to unwaged community work, in which men, women and children all participate in pretty muchconvivialwaysandgenerallyendsupinbigbanquets.Infrastructurework such as road maintenance, water irrigation, planting, digging, but also garbage collectionandcleaningupthesquarearealltypeofworkthatcallsforaMinga of different size and are used in Salinas. Yet another example is the important use of foundations, that channel funds earned in social enterprises for projects forthecommunity.
Angelis,despitehisadmiration,hasseriousdoubtsastowhethertheproject is relevant or replicable. For one thing, this mixed commons/market system may be less sustainable when more capitalintensive forms of production are under taken,andmayaccordinglybemorevulnerabletodestabilization anddecayinto exploitativecapitalism.Heraisestheexampleofthenewfactoryforturningwool intothread,tobeverticallyintegratedwiththehouseholdproductionofsweaters andotherwoolens.Thelargecapitaloutlay,hesays,meansabreakevenpointcan onlybeachievedwithfairlylargebatchproduction. For another, de Angelis says, the success of the Salinas model arguably de pendsonitsuniqueness,sothatitcanservewideopenglobalnichemarketswith outalotofglobalcompetitionfromotherlocaleconomiespursuingthesamede velopmentmodel. And finally, debt financing of capital investment leads to a certain degree of selfexploitationtoservicethatdebt. DeAngelisanalyzesthecumulativeimplicationsoftheseproblems:
IhavemixedfeelingsaboutthisSalinasexperience.Thereisnodoubtthatthe 69agroindustrialand38servicecommunitiesenterprisesarequiteameansfor thelocalpopulationtomeetreproductionneedsinwaysthatshieldthemfrom themostexploitativepracticesofotherareasintheregionandmakethemactive participantsincommoningprocessescentredondignity.Buttheincreasingreli anceon,andstrongpreoccupationwith,globalexportcircuitsandonthemar ketsseemsexcessive,withtheriskthatexperimentslikethesereallybecomethe vehiclesforcommonscooptation.
The newest venture along these lines is the Evergreen Cooperative Initiative inthedecayingrustbeltcityofClevelandakatheMistakebytheLake,where thepovertyrateis30%.1 The Evergreen Cooperative Initiative is heavily influenced by the example of Mondragon.2 The project had its origins in a study trip to Mondragon sponsored bytheClevelandFoundation,andisdescribedasthefirstexampleofamajorcity trying to reproduce Mondragon.3 Besides the cooperative development fund, its umbrella of support organizations includes Evergreen Business services, which provides backoffice services, management expertise and turnaround skills shouldacoopgetintotroubledowntheroad.Memberenterprisesareexpected
<http://www.evergreencoop.com/> GuyAlperowitz,TedHoward,andThadWilliamson,TheClevelandModel,TheNa tion,February11,2010<http://www.thenation.com/doc/20100301/alperowitz_et_al/single>. 3 AndrewMacLeod,MondragonClevelandSacramento,CooperateandNoOneGets Hurt, October 10, 2009 <http://coopgeek.wordpress.com/2009/10/10/mondragoncleveland sacramento/>;OhioEmployeeOwnershipCenter,ClevelandGoestoMondragon,Owners at Work (Winter 20082009), pp.1012 <http://dept.kent.edu/oeoc/OEOCLibrary/OaW_ Winter08_Cleveland_Goes_to_Mondragon.pdf>.
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to plow ten percent of pretax profits back into the development fund to finance investmentinnewcooperatives.1 TheEvergreenCooperativeLaundry2wasthefirstofsometwentycooperative enterprisesonthedrawingboard,followedbyOhioCooperativeSolar3(whichcar riesoutlargescaleinstallationofsolarpowergeneratingequipmentontheroofs of local government and nonprofit buildings). A second and third enterprise, a cooperative greenhouse4 and the Neighborhood Voice newspaper, are slated to openinthenearfuture. The Initiative is backed by stakeholders in the local economy, local govern mentanduniversities.Theprimaryfocusofthenewenterprises,besidesmarket ing to individuals in the local community, is on serving local anchor institu tionsthelargehospitalsanduniversitiesthatwillprovideaguaranteedmarket foraportionoftheirservices.TheClevelandFoundationandotherlocalfounda tions,banks,andthemunicipalgovernmentareallprovidingfinancing.TheEver green Cooperative Development Fund is currently capitalized at $5 million, and expectstoraiseatleast$1012millionmore.5 Besides the Cleveland Foundation, other important stakeholders are the ClevelandRoundtableandtheDemocracyCollaborative.TheRoundtableisapro ject of CommunityWealth.org6; CommunityWealth7, in turn, is a project of the Democracy Collaborative at the University of Maryland, College Park.8 All three organizations are cooperating intensively to promote the Evergreen Cooperative Initiative.
On December 78, 2006, The Democracy Collaborative, the Ohio Em ployee Ownership Center, and the Aspen Institute Nonprofit Sector Research Fund convened a Roundtable in Cleveland, Ohio. The event, titled Building Community Wealth: New AssetBased Approaches to Solving Social and Eco nomic Problems in Cleveland and Northeast Ohio, brought together national experts, local governmentrepresentatives, and more than threedozen commu nityleadersinClevelandtodiscusscommunitywealthissuesandidentifyaction stepstowarddevelopingacomprehensivestrategy. The fifty participants included representatives of the Federal ReserveBank of Cleveland, the Ohio Public Employees Retirement System, universities, and employeeowned firms; directors of nonprofit community and economic devel opment organizations such as community development corporations, housing land trusts, and community development financial institutions; the economic developmentdirectoroftheCityofClevelandandmembersofhisstaff;adirec torofthenewveteransadministrationhospitaltobeestablishedinthecity;the treasurer of Cuyahoga County; and others of the public, private, philanthropic, faithbased and nonprofit communities. Funding and other support for the meetingwasprovidedbytheGundFoundation,theClevelandFoundation,and 9 theSistersofCharityFoundation.
Alperovitzetal.,TheClevelandModel. <http://www.evergreencoop.com/Laundry/index.html> 3 <http://www.evergreencoop.com/OhioSolar/index.html> 4 <http://www.evergreencoop.com/GreenCity/greencity.html> 5 Alperowitzetal.,TheClevelandModel. 6 <http://www.communitywealth.org/strategies/cwroundtables.html#cleveland>. 7 <http://www.communitywealth.org/about/index.html>. 8 <http://www.communitywealth.org/about/aboutus.html>. 9 Community Wealth Building Conference in Cleveland, OH,GVPTNews, February 2007,p.14<http://www.bsos.umd.edu/gvpt/newsletter/February07.news.pdf>.
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Thisisoneofthelargestandmostpromisingexperimentsincooperativeeco nomics ever attempted in the United States, with an unprecedented number of localstakeholdersatthetable. What do Antigonish, Mondragon, Salinas and Cleveland have in common? They all take the conventional commercial enterprise using existing production technology as a given, and simply tinker around with applying the cooperative principleandeconomiclocalismtosuchenterprises. MostofBrummettshitsontheeconomicviabilityofsmalltownsintheDelta arebasedonthetechnocraticliberalassumptionthatenormouscapitaloutlaysare required to accomplish particular economic functions. Thats an assumption shared by technocratic liberals of the same stripe who promoted a Third World economicdevelopmentmodelbasedonmaximizingeconomiesofscalebyconcen tratingavailablecapitalinafewgiant,capitalintensiveenterprisesratherthanin tegratingintermediateproductiontechnologiesintovillageeconomies.1Thatstrue of most Progressive(TM) versions of community economic developmentObamas greenjobsprograms,alternativeenergyprojects,andthelike.Typicallytheyen tailprivatepublicpartnerships,basedonattractingcolonizationbyprogressive orgreencorporationswithcapitalintensivebusinessmodels,andthecaptureof profits from new technology on the pattern of cognitive capitalism: a sort of mashupoftheGatesFoundation,WarrenBuffettandBono. And the governments criteria for aiding such development efforts usually managetoexcludelowcapital,bottomupeffortsbyselforganizedlocals.2
And de Angeliss critique of the Salinas experiment comes from a similar set of assumptions: namely, that capitalintensive forms of production, with the re quirementforhighcapitaloutlaysanddebtfinance,andanexportorientedeco nomic model for servicing that debt and fully utilizing the expensive plant and equipment,aresimplyagiven.
But as we saw in the previous chapter, decent standards of living no longer depend on building communities around enormous concentrations of capital as setshousedinlargebuildings.Thankstotechnicalchange,thecapitaloutlaysre quired to support a comfortable standard of living are scalable to smaller and smallerpopulationunits.SoMuhammadnolongerneedgotothemountain. Thishasenormousliberatorysignificanceforexperimentsincooperativelocal economies like Salinas. As production tools become cheaper and cheaper, for an
See Chapter One, Appendix A, Economy of Scale in Development Economics, in KevinCarson,OrganizationTheory:ALibertarianPerspective(Booksurge,2008),pp.24et seq. 2 KeithTaylor,whoisdoingdissertationworkonhowwindfarmsrelatetoalternative models of economic development. The structure of refundable tax credits for green en ergy investment, in particular, massively empowers conventional corporate wind farms against electric power cooperatives. Making credits conditional on paying at least some taxesseemsatfirstglancetobeafairnessissue,ensuringthatonlypeoplewhopaytaxes cangetcredits,andthusmakingrefundablecreditsabitlesswelfarelike.Buttheostensi blefairnessisonlysuperficial:Oncethethresholdofpayinganytaxesatallistriggered,the scaleofthecreditneedbearnoproportionatalltotheamountoftaxespaid.Soarefund able credit which is available only to forprofit, taxpaying entities is equivalent to a $20 millionwelfarecheckthatsavailabletoanyonewhopaidadollarintaxes,butnottothe unemployed.Andtherefundablegreenenergyinvestmenttaxcreditsareineffectamas sivesubsidythatisavailableonlytoforprofitcorporations.Likewise,theObamaadmini strationssmartgridpoliciesaresuitedprimarilytotheinterestsofcorporatewindfarm megaprojects,situatedfarfromthepointofconsumption,likethoseT.BoonePickensis sobusypromoting.
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ever increasing range of products, the more feasible it is to produce more and moreofthethingsthelocalpopulationconsumesinsmallshopsscaledtothelocal market,withouthighcapitaloutlaysandoverheadcreatingpressuretomaximize batchsizeandamortizecosts.Thiswillalsomeanless indebtednessfromcapital investment, less pressure to selfexploitation, and less pressure to compete in a globalmarketplaceinsteadofservingthelocaleconomy. That means that manufacturing can move toward the kind of local subsis tencemodelthatdeAngelisdesiresfortheSalinaseconomy,andenvisionsasits idealized better self: a means for the local population to meet reproduction needsinwaysthatshieldthemfromthemostexploitativepracticesofotherareas intheregion... In general, the promise of lowcost production tools dovetails perfectly with thegoalsofthecooperativeandrelocalizationmovements.Aswewillseeinmore detailinthenextchapter,thelowerthecostofproductiontools,thelessofabot tleneckinvestmentcapitalbecomesforlocaleconomicdevelopment,andtheless dependentthelocaleconomybecomesonoutsideinvestors.Theimplodingcostof productionmachineryisarevolutionaryreinforcementforthekindofprocessthat JaneJacobsregardedasthebestapproachtocommunityeconomicdevelopment: importreplacementbyusinglocalresourcesandputtingformerlywasteresources to use. Every technological change that reduces the capital outlays required for producinglocalconsumptionneedsisaforcemultiplier,notonlymakingimport substitutionmorefeasiblebutincreasingitscosteffectiveness,andenablinglocal economies to do more with less. When the masters of the corporate state realize thefullrevolutionarysignificanceofmicromanufacturingtechnologyinliberating localeconomiesfromcorporatepower,wellbeluckyifthepeopleintheFabLabs dontwindupbeingwaterboardedatGitmo. Lowcapitaloutlaysandotherfixedcosts,andtheresultinglowoverheadbur dentobeserviced,arethekeytothecountereconomysadvantagesasapathto communityeconomicdevelopment. TheIndianvillagesNeilGerschenfelddescribedinFab(quotedextensivelyin the next chapter) one illustration of the possibilities for economically depressed, resourcepoor areas using the latest generation of technology to bootstrap devel opmentandleapfrogpreviousgenerationsofhighcost,capitalintensivetechnol ogy. SamKronickrecentlychallengedmembersoftheOpenManufacturingemail list on the relevance of their pet micromanufacturing technology as a lifeline for dyingrustbeltcommunitieslikeBraddock,Pennsylvania.
The state has classified it a distressed municipalitybankrupt, more or lesssincetheReaganadministration.Thetaxbaseisgone.Soaremostofthe residents.Thepopulation,about18,000afterWorldWarII,hasdeclinedtoless than3,000.Manyofthosewhoremainareunemployed.Realestatepricesfell50 percentinthelastyear. Everyoneinthecountryisasking,Wheresthebottom?saidthemayor, JohnFetterman.Ithinkwevefoundit. Mr. Fetterman is trying to make an asset out of his towns lack of assets, callingitalaboratoryforsolutionstoallthesemaladiesstartingtoknockonthe doorofeverycommunity.Oneofhisfirstactsafterbeingelectedmayorin2005 wastosetup,athisownexpense,aWebsitetopublicizeBraddockifyoucan callpicturesofbuildingsdestroyedbyneglectandvandalsaformofpromotion.
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He has encouraged the development of urban farms on empty lots, which employ area youths and feed the community. He started a nonprofit organiza 1 tiontosaveahandfulofproperties.
This,Kronicksays,isascloseasyoullgettoanopeninvitationbyagovern menttoexperimentwithsomeoftheseideasintherealworld.
Whatcouldbedoneinthenextweek/month/year/decade?... ...[H]owcouldacommunityfablab/hackerspaceaffectaplacelikethisin 2 theshortterm?
Several other list members replied by pointing out the negative points of BraddockasasiteforaFabLaborhackerspace:thehighratesofcrimeandvan dalism,thedeterioratingbuildings,etc.Onememberarguedthatmicromanufac turingwasaboutbuildingfromabundance,nottryingtorebuildfromscratch intheworstoffareas.Kronick,nonplussed,rejoinedthattheyhadmadethecase forBraddockastheprototypicalchallengetomanyofyourideas.
If your postscarcity dreams dont have a chance there, I dont know how muchhopeIhaveforthemintherestoftheworld.... Vandalismis,Iwouldargue,akeyindicatorofabundanceor,putmoresim ply,freetime.Vandalismcanbeanoutletforcreativityandintelligence(andI dont just mean artistic graffiti. Some tend to venerate the bourgeois urban ex plorers with their ropes and headlamps and cameras but not the kids who risk arrestorinjuryclimbingbuildingsorbillboardstothrowupaquicktag).Iwont arguethatyou/should/movetherebecauseofthis,buttrytounderstandhow uselessorupsettingyourownpasttimesmightseemtoothers.Buyingcheapdis tressed property can lead to what many might call gentrification, a prospect somefindmoreterrifyingtotheirwayoflifethanbrokenwindowsandscribbles onthewalls.Itsamatterofperspective. ButIwillnotdigressfurther;Iwillattempttosustainmydisbeliefthatthis mailinglistisntreallyjustathinguiseforendlesstheoreticalmusingsonUtopia andreturntothesubjectIoriginallyaskedabout:whatimplicationscouldopen manufacturinghaveinasmalltownthatisactivelyseekingoutnewideas?... WhatmighttheprioritiesbeinaBraddockcommunalworkshop?Anarmy ofRepraps?AfewoldBridgeports?Asafe,soundbuildingthatcanbeusedyear round? Community showandtell nights to get the whole town interested in whats being built? Connections to the schools? Connections to local manufac turers?Initiativesthatwouldbringingovernmentgreenjobsmoney?Produc tionofprofitableitemstobringcashintothecommunity?Productionofneces sary items for people in the community? A focus on urban gardening, bicycle transportation, alternative energy, building rehabilitation, permaculture, elec tronics,EVs,biodiesel,art,music,etcetcetc? I guess I see plenty of options and directions that the tools of open manufacturing could bring (though I appreciate those working on creating more/better tools, more options); now I want to know how their application wouldfareinaplacethatwouldprovidesbothclearchallengesandopportuni ties.Ithinkthisiswhatpeopleliketheopenfarmtechpeoplearedoingalready, 3 butwhynotexperimentinanothersituation?
David Streitfeld, Rock Bottom for Decades, but Showing Signs of Life, New York Times,February1,2009<http://www.nytimes.com/2009/02/01/us/01braddock.html>. 2 SamKronick,[OpenManufacturing]Re:Howwilllawsbechangedjustbytheexis tence of selfsufficient people? Open Manufacturing, January 16, 2010 <http://groups .google.com/group/openmanufacturing/msg/8014b08692f05f8e>. 3 Kronick, [Open Manufacturing] Regenerating Braddock (was Re: How will laws be changed ...), Open Manufacturing, January 17, 2010 <http://groups.google.com/group/ openmanufacturing/msg/12bd8bdf36290535>.
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AsIarguedonlist,mypositionismidwaybetweenthoseofKronickandthe skeptics. It seems to me that depressed areas like Braddock, the Arkansas Delta, and a good many Rust Belt communities in the former Ohio Valley have a lot in commonwiththeeconomicproblemsfacingIndianvillages,asdescribedbyNeil Gerschenfeld in Fab. Gerschenfelds examples (which, again, we will examine in the next chapter) of rural hardware hackers reverseengineering homebrew ver sionsofproprietarytractorsforasmallfractionofthecost,orofvillagecablesys temsusingcheapreverseengineeredsatellitereceivers,seemslikesomethingthat wouldberelevanttoAmericancommunitieswithhighunemployment,collapsing asset values and eroding tax bases. Those villages in India that Gerschenfeld de scribes couldnt exactly be described as building from abundance, except in the sensethatimplodingfixedcostsarecreatingpotentialabundanceexnihiloevery where. And as I also argued, it seems to me that stigmergic organization (see espe ciallythediscussioninthenextchapter)isrelevanttotheproblem.Inmyopinion micromanufacturing will benefit communities like Braddock and the Arkansas Deltaalotsoonerthanmostpeoplethink.Butthefastestwaytogetfromhereto there, from the perspective of those currently involved in the movement, is for them to develop and expand the technology as fast as they can from where they arerightnow.Thosecurrentlyengagedinmicromanufacturingshouldfeelunder nomoralpressuretoabandonthecapitalassetstheyvebuiltupwheretheyareto startoversomewhereelse,assomesortofmissionaryeffort.ThefasterFabLabs, hacker spaces and garage factories proliferate and drop in price, the more of a demonstrationeffecttheyllcreate.Andthecheaperandmoredemonstratedlyfea siblethetechnologybecomes,themoreitbuildsupanmodelsofcompleteindus trialecologiesincommunitieswhereitalreadyexists,andthemoreitshowsitself asbenefitingthoselocaleconomiesbyfillingthevoidleftbydeindustrializationof oldstylemassproductionemployers,themoreattractiveitwillbeinplaceswhere ithasntyetbeentried.Themorethishappens,inturn,themorepeopletherewill belikeKronicksfriendinBraddock(hissuggestiontoKronickthatitmightbea useful site for a micromanufacturing effort after Kronicks graduation was what sparkedthewholediscussion),whoareeagertoexperimentwithitlocally.Andat the same time, the more people there will be in the existing fab/hackerspace movementwhoarewillingtotakeagambleinactingasmicromanufacturingmis sionariesintheRustBelt.Likewise,themoreprominentapartofeconomiclifeit becomesinareaswhereitalreadyexists,andthemorepublicawarenessitcreates as a credible path to economic development in depressed levels, the more open peopleliketheunconventionalmayorofBraddockwillbetowardtryingitout. In keeping with Eric Raymonds stigmergic model, the people who are best suitedtotackleparticularproblemsdoso,andputalltheireffortintodoingwhat theyre best at where they are. These contributions create a demonstration effect andgointothenetworkculturespoolofcommonknowledge,forfreeadoptionby anyone who finds them to be what they need. So the more everybody does their own thing, the more theyre facilitating the eventual adoption of the benefits of theirworkinareaslikeBraddock. EverythingKronicksaidofBraddockistrueofClevelandinspades;itsanun precedented opportunity for micromanufacturing enthusiasts to put their ideas into operation. The micromanufacturing and open hardware movements are ac tivelyengagedinbuildingthetechnologicalbasisforthelibertarian,decentralized manufacturingeconomyofthefuture.AndrightnowClevelandisengagedinthe biggest experimental project around for building a relocalized cooperative econ
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omy. An alliance between the micromanufacturing movement and the Cleveland model would seem to be the opportunity of a century. As I asked in an article at P2PFoundationBlogontheEvergreenCooperativeInitiative:
There is enormous potential for fruitful collaboration between the Cleve land experiment and the micromanufacturing, Fab Lab and hackerspace move ments. What local resources exist in Cleveland right now for a networked micro manufacturingeconomy?Perhapssomeoneinourreadershipknowsofsomeone inClevelandwithCNCtoolswhowouldbeinterestedinjoiningthe100kGarages micromanufacturing network. Or someone in the Cleveland area with the ap propriateskillsmightbeinterestedinorganizingahackerspace. The university is one of the leading stakeholders in the effort. Universities likeStanford,MITandUTAustinhaveplayedacentralroleincreatingthelead ingtecheconomiesinotherpartsofthecountry,andtheflagshipprojectofthe FabLabmovementistheAustinFabLabcreatedundertheauspicesofUT.Per hapstheengineeringdepartmentatoneoftheuniversitiesinvolvedinbuilding theClevelandModelwouldbeinterestedinsupportinglocalmicromanufactur ing projects. Or maybe some high school shop classes, or community college machiningclasses,wouldbeinterestedincollaboratingtobuildalocalFabLab. From the other direction, is anyone involved in networked manufacturing projects like 100kGarages, or in the Fab Lab and hackerspace movement, inter 1 estedinfeelingoutsomeofthestakeholdersintheClevelandinitiative?
Countereconomic development initiatives in decaying American cities like Clevelandcanachievesynergiesnotonlywiththemicromanufacturingmovement, butalsowiththemicroenterprisemovement. Micromanufacturing is a force multiplier because new, cheaper production technologiesfreelocaleconomiesfromdependenceonexternalcapitalfinancefor organizingthelocalproductionoflocalneeds.Themicroenterprise,ontheother hand,isaforcemultiplierbecauseitputsexistingunderutilizedcapitalequipment to full use. The household microenterprise operates on extremely low overhead because it uses idle capacity (spare cycles) of the ordinary capital goods that mosthouseholdsalreadyown. TheClevelandinitiativecouldachieveveryhighbangforthebuck,inbuilding aresilientandselfsufficientlocaleconomy,byeliminatingallthelocalregulatory barrierstomicroenterprisesoperatingoutofpeopleshomes. Suchrelocalizationmovementscanalsoachievesynergiesandgetmorebang fromthebuckinanotherway:byeliminatingbarrierstocheapsubsistencebythe homelessandunemployed.Nomatterhowlargeashareofthegoodsandservices weconsumecanbeproducedandexchangedinthecountereconomy,mostpeo plestillbearonesignificantfixedcostthatcantbemetoutsidethewagesystem: theirrentormortgagepayment.Andmostofthepossibilitiesforinformalproduc tion go right out the window when a household lacks sufficient employment in come to pay the rent or mortgage, and people consequently lose the roofs over theirheads. So the problem of informal housing needs to be addressed in some way as partofthelargeragenda.Thismeanseffortslikethosediscussedlaterinthischap ter: for law enforcement to deprioritize foreclosure evictions and the eviction squatters, for local governments to open unused public buildings as barebones shelters (with group toilets, water taps and hot plates), and similarly to open va
Kevin Carson, The Cleveland Model and Micromanufacturing,P2P Foundation Blog, April6,2010<http://blog.p2pfoundation.net/theclevelandmodelandmicromanufacturing anopportunityforcollaboration/2010/04/06>.
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cantpubliclandascampinggroundswithcommunalwatertapsandportabletoi lets.
F.CONTEMPORARYIDEASANDPROJECTS
To some extent Factor e Farm and 100kGarages, which we examined in the previouschapter,arelocaleconomyprojectsofsorts.Ratherthanduplicatingthe materialinthelastchapter,wereferyoubacktoit. 1.JeffVailsHamletEconomy. Thisisasystemofnetworkedvillagesbasedonanidealizedversionofthehis torical lattice network of Tuscan hill towns numbering in the hundreds (which becamethebasisofamodernregionaleconomybasedlargelyonnetworkedpro duction). The individual communities in Vails network must be large enough to achieve selfsufficiency by leveraging division of labor, as well as providing suffi cientredundancytoabsorbsystemicshock.Whenlargerscaledivisionoflaboris requiredtosupportsomeindustry,Vailwrites,thisisnottobeachievedthrough hierarchy,withlargerregionaltownsbecomingcentersoflargeindustry.Rather,it istobeachievedbytownsofroughlysimilarsizespecializinginproducingspecial izedsurplusgoodsforexchange,viafairsandotherhorizontalexchangerelation ships.1 TheHamletreliesonadesignimperative,inanageofPeakOil,forextract ing the maximum quality of life from reduced energy inputs. The Tuscan hill townsVailpointstoasamodelaredecentralized,opensourceandvernacular.
How is the Tuscan village decentralized? Production is localized. Admit tedly,everythingisntlocal.Notbyalongshot.ButcomparedtoAmericansub urbia,agreatpercentageoffoodandbuildingmaterialsareproducedandcon sumedinahighlylocalnetwork.Ahighpercentageofpeoplegardenandshopat localfarmersmarkets. HowistheTuscanvillageopensource?Tuscanculturehistoricallytapsinto asharedcommunitypooloftechnicsinrecognitionthatasustainablesocietyis anonzerosumgame.Mostfarmingcommunitiesarethiswayadvice,knowl edge,andinnovationisshared,notguarded.Beyondacertainthresholdofsize and centralization, the motivation to protect and exploit intellectual property seemstotakeover(anotherargumentfordecentralization).Thereisnoreason why we cannot share innovation in technics globally, while acting locallyin fact, the internet now truly makes this possible, leveraging our opportunity to usetechnicstoimprovequalityoflife. How is the Tuscan village vernacular? You dont see many ColonialStyle housesinTuscany.Yetstrangely,inDenverImsurroundedbythem.Why?They makenomoresenseinDenverthaninTuscany.ThedifferenceisthattheTus cans recognize (mostly) that locallyappropriate, locallysourced architecture improves quality of life. The architecture is suited to their climate and culture, and the materials are available locally. Same thing with their foodthey cele brate what is available locally, and what is in season. Nearly every Tuscan with thespacehasavegetablegarden.Andfinally(thoughthepressuresofglobaliza tionarechallengingthis),theircultureisvernacular.Theycelebratelocalfesti vals,localharvests,anddontrelyonmanufactured,massmarketed,andglobal trends for their culture nearly as much as disassociated suburbanitestheir
Jeff Vail, RePost: Hamlet Economy, Rhizome, July 28, 2008 <http://www.jeffvail .net/2008/07/reposthamleteconomy.html>.
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strong sense of community gives prominence to whatever their celebration is 1 overwhattheglobaleconomytellsthemitshouldbe.
2.GlobalEcovillageNetwork GEN was based on, and in some cases went on to incorporate, a number of apparently simultaneous ideas arising in different locations at about the same time.2 It seems to have been a direct outgrowth of the planetary village move ment,centeredontheFindhornecommunityinScotland,foundedin1962.3
In 1975 the magazine Mother Earth News began constructing experimental energysystems,novelbuildings,andorganicgardensnearitsbusinessofficein Hendersonville,NorthCarolina,andin1979,begancallingthiseducationalcen teranecovillage. AtaboutthesametimeinGermany,duringthepoliticalresistanceagainst disposal of nuclear waste in the town of Gorleben, antinuclear activists at temptedtobuildasmall,ecologicallybasedvillageatthesite,whichtheycalled an okodorf (literally ecovillage). In the largest police action seen in Germany sincetheSecondWorldWar,theircampwasultimatelyremoved,butthecon cept lived on, and small okodorf experiments continued in both eastern and western Germany. The magazine Okodorf Informationen began publishing in 1985 and later evolved into Eurotopia. After reunification of Germany, the movementcoalescedandbecamepartoftheInternationalecovillagemovement. AboutthesametimeinDenmark,anumberofintentionalcommunitiesbe ganlookingbeyondthesocialbenefitsofcohousingandothercooperativeforms ofhousingtowardstheecologicalpotentialsofamorethoroughredesignofhu man habitats. In 1993 a small group of communities inaugurated the Danish ecovillage network, Landsforeningen for Okosamfund, the first network of its kindandamodelforthelargerecovillagemovementthatwastofollow.... Throughout the 1980s and early 1990, on Bainbridge Island near Seattle, RobertandDianeGilmanusedtheirjournal,InContext,topublishstoriesand interviews describing ecovillages as a strategy for creating a more sustainable culture.WhenHildurJackson,aDanishattorneyandsocialactivist,discovered InContext,theecovillagemovementsuddenlygottraction. Ross Jackson, Hildurs husband, was a Canadian computer whiz who had beenworkinginthefinancialmarket,writingprogramstopredictshiftsininter nationalcurrencies.WhenhetookhisalgorithmspublicasGaiaCorporation,his modelsmadeafortuneforhisinvestors,butRoss,beingadeeplyspiritualman, wantedlittleofitforhimself.Searchingforthebestwaytousetheirprosperity, Ross and Hildur contacted the Gilmans and organized some gatherings of vi sionariesatFjordvang,theJacksonsretreatinruralDenmark,tomulloverthe needsoftheworld.... Ross Jackson was also interested in utilizing the new information technol ogy that was just then emerging: email and electronic file exchanges between universities and research centers (although it would still be a few years before theappearanceofsharewarebrowsersandtheopentoallWorldWideWeb). Ross and Hildur Jackson created a charitable foundation, the Gaia Trust, andendoweditwith90percentoftheirshareofcompanyprofits.In1990,Gaia TrustaskedInContexttoproduceareport,EcovillagesandSustainableCommu nities,inordertocatalogthevariouseffortsatsustainablecommunitylivingun derwayaroundtheworld,andtodescribetheemergingphilosophyandprinci Vail, The Design Imperative, JeffVail.Net, April 8, 2007 <http://www.jeffvail.net/ 2007/04/designimperative.html>. 2 Albert Bates, Ecovillage Roots (and Branches): When, where, and how we re inventedthisancientvillageconcept,CommunitiesMagazineNo.117(2003). 3 Ross Jackson, The Ecovillage Movement, Permaculture Magazine No. 40 (Summer 2004),p.25.
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ples in greater detail. The report was released in 1991 as a spiral bound book (nowoutofprint). InSeptember1991,GaiaTrustconvenedameetinginFjordvangtobringto getherpeoplefromecocommunitiestodiscussstrategiesforfurtherdeveloping the ecovillage concept. This led to a series of additional meetings to form na tionalandinternationalnetworksofecovillages,andadecision,in1994,tofor malizenetworkingandprojectdevelopmentundertheauspicesofaneworgani zation,theGlobalEcovillageNetwork(GEN). By 1994 the Internet had reached the point where access was becoming availableoutsidetherealmofuniversityandgovernmentagenciesandcontrac tors.Mosaicwastheuniversalbrowseroftheday,andthefirstInternetcafeshad begun to appear in major cities. Ross Jackson brought in a young Swedish web technician, Stephan Wik, whod had a computer services business at Findhorn, and the Ecovillage Information Service was launched from Fjordvang at www.gaia.org. With Stephan and his coworkers gathering both the latest in hardware advances and outstanding ecovillage content from around the world, gaia.org began a steady growth of hits, increasing 5 to 15 percent per month, that would go on for the next several years, making the GEN database a major portalforsustainabilitystudies. InOctober1995,GaiaTrustandtheFindhornFoundationcosponsoredthe first international conference Ecovillages and Sustainable Communities Modelsforthe21stCentury,heldatFindhorninScotland.Aftertheconference, GENheldaformativemeetingandorganizedthreeworldwideadministrativere gions:EuropeandAfrica;AsiaandOceania;andtheAmericas.Eachregionwas tobeoverseenby asecretariat office responsible for organizinglocalecovillage networksanddevelopingoutreachprogramstoencouragegrowthofthemove ment. A fourth secretariat was established in Copenhagen to coordinate all the offices,seekadditionalfunding,andoverseethewebsite.Thefirstregionalsecre taries, chosen at the Findhorn meeting, were Declan Kennedy, Max Lindegger, 1 andmyself.HamishStewartwasthefirstinternationalsecretary.
According to Ross Jackson, the GEN was founded to link the hundreds of smallprojectsthathadsprunguparoundtheworld....2TheGaiaTrustwebsite adds:
The projects identified varied from wellestablished settlements like Solheimer in Iceland, Findhorn in Scotland, Crystal Waters in Australia, Lebensgarten in Germany to places like The Farm in Tennessee and the loosely knit innercity LosAngelesEcovillageprojecttoplacesliketheFolkecenterforRenewableEn ergy in Thy and many smaller groups that were barely started, not to mention 3 thetraditionalvillagesoftheSouth.
Following the foundation of GEN, Albert Bates continues, [w]ith generous fundingfromGaiaTrustforthisnewmodel,theecovillagemovementexperienced rapidgrowth.
KibbutzimthatrevegetatedthedesertsofPalestineinthe20thcenturyde veloped a new outlook with the formation of the Green Kibbutz Network. The Russian Ecovillage Network was inaugurated. Permaculturebased communities inAustraliasuchasCrystalWatersandJarlanbahpioneeredeasypathstomore environmentally sensitive lifestyles for the mainstream middle class. GEN Europe hosted conferences attended by ecovillagers from dozens of countries, andnationalnetworkssprangupinmanyofthem.InSouthandNorthAmerica, nine representatives were designated to organize ecovillage regions by geogra phyandlanguage.Bytheturnofthe21stcenturyGENhadcataloguedthousands Bates,EcovillageRoots(andBranches). RossJackson,TheEcovillageMovement. 3 What is an Ecovillage? Gaia Trust website <http://www.gaia.org/gaia/ecovillage/ whatis/>.
2
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of ecovillages, built living and learning centers in several of them, launched ecovillage experiments in universities, and sponsored universitybased travel semesterstoecovillagesonsixcontinents.... Ecovillagestodayaretypicallysmallcommunitieswithatightlyknitsocial structureunitedbycommonecological,social,orspiritualviews.Thesecommu nitiesmaybeurbanorrural,highorlowtechnologically,dependingoncircum stance and conviction. Okodorf Seiben Linden is a zeroenergy cohousing set tlementfor200peopleinaruralareaofeasternGermany.LosAngelesEcoVil lageisaneighborhoodaroundanintersectionininnerLosAngeles.SasardiVil lage is in the deep rainforest of Northern Colombia. What they share is a deep respectfornature,withhumansasanintegralpartofnaturalcycles.Ecovillages addresssocial,environmental, and economic dimensions of sustainabilityinan integrated way, with human communities as part of, not apart from, balanced 1 ecologies....
ThebestconcisedescriptionofanecovillagethatIveseencomesfromwhatis apparently an older version of the Gaia Trust website, preserved on an article at PermacultureMagazine:
Ecovillagesareurbanorruralcommunitiesthatstrivetocombineasuppor tivesocialenvironmentwithalowimpactwayoflife.Toachievethis,theyinte grate various aspects of ecological design, permaculture, ecological building, green production, alternative energy, community building practices, and much more. These are communities in which people feel supported by and responsible tothosearoundthem.Theyprovideadeepsenseofbelongingtoagroupandare smallenoughforeveryonetobeseenandheardandtofeelempowered.People are then able to participate in making decisions that affect their own lives and thatofthecommunityonatransparentbasis. Ecovillagesallowpeopletoexperiencetheirspiritualconnectiontotheliv ing earth. People enjoy daily interaction with the soil, water, wind, plants and animals. They provide for their daily needsfood, clothing, shelterwhile re spectingthecyclesofnature. Theyembodyasenseofunitywiththenaturalworld,withculturalheritage aroundtheworldandfosterrecognitionofhumanlifeandtheEarthitselfaspart ofalargeruniverse. Mostecovillagesdonotplaceanemphasisonspiritualpracticesassuch,but thereisoftenarecognitionthatcaringforonesenvironmentdoesmakepeople a part of something greater than their own selves. Observing natural cycles throughgardeningandcultivatingthesoil,andrespectingtheEarthandallliv ing beings on it, ecovillages tend to maintain, recreate or find cultural expres sionsofhumanconnectednesswithnatureandtheuniverse. Respectingthisspiritualityandculturemanifestsinmanywaysindifferent 2 traditionsandplaces.
The typical ecovillage has 50400 people. Many ecovillages, particularly in Denmark,arelinkedtoacohousingprojectofsomesort.3Suchprojectslowerthe materialcostofhousing(constructionmaterials,heating,etc.)perperson,andre duceenergycostsbyintegratingthehomewithworkplaceandrecreation.4Neigh borhoodbasedecovillagesinsomeplaceshaveinfluencedtheliberalizationoflo cal zoning laws and housing codes, and promoted the adoption of new building techniques by the construction industry. Ecovillage practices include peripheral
Bates,EcovillageRoots(andBranches). What is an Ecovillage? (sidebar), Agnieszka Komoch, Ecovillage Enterprise, PermacultureMagazineNo.32(Summer2002),p.38. 3 Jackson,p.26. 4 Jackson,p.28.
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parking,commonopenspacesandcommunityfacilities,passivesolardesign,ver nacularmaterials,andcompostingtoilets.1 Theecovillagemovementisalooseandliberallydefinednetwork.According to Robert and Diane Giulman, in Ecovillages and Sustainable Communities (1991), anecovillageisAhumanscale,fullfeaturedsettlementinwhichhumanactivities are harmlessly integrated into the natural world in a way that is supportive of healthyhumandevelopmentandcanbesuccessfullycontinuedintotheindefinite future.TheGENrefusestopolicemembercommunitiesortoenforceanycentral izedstandardofcompliance.Ata1998GENboardmeetinginDenmark,theNet workaffirmedthatacommunityisanecovillageifitspecifiesanecovillagemis sion,suchasinitsorganizationaldocuments,communityagreements,ormember shipguidelines,andmakesprogressinthatdirection.TheNetworkpromotesthe CommunitySustainabilityAssessmentTool,aselfadministeredauditingsurvey,as a way to measure progress toward the same general set of goals.2 The Ecological portionofthechecklist,forexample,includesdetailedsurveyquestionson
1. Sense of Placecommunity location & scale; restoration & preservation of nature 2. FoodAvailability,Production&Distribution 3. PhysicalInfrastructure,Buildings&Transportationmaterials,methods,de signs 4. ConsumptionPatterns&SolidWasteManagement 5. Watersources,quality&usepatterns 6. WasteWater&WaterPollutionManagement 3 7. EnergySources&Uses
Question2,FoodAvailability,includesquestionsonthepercentageoffood produced within the community, what is done with food scraps, and whether greenhousesandrooftopgardensareusedforproductionyearround.4 Suchliberalityofstandardsisarguablynecessary,giventhediversityofstart ingpointsofaffiliatecommunities.Anecovillagebasedinaninnercityneighbor hood, it stands to reason, will probably have much further to go in achieving sustainabilitythanaruralbasedintentionalcommunity.Urbanneighborhoods,of necessity,mustbeverticallyoriented,andintegratetheproductionoffoodand otherinputsonanincrementalbasis,oftenstartingfromzero.5 3.TheTransitionTownMovement Thismovement,whichbeganwiththetownofTotnesintheUK,isdescribed by John Robb as an opensource insurgency: a virally replicable, opensource modelforresilientcommunitiescapableofsurvivingthePeakOiltransition.Asof April 2008, some six hundred towns around the world had implemented Transi tionTownprojects.6 TheTransitionTownsWiki7includes,amongmanyotherthings,aTransition InitiativesPrimer(a51pp.pdffile),aguidetostartingaTransitionTowninitiative
Jackson,p.29. LindaJosephandAlbertBates,WhatIsanEcovillage?CommunitiesMagazineNo. 117(2003). 3 <http://gen.ecovillage.org/activities/csa/English/toc.html>. 4 <http://gen.ecovillage.org/activities/csa/English/eco/eco2.php>. 5 JosephandBates. 6 JohnRobb,ResilientCommunities:TransitionTowns,GlobalGuerrillas,April7,2008 <http://globalguerrillas.typepad.com/globalguerrillas/2008/04/transitiontown.html>. 7 <http://transitiontowns.org/>.
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in a local community.1 It has also published a print book, The Transition Hand book.2 Totnes is the site of Rob Hopkins original Transition Town initiative, and a modelforthesubsequentglobalmovement.
Thethinkingbehind[TransitionTownTotnes]issimplythatatownusing much less energy and resources than currently consumed could, if properly plannedforanddesigned,bemoreresilient,moreabundantandmorepleasur ablethanthepresent. Given the likely disruptions ahead resulting from Peak Oil and Climate Change,aresilientcommunityacommunitythatisselfreliantforthegreatest possible number of its needswill be infinitely better prepared than existing communitieswiththeirtotaldependenceonheavilyglobalisedsystemsforfood, energy,transportation,healthandhousing. Through 2007, the project will continue to develop an Energy Descent Ac tion Plan for Totnes, designing a positive timetabled way down from the oil 3 peak.
ThemostcompleteEnergyDescentActionPlanisthatofKinsale.Itassumesa scenarioinwhichKinsalein2021hashalftheenergyinputsasin2005.Itincludes detailedtargetsandstepbystepprograms,forawiderangeofareasoflocaleco nomiclife,bywhichenergyconsumptionperunitofoutputmaybereducedand local inputs substituted for outside imports on a sustainable basis. In the area of food, for example, it envisions a shift to local market gardening as the primary source of vegetables and a large expansion in the amount of land dedicated to communitysupported agriculture. By 2021, the plan says, most ornamental land scaping will likely be replaced with fruit trees and other edible plants, and the lawnmowerwillbeasobsoleteasthebuggywhip.Inhousing,theplancallsfora shift to local materials, vernacular building techniques, and passive solar design. The plan also recommends the use of local currency systems, skill exchange net works,volunteertimebanks,andbarterandfreecyclingnetworksasawaytoput localproducersandconsumersincontactwithoneanother.4 4.GlobalVillages Thesearedesignedtogenerate80%oftheirincomeinternallyand20%exter nally, with internally generated wealth circulating five times before it leaves the community.AsdescribedbyClaudeLewenz,inHowtoBuildaVillage:
Thelocaleconomyislayered,builtonafoundationthatprovidesthebasicneeds independentoftheglobaleconomyifitmeltsdowntheVillagerswillsurvive. Thelocaleconomyisdiversified....Thelocaleconomymustprovideconditions thatencourageawidediversityofbusinessesandofficerstooperate.Thenwhen some collapse or move away, the local economy only suffers a bitit remains 5 healthy. BenBrangwynandRobHopkins,TransitionInitiativesPrimer:becomingaTransition Town, City, District, Village, Community or even Island (Version 26August 12, 2008) <http://transitionnetwork.org/Primer/TransitionInitiativesPrimer.pdf>. 2 Rob Hopkins, The Transition Handbook: From Oil Dependency to Local Resilience (GreenBooks)<http://transitiontowns.org/TransitionNetwork/TransitionHandbook>. 3 Ibid.,p.10. 4 Kinsale2021:AnEnergyDescentActionPlan.Version.1.2005.ByStudentsofKinsale Further Education College. Edited by Rob Hopkins <http://transitionculture.org/wp content/uploads/members/KinsaleEnergyDescentActionPlan.pdf>. 5 ClaudeLewenz,HowtoBuildaVillage(Auckland,NewZealand:VillageForumPress andJacksonHousePublishingCompany,2007),p.73.
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Lewenzs Village is also essentially the kind of resilient community John RobbandJeffVailhaveinmind:
... [E]conomies can collapse and firstworld people can starve if systems fail. We have now built a food system almost entirely dependent on diesel fuelledtractors,dieseldeliverytrucksandalongdistancesupermarketdelivery system. More recently, we shifted to an economic and communication system entirelydependentoncomputersasystemthatonlyrunsiftheelectricalgrid suppliespower.IntheGreatDepressionintheUSA,poorpeoplesaytheyhardly noticedin those days they kept gardens because the USA was predominantly ruralandvillage.Thepotentialforeconomiccollapsealwayslooms,especiallyas the global economic system becomes more complex and vulnerable. Prudence would dictate that in planning for a local economy, it include provisions to as sure the Village sustained its people, and those of the surrounding region, in suchadverseconditions. The challenge is to maintain a direct rural and farm connection for local, good food, and establish an underlying local economy that can operate inde pendentofthelargereconomyandwhichcanputunemployedpeopletoworkin 1 hardtimes.
TheGlobalVillagesnetwork2hashadfairlyclosetieswithMarcinJakubowski andFactoreFarm,whichweconsideredinthepreviouschapter. 5.VentureCommunism Venture communism is a project developed by Dmytri Kleiner. The basic principlepurchasingundevelopedlandandresourcescheaplyfromthecapitalist economy,andthenfinancingitselfinternallyfromtherentsonthatlandasdevel opment by venture communist enterprises causes it to appreciate in valueis reminiscentofEbenezerHowardsoriginalvisionfortheGardenCitymovement.
Startingfromthebeliefthatpoliticalchangecanonlyfollowachangeinthe modeofproduction,venturecommunismisanattempttocreateamodeofpro duction that will expand socialism by reducing the labour available to be ex ploitedbyproperty.... Socialism is defined as a mode of production where the workers own the meansofproduction,andespeciallythefinalproduct.Bywithholdingourlabour fromCapitalistsandinsteadformingourownworkerownedenterprisesweex pandSocialism. 3 ThemorelabourwithheldfromCapitalists,thelesstheyareabletoexploit.
InanextendedpassagefromtheP2PFoundationWiki,Kleinerdescribesthe actualfunctioningofaventurecommune:
A Venture Commune is a joint stock corporation, much like the Venture Capital Funds of the Capitalist class, however it has four distinct properties whichtransformitintoaneffectivevehicleforrevolutionaryworkersstruggle. 1AShareInTheVentureCommuneCanOnlyBeAcquiredByContribu tionsOfLabour,andNotProperty. In other words only by working is ownership earned, not by contributing Land,CapitalorevenMoney.OnlyLabour. ItisthiscontributedlabourwhichrepresentstheinitialInvestmentcapacity oftheCommune.
Ibid.,p.77. SeealsotheGlobalVillagessitemaintainedbyFrahzNahrada,anotherleadingfigure inthemovement.<http://www.globalvillages.info>. 3 Luca, TeleKommunisten (interview with Dmytri Kleiner), ecopolis, May 21, 2007 <http://www.ecopolis.org/telekommunisten/>.
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The Commune Issues its own currency, based on the value of the labour pledgesithas. Ittheninveststhiscurrencyintotheprivateenterpriseswhichitintendsto purchaseorfund,theseEnterprisesthusbecomeownedbytheCommune,inthe same way that Enterprises which receive Venture Capital become owned by a VentureCapitalFund. 2TheVentureCommunesReturnOnInvestmentFromItsEnterprisesIs DerivedFromRentandNotIncome. Asconditionofinvestment,theEnterpriseagreestonotownitsownprop erty, neither Land nor Capital, but rather to rent Land and Capital from the Commune. TheCommune,unlikeaVentureCapitalFund,nevertakesashareofthein comeoftheEnterprisenorofanyofitsworkers. The Commune finances the acquisition of Land and Capital by issuing Bonds,andthenRentstheLandandCapitaltoitsEnterprises,oranEnterprise cansellwhateverLandandCapitalitacquiresthroughothermeanstotheCom mune,andinturnRentit. In this way Property is always owned Mutually by all the members of the Commune,howeverallworkersandtheEnterprisesthatemploythemretainthe entireproductoftheirlabour. 3TheVentureCommuneIsOwnedEquallyByAllItsMembers. Eachmembercanhaveoneshare,andonlyoneshare.Thusalthougheach worker is able to earn different prices for their labour from the Enterprises, based on the demand for their labour, each worker may never earn any more thanoneshareintheownershipoftheCommuneitself,andthereforecannever accumulateadisproportionateshareoftheproceedsofProperty. Ownership of Property can therefore never be concentrated in fewer and fewerhandsandusedtoexploittheworkerasinCapitalistcorporations. 4All Those Who Apply Their Labour To the Property of the Commune MustBeEligibleForMembershipInTheCommune. TheCommunemaynotrefusemembershiptoanyLabouremployedbyany of its enterprises that work with the Land and Capital controlled by the com mune.InthiswayCommunememberscannotexploitoutsidewageearners,and thelabourneedsoftheEnterprisewillensurethateachCommunecontinuesto growandacceptnewmembers. Discussion DmytriKleiner: I see venture communism in two initial phases, in the first phase proto venturecommunistenterprisesmustbreaktheIronlawandthenjointogether tofoundaventurecommune. In a mature venture commune, costrecovery is simply achieved by using rentsharing to efficiently allocate property to its most productive use, thereby ensuring mutual accumulation. Rent sharing works by renting the property for itsfullmarketvaluetomemberenterprisesandthendistributingtheproceeds ofthisrentequallyamongallcommunemembers. Investment, when required by exogenous exchange, is funded by selling bonds at auction. Endogenous liquidity is achieved through the use of mutual credit. Howeverintheinitialphasethereisnopropertytorentshareandthede mandforthebondsislikelytobeinsufficient,thustheonlywaytheenterprise cansucceedistobreaktheironlawandsomehowcapitalizeandearnmorethan subsistencecosts,makingmutualaccumulationpossible. IMO,therearetworequirementsforbreakingtheironlaw: a)Theenterprisemusthavehighlyskilledcreativelabour,sothatthelabour itselfcancapturescarcityrents,i.e.artists,softwaredevelopers. b) Production must be based on what I call commodity capital, that is Capitalthatisacommoninputtomost,ifnotall,industries,andthereforeisof tensubsidizedbypublicandprivatefoundationsandavailableonthemarketfor
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belowitsactualcost.Examplesofthisaretelecommunicationsandtransporta tioninfrastructure,bothofwhichhavebeenheavilysubsidized. Also, a third requirement for me, although not implied by the simple eco nomiclogic,isthattheinitialproductsareofgeneralusetomarketsegmentsI believearemostdirectlyagentsforsocialchange,i.e.otherpeerproducers,ac tivists,diasporic/translocalcommunitiesandtheinformaleconomybroadly. Also,Iwouldliketonotethatwhiletheinitialenterprisesdependoncom plexlabourandshouldfocusonproductsofstrategicbenefit,amatureventure communecanincorporatealltypesoflabourandprovidealltypesofgoodsand services once the implementation of rentsharing, bondauction and mutual 1 creditisachieved.(Oekonuxmailinglist,January2008)
The Telekommunisten collective is one such initial enterprise for raising money.VentureCommunism,Kleinerwrites,isaformofworkersselforganiza tionwhichprovidesamodelofsharingpropertyandformingmutualcapitalthatis compatiblewithanticapitalistideals.
However,venturecommunismdoesnotprovideameansofacquiringsuch property in the first place. Telekommunisten is intended to realize possibilities in forming the privative mutual property required to initiate venture commu nism. Thelackofanyinitialfinancing,mostformsofwhichwouldbeincompati ble with the venture communist principal of ownership as a reward for labour notwealth,presenttwinchallengesforaprotoventurecommunistenterpriseto overcome:Formingcapitalandfindingcustomers.Thefirstchallengeinessence requires breaking the Iron Law of Wages, the implications of which are that workerscanneverformcapitalbecausetheycanneverearnanymorethantheir subsistencecostfromwagesalone. The primitive accumulation theory of Telekommunisten proposes to break theIronLawbyexploitingitsboundaryconditions,namelythatsomelabouris scarce, and therefore captures a form of scarcity rent in addition to wages and that some forms of capital are themselves commodities, and therefore can not even capture interest, more to the point, often these forms of capital are com moninputstoproductionandaresubsidizedbyprivateandpublicfundsandare availableonthemarketforbelowtheirownreproductioncosts. Therefore,theIronLawcanbebrokenifyouareabletoinvestscarcelabour and employ commodity capital in production. An obvious example of such commodity capital is basic telephone and internet infrastructure, which con nectsthefarthestreachesoftheglobetogether,builtalmostentirelywithpublic moneyandavailabletobeexploitedforfarlessthanitsrealcost.Andlikewise, anobviousexampleoftheneededscarcelabourinvestmentistheITandmedia skillsrequiredtoderivenewproductsfrombasicinternetandtelephoneservice.
Thus,Telekommunistenproposetoformtheprimitivemutualprop ertyrequiredtoinitiateventurecommunismbycollectiveinvestmentin theformofITandmedialabourusingonlycommonlyavailableinternet resources to derive marketable products. The first of these products is Dialstation,whichallowanylandlineormobiletelephonetomakevery inexpensiveinternationalphonecalls.
The second challenge, finding customers without any initial financing for marketing,isaddressedbylinkingtheartisticandpoliticalnatureoftheproject very closelywithour products, therefore we promote productssuch asDialsta tionasamatterofcourseinourartisticproductionandourparticipationinthe activistandhackercommunities.Ourbasicpremiseisthatpeoplewilluseand
Venture Communism, P2P Foundation Wiki <http://p2pfoundation.net/Venture_ Communism>(accessedAugust8,2009.
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promote our products if they identify with our artistic and political practices, 1 andinturntheeconomygeneratedcansupportandexpandthesepractices.
It is most notable for its Dialstation project, an international longdistance service.2 6.DecentralizedEconomicandSocialOrganization(DESO) This is a project in development by Reed Kinney. Its a continuation of the work of his late father, Mark Kinney, among other things a writer on alternative currency systems and an associate of Thomas Greco.3 Kinneys book on DESO is forthcoming.Heresabriefsummaryoftheproject:
ThisisaminisculeexplanationofDecentralizedEconomicSocialOrganiza tion,DESO. Thetexthas requiredfiveyears to research and write. AsofJuly 2009,Im noweditingit.ThetextcategoricallyunfoldseveryDESOstructure,component, department,anditsaccompanyingphilosophies.Itisasubstantialworkandwill requireaconventionalpublisherbyOctober2009.AsafavortoKevinCarson,I canofferthisverybriefoverview. Thecontentofthistextisanobjectofdialogue.Theassertionmadehereis thatthebaseofhumanintercourseisstructurallyembedded.Andthateachtype ofsocioeconomicstructuregeneratesacorrespondingformofsocialintercourse. Thestatedobjectivehereisthedevelopmentofthesocioeconomicpatternthat bestmeetstherealneedsofitsmembersandthatgeneratesthemaximumand thefullestmentalhealthamongthem.Thiscontentisderivedfrommanycon tributors, like Paulo Freire, whom each create equally important components that are here molded into coherent functioning form. True dialogue is the soil, waterandsunlightneededtogerminateDESO. DESOisthecreationofviable,independentcommunitieswithinwhichthe humanity of each person is supported through humanistic education and par ticipatory decision making processes. The autonomous DESO economy is de signedtobothsupportandfurthercultivatethoseobjectives. DESOs economic organization, its educational organization, and its civic organization are designed to interpenetrate and to be interdependent. From theirincipienceeachDESOcommunitydevelopsthosethreefundamentalDESO spheres concurrently. DESO culture is the consequence of intercommunity networks.However,itisstructuredtomaintainandperpetuatedecentralization. DESO creates stable, regional economies that resemble the selfsustaining ecosystems of nature. DESO independence is proportional to its population. Structurally, DESO is designed to expand exponentially through mass centrist society,MCS,whichitdepopulateswithastonishingrapidity.Ultimately,DESO 4 curbsthedestructivemomentumofMCS. ... StatelessSociety Torefertoasocietyasstatelessdoesnotimplyanabsenceofsocioeconomic organization. To build an equitable society two basic interrelated tactics are used. First, the dissection, the deconstruction, of the structures of mass centrist society, MCS, reveal what their opposite structures would be, then, second, all of the Telekommunisten:TheRevolutionisComing<http://telekommunisten.net/about> AccessedOctober19,2009. 2 <http://www.dialstation.com/>. 3 See, for example, Mark Kinneys pamphlet In Whose Interest? (n.d) <http://www .appropriateeconomics.org/materials/in_whose_interest.pdf>.Itbrieflysetsforthaviewof moneymuchlikeGrecos.HisworkisquotedseveraltimesinGrecosbodyofwork. 4 ReedKinney,privateemail.
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knownrequirements,theconditionsneeded,forfermentingfull,humanpsychic healthareevaluated.Thesetwoknownfactorsarethenusedtomoldthefunc tionsofthestructuresofdecentralizedeconomicsocialorganization,DESO. The interpersonal relations born of genuine dialogical based organization (mutualism), both in civic and familial spheres, develops the selfrealization of allmembers(TheKnowledgeofMan,APhilosophyoftheInterhuman,byMar tin Buber, Edited with an Introduction by Maurice Friedman, Harper & Row). Whenthatiscombinedwitheducationthroughart(HerbertRead),then,genu ineindividuationdevelops.Thesecombinedconditionsmustbemettoferment full,humanpsychichealth. DESOismembermanagedandisstructuredtobeperpetuallydecentralized andnetworked.Eachsovereigncommunityissemiselfsufficient;organizationis dialogical. DESOusestechnologytoreducethecost,timeandspacerequiredforpro duction.Aproductionbasedeconomyisneitherconsumernorprofitbased. SinceDESOisaproductionbasedeconomyitsproductionslowsastheba sic needs of its members are met; slows, levels off, and is then maintained. Its economydoesnotposeathreattothelifesupportsystemsoftheplanet. Memberobjectivesarenotmaterialisticperse,althoughprosperityisgen eralized. Rather, the objectives of its members orbit their dialogical interper sonalrelationshipsandtheirmutualselfdevelopmentthroughallart,aesthetics, and all knowledge. Art and knowledge are not viewed as commodities, but ratherasintegralaspectsofculture. Unavoidably, incipient DESO grows alongside and through MCS. It pur chases productive facilities from MCS and adopts from it what is useful for DESO. Nonetheless, the DESO objective is independence from MCS. Its inde pendence is everaugmented through the expansion of its own infrastructures. (Itsinternalmonetizedorganizationisaninterestfreecivicservice.) [The political implications are somewhat selfevident. MCS is not dis rupted by internal modifications within its own context. However, people that liveinahumanistic,independentsocioeconomicorganization,onethatisex pansive and competitive, represent an external force that can curb the self destructive momentum of MCS; not through direct confrontation per se, but, rather,byinfiltratinganddepopulatingMCS.] InthisotherDESOcontext...withinitsowncircumstances...theindis pensableanddynamicdramaofequilibriumbetweenindividuationandmutual ismcanbemaintainedindefinitely. TheDESOscenariodoesnotresembleanythingthatMCSproduces;neither an economy of scarcity nor the alienated mind. No, rather, what you have in DESO is an economy of abundance and a postalienated population of whole 1 humanbeings;wholeinalltheirdichotomies.
7.TheTripleAlliance Thisisaninterestingproposalforbuildingaresilientcommunitythroughso cialproductionbytheurbanunderemployedandunemployed.Theideawasorigi nallysparkedbyablogpostbyDougaldHine:SocialMediavstheRecession.

Lookedatverysimply:hundredsofthousandsofpeoplearefindingorareabout tofindthemselveswithalotmoretimeandalotlessmoneythantheyareused to.Theresultisatleastthreesetsofneeds: practical/financial (e.g. how do I pay the rent/avoid my house being repos sessed?) emotional/psychological (e.g. how do I face my friends? where do I get my identityfromnowIdonthaveajob?) directional(e.g.whatdoIdowithmytime?howdoIfindwork?)...
ReedKinney,personalemail,April8,2010.
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ArguablythebiggestthingthathaschangedincountriesliketheUKsince therewaslastamajorrecessionisthatmostpeoplearenetworkedbytheinter netandhavesomeexperienceofitspotentialforselforganisation...Therehas never been a major surge in unemployment in a context where these ways of organisingwithoutorganisationswereavailable. As my School of Everything cofounder Paul Miller has written, Londons techsceneisdistinctivefortheincreasingfocusonapplyingthesetechnologies to huge social issues ... Agility and the ability to mobilise and gather momen tum quickly are characteristics of social media and online selforganisation, in waysthatgovernment,NGOsandlargecorporationsregardwithahealthyenvy. So,withthat,theconversationsIvebeenhavingkeepcomingbacktothis centralquestion:isthereawaywecanconstructivelymobilisetorespondtothis situationinthedaysandweeksahead?... Informationsharingfordealingwithpracticalconsequencesofredundancyor jobinsecurity.YoucanseethishappeningalreadyonasiteliketheSheffield Forum. Indexesoflocalresourcesofusetothenewlyunemployedincludingeduca tionalandtrainingopportunitiesbuiltupinausergeneratedstyle. Tools for reducing the cost of living. These already existLiftShare, Freecy cle, etc.so its a question of more effective access and whether there are quickwaystosignpostpeopletowardsthese,orlinktogetherexistingservices better. Anidentificationofskills,notjustforpotentialemployersbutsopeoplecan find each other and organise, both around each other and emergent initia tivesthatgrowinafertile,sociallynetworkedcontext. Iftheaimistoavoidthisrecessioncreatinganewtrancheoflongtermun employed(ashappenedinthe1980s),thensofteningthedistinctionbetweenthe employedandunemployedisvital.Insocialmedia,wevealreadyseenconsider ablesofteningofthelinebetweenproducerandconsumerinallkindsofareas, andtheremustbelessonstodrawfromthisinhowweviewanylargescaleini tiative. AsIseeit,suchasofteningwouldinvolvenotonlythekindofonlinetools andspacessuggestedabove,butthespreadofrealworldspaceswhichreflectthe collaborativevaluesofsocialmedia.Examplesofsuchspacesalreadyexist: MedialabsonthemodelofAccessSpaceortheBrasilianPontosdeCultura programme,whichhasappliedthisapproachonanationalscale FabLabsformanufacturing,asalreadyexistfromIcelandtoAfghanistan studio spaces like TenantSpin, the microTV station in Liverpool based in a flatinatowerblockandlikemanyotherexamplesintheworldofCommu nityMedia Again, if these spaces are to work, access to them should be open, not re strictedtotheunemployed.(If,assomearepredicting,weseethereturnofthe threedayweek,thevalueofspaceslikethisopentoallbecomesevenmoreob 1 vious!) ThiswasthedirectinspirationforNathanCravens,ofAppropediaandsome timeOpenSourceEcologycollaborator,inoutlininghisTripleAlliance: TheTripleAlliancedescribesanetworkofthreecommunitysupportedor ganizationsnecessarytomeetbasicneedsandcomforts. TheOpenCafe,aplacetohaveamealingoodcompanywithoutapricetag TheCSAorcommunitysupportedfarm
DougaldHine,SocialMediavstheRecession,ChangingtheWorld,January28,2009 <http://otherexcuses.blogspot.com/2009/01/socialmediavsrecession.html>.
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The Fab Lab, a digitally assisted manufacturing facility to make almost any 1 thing
AswesawinChapterSix,theFabLabalreadyexistsintheformofcommer cialworkshopspace(forexampleTechShop);italsoexists,informsrangingfrom nonprofittocommercial,inthehackerspacemovement.Regardingthislatter, accordingtoWiredmagazinethereare96hackerspacesworldwide29ofthemin theUnitedStatesincludingtheNoisebridgehackerspaceprofiledinthearticle.

Located in rented studios, lofts or semicommercial spaces, hacker spaces tendtobelooselyorganized,governedbyconsensus,andinfusedwithanalmost utopianspiritofcooperationandsharing. Its almost a Fight Club for nerds, says Nick Bilton of his hacker space, NYCResistorinBrooklyn,NewYork.BiltonisaneditorinTheNewYorkTimes R&DlabandaboardmemberofNYCResistor.BiltonsaysNYCResistorhasat tractedaprettywidevarietyofpeople,butdefinitelyallgeeks.NotDungeons& Dragonstypegeeks,butmoreprofessional,workingtypegeeks.... SinceitwasformedlastNovember,Noisebridgehasattracted56members, whoeachpay$80permonth(or$40permonthonthestarvinghackerrate)to cover the spaces rent and insurance. In return, they have a place to work on whatever theyre interested in, from vests with embedded sonar proximity sen sorstoweboptimizeddatabasesoftware.... Noisebridge is located behind a nondescript black door on a filthy alley in SanFranciscosMissionDistrict.Itisasmallspace,onlyabout1,000squarefeet, consistingprimarilyofonebigroomandaloft.Butmembershavecrammedit withanimpressivevarietyoftools,furnitureandsubspaces,includingkitchen, darkroom,bikerack,bathroom(withshower),circuitbuildingandtestingarea, asmallchillspacewithcouchesandwhiteboard,andmachineshop. Themainpartoftheroomisdominatedbyabatteredworktable.Apairof ethernet cables snakes down into the middle of the table, suspended overhead by a plastic track. Cheap metal shelves stand against the walls, crowded with sparepartsandprojectsinprogress. Thedrawersofapartscabinetcarrylabelsreflectingtheeclecticismofthe space: Altoids Tins, Crapulence, Actuators, DVDs, Straps/Buckles, An chors/Hoisting,andFasteners. Almost everything in the room has been donated or built by members including a drill press, oscilloscopes, logic testers and a sack of stickon googly eyes. While many movements begin in obscurity, hackers are unanimous about the birth of U.S. hacker spaces: August, 2007 when U.S. hackers Bre Pettis, Nicholas Farr, Mitch Altman and others visited Germany on a geeky field trip calledHackersonaPlane. GermanandAustrianhackershavebeenorganizingintohackercollectives foryears,includingMetalabinVienna,cbaseinBerlinandtheChaosComputer Club in Hannover, Germany. Hackers on a Plane was a delegation of American hackerswhovisitedtheChaosCommunicationsCampBurningManforhack ers,saysMetalabfounderPaulEnkiBoehmandtheirtripincludedatourof thesehackerspaces.Theywereimmediatelyinspired,Altmansays. OnreturningtotheUnitedStates,Pettisquicklyrecruitedotherstotheidea andsetupNYCResistorinNewYork,whileFarrinstigatedahackerspacecalled HacDCinWashington,D.C.Bothwereopenbylate2007.Noisebridgefollowed somemonthslater,openingitsdoorsinfall2008. Itcouldnthavehappenedatabettertime.Makemagazine,whichstartedin January, 2005, had found an eager audience of doityourself enthusiasts. (The magazines circulation now numbers 125,000.) Projects involving complex cir cuitry and microcontrollers were easier than ever for nonexperts to undertake, Nathan Cravens, The Triple Alliance, Appropedia: The sustainability wiki <http:// www.appropedia.org/The_Triple_Alliance>(accessedJuly3,2009).
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thankstoopensourceplatformslikeArduinoandtheeasyavailabilityofhowto guidesontheinternet. The idea spread quickly to other cities as visitors came to existing hacker spacesandsawhowcooltheywere. Peoplejusthavethiswideeyedlookof,Iwantthisinmycity.Itsalmost primal,saysRoseWhite,asociologygraduatestudentandNYCResistormem ber.... Hackerspacesarentjustgrowingupinisolation:Theyreformingnetworks and linking up with one another in a decentralized, worldwide network. The hackerspaces.org website collects information about current and emerging hacker spaces, and provides information about creating and managing new 1 spaces.
CravensspecifiedthathismodelofFabLabswasbasedonOpenSourceEcol ogy(forruralareas)andhackerspaceslikeNYCResistor2(forurbanareas).3 IndiscussionontheOpenManufacturingemaillist,IsuggestedthatCravens threeleggedstoolneededafourthleg:housing.Opensourcehousingwouldfilla big gap in the overall resiliency strategy. It might be some kind of cheap, bare bonescohousingprojectassociatedwiththeCafe(watertaps,cots,hotplates,etc) thatwouldhousepeopleatminimalcostontheYMCAmodel.Itmightbeanin tentionalcommunityorurbancommune,withcheaprentalhousingadaptedtoa large number of lodgers (probably in violation of laws restricting the number of unrelatedpersonslivingunderoneroof).Anothermodelmightbethecommercial campground,withspacefortents,watertaps,etc.,oncheaplandoutsidethecity, inconnectionwitharidesharingarrangementofsomesorttogettoAlliancefa cilities in town. The governmentrun migrant worker camps, as depicted in The Grapes of Wrath, are an example of the kind of cheap and efficient, yet comfort able,barebonesprojectsthatarepossiblebasedonacombinationofprefabhous ing with common bathrooms. And finally, Vinay Guptas work in the Hexayurt project on emergency lifesupport technology for refugees is also relevant to the housingproblem:offeringcheapLEDlighting,solarcookers,waterpurifiers,etc., tothoselivingintentcitiesandHoovervilles.Cravensreplied:
Inanurbanarea,onelargemultilevelbuildingcouldprovideallbasicneeds.A floor for hydroponicly [sic] grown food, the fab, and cafe. The remaining space canbeusedforhousing.Themoresophisticatedthefabsandavailibilityofma 4 terials,thebetterconditionsmayrivalorexceedpresentmiddleclassstandards.
Such large multilevel buildings resemble what actually exists in the net worked manufacturing economies of EmiliaRomagna (as described by Sabel and Piore) and Shenzhen (as described by Bunnie Huang), which we examined in Chapter Six: publicly accessible retail space on the ground floor, a small factory upstairs,andworkerhousingabovethat. Thiswouldprobablyfallafouloflocalzoninglawsandhousingcodesinthe UnitedStates,inmostcases.ButasDmitryOrlovpointsout,massivedecreasesin formalhomeownershipandincreasesinunemploymentincomingyears,coupled with increasingly hollowedout local governments with limits on resources avail ableforenforcement,willquiteplausiblyleadtoasituationinwhichsquattingon
Dylan Tweney, DIY Freaks Flock to Hacker Spaces Worldwide, Wired, March29, 2009<http://www.wired.com/gadgetlab/2009/03/hackerspaces/>. 2 <http://www.nycresistor.com>. 3 Nathan Cravens, important appeal: social media and p2p tools against the melt down, Open Manufacturing (Google Groups), March 13, 2009 <http://groups.google.com/group/openmanufacturing/msg/771617d04e45cd63>. 4 Ibid.
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(defacto)abandonedresidentialandcommercialrealestateisthenorm,andlocal authoritiesturnablindeyetoit.Squatsinabandoned/publicbuildings,andbuild ing with scavenged materials on vacant lots, etc. (a la Colin Ward), might be a black market version of what Cravens proposes. According to Gifford Hartman, although tent cities and squatter communities often receive hostile receptions, theyreincreasinglygettingdefactoacceptancefromthelocalauthoritiesinmany partsofthecountry:
In many places people creating tent encampments are met with hostility, andareblamedfortheirowncondition.NewYorkCity,withareputationforin tolerancetowardsthehomeless,recentlyshutdownatentcityinEastHarlem. Homeowners near a tent city of 200 in Tampa, Florida organised to close it down,sayingitwoulddevaluetheirhomes.InSeattle,policehaveremovedsev eraltentcities,eachnamedNickelsvilleaftertheMayorwhoorderedtheevic tions. Yetinsomeplaces,likeNashville,Tennessee,tentcitiesaretoleratedbylo calpoliceandpoliticians.Churchgroupsareevenallowedtobuildshowersand provideservices.Othercitiesthathaveallowedtheseencampmentsare:Cham paign,Illinois;St.Petersburg,Florida;Lacey,Washington;Chattanooga,Tennes see; Reno, Nevada; Columbus, Ohio; Portland, Oregon. Ventura, California re centlychangeditslawstoallowthehomelesstosleepincarsandnearbySanta Barbarahasmadesimilarallowances.InSanDiego,Californiaatentcityappears everynightinfrontofthemainpubliclibrarydowntown. California seems to be where most new tent cities are appearing, although many are covert and try to avoid detection. One that attracted overflowing crowds is in the Los Angeles exurb of Ontario. The region is called the Inland Empireandhadbeenboominguntilrecently;itsbeenhitextremelyhardbythe wave of foreclosures and mass layoffs. Ontario is a city of 175,000 residents, so whenthehomelesspopulationinthetentcityexplodedpast400,aresidencyre quirement was created. Only those born or recently residing in Ontario could stay. The city provides guards and basic services for those who can legally live 1 there.
Even squatting ones own residence after foreclosure has worked out fairly wellinasurprisingnumberofcases.AmemberoftheOpenManufacturingemail list
Foreclosure is a doubleedged sword. Dear friends of mine, a couple with twodaughters,werereallystrugglingtwoyearsago,astheeconomytanked,to paytheirrentandfeedtheirfamilyfromthesamemeager,erraticpaychecks. When they heard that the owners of their rental unit had foreclosed, they sawitasthefinalblow.Butunliketheothersixresidentstheychosenottomove out.Itsbeeneighteenmonthssincethishappened:theyhaveanongoingrela tionshipwithcorporationsthatprovideheat,powerandinternetservicebutno rentispaid,whiletheformermasterssueeachother.Itisprobablethattheso calledownersofthepropertyarethemselvesbankruptandboughtout,atthis point;whoknowswhenthesituationmightresolveitself. In the US this is called Adverse possession, the legal term for squatting, andshouldtheykeepitupforsevenyears,theywouldowntheirapartmentfree andclear. ThisisinadenseneighborhoodofChicago,forperspective.Itshappening all over the place, and with more foreclosure on the horizon, its only going to
Gifford Hartman, Crisis in California: Everything Touched by Capital Turns Toxic, Turbulence5(2010)<http://turbulence.org.uk/turbulence5/california/>.
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getmorecommon.Singlefamiliesarentheonlyonesgoingbankrupt,itshap 1 peningtoalotoflandlordsandmortgageinterestsalso.
In addition, the proliferation of mortgagebased securities means the holder of a mortgage is several changeofhands removed from the original lender, and may well lack any documentation of the original mortgage agreement. Some courtshavefailedtoenforceevictionordersinsuchcases. Anotherpromisingexpedientforvictimsofforeclosureistoturntofirmslike BostonCommunityCapitalthatspecializeinbuyingupforeclosedmortgages,and thensellingtheproperty(withprinciplereducedtocurrentmarketvalue)backto the original occupants. BCCs bargaining power is aided, in cutting a deal with foreclosing lenders, by embarrassing demonstrations by neighbors demanding theyselltoBCCatmarketvalueratherthanevict.2 Ingeneral,theresalevalueofforeclosedresidencesissomuchlower,theyare sodifficulttoresell,andmanagingthepropertiesinthemeantimeissoinconven ient and costly, thatespecially when the growing volume of defaults increases thedifficultyofhandlingthemthebargainingpowerofdefaultinghomeowners isgrowingagainstlenderswithanincentivetocutadealratherthanbecomereal estateholdingcompanies. AlthoughCravensexpressedsomeinterestinthetechnicalpossibilitiesforso cialhousing,heobjectedtomyproposaltoincludehousingasafourthlegofan expandedQuadrupleAlliance.
Idisagreewiththename,QuadrupleAlliance,asthesethreeorganizationsIcon sider community ventures outside the home environment. Because the home I prefertokeepinthepersonalrealm,Idonotconsiderthatanofficialcommunity 3 space.
TotheextentthatmyproposedhousingfourthlegisadeparturefromCra vens schema, it may be a closer approximation to Hines original vision. Hines original post addressed the basic question, from the individual in need of subsis tence: What do I do now that Im unemployed. Housing is an integral part of such considerations. From the perspective of the sizable fraction of the general population that may soon be unemployed or unemployed, and consequently homeless,accesstoshelterfallsinthesamegeneralclassofpressingselfsupport needsasworkintheFabLabandfeedingoneselfviatheCSAfarm.AlthoughCra venschosetofocusonsocialproductiontotheexclusionofprivatesubsistence,if wereverttoHinesoriginalconcern,P2Phousingprojectsareverymuchpartofan overall resilient community packageanalogous to the Roman villas of the Fifth CenturyforweatheringtheGreatRecessionorGreatDepression2.0
SamPutman,WalkableCommunityNetworksforSpontaneousGiftEconomyDevelop mentandHappiness,OpenManufacturing,March20,2010<http://groups.google.com/group/ openmanufacturing/browse_thread/thread/373013b9d631a374/78ba19a52d25e144>. 2 John Leland, Finding in Foreclosure a Beginning, Not an End, New York Times, March21,2010<http://www.nytimes.com/2010/03/22/us/22foreclose.html>. 3 Nathan Cravens, [p2presearch] simpler way wiki, P2P Research, April 20, 2009 <http://listcultures.org/pipermail/p2presearch_listcultures.org/2009April/002083.html>.
TheAlternativeEconomy asaSingularity
ehaveseentheburdensofhighoverheadthattheconventional,hierarchical enterpriseandmassproductionindustrycarrywiththem,theirtendencyto confuse the expenditure of inputs with productive output, and their culture of costplusmarkup.Runningthroughoutthisbook,asacentraltheme,hasbeenthe superior efficiency of the alternative economy: its lower burdens of overhead, its moreintensiveuseofinputs,anditsavoidanceofidlecapacity. Two economies are fighting to the death: one of them a highlycapitalized, highoverhead, and bureaucratically ossified conventional economy, the subsi dizedandprotectedproductofoneandahalfcenturyscollusionbetweenbiggov ernmentandbigbusiness;theotheralowcapital,lowoverhead,agileandresilient alternative economy, outperforming the state capitalist economy despite being hobbledanddrivenunderground. The alternative economy is developing within the interstices of the old one, preparing to supplant it. The Wobbly phrase building the structure of the new societywithintheshelloftheoldisoneofthemostfittingphraseseverconceived forsumminguptheconcept.
A.NETWORKEDPRODUCTIONANDTHE BYPASSINGOFCORPORATENODES
One of the beauties of networked production, for subcontractors ranging from the garage shop to the small factory, is that it transforms the old corporate headquartersintoanodetobebypassed. Johan Soderberg suggests that the current model of outsourcing and net worked production makes capital vulnerable to being cut out of the production process by labor. He begins with an anecdote about Toyota subcontractor Aisin Seiki, the only manufacturer of a component critical to the whole Toyota net work,whosefactorywasdestroyedinafire:
The whole conglomerate was in jeopardy of grinding to a halt. In two months Toyota would run out of supplies of the parts produced by Aisin Seiki. Faced with looming disaster, the network of subcontractors fervently cooperated and createdprovisorymeansforsubstitutingthefactory.Inastunninglyshorttime, Toyota subsidiaries had restructured themselves and could carry on unaffected by the incident. Duncan Watt attributes the swift response by the Toyota con glomeratetoitsnetworkedmodeoforganisation.Therelevanceofthisstoryfor labour theory becomes apparent if we stipulate that the factory was not de stroyed in an accident but was heldup in a labour conflict. Networked capital turnseverypointofproduction,fromthefirmdowntotheindividualworkas
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signment, into a node subject to circumvention. ... [I]t is capitals ambition to routearoundlabourstrongholdsthathasbroughtcapitalismintonetworkpro duction....Nations,factories,naturalresources,andpositionswithinthesocial and technical division of labour, are all made subject to redundancy. Thus has capital annulled the threat of blockages against necks in the capitalist produc tionchain,uponwhichthenegotiatingpowerofunionsisbased.
Butthisredundancycreatedbycapitalasawayofroutingaroundblockages, Soderbergcontinues,threatenstomakecapitalitselfredundant:
Thefadingstrengthofunionswillcontinueforaslongasorganisedlabourisen trenched in past victories and outdated forms of resistance. But the networked modeofproductionopensupawindowofopportunityforarenewedcycleof struggle, this time, however, of a different kind. Since all points of production havebeentransformedintopotentiallyredundantnodesofanetwork,capitalasa factor of production in the network has itself become a node subject to redun 1 dancy.
(This was, in fact, what happened in the Third Italy: traditional mass production firms attempted to evade the wave of strikes by outsourcing produc tion to small shops, and were then blindsided when the shops began to federate amongthemselves.)2 Soderbergseesthegrowingimportanceofhumanrelativetophysicalcapital, andtheriseofpeerproductionintheinformationalrealm,asreasonforhopethat independent and selfmanaged networks of laborers can route around capital. Hencetheimportanceheattachestotheincreasinglydraconianintellectualprop ertyregimeasawayofsuppressingtheopensourcemovementandmaintaining controlovertheconditionsofproduction.3 DavePollard,writingfromtheimaginaryperspectiveof2015,madeasimilar observationaboutthevulnerabilityofcorporationsthatfollowtheNikemodelof hollowingthemselvesoutandoutsourcingeverything:
In the early 2000s, large corporations that were once hierarchical endto end business enterprises began shedding everything that was not deemed core competency,insomecasestothepointwheretheonlythingsleftwerebusiness acumen, market knowledge, experience, decisionmaking ability, brand name, and aggregation skills. This hollowing out allowed multinationals to achieve enormous leverage and margin. It also made them enormously vulnerable and potentiallydispensable. As outsourcing accelerated, some small companies discovered how to ex ploitthisveryvulnerability.When,forexample,theyidentifiedNorthAmerican manufacturersoutsourcingdomesticproductiontothirdworldplantsinthein terestofincreasingproductivity,theywentdirectlytothethirdworldmanufac turers, offered them a bit more, and then went directly to the North American retailers, and offered to charge them less. The expensive outsourcers quickly found themselves unnecessary middlemen.... The large corporations, having shed everything they thought was non core competency, learned to their cha grinthatintheconnected,informationeconomy,thevalueoftheircorecompe tency was much less than the inflated value of their stock, and they have lost
JohanSoderberg,HackingCapitalism:TheFreeandOpenSourceSoftwareMovement (NewYorkandLondon:Routledge,2008),pp.141142. 2 Michael J. Piore and Charles F. Sabel, The Second Industrial Divide: Possibilities for Prosperity(NewYork:HarperCollins,1984),pp.226227. 3 Soderberg,HackingCapitalism,pp.142142
THEALTERNATIVEECONOMYASASINGULARITY
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much of their market share to new federations of small entrepreneurial busi 1 nesses.
Theworstnightmareofthecorporatedinosaursisthat,inaneconomywhere imaginationorhumancapitalisthemainsourceofvalue,theimaginationmight takeawalk:thatis,thepeoplewhoactuallypossesstheimaginationmightfigure out they no longer need the companys permission, and realize its intellectual propertyisunenforceableinanageofencryptionandbittorrent(thesameisbe comingtrueinmanufacturing,asthediscoveryandenforcementofpatentrights againstreverseengineeringeffortsbyhundredsofsmallshopsservingsmalllocal marketsbecomessimplymorecostlythanitsworth). For example, Tom Peters gives the example of Oticon, which got rid of the entire formal organization and abolished departments, secretaries, and formal management titles. Employees put their personal belongings in caddies, or per sonal carts, moving them to appropriate spots in the completely open space as their work with various colleagues requires.2 The danger for the corporate gate keepers, in sectors where outlays for physical capital cease to present significant entry barriers, is that one of these days knowledge workers may push their per sonalcartsoutoftheorganizationaltogether,anddecidetheycandoeverything justaswellwithoutthecompany.
B.THEADVANTAGESOFVALUECREATIONOUTSIDETHECASHNEXUS
We already examined, in Chapters Three and Five, the tendencies toward a sharpreductioninthenumberofwagehoursworkedandincreasedproductionof value in the informal sector. From the standpoint of efficiency and bargaining power,thishasmanyadvantages. Ontheindividuallevel,akeyadvantageoftheinformalandhouseholdecon omy lies in its offer of an alternative to wage employment for meeting a major share of ones subsistence needs, and the increased bargaining power of labor in whatwageemploymentremains.
Howmuchdoesthelaborerincreasehisfreedomifhehappenstoownahome, sothatthereisnolandlordtoevicthim,andhowmuchstillgreaterishisfree domifhelivesonahomesteadwherehecanproducehisownfood? That the possession of capital makes a man independent in his dealings withhisfellowsisaselfevidentfact.Itmakeshimindependentmerelybecause itfurnisheshimactuallyorpotentiallymeanswhichhecanusetoproducesup 3 portforhimselfwithoutfirstsecuringthepermissionofothermen.
Ralph Borsodi demonstrated some eight decades agousing statistics!that the hourly wage from gardening and canning, and otherwise replacing external purchases with home production, is greater than the wages of most outside em ployment.4 Contra conventional finance gurus like Suze Orman, who recommend in vestmentslikelifetimecostaveragingofstockpurchases,contributingtoa401kup totheemployersmaximummatchingcontribution,etc.,themostsensiblegenu
David Pollard, The Future of Business, How to Save the World, January 14, 2004 <http://blogs.salon.com/0002007/2004/01/14.html>. 2 TomPeters,TheTomPetersSeminar:CrazyTimesCallforCrazyOrganizations(New York:VintageBooks,1994),pp.2930. 3 Ralph Borsodi, Prosperity and Security (New York and London: Harper & Brothers, 1938),p.241. 4 Borsodi,ThisUglyCivilization(Philadelphia:PorcupinePress,1929,1975),p.99.
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ine investment for the average person is capital investment in reducing his need foroutsideincome.Thisincludesbuildingorpurchasingtheroofoverhisheadas cheaplyandpayingitoffasquicklyaspossible,andsubstitutinghomeproduction forpurchases withwagemoneywheneverthefirst alternative isreasonably com petitive. Compared to the fluctuation in value of financial investments, Borsodi writes,
the acquisition of things which you can use to produce the essentials of com forthousesandlands,machinesandequipmentarenotsubjecttothesevicis situdes....Fortheireconomicutilityisdependentuponyourselfandisnotsub 1 jecttochangebymarkets,bylawsorbycorporationswhichyoudonotcontrol.
Thehomeproducerisfreefromtheinsecuritywhichhauntsthemyriadswho canbuythenecessariesoflifeonlysolongastheyholdtheirjobs.2Ahousehold withnomortgagepayment,alargegardenandawellstockedpantrymightsurvive indefinitely(ifinconveniently)withonlyoneparttimewageearner. As we saw in Chapter Three, the evaporation of rents on artificial property rights like intellectual property, and the rapid decline of capital outlays for physicalproduction,meanacrisisintheabilitytocapturevaluefromproduction. But, turning this on its head, it also means a collapse in the costs of living. As BruceSterlingargued\halffacetiously(doesheeverargueotherwise?),increased knowledge creates poverty in the sense that when everything is free, nothing is worth anything. But conversely, when nothing is worth everything, everything is free. And a world of free goods, while quite inconvenient for those who used to maketheirlivingsellingthosegoods,isofalessunambiguouslybadcharacterfor thosewhonolongerneedtomakeasmuchofalivingtopayforstuff.Wheneve rythingisfree,thepressuretomakealivinginthefirstplaceisalotless.
Waiting for the day of realization that Internet knowledgerichness actively MAKESpeopleeconomicallypoor.Gosh,Craigslisthassuchaccesstoultra cheapeverythingnow...heywaitasecond,wheredidmyjobgo? Someday the Internet will offer free food and shelter. At that point, hordes simply walk away. They abandon capitalism the way a realestate bustee 3 abandonsanunderwaterbuilding.
C.MOREEFFICIENTEXTRACTIONOFVALUEFROMINPUTS
John Robb uses STEMI compression, an engineering analysis template, as a toolforevaluatingthecomparativeefficiencyofhisproposedResilientCommuni ties:
In the evolution of technology, the next generation of a particular de vice/programoftenfollowsawellknownpatterninthemarketplace:itsdesign makes it MUCH cheaper, faster, and more capable. This allows it to crowd out the former technology and eventually dominate the market (i.e. transistors re placing vacuum tubes in computation). A formalization of this developmental processisknownasSTEMIcompression: Space.Lessvolume/areaused. Time.Faster. Energy.Lessenergy.Higherefficiency. Ibid.,p.337. Ibid.,p.352. 3 BruceSterling,ThePowerofDesigninyourexcitingnewworldofabjectpoverty, Wired: Beyond the Beyond, February 21, 2010 <http://www.wired.com/beyond_the_ be yond/2010/02/thepowerofdesigninyourexcitingnewworldofabjectpoverty/>.
2
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Mass.Lesswaste. I nformation.Higherefficiency.Lessmanagementoverhead. So,theviabilityofaproposednewgenerationofaparticulartechnologycanof ten be evaluated based on whether it offers a substantial improvement in the compression of all aspects of STEMI without a major loss in system complexity or capability. This process of analysis also gives us an arrow of development thatcanbetracedoverthelifeofagiventechnology.
Therelevanceoftheconcept,hesuggests,maygobeyondnewgenerationsof technology. Do Resilient Communities offer the promise of a generational im provementovertheexistingglobalsystemornot?

Inotherwords:istheResilientCommunityconcept(asenvisionedhere)aviable selforganizingsystemthatcanrapidlyandvirallycrowdoutexistingstructures due to its systemic improvements? Using STEMI compression as a measure, thereisreasontobelieveitis: Space.Localization(orhyperlocalization)radicallyreducesthespaceneeded tosupportanygivenunitofhumanactivity.Turnsuselessspace(residential, etc.)intoproductivespace. Time.Wastedtimeinglobaltransportiswashedaway.JIT(justintimepro duction)andplace. Energy.Wastedenergyforglobaltransportiseliminated.Energyproduction is tied to locality of use. More efficient use of solar energy (the only true exogenousenergyinputtoourglobalsystem). Mass.Lesssystemicwastage.Madetoordervs.madeformarket. Information.Radicalsimplification.Replaceshideouslycomplexglobalman 1 agementoverheadwithsimplelocalmanagementsystems.
The contrast between Robbs Resilient Communities and the current global system dovetails, more or less, with that between our two economies. And his STEMIcompressiontemplate,asamodelforanalyzingthealternativeeconomys superiorities over corporate capitalism, overlaps with a wide range of conceptual modelsdevelopedbyotherthinkers.WhetheritbeBuckminsterFullersephemer alization, or lean productions eliminating muda and doing more and more with lessandless,thesamegeneralideahasaverywidecurrency. A good example is what Mamading Ceesay calls the economies of agility. The emerging postindustrial age is a network age where emerging Peer Produc tionwillbedrivenbytheeconomiesofagility.
Economiesofscaleareaboutdrivingdowncostsofmanufacturedgoodsbypro ducingthemonalargescale.Economiesofagilityincontrastareaboutquickly beingabletoswitchbetweenproducingdifferentgoodsandservicesinresponse 2 todemand.
IftheToyotaProductionSystemisaquantumimprovementonSloanistmass productionintermsofSTEMIcompressionandtheeconomicsofagility,andnet workedproductionontheEmiliaRomagnamodelisasimilaradvancementonthe TPS, then the informal and household economy is an order of magnitude im provementonbothofthem.
1
John Robb, STEMI Compression, Global Guerrillas blog, November 12, 2008 <http://globalguerrillas.typepad.com/globalguerrillas/2008/11/stemi.html>. 2 Mamading Ceesay, The Economies of Agility and Disrupting the Nature of the Firm, Confessions of an Autodidactic Engineer, March 31, 2009 <http://evangineer .agoraworx.com/blog/20090331theeconomiesofagilityanddisruptingthenatureof thefirm.html>.
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JeffVailusesthetermRhizomefortheformsoforganizationassociatedwith Robbs Resilient Communities, and with the alternative economy in general: an alternativemodeofhumanorganizationconsistingofanetworkofminimallyself sufficientnodesthatleveragenonhierarchalcoordinationofeconomicactivity.
The two key concepts in my formulation of rhizome are 1) minimal self sufficiency, which eliminates the dependencies that accrete [sic] hierarchy, and 2)looseanddynamicnetworkingthatusesthesmallworldstheoryofnetwork information processing to allow rhizome to overcome information processing 1 burdensthatnormallyoverburdenhierarchies.
By these standards, the alternative economy that we saw emerging from the crises of state capitalism in previous chapters is capable of eating the corporate stateeconomyforlunch.Itsgreatvirtueisitssuperiorefficiencyinusinglimited resourcesintensively,asopposedtomassproductioncapitalistindustryspractice of adding subsidized inputs extensively. The alternative economy reduces waste and inefficiency through the greater efficiency with which it extracts usevalue fromagivenamountoflandorcapital. Animportantconceptforunderstandingthealternativeeconomysmoreeffi cientuseofinputsisproductiverecursion,whichNathanCravensusestoreferto the order of magnitude reduction in labor required to obtain a good when it is producedinthesocialeconomy,withouttheartificiallevelsofoverheadandwaste associatedwiththecorporatestatenexus.2Savingsinproductiverecursioninclude (say) laboring to produce a design in a fraction of the time it would take to earn themoneytopayforaproprietarydesign,orsimplyusinganopensourcedesign; orreforgingscrapmetalatatenththecostofusingvirginmetal.3
Productionmethodslowerthecostofproductswhensimplifiedforrapidreplica tion.Thatiscalledproductiverecursion.Understandingproductiverecursionis thefirststeptounderstandinghowweneedtorestructureIndustrialeconomic systems in response to this form of technological change. If Industrial systems arenotreconfiguredforproductiverecursion,theywillcollapsebeforereaching anywherenearfullautomation.Ihopethiswritinghelpsdivertakinkinthepro liferationofpersonaldesktopfabricationandfullproductiveautomationgener 4 ally.
Hecites,fromNeilGershenfeldsFab,aseriesofcasesthatprovethetheory of productive recursion in practice. One example is the greatly reduced cost for cableserviceinruralIndianvillages,duetoreverseengineeredsatellitereceivers bymeansofdistributedproduction.QuotingfromFab:
A typical village cable system might have a hundred subscribers, who pay onehundredrupees(abouttwodollars)permonth.Paymentisprompt,because the cablewallahs stop by each of their subscribers personally and rather per suasivelymakesurethattheypay.Visitingoneofthesecableoperators,Iwasin triguedbythetechnologythatmakesthesesystemspossibleandfinanciallyvi able. Ahandmadesatelliteantennaonhisrooffedthevillagescablenetwork.In stead of a roomful of electronics, the head end of his cable network was just a JeffVail,WhatisRhizome?JeffVail.Net,January28,2008<http://www.jeffvail.net/ 2007/01/whatisrhizome.html>. 2 Nathan Cravens, Productive Recursion Proven, Open Manufacturing (Google Groups), March 8, 2009 <http://groups.google.com/group/openmanufacturing/browse_ thread/thread/f819aab7683b93ac?pli=1>. 3 Cravens, Productive Recursion, Open Source Ecology Wiki <http://openfarmtech .org/index.php?title=Productive_Recursion>. 4 Cravens,ProductiveRecursionProven.
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shelfatthefootofhisbed.Asensitivereceivertheredetectsandinterpretsthe weaksignalfromthesatellite,thenthesignalisamplifiedandfedintothecable for distribution around the village. The heart of all this is the satellite receiver, whichsellsforafewhundreddollarsintheUnitedStates.Hereportedthatthe 1 costofhiswasonethousandrupees,abouttwentydollars.
ThecheapsatellitereceiverwasbuiltbySharp,whichaftersomelegworkGershen feldfoundtobeanentirelyindependentdomesticbrandrunoutofaroomfullof workbenchesinadistrictoffurnitureworkshopsinDelhi.

They produced all of their own products, although not in that roomdone there,itwouldcosttoomuch.Theassemblyworkwasfarmedouttohomesin the community, where the parts were put together. Sharp operated like a farm market or grain elevator, paying a marketbased perpiece price on what was broughtin.ThejoboftheSharpemployeeswastotestthefinalproducts. Theheartofthebusinesswasinabackroom,whereanengineerwasbusy takingapartlastgenerationvideoproductsfromdevelopedmarkets.Justasthe students in my fab class would learn from their predecessors designs and use them as the starting point for their own, this engineer was getting a handson educationinsatellitereceptionfromthehandiworkofunknownengineerselse where.Hewouldreverseengineertheirdesignstounderstandthem,thenredo the designs so that they could be made more simply and cheaply with locally available components and processes. And just as my students werent guilty of plagiarismbecauseofthevaluetheyaddedtotheearlierprojects,thisengineers inspiration by product designs that had long since become obsolete was not likelytobeaconcerntotheoriginalsatellitereceivermanufacturers. TheengineerattheapexoftheSharppyramidwasgoodathisjob,butalso frustrated. Their business model started with existing product designs. The companysawabusinessopportunitytobranchoutfromcabletelevisiontocable Internet access, but there werent yet available obsolete cable modems using commoditypartsthattheycouldreverseengineer.Becausecablemodemsareso recent,theyusehighlyintegratedstateoftheartcomponentsthatcantbeun derstood by external inspection, and that arent amenable to assembly in a home. But there no technological reason that data networks couldnt be pro ducedinjustthisway,providingruralIndiawithInternetaccessalongwithBol lywoodsoapoperas.... ...Thereisntevenasingleentitywithwhichtopartneronajointventure; 2 thewholeoperationisfundamentallydistributed.
Anotherexampleofproductiverecursion,alsofromGershenfeldsexperiences inIndia,isthereverseengineeringofgroundresistancemeters.
Forexample,the groundresistance meters that were usedforlocatingwater in the area cost 25,000 rupees (about $500). At Vigyan Ashram they bought one, stripped it apart, and from studying it figured out how to make them for just 5,000 rupees.... Another example arose because they needed a tractor on the farmatVigyanAshram,butcouldnotaffordtobuyanewone.Instead,theyde veloped their own MechBull made out of spare jeep parts for 60,000 rupees ($1,200). This proved to be so popular that a Vigyan Ashram alum built a busi 3 nessmakingandsellingthesetractors.
Yet another is a walkbehind tractor, developed from a modified motorcycle withinAnilGuptasHoneybeeNetwork(anIndianalternativetechnologygroup).

Modeledonhowhoneybeesworkcollectingpollenwithoutharmingtheflow ers and connecting flowers by sharing the pollenthe Honeybee Network col NeilGershenfeld,Fab:TheComingRevolutiononYourDesktopfromPersonalCom puterstoPersonalFabrication(NewYork:BasicBooks,2005),p.182. 2 Ibid.,pp.185187. 3 Ibid.p.164.
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lectsandhelpsdevelopideasfromgrassrootsinventors,sharingratherthantak ingtheirideas.Atlastcounttheyhadadatabaseoftenthousandinventions. OneIndianinventorcouldntaffordorjustifybuyingalargetractorforhis smallfarm;itcosttheequivalentof$2,500.Buthecouldaffordamotorcyclefor about$800.Sohecameupwitha$400kittoconvertamotorcycleintoathree wheeledtractor(removableofcourse,sothatitsstillusefulastransportation). Anotheragriculturalinventorwasfacedwithasimilarprobleminapplyingfertil 1 izer;hissolutionwastomodifyabicycle.
According to Marcin Jakubowski of Open Source Ecology, the effects of pro ductiverecursionarecumulative.CascadingFactor10costreductionoccurswhen theavailabilityofoneproductdecreasesthecostofthenextproduct.2Wealready saw,inChapterFive,thespecificcaseoftheCEBPress,whichcanbeproducedfor around20%ofthecostofpurchasingacompetingcommercialmodel. AmoryLovinsandhiscoauthors,inNaturalCapitalism,describedthecascad ingcostsavings(TunnelingThroughtheCostBarrier)thatresultwhentheeffi cienciesofonestageofdesignreducecostsinlaterstages.Incrementalincreasesin efficiencymayincreasecosts,butlargescaleefficiencyimprovementsinentirede signsmayactuallyresultinmajorcostreductions.Improvingtheefficiencyofin dividualcomponentsinisolationcanbeexpensive,butimprovingtheefficiencyof systemscanreducecostsbyordersofmagnitude.3
Much of the art of engineering for advanced resource efficiency involves harnessing helpful interactions between specific measures so that, like loaves andfishes,thesavingskeeponmultiplying.Themostbasicwaytodothisisto thinkbackward,fromdownstreamtoupstreaminasystem.Atypicalindustrial pumping system, for example ..., contains so many compounding losses that aboutahundredunitsoffossilfuelatatypicalpowerstationwilldeliverenough electricitytothecontrolsandmotortodeliverenoughtorquetothepumptode liveronlytenunitsofflowoutofthepipealossfactorofabouttenfold. But turn those tentoone compounding losses around backward ..., and theygenerateaonetotencompoundingsaving.Thatis,savingoneunitofen ergyfurthestdownstream(suchasbyreducingfloworfrictioninpipes)avoids enoughcompoundinglossesfrompowerplanttoendusetosaveabouttenunits 4 offuel,cost,andpollutionbackatthepowerplant.
Totakeanotherexample,bothpowersteeringandV8enginesresultedfrom Detroitsmassiveincreasesinautomobileweightinthe1930s,alongwithmarket ingoriented decisions to add horsepower that would be idle except during rapid acceleration. The introduction of lightweight frames, conversely, makes possible the use of much lighter internal combustion engines or even electric motors, whichinturneliminatetheneedforpowersteering. Most of the orderofmagnitude efficiencies of wholesystem design that Lovins et all describe result, not from new technology, but from more conscious use of existing technology: what Edwin Land called the sudden cessation of stu pidityorstoppinghavinganoldidea.5Simplycombiningexistingtechnological elementsinthemosteffectivewaycanresultinefficiencyincreasesofFactorFour,
Ibid.,p.88. Marcin Jakubowski, OSE ProposalTowards a World Class Open Source Research and Development Facility, v0.12, January 16, 2008 <http://openfarmtech.org/OSE_ Proposal.doc>. 3 PaulHawken,AmoryLovins,andL.HunterLovins,NaturalCapitalism:Creatingthe Next Industrial Revolution (Boston, New York, and London: Little, Brown and Company, 1999),pp.113124. 4 Ibid.,p.121. 5 Ibid.,pp.65,117.
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Factor Eight, or more. The overall designs are generally the kinds of mashups of offtheshelf technology that Cory Doctorow and Murray Bookchin comment on below. The increased efficiencies result from a design process like Eric Raymonds Bazaar: designers operate intelligently, with constant feedback.1 The number of stepsandthetransactioncostsinvolvedinaggregatinguserfeedbackwiththede signprocessarereduced.Theinefficienciesthatresultfromaninabilitytothink backwardarefarmorelikelytooccurinastovepipedorganizationalframework, whereeachsteporpartisdesignedinisolationbyadesignerwhoserelationtothe overall process is mediated by a bureaucratic hierarchy. For example, in building design:
Conventional buildings are typically designed by having each design specialist toss the drawings over the transom to the next specialist. Eventually, all the contributing specialists recommendations are integrated, sometimes simply by 2 usingastapler.
Thisapproachinevitablyresultsinhighercosts,becauseincreasedefficiencies ofasinglesteptakeninisolationgenerallyaregovernedbyalawofincreasedcosts anddiminishingreturns.Thickerinsulation,betterwindows,etc.,costmorethan theirconventionalcounterparts.Lightermaterialsandmoreefficientenginesfora car, similarly, cost more than conventional components. So optimizing the effi ciencyofeachstepinisolationfollowsarisingcostcurve,witheachmarginalim provementinefficiencyofthestepcostingmorethanthelast.Butbyapproaching design from the perspective of a whole system, it becomes possible to tunnel throughthecostbarrier:
Whenintelligentengineeringanddesignarebroughtintoplay,bigsavingsoften costlessupfrontthansmallorzerosavings.Thickenoughinsulationandgood enough windows can eliminate the need for a furnace, which represents an in vestmentofmorecapitalthanthoseefficiencymeasurescost.Betterappliances helpeliminatethecoolingsystem,too,savingevenmorecapitalcost.Similarly,a lighter,moreaerodynamiccarandamoreefficientdrivesystemworktogetherto launch a spiral of decreasing weight, complexity and cost. The only moderately moreefficienthouseandcardocostmoretobuild,butwhendesignedaswhole systems,thesuperefficienthouseandcaroftencostlessthantheoriginal,unim 3 provedversions.
Whileaddedinsulationandtighterwindowsincreasethecostofinsulationor windows,takeninisolation,ifintegratedintooverallbuildingdesigntheymayre ducetotalcostsupfrontbyreducingtherequiredcapacityandhenceoutlayson capital equipmentof heating and cooling systems. A more energyefficient air conditioner, given unchanged cooling requirements, will cost more; but energy efficientwindows,officeequipment,etc.,canreducethecoolingloadby85%,and thusmakeitpossibletoreplacethecoolingsystemwithonethreefourthssmaller than the originalthereby not only reducing the energy bill by 75%, but enor mously reducing capital expenditures on the air conditioner.4 The trick is to do therightthingsintherightorder:
...ifyouregoingtoretrofityourlightsandairconditioner,dothelightsfirstso youcanmaketheairconditionersmaller.Ifyoudidtheopposite,youdpayfor Eric S. Raymond, The Cathedral and the Bazaar <http://catb.org/~esr/writings/ homesteading>. 2 Hawkenetal,NaturalCapitalism,p.90. 3 Ibid.,p.114. 4 Ibid.,pp.119120.
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morecoolingcapacitythanyoudneedafterthelightingretrofit,andyoudalso maketheairconditionerlessefficientbecauseitwouldeitherrunatpartloador 1 cycleonandofftoomuch.
This is also a basic principle of lean production: most costs come from five percent of point consumption needs, and from scaling the capacity of the load bearinginfrastructuretocoverthatextrafivepercentinsteadofjusthandlingthe firstninetyfivepercent.Ittiesin,aswell,withanotherleanprinciple:gettingpro ductionoutofsyncwithdemand(includingthedownstreamdemandfortheout putofonestepinaprocess),eitherspatiallyortemporally,createsinefficiencies. Optimizingonestagewithoutregardtoproductionflowanddownstreamdemand usuallyinvolvesexpensiveinfrastructuretogetaninprocessinputfromonestage to another, often with intermediate storage while it is awaiting a need. The total resulting infrastructure cost greatly exceeds the saving at individual steps. Ineffi cient synchronization of sequential steps in any process results in bloated over headcostsfromadditionalstorageandhandlinginfrastructure. A good example of the costtunneling phenomenon was engineer Jan Schil hamsworkattheInterfacecarpetfactoryinShanghai,whichreducedhorsepower requirementsforpumpinginoneprocesstwelvefoldwhilereducingcapitalcosts. In conventional design, the factory layout and system of pipes are assumed as given,andthepumpschosenagainstthatbackground.
...First,Schilhamchosetodeploybigpipesandsmallpumpsinsteadofthe original designs small pipes and big pumps. Friction falls as nearly the fifth powerofpipediameter,somakingthepipes50percentfatterreducestheirfric tionby86percent.Thesystemneedslesspumpingenergyandsmallerpumps andmotorstopushagainstthefriction.Ifthesolutionisthiseasy,whywerent the pipes originally specified to be big enough? ... Traditional optimization comparesthecostoffatterpipewithonlythevalueofthesavedpumpingenergy. This comparison ignores the size, and hence the capital cost, of the [pumping] equipmentneededtocombatthepipefriction.Schilhamfoundheneedntcalcu late how quickly the savings would repay the extra upfront cost of the fatter pipe,becausecapitalcostwouldfallmoreforthepumpinganddriveequipment thanitwouldriseforthepipe,makingtheefficientsystemasawholecheaperto construct. Second,Schilhamlaidoutthepipesfirstandtheninstalledtheequipment, in reverse order from how pumping systems are conventionally installed. Nor mally,equipmentisputinsomeconvenientandarbitraryspot,andthepipefit ter is then instructed to connect point A to point B. the pipe often has to go throughallsortsoftwistsandturnstohookupequipmentthatstoofarapart, turnedthewrongway,mountedatthewrongheight,andseparatedbyotherde vicesinstalledinbetween.... Bylayingoutthepipesbeforeplacingtheequipmentthatthepipesconnect, Schilham was able to make the pipes short and straight rather than long and crooked.Thatenabledhimtoexploittheirlowerfrictionbymakingthepumps, 2 motors,invertersandelectricalsevensmallerandcheaper.
VinayGuptadescribedsomeofthespecificefficienciesinvolvedinproductive recursion, that combine to reduce the alternative economys costs by an order of magnitude.3Themostimportantefficiencycomesfromdistributedinfrastructure whichprovides
1
Ibid.,p.122. Ibid.,pp.116117. 3 VinayGupta,TheGlobalVillageDevelopmentBank:financinginfrastructureatthe individual, household and village level worldwide Draft 2 (March 12, 2009)
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thesameclassofservicesthatareprovidedbycentralizedsystemslikethewater and power grids, but without the massive centralized investments in physical plant.Forexample,drytoiletsandsolarpanelscanprovidehighqualityservices householdbyhouseholdwithoutagrid.
Thedigitalrevolutionandnetworkorganizationinteractwithdistributedin frastructuretoremovemostoftheadministrativeandothertransactioncostsin volvedingettingthetechnologiestothepeoplewhocanbenefitfromthem.Itis, inotherwords,governedbytherulesofRaymondsBazaar,whichRobbmadethe basisofhisopensourceinsurgency. Distributed infrastructure also benefits from economies of agility, as op posed to the enormous capital outlays in conventional blockbuster investments thatmustfrequentlybeabandonedassunkcostswhenthesituationchangesor fundingstops....[H]alfadamisnodamatall,but500of1000smallprojectsis halfwaytothegoal.Anddistributedinfrastructureprojectsmanagetodowithout the enormous administrative and overhead costs of conventional organizations, whichwesawdescribedbyPaulGoodmaninChapterTwo;mostoftheorganiza tionandplanningaredonebythosewiththetechnicalknowledgeandsweateq uity,whoaredirectlyengagedintheprojectandreactingtothesituationonthe ground. And finally, Gupta argues, distributed financemicrocreditinteracts with distributedinfrastructureandnetworkorganizationtoheightentheadvantagesof agilityandlowoverheadstillfurther. Wealsosaw,inChapterFive,thewaysthatmodulardesignandtheformsof stigmergic organization facilitated by opensource design contribute to lower costs.ModulardesignisawayofgettingmorebangfortheR&Dbuckbymaximiz ing use of a given innovation across an entire product ecology, and at the same time building increased redundancy into the system through interchangeable parts.1 And stigmergic organization with opensource designs eliminates barriers towidespreaduseofthemostefficientexistingdesigns. MalcolmGladwellsDavidvs.Goliathanalysisofmilitaryhistoryisanexcel lent illustration of the economies of agility. Victory goes to the bigger battalions aboutseventimesoutoftenwhenGoliathoutnumbersDavidtentoone,thatis. But when the smaller army, outnumbered ten to one, acknowledges the fact and deliberately chooses unconventional tactics that target Goliaths weaknesses, it actuallywinsaboutsixtimesoutoften.Whenunderdogschoosenottoplayby Goliathsrules,theywin...GuerrillafightersfromJ.E.B.StuarttoT.E.Lawrence to Ho Chi Minh have learned, as General Maurice de Saxe put it, that victory is about legs rather than arms. As Lawrence wrote, Our largest available resources were the tribesmen, men quite unused to formal warfare, whose assets were movement, endurance, individual intelligence, knowledge of the country, cour age.2 Another good example is what the U.S. military (analyzing Chinese asym metric warfare capabilities) calls Assassins Maces: anything which provides a
<http://vinay.howtolivewiki.com/blog/hexayurt/mylatestpiecetheglobalvillage developmentbank1348>. 1 JonathanDugan,forexample,stressesRedundancyandModularityastwoofthecen tralprinciplesofresilience.ChrisPinchen,Resilience:Patternsforthrivinginanuncertain world, P2P Foundation Blog, April 17, 2010 <http://blog.p2pfoundation.net/resilience patternsforthrivinginanuncertainworld/2010/04/17>. 2 Malcolm Gladwell, How David Beats Goliath, The New Yorker, May 11, 2009 <http://www.newyorker.com/reporting/2009/05/11/090511fa_fact_gladwell?currentPage=all >.
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cheapmeansofcounteringanexpensiveweapon.Agoodexampleistheblackbox thattransmitstenthousandsignalsonthesamefrequencyusedbySAMmissiles, and thus overwhelms American airtosurface missiles which target SAM radio signals.TheChinese,apparently,workfromtheassumptionthattheU.S.develops countermeasurestoAssassinsMaceweapons,anddeliberatelymakeiteasierfor Americanintelligencetoacquireoldersuchweaponsasaformofdisinformation; theres good reason to believe the Chinese military can work around American countermeasures much more quickly, and cheaply, than the U.S. can develop them.1 A recent example of Assassins Mace technology is Skygrabber, an offthe shelf software product that costs $26. Insurgents in Afghanistan use it to capture videofeedsfromU.S.militarydrones.ThePentagonhasknownabouttheproblem since the Balkan wars, butget thisdidnt bother spending the money to en cryptthefeedbecausetheyassumedlocaladversarieswouldntknowhowtoex ploitit.2InourdiscussionofnetworkedresistanceinChapterThree,ifyourecall, wesawthatthemusicindustryassumeditsDRMonlyhadtobegoodenoughto thwarttheaverageuser,becausethegeekswhocouldcrackitwouldbetoofewto have a significant economic impact. But as Cory Doctorow pointed out, it takes only one geek to figure it out and then explain it to everybody else. Its called stigmergic organization. Well, heres Dat Ole Debbil stigmergy again, and the Pentagonshavingaboutasmuchfunwithitastherecordcompanies.JohnRobb describestheclashoforganizationalcultures:
Thiseventisntanaberration.Itisaninevitabledevelopment,onethatwill onlyoccurmoreandmoreoften.Why?Militarycyclesofdevelopmentandde ployment take decades due to the dominance of a lethargic, bureaucratic, and bloated military industrial complex. Agility isnt in the DNA of the system nor will it ever be (my recent experience with a breakthrough and inexpensive in formationwarfaresystemmyteambuilt,isyetanotherexampleofhowFAILthe militaryacquisitionsystemis). In contrast, vast quantities of cheap/open/easy technologies (commercial and open source) are undergoing rapid rates of improvement. Combined with tinkeringnetworksthatcanrepurposethemtoaplethoraofunintendedneeds (likewarfare),thisdevelopmentpathbecomesaninexorableforce.Thedelta(a deficitfromtheperspectiveofthestatusquo,anadvantageforrevisionists)be tweentheformalandtheinformalwillonlyincreaseasearlystagenetworksthat focus specifically on weapons/warfare quickly become larger, richer, etc. (this willhappenastheyarecombinedwiththeeconomicsystemsofmorecomplex 3 tribal/communityDarknets).
In theory, its fairly obvious what the U.S. national security establishment needs to do. All the assorted Fourth Generation Warfare doctrines are pretty muchagreedonthat.Ithastoreconfigureitselfasanetwork,moredecentralized and agile than the network its fighting, so that it can respond quickly to intelli gence and small autonomous units can swarm enemy targets from many direc
David Hambling, China Looks to Undermine U.S. Power, With Assassins Mace. Wired,July2<http://www.wired.com/dangerroom/2009/07/chinalookstoundermineus powerwithassassinsmace/>. 2 Siobhan Gorman, Yochi J. Dreazen and August Cole, Insurgents Hack U.S. Drones, WallStreetJournal,December17,2009<http://online.wsj.com/article/SB126102247889095011 .html>. 3 John Robb, SUPER EMPOWERMENT: Hack a Predator Drone, Global Guerrillas, December 17, 2009 <http://globalguerrillas.typepad.com/globalguerrillas/2009/12/super empowermenthackapredatordrone.html>.
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tionsatonce.1Theproblemis,itseasiersaidthandone.AlQaedahadonehuge advantageovertheU.S.nationalsecurityestablishment:OsamabinLadenissim plyunabletointerferewiththeoperationsoflocalAlQaedacellsinthewaythat Americanmilitarybureaucraciesinterferewiththeoperationsofmilitaryunits.No matterwhat4GWdoctrinecallsfor,nomatterwhattheslogansandbuzzwordsat theacademiesandstaffcollegessay,itwillbeimpossibletodoanyofitsolongas themilitarybureaucracyexistsbecausemilitarybureaucraciesareconstitutionally incapableofrestrainingthemselvesfrominterference.Robbdescribestheproblem. HequotesJonathanVaccarosopedfromtheNewYorkTimes:

Inmyexperience,decisionsmovethroughtheprocessofriskmitigationlike molasses.WhentheTalibanarriveinavillage,Idiscovered,ittakes96hoursfor an Army commander to obtain necessary approvals to act. In the first half of 2009,theArmySpecialForcescompanyIwaswithrepeatedlytriedtointerdict Taliban. By our informal count, however, we (and the Afghan commandos we workedwith)werestoppedon70percentofourattemptsbecausewecouldnot achievetherequisite11approvalsintime. Forsomeunits,groundmovementtodislodgetheTalibanrequiresacolo nelsoversight.IneasternAfghanistan,travelinginanythingotherthana20ton mineresistant ambushprotected vehicle requires a written justification, a risk assessment and approval from a colonel, a lieutenant colonel and sometimes a major.Thesevehiclesaresolargethattheycandrivetofewerthanhalfthevil lagesinAfghanistan.Theysinkintowetroads,crushdryonesandrequirewide berth on mountain roads intended for donkeys. The Taliban walk to these vil lagesordrivepickuptrucks. Theredtapeisntjustonthebattlefield.Combatcommandersarerequired tosubmitreportsinPowerPointwithproperfonts,linewidthsandcolorssothat the filing system is not derailed. Small aid projects lag because of multimonth authorizationprocedures.AUnitedStatesfinancedhealthclinicinKhostProv incewasbuiltlastyear,butitsopeningwasdelayedformorethaneightmonths whilepaperworkforerectingitsprotectivefencewaitedintheapprovalqueue. Communication with the population also undergoes thorough oversight. When a suicide bomber detonates, the Afghan streets are abuzz with Taliban propagandaaboutthegloriesofthewaragainstAmerica.Meanwhile,ourmes sageshavetoinchthroughapressreleaseapprovalpipeline,emerging24to48 2 hoursaftertheevent,likeadebutantetoolatefortheball.
Robbaddshisowncommentsonjusthowbadlytheagilityenhancingpoten tialofnetworktechnologyissabotaged:
Riskmitigationtrumpsinitiativeeverytime.Careersaremoreimportantthan victory. Risk evaluation moves upward in the hierarchy. Evaluation of risk takestime,particularlywiththepaucityofinformationthatcanbeaccessed atpositionsremovedfromtheconflict.... New communications technology isnt being used for what it is designed to do (enable decentralized operation due to better informed people on the ground).Insteaditisbeingusedtoenablemorecomplicatedandhierarchical approval processesmore sign offs/approvals, more required processes, and higher level oversight. For example: a general, and his staff, directly 3 commandingasmallstriketeamremotely. John Arquilla and David Ronfeldt, Fighting the Network War, Wired, December 2001<http://www.wired.com/wired/archive/9.12/netwar.html>. 2 Jonathan J. Vaccaro, The Next SurgeCounterbureaucracy, New York Times, De cember7,2009<http://www.nytimes.com/2009/12/08/opinion/08vaccaro.html>. 3 Robb, Fighting an Automated Bureaucracy, Global Guerrillas, December 8, 2009 <http://globalguerrillas.typepad.com/globalguerrillas/2009/12/journalfightingan automatedbureaucracy.html>.
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So long as the military bureaucracy exists, it will be impossible to put 4GW ideasintopracticewithoutinterferencefromthepointyhairedbosses. AnotherexampleofthesamephenomenonisthewaytheTransportationSe curity Administration deals with security threats: as the saying goes, by always planningforthelastwar.
First they attacked us with box cutters, so the TSA took away anything even vaguelysharporpointy.Thentheytried(andfailed)tohurtuswithstuffhidden in their shoes. So the TSA made us take off our shoes at the checkpoint. Then therewasarumorofaplanned(butneverexecuted)attackinvolvingliquids,so 1 theTSAdecidedtotakeawayourliquids.
Distributed infrastructure benefits, as well, from what Robb calls scale in variance2: the ability of the part, in cases of system disruption, to replicate the whole.Eachpartconservesthefeaturesthatdefinethewhole,onthesameprinci pleasahologram.ProjectslikeOpenSourceEcology,3oncethemajorcomponents ofalocalsiteareinplace,canduplicateanyoftheindividualcomponentsordu plicate them all to create a second site. The Fab Lab can produce the parts for a steamengine,CEBpress,tractor,sawmill,etc.,oreventhemachinetoolsforan otherFabLab. DistributistwriterJohnMedaillepointedout,byprivateemail,thattheIsrael itesundertheJudgeswereagoodexampleofsuperiorextractionofvaluefromin puts.AtatimewhenthemorecivilizedPhilistinesdominatedmostofthefertile valleys of Palestine, the Israelite confederacy stuck to the central highlands. But theiralternativetechnology,focusedonextractingmoreproductivityfrommar ginalland,enabledthemtomakemoreintensiveuseofwhatwasunusabletothe Philistines.
Thetribesclungtothehilltopsbecausethevalleyswereownedbythetownies (Philistines)andthelawofrentswasinfulloperation.TheHebrewswerefreein the hills, and increasingly prosperous, both because of their freedom and be cause of new technologies, namely contoured plowing and waterproof cement, 4 whichallowedtheconstructionofcisternstoputthemthroughthedryseason.
In other words, a new technological regime supplanted a more privileged formofsocietythroughsuperiorefficiency,despitebeingdisadvantagedinaccess to productive inputs. The Hebrews were able to outcompete the dominant social systembymakingmoreefficientandintensiveuseofinputsthatwereunusable withconventionalmethodsofeconomicorganization. The alternative economy, likewise, has taken for its cornerstone the stone whichthebuildersrefused.AsIputitinablogpost(inanadmittedlygrandiose yetneverthelesseminentlysatisfyingpassage):
...[T]heowningclassesuselessefficientformsofproductionpreciselybecause thestategivesthempreferentialaccesstolargetractsoflandandsubsidizesthe inefficiency costs of largescale production. Those engaged in the alternative economy,ontheotherhand,willbemakingthemostintensiveandefficientuse ofthelandandcapitalavailabletothem.Sothebalanceofforcesbetweentheal Thoreau, More on the swarthy threat to our precious carryon fluids, Unqualified Offerings, December 26, 2009 <http://highclearing.com/index.php/archives/2009/12/26/ 10438>. 2 Robb,ResilientCommunitiesandScaleInvariance,GlobalGuerrillas,April16,2009 <http://globalguerrillas.typepad.com/globalguerrillas/2009/04/resilientcommunitiesand scaleinvariance.html>. 3 SeeChapterFive. 4 JohnMedaille,personalemailtoauthor,January28,2009.
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ternativeandcapitalisteconomywillnotbeanywherenearasunevenasthedis tributionofpropertymightindicate. Ifeveryonecapableofbenefitingfromthealternativeeconomyparticipates in it, and it makes full and efficient use of the resources already available to them, eventually well have a society where most of what the average person consumesis produced in a network of selfemployed or workerownedproduc tion, and the owning classes are left with large tracts of land and understaffed factoriesthatarealmostuselesstothembecauseitssohardtohirelaborexcept atanunprofitableprice.Atthatpoint,thecorrelationofforceswillhaveshifted untilthecapitalistsandlandlordsareislandsinamutualistseaandtheirland 1 andfactorieswillbethelastthingtofall,justliketheU.SEmbassyinSaigon.
Soderberg refers to the possibility that increasing numbers of workers will defectfromthelabourmarketandestablishmeansofnonwagedsubsistence, through efficient use of the waste products of capitalism.2 The freegan lifestyle (lesscharitablycalleddumpsterdiving)isoneendofaspectrumofsuchpossi bilities.Attheotherendislowcostrecyclingandupgradingofusedanddiscarded electronic equipment: for example, the rapid depreciation of computers makes it possibletoaddRAMtoamodelafewyearsoldatasmallfractionofthecostofa newcomputer,withalmostidenticalperformance. ReasonsBrianDoherty,inadisplayofratherconvolutedlogic,attemptedto depictfreeganismasproofofcapitalismsvirtues:
Itsniceofcapitalismtoprovidesuchanoverflowingcornucopiathatthe[free gans] of the world can opt out. Wouldnt it be gracious of them to show some love to the system that manages to keep them alive and thriving without even 3 trying?
TotakeDohertysargumentandstanditonitshead,considertheamountof wasteresultingfromtheperverseincentivesundertheSovietplannedeconomy.In somecases,newrefrigeratorsandotherapplianceswerebadlydamagedbybeing roughlythrownoffthetrainandontoapileatthepointofdelivery,becausethe factory got credit simply for manufacturing them, and the railroad got credit for delivering them, under the metrics of the Five Year Plan. Whether they actually worked,orarrivedattheretailerinaconditionsuchthatsomeonewaswillingto buythem,wasbesidethepoint.Now,imagineifsomehandyfellowintheSoviet alternativeeconomymovementhadboughtupthosefridgesasfactoryrejectsfora ruble apiece, or just bought them for scrap prices from a junkyard, and then got them in working order at little or no cost. Would Doherty be praising Soviet so cialismforitsefficiencyinproducingsuchasurplusthattheRussianfreegancould liveoffthewaste? Whenthealternativeeconomyisabletomakemoreefficientuseofthewaste byproductsofstatecapitalismwastebyproductsthatresultfromthelattersinef ficient use of subsidized inputsand thereby supplant state capitalism from withinbythesuperioruseofitsunderutilizedresourcesandwaste,itisratherper versetodismissthealternativeeconomyasjustanotherhobbyorlifestylechoice enabledbytheenormousefficienciesofcorporatecapitalism.Andthealternative economyisutilizinginputsthatwouldotherwisebewaste,andtherebyestablish
Kevin Carson, Building the Structure of the New Society Within the Shell of the Old, Mutualist Blog: Free Market AntiCapitalism, March 22, 2005 <http://mutualist.blogspot.com/2005/03/buildingstructureofnewsociety.html>. 2 Soderberg,HackingCapitalism,p.172. 3 Brian Doherty, The Glories of QuasiCapitalist Modernity, Dumpster Diving Divi sion, Reason Hit & Run Blog, September 12, 2007 <http://reason.com/blog/show/122450 .html>.
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ing an ecological niche based on the difference between capitalisms actual and potentialefficiencies;sototreatcapitalismsinefficienciesasamarkofefficiency i.e.,howinefficientitcanaffordtobeisadisplayofLookingGlasslogic. Thealternativeeconomyssuperiorextractionofvaluefromwasteinputsex tends,ultimately,totheentireeconomy.
Iftheseisolatednodesofselfsufficiencyconnect,communicate,andinter act,thentheywillenjoyanimprovepositionrelativetohierarchalstructures.... Additionally, from the perspective of the diagonal, the Diagonal Economy willbeginasacomplementarystructurethatiscoextensivebutoutofphasewith ourcurrentsystem.However,itwillbepreciselybecauseitleveragesamoreeffi cientinformationprocessingstructurethatitwillbeabletoeventuallysupplant 1 thesubstratehierarchiesasthedominantsystem.
One example of how the alternative economy permits the increasingly effi cientextractionofvaluefromwastematerial,bytheway,isthewayinwhichnet worktechnologyfacilitatesrepairevenwithinthelimitsofproprietarydesignand theplannedobsolescencemodel.InChapterTwo,weconsideredJulianSanchezs account of how Apples design practices serve to thwart cheap repair. iFixit is an answertothatproblem:
KyleWiensandLukeSoulesstartediFixit(ifixit.com)outoftheirdormsat CalPolyinSanLuisObispo,Calif.Thatwassixyearsago.Todaytheyhaveaself funded business that sells the parts and tools you need to repair Apple equip ment. One of their innovations is creating online repair manuals for free that showyouhowtomaketherepairs. OurbiggestsourceofreferralsisAppleemployees,particularlyfolksatthe GeniusBar,Wiensays.TheyrefercustomerswhocomplainwhenApplewont letthemfixanoutofwarrantyproduct.(Apple:Justbuyanewone!) iFixitwillalsobuyyouroldMacandharvestthereusablepartstoresell.... Ifitsstartingtosoundlikeanautopartsfranchise,well,WiensandSouleshave been thinking about someday doing for cars what they do for computers and 2 handheldstoday.
Inotherwords,thesameopensourceinsurgencymodelthatgovernsthefile sharing movement is spreading to encompass the development of all kinds of measuresforroutingaroundplannedobsolescenceandtheotherirrationalitiesof corporate capitalism. The reason for the quick adaptability of fourth generation warfareorganizations,asdescribedbyJohnRobb,isthatanyinnovationdeveloped byaparticularcellbecomesavailabletotheentirenetwork.Andbythesameto ken,inthefilesharingworld,itsnotenoughthatDRMbesufficientlyhardtocir cumventtodetertheaverageuser.TheaverageuserneedonlyuseGoogletobene fit from the superior knowhow of the geek who has already figured out how to circumventit.Likewise,onceanyonefiguresouthowtocircumventanyinstance ofplannedobsolescence,theirhardwarehackbecomespartofauniversallyacces siblerepositoryofknowledge. As Cory Doctorow notes, cheap technologies which can be modularized and mixedandmatched for any purpose are just lying around. ... [T]he market for factshascrashed.TheWebhasreducedthemarginalcostofdiscoveringafactto $0.00. He cites Robbs notion that [o]pen source insurgencies dont run on de tailedinstructionalmanualsthatdescribetacticsandtechniques.Rather,theyjust
JeffVail,TheDiagonalEconomy5:ThePowerofNetworks,Rhizome,December21, 2009<http://www.jeffvail.net/2009/12/diagonaleconomy5powerofnetworks.html>. 2 Dale Dougherty, Whats in Your Garage? Make, vol. 18 <http://www.make digital.com/make/vol18/?pg=39>.
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runonplausiblepremises.Youjustputouttheplausiblepremisei.e.,thesug gestion based on your gut intuition, based on current technical possibilities, that somethingcanbedonethatIEDscankillenemysoldiers,andthenanyonecan find out how to do it via the networked marketplace of ideas, with virtually zero transactioncosts.
Butthisdoesntjustworkforinsurgentsitworksforanyoneworkingtoef fectchangeortakecontrolofherlife.Tellsomeonethathercarhasachipbased controllerthatcanbehackedtoimprovegasmileage,andyougiveherthekey words to feed into Google to find out how to do this, where to find the equip menttodoiteventhefirmsthatspecializeindoingitforyou. Intheageofcheapfacts,wenowinhabitaworldwhereknowingsomething ispossibleispracticallythesameasknowinghowtodoit. Thismeansthatinventionisnowalotmorelikecollagethanlikediscovery.
DoctorowmentionsBruceSterlingsreactiontotheinnovationsdevelopedby the protagonists of his (Doctorows)Makers: Theres hardly any engineering. Al mostallofthisismashuptinkering.OrasDoctorowputsit,itassemblesrather thaninvents.
Its not that every invention has been invented, but we sure have a lot of basic partsjusthangingaround,waitingtobeconfigured.Pickupa$200FPGAchip toaster and you can burn your own microchips. Drag and drop some code objects around and you can generate some software to run on it. None of this willbeasefficientoreffectiveasabespokesolution,butitsallcloseenoughfor 1 rocknroll.
MurrayBookchinanticipatedsomethinglikethisbackinthe1970s,writingin PostScarcityAnarchism:
Suppose,fiftyyearsago,thatsomeonehadproposedadevicewhichwouldcause anautomobiletofollowawhitelinedownthemiddleoftheroad,automatically andevenifthedriverfellasleep....Hewouldhavebeenlaughedat,andhisidea wouldhavebeencalledpreposterous....Butsupposesomeonecalledforsucha devicetoday,andwaswillingtopayforit,leavingasidethequestionofwhether itwouldactuallybeofanygenuineusewhatever.Anynumberofconcernswould standreadytocontractandbuildit.Norealinventionwouldberequired.There arethousandsofyoungmeninthecountrytowhomthedesignofsuchadevice would be a pleasure. They would simply take off the shelf some photocells, thermionic tubes, servomechanisms, relays, and, if urged, they would build what they call a breadboard model, and it would work. The point is that the presenceofahostofversatile,reliable,cheapgadgets,andthepresenceofmen whounderstandalltheircheapways,hasrenderedthebuildingofautomaticde vices almost straightforward and routine. It is no longer a question of whether 2 theycanbebuilt,itisaquestionofwhethertheyareworthbuilding.
D.SEEINGLIKEABOSS
The contrast in agility and learning ability between stigmergic organizations andhierarchiesisbeautifullybroughtoutbyDavidPollard:
CoryDoctorow,CheapFactsandthePlausiblePremise,LocusOnline,July5,2009 <http://www.locusmag.com/Perspectives/2009/07/corydoctorowcheapfactsand plausible.html>. 2 Murray Bookchin, Toward a Liberatory Technology, in PostScarcity Anarchism (Berkeley,Calif.:TheRampartsPress,1971),pp.4950.
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SoManagementbySMARTObjective[Specific,Measurable,Achievable,Re alistic, and TimeBasedPeter Drucker] leads to this ludicrous and dysfunc tionaldance: Leaders hire expert consultants, or huddle among themselves, or decide by fiat, what the SMART objectives should be for their organization: increase revenuesby10%andprofitsby20%nextyearbyintroducingimprovedversions of15selectedproductsthatcanbesoldforanaverageprice25%higherthanthe old version, and which, through internal efficiencies, cost 15% less per unit to produce Theseleadersthencascadedowntheseobjectivesandcommandsubordi natestocomeupwithSMARTbusinessunitplansthatwill,ifsuccessful,collec tivelyachievethesetoplevelobjectives. Thesubordinatesunderstandthattheirsuccessdependsonratchetingup profits, and that the objectives set by the leaders are ridiculous, magical think ing.Sotheycomeupwithalternativeplanstoincreaseprofitsby20%througha series of difficult, but realistic, moves. These entail offshoring everything to China,layoffs,pressuringstafftoworklongerhoursfornomoremoney,and,if allelsefails,firingpeopleorleavingvacanciesunfilled. The good people in the organization all leave, because they know this shortrange thinking is dysfunctional, damaging to the organizations in the longerterm,unsustainable,andarecipeforamiserableworkplace.Theirdepar ture creates more vacancies that arent filled, which in the short term reduces costs. Thecluelessandthelosers,whoareleft,attempttopickuptheslack.They work harder, find workarounds for the dumbest management decrees, and do theirbesttoachievetheseobjectives.Thosefortunateenoughtobeintheright marketareasintherighteconomiesgetpromotedintosomeofthevacantspots leftbythegoodpeople,butwithoutthecommensuratesalaryincrease. The leaders, as a result, achieve their shortrun objectives, award them selves huge bonuses, profit from increases in the value of their stock options, andrepeatthewholecyclethenextyear. At some point the utter sustainability of this management process be comesapparent.Thereisareallybadyear.Theeconomyisblamed,perhaps.Or thetopleadersarefired,andrehiredinotherorganizationssufferingfromreally badyears.Orthecompanyisboughtout,orreorganizedsothatalltheoldob jectivesandmeasuresnolongerapply,andacompletelynewsetisestablished. Thebyproductisablizzardofplans,budgetsandstrategies,whicharesub stantiallymeaningless.Everyonedoesadhocthingstoprotecttheirassandtry to make the best of impossible targets and incompetent, arrogant leaders self deluded about their own brilliance and about their ability to control what is reallyhappeningintheorganizationandthemarketplace. Thereare,however,somethingsofrealvaluehappeningintheseorganiza tions.NoneofthemareSMARTsononeisrecognizedorrewarded,andmostof these things are actively discouraged. Nevertheless, because most people take prideinwhattheydo,thesevaluablethingshappen.Theyinclude: Learning:Peoplelearnbymakingmistakes(thattheydontadmitto),and thismakesthembetteratdoingtheirjobs. Conversations: People share, peertopeer, what works and doesnt work, throughmostlyinformalconversations,andthistoomakesthembetteratdoing theirjobs.Theseconversationsareoftensurreptitious,sincetheyarenotconsid eredproductivework. Practice:Themorepeopleworkatdoingaparticulartask,thebetterthey getatit.Mostsuchpracticesaresubstantiallyworkarounds,selfdevelopedways todotheirparticularspecializedworkoptimally,despiteinstructionstothecon trary from leaders and published manuals, and despite the burden of reporting SMARTdataupthehierarchy,whichhastobecreativelyinventedandexplained sothatthepracticesarentdisruptedbynewordersfromtheleaders.
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Judgement:Throughtheaboveimprovedlearning,conversationsandprac tice, people develop good judgement. They make better decisions. The leaders getallthecreditforthesedecision,butitdoesntmatter. Trust Relationships: Through peertopeer conversations, trust relation ships develop. When people trust each other, whole layers of bureaucracy are strippedaway.Peoplearelefttodowhattheydowell.Unfortunatelyleadersin largeorganizationsalmostnevertrusttheirsubordinates,sothesetrustrelation shipsarealmostalwayshorizontal,notvertical.Despitethis,theserelationships profoundlyimproveproductivity. Professionalism:Thenetresultofalloftheaboveisincreasedprofessional ism.Peoplejustbecomemorecompetent. Thisiswhy,inallmyyearsasamanager,Ialwayssawmyroleaslistening and clearing away obstacles my staff were facing, identifying and getting rid of thesmallpercentagewhocouldnotbetrusted(tooambitious,tooselfserving, uncollaborative, secretive or careless), and trusting the rest to do what they do best,andstayingoutoftheirway.InrecentyearsIstartedtolosethehearttodo this,butIstilltried. TheidealorganizationisthereforenotSMART,butselforganized,trusting (noneedtomeasureresults,justpracticeyourcraftandtheresultswillinevita bly be good), highly conversational, and ultimately collaborative (impossible in large organizations because performance is measured individually not collec tively). Its one where the nonperformers are collectively identified by their peers and selfselect out by sheer peer pressure. Its one without hierarchy. Its agile,resilientandimprovisational,becauseitrunsonprinciples,notrules,and becausewhenissuesarisetheyredealtwithbytheselforganizedgroupimme diately,notshelveduntilsomeonebringsthemtotheattentionoftheleaders. Itsdesignedforcomplexity.Itsorganic,natural. In my experience, such an organizational model can be replicated, but it 1 doesntscale.
EricRaymondseesthephasetransitionbetweenformsofsocialorganization asaresponsetoinsupportablecomplexity.Theprofessionalizedmeritocraciesthat managedthecentralizedstateandlargecorporationthroughthemiddleofthe20th centurywereanattempttomanagecomplexitybyapplyingWeberianandTaylor istrules.Andtheydidapassablejobofmanagingthesystemcompetentlyformost of that time, he says. But in recent years weve reached a level of complexity be yondtheircapacitytodealwith.
The educated classes are adrift, lurching from blunder to blunder in a world that has outcomplexified their ability to impose a unifying narrative on it, or evenasmallcollectionofrivalbutcommensurablenarratives.Theyreintheex actpositionofoldSovietcentralplanners,systemicallylockedintogrindingout productsnobodywantstobuy.
The answer, under these conditions, is to [a]dapt, decentralize, and hardeni.e., to reconfigure the system along the stigmergic lines he described earlierinTheCathedralandtheBazaar:
Levelsofenvironmentalcomplexitythatdefeatplanningarereadilyhandled by complex adaptive systems. A CAS doesnt try to plan against the future; in stead, the agents in it try lots of adaptive strategies and the successful ones propagate. This is true whether the CAS were speaking of is a human immune system,afreemarket,oranecology. Sincewecannolongercountonbeingabletoplan,wemustadapt.When planningdoesntwork,centralizationofauthorityisatbestuselessandusually David Pollard, Replicating (Instead of Growing) Natural Small Organizations, how tosavetheworld,January14,2009<http://howtosavetheworld.ca/2010/01/14/notsosmart replicatinginsteadofgrowingnaturalsmallorganizations/>.
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harmful.Andwemustharden:thatis,weneedtobuildrobustnessandtheca pacitytoselfhealandselfdefendateverylevelofthesystem.Ithinktherising popular sense of this accounts for the prepper phenomenon. Unlike oldschool survivalists, the preppers arent gearing up for apocalypse; theyre hedging against the sort of relatively transient failures in the power grid, food distribu tion,andevencivilorderthatwecanexpectduringthelagtimebetweenplan ningfailuresandCASresponses. CAS hardening of the financial system is, comparatively speaking, much easier.Almosttrivial,actually.Aboutallitrequiresisthatwerestigmatizethe carrying of debt at more than a very small proportion of assets. By anybody. Withthatpressure,therewouldtendtobeenoughreserveatalllevelsofthefi nancialsystemthatitwouldavoidcascadefailuresinresponsetounpredictable shocks. Cycling back to terrorism, the elite planners response to threats like un derwearbombsistobuildelaboratebutincreasinglybrittlesecuritysystemsin which airline passengers are involved only as victims. The CAS response would be to arm the passengers, concentrate on fielding bombsniffers so cheap that hundredsofthousandsofcivilianscancarryone,andpaybountiesondeadter 1 rorists.
Comparedtothestigmergicorganization,abureaucratichierarchyissystem aticallystupid.ThiswasthesubjectofarecentdebatebetweenRoderickLongand BryanCaplan.HereswhatLongwrote:

Rand describes a pyramid of ability operating within capitalism, wherein the dull masses are carried along by the intelligent and enterprising few. The manatthetop,Randassuresus,contributesthemosttoallthosebelowhim, whilethemanatthebottomwho,lefttohimself,wouldstarveinhishopeless ineptitude,contributesnothingtothoseabovehim,butreceivesthebonusofall oftheirbrains.Randdoesntsaythatthetopandthebottomalwayscorrespond to employers and employees respectively, but she clearly takes that to be the usual situation. And that simply does not correspond with the reality of most peopleseverydayexperience. Ifyouvespentanytimeatallinthebusinessworld,youvealmostcertainly discoveredthattherealityonthegroundresemblesthecomicstripDilbertalot morethanitresemblesRandspyramidofability.InKevinCarsonswords:asin government, so likewise in business, the people who regulate what you do, in most cases, know less about what youre doing than you do, and businesses generally get things done only to the extent that rules imposed by people not directlyinvolvedinthesituationaretreatedasanobstacletoberoutedaround by the people actually doing the work. To a considerable extent, then, in the real world we see the people at the bottom carrying the people at the top 2 ratherthanviceversa.
Caplan, in challenging this assessment, missed the point. He treated Longs critiqueasanattackontheintelligenceoftheaveragemanager:
ButwhataboutthetonsofempiricalevidencethatRandspyramidofabil ity is real? The Bell Curve is a good place to start. Intelligence is one of the strongestif not the strongestpredictors of income, occupation, and social status. More to the point, simple pencilandpaper tests of intelligence are the singlebestpredictorofindependentlymeasuredjobperformanceandtrainabil ity.Ifyouwanttodigdeeper,checkoutthelargeliteratureonwhyincomeruns infamilies.
Eric Raymond, Escalating Complexity and the Collapse of Elite Authority, Armed andDangerous,January5,2010<http://esr.ibiblio.org/?p=1551>. 2 Roderick Long, The Winnowing of Ayn Rand, Cato Unbound, January 20, 2010 <http://www.catounbound.org/2010/01/20/rodericklong/thewinnowingofaynrand/>.
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How then can we reconcile firsthand observation with economic theory andstatisticalfact?Itseasierthanitseems.Lotsofpeoplethinktheirbossesare stupidbecause: 1.Themarketdoesntmeasuremeritperfectly,sosuccessispartlyluck.Asa result, some bosses are unimpressive. (Though almost all of them are smarter thantheaveragerankandfileworker). 2.Theresabigcontrasteffect:Ifyouexpectbossestobeinthe99thpercen tile of ability, but theyre only in the 90th, its natural to misperceive them as stupid.(Similarly,ifsomeonescoresinthe99thpercentileontheSATinmath, andthe80thinEnglish,manypeoplewillperceivehimasterribleinEnglish.) 3.Bosses are much more visible than regular workers, so their flaws and mistakeseven if minorare quickly noticed. When normal people screw up, theresusuallynoonepayingattention. 4.Perhapsmostimportantly,peopleoverratethemselves.Weliketoimag inethatweresogreatthatweintellectuallytoweroveroursocalledsuperiors. Onlyasmallpercentageofusareright. IfRodLongspointismerelythatmarketswouldbeevenmoremeritocratic underlaissezfaire,Iagree.Buttodenythatactuallyexistingcapitalismishighly meriocratic is misguided. To suggest that the pyramid of ability is actually in 1 vertedisjustsilly.
But the point, as I argued with Caplan, is not that managers are inherently lessintelligentorcapableasindividuals.Rather,itsthathierarchicalorganizations areto borrow that wonderful phrase from Feldman and Marchsystematically stupid. For all the same Hayekian reasons that make a planned economy unsus tainable,noindividualissmartenoughtomanagealarge,hierarchicalorganiza tion. Nobodynot Einstein, not John Galtpossesses the qualities to make a bu reaucratichierarchyfunctionrationally.Nobodysthatsmart,anymorethanany bodyssmartenoughtorunGosplanefficientlythatsthewholepoint.Nomatter howinsightfulandresourcefultheyare,nomatterhowprudent,ashumanbeings indealingwithactualreality,neverthelessbytheirverynaturehierarchiesinsulate thoseatthetopfromtherealityofwhatsgoingonbelow,andforcethemtooper ate in imaginary worlds where all their intelligence becomes useless. No matter howintelligentmanagersareasindividuals,abureaucratichierarchymakestheir intelligencelessusable. Inthecaseofnetworkorganization,justtheoppositeisthecase:networked, stigmergicorganizationpromotesmaximumusabilityofintelligence. The fundamental reason for agility, in a selfmanaged peer network, is the lack of a bureaucratic hierarchy separating the worker from the enduser. The main metric of quality is direct enduser feedback. And in a selfmanaged peer network, employee education follows directly from what workers actually learn bydoingtheirjobs. Inacorporatehierarchy,incontrast,mostqualitymetricsaredevelopedtoin form bureaucratic intermediaries who are neither providers nor endusers of the companysservices. And, much like management metrics of quality, their metrics of employee skill and competence are utterly divorced from reality. At just about every job where Ive ever worked, for example, employee education credits were utterly worthlessbusyworkthathadnothingtodowithwhatIactuallydid. SteveHerrick,commentingunderablogpostofmine,confirmedmyimpres sionofthe(lackof)valueofmostinservicemeetingsandemployeeeducation hours,basedonhisownexperienceworkinginhospitals:
Bryan Caplan, Pyramid Power, EconLog, January 21, 2010 <http://econlog.econlib .org/archives/2010/01/pyramid_power.html>.
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...Iworkasamedicalinterpreter.Accordingtotherules,Icanttouchpatients (letaloneprovidecare)orcomputers.However,accordingtootherrules,Ihave [to]passtestsonsharpsdisposal,pathogentransmission,properuseofportable 1 computers,etc.
Suchnonsenseresults,ofnecessity,fromasituationinwhichabureaucratic hierarchy must develop some metric for assessing the skills or work quality of a labor force whose actual work they know nothing about. When management doesnt know (in Paul Goodmans words) what a good job of work is, they are forcedtorelyonarbitrarymetrics.BloggerAtriosdescribeshisexperiencewiththe phenomenon.
DuringmysummersdoingtempofficeworkIwasalwaysastoundedbythecul ture of face timethe need to be at your desk early and stay late even when there was no work to be done and doing so in no way furthered any company goals.Doingyourworkanddoingitadequatelywasentirelysecondarytolook inglikeyouwereworkinghardasdemonstratedbyyourdesiretostayatwork 2 longerthanstrictlynecessary.
One of his commenters, in considerably more pointed language, added: If you are a manager who is too stupid to figure out that what you should actually measureisrealoutputthenthenextbestthingistomeasurehowmuchtimepeo plespendpretendingtoproducethatoutput.Butinfairness,again,establishinga satisfactory measure of real output that can convey information to those outside theproductionprocess,withoutbeinggamedbythoseengagedintheprocess,ina situationwheretheinterestsofthetwodiverge,isaloteasiersaidthandone. Mostoftheconstantlyrisingburdenofpaperworkexiststogiveanillusionof transparencyandcontroltoabureaucracythatisoutoftouchwiththeactualpro ductionprocess.Mostnewpaperworkisaddedtocompensateforthefactthatex istingpaperworkreflectspoorlydesignedmetricsthatpoorlyconveytheinforma tiontheyresupposedtomeasure.Ifwecanonlydesigntheperfectform,wellfi nallyknowwhatsgoingon. Weberian work rules result of necessity when performance and quality met rics are not tied to direct feedback from the work process itself. It is a metric of workforsomeonewhoisneitheracreator/providernotanenduser. Inaselfmanagedprocess,ifwemayrecurtotheterminologyofJamesScott citedinthepreviouschapter,workqualityishorizontallylegibletothosedirectly engagedinit.Inahierarchy,managersareforcedtoseeinaglassdarklyaproc esswhichisnecessarilyopaquetothembecausetheyarenotdirectlyengagedinit. Theyareforcedtocarryouttheimpossibletaskofdevelopingaccuratemetricsfor evaluatingthebehaviorofsubordinates,basedontheselfreportingofpeoplewith whom they have a fundamental conflict of interest. All of the paperwork burden thatmanagementimposesonworkersreflectsanattempttorenderlegibleasetof socialrelationshipsthatbyitsnaturemustbeopaqueandclosedtothem,because theyareoutsideofit.Eachnewformisintendedtoremedytheheretoforeimper fect selfreporting of subordinates. The need for new paperwork is predicated on the assumption that compliance must be verified because those being monitored have a fundamental conflict of interest with those making the policy, and hence cannot be trusted; but at the same time, that paperwork relies on their self reportingasthemainsourceofinformation.Everytimenewevidenceispresented
Comment under Carson, The People Making The Rules are Dumber than You, CenterforaStatelessSociety,January11,2010<http://c4ss.org/content/1687>. 2 Atrios, Face Time, Eschaton, July 9, 2005 <http://atrios.blogspot.com/2005_07 03_atrios_archive.html>.
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thatthisorthattaskisntbeingperformedtomanagementssatisfaction,orthisor thatpolicyisntbeingfollowed,despitetheexistingreamsofpaperwork,manage mentsresponseistodesignyetanotherform.Ifyoudonttrustmetodothejob rightwithoutfillingoutalltheseforms,whydoyoutrustmetofillouttheforms truthfully? Thedifficultiesareinherentintheagencyproblem.Humanagencyisinalien able.Whensomeoneagreestoworkundersomeoneelsesdirectionforaperiodof time,thesituationiscomparabletosellingacarbutremaininginthedriversseat. There is no magical set of compliance paperwork or quality/performance metrics thatwillenablemanagementtositinthedriversseatoftheworkersconscious ness,toexercisedirectcontroloverhishands,ortolookoutthroughhiseyes. Theonlysolutionistobuildincentivesintotheworkitself,andintothedirect relationships between the worker and customer, so that it is legible to them It is necessary to create a situation in which creators/providers and endusers are the onlypartiesdirectlyinvolvedintheprovisionofgoodsandservices,sothatmet ricsofqualityareforthemaswellasofthem.MichelBauwenswrites:
The capacity to cooperate is verified in the process of cooperation itself. Thus,projectsareopentoallcomersprovidedtheyhavethenecessaryskillsto contribute to a project. These skills are verified, and communally validated, in the process of production itself. This is apparent in open publishing projects suchascitizenjournalism:anyonecanpostandanyonecanverifytheveracityof thearticles.Reputationsystemsareusedforcommunalvalidation.Thefiltering is a posteriori, not a priori. Anticredentialism is therefore to be contrasted to traditionalpeerreview,wherecredentialsareanessentialprerequisitetopartici pate. P2P projects are characterized by holoptism. Holoptism is the implied ca pacityanddesignofpeerto[peer]processesthatallowsparticipantsfreeaccess toalltheinformationabouttheotherparticipants;notintermsofprivacy,but in terms of their existence and contributions (i.e. horizontal information) and accesstotheaims,metricsanddocumentationoftheprojectasawhole(i.e.the verticaldimension).Thiscanbecontrastedtothepanoptismwhichischaracter isticofhierarchicalprojects:processesaredesignedtoreservetotalknowledge foranelite,whileparticipantsonlyhaveaccessonaneedtoknowbasis.How ever, with P2P projects, communication is not topdown and based on strictly defined reporting rules, but feedback is systemic, integrated in the protocol of 1 thecooperativesystem.
Whenyoumakeasandwichforyourself,orforamemberofyourfamily,you dontneedathirdpartyinspectionregimetoguaranteethatthesandwichisupto snuff, because there is a fundamental unity of interest between you as sandwich makerandsandwicheater,orbetweenyouandthepersonyouremakingfoodfor. Andifthequalityofthesandwichissubstandard,youoryourfamilyknowitbe cause it tastes bad when they take a bite of it. In other words, the process is run directlyforthebenefitofthoseengagedinit,andthequalityfeedbackisbuiltdi rectlyintotheprocessitself. Itsonlywhenpeopleareengagedinworkwithnointrinsicvalueormeaning tothemselves,withwhichtheydontidentify,whichtheydontcontrol,andwhich is for the benefit of people whose interests are fundamentally opposed to their own,thatacomplicatedsystemofcomplianceandqualitymetricsarerequiredto vouchforitsqualitytothirdpartiesremovedfromtheimmediatesituation.Andin such circumstances, because the managerial hierarchy lacks the jobrelated tacit
MichelBauwens,ThePoliticalEconomyofPeerProduction,Ctheory.net,December 1,2005<http://www.ctheory.net/articles.aspx?id=499>.
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knowledge required to formulate meaningful metrics or evaluate incoming data, thefunctionofthemetricsanddataisatbestlargelysymbolic:e.g.,elaborateex ercisesinshiningiton,likeJCAHOinspectionsandISO9000.Atworst,theyre ducequalitywhenpeoplewhodontunderstandtheworkinterferewiththosewho do.Soyouwindupwitha300pagemanualformakingthesandwich,alongwith numerousother300pagemanualsforvendorspecificationsanditstilltasteslike crap. Aclassicexampleofthecounterproductivityofusingbureaucraticrulestoob structtheinitiativeofthosedirectlyinvolvedinasituationisthestoryofatrain firewhichwaswidelycirculatedontheInternet(which,accordingtoSnopes.Com, itturnsoutwaslegitimate).Afaultybearingcausedawheelononeofthecarsto overheatandmeltdown.Thecrew,spottingthesmoke,stoppedthetrainincom pliance with the rules. Unfortunately, it came to rest on a wooden bridge with creosote ties. Still more unfortunately, the management geniuses directing the crewfromafarrefusedtobudgeontherules,whichprohibitedmovingthetrain. Asaresult,thebridgeburnedandsixburningcoalcarsdroppedintothecreekbe low.1 Thesameprinciple wasillustratedbyananecdotefromtheSovietGreatPa triotic War (Im afraid I cant track down the original source, but its too good a storynottorelate).Adivisioncommanderwasdeniedpermissiontopullhisdivi sional artillery back far enough to be in effective range of a road, and thus to be abletotargetGermanarmormovingalongthatroad,becausehecouldntconvince thepoliticalofficerthatbackwardmovementdidntconstituteretreat. And then theres the old saw about how the Egyptians lost the 1967 Arab Israeli War because they literally obeyed the instructions in their Russian field manuals:retreatintotheinteriorandwaitforthefirstsnowfall. Rigidhierarchiesandrigidworkrulesonlyworkinapredictableenvironment. When the environment is unpredictable, the key to success lies with empowermentandautonomyforthoseindirectcontactwiththesituation.Agood exampleistheTransportationSafetyAdministrationsresponsetothethreatofAl Qaeda attacks. As Matthew Yglesias has argued, the key point about identifying alQaeda operatives is that there are extremely few alQaeda operatives so (by Bayestheorem)anymethodyouemployofidentifyingalQaedaoperativesisgo ingtomostlyrevealfalsepositives.2So(thisismetalking)whenyoursystemfor anticipating attacks upstream is virtually worthless, the last mile becomes monumentally important: having people downstream capable of recognizing and thwartingtheattempt,andwiththefreedomtousetheirowndiscretioninstop pingit,whenitisactuallymade. Analmostuniversalproblem,whenbureaucratic,stovepipedindustrialdesign processesisolatedesignersfromuserfeedback,isthegoldplatedturd.Whenever aproductisdesignedbyonebureaucracy,forsaletoprocurementofficersinan otherbureaucracywhoarebuyingitforsomeoneelsesuse,agoldplatedturdis almostinvariablytheresult. Agoodexamplefrommyexperienceasahospitalworkeristhekindoftoilet paperdispensersoldtolargeinstitutionalclients.Ifyouveeverusedapublicrest roomorpatientrestroominahospital,youvealmostcertainlyencounteredoneof thoseGeorgiaPacificmonstrosities:aplastichousingthatmakesitalmostimpos
ABridgeTooFar:TrainSetsBridgeonFire,Snopes.Com<http://www.snopes.com/ photos/accident/trainfire.asp>. 2 Matthew Yglesias, Too Much Information, Matthew Yglesias, December 28, 2009 <http://yglesias.thinkprogress.org/archives/2009/12/toomuchinformation.php>.
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sible to manipulate the roll without breaking your wrist, and so much resistance that you tear the paper rather than turning the spool more often than not. And thesetoiletpaperdispensers,seeminglyengineeredatgreatefforttoperformtheir functionsasbadlyaspossible,sellfor$20ormore.Ontheotherhand,anordinary toilet paper spoolone that actually turns easily and is convenient to usecan probablybeboughtatLowesorHomeDepotforadollar. Ive had similar experiences as a consumer of goods and services, outside of myjob.AgoodexampleismyexperiencewiththeITofficeratthelocalpublicli brary, which I described earlier in the book. I emailed the library on how poorly thenewlyinstalledWord2007software,andwhateverWindowsdesktopupgrade theyd bought, performed compared to the earlier version of Windows and the Word2003theyreplaced.AsWindowsproductsgo,Word2003isaboutthebest word processing software you can get. Its got a user interface pretty much the sameasthatofOpenOffice,intermsofcomplexity.Infact,Idgosofarastosayit wasasgoodasOpenOffice,asidefromthe$200pricetagandtheforcedupgrades thatopensourcesoftwareismercifullyfreeof.Word2007,ontheotherhand,isa classic goldplated turd. Its user interface is so complicated and busy that the dashboardactuallyhas tobetabbedtoaccommodateallthebellsandwhistles.I toldtheITofficerthatitwasagoodidea,whenevershefoundaWindowsproduct thatworkedacceptably,toholdontoitlikegrimdeathandrunlikehellwhenof fered anything new and improved from Redmond. Her response: Word 2007 is thestandardproductivitysoftwarechoiceofmajorpubliclibrariesandcorpora tionsallacrossAmerica.Inmyfollowup,Itoldhertheveryfactthatsomething workedworsethanwhatitreplaced,despitebeingthestandardchoiceofpointy hairedbossesallacrossthecountry,wasanobjectlessoninthewisdomofbasing ones software choice on corporate bureaucrats best practices rather than on feedback from user communities. Never heard back from her, for some reason. Nicelady,though. Niall Cook, in Enterprise 2.0, describes the comparative efficiencies of social softwareoutsidetheenterprisetotheenterprisesoftwareincommonusebyem ployers.Selfmanagedpeernetworks,andindividualsmeetingtheirownneedsin theoutsideeconomy,organizetheireffortsthroughsocialsoftwarechosenbythe users themselves based on its superior usability for their purposes. And they are free to do so without corporate bureaucracies and their officially defined proce duralrulesactingasaballandchain.Enterprisesoftware,incontrast,ischosenby nonusersforusebyotherpeopleofwhoseneedstheyknowlittle(atbest).Hence enterprisesoftwareisfrequentlyagoldplatedturd.Blogsandwikis,andthefree, browserbased platforms offered by Google and Mozilla, are a quantum improve mentontheproprietaryenterprisesoftwarethatmanagementtypicallyforceson itsemployees.Thekindsofproductivitysoftwareandsocialsoftwarefreelyavail able to individuals in their private lives is far better than the enterprise software thatcorporatebureaucratsbuyforacaptiveclienteleofusersconsumersoftware capabilitiesamounttoafullyfunctioning,alternativeITdepartment.1Corporate ITdepartments,incontrast,prefertoinvestinasuiteoftoolsofferedbyamajor incumbent vendor like Microsoft or IBM. System specs are driven by manage mentstopdownrequirementsratherthanbyuserneeds.
... a small group of people at the top of the organization identify a problem, spend12monthsidentifyingandimplementingasolution,andahugeamountof NiallCook,Enterprise2.0:HowSocialSoftwareWillChangetheFutureofWork(Bur lington,Vt.:Gower,2008),p.91.
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resourceslaunchingit,onlythentofindthatemployeesdontorwontuseitbe 1 causetheydontbuyintotheoriginalproblem.
Managementisinclinedtoconductadetailedrequirementsanalysiswiththe gestation period of an elephant simply in order to chose a $1,000 social software application.2 Employees often wind up using their company credit cards to pur chase needed tools online rather than wait for [the] IT department to build a businesscaseandsecurefunding.3Thisisthedirectoppositeofagility. Asaresultofallthis,peoplearemoreproductiveawayfromworkthanthey areatwork. Corporate IT departments are a lot like the IT department at my public li brary, as recounted above. They are obsessed with security and control, and see the free exchange of information between employees as a threat to that security andcontrol.Theyalsohaveanaffinityfordoingbusinesswithotherbureaucracies likethemselves,whichmeansapreferenceforbuyingproprietaryenterprisesoft warefromgiantcorporations.Theyselectsoftwareonprettymuchthesamebasis as a Grandma buying a gift for her granddaughter just entering college: I just knewithadtobethebest,dear,becauseitsthelatestthingfromMicrosoft! NascentEnterprise2.0organizationwithinatraditionalfirmisoftenforced to fight obstruction from topdown management styles, even in areas where hu mancapitalisthemainsourceofvalue.Withcorporateculturesbasedonobses sionwithsecurityandcontrol,managementinstinctivelyfightsworkersattempts to choose their own platforms based on usability. Attempts to facilitate informa tionsharingbetweenemployeesfallsafoulofthisculture,becauseemployeesob viouslywouldntdesireaccesstoinformationunlesstheywereuptonogood.On theoutside,peernetworksarefreetoselforganizewithoutinterferencefromhier archy.Asaresult,informsofproductionwherethemainsourceofvalueishuman capital,andhumanrelationshipsforsharingknowledge,autonomousoutsidepeer networkshavealeguponcorporatehierarchies. The parallels between Enterprise 2.0 and the militarys doctrines for Fourth Generation Warfare are striking. The militarys Fourth Generation Warfare doc trines are an attempt to take advantage of network communications technology andcyberneticinformationprocessingcapabilitiesinorderreplicate,withinacon ventionalmilitaryforce,theagilityandresilienceofnetworkedorganizationslike AlQaeda.Theproblem,aswesawearlierinthischapter,isthatinterferencefrom the militarys old bureaucratic hierarchies systematically impede all the possibili ties offered by network technology. The basic idea behind the new doctrines is, throughtheuseofnetworkedcommunicationstechnology,toincreasetheauton omyandreducethereactiontimeofthebootsonthegrounddirectlyengagedin a situation. But as John Robb suggested, military hierarchies wind up seeing the new communications technologies instead as a way of increasing midlevel com mandersrealtimecontroloveroperations,andincreasingthenumberofsignoffs requiredtoapproveanyproposedoperation.Bythetimethoseengagedincombat operations get the required eleven approvals of higherups, and the staff officers havehadtimetoprocesstheinformationintosomekindofunrecognizablescrap ple (PowerPoint presentations and all), the immediate situation has changed to thepointthattheiroriginalplanismeaninglessanyway.
1
Ibid.,p.93. Ibid.,p.95. 3 Ibid.,p.96.

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Sotherealthinggenuinelyindependent,selfmanagednetworkedresistance movements unimpeded by bureaucratic interference with the natural feedback and reaction mechanisms of a stigmergic organizationis incomparably better thanthemilitaryhierarchyspallidimitations. Similarly,Enterprise2.0isanattempttoreplicate,withintheboundariesofa corporation,thekindsofnetworked,stigmergicorganizationthatRaymondwrote aboutinTheCathedralandtheBazaar.Butnetworkedproducersinsidethecor porationfindthemselvesthwarted,ateveryhand,bybureaucraticimpedimentsto their putting immediately into practice their own judgment of whats necessary basedondirectexperienceofthesituation. Whatactuallyhappens,whenmanagementattemptstoempoweremployees by adopting a networked organization within corporate boundaries, is suggested by an anecdote from an HR blog. Management came up with a brilliant idea for reducingthenumberofroundrobinemailssellingextraconcertticketsandused cars,solicitingrides,etc.:toputanofficialbulletinboardatoneconvenientcentral location!Butratherthansimplymountingasquareofcorkboardandleavingem ployeestotheirowndevicesinpostingnotices,managementhadtocomeupwith an official procedure for advance submission of notices for approval, followeda week later, if they were lucky and the notice was successfully vetted for all con ceivableviolationsofcompanypolicybyamanagerunlockingtheglasscasewith hismagicsetofkeysandpostingthead.Believeitornot,managementwaspuz zled as to why the roundrobin emails continued and the bulletin board wasnt morepopular.1 Thissortofthingisthecurrencyofoneschooloforganizationtheorists,who asCharlesSabeldescribesthem,assertthat
Soboundedistherationalityoforganizationsthattheyareincapableoflearning inthesenseofimprovingdecisionsbydeliberationonexperience.Thustheas sumption that decision makers survey only the first feasible choices immedi ately accessible to them at the moment of decision, and prefer that choice to anyotherorinaction,yieldsgarbagecanmodelsoforganizations,inwhichde cisionsresultfromcollisionsbetweendecisionmakersandsolutions....Theas sumptionthatdecisionmakerscancompareonlyafewcurrentsolutionstotheir problem,andprefertheonethatbestmeetstheirneeds,butcannotdrawfrom thisdecisionanyanalyticconclusionsregardingsubsequentchoices,turnsorga 2 nizeddecisionmakingintomuddlingthrough....
Totakejustoneexample:MarthaFeldmanandJamesMarchfoundlittlerela tionshipbetweenthegatheringofinformationandthepoliciesthatwereostensi bly based on it. In corporate legitimizing rhetoric, of course, management deci sionsarealwaysbasedonarationalassessmentofthebestavailableinformation.3 Theydidcasestudiesofthreeorganizations,andfoundanalmosttotaldisconnect betweenpoliciesandtheinformationtheyweresupposedlybasedon. FeldmanandMarchdidtheirbesttoprovideacharitableexplanationanex planation, that is, other than organizations are systematically stupid.4 System atically stupid probably comes closest to satisfying Occams Razor, and Id have
Chloe, Important People, Corporate Whore, September 21, 2007 <http://web .archive.org/web/20071014221728/http://corporatewhore.us/importantpeople/>. 2 CharlesF.Sabel,ARealTimeRevolutioninRoutines,inCharlesHecksherandPaul S. Adler, The Firm as a Collaborative Community: Reconstructing Trust in the Knowledge Economy(NewYork:OxfordUniversityPress,2006),pp.110111. 3 MarthaS.FeldmanandJamesG.March,InformationinOrganizationsasSignaland Symbol,AdministrativeScienceQuarterly26(April1981). 4 Ibid.,p.174.
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happily stuck with that explanation. But Feldman and March struggled to find someadaptivepurposeintheobserveduseofinformation. Theinterestingthing,frommyperspective,isthatmostoftheadaptivepur posestheydescribereflectpreciselywhatIdcallsystematicstupidity.Theybe ganbysurveyingmoreconventionalassessmentsoforganizationalinefficiencyas an explanation for the observed pattern. First, organizations are unable ... to processtheinformationtheyhave.Theyexperienceanexplanationglutasashort age.Indeed,itispossiblethattheoverloadcontributestothebreakdowninproc essingcapabilities....Second,...theinformationavailabletoorganizationsis systematicallythewrongkindofinformation.Limitsofanalyticalskillorcoordina tionleaddecisionmakerstocollectinformationthatcannotbeused.1 Thentheymadethreeobservationsoftheirownonhoworganizationalstruc tureaffectstheuseofinformation:
First,ordinaryorganizationalproceduresprovidepositiveincentivesforun derestimating the costs of information relative to its benefits. Second, much of the information in an organization is gathered in a surveillance mode rather thaninadecisionmode.Third,muchoftheinformationusedinorganizational lifeissubjecttostrategicmisrepresentations. Organizationsprovideincentivesforgatheringmoreinformationthanisop timalfromastrictdecisionperspective....First,thecostsandbenefitsofinfor mation are not all incurred at the same place in the organization. Decisions aboutinformationareoftenmadeinpartsoftheorganizationthatcantransfer thecoststootherpartsoftheorganizationwhileretainingthebenefits.... Second,posthocaccountabilityisoftenrequiredofbothindividualdecision makersandorganizations... Mostinformationthatisgeneratedandprocessedinanorganizationissub jecttomisrepresentation....
Thedecisionmaker,inotherwords,mustgatherexcessinformationinantici pateddefenseagainstthepossibilitythathisdecisionwillbesecondguessed.2By surveillancemode,theauthorsmeanthattheorganizationseeksoutinformation notforanyspecificdecision,butrathertomonitortheenvironmentforsurprises. Theleadtimeforinformationgatheringislongerthantheleadtimefordecisions. Informationmustthereforebegatheredandprocessedwithoutclearregardtothe specificdecisionsthatmaybemade.3 Alltheincentivesmentionedsofarseemtoresultmainlyfromlargesizeand hierarchyi.e.,toresult(again)fromsystematicstupidity.Theproblemofnon internalizationofthecostsandbenefitsofinformationgatheringbythesameac tor,ofcourse,fallsintotheinefficiencycostsoflargesize.Theproblemofposthoc accountabilityresultsfromhierarchy.Atleastpartoftheproblemofsurveillance mode is another example of poor internalization: the people gathering the infor mation are different from the ones using it, and are therefore gathering it with a secondhandsetofgoalswhichdoesnotcoincidewiththeirownintrinsicmotives. Thestrategicdistortionofinformation,asanagencyproblem,is(again)theresult ofhierarchyandthepoorinternalizationofcostsandbenefitsinthesamerespon sibleactors.Inotherwords,thelarge,hierarchicalorganizationissystematically stupid. Theauthorsmostsignificantcontributioninthisarticleistheirfourthobser vation:thatthegatheringofinformationservesalegitimizingfunctionintheor ganization.
1
Ibid.,p.175. Ibid.,pp.175176. 3 Ibid.,p.176.

