Beyond Jeremy Rifkin: How Will the Phase Transition to a Commons Economy Actually Occur?

In his new book, Jeremy Rifkin focuses on the value crisis of contemporary capitalism based on the revolution in marginal costs which destroys the profit rate. He concludes that this will mean that the economy and society will re-orient itself around collaborative commons, with a more peripheric role for the market dynamics. In this, Jeremy Rifkin joins the founding charter of the P2P Foundation, which was precisely created in 2005 to observe, study and promote this transition.

Past historical phase transitions, say the transition from the Roman Empire slave-based system to feudal serfdom, or the transition of feudalism to capitalism, where not exactly smooth affairs, so it may be un-realistic to expect a smooth and unproblematic phase transition towards a post-capitalist social order.

To get a better understanding of how this transition could occur, we can do two things. First, we can look at past transitions, such as transition to feudalism, and ask ourselves what this means for the current one; second, we can look at the micro-economy of the already existing commons economy, and perhaps deduce from this the future outlines of the social order to come. Follow me in these two explorations.

1. What we can learn from Rome

Most historical empires followed the process outlined by the 14th century Islamic historian Ibn Khaldun: at a certain stage of development, the benefits of the expansion are no longer sufficient to outpace the rise of the costs of managing complexity, the empire starts to decline and is taken over by neighboring 'barbaric' tribes ... But Roman transition did much more than that: it created an entirely new economic and social system. Faced with the crisis of Roman globalization, i.e. a dearth of slaves and gold, Roman emperors and the more intelligent parts of the elite, switched to the emerging coloni system, i.e. a system of land-bound agrarian serfs.

The transition dynamic can be summarized as;

1) a crisis occurs in the dominant system;

2) an exodus occurs at the bottom of society in the producing class (from slaves to serfs, from serfs to labor, from labor to peer producer);

3) a section of the managerial class orients itself to the new mode of value creation and distribution.

Hence the paradox that it is actually a section of the former ruling class that funds and creates the new modalities. Reality check today: the economic meltdown is causing an exodus of labor to freelance status, unemployment and peer production; a section of capital, netarchical capital, invests in the commons and sharing-based social media. Think IBM, which has morphed to a certain degree into a Linux-based consulting company; think Facebook, paradoxically enabling and empowering self-organization and p2p social logics on a global scale.

A second factor, based on the resource crisis of the Roman Empire, is a transition from economies of scale, to economies of scope, i.e. 'doing more with the same thing.' Hence, the feudal system relocalized production in local domains, the Catