2012: The Year of the Cooperative

21 03 2012

by Jessica Reeder

from Yes! Magazine

How an old business model is finding new relevance all over the world.

What do coffee growers in Ethiopia, hardware store owners in America, and Basque entrepreneurs have in common? For one thing, many of them belong to cooperatives. By pooling their money and resources, and voting democratically on how those resources will be used, they can compete in business and reinvest the benefits in their communities.

The United Nations has named 2012 as the International Year of Cooperatives, and indeed, co-ops seem poised to become a dominant business model around the world. Today, nearly one billion people worldwide are cooperative member-owners. That’s one in five adults over 15 — and it could soon be you.

Why Cooperatives?
Cooperatives have been around in one form or another throughout human history, but modern models began popping up about 150 years ago. Today’s co-ops are collaboratively owned by their members, who also control the enterprise collaboratively by democratic vote. This means that decisions made in cooperatives are balanced between the pursuit of profit, and the needs of members and their communities. Most co-ops also follow the Seven Cooperative Principles, a unique set of guidelines that help maintain their member-driven nature.

From their beginnings in England, cooperatives have spread throughout the world. In Ethiopia, cooperation helps women and men rise above poverty. In Germany, half of renewable energy is owned by citizens. In America, 93 million credit union member-owners control $920 billion in assets. In Japan, a sixth of the population belongs to a consumer co-op. And in Basque Country, a 50-year-old worker co-op has grown to become a multinational, cooperative corporation.

If a “multinational cooperative corporation” sounds strange to you, you’re not alone. The past century’s multinational corporations, in most cases, were anything but cooperative. During the 19th and 20th centuries, the business landscape was dominated by large, private corporations controlled by a small number of people; those corporations tended to pursue profit without consideration for people, the environment, and in many cases, ethics.

While 20th-century corporations were good at making money, the 21st century finds humanity in need of new business models that value sustainable growth and community benefit. The UN stands behind cooperative models, and in 2012 will dedicate its efforts to raising awareness of co-ops, helping them grow and influencing governments to support them legislatively.

Raising Cooperative Awareness
Cooperatives are more widespread than you might think. From banks and credit unions to apartment buildings to worker-owned businesses, co-ops appear in every facet of today’s economy. In most cases, they formed in response to economic crises like the Great Depression, or to let small groups compete in monopolized markets. In 2012, both of those conditions exist — and unsurprisingly, so do cooperatives.

Far from being limited to grocery stores, modern American co-ops also include agricultural marketing groups like Land O’Lakes and Florida’s Natural; retail outlets like R.E.I.; electrical utilities in the Southeast; housing cooperatives in New York; credit unions; and countless local farm-to-store programs. Purchasing co-ops like ACE, True Value Hardware, and Carpet One let independent stores compete with chain outlets. Yet, in many cases, Americans don’t think of these well-known brands as cooperatives. In fact, the United States is full of co-ops — around 30,000 of them with nearly 900,000 members. Thirty percent of Americans belong to cooperatively-owned credit unions, the largest of which serves 3.4 million Department of Defense employees and has $45 billion in assets. In 2004, the ten largest co-ops in America earned over $12 billion in revenues.

If you knew how many successful cooperatives surrounded you, and what a positive impact cooperative enterprise can have on the world, would you be more likely to join or start your own co-op? The UN believes you might. This is one of the primary goals of both the UN and the International Cooperative Alliance: to make you aware of the cooperatives in your own backyard, as well as their potential to influence your life and future.

“Cooperatives, in their various forms, promote the fullest possible participation in the economic and social development of all people, including women, youth, older persons, persons with disabilities and indigenous peoples, are becoming a major factor of economic and social development and contribute to the eradication of poverty.” – UN Resolution 64/136, 2010

The UN officially launched the Year of the Cooperative campaign in October 2011. The preparations continued in November, when the International Cooperative Association held a General Assembly in Cancun. There, Mexican President Felipe Calderón hailed co-ops as “a great opportunity” to create jobs and help Mexico recover from the economic crisis. Cooperative-related events will continue throughout 2012, highlighted by two major summits in Venice, Italy and Quebec City, Canada. Meanwhile, individual countries and independent groups will throw events, publish new research, and celebrate the possibilities cooperation brings to a 21st-century world economy.

Promoting Cooperative Growth
In the developing world, cooperatives often function as building blocks for stronger, more stable economies. One of the most fertile breeding grounds for co-ops has been sub-Saharan Africa. Since the economy was liberalized in the 1990s, Africa has entered a renaissance of cooperative enterprise.

Most of these cooperatives start small. Poverty in Africa is still high, and, as in many parts of the world, women and older or younger people have traditionally received much lower wages for their work. A cooperative like the coffee growers’ group at Indido in Ethiopia allows all workers to receive equal wages while selling their coffee at better market rates.

In Kenya, cooperative banks and credit unions are revolutionizing the economy, making small loans available to farmers and growers at affordable rates. But the cooperative model is still controversial. During the global economic downturn that followed 2008’s food shortages, co-ops were forced to cut back on the number of loans they offered to members, while taking infusions of cash from external sources. Cooperatives were born in crisis and are specifically designed to weather economic storms — so why did these institutions falter? Will the resulting drop in consumer confidence hinder their growth?

n 2012, the UN will focus on how cooperatives can grow and thrive. The trend is well-established: The cooperative model is expected to be the world’s fastest-growing business model by 2025. However, there are still some inconsistencies holding co-ops back. In many cases, cooperative models are still under development and each company must come up with its own self-sustaining plan.

Dr. Joni Carley, a values-driven leadership expert, believes that the cooperative model’s perceived newness is one of its greatest challenges to widespread adoption.

“While cooperation is really our oldest model of work, it feels brand new and we don’t have the systems down yet. It also usually takes much longer than anyone thinks it should to make some decisions, to develop infrastructure, and to create the kind of cooperative alignments that serve for the long haul … Although we now have some excellent tools to quantify culture, few leaders understand the value of deploying those tools and few see themselves as able to devote the time and attention required.”

In other cases, a lack of regulation and legislative support can undermine co-ops. During the recent crisis in Africa, pyramid schemes in the Savings and Credit Cooperatives led to a serious thinning out of available capital. With better regulation, that situation could have been avoided and the money kept inside the member-owner community it was intended for.

Developing Cooperative Legislation
One of the greatest cooperative success stories is that of Mondragón Corporation. Founded in 1956 by a Catholic priest in the autonomous Basque region of Spain, Mondragón (named after the town of Mondragón where it is based) began as a cooperative trade school and a group of five workers selling paraffin heaters.

Less than 50 years later, Mondragón is the world’s largest cooperative, and Spain’s seventh largest business. A paragon of co-ops, Mondragón has operations in 19 countries and employs 83,000 worker-owners. Yet for every international job the company creates, it employs two people in Spain.

What has allowed Mondragón to grow steadily without abandoning its cooperative principles? For one thing, it has embraced innovation, and worker-owners have repeatedly chosen to reinvest in the future of the corporation. It’s also based in the Basque community, known for its strength and cooperative nature.

Mondragón also got a head start with early support from the Spanish government. In the years after Franco, Spain created a framework of loans designed to help farmers and small businesses recover financially; meanwhile, the Spanish economy remained relatively insular, protecting the same businesses from external competition. Mondragón benefited from that governmental support, without governmental interference in the company’s autonomy.

The UN’s third objective in 2012 is to influence governments and regulatory bodies to develop frameworks that will support cooperatives in their various forms. This can be a delicate procedure: One of the seven Cooperative Principles states that cooperatives can’t make agreements that would interfere with their autonomy and democratic control. European nations, for the most part, have developed a system that supports cooperative business without interference. Canada has also been highly successful at fostering cooperative growth. But for many nations, co-ops can appear risky, regulation can be lacking — or, quite simply, the government may have an interest in controlling its citizens’ actions.

A Cooperative Future
UN Secretary General Ban-Ki Moon calls cooperatives “a unique and invaluable presence in today’s world. Cooperatives are a reminder to the international community that it is possible to pursue both economic viability and social responsibility.”

Nowhere is that statement more apt than in the United States, where cooperatives are etched into the public consciousness as hippie grocery stores.

According to Dr. Carley, this is a dangerous misconception:

“Unfortunately, in the US, there is a highly vested interest in maintaining the mythology that values have to be compromised to make money and that they have no place in the workplace. What we know now is that when personal and organizational values are aligned, profits, share prices, stakeholder loyalty, innovation and more go up.”

The UN’s goal for the United States is to rebrand cooperatives — and it may get some help. In 2009, the United Steelworkers, North America’s largest industrial trade union, announced a new affiliation with Mondragón. The goal: To help steelworkers purchase and run their own mills cooperatively, focusing on sustainable business and environmentally sound practices.

In 2000, poverty expert Barbara Peters visited the town of Mondragón. She labeled it a “town without poverty” — and also noted the absence of “extreme wealth.” Peters immediately made the connection between this small town in Spain’s industrial region, and the suffering Rust Belt of North America. If the USW’s new plan succeeds, cooperatives may be able to reinvent faltering towns, even as they reinvent their own image for American workers.

Ultimately, the key to equal employment and fair wages may be as simple as taking control of our own economic realities, stepping up and sharing the responsibility for our future. The United Nations thinks you’d be a great boss — don’t you?

Jessica Reeder is the cofounder and managing editor of Love and Trash, and a contributor to Burning Blog and Shareable.net, where this article originally appeared.

Over Half of Germany’s Renewable Energy Owned By Citizens & Farmers, Not Utility Companies

20 03 2012

from TreeHugger

by Mathew McDermott, January , 2012

photo by Thomas Kohler

Germany’s promotion of renewable energy rightly gets singled out for its effectiveness, most often by me as an example of how to do things well versus the fits and starts method of promotion common in the US. Over at Wind-Works, Paul Gipe points out another interesting facet of the German renewable energy saga: 51% of all renewable energy in Germany is owned by individual citizens or farms, totaling $100 billion worth of private investment in clean energy.

Breaking that down into solar power and wind power, 50% of Germany’s solar PV is owned by individuals and farms, while 54% of its wind power is held by the same groups.

In total there’s roughly 17 GW of solar PV installed in Germany—versus roughly 3.6 GW in the US (based on SEIA’s figures for new installations though the third quarter of 2011 plus the 2.6 GW installed going into the year).

Remember, Germany now produces slightly over 20% of all its electricity from renewable sources.

The thing that got me though, other than the huge lead in solar PV installations Germany has over the US, thanks to good policy, and the fact that so much wind power isn’t owned by utilities, is what slightly over half of renewable energy being owned not by corporations but by actual biological people means—obviously a democratic shift in control of resources and a break from the way electricity and energy has been produced over the past century.

A good thing: Decentralized power generation, more relocalization and reregionalization of economic activity, the world getting smaller while more connected and therefore in a way bigger at the same time… taking a step backwards, and perhaps sideways, while moving forwards.

Worker Cooperatives Can Revitalize Our Economy

20 03 2012

from Sustainable Tompkins

by Joe Marraffino and Gay Nicholson

Leaders in the sustainability movement believe that the most promising economic development strategy available may be a focus on economic justice. This would reduce poverty and increase tax revenues, strengthen democracy and the sense of a shared future, reduce the tax burden for social services, and increase support for investments in education and public infrastructure. All of these are part of a viable and sustainable local economy.

Worker cooperatives can be an important tool in this strategy. According to the Democracy Collaborative at the University of Maryland, cooperatives can create a green and just economy by building community wealth “in which ownership is broadly shared, locally rooted, and directed toward the common good. Worker cooperatives are businesses owned and democratically controlled by their workers. They have been organized since the dawn of the industrial revolution and have been successful in virtually every industry – from mining companies, to robotics firms, taxi drivers, health care providers, food processors, to creative and technology firms – anywhere where the workers and their community would benefit from having a stake in their workplace and the incentive of receiving an equitable share of the fruits of their labor.

While worker cooperatives have been a steady presence in modern history, they have surged during times of economic dislocation, and rapid cultural and technological change. During the massive movement of capital and jobs out of the upstate (New York) region in the 1970s and 1980s, a wave of efforts to create and save jobs through cooperatives and employee ownership rose up in Jamestown, Herkimer, Saratoga, the Mohawk Valley, Ithaca and elsewhere.

The wave was given technical assistance by the NYS School of Industrial and Labor Relations and supported by government loans. State workers, researchers and organizers in Central New York were considered authorities throughout the country, structuring buyouts and training workers. In the mid-1980s the New York State Legislature formalized their support by writing a new article into State Corporations law recognizing the benefits of the worker cooperative model.

Worker cooperatives can have profound social benefits in terms of job satisfaction and empowerment of citizens through the everyday practice of democratic participation. They have also been shown to have significant economic benefits, both at an individual and regional level. Participation in decision-making and an equitable share of profits increases worker productivity and creativity, and decreases the need for supervision. A broad base of employee ownership increases economic stability by increasing the incentive for firms and workers to stay in the region and via the multiplier effect of worker/resident’s local spending. Worker cooperatives also build and retain locally-rooted assets for workers who may have no other path to wealth creation or entry to the middle class.

In our current economic climate, worker cooperatives are increasingly being seen by governments, community groups, and workers as a valuable tactic to stabilize regional economies, create and retain local jobs, and create assets for residents, including those that may have no other path to enter the middle class. For example, Cooperative Home Care Associates, a NYC home health care business, has over 1,500 worker-owners and annual income of over $40 million. The cooperative has helped raise the base pay for the entire sector of workers in the region, and has created full-time work and career paths in an industry notorious for its instability and low pay. South of Rochester, one of the oldest worker cooperatives in the country, the 35-year-old, and $18 million per year food processor Once Again Nut Butter has grown and created jobs despite regional closures and layoffs.

The Finger Lakes and Southern Tier regions need a program to mobilize the creation of regional worker cooperatives. Worker cooperatives need technical assistance to get started. They need incubation services, connections with investments, and organizational development that is not available through existing business development agencies. This need exists in part because of the relative lack of familiarity that banks, attorneys, and workers have with the model, and also because of some unique aspects of the model itself.

Sustainable Tompkins is proposing a pilot project of an incubator and technical assistance center for worker coops. Let’s make sure that economic justice is at the heart of our economic development strategy. It’s good for business. Contact us at info@sustainabletompkins.org to learn more and get involved.

Joe Marraffino is a Cooperative Organizer with Democracy at Work Network
Gay Nicholson is President of Sustainable Tompkins

Tompkins Weekly 10/3/11


20 03 2012

from Realizing The Future

by Steve Liptay
December 1, 2011

As 2012 approaches and movement strategies are being shaped within the 99% movement and the climate justice movement, we stand at a pivotal moment in history. The climate crisis is bearing down on us stronger than ever, the ecological crisis is deepening, and economic, social and environmental injustices are escalating. With our hijacked democracy in gridlock we’ve taken to the streets and sparked what many, including Dr. Cornel West, would describe as a ‘deep democratic awakening’. How do we yield the paradigm level changes that are needed to heal the earth and make our human world both just and sustainable? That’s the question of our time. None-the-less, solving the climate crisis will require us to rewire the globe with renewable energy and put an end to the tyranny of oil, gas and coal. To do this I propose that the 99% movement and the climate justice movement initiate a sustained civil disobedience campaign targeting climate deniers in the U.S. Congress to dramatize the need for their ouster.

To end the extraction and burning of fossil fuels it is necessary to put a rising price on carbon pollution. For Americans, this means that rewiring our country with renewable energy will require the U.S. Congress and our President pass a new law that taxes the most profitable industry in the history of the world. The revenue generated would then be distributed in its entirety on a per capita basis back to the American people to buffer rising energy costs. A monthly dividend check would give the 99% the ability to become more energy efficient and afford the transition to renewable energy. A highly centralized energy sector in which the 1% have become richer and richer would be transformed into a highly decentralized sector in which the 99% power their lives with rooftop solar panels and a host of other renewable energy technologies. This policy is called ‘fee-and-dividend’ – you can download a PDF of a legislative proposal at: www.citizensclimatelobby.org/. If enacted, the thriving fossil fuel industry could potentially be put to an end in the matter of a decade.

Electing a Congress to pass ‘fee-and-dividend’ would require a massive and sustained civil disobedience campaign to shine a light on the urgency of climate change. One of the central lessons we can take away from the Tar Sands Action campaign to oppose the Keystone XL pipeline is that civil disobedience gets the goods. A 2-week long sit-in at the White House led to 1,253 arrests and an explosion in media hits. During the sit-in and in the weeks to follow the American people were educated by our mass media and social media – they learned the who, what, where, when and why of the tar sands in Alberta, Canada. The media and the American people began to evaluate the costs and the benefits of the proposed pipeline and the events that unfolded were nothing short of remarkable. The big environmental groups came together against Keystone, Republicans and Democrats found common ground in opposition, the New York Times wrote a timely editorial and an in-depth investigation of pipeline safety, Nobel laureates a wrote letter to the President, and a State Department scandal broke (among other developments). The Obama administration responded by sending the pipeline proposal back to the drawing board, promising a thorough and independent review that will include climate change. If we had instead decided to pass around a petition, hold permitted protests, submit op-eds to the newspapers, and make phone calls to our elected officials this fight would very likely not have gained the momentum it needed. Of course I think we all wish it weren’t the case, but as history has proven over and over there comes a time when we have no other choice but to take a stand. As the Tar Sands Action and the Occupy movement have demonstrated, it is time for direct action.

If our movements were to get behind this line of reasoning, I believe that it would leads us into a sustained civil disobedience campaign targeting the U.S. House and Senate calling for 1. an immediate end to all fossil fuel subsidies and 2. a comprehensive renewable energy bill centered around ‘fee-and-dividend’. It would trigger a grassroots mobilization with all hands on deck and everyone playing to their strengths. On the ground it would likely mean occupying House and Senate offices and disrupting debate in Congress from the House gallery and the Senate gallery. In addition, mic checking and bird-dogging Congress’ climate deniers would help maintain pressure when Congress was not in session.

A few months ago I disrupted the House of Representatives with 8 others on the day that Power Shift 2011 began. (Here’s a video.) Our intent was to spark a conversation within Power Shift about the need for civil disobedience in the climate movement and to speak directly to our elected officials about the urgency that the climate crisis demands. We were handcuffed by the Capitol police and transported to a D.C. police station where they booked and held us for the afternoon and early evening. In the end, we all took a settlement offer, completed 32-hours of community service for a non-profit of our choosing, and waited out a 4-month stay away from the Capitol grounds. It was a minor sacrifice relative to the suffering endured today by our frontline communities and the suffering to come if we continue to extract and burn fossil fuels. As I look back, disrupting Congress with my fist raised and singing ‘We Shall Overcome’ was the possibly first time I felt fully engaged as an American citizen.

If we were to begin this campaign when Congress reconvened in January 2012 it could potentially put a proposal to end fossil fuel subsidies up for a vote during the 112th Congress and make ‘fee-and-dividend’ a key election issue in November. While ending fossil fuel subsidies would do little to curb carbon pollution and would only reduce the national debt by an estimated $122 billion over 10-years, it would be a small step in the right direction. Putting a significant price on carbon would get us on the path to a renewable energy future and put the fossil fuel industry in the grave where it belongs. Maybe we’d achieve one or both of these goals during the 112th and 113th Congresses, maybe we wouldn’t. What’s critical is that we start to wake up our elected officials and fellow Americans who are asleep at the wheel on climate change. Now is our hour. It’s up to us to end the tyranny of oil, gas, and coal.

Steve Liptay

‘Occupy’ as a business model: The emerging open-source civilization

20 03 2012

by Michael Bauwens

from Al Jazeera

The Occupy Wall Street movement is a model for a new economic paradigm, in which value is first created by communities.

Chiang Mai, Thailand – Last week I discussed the value crisis of contemporary capitalism: the broken feedback loop between the productive publics who create exponentially increasing use value, and those who capture this value through social media – but do not return these income streams to the value “producers”.

n other words, the current so-called “knowledge economy” is a sham and a pipe dream – because abundant goods do not fare well in a market economy. For the sake of the world’s workers, who live in an increasingly precarious situation, is there a way out of this conundrum? Can we restore the broken feedback loop?

Strangely enough, the answer may be found in the recent political movement that is Occupy, because along with “peer producing their political commons“, they also exemplified new business and value practices. These practices were, in fact, remarkably similar to the institutional ecology that is already practiced in producing free software and open hardware communities. This is not a coincidence.

Let’s look back at the workings of Occupy Wall Street at Zuccotti Park, when it was still in operation in the autumn. At its centre was a productive public, reaching consensus through the General Assembly and offering all kinds of templates (“Mic Check”, “Protest Camping”, “Working Groups”, et cetera) which, in a true open-source way, could be copied and practiced by similar communities the world over, but also modified to suit local needs.

This community had all kinds of needs: physical needs, such as food, shelter and healthcare. Did they resort to the market economy for this?

The answer isn’t a simple yes or no. Occupy Wall Street set up working groups to find solutions to their physical needs. The economy was considered as a provisioning system (as explained in Marvin Brown’s wonderful book, Civilising the Economy), and it was the “citizens”, organised in these working groups, who decided which provisioning system was appropriate given their ethical values.

For example, organic farmers from Vermont provided free food to the campers, but this had a negative side effect: the local street vendors, generally poor immigrants, did not fare too well with everyone getting free food. The occupiers cared about the vendors and so they set up an Occupy Wall Street Vendor Project, which raised funds to buy food from the vendors.

Bingo: in one swoop, OWS created a well-functioning ethical economy that included a market dynamic, but that also functioned in harmony with the value system of the occupiers. What is crucial here is that it was the citizens who decided on the most appropriate provisioning system – and not the property and money owners in an economy divorced from ethical values.

The free software economy

Before you shrug this off as a one-time utopian experiment, let’s consider the larger institutional logic of the now-mature free software economy, which we can fairly say is the standard for present and future software production.

In commons-oriented peer production (first theorised by Yochai Benkler in his The Wealth of Networks, a “p2p” updating of Adam Smith), core value creation occurs through contributors to a shared innovation pool, a commons of knowledge, software or design. The contributors may be volunteers or paid employees. Importantly, even paid contributors add to the common pool. Why?

Because shared innovation makes an enormous difference in costs (give a brick, get a house), and it is also hyper-competitive. A recent study by the makers of the Open Governance Index, which measures the openness of software projects, confirms that more open projects do much better in the long-run than more closed projects. In other words, it makes sound business sense: open businesses tend to drive out business models based on proprietary IP. So it doesn’t matter whether you are a “commonist” free software developer, or a capitalist shareholder of IBM. Both sides benefit and they outcompete or “outcooperate” traditional proprietary competitors.

The second player in open-source software production are the so-called FLOSS Foundations, such as the Apache, Gnome, Eclipse, Perl Foundation and the Wikimedia Foundation. These non-profits do not manage or “command and control” the production process, but enable it. In other words, they maintain the infrastructure of co-operation, just as the provisioning Working Groups enable the occupation to continue to operate.

Finally, just as with the street vendors of Zuccoti Park, successful open-source projects create an economy of players that create added value on top of the commons, through all kinds of derivative services, which create monetary exchange value on the marketplace. They sell their labour and consulting prowess, training and integration. IBM, for example, managed to overcome its long-term decline by transforming itself from a hardware company into a giant Linux consulting firm.

What is the relationship between this entrepreneurial coalition and the commons from which they derive their value? For one, they turn Linux into what is partly a “corporate commons”, as explained by Doc Searls. The Linux Journal editor explains:

“Linux has become an economic joint venture of a set of companies, in the same way that Visa is an economic joint venture of a set of financial institutions. As the Linux Foundation report makes clear, the companies are participating for a diverse set of commercial reasons.”