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Bureaucratic organizations are edifices built on ideas of rationality. The cornerstonesofrationalityarevaluesregardingdecisionmaking.... Thegatheringofinformationprovidesaritualisticassurancethatappropri ate attitudes about decision making exist. Within such a scenario of perform ance,informationisnotsimplyabasisforaction.Itisarepresentationofcompe tenceandareaffirmationofsocialvirtue.Commandofinformationandinforma tionsourcesenhancesperceivedcompetenceandinspiresconfidence.Thebelief thatmoreinformationcharacterizesbetterdecisionsengendersabeliefthathav inginformation,initself,isgoodandthatapersonororganizationwithmorein formation is better than a person or organization with less. Thus the gathering and use of information in an organization is part of the performance of a deci sion maker or an organization trying to make decisions intelligently in a situa tion in which the verification of intelligence is heavily procedural and norma tive.... Observable features of information use become particularly important in this scenario. When there is no reliable alternative for asserting a decision makersknowledge,visibleaspectsofinformationgatheringandstorageareused as implicit measures of the quality and quantity of information possessed and 1 used....
Inotherwords,whenanorganizationgetstoobigtohaveanyclearideahow wellitisperformingthefunctionforwhichitofficiallyexists,itcreatesametricfor successdefinedaswesawinourstudyofSloanistorganizationalpathologies intermsoftheprocessingofinputs. Butinfairnesstomanagement,itsnotthestupidityoftheindividual;tore peat my point above contra Caplan, its the stupidity of the organization. Large, hierarchical organizations are systematically stupid, regardless of how intelligent and competent the people running them are. By definition, nobody is smart enoughtorunalarge,hierarchicalorganization,justasnobodyssmartenoughto centrallyplananeconomy. The reality of corporate life is apt to bear a depressing resemblance to the MinistryofCentralServicesinBrazil,ortoTheFedsinNealStephensonsSnow Crash. The Feds in the latter example are the direct successor to the United Statesgovernment,claimingcontinuedsovereignjurisdictionovertheterritoryof theformerU.S.,butinfactfunctioningassimplyoneofmanycompetingfranchise governments or networked civil societies in the panarchy that exists following thecollapseofmostterritorialstates.Mainlyoccupyingthefederalofficebuildings on what used to be federal property, its primary activity is designing enterprise softwareforsaletocorporations.Itsinternalgovernanceseemstoreflect,inequal parts, the bureaucratic world of Brazil and the typical IT departments idealized visionofacorporateintranet(notthattheresmuchdifference). One employee of the Feds shows up for work and logs on, after negotiating theendlessseriesofbiometricscans,onlytoreceivealongandexcruciatinglyde tailedmemoonthepoliciesgoverningtheunauthorizedbringinginoftoiletpaper fromhome,sparkedbytoiletpapershortagesinthelatestausteritydrive. The memo includes an announcement that Estimated reading time for this document is 15.62 minutes (and dont think we wont check). Her supervisors standardtemplate,incheckinguponmemoreadingtimes,issomethinglikethis:
Less than 10 min. Time for an employee conference and possible attitude counseling. 1014 min. Keep an eye on this employee; may be developing slipshod atti tude.
Ibid.,pp.177178.
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1415.61 min. Employee is an efficient worker, may sometimes miss importantdetails. Exactly15.62min.Smartass.Needsattitudecounseling. 15.6316min.Asswipe.Nottobetrusted. 1618min.Employeeisamethodicalworker,maysometimesgethungupon minordetails. Morethan18min.Checkthesecurityvideotape,seejustwhatthisemployee wasupto(e.g.,possibleunauthorizedrestroombreak).
The employee decides, accordingly, to spend between fourteen and fifteen minutesreadingthememo.Itsbetterforyoungerworkerstospendtoolong,to showthattheyrecareful,notcocky.Itsbetterforolderworkerstogoalittlefast, toshowgoodmanagementpotential. Theiractualworkissimilarlymicromanaged:
SheisanapplicationsprogrammerfortheFeds.Intheolddays,shewould havewrittencomputerprogramsforaliving.Nowadays,shewritesfragmentsof computer programs. These programs are designed by Marietta and Mariettas superiorsinmassiveweeklongmeetingsonthetopfloor.Oncetheygetthede sign down, they start breaking up the problem into tinier and tinier segments, assigning them to group managers, who break them down even more and feed littlebitsofworktotheindividualprogrammers.Inordertokeeptheworkdone bytheindividualcodersfromcolliding,itallhastobedoneaccordingtoasetof rules and regulations even bigger and more fluid than the Government proce duremanual[evenbiggerthantherulesforreadingatoiletpapermemo?]. Sothefirstthing[she]does,havingreadthenewsubchapteronbathroom tissuepools,istosignontoasubsystemofthemaincomputersystemthathan dles the particular programming project shes working on. She doesnt know whattheprojectisthatsclassifiedorwhatitscalled.Shesharesitwithafew hundred other programmers, shes not sure exactly who. And every day when shesignsontoit,theresastackofmemoswaitingforher,containingnewregu lationsandchangestotherulesthatthey allhavetofollowwhenwritingcode for the project. These regulations make the business with the bathroom tissue seemassimpleandelegantastheTenCommandments. SoshespendsuntilaboutelevenA.M.reading,rereading,andunderstand ing the new changes in the Project [presumably with recommended reading times,carefullymonitored,foreachone].... Thenshestartsgoingbackoverallthecodeshehaspreviouslywrittenfor theProjectandmakingalistofallthestuffthatwillhavetoberewritteninor der to make it compatible with the new specifications. Basically, shes going to havetorewriteallofhermaterialfromthegroundup.Forthethirdtimeinas manymonths.
Buthey,itsajob.1 Ifyouthinkthatsajoke,gobackandrereadthematerialinthelastsection ontherulesgoverningPowerPointpresentationsintheU.S.militarycommandin Afghanistan.
E.THEIMPLICATIONSOFREDUCEDPHYSICALCAPITALCOSTS
Theinformalandhouseholdeconomyreduceswastebyitsrelianceonspare cyclesofordinarycapitalgoodsthatmostpeoplealreadyown.Itmakesproduc tiveuseofidlecapitalassetstheaveragepersonownsanyway,providesaproduc tiveoutletforthesurpluslaboroftheunemployed,andtransformsthesmallsur plusesofhouseholdproductionintoareadysourceofexchangevalue.
1
NealStephenson,SnowCrash(Westminster,Md.:BantamDellPubGroup,2000).
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Letsconsideragainourexampleofthehomebasedmicroenterprisethemi crobrewery or restaurantfrom Chapter Five. Buying a brewing vat and a few smallfermentersforyourbasement,usingafewtablesinanextraroomasapublic restaurantarea,etc.,wouldrequireasmallbankloanforatmostafewthousand dollars. And with that capital outlay, you could probably make payments on the debt with the margin from one customer a day. A few customers evenings and weekends, probably found mainly among your existing circle of acquaintances, wouldenableyoutoinitiallyshiftsomeofyourworkinghoursfromwagelaborto work in the restaurant, with the possibility of gradually phasing out wage labor altogetherorscalingbacktoparttime,asyoubuiltupacustomerbase.Inthisand manyotherlinesofbusiness(forexampleaparttimegypsycabserviceusingacar andcellphoneyouownanyway),theminimalentrycostsandcapitaloutlaymean that the minimum turnover required to pay the overhead and stay in business wouldbequitemodest.Inthatcase,alotmorepeoplewouldbeabletostartsmall businesses for supplementary income and incrementally shift some of their wage worktoselfemployment,withminimalriskorsunkcosts. Thelowertheinitialcapitaloutlays,andthelowertheresultingoverheadthat must be serviced, the larger the percentage of its income stream belongs to the microenterprisewithoutencumbranceregardlessofhowmuchbusinessitisable todo.Itisundernopressuretogobigornotgoatall,togetbigorgetout,or toengageinlargebatchproductiontominimizeunitcostsfromoverhead,because it has virtually no overhead costs. So the microenterprise can ride out prolonged periods of slow business. If the microenterprise is based in a household which ownsitslivingspacefreeandclearandhasagardenandwellstockedpantry,the householdmaybeabletoaffordtogowithoutincomeduringslowspellsandlive off its savings from busy periods. Even if the household is dependent on some wage labor, the microenterprise in good times can be used as a supplemental sourceofincomewithnorealcostorriskofthekindthatwouldexistwerethere overheadtobeserviced,andthereforeenableasmallerwageincometogofurther inahouseholdincomepoolingunit. Thats why, as we saw in Chapter Two, one of the central functions of so calledhealthandsafetycodes,andoccupationallicensingistopreventpeople fromusingidlecapacity(orsparecycles)ofwhattheyalreadyownanyway,and therebytransformingthemintocapitalgoodsforproductiveuse.Ingeneral,state regulatory measures that increase the minimum level of overhead needed to en gageinproductionwillincreasetherateoffailureforsmallbusinesses,withpres suretointensifiedcutthroatcompetition.Inthespecificcaseofhighburdensof interestbearingdebt,andthepressuretoearnasufficientrevenuestreamtorepay theinterestaswellastheprincipal,TomGrecowrites,
As borrowers compete with one another to try to meet their debt obliga tions in this game of financial musical chairs, they are forced to expand their production,sales,andprofits.... ... Thus, debt continually mounts up, and businesses and individuals are forcedtocompeteformarketsandscarcemoneyinafutileattempttoavoidde 1 faultingontheirdebts.Thesystemmakesitcertainthatsomemustfail.
Because the household economy and the microenterprise require few or no capitaloutlays,theirburdenofoverheadisminiscule.Thisremovesthepressureto largebatch production. It removes the pressure to get out of business altogether
Thomas Greco, The End of Money and the Future of Civilization (White River Junc tion,Vt.:ChelseaGreenPublishing,2009),p.55.
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andliquidateonesassetswhenbusinessisslow,becausethereisnooverheadto service. Reduced overhead costs reduce the failure rate; they reduce the cost of staying in business indefinitely, enjoying revenue free and clear in good periods andridingoutslowoneswithvirtuallynoloss.AsBorsodiwrote,
Onlyinthehomecantheownerofamachineaffordtheluxuryofusingitonly whenhehasneedofit.Thehousewifeusesherwashingmachineonlyanhouror two per week. The laundry has to operate its washing machine continuously. Whether operating or not operating all of its machines, the factory has to earn enough to cover depreciation and obsolescence on them. Office overhead, too, 1 mustbeearned,whetherthefactoryoperatesonfulltimeoronlyonparttime.
And a housewife who uses her washing machine to full capacity in a house hold microlaundry, with no additional marginal cost besides the price of soap, water,andpower,willeatthecommerciallaundryalive.
F.STRONGINCENTIVESANDREDUCEDAGENCYCOSTS
Wealreadysaw,above,EricRaymondsdescriptionofhowselfselectionand incentives work in the Linux Bazaar model of opensource development. As MichelBauwensputit,
thepermissionlessselfaggregationaffordedbytheinternet,allowedhumansto congregate around their passionate pursuits.... It was discovered that when people are motivated by intrinsic positive motivation, they are hyperproduc tive.... ... [W]hile barely one in five of corporate workers are passionately moti vated, one hundred percent of peer producers are, since the system filters out 2 thoselackingit!
AndJohanSoderberg,likewise:
Toahiredprogrammer,thecodeheiswritingisameanstogetapaycheckat the end of the month. Any shortcut when getting to the end of the month will do.Forahacker,ontheotherhand,writingcodeisanendinitself.Hewillal 3 wayspayfullattentiontohisendeavour,orelsehewillbedoingsomethingelse.
The alternative economy reduces waste by eliminating all the waste of time involvedinthefacetimeparadigm.Wagelaborandhierarchyarecharacterized by high degrees of presenteeism. Because the management is so divorced from theactualproductionprocess,ithasinsufficientknowledgeoftheworktodevelop areliablemetricofactualworkaccomplished.Soitisrequiredtorelyonproxies for work accomplished, like the amount of time spent in the office and whether peoplelookbusy.Workers,whohavenointrinsicinterestintheworkandwho getpaidforjustbeingthere,havenoincentivetousetheirtimeefficiently. MatthewYglesiasdescribesthisastheofficeillusion:theequationofbeing intheofficetoworking.
Thus, minor questions like am I getting any work done? can tend to slip away. Similarly,whenIcameintoanofficeeveryday,IfeltlikeIcouldntjustleavethe office just because I didnt want to do anymore work, so I would kind of foot dragonthingstomakesurewhatevertaskIhadstretchedouttofilltheentire workingday.IfImnotinanoffice,bycontrast,ImacutelyawarethatIhavea Borsodi,ThisUglyCivilization,p.126. Michel Bauwens, The three revolutions in human productivity, P2P Foundation Blog,November29,2009<http://blog.p2pfoundation.net/thethreerevolutionsinhuman productivity/2009/11/29>. 3 JohanSoderberg,HackingCapitalism,p.26.
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budget of tasks that need to be accomplished, that working means finishing someofthosetasks,andthatwhenthetasksaredone,Icangotothegymorgo seeamovieorwatchTV.Thus,Itendtoworkinarelativelyfocused,disciplined 1 mannerandthengodosomethingotherthanworkratherthanslackoff.
Under the face time paradigm of wage employment at a workplace away fromhome,thereisnotradeoffbetweenworkandleisure.Anythingdoneatwork iswork,forwhichonegetspaid.Thereisnoopportunitycosttoslackingoffon thejob.Inhomeemployment,ontheotherhand,thetradeoffbetweeneffortand consumption is clear. The selfemployed worker knows how much productive la borisrequiredtosupporthisdesiredlevelofconsumption,andgetsitdonesohe canenjoytherestofhislife.Ifhisworkitselfisaconsumptiongood,hestillbal ancesitwiththerestofhisactivitiesinarational,utilitymaximizingmanner,be cause he is the conscious master of his time, and has no incentive to waste time becauseImhereanyway.Anyworkhedoeswhichiscomparativelyunproduc tiveorunrewardingcomesattheexpenseofmoreproductiveorenjoyablewaysof spendinghistime. Atwork,ontheotherhand,alltimebelongstotheboss.Ashiftofworkisan eighthourchunkofoneslife,cutoffandflusheddownthetoiletforthemoneyit willbring.Andasageneralrule,peopledonotmakeveryefficientuseofwhatbe longstosomeoneelse. J.E.Meadecontraststheutilitymaximizingbehaviorofaselfemployedindi vidualtothatofawageemployee:
AworkerhiredatagivenhourlywageinanEntrepreneurialfirmwillhave toobservetheminimumstandardofworkandeffortinordertokeephisjob;but hewillhavenoimmediatepersonalfinancialmotive...tobehaveinawaythat willpromotetheprofitabilityoftheenterprise....[A]nyextraprofitduetohis extraeffortwillinthefirstplaceaccruetotheentrepreneur.... Let us go to the other extreme and consider a oneman Cooperative, i.e. a singleselfemployedworkerwhohireshisequipment.Hecanbalancemoneyin comeagainstleisureandotheramenitiesbypleasinghimselfoverhoursofwork, holidays,thepaceandconcentrationofwork,teabreaksorthechoiceofequip mentandmethodsofworkwhichwillmakehisworkmorepleasantatthecost ofprofitability.Anyinnovativeideaswhichhehas,hecanapplyatonceandreap 2 thewholebenefithimself.
Thisistruenotonlyofselfemploymentinthehouseholdsectorandofself managedpeernetworks,butofselfmanagedcooperativesinthemoneyeconomy aswell.Thelatterrequirefarlessinthewayoffrontlinemanagersthandocon ventional capitalist enterprises. Edward Greenberg contrasts the morale and en gagementwithwork,amongtheemployeesofacapitalistenterprise,withthatof workerswhoownandmanagetheirplaceofemployment:
Rather than seeing themselves as a group acting in mutuality to advance theircollectiveinterestsandhappiness,workersinconventionalplantsperceive theirworkexistence,quitecorrectly,asoneinwhichtheyarealmostpowerless, beingusedfortheadvancementandpurposesofothers,subjecttothedecisions ofhigherandmoredistantauthority,anddrivenbyaproductionprocessthatis relentless....
Matthew Yglesias, The Office Illusion, Matthew Yglesias, September 1, 2007 <http://matthewyglesias.theatlantic.com/archives/2007/09/the_office_illusion.php>. 2 J.E. Meade, The Theory of LabourManaged Firms and Profit Sharing, in Jaroslav Vanek, ed., SelfManagement: Economic Liberation of Man (Hammondsworth, Middlesex, England:PenguinEducation,1975),p.395.
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Thegeneralmoodofthesetwoalternativetypesofworksettingscouldnot bemoresharplycontrasting.Topeoplewhofindthemselvesinconventional,hi erarchicallystructuredworkenvironments,theworkexperienceisnothumanly rewardingorenhancing.Thisseemstobeaproductofthealltoofamiliarcom binationofrepetitiousandmonotonouslabor...andthestructuralpositionof powerlessness,oneinwhichworkersarepartoftherawmaterialthatismanipu lated, channeled, and directed by an only partly visible managerial hierarchy. Workers in such settings conceive of themselves, quite explicitly, as objects ratherthansubjectsoftheproductionprocess,andcometoapproachtheentire situation, quite correctly, since they are responding to an objective situation of subordination,asoneofasimpleexchangeoflaborforwages.Work,donewith out a great deal of enthusiasm, is conceived of as intrinsically meaningless, yet necessary for the income that contributesto a decent life away from the work 1 place.
Greenbergnotesastrikingfact:thevastdifferenceinthenumberofsuper visors and foremen found in conventional plants as compared with the plywood cooperatives.
Whilethelatterwerequiteeasilyabletomanageproductionwithnomore than two per shift, and often with only one, the former often requires six or seven. Such a disparity is not uncommon. I discovered in one mill that had re centlybeenconvertedfromaworkerownedtoaconventional,privatelyowned firmthattheveryfirstactiontakenbythenewmanagementteamwastoquad ruple the number of line supervisors and foremen. In the words of the general managerofthismillwhohadalsobeenmanagerofthemillpriortoitsconver sion, We need more foremen because, in the old days, the shareholders super vised themselves.... They cared for the machinery, kept their areas picked up, helped break up production bottlenecks all by themselves. Thats not true any 2 more.Wevegottoprettymuchkeeponthemallofthetime.
Workersinacooperativeenterpriseputmoreofthemselvesintotheirwork, andfeelfreetosharetheirprivateknowledgeknowledgethatwouldbeexploited far more ruthlessly as a source of information rent in a conventional enterprise. Greenbergquotesacommentbyaworkerinaplywoodcoopthatspeaksvolumes on wage labors inefficiency at aggregating distributed knowledge, compared to selfmanagedlabor:
If the people grading off the end of the dryer do not use reasonable pru denceandtheystartmixingthegradestoomuch,IgetholdofsomebodyandI say,nowlook,thiscameovertomeasfacestockanditwouldntevenmakede centback.Whatthehellsgoinonhere? [Interviewer:Thatwouldnthappenifitwerearegularmill?]
That wouldnt happen. [In a regular mill] ... he has absolutely no moneyinvestedintheproductthatsbeingmanufactured....Hesselling nothingbuthistime.Anyknowledgehehasontheside,heisnotcommit tedorheisnotrequiredtosharethat.[emphasisadded] IttookmealittlewhiletogetusedtothisbecausewhereIworked before...therewasaunionandyoudidyourjobandyoudidntgoout anddosomethingelse.Hereyougetinanddoanythingtohelp....Isee somebodyneedshelp,whyyoujustgohelpthem.
Edward S. Greenberg. Producer Cooperatives and Democratic Theory in Robert JackallandHenryM.Levin,eds.,WorkerCooperativesinAmerica(Berkeley,LosAngeles, London:UniversityofCaliforniaPress,1984),p.185. 2 Ibid.,p.193.
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Ialsotendto...lookaroundandmakesurethingsareworkingrightalittle more than ... if I didnt have anything invested in the company.... I would 1 probablyneversayanythingwhenIsawsomethingwrong.
G.REDUCEDCOSTSFROMSUPPORTINGRENTIERS ANDOTHERUSELESSEATERS
The alternative economy reduces waste and increases efficiency by eliminat ingtheburdenofsupportingaclassofabsenteeinvestors.Byloweringthethresh old of capital investment required to enter production, and easing the skids for selfemployment at the expense of wage employment, the informal economy in creases efficiency. Because producerowned property must support only the la borerandhisfamily,therateofreturnrequiredtomaketheemploymentofland andcapitalworthwhileisreduced.Asaresult,fewerproductiveresourcesareheld outofuseandtherearemoreopportunitiesforproductivelabor. The absentee ownership of capital skews investment in a different direction fromwhatitwouldbeinaneconomyoflaborownedcapital,andreducesinvest menttolowerlevels.Investmentsthatwouldbejustifiedbythebarefactofmak ing labor less onerous and increasing productivity, in an economy of worker ownedcapital,2mustproduceanadditionalreturnonthecapitaltobeconsidered worthmakinginaneconomyofrentiers.Itisdirectlyanalogoustotheholdingof vacantlandoutofusethatmightenablelaborerstosubsistcomfortably,becauseit will not in addition produce a rent over and above the laborers subsistence. As ThomasHodgskinobservedinPopularPoliticalEconomy,
Itismaintained...thatlabourisnotproductive,and,infact,thelabourerisnot allowedtowork,unless,inadditiontoreplacingwhateverheusesorconsumes, andcomfortablysubsistinghimself,hislabouralsogivesaprofittothecapitalist ...;orunlesshislabourproducesagreatdealmore...thanwillsufficeforhis own comfortable subsistence. Capitalists becoming the proprietors of all the wealth of the society ... act on this principle, and never ... will they suffer la bourerstohavethemeansofsubsistence,unlesstheyhaveaconfidentexpecta tionthattheirlabourwillproduceaprofitoverandabovetheirownsubsistence. This ... is so completely the principle of slavery, to starve the labourer, unless hislabourwillfeedhismasteraswellashimself,thatwemustnotbesurprisedif weshouldfinditoneofthechiefcauses...ofthepovertyandwretchednessof 3 thelabouringclasses.
Whencapitalequipmentisownedbythesamepeoplewhomakeanduseit, ormadeandusedbydifferentgroupsofpeoplewhodividetheentireproductac cording to their respective labor and costs, it is productive. But when capital equipmentisownedbyaclassofrentiersseparatefromthosewhomakeitoruse it,theownersmaybesaidmoreaccuratelytoimpedeproductionratherthancon tributetoit.
If there were only the makers and users of capital to share between them the produceoftheircooperatinglabour,theonlylimittoproductivelabourwould be, that it should obtain for them and their families a comfortable subsistence. Butwheninadditiontothis...,theymustalsoproduceasmuchmoreassatis fiesthecapitalist,thislimitismuchsoonerreached.Whenthecapitalist...will allowlabourersneithertomakenoruseinstruments,unlessheobtainsaprofit Ibid.,p.191. ThomasHodgskin,PopularPoliticalEconomy:FourLecturesDeliveredattheLondon MechanicsInstitution(NewYork:AugustusM.Kelley,1966[1827]),pp.255256. 3 Ibid.,pp.5152.
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overandabovethesubsistenceofthelabourer,itisplainthatboundsaresetto productivelabourmuchwithinwhatNatureprescribes.Inproportionascapital inthehands of a third party is accumulated, so the whole amount ofprofit re quired by the capitalist increases, and so there arises an artificial check to pro duction and population. The impossibility of the labourer producing all which thecapitalistrequirespreventsnumberlessoperations,suchasdrainingmarshes, andclearingandcultivatingwastelands;todowhichwouldamplyrepaythela bourer,byprovidinghimwiththemeansofsubsistence,thoughtheywillnot,in addition,give a large profit to the capitalist. In the present state of society, the labourersbeinginnocasetheownersofcapital,everyaccumulationofitaddsto the amount of profit demanded from them, and extinguishes all that labour 1 whichwouldonlyprocurethelabourerhiscomfortablesubsistence.
Hodgskindevelopedthissametheme,asitappliedtoland,inTheNaturaland ArtificialRightofPropertyContrasted:
Itis,however,evident,thatthelabourwhichwouldbeamplyrewardedin cultivatingallourwastelands,tilleveryfootofthecountrybecamelikethegar dengroundsaboutLondon,werealltheproduceoflabouronthoselandstobe therewardofthelabourer,cannotobtainfromthemasufficiencytopayprofit, tithes,rent,andtaxes.... In the same manner as the cultivation of waste lands is checked, so are commercialenterpriseandmanufacturingindustryarrested.Infinitearetheun dertakingswhichwouldamplyrewardthelabournecessaryfortheirsuccess,but which will not pay the additional sums required for rent, profits, tithes, and taxes.These,andnowantofsoil,nowantofadequatemeansforindustrytoem ploy itself, are the causes which impede the exertions of the labourer and clog 2 theprogressofsociety.
Theadministrativeandtranactioncostsofconventionalcommercialeconomy haveasimilareffecttothatofrentierincomes:theyincreasethenumberofpeople the laborer must support, in addition to himself, and thereby increase the mini mumscaleofoutputrequiredforenteringthemarket.Thesocialeconomyenables its participants to evade the overhead costs of conventional organization (of the kind we saw skewered by Paul Goodman in Chapter Two), as described by Scott BurnsinTheHouseholdEconomy.Themostenthusiasticcelebrationsofincreased efficienciesfromdivisionoflaborlikethoseatMises.Orgtendtorelyonillus trationsinwhich,asBurnsputsit,laborcanbedirectlypurchased,orbemade theobjectofdirectexchangebetweenthelaborersthemselves.Butinfact,
[m]arketplacelabormustnotonlybeartheinstitutionalburdenoftaxation, itmustalsocarrytheoverheadcostsoforganizationandthecostofdistribution. Even the most direct service organizations charge two and onehalf times the costoflabor.Theaccountantwhoispaidtendollarsanhourisbilledouttocli ents at twentyfive dollars an hour.... When both the general and the specific overheadburdensareconsidered,itbecomesclearthatanyproductivitythatac cruestospecializationisvitiatedbytheoverheadburdensitmustcarry. Consider, for example, what happens when an eightdollaranhour ac countant hires an eightdollaranhour service repairman, and vice versa. The repairman is billed out by his company at two and onehalf times his hourly wage, or twenty dollars; to earn this money, the accountant must work three hours and twenty minutes, because 25 per cent of his wages are absorbed by Ibid.,pp.243244 Hodgskin, Letter the Eighth: Evils of the Artificial Right of Property, The Natural andArtificialRightofPropertyContrasted.ASeriesofLetters,addressedwithoutpermission toH.Brougham,Esq.M.P.F.R.S.(London:B.Steil,1832). <http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Fti tle=323&layout=html>
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taxes.Thus,tobetrulyeconomicallyefficient,theservicerepairmanmustbeat 1 leastthreeandonethirdtimesasefficientastheaccountantatrepairingthings.
The same principle applies to exchange, with household and informal ar rangementsrequiringfarlessinthewayofadministrativeoverheadthanconven tionalretailers.Foodbuyingclubsrunoutofpeopleshomes,barterbazaars2and freecycling networks, the imploding transaction costs of aggregating information and putting buyer and seller together on Craigslist, etc., all involve little or no overheadcost.ProjectslikeFreeCycle,infact,killtwobirdswithonestone:they simultaneously provide a lowoverhead alternative to conventional retail, and maximizetheefficiencywithwhichthealternativeeconomyextractsthelastdrop ofvaluefromthewastebyproductsofcapitalism. Totakejustoneexample,considertheenormouscostoffactoringintheap parel industry. Because most large retailers dont pay their apparel suppliers on time(delaysofasmuchassixmonthsarecommon),apparelproducersmustrely onfactorstobuytheiraccountsreceivableataheavydiscount(loansharkrates, in the words of Eric Husman, an engineer who blogs on lean manufacturing is suestypically 1520%).3 The requirement either to absorb several months ex penseswhileawaitingpayment,ortogettimelypaymentonlyatasteepdiscount, isanenormoussourceofaddedcostwhichexertspressuretomakeituponvol umethroughlargebatchsize.Nowthelargeretailers,helpfully,areintroducinga newSupplierAllianceProgram,whichamountstobringingthefactoringopera tion inhouse.4 Thats right: they actually lend you the money they owe you (in Husmanswords).Technically,theretailersarentactuallylendingthemoney,but rather extending their credit rating to cover your dealings with independent banks.Theprogramisaresponsetothebankruptcyofseveralmajorfactorsinthe recent financial crisis, and the danger that hundreds of vendors would go out of business in the absence of factoring. (Of course actually paying for orders on re ceiptwouldbebeyondthemeagerresourcesofthepoorbigboxchains.) For the small apparel producer, in contrast, producing directly for an inde pendentlocalretailer,foralocalbarternetwork,orfornetworkedoperationslike Etsy,carrieslittleornooverhead.Consideralsothenumberofotherindustriesin whichsomethinglikethefactoringsystemprevails(i.e.,sellingyou,oncredit,the ropetohangyourselfwith).AgoodexampleistherelationshipCargillandADM have with family farmers: essentially a recreation of the 18th century puttingout system.KathleenFasanella,aconsultanttothesmallapparelindustrywhospecial izesamong other thingsin applying lean principles to apparel manufacturing, isforthisreasonanenthusiasticsupporterofpulldistributionnetworks(farmers sellingatfarmersmarkets,craftproducerssellingonEtsy,etc.).5
ScottBurns,TheHouseholdEconomy:ItsShape,Origins,&Future(Boston:TheBea conPress,1975),pp.163164. 2 Gul Tuysuz, An ancient tradition makes a little comeback, Hurriyet DailyNews, January23,2009<http://www.hurriyet.com.tr/english/domestic/10826653.asp?scr=1>. 3 Eric Husman, private email, November 18, 2009; Kathleen Fasanella, Selling to De partment Stores pt. 1, Fashion Incubator, August 11, 2009 <http://www.fashion incubator.com/archive/sellingtodepartmentstorespt1/>. 4 SupplyChainNews:WalmartJoinsKohlsinOfferingFactoringProgramtoApparel Suppliers, Supply Chain Digest, November 17, 2009 <http://www.scdigest.com/ASSETS/ ON_TARGET/0911172.PHP?cid=2954&ctype=conte>. 5 Kathleen Fasanella, private email, November 19, 2009. Fasanella wrote the best knownbookintheindustryonhowtostartanapparelcompany:TheEntrepreneursGuide toSewnProductManufacturing(ApparelTechnicalSvcs,1998).EricHusmanalsohappens tobeherhusband.
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The shift to dispersed production in countless microenterprises also makes thealternativeeconomyfarlessvulnerabletostatetaxationandimpositionofarti ficial levels of overhead. In an economy of largescale, conventional production, therequiredscaleofcapitaloutlaysandresultingvisibilityofenterprisesprovides aphysicalhostageforthestatesenforcementofoverheadraisingregulationsand intellectualpropertylaws. The conventional enterprise also provides a much larger target for taxation, with much lower costs for enforcement.1 But as required physical capital outlays implode,andconventionalmanufacturingmeltsintoanetworkofsmallmachine shops and informal/household hobby shops, the targets become too small and dispersedtobotherwith. Thiseffectofrentierincome,bytheway,isjustanotherexampleofabroader phenomenonwehavebeenobservinginvariousguisesthroughoutthisbook:the effectofanyincreaseintheminimumcapitaloutlay,overhead,etc.,tocarryouta function, is to increase the scale of production necessary to service fixed costs. Overheadisabafflethatdisruptstheflowfromefforttooutput,andhasaneffect on the productive economy comparable to that of constipation or edema on the humanbody. On the Open Manufacturing list, Eric Hunting argues that one of the side effects of the kind of relocalized flexible manufacturing we examined in Chapter Five is that increasing competition, easy diffusion of new technology and tech nique, and increasing transparency of cost structure willbetween them arbitragetherateofprofittovirtuallyzeroandsqueezeartificialscarcityrentsand spotmarketprofitsfrompricealmostentirely.
What Open Manufacturing is doing is on the bleedingedge of a general tendinindustrialautomationforprogressivelyincreasingproductivityandpro duction flexibility (mass customization/demanddriven flex production) with systemsofdecreasingscaleandupfrontcost.Atthesametimetheeconomicsof manufacturinghasusedupthepotentialofGlobalizationasameanstoexploit geographicspotmarketbargainsinmaterialsandlaborcostsandisnowdealing in a world of increasingly homogenous materials costs and expensive energy and therefore transportationcosts. The efficiency of manufacturing logistics really matters now. It no longer makes economic sense to manufacture whole goodsinfarawayplacesnomatterhowcheapthelaboris.Andthoughtheex ecutiveclassremainsslowontheuptakeasusualthetrendistowardlocaliza tion of production with increasing flexibility. So, ironically driven by the profit motive, commercial manufacturing is on a parallel track to the same goal as OpenManufacturing;progressivelocalizationanddiversificationofproduction. Iforeseethisproducingaprogressivecommoditizationofglobaleconom ics.Inotherwords,globaltradewillincreasinglybetradeofcommoditiesmate rialsandcomponents,becauseitnolongermakeseconomicsensetomovefin ished goods around when their transportation is so inefficient. Commodities tradeishighlyautomatedbecausecommoditiesproductionishighlyautomated, producesuniformproducts,anddealsinlargevolumesrelativetothenumberof workers. Production costs are highly quantifiable when the amortized cost of equipment supersedes the human labor overhead and that tends to factor out thevariabilityinthatonlyremaining(anddeliberately)fuzzyvaluedcommod ity.Theresultisthatthereisincreasingglobalpricecapitulationinthevalueof commoditieslargelybecauseitsincreasinglydifficulttohidecosts,findexclu See, for example, Benjamin Darrington, Government Created Economies of Scale and Capital Specificity (Austrian Student Scholars Conference, 2007) pp. 67 <http://agorism.info/_media/government_created_economies_of_scale_and_capital_specif icity.pdf>.
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sive geographical spotmarket bargains, or maintain exclusive distribution he gemonies.Tradingsystemshaveaveryhighandsteadilyincreasingquantitative awarenessofthecostsofeverythingandtheprojecteddemandandproduction capacity for everything. At a certain point they can algorithmically factor out profitandcanstarttradingcommoditiesforcommoditieswithoutcashindexed to projected demand/production. Profit in trade is based on divergence in the perceptionofvaluebetweenbuyerandseller.Scarcityisoftenaperceptioncre atedbyhidingdataandthatsincreasinglyhardtodoinaworldwherequanti tativeanalysistradingknowsmoreaboutanindustrythantheCEOsdo.When everybody knows ahead of time what the concrete values of everything is and you have an actual open market where everyone has alternate sources for just 1 abouteverything,profitbecomesimpossible.
H.THESTIGMERGICNONREVOLUTION
KimStanleyRobinson,inthesecondvolumeofhisMarstrilogy,madesome interestingcomments(throughthemouthofoneofhischaracters)onthedraw backsoftraditionalmodelsofrevolution:
... [R]evolution has to be rethought. Look, even when revolutions have been successful,theyhavecausedsomuchdestructionandhatredthatthereisalways some kind of horrible backlash. Its inherent in the method. If you choose vio lence,thenyoucreateenemieswhowillresistyouforever.Andruthlessmenbe comeyourrevolutionaryleaders,sothatwhenthewarisovertheyreinpower, 2 andlikelytobeasbadaswhattheyreplaced.
ArthurSilber,insimilarvein,wrotethatwithnoexceptioninhistorythatI canthinkof,violentrevolutionsonanyscaleleadtoastateofaffairswhichisno betterandfrequentlyworsethanthatwhichtherebelsseektoreplace.3 Apoliticalmovementisusefulmainlyforrunninginterference,defendingsafe spacesinwhichwecanbuildtherealrevolutiontherevolutionthatmatters.To theextentthatviolenceisused,itshouldnotbeperceivedbythepublicatlargeas a way of conquering anything, but as defensive force that raises the cost of gov ernmentattacksonthe countereconomyinasituationwherethegovernmentis clearly the aggressor. The movement should avoid, at all costs, being seen as an attempttoimposeanewalternativewayoflifeontheconventionalpublic,but instead strive to be seen as a fight to enable everyone to live their own lives the waytheywant.Andeveninsuchcases,noncooperationandcivildisobedience whiletakingadvantageofthepossibilitiesofexposurethatnetworkedculturepro videarelikelytobemoreeffectivethanviolentdefense. Rather than focusing on ways to shift the correlation of forces between the statescapabilitiesforviolenceandours,itmakesfarmoresensetofocusonways toincreaseourcapabilitiesoflivinghowwewantbelowthestatesradar.Thenet workedformsoforganizationweveexaminedinChapterThreeandinthischapter arekeytothatprocess. The focus on securing liberty primarily through political organization organizingonebigmovementtomakesureeverybodyisonthesamepage,be
EricHunting,Re:RoadmaptoPostScarcity,OpenManufacturing,January12,2010 <http://groups.google.com/group/openmanufacturing/msg/96166c44e39d3e6e?hl=en>. 2 KimStanleyRobinson,GreenMars(NewYork,Toronto,London,Sydney,Auckland: BantamBooks,1994),p.309. 3 Arthur Silber, An Evil Monstrosity: Thoughts on the Death State, Once Upon a Time, April 20, 2010 <http://powerofnarrative.blogspot.com/2010/04/evilmonstrosity thoughtsondeath.html>.
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foreanyonecanputonefootinfrontoftheotherembodiesalltheworstfaultsof 20thcenturyorganizationalculture.Whatweneed,instead,istocapitalizeonthe capabilitiesofnetworkculture. Networkculture,initsessence,isstigmergic:thatis,aninvisiblehandeffect resultsfromtheseveraleffortsofindividualsandsmallgroupsworkingindepend ently.Suchindependentactorsmayhaveaviewtocoordinatingtheireffortswith alargermovement,andtaketheactionsofotheractorsintoaccount,buttheydo sowithoutanysinglecoordinatingapparatussetoverandabovetheirindependent authority. In other words, we need a movement that works like Wikipedia at its best (withoutthedeletionazis),orlikeopensourcedeveloperswhoindependentlytai lormodularproductstoacommonplatform. Thebestwaytochangethelaws,inpracticalterms,istomakethemirrele vant and unenforceable through counterinstitution building and through countereconomicactivityoutsidethestatescontrol.Statesclaimallsortsofpow ersthattheyareutterlyunabletoenforce.Itdoesntmatterwhattaxlawsareon thebooksifmostcommerceisinencryptedcurrencyofsomekindandinvisibleto the state. It doesnt matter how industrial patents enforce planned obsolescence, whenagaragefactoryproducesgenericreplacementsandmodularaccessoriesfor proprietarycorporateplatforms,andsellstosuchasmallmarketthatthecostsof detectingandpunishinginfringementareprohibitive.Itdoesntmatterthatlocal zoningregulationsprohibitpeopledoingbusinessoutoftheirhomes,whentheir clienteleissosmalltheycantbeeffectivelymonitored. Without the ability of governments to enforce their claimed powers, the claimedpowersthemselvesareaboutasrelevantastheedictsoftheEmperorNor ton. Thats why Charles Johnson argues that its far more costeffective to go di rectlyafterthestatesenforcementcapabilitiesthantotrytochangethelaw.
Inpointoffact,ifoptionsotherthanelectoralpoliticsareallowedontothe table,thenitmightverywellbethecasethatexactlytheoppositecoursewould be more effective: if you can establish effective means for individual people, or better yet large groups of people, to evade or bypass government enforcement andgovernmenttaxation,thenthatmightverywellprovideamuchmoreeffec tive route to getting rid of particular bad policies than getting rid of particular badpoliciesprovidestogettingridofthegovernmentenforcementandgovern menttaxation. Totakeoneexample,considerimmigration.Ifthegovernmenthasatyran nicalimmigrationlawinplace...,thentherearetwowaysyoucouldgoabout tryingtogetridthetyranny.Youcouldstartwiththeworstaspectsofthelaw, build a coalition, do the usual stuff, get the worst aspects removed or perhaps ameliorated,fightoffthebacklash,then,acoupleelectioncycleslater,starttalk ing about the almostasbad aspects of the law, build another coalition, fight somemore,andsoon,andsoforth,progressivelywhittlingtheprovisionsofthe immigrationlawdownuntilfinallyyouhavewhittleditdowntonothing,oras closetonothingas youmight realistically hope for. Then,if youhavegottenit downtonothing,youcannowturnaroundandsay,Well,sincewehavebasi cally no restrictions on immigration any more, why keep paying for a border control or internal immigration cops? Lets go ahead and get rid of that stuff. Andthenyouredone. Theotherwayisthereversestrategy:togetridofthetyrannybyfirstaim ingattheenforcement,ratherthanaimingatthelaw,bymakingthebordercon trol and internal immigration cops as irrelevant as you can make them. What you would do, then, is to work on building up more or less loose networks of blackmarket and greymarket operators, who can help illegal immigrants get into the country without being caught out by the Border Guard, who provide
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safehousesforthemtostayonduringtheirjourney,whocanhelpthemgetthe papersthattheyneedtoskirtsurveillancebyLaMigra,whocanhookthemup withworkandplacestoliveunderthetable,etc.etc.etc.Totheextentthatyou cansucceedindoingthis,youvemadeimmigrationenforcementirrelevant.And withouteffectiveimmigrationenforcement,thestatecanblusteronasmuchas itwantsabouttheEvilAlienInvasion;asamatterofrealworldpolicy,theim 1 migrationlawwillbecomeadeadletter.
Its a principle anticipated over twenty years ago by Chuck Hammill, in an earlycelebrationoftheliberatorypotentialofnetworktechnology:
WhileIcertainlydonotdisparagetheconceptofpoliticalaction,Idontbe lievethatitistheonly,norevennecessarilythemostcosteffectivepathtoward increasingfreedominourtime.Considerthat,forafractionoftheinvestmentin time,moneyandeffortImightexpendintryingtoconvincethestatetoabolish wiretappingandallformsofcensorshipIcanteacheverylibertarianwhosin terestedhowtousecryptographytoabolishthemunilaterally.... ....SupposethishungryEskimoneverlearnedtofishbecausetherulerof hisnationstatehaddecreedfishingillegal.... .... However, it is here that technologyand in particular information technologycan multiply your efficacy literally a hundredfold. I say literally, becausefor a fraction of the effort (and virtuallynone of the risk) attendant to smuggling in a hundred fish, you can quite readily produce a hundred Xerox copiesoffishinginstructions.... AndthatswhereImtryingtotakeTheLiberTechProject.Ratherthanbe seechingthestatetopleasenotenslave,plunderorconstrainus,Iproposealib ertariannetworkspreadingthetechnologiesbywhichwemayseizefreedomfor ourselves.... So, the next time you look at the political scene and despair, thinking, Well,if51%ofthenationand51%ofthisState,and51%ofthiscityhavetoturn Libertarian before Ill be free, then somebody might as well cut my goddamn throatnow,andputmeoutofmymiseryrecognizethatsuchisnotthecase. 2 Thereexistwaystomakeyourselffree.
ThiscoincidestoalargeextentwithwhatDavePollardcallsincapacitation: renderingtheoldorderunabletofunctionbysappingwhatitneedstosurvive.3
Butsupposeif,insteadofwaitingforthecollapseofthemarketeconomyandthe crumblingofthepowerelite,webroughtaboutthatcollapse,guerrillastyle,by making information free, by making local communities energy selfsufficient, and by taking the lead in biotech away from government and corporatists (the powerelite)byworkingcollaboratively,usingthePowerofMany,OpenSource, 4 unconstrainedbycorporateallegiance,patentsandshareholderexpectations?
Inshort,weunderminetheoldcorporateorder,notbythepeopleweelectto Washington,orthepoliciesthosepeoplemake,butbyhowwedothingswherewe live. A character in Marge Piercys Woman on the Edge of Time, describing the revolutionthatledtoherfuturedecentralistutopia,summeditupperfectly.Revo lution, she said, was not uniformed parties, slogans, and massmeetings. Its the people who worked out the laborandland intensive farming we do. Its all the
CharlesJohnson,InwhichIfailtobereassured,RadGeekPeoplesDaily,January26, 2008<http://radgeek.com/gt/2008/01/26/in_which/>. 2 Chuck Hammill, From Crossbows to Cryptography: TechnoThwarting the State (Given at the Future of Freedom Conference, November 1987) <www.csua.berkeley.edu/ ~ranga/papers/crossbows2crypto/crossbows2crypto.pdf>. 3 David Pollard, All About Power and the Three Ways to Topple It (Part 1), How to SavetheWorld,February18,2005<http://blogs.salon.com/0002007/2005/02/18.html>. 4 Pollard, All About PowerPart Two, How to Save the World, February 21, 2005 <http://blogs.salon.com/0002007///2005/02/21.html>.
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peoplewhochangedhowpeopleboughtfood,raisedchildren,wenttoschool!.... Whomadenewunions,withheldrent,refusedtogotowars,wroteandeducated andmadespeeches.1 Oneofthebenefitsofstigmergicorganization,aswesawinearlierdiscussions of it, is that individual problems are tackled by the selfselected individuals and groupsbestsuitedtodealwiththemandthattheirsolutionsarethenpassedon, viathenetwork,toeveryonewhocanbenefitfromthem.DRMmaybesohardto crackthatonlyahandfulofgeekscandoit;butthatdoesntmean,asthemusic and movie industries had hoped, that that would make piracy economically ir relevant.WhenahandfulofgeeksfigureouthowtocrackDRMtoday,thanksto stigmergicorganization,grandmaswillbedownloadingDRMfreepiratedmusic andmoviesattorrentsitesnextweek. Eachindividualinnovationinwaysoflivingoutsidethecontrolofthecorpo ratestate nexus, of the kind mentioned by Pollard and Piercy, creates a demon strationeffect:Youcandothistoo!Everytimesomeonefiguresoutawaytopro ducepiratedknockoffgoodsinamicrofactoryindefianceofamassproduction corporations patents, or build a cheap and livable house in defiance of the con tractorwrittenbuildingcode,orrunamicrobakeryorunlicensedhairsalonoutof their home with virtually zero overhead in defiance of local zoning and licensing regulations, theyre creating another hack to the system, and adding it to the shared culture of freedom. And the more theyre able to do business with each other through encrypted currencies and organize the kind of darknet economy described by John Robb, the more the countereconomy becomes a coherent wholeopaquetothecorporatestate. Statismwillultimatelyend,notastheresultofanysuddenanddramaticfail ure,butasthecumulativeeffectofalongseriesoflittlethings.Thecostsofencul turingindividualstothestatesviewoftheworld,andofdissuadingalargeenough majority of people from disobeying when theyre pretty sure theyre not being watched, will result in a death of a thousand cuts. More and more of the states activities, from the perspective of those running things, will just cost more (in termsnotonlyofmoneybutofjustplainmentalaggravation)thantheyreworth. The decay of ideological hegemony and the decreased feasibility of enforcement willdothesamethingtothestatethatfilesharingisnowdoingtotheRIAA. One especially important variant of the stigmergic principle is educational and propaganda effort. Even though organized, issueoriented advocacy groups arguablycanhaveasignificanteffectonthestate,inpressuringthestatetocease orreducesuppressionofthealternativeeconomy,thebestwaytomaximizebang forthebuckinsucheffortsissimplytocapitalizeonthepotentialofnetworkcul ture:thatis,putmaximumeffortintojustgettingtheinformationoutthere,giving the government lots and lots of negative publicity, and then letting a thousand flowers bloom when it comes to efforts to leverage it into political action. That being done, the political pressure itself will be organized by many different indi vidualsandgroupsoperatingindependently,spurredbytheir own outrage, with outevensharinganycommonantistatistideology. In the case of any particular state abuse of power or intervention into the economy, there are likely to be countless subgroups of people who oppose it for any number of idiosyncratic reasons of their own, and not from any single dog maticprinciple.Ifwesimplyexposethenatureofthestateactionandallitsunjust particulareffects,itwillbeleveragedintoactionbypeopleinnumbersmanytimes
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MargePiercy,WomanontheEdgeofTime(NewYork:FawcettColumbine,1976),p.
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largerthanthoseoftheparticularalternativeeconomicmovementweareinvolved in. Even people who do not particularly sympathize with the aims of a counter economicmovementmaybemovedtooutrageifthestatesenforcerscanbeputin apositionoflookinglikeBullConnor.AsJohnRobbsays:Theuseofthemediato communicateintentandtoshareinnovationwithotherinsurgentgroupsisasta ple of open source insurgency.... 1 The state and the large corporations are a bunch of cows floundering around in the Amazon. Just get the information out there,andtheindividualtoothylittlecrittersintheschoolofpiranha,actinginde pendently,willtakecareoftheskeletonizingontheirown. Agoodexample,inthefieldofcivilliberties,iswhatRadleyBalkodoesevery day,justthroughhisowneffortsatexposingthecockroachesoflawenforcement to the kitchen light, or the CNN series about gross civil forfeiture abuses in that towninTexas.WhenWoodwardandBernsteinuncoveredWatergate,theydidnt start trying to organize a political movement to capitalize on it. They just pub lishedtheinfoandafirestormresulted. ThisisanexampleofwhatRobbcallsselfreplication:createsociallyengi neeredcopiesofyourorganizationthroughtheuseofsocialmedia.Basically,this meansprovidingthemotivation,knowledge,andfocusnecessaryforanunknown person (external and totally unconnected to your group) to conduct operations that advance your groups specific goals (or the general goals of the open source insurgency).2 Itsbecauseofincreasedlevelsofgeneraleducationandthediffusionofmore advanced moral standards that countries around the world have had to rename theirministriesofwarministriesofdefense.Itsforthesamereasonthat,inthe twentiethandtwentyfirstcenturies,governmentscouldnolongerlaunchwarsfor reasons of naked realpolitik on the model of the dynastic wars of two centuries earlier;rather,theyhadtomanufacturepretextsbasedonselfdefense.Hencepre texts like the mistreatment of ethnic Germans in Danzig as a pretext for Hitlers invasionofPoland,andtheTonkinGulfincidentandKuwaitiincubatorbabiesas pretexts for American aggressions. Thats not to say that the pretexts had to be verygoodtofoolthegeneralpublic;butnetworkcultureischangingthataswell, aswitnessedbythecontrastinglevelsofantiwarmobilizationinthefirstandsec ondGulfwars. Morethanonethinkeronnetworkculturehasarguedthatnetworktechnol ogy and the global justice movements piggybacked on it are diffusing more ad vanced global moral norms and putting increasing pressure on governments that violate those norms.3 Global activism and condemnation of violations of human rights in countries like China and Iranlike American nationwide exposure and boycottsofmeasureslikeArizonaspapers,pleaselawareanincreasingsource of embarrassment and pressure. NGOs and global civil society are emerging as a powerful countervailing force against both national governments and global cor porations.AswesawinthesubsectiononnetworkedresistanceinChapterThree, governments and corporations frequently can find themselves isolated and ex
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John Robb, Links: 2 APR 2010, Global Guerrillas, April 2, 2010 <http:// globalguerrillas.typepad.com/globalguerrillas/2010/04/links2apr2010.html>. 2 John Robb, STANDING ORDER 8: Selfreplicate, Global Guerrillas, June 3, 2009 <http://globalguerrillas.typepad.com/globalguerrillas/2009/06/standingorder8 selfreplicate.html>. 3 PaulHartzog,Panarchy:GovernanceintheNetworkAge,<http://www.panarchy.com/Members/ PaulBHartzog/Papers/Panarchy%20%20Governance%20in%20the%20Network%20Age.htm#_ftn>.
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posed in the face of an intensely hostile global public opinion quite suddenly, thankstonetworkedglobalactors. In light of all this, the most costeffective political effort is simply making peopleunderstandthattheydontneedanyonespermissiontobefree.Starttell ingthemrightnowthatthelawisunenforceable,anddisseminatingknowledgeas widelyaspossibleonthemosteffectivewaysofevadingit.Publicizeexamplesof wayswecanliveourlivesthewaywewant,withinstitutionsofourownmaking, undertheradarofthestatesenforcementapparatus:localcurrencysystems,free clinics,waystoprotectsquattercommunitiesfromharassment,andsoon.Educa tionaleffortstounderminethestatesmorallegitimacy,educationalcampaignsto demonstrate the unenforceability of the law, and efforts to develop and circulate meansofcircumventingstatecontrol,areallthingsbestdoneonastigmergicba sis. CriticsofdigitalcommunismlikeJaronLanierandMarkHelprin,whocon demn network culture for submerging individual authorial voice in the collec tive,aremissingthepoint.Stigmergysynthesizesthehighestrealizationofboth individualism and collectivism, and represents the most absolute form of each of them,withouteitherbeinglimitedorqualifiedinanyway. Stigmergyisnotcollectivistinthetraditionalsense,asitwasunderstoodin thedayswhenacommoneffortonanysignificantscalerequiredalargeorganiza tiontorepresentthecollective,andthecoordinationofindividualeffortsthrough ahierarchy.Butitistheultimaterealizationofcollectivism,inthatitremovesthe transactioncostoffreecollectiveactionbymanyindividuals. It is the ultimate in individualism because all actions are the free actions of individuals, and the collective is simply the sum total of several individual ac tions.Everyindividualisfreetoformulateanyinnovationheseesfit,withoutany needforpermissionfromthecollective.Everyindividualorvoluntaryassociation ofindividualsisfreetoadopttheinnovation,ornot,astheyseefit.Theextentof adoption of any innovation is based entirely on the unanimous consent of every voluntary grouping that adopts it. Each innovation is modular, and may be adoptedintoanynumberoflargerprojectswhereitisfounduseful.Anygrouping where there is disagreement over adoption may fork and replicate their project withorwithouttheinnovation. Groupactionisfacilitatedwithgreatereaseandlowertransactioncoststhan everbefore,butallgroupactionsaretheunanimousactionsofindividuals.
I.THESINGULARITY
Thecumulativeeffectofallthesesuperiorefficienciesofpeerproduction,and oftheinformalandhouseholdeconomy,istocreateasingularity. Theproblem,forcapital,isthataswesawinpreviouschapterstheminia turization and cheapness of physical capital, and the emergence of networked meansofaggregatinginvestmentcapital,arerenderingcapitalincreasinglysuper fluous. The resulting crisis of realization is fundamentally threatening. Not only is capital superfluous in the immaterial realm, but the distinction between the im material and material realms is becoming increasingly porous. Material produc tion,moreandmore,istakingonthesamecharacteristicsthatcausedthedesktop computertorevolutionizeproductioninthematerialrealm. Thetechnologicalsingularitymeansthatlaborisceasingtodependoncapi tal,andonwageemploymentbycapital,foritsmaterialsupport.
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Forovertwocenturies,asImmanuelWallersteinobserved,thesystemofcapi talist production based on wage labor has depended on the ability to externalize manyofitsreproductionfunctionsonthenonmonetizedinformalandhousehold economies, and on organic social institutions like the family which were outside thecashnexus. 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 thattheybearreproductioncoststhatwouldotherwisehavetobeinternalizedin wages;buttheyhavebeensuppressed(asintheEnclosures)whentheythreatento increase in size and importance to the point of offering a basis for independence fromwagelabor. The employing classes fear of the subsistence economy made perfect sense. ForasKropotkinasked:
If every peasantfarmer had a piece of land, free from rent and taxes, if he hadinadditionthetoolsandthestocknecessaryforfarmlabourWhowould ploughthelandsofthebaron?Everyonewouldlookafterhisown.... Ifallthemenandwomeninthecountrysidehadtheirdailybreadassured, and their daily needs already satisfied, who would work for our capitalist at a wageofhalfacrownaday,whilethecommoditiesoneproducesinadaysellin 1 themarketforacrownormore?
Thehouseholdasanincomepoolingunit,Wallersteinwrites,canbeseen as a fortress both of accommodation to and resistance to the patterns of labor forceallocationfavoredbyaccumulators.Capitalhastendedtofavorseveringthe nuclear family household from the larger territorial community or extended kin network, and to promote an intermediatesized incomepooling household. The reasonisthattoosmallahouseholdfallssofarshortasabasisforincomepooling thatthecapitalistisforcedtocommodifytoolargeaportionofthemeansofsub sistence,i.e.tointernalizethecostinwages.2Itisintheinterestoftheemployer nottorendertheworkertotallydependentonwageincome,becausewithoutthe ability to carry out some reproduction functions through the production of use valuewithinthehouseholdsubsistenceeconomy,theworkerwillbecompelledto demandhigherrealwages....3Ontheotherhand,toolargeahouseholdmeant that the level of work output required to ensure survival was too low, and di minishedpressuretoenterthewagelabormarket.4 Its only common sense that when there are multiple wageearners in a household, their dependence on any one job is reduced, and the ability of each member to walk away from especially onerous conditions is increased: While a family with two or more wageearners is no less dependent on the sale of labor power in general, it is significantly shielded from the effects of particular unem
1
PeterKropotkin,TheConquestofBread(NewYork:VanguardPress,1926),pp.3637. Immanuel Wallerstein, Household Structures and LaborForce Formation in the CapitalistWorldEconomy,inJoanSmith,ImmanuelWallerstein,HansDieterEvers,eds., HouseholdsandtheWorldEconomy(BeverlyHills,London,NewDelhi:SagePublications, 1984),pp.2021. 3 WallersteinandJoanSmith,Householdsasaninstitutionoftheworldeconomy,in SmithandWallerstein,eds.,CreatingandTransformingHouseholds:Theconstraintsofthe worldeconomy (Cambridge; New York; Oakleigh, Victoria; Paris: Cambridge University Press,1992),p.16. 4 Wallerstein,HouseholdStructures,p.20.
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ployment...1Andinfactitislessdependentonthesaleoflaborpoweringen eral,totheextentthatthepercapitaoverheadoffixedexpensestobeservicedfalls as household size increases. And the absolute level of fixed expenses can also be reducedbysubstitutingthehouseholdeconomyforwageemployment,inpart,as thelocusofvaluecreation.AswesawBorsodiputitinthepreviouschapter,[a] little money, where wages are joined to the produce of the soil, will go a long way.... The new factor today is a revolutionary shift in competitive advantage from wage labor to the informal economy. The rapid growth of technologies for home production,basedonsmallscaleelectricallypoweredmachineryandnewformsof intensive cultivation, has radically altered the comparative efficiencies of large and smallscale production. This was pointed out by Borsodi almost eighty years ago,andthetrendhascontinuedsince.Thecurrentexplosioninlowcostmanu facturing technology promises to shift competitive advantage in the next decade muchmorethanintheentirepreviouscentury. Thepracticalchoicepresentedtolaborbythisshiftofcomparativeadvantage wasablystatedbyMarcinJakubowski,whoseFactorEFarmisoneofthemostno table attempts to integrate open manufacturing and digital fabrication with an opendesignrepository:
Friends and family still harass me. They still keep telling me to get a real job.Ivegotagoodresponsenow.Itis: 1.Takealookatthelastpostonthesoilpulverizer 2.Consider getting a real job at $100k, a wellpaid gig in The System. Tax andexpensetakeitdownto$50k,saved,ifyourefrugal. Ok.Icangetarealjob,workfor6months,andthenbuyaSoilPulverizer for$25k.Or,Imakemyownin2weeksat$200cost,andsavetheworldwhile Imatit. Whichonemakesmoresensetoyou?Youcanseewhichonemakesmore 2 sensetome.Itsjusteconomics.
Inotherwords,howyagonnakeepemdowninthefactory,whenthecostofget tingyourowngaragefactoryhasfallentotwomonthswages? As James OConnor described the phenomenon in the 1980s, the accumula tion of stocks of means and objects of reproduction within the household and communitytooktheedgeofftheneedforalienatedlabor.
Laborpower was hoarded through absenteeism, sick leaves, early retire ment, the struggle to reduce days worked per year, among other ways. Con servedlaborpowerwasthenexpendedinsubsistenceproduction....Theliving economybasedonnonandanticapitalistconceptsoftimeandspacewentun derground:inthereconstitutedhousehold;thecommune;cooperatives;thesin gleissue organization; the selfhelp clinic; the solidarity group. Hurrying along thedevelopmentofthealternativeandundergroundeconomieswasthegrowth of underemployment ... and mass unemployment associated with the crisis of the 1980s. Regular employment and unionscale work contracted, which be cameanincentivetodevelopalternative,localizedmodesofproduction.... ...Newsocialrelationshipsofproductionandalternativeemployment,in cluding the informal and underground economies, threatened not only labor discipline, but also capitalist markets.... Alternative technologies threatened capitals monopoly on technological development ... Hoarding of laborpower SamuelBowlesandHerbertGintis.TheCrisisofLiberalDemocraticCapitalism:The CaseoftheUnitedStates,PoliticsandSociety11:1(1982),p.83. 2 Marcin Jakubowski, Get a Real Job! Factor E Farm Weblog, September 7, 2009 <http://openfarmtech.org/weblog/?p=1067>.
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threatened capitals domination of production. Withdrawal of laborpower un 1 derminedbasicsocialdisciplinarymechanisms....
More recently, Eleutheros, of How Many Miles from Babylon? blog, de scribedthesenseoffreedomthatresultsfromacapacityforindependentsubsis tence:
...ifwepadlockedthegatetothisfarmsteadandneverhadanytraffickingwith Babyloneveragain,wecouldstillgrowcornandbeansinperpetuity.... Whatisthislowtech,lowinput,subsistenceeconomyallabout,whatdoes it mean to us? It is much like Jack Sparrows remark to Elizabeth Swann when ... he told her what the Black Pearl really was, it was freedom. Like that to us our centuries old agriculture represents for us a choice. And having a choice is theveryessenceandfoundationofourescapefromBabylon. ...TowalkawayfromBabylon,youmusthavechoices....Babylon,aswith anyexploitativeandcontrollingsystem,canonlyexistbylimitingandeliminat ing your choices. After all, if you actually have choices, you may in fact choose thethingsthatbenefitandenhanceyouandyourfamilyratherthanthingsthat benefitBabylon. Babylonmusteliminateyourabilitytochoose.... SoIbringupmycornfieldinwayofillustrationofwhatarealchoicelooks like.Weproduce...ourstaplebreadwithnoinputatallfromBabylon.Sowe always have the choice to eat that instead of what Babylon offers. We also buy wheat in bulk and make wheat bread sometimes, but if (when, as it happened this year) the transportation cost or scarcity of wheat makes the price beyond the pale, we can look at it and say, No, not going there, we will just go home and have our cornbread and beans. Likewise we sometimes buy food from stands and stores, and on a few occasions we eat out. But we always have the choice,andifweneedto,wecanenforcethatchoiceformonthsonend.... Your escape from Babylon begins when you can say, No, I have a choice. Oh,IcandinearoundBabylonstableifIchoose,butiftheBabyoniantermsand 2 conditionsareodious,thenIdonthaveto.
Andthepayoffdoesntrequireatotaleconomicimplosion.Thisisawinning strategyevenifthemoneyeconomyanddivisionoflaborpersistindefinitelytoa largeextentasIthinktheyalmostsurelywillandmostpeoplecontinuetogeta considerable portion of their consumption needs through money purchases. The endstate,afterPeakOilandtheotherterminalcrisesofstatecapitalismhaverun their course, is apt to bear a closer resemblance to Warren Johnsons Muddling Toward Frugality and Brian Kallers Return to Mayberry than Jim Kunstlers WorldMadebyHand.Theknowledgethatyouaredebtfreeandownyourliving space free and clear, and that you could keep a roof over your head and food on thetablewithoutwagelaborindefinitely,ifyouhadto,hasanincalculableeffect onyourbargainingpowerhereandnow,evenwhilecapitalismpersists. As Ralph Borsodi observed almost eighty years ago, his ability to retire on the household economy for prolonged periods of timeand potential employers knowledge that he could do soenabled him to negotiate far better terms for what outside work he did decide to accept. He described, from his own personal experience, the greatly increased bargaining power of labor when the worker has theabilitytowalkawayfromthetable:
... Eventually income began to go up as I cut down the time I devoted to earningmoney,orperhapsitwouldbemoreaccuratetosayIwasabletosecure more for my time as I became less and less dependent upon those to whom I JamesOConnor,AccumulationCrisis(NewYork:BasilBlackwell,1984),pp.184186. Eleutheros,Choice,theBestSauce,HowManyMilesfromBabylon,October15,2008 <http://milesfrombabylon.blogspot.com/2008/10/choicebestsauce.html>.
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soldmyservices....Thispossibilityofearningmore,byneedingtoworkless,is cumulativeandisopentoanimmensenumberofprofessionalworkers.Itisre markablehowmuchmoreappreciativeofonesworkemployersandpatronsbe come when they know that one is independent enough to decline unattractive commissions. And of course, if the wageearning classes were generally to de velop this sort of independence, employers would have to compete and bid up wagestosecureworkersinsteadofworkerscompetingbycuttingwagesinorder 1 togetjobs. .... Economic independence immeasurably improves your position as a seller of services. It replaces the present buyers market for your services, in which the buyer dictates terms with a sellers market, in which you dictate terms.Itenablesyoutopickandchoosethejobsyouwishtoperformandtore fusetoworkiftheterms,conditions,andthepurposesdonotsuityou.Thenext timeyouhaveyourservicestosell,seeifyoucannotcommandabetterpricefor themifyoucanmaketheprospectivebuyerbelievethatyouareundernocom 2 pulsiontodealwithhim. ... [T]he terms upon which an exchange is made between two parties are deter mined by the relative extent to which each is free to refuse to make the ex change....Theonewhowasfree(torefusetheexchange),dictatedtheterms ofthesale,andtheonewhowasnotfreetorefuse,hadtopaywhateverprice 3 wasexactedfromhim.
Colin Ward, in Anarchism and the informal economy, envisioned a major shiftfromwagelabortothehouseholdeconomy:
[Jonathan Gershuny of the Science Policy Research Unit at Sussex Univer sity]seesthedeclineoftheserviceeconomyasaccompaniedbytheemergence ofaselfserviceeconomyinthewaythattheautomaticwashingmachineinthe homecanbesaidtosupersedethelaundryindustry.HisAmericanequivalentis ScottBurns,authorofTheHouseholdEconomy,withhisclaimthatAmericais goingtobetransformedbynothingmoreorlessthantheinevitablematuration anddeclineofthemarketeconomy.Theinstrumentforthispositivechangewill be the householdthe familyrevitalized as a powerful and relatively autono mousproductiveunit. Theonlywaytobanishthespectreofunemploymentistobreakfreefrom ourenslavementtotheideaofemployment.... The first distinction we have to make then is between work and employ ment.Theworldiscertainlyshortofjobs,butithasneverbeen,andneverwill be,shortofwork....Theseconddistinctionisbetweentheregular,formal,visi ble and official economy, and the economy of work which is not employ ment.... ...VictorKeeganremarksthatthemostseductivetheoryofallisthatwhat we are experiencing now is nothing less than a movement back towards an in formaleconomyafterabriefflirtationof200yearsorsowithaformalone. Wearetalkingaboutthemovementofworkbackintothedomesticecon 4 omy....
Burns,whomWardcitedabove,sawtheformationofcommunes,thebuying of rural homesteads, and other aspects of the back to the land movement, as an attempt
1
Borsodi, Flight From the City: An Experiment in Creative Living on the Land(New York,Evanston,SanFrancisco,London:Harper&Row,1933,1972),p.100. 2 Borsodi,p.335. 3 Ibid.,p.403. 4 ColinWard,Anarchismandtheinformaleconomy,TheRavenNo.1(1987),pp.27 28.
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to supplant the marketplace entirely. By building their own homes and con structingthemtominimizeenergyconsumption,byrecyclingoldcarsoravoid ingtheautomobilealtogether,bybuildingtheirownfurniture,sewingtheirown clothes, and growing their own food, they are minimizing their need to offer their labor in the marketplace. They pool it, instead, in the extended house hold....[T]henewhomesteadercaninternalize7080percentofallhisneeds inthehousehold;hismoneyworkisintermittentwhenitcantbeavoidedalto 1 gether.
Toreiterate:wereexperiencingasingularityinwhichitisbecomingimpossi ble for capital to prevent a shift in the supply of an increasing proportion of the necessitiesoflifefrommassproducedgoodspurchasedwithwages,tosmallscale productionintheinformalandhouseholdsector.Theupshotislikelytobesome thing like Vinay Guptas Unplugged movement, in which the possibilities for lowcost,comfortablesubsistenceoffthegridresultinexactlythesamesituation, thefearofwhichmotivatedthepropertiedclassesincarryingouttheEnclosures:a situation in which the majority of the public can take wage labor orleave it, if it takesitatall,theaveragepersonworksonlyonhisowntermswhenheneedssup plementalincomeforluxurygoodsandthelike,and(evenifheconsiderssupple mentalincomenecessaryinthelongrunforanoptimalstandardofliving)canaf fordintheshortruntoquitworkandliveoffhisownresourcesforprolongedpe riods of time, while negotiating for employment on the most favorable terms. It willbeasocietyinwhichworkers,notemployers,havethegreaterabilitytowalk awayfromthetable.Itwill,inshort,bethekindofsocietyWakefieldlamentedin thecolonialworldofcheapandabundantland:asocietyinwhichlaborishardto getonanyterms,andalmostimpossibletohireatalowenoughwagetoproduce significantprofit. GuptasshortstoryTheUnplugged2relatedhisvisionofhowsuchasingu laritywouldaffectlifeintheWest.
To get off at the top requires millions and millions of dollars of stored wealth.Exactlyhowmuchdependsonyourlifestyleandrateofreturn,butitsa lot of money, and its volatile depending on economic conditions. A crash can wipeoutyourcapitalbaseandleaveyouhelpless,becauseallyouhadwasshares inamachine. SoweUnpluggersfoundanewwaytounplug:anindependentlifesupport infrastructure and financial architecturea society within societywhich al lowedanybodywhowantedtobuyouttobuyoutatthebottomratherthan buyingoutatthetop. IfyouarewillingtoliveasanUnpluggerdoes,yourcosttobuyoutisonly aroundthreemonthsofwagesforafactoryworker,thepriceofausedcar.You never need to work againthat is, for money which you spend to meet your basicneeds.
Themoretechnicaladvanceslowerthecapitaloutlaysandoverheadforpro ductionintheinformalandhouseholdeconomy,themoretheeconomiccalculus isshiftedinthewaydescribedbyJakubowskiabove. The basic principle of Unplugging was to combine Gandhis Goals (self sufficiency, or the freedom that comes from owning your own life support sys tem)withFullersMethods(gettingmorefromless).Suchfreedom
allowsustodisconnectfromthenationaleconomyasawayofsolvingtheprob lemsofourplanetonehumanatatime.ButGandhisgoalsdontscalepastthe Burns,TheHouseholdEconomy,p.47. VinayGupta,TheUnplugged,HowtoLiveWiki,February20,2006<http://how tolivewiki.com/en/The_Unplugged>.
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lifestyleofapeasantfarmerandmanywesternersviewthatwayoflifeasunsus tainableforthempersonally.... Fullers do more with less was a method we could use to attain self sufficiency with a much lower capital cost than buy out at the top. An inte grated,wholesystemsthinkingapproachtoasustainablelifestylethehouses, thegardeningtools,themonitoringsystemsallofthatstuffwasdesignedusing inspirationfromFullerandlaterthinkersinspiredbyefficiency.Theslackthe wastein our old ways of life were consuming 90% of our productive labor to maintain. Athousanddollaramonthcombinedfuelbillisyourlifeenergygoingdown thedrainbecausetheplaceyoulivesucksyourlifeway[sic]inwasteheat,which is wastemoney,whichiswaste time. Your car, your house,the portionof your taxeswhichtheGovernmentspendsonfuel,onelectricity,onwasteheat...all ofthetimeyouspenttoearnthatmoneyiswastedtothedegreethosesystems areinefficientsystems,behindbestpractices!
JamesL.Wilson,inavignetteoffamilylifeinthemid21stcentury,writesof ordinary people seceding from the wage system and meeting as many of their needsaspossiblelocally,primarilyasaresponsetothepriceincreasesfromPeak Oilbutinsodoing,alsoregainingcontroloftheirlivesandendingtheirdepend enceonthecorporationandthestate.
Well,youseeallthesepeopleworkingontheirgardens?Theyusedtonot behere.Peoplehadgrasslawns,andwouldcompetewitheachotherforhaving the greenest, nicest grass. But your gramma came home from the supermarket oneday,satdown,andsaid,Thatsit.Weregoingtogrowourownfood.And thenextspring,sheplantedavegetablegardenwherethegrassusedtobe. And boy, were some of the neighbors mad. The Homeowners Association sued her. They said the garden was unsightly. They said that property values wouldfall.Butthen,thenextyear,morepeoplestartedplantingtheirowngar dens. And not just their lawns. People started making improvements on their homes,tomakethemmoreenergyefficient.Theydidntdoittohelptheenvi ronment, but to save money. People in the neighborhood started sharing ideas andworkingtogether,whenbeforetheybarelyeverspoketoeachother.... Andpeoplealsostartedbuyingfromfarmersmarkets,buyingmilk,meat, eggs and produce straight from nearby farmers. This was fresher and healthier than processed food. They realized they were better off if the profits stayed withinthecommunitythaniftheywenttobigcorporationsfaraway. This is when your gramma, my Mom, quit her job and started a bakery fromhome.Itwasactuallyinviolationofthezoninglaws,butthepeoplesided with gramma against the government. When the government realized it was powerless to crack down on this new way of life, and the people realized they didnt have to fear the government, they became free. And so more and more peoplestartedworkingfromhome.MommiesandDaddiesusedtohavediffer entjobsindifferentplaces,butnowmoreandmoreofthemareinbusinessto gether in their own home, where theyre close to their children instead of put 1 tingthemindaycare.....
CONCLUSION
Wehaveseenthroughoutthischapterthesuperiorityofthealternativeecon omy, in terms of a number of different conceptual modelsRobbs STEMI com pression, Ceesays economies of agility, Guptas distributed infrastructure, and Cravensproductiverecursiontothecorporatecapitalisteconomy.Allthesesu
James L. Wilson, Standard of Living vs. Quality of Life, The Partial Observer, May 29,2008<http://www.partialobserver.com/article.cfm?id=2955&RSS=1>.
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perioritiescanbesummarizedastheabilitytomakebetteruseofmaterialinputs thancapitalism,andtheabilitytomakeuseofthewasteinputsofcapitalism. Localized,smallscaleeconomiesaretheratsinthedinosaursnests.Thein formalandhouseholdeconomyoperatesmoreefficientlythanthecapitalistecon omy, and can function on the waste byproducts of capitalism. It is resilient and replicates virally. In an environment in which resources for technological devel opment have been almost entirely diverted toward corporate capitalism, it takes technologies that were developed to serve corporate capitalism, adapts them to smallscaleproduction,andusesthemtodestroycorporatecapitalism.Infact,its almost as though the dinosaurs themselves had funded a genetic research lab to breedmammals:Letsreconfiguretheteethsotheyrebetterforsuckingeggs,and rampupthemetabolismtosurviveamajorcatastrophelike,say,anasteroidcol lision.Nah,Idontreallyknowwhatitwouldbegoodforbutwhatthefuck,the PangeanMinistryofDefenseispayingforit! Torepeat,therearetwoeconomiescompeting:theiroldeconomyofbureauc racy,highoverhead,enormouscapitaloutlays,andcostplusmarkup,andournew economyofagilityandlowoverhead.Andintheend...wewillburythem.
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APPENDIX THESINGULARITYINTHETHIRDWORLD
If the coming singularity will enable the producing classes in the industrial izedWesttodefectfromthewagesystem,intheThirdWorlditmayenablethem to skip that stage of development altogether. Gupta concluded The Unplugged withahintabouthowtheprinciplemightbeappliedintheThirdWorld:Ween couragethedevelopingworldtoUnplugastheultimateformofLeapfrogging:skip hypercapitalism and anarchocapitalism and democratic socialism entirely and jumpdirectlytoUnplugging. GuptaenvisionsacorrespondingsingularityintheThirdWorldwhenthecost ofanInternetconnection,throughcellphonesandothermobiledevices,fallslow enough to be affordable by impoverished villagers. At that point, the transaction costswhichhamperedpreviousattemptsatdisseminatingaffordableintermediate technologies in the Third World, like Village Earths Appropriate Technology Li brary or Schumachers Intermediate Technology Development Group, will finally beovercomebydigitalnetworktechnology.
Itisinevitablethatthenetworkwillspreadeverywhereacrosstheplanet,or very nearly so. Already the cell phone has reached 50% of the humans on the planet.Astechnologicalinnovationtransformstheordinarycellphoneintoalit tle computer, and ordinary cell services into connections to the Internet, the population of the internet is going to change from being predominantly edu cated westerners to being mainly people in poorer countries, and shortly after that,tobeingpredominantlypeoplelivingonafewdollarsaday.... ...Mostpeopleareverypoor,andasthepriceofaconnectiontotheInter netfallstoaleveltheycanafford,astheycanaffordcellphonesnow,werego ingtogetachancetoreallyhelpthesepeoplegetabetterlifebyfindingthem theinformationresourcestheyneedtogrowandprosper. ImaginethatyouareapoorsinglemotherinSouthAmericawholivesina villagewithoutacleanwatersource.Yourchildgetssicknowandagainfromthe dirtywater,andyoufeelthereisnothingyoucando,andworryabouttheirsur vival. Then one of your more prosperous neighbors gets a new telephone, and theres a video which describes how to purify water [with a solar purifier made fromatwolitersodabottle].Itssimple,inyourlanguage,anddescribesallthe basic steps without showing anything which requires schooling to understand. After a while, you master the basic practical skillsthe year or two of high school you caught before having the child and having to work helps. But then youteachyoursisters,andnoneofthekidsgetsickasoftenastheyusedto... lifehasimprovedbecauseofthenetwork. Thencomessolarcookers,andimprovedstoves,andpreventativemedicine, and better agriculture [earlier Gupta mentions improved green manuring tech niques], and diagnosis of conditions which require a doctors attention, with a 1 GPSmapandcalendarofwhenthevisitingdoctorswillbeintownagain.
The revolution is already here, according to a New York Times story. Cell phones,withserviceplansaveraging$5amonth,havealreadyspreadtoathirdof the population of India. That means that mobile phones, with Internet service, haveseepeddownthesocialstrata,intoslumsandsmalltownsandvillages,be coming that rare Indian possession to traverse the walls of caste and region and class; a majority of subscribers are now outside the major cities and wealthiest
Vinay Gupta, Whats Going to Happen in the Future, The BuckyGandhi Design Institution,June1,2008<http://vinay.howtolivewiki.com/blog/global/whatsgoingtohappen inthefuture670>.
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states. And the mushrooming growth of cell phone connections, 15 million in March 2009, amounts to something like a 45% annual growth rate over the 400 million currently in usea rate which, if it continues, will mean universal cell phoneownershipwithinfiveyears.1 Interestingly, Jeff Vail predicts that this increased connectivity, combined with especially exacerbated trends toward the hollowing out of the nationstate (seeChapterThree),willcauseIndiatobeapioneerintheearlydevelopmentof theDiagonalEconomy(seeChapterSix).
... I do want to give one locationspecific example of where I think this trend toward the degradation of the NationState construct will be especially severe: India.No,IdontthinkIndiawillcollapse(thoughtherewillbeplentyofstories ofwoe),northatthestategovernmentthatoccupiesmostofthegeographicter ritoryofIndiawillcollapse(notethatcarefulwording).Rather,Ithinkthatthe trendforadisconnectionbetweenanyabstractnotionofNationandaunitary stateinIndiawillbecomeparticularlypronouncedoverthecourseof2010.This isalreadylargelyapparentinIndia,butlookforittobecomemoreso.WhileIn dianbusinessandeconomywillfaredecentlywellin2010fromaninternational tradeperspective,therealstorywillbearisingfailureofthissuccesstobeeffec tively distributed by the government outside of a narrow class of urban middle class.Itwillinsteadbearisingconnectivityandselfawarenessoftheirsituation among Indias rural poor, resulting in an increasing push for localized self sufficiencyandresiliencyoffoodproduction(especiallythetippingoffoodfor estsandperennialpolycultures),thatwillmostbegintotearattherelevancyof Indiascentralstategovernment.InIndiathereisagreatpotentialforthebegin 2 ningsoftheDiagonalEconomytoemergein2010.
Anand Giridhardas, A PocketSize Leveler in an Outsized Land, New York Times, May 9, 2009 <http://www.nytimes.com/2009/05/10/weekinreview/10giridharadas.html?ref =world>. 2 Jeff Vail, 2010Predictions and Catabolic Collapse, Rhizome, January 4, 2010 <http://www.jeffvail.net/2010/01/2010predictionsandcataboliccollapse.html>.
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Index
accountingstandardsandpractices,28, 29,31,32,102,116,127,149,229,264, 275,278,279,281,282,344 Adams,Scott,230,231,328,363 Adventism,Seventhday,274 advertisingandmarketing,16,33,44,45, 47,48,49,50,63,74,90,93,94,109, 110,142,143,144,145,146,147,157,159, 162,167,172,203,207,212,218,229,239, 258,269,270,284,287,301 Afghanistan,111,304,320,321,338 AFLCIO,202 agencies,protective,268 agriculture,10,53,79,81,86,95,103,162, 178,195,267,298,355,360 airports,56 analogy,19,114,130,135,151,160 anarchism,20,272,302,393 anticapitalism,137,233,301,354 antiimperialism,351 Arkansas,66,283,284,291,366 assetspecificity,33 AustrianSchool,119,126,305,346,368, 393 autonomy,35,67,132,134,179,200,251, 332,334 Balko,Radley,351 banking,free,274,275,276,278,279, 280,300 banks,87,89,90,96,97,125,127,130,140, 141,166,215,216,218,227,235,275,277, 278,279,282,283,285,287,298,339, 345,372 Bauwens,Michel,95,114,115,119,124,125, 126,206,209,214,215,220,231,232,233, 249,250,251,331,340,364,365 Bernays,Edward,44 binLaden,Osama,321 Bodek,Norman,8,28,29,30,31,82,177, 178,185,375,386 Bookchin,Murray,182,183,184,317,325, 366 Borsodi,Ralph,10,11,12,17,26,46,47,48, 49,50,159,160,162,171,172,173,174, 175,182,183,255,261,262,311,312,340, 354,355,356,366,380 Boulding,Kenneth,69,70,366 Bowles,Samuel,233,272,354,366,388 branding,46,47,48,49,50,74,86,93, 94,143,165,206,229,230,254,285,310, 315,363 BrettonWoods,19,52,53 Buber,Martin,303 cartels,cartelization,20,23,39,40,43, 50,62,68,149,218,219 CatoInstitute,80,228,328,377 Chandler,AlfredD.,15,16,17,18,22,27, 28,33,38,39,46,50,61,62,63,126,367 change,social,301 Chartier,Gary,3,273,274 Cole,G.D.H.,258,259,320,367,370 colonialism,51,357 Commandments,Ten,338 complacency,218 copyright,107,115,122,123,126,166,167, 231 countereconomics,261 Cox,Harvey,80 deSoto,Hernando,283 democracy,27,38,81,129,130,132,135, 265,360 denominations,274 distributedmanufacturing,86,111,158, 214,246,249,251,364,365 Doherty,Brian,323,369 Drucker,Peter,326 elections,voting,107,140,203,289,348 EmiliaRomagna,13,71,109,110,127,156, 157,174,175,176,177,178,179,187,219, 306,313,365 eminentdomain,56,284 emotion,303 empire,imperialism,232 enclosures,v,114,189,190,212,353,357 EnergyDescentActionPlan,298,375 Engels,Friedrich,164,256,377 entrepreneurship,16,19,71,124,125,176, 197,210,215,218,231,237,248,249,254, 277,311,341,367
390
epistemology,158,181 ethics,19,41,45,75,143,149,167,273,274, 275,291,351,352 evangelicalism,267 exclusivism,22,67,74,211,212,262,347 FactoreFarm,vi,157,238,239,240,241, 242,243,244,245,250,251,266,293, 299,365,374,375,378,380 fairness,52 feudalism,114,232,266,393 food,2,40,46,69,79,80,139,155,160, 162,169,171,172,212,234,235,236,237, 238,258,263,264,266,272,275,276, 284,293,296,297,298,299,306,311, 312,328,331,350,355,357,358,361,386, 388 forgiveness,179 freeways,54,55,68,105,147 Friedman,Milton,64 friendship,2,78,110,146,200,220,230, 234,291,303,307 fuels,fossil,95,100,185,316 Galbraith,JohnKenneth,26,27,33,34, 35,36,37,46,61,62,64,112,126,156, 370 gasoline,10,54,56,182,196,239,243,267 gender,261,262,263,286,353 gender,genderrelations,19,27,46,195, 261,262,263,286,311,319,325,347,353 GeneralMotors,28,36,45,55,82,121,365 Germany,22,31,52,59,76,89,100,106, 175,189,207,251,294,295,296,305, 332 Gintis,Herbert,233,354,366 God powerof,111,124 Goodman,Paul,8,29,38,46,63,64,65, 68,69,186,195,196,254,255,319,330, 344,370 Gosplan,30,329 Green,Leslie,37,100,139,206,278,295, 298,339,347,370,372,382 greenhousegasemissions,223,287 Gupta,Vinay,205,239,261,306,315,318, 319,357,358,360,363,371 Hagel,John,46 happiness,341 Hawken,Paul,25,31,187,316,317,371 Hayek,Friedrich,64 health,16,70,76,79,80,148,168,173, 265,284,297,298,302,303,304,321, 339,388 Heinberg,Richard,100,101,371 hell,234,248,273,333,342 Hellwig,Monika,35,36,84,372 Hess,Karl,186,192,193,194,195,197,263, 280,372
hierarchy,46,62,65,69,111,112,121,128, 129,130,132,135,143,152,168,198,206, 208,274,293,309,310,314,317,321, 326,327,328,329,330,331,334,335, 336,337,340,342,352,365 Hitler,Adolf,54,55,351,365 Hodgskin,Thomas,70,275,276,343,344, 372 Hopkins,Rob,100,102,298,366,372,375 Hoppe,HansHermann,273 housing,1,85,86,87,90,91,92,93,163, 165,166,210,239,274,287,292,294, 296,298,306,308,332 Hunting,Eric,72,73,110,209,210,248, 249,346,347,372 Illich,Ivan,16,67,68,69,105,108,164, 201,373 individualism,267,352 IndustrialWorkersoftheWorld (Wobblies),145,372 inequality,110 InternationalMonetaryFund,134 Iraq,101,102,136,200 Jackall,Robert,342,371 Jakubowski,Marcin,206,216,222,223, 224,225,238,239,240,241,242,243, 244,245,249,299,316,354,357,374 Japanese,2,52,83,89,90,109,112,113, 158,178,183,184,194,195,221,232,235, 388 Johnson,Charles,1,2,148,149,215,216, 227,265,273,348,349,375 juries,41 justice,10,154,273 global,351 Kaller,Brian,103,104,355,375 Keynes,JohnMaynard,89,92,169,365 Keynesianism,26,53,83,88,89,90,91, 92,155,253 Klein,Naomi,49,94,114,139,140,143, 376 Knapp,Thomas,136,137,376 Korea,235 Kropotkin,Pyotr,8,9,11,17,169,261,265, 268,271,353,376 Krugman,Paul,88,91,92,94,126,376, 381 Kunstler,JamesHoward,90,103,107,108, 355,376 labortheoryofvalue,30,37,42,72,177, 178,216,346 laborunions,37,49,64,95,120,132,145, 147,148,150,202,229,258,259,260, 261,265,271,284,285,310,321,342,350, 372 LatinAmerica,52,285 Lawrence,P.M.,120 Lazonick,William,15,61,62,377

leftlibertarianism,138,265,393 Lenin,V.I.,14,164 LewRockwell.Com,119,367 liberalism,17,35,37,50,94,117,126,129, 132,140,152,201,262,269,270,288,297 corporate,129 political,35,50,129 libertarianism,vulgar,19 localization,31,187,196,214,220,223, 225,233,241,254,257,282,293,346, 354,361 Locke,John,145,198,262,377 LongEmergency,103,108,376 Long,RoderickT.,2,3,80,228,265,273, 328,375,377 Lovins,Amory,25,30,32,187,316,371 Lovins,L.Hunter,25,187,316,371 lying,19,51,83,197,324 Machan,Tibor,265,375 Marx,Karl,v,42,57,83,84,112,126,164, 179,189,190,197,218,255,256,377,393 Marxism,v,42,126,164,189,190,204,218, 380,393 McKibben,Bill,258,377 medicalcare,169,233,265,284,321,354 migration,148,285,348 Mills,C.Wright,29 Mises,Ludwigvon,126 Mises.Org,45,344 Monsanto,40,59,270,378 Moore,Michael,35,91,153,269 Morris,David,186,194,280,372 Morris,William,9,378 mortgages,90,107,169,172,292,308,312 Mumford,Lewis,v,8,9,10,11,13,14,18, 25,32,33,108,175,378,379 mutualaid,265,267,271,272 mutualist,mutualism,303,323,366,367, 393 narrative,327 Nazism,54,55,351,365 NewClass,68 nonhumanworld,144,272,275,276,296 oil,8,18,19,52,54,55,59,95,99,100,101, 102,103,104,107,108,158,238,244,257, 298,368,376 OpenSourceEcology,vi,206,207,221, 223,238,239,242,244,251,304,306, 314,316,365,368,373,377,378,379, 384,385 Oppenheimer,Franz,276,277,379 organizationalmodels bottomup,67,129,194,212,251,265, 288 topdown,61,130,238,331,333,334 organizations,international,106
INDEX
391
ownership,2,14,62,111,112,114,124,157, 158,190,198,215,247,271,299,300,301, 306,343,361 pathdependence,58 patriarchy,274 PeakOil,v,85,86,92,99,100,101,102, 103,104,107,109,128,194,293,297, 298,355,358,386 peerproduction,124,163,189,190,204, 208,209,214,215,216,220,226,233, 250,310,352,365 Peters,Tom,74,75,114,168,198,311,379 Piore,Michael,12,13,17,18,25,36,37,83, 108,109,110,112,156,175,178,179,181, 184,188,190,197,198,227,306,310,380 policeforces,officers,78,134,135,136, 137,151,219,266,294,297,307,348 Pollard,Dave,112,206,207,310,311,325, 327,349,350,380 poverty,11,27,46,54,60,66,68,69,87, 146,148,161,162,163,167,192,200,205, 210,263,265,269,280,281,282,284, 285,286,292,296,299,307,308,312, 336,343,345,360,361,385 power nuclear,243 solar,103,205,243,244,287,297, 298,306,313,319,360 power,economic,8 Progressivemovement,39,41,212,234, 288,373 punishment,23 Rajan,Raghuram,203,381 Rand,Ayn,328,377 uncriticalenthusiasmfor,19 rationality,36,38,41,45,65,100,101,105, 182,272,335,337,341 Read,LeonardE.,142,303,383 RecordingIndustryAssociationof America,110,122,137,150,350 Reich,Charles,122 Reisman,George,119,126,381 Rifkin,Jeremy,156,157 rights,human,138,351 Robb,John,92,106,136,142,143,214,247, 248,253,254,265,266,267,297,299, 312,313,314,319,320,321,322,324,334, 350,351,358,381,382 Rockwell,Lew,45 Ronfeldt,David,131,132,133,135,321,363, 364,382 Roosevelt,FranklinD.,37,41,52,54,96 Rothbard,MurrayN.,17,45,52,271,272, 382 Sabbath,273,274 Sabel,Charles,12,13,17,18,25,36,37,83, 108,109,110,112,156,175,178,179,181,
392
184,188,190,197,198,227,306,310,335, 380,383 Sale,Kirkpatrick,182,183,191,263,383 scale,economiesof,8,15,126,158,162, 182,184,197,261,288,346,368 schools public,45,64,65 Schumacher,E.F.,26,69,193,227,360, 378,383 Schumpeter,Joseph,36,52,84,116,125, 231,275,277,383 science,natural,5,7,11,12,17,20,41,43, 44,95,114,116,120,138,226,270,385 Seattle,134,137,294,307,366 sexuality,274 Silber,Arthur,347,384 Simon,Herbert,32,60,186,378,388 slavery,70,95,114,164,232,239,343 Sloan,AlfredP.,v,1,28,30,31,54,61,63, 71,108,177,178,183,185,186 Sloanism,v,1,28,61,63,71,177,183,185 Smith,Adam,126 socialism,127,166,189,197,267,277,299, 323,360 Soderberg,Johan,115,198,220,309,310, 323,340,384 sovereignty,27,303,337 Spangler,Brad,3 spirituality,296 Stein,Barry,34,48,384 stigmergy,130,131,137,214,291,319,320, 325,327,328,329,335,348,350,352, 382 Stromberg,JosephL.,52 subsidies,14,17,26,39,42,51,53,54,56, 60,88,91,104,115,128,162,166,167, 184,288,368,377 Taylorism,14,327
technology,appropriate,222,227 technostructure,26,35,37,46,61,63 theology,theologians,91,120 Toyota,28,30,31,32,110,112,113,156,157, 175,176,177,183,185,309,313,385 TransitionTownmovement,vi,281,297, 298,366,382,385 Truman,HarryS.,56,376 Tuscany,293 Vail,Jeff,vi,21,22,101,102,135,250,254, 293,294,299,314,324,361,386 vocation,29,118,289,294 Waddell,William,8,28,29,30,31,82,93, 177,178,185,186,375,386 Walker,Jesse,2,200,387 Wallerstein,Immanuel,95,353,370,387 WalMart,115,147,148,219,382,386 war,22,40,41,44,52,53,54,56,58,59, 60,66,82,123,136,195,196,253,266, 321,322,347,351 Ward,Colin,169,191,192,256,261,262, 263,307,356,372,387 warfare,asymmetric,129,131,132,133,134, 135,139,143,145,147,151,319,321,363 Warren,Josiah,103,288,355,375 wealth redistributionof,85,129,155,281, 284 Williams,WilliamAppleman,51,387 Williamson,Oliver,286,363 Wolfe,Claire,167,273 workplaces,87,150,192,198,273,296, 326,341,342,372 WorldTradeOrganization,20,124,134, 197,367 Zingales,Luigi,147,198,203,381,388 zoning,2,70,80,107,168,173,228,273, 296,306,348,350,358
AbouttheAuthor KEVINA.CARSONisResearchAssociateattheCenterforaStatelessSociety.Heisthe authorofOrganizationTheory:ALibertarianPerspective,StudiesinMutualistPoliti calEconomythefocusofasymposiumpublishedintheJournalofLibertarianStud iesaswellasofthepamphletsAustrianandMarxistTheoriesofMonopolyCapital andContractFeudalism:ACritiqueofEmployerPowerOverEmployees(Libertarian Alliance);TheEthicsofLaborStruggle(AllianceoftheLibertarianLeft);andTheIron FistbehindtheInvisibleHand:CorporateCapitalismAsaStateGuaranteedSystemof Privilege (Red Lion Press). His writing has also appeared in Just Things, Any Time Now, The Freeman: Ideas on Liberty, and Land and Liberty, as well as on the P2P Foundationblog.AmemberoftheIndustrialWorkersoftheWorld,theVoluntary CooperationMovement,andtheAllianceoftheLibertarianLeft,andaleaderinthe contemporary revival of Proudhonian mutualist anarchism, he maintains the blog FreeMarketAntiCapitalismathttp://Mutualist.BlogSpot.Com.