A Linux Foundation report on the work on the Linux kernel makes this very clear:

“Over 70 per cent of all kernel development is demonstrably done by developers who are being paid for their work. Over 14 per cent is contributed by developers who are known to be unpaid and independent, and 13 per cent by people who may or may not be paid (unknown), so the amount done by paid workers may be as high as 85 per cent. The Linux kernel, then, is largely the product of professionals, not volunteers.”

But this is not the whole story. Timothy Lee explains that the corporatisation of Linux has not changed its underlying organisational model:

“…What matters is the way open-source projects are organised internally. In a traditional software project, there’s a project manager who decides what features the product will have and allocates employees to work on various features. In contrast, there’s nobody directing the overall development of the Linux kernel. Yes, Linus Torvalds and his lieutenants decide which patches will ultimately make it into the kernel, but the Red Hat, IBM and Novell employees who work on the Linux kernel don’t take their orders from them. They work on whatever they (and their respective clients) think is most important, and Torvalds’s only authority is deciding whether the patches they submit are good enough to make it into the kernel.

Community first, business second

Clay Shirky, author of Here Comes Everybody: The Power of Organizing Without Organisations stresses that companies that work with Linux, such as IBM, “have given up the right to manage the projects they are paying for, and their competitors have immediate access to everything they do. It’s not IBM’s product”.

This, then, is the point I want to make: that even with shareholder companies allied with peer production, the community’s value creation is still at the core of the process, and that the entrepreneurial coalition, to a substantial degree, already follows this new logic – in which the community is primary and business secondary.

For sure, in the present political economy, a key problem persists. Though the commons create core value, it cannot reproduce itself, apart from commoners becoming either entrepreneurs or wage labourers for for-profit companies. In other words, the commons remains dependent on the social reproduction of capital. But unlike the social media logic we discussed last week, at least here there is a form of payment and funding occurring, so that the value “produsers” do indeed generate an income. Here, in this model, to a substantial degree, the feedback loop has been restored (though perhaps insufficiently).

So why is it happening here and not in social media?

The answer derives from the network logic of how peers are associating themselves. In social media, we are there as individuals, sharing our creative expression, There are weak links among ourselves and as a result, we need third-party platforms to create infrastructures for us.

Dolphins and sharks

In the free software world, however, and in Wikipedia, we are creating joint objects of value that bind us together, and so make us into a community. These communities then create their own sovereign associations to which associated entrepreneurs are beholden. However, we have to acknowledge that for-profit companies with shareholders will always have to contend with an interior struggle between their inner “dolphin” (which wants to engage in “co-opetition” with the commons), and their inner “shark” (which wants to exploit or enclose the commons). These contradictory behaviours are well-documented in the open-source software world.

To improve the situation in social media, we need peer-producing communities to create their own social media infrastructure – as Occupy is now undertaking with its ambitious Global Square project, whose aim is to ultimately replace Facebook with a civic network.

But in peer production, we need a further hack as well. Instead of associating with shareholding companies, why not create our own entities: ethical company structures, in which the commons values are embedded within its legal structure, and do not have to be imposed from the outside? In other words, where the “invisible hand” needs not be theorised as an outside force, but is a clearly active “visible hand” that drives each individual, but commons-oriented, enterprise?

Dmytri Kleiner, who calls himself a “venture communist”, has proposed a clever new “peer production” license, which would open up the commons to ethical companies and other commoners – but not to for-profits, who would need to pay. This would create a self-sustaining feedback loop in an emerging commons-oriented counter-economy. Las Indias, another network of commons enterprises, proposes the creation of mutualist “phyles”: community-oriented, global co-operatives, operating much like the Venetian and Florentine guilds during the Renaissance.

‘Occupy’ as business model

n the title of this editorial, I describe Occupy as a business model and link it to the possibility of a new civilisational model. We can do this by expanding from the already-existing institutional logic of peer production in knowledge, software and hardware, to a vision of the macro-economy.

Today, we assume that value is created by for-profit companies and conceive of civil society as a “remainder” category: it’s what we do when we come home, exhausted after our paid work. This is reflected in the language we use to describe civil society, when we call them non-profits or non-governmental.

This system as a whole is managed by a state. But the social democratic welfare state has increasingly become a corporate-welfare state, in which the gains are privatised and the losses socialised. In other words, the state has become an extension of the corporation and is less and less a servant of the citizenry. We can see the progress of this model in how the so-called “troika” (consisting of the European Union, European Central Bank and the IMF) is now imposing slash-and-burn politics in Greece.

Occupy and open-source models illuminate a new possible reality, in which the democratic civic sphere, productive commons and a vibrant market can co-exist for mutual benefit:

-At the core of value creation are various commons, where innovations are open for all to share and to build upon;
-hese commons are protected through non-profit civic associations, which empower that social production;
-Around the commons emerges a vibrant commons-oriented economy comprised of ethical companies, whose legal structures tie them to the values and goals of the commons communities, not to creating private profit.

Where these three circles intersect, citizens decide on the optimal shape of their provisioning systems.