The Homebrew Industrial Revolution : A Low Overhead Manifesto .

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imaginablespecifictaskwasinevitable.Regardlessoftheprimemoveratoneend, orthespecificprocessattheother,clockworktransmissionofpowerwasthede finingfeatureofautomaticmachinery.

Withtheuseofclockworktoharnessthepowerofprimemoversandtransmit ittomachineproductionprocesses,eotechnicindustryproliferatedwhereverwind orrunningwaterwasabundant.Theheartlandofeotechnicindustrywastheriver countryoftheRhinelandandnorthernItaly,andthewindyareasoftheNorthand Balticseas.2

Ibid.,p.134. Ibid.,p.113. 3 Ibid.,pp.114115.

Ibid.,p.266. Ibid.,p.267. 3 Ibid.,p.265. 4 Ibid.,p.264.

Josephson,pp.250251. Ibid.,p.253. 3 Ibid.,p.265. 4 Ibid.,p.251. 5 Ibid.,p.252.

Thisapproachstrengthenedthecompanyspositionofcontroloverthemar ketnotonlyduringtheseventeenyearperiodofthemainpatents,but(asFreder ickFishputitinanaddresstotheAmericanInstituteofElectricalEngineers)dur ingthesubsequentseventeenyearsof

Ibid.,p.9. Ibid.,pp.910. 3 Ibid.,pp.1112. 4 Ibid.,p.12.

Ibid.,pp.67. Ibid.,p.241. 3 Ibid.,p.287. 4 Ibid.,p.244. 5 Ibid.,p.412.

Underthepracticeofoverheadabsorption,allproductioncostsarefullyincorpo ratedintothepriceofgoodssoldtoinventory,atwhichpointtheycountasan assetonthebalancesheet.

Inotherwords,bytheSloanistaccountingprinciplespredominantinAmeri canindustry,the expenditure of moneyoninputsisbydefinitionthecreation of value.AsWaddelldescribeditathisblog,

WaddellandBodek,pp.89,92. Ibid.,pp.122123. 3 Ibid.,p.39. 4 Hawkenetal,pp.129130.

workchangingfromonerateofproductiontoanotherinfactories....Thebenefit ofthefuturedeliveryplanisapparentsincewecanmanufacturetostockknowing 1 thatallthestockistobetakenwithinacertaintime.

PioreandSabel,p.58. Ibid.,p.65. 3 Ibid.,p.132.

OrasPaulGoodmanputit,ahandfulofmanufacturerscontrolthemarket,com petingwithfixedpricesandslowlyspoonedoutimprovements.2 Besidesthesemicroeconomicstructurescreatedbythenominallyprivatecor porationtoprovidestability,thestateengagedinthepoliciesdescribedbyGabriel Kolkoaspoliticalcapitalism.

KolkoprovidedconsiderableevidencethatthemainforcebehindtheProgres siveEralegislativeagendawasbigbusiness.TheMeatInspectionAct,forinstance, waspassedprimarilyatthebehestofthebigmeatpackers.6Thispatternwasre

RalphBorsodi,TheDistributionAge(NewYorkandLondon:D.AppletonandCom pany,1929),pp.217,228. 2 Ibid.,p.110. 3 QuotedinIbid.,pp.16061. 4 Ibid.,p.v. 5 Ibid.,p.4.

Ibid.,pp.112113. Ibid.,p.136. 3 Ibid.,p.247. 4 Ibid.,pp.8384. 5 Ibid.,p.84. 6 Ibid.,p.162. 7 Ibid.pp.21617.

Noble,ForcesofProduction,p.5. Ibid.,p.7. 3 Ibid.,pp.78. 4 Ibid.,pp.4748. 5 Ibid.,p.50. 6 Ibid.,p.52.

Ibid.,pp.89. Ibid.,p.47. 3 Ibid.,pp.4849. 4 Ibid.,pp.6061. 5 Ibid.,p.213.

Ibid.,pp.94122. Ibid.,pp.102104. 3 Ibid.,pp.107110. 4 Ibid.,pp.110111. 5 Ibid.,p.105.

Intellectual property in onboard computer software and diagnostic equip menthasessentiallythesameeffect.

PaulBaranandPaulSweezy,MonopolyCapital:AnEssayintheAmericanEconomic andSocialOrder(NewYork:MonthlyReviewPress,1966)p.240. 2 WilliamWaddellandNormanBodek,RebirthofAmericanIndustry:AStudyofLean Management(Vancouver,WA:PCSPress,2005)p.94.

LawrenceW.Reed,ATributetothePolishPeople,TheFreeman:IdeasonLiberty, October 2009 <http://www.thefreemanonline.org/columns/ideasandconsequences/a tributetothepolishpeople/>.

PioreandSabel,SecondIndustrialDivide,p.207. Ibid.,p.218. 3 PioreandSabel,ItalianSmallBusinessDevelopment,pp.397398.

Anddespitetheadmittedcontrolofdistributedmanufacturingwithinacor porateframework,basedoncorporateownershipofintellectualproperty,Robin sonsuggeststhatthegrowingdifficultyofenforcingIPwillcausethatframework toerodeinthenearfuture:

field,andthisisbasicallywhattheexperienceeconomymeans.Thehopethatit expressesisthatbusinesscansimplycontinuetogrowintheimmaterialfieldof 1 experience.

RichardFlorida,TheRiseoftheCreativeClass(NewYork:BasicBooks,2002),p.36. Ibid.p.6. 3 Ibid.,pp.2627.

Doctorow,ItstheInformationEconomy,Stupid,Ibid.,p.60. Doctorow,WhyisHollywoodMakingaSequeltotheNapsterWars?inContent,p. Bauwens,P2PandHumanEvolution. Bauwens,Cantheexperienceeconomybecapitalist?

In Tribes, Institutions, Markets, Networks (1996) Ronfeldt focused on the specialsignificanceofthenetworkfornetworkedglobalcivilsociety.

Ibid.,p.281. Ibid.,p.351. 3 Ibid.p.285. 4 Ibid.,p.288. 5 Ibid.,p.281. 6 Ibid.,pp.349350. 7 Ibid.,p.351.

APPENDIX THREEWORKSONABUNDANCE ANDTECHNOLOGICALUNEMPLOYMENT

Ibid.,p.78. Ibid.,p.33. 3 Ibid.,p.51. 4 Ibid.,p.52.

Thesuccessofshanzhaienterprisesresultsnotonlyfromtheirtechnicalinno vativeness,accordingtoVassarprofessorYuZhou,butfromhowtheyformsup plychainsandhowrapidlytheyreacttonewtrends.3

Decentralizingtechnologiesunderminedtherationaleforlargescalenotonly in massproduction industries, but in continuousprocessing industries. In steel, forexample,theintroductionoftheminimillwithelectricarcfurnaceeliminated

SIDEBAR MARXISTOBJECTIONSTONONCAPITALISTMARKETS:THERELEVANCE OFTHEDECENTRALIZEDINDUSTRIALMODEL

TheSmallWorkshop, DesktopManufacturing, andHouseholdProduction

Karl Hess also discussed community workshopsor as he called them, sharedmachineshopsinCommunityTechnology.

Interestinglyenough,DonTapscottandAnthonyWilliamsdescribejustsuch aprocesstakingplaceinmicromanufacturingfacilities(aboutwhichmorebelow) whichhavebeenintroducedintheThirdWorld.Indianvillagersareusingfablabs

Jacobs,EconomyofCities,pp.6364. KarlHessandDavidMorris,NeighborhoodPower:TheNewLocalism(Boston:Beacon Press,1975),p.69.

YochaiBenkler,TheWealthofNetworks:HowSocialProductionTransformsMarkets andFreedom(NewHavenandLondon:YaleUniversityPress,2006),p.179. 2 Ibid.,p.188. 3 Ibid.,pp.21213. 4 Ibid.,pp.3233. 5 Ibid.,p.54.

Inanother,similarexample,theformerheadofSalomonBrothersbondtrad inggroupformedanewgroupwithformerSalomontradersresponsiblefor87%of thefirmsprofits.

Inotherwords,thefurtherproductioncostfallsrelativetothecostsofdesign, thegreatertheeconomicincentivetomodulardesignasawayofdefrayingdesign costsoverasmanyproductsaspossible. InanemailtotheOpenManufacturinglist,Huntingsummeduptheprocess moresuccinctly.Industrialrelocalization

Thesizelimitationsoffabricationinthesmallshop,andthelackoffacilities forplasticinjectionmoldingorsheetmetalstampingofverylargeobjects,consti tuteafurtherimpetustomodulardesign.

Theavailabilityofmodestlypriceddesktopmanufacturingtechnology(about whichwewillseemoreimmediatelybelow),coupledwiththepromiseofcrowd sourcedmeansofaggregatingcapital,hasledtoaconsiderableshiftinopinionin thepeertopeercommunity,asevidencedbyMichelBauwens:

Themultimachine,accordingtoDelaney,canbebuiltbyasemiskilledme chanicusingjustcommonhandtools,fromdiscardedengineblocks,andcanbe scaledfromaclosetsizeversiontoonethatwouldweigh4or5tons.2 Indevelopingcountries,inparticular,thekindsofproductsthatcanbebuilt withamultimachineinclude:

Jakubowski,OSEProposal. <http://groups.yahoo.com/group/multimachine/?yguid=234361452>. 3 <http://opensourcemachine.org/node/2>.

motorizedvehicleslikepassengercarsandtractors,whentheheavyengineblock isreplacedwithlightelectricmotor.Suchelectricvehicles,infact,arepartofthe totalproductpackageatFactorEFarm.

APPENDIX CASESTUDIESINTHECOORDINATIONOF NETWORKEDFABRICATIONANDOPENDESIGN

Interestingly, this was almost identical to the relocalized manufacturing modeldescribedbyJohnRobb:

The relocalization of manufacturing will be promoted among other things, Robbsays,bythefactthat

Mahatma Gandhi on Mass Production (1936), TinyTech Plants <http://www .tinytechindia.com/gandhiji2.html>(punctuationinoriginal).

AliBabaapproach).Atsomepoint,ifitisdesignedcorrectly,thisnetworkcould becomeselfsustainingandabletogeneratetheincomenecessarytocontinuea 1 globalrolloutbyitself.

Franz Oppenheimer made a similar argument in A Post Mortem on Cam bridgeEconomics:

ThomasHodgskin,LabourDefendedAgainsttheClaimsofCapital(NewYork:Augus tusM.Kelley,1969[1825]),pp.3640. 2 Hodgskin,PopularPoliticalEconomy:FourLecturesDeliveredattheLondonMechan icsInstitution(NewYork:AugustusM.Kelley,1966[1827]),p.247. 3 Hodgskin,LabourDefended,p.71.

Ibid.pp.106107 Ibid.,p.134. 3 Greco,TheEndofMoney,pp.139141.

KarlHessandDavidMorris,NeighborhoodPower:TheNewLocalism(Boston:Beacon Press,1975),pp.154155. 2 Greco,TheEndofMoney,p.116. 3 Ibid.,p.158.

strong sense of community gives prominence to whatever their celebration is 1 overwhattheglobaleconomytellsthemitshouldbe.

Venture Communism, P2P Foundation Wiki <http://p2pfoundation.net/Venture_ Communism>(accessedAugust8,2009.

7.TheTripleAlliance Thisisaninterestingproposalforbuildingaresilientcommunitythroughso cialproductionbytheurbanunderemployedandunemployed.Theideawasorigi nallysparkedbyablogpostbyDougaldHine:SocialMediavstheRecession.