This model can exist as a submodel within capitalism, and to some extent already does so in the present system, as the open-source software business ecology. It could also become, with some necessary hacks, the core logic of a new civilisation. Occupy has not just shown us prefigurative politics, but prefigurative economics as well.

Michel Bauwens is a theorist, writer and a founder of the P2P (Peer-to-Peer) Foundation.

PART 1 (The $100bn Facebook question: Will capitalism survive ‘value abundance’?)

The $100bn Facebook question: Will capitalism survive ‘value abundance’?

20 03 2012

from Al Jazeera English

by Michel Bauwens

Open-source software, shared innovation and crowd-sourced manufacturing threaten capitalism as we know it.


Chiang Mai, Thailand – Does Facebook exploit its users? And where is the $100bn in the company’s estimated value coming from?

This is not a new debate. It resurfaces regularly in the blogosphere and academic circles, ever since Tiziana Terranova coined the term “Free Labour” to indicate a new form of capitalist exploitation of unpaid labour – firstly referring to the viewers of classic broadcast media, and now to the new generation of social media participants on sites such as Facebook. The argument can be summarised very succinctly by the catch phrase: “If it’s free, then you are the product being sold.”

This term was recently relaunched in an article by University of Essex academics Christopher Land and Steffen Böhm, entitled “They are exploiting us! Why we all work for Facebook for free“. In this mini-essay, they make a very strong claim that “we can certainly position the users of Facebook as labourers. If labour is understood as ‘value producing activity’, then updating your status, liking a website, or ‘friending’ someone, creates Facebook’s basic commodity.”

This line of argument is misleading, however, because it conflates two types of value creation that were already recognised as distinct by 18th century political economists. The distinction is between use value and exchange value. For thousands of years, under conditions of non-capitalist production, the majority of the working population directly produced “use value” – either for themselves as subsistence farmers, or as tributes to the managerial class of the day. It is only under capitalism that a majority of the working population produces “exchange value” by selling their labour to firms. The difference between what we are paid and what the market pays for the products we are making is the “surplus value”.

But Facebook users are not workers producing commodities for a wage, and Facebook is not selling these commodities on a market to create surplus value.

Indeed, Facebook users are not directly creating exchange value at all, but instead communicative use value. What Facebook does is to enable this pooling of sharing and collaboration around their platform – and by enabling, framing and “controlling” that activity, they create a pool of attention. It is this pool of attention which is sold to advertisers, for an estimated $3.2bn per year, which is barely $3.79 in ad revenue per user.

We can, of course, argue that Facebook does a lot more than just selling the attention. For instance, their knowledge of our social behaviour, down to the individual level, has undoubted strategic value – for political power players and commercial firms alike. But is this surplus value really worth $100bn? That remains a speculative bet. For the moment, it’s likely that the nearly one billion users of Facebook do not find the $3.79 in ad revenue per user very exploitative, especially since they do not pay to use Facebook, and are using the website voluntarily. That said, there is a price to pay for not using Facebook, in terms of relative social isolation from their peers who are users.

Engineering scarcity

What is important, however, is that Facebook is not an isolated phenomenon, but part of a much larger trend in our society: an exponential rise in the creation of use value by productive publics, or “produsers“, as Axel Bruns calls them. It is important to understand that this creates a huge problem for a capitalist system, but also for workers as we have traditionally conceived them. Markets are defined as ways to allocate scarce resources, and capitalism is in fact not just a scarcity “allocation” system but also a scarcity engineering system, which can only accumulate capital by constantly reproducing and expanding conditions of scarcity.

Where there is no tension between supply and demand, there can be no market and no capital accumulation. What peer producers are doing, for now mostly producing intangible entities such as knowledge, software and design, is to create an abundance of easily reproduced information and actionable knowledge.

This cannot be directly translated into market value, because it is not at all scarce – it’s over-abundant. And this activity, moreover, is done by knowledge workers, whose ranks are steadily expanding. This over-supply threatens to make knowledge workers’ jobs precarious. Hence, an increased exodus of productive capacities, in the form of direct use value production, outside the existing system of monetisation, which only operates at its margins. In the past, whenever such an exodus occurred – of slaves in the decaying Roman Empire, or of serfs in the waning Middle Ages – that is precisely the time when conditions were set for major societal and economic changes.

Indeed, without a core reliance on capital, commodities and labour, it is hard to imagine a continuation of the capitalist system.

The problem is this: internet collaboration has enabled the creation of use value in a way that totally bypasses the normal functioning of our economic system. Normally, increases in productivity are somehow rewarded, and these rewards enable consumers to derive an income and buy products.

But this is no longer happening. Facebook and Google users create commercial value for their platforms, but only very indirectly. And they are not at all rewarded for their own value creation. Since what they are creating is not what is commodified on the market for scarce goods, these value creators do not receive income. Social media platforms are exposing an important fault line in our economic system.

We have to link this emerging social economy, based on sharing creative expression, with the more authentic field of commons-oriented peer production, as expressed in the open-source and “fair use” open-content economy, which one estimate said made up one-sixth of US GDP. There is also no doubt that one of the key ingredients of China’s success so far has been the combination of the open-source – such as the country’s domestic “Shanzai” economy – together with the patent-free policies that are imposed on foreign investors. This has guaranteed an open, innovative commons for much of Chinese industry.

Even as the open-source economy becomes the default way to create software, and even as it creates companies that reach a revenue of more than $1bn, such as Red Hat, the overall effect is still deflationary. It has been estimated that open-source annually destroys $60bn in revenues for the proprietary sector.

Thus, the open-source economy destroys more proprietary software value than it replaces. Even as it creates an explosion of use value, its monetary value decreases.

Open-source manufacturing

The same effects occur when the shared innovation commons approach is used in physical production, where it combines an open-source approach with distributed machinery and capital allocation (using techniques such as crowd-funding and social lending platforms, like Kickstarter).

For example, the Wikispeed SGT01, a car that received a five-star security rating and can attain a fuel efficiency of 100 miles per gallon (roughly 42.5 kilometres per litre), was developed by a team of volunteers in just three months. The car is being sold for only $29,000, about a quarter of what a traditional industrial automobile firm would charge, and for which it would have needed at least five years of development and billions of dollars.

Local Motors, a rapidly growing crowd-sourced car company, claims to develop automobiles five times faster than Detroit, with 100 times less capital, but WikiSpeed has achieved even faster design and production times. The WikiSpeed car is designed for modularity, using sophisticated software development techniques (such as agile, scrum, and extreme programming), an open design, and local production by garages, using distributed manufacturing techniques.

And Arduino, an open-source electronics prototyping platform, works similarly to WikiSpeed and is driving prices down in its sector. If Marcin Jakubowsky’s Open Source Ecology project is successful, this will happen for at least 40 different types of machinery. In every field where an open-source manufacturing alternative develops – and I predict that they will be developed in every single field – there will be similar pricing and income pressures on mainstream economic models.

‘Collaborative consumption’

Another expression of the sharing economy is collaborative consumption. As Rachel Botsman and Lisa Gansky have demonstrated in their recent books – What’s Mine is Yours and The Mesh, respectively – there is a rapidly growing sharing economy developing through product-service systems, sharing marketplaces and collaborative lifestyles.

For example, it’s estimated that there are about 460 million homes in the developed world, and that each home has, on average, $3,000 worth of unused items available. There is clearly economic benefit to be had by using these idle resources. Much of it will not be rented, however, but swapped and bartered for free. Even the paid sharing economy will have a depressive effect on the buying of new products.

Such developments are good for the planet and good for humanity, but the larger question is: are they good for capitalism?

What will happen with capitalism given social media-based exchanges, commons-based production of software and hardware, and collaborative consumption, on an increasingly massive scale?

What happens if more and more of our time goes into producing use value – a fraction of which creates monetary value – but there is not a substantial return of income to the use value producers?

The financial crisis beginning in 2008, far from diminishing the enthusiasm for sharing and peer production, is in fact accelerating the adoption of such practices. This is not just a problem for the increasingly precarious working class, but also for capitalism itself, which is seeing its opportunities for accumulation and expansion dry up.

Not only is the world faced with a global resource crisis, it is also facing a crisis of intensive development, because value creators are increasingly income-less. The knowledge economy turns out to be a pipe dream, because what is abundant cannot sustain market dynamics.

Thus we have an exponential rise in the creation of use value, but only a linear increase in the creation of monetary value. If workers have less and less income, who can buy the commodities that are offered for sale by companies? This, in a nutshell, is the crisis of value that we are facing as humanity. It is a challenge just as big as climate change or increases in social inequality.

The meltdown of 2008 was a prefiguration of this crisis. Since the advent of neoliberalism, workers’ wages have been stagnating and purchasing power was maintained only by an over-extension of credit throughout society. This was the first phase of the knowledge economy, in which only capital had access to networks, which it used to create globally coordinated multinationals.

As the knowledge society grew in size, more and more of businesses’ value consisted of intangible, not physical, assets. The neoliberal stock market and its speculative excesses can be seen as a way to evaluate the amount of intangible value that is added to the stock’s value by human co-operation. This bubble had to burst.

The second phase of the knowledge society, in which networks are diffused throughout society and allow productive publics to be directly engaged in peer production, creates an additional layer of problems. Add to the wage stagnation and the exodus out of wage labour that peer-based use value creation causes, and we can see that the problem is not solvable within the present paradigm. Is there a solution?

There is – but that is for the next installment. The solution involves an adaptation of capitalism to peer production, but also opens up the avenues for a transcendence of capitalism.

Michel Bauwens is a theorist, writer and a founder of the P2P (Peer-to-Peer) Foundation.

PART 2 (Occupy as a Business Model: The Emerging Open-Source Civilization

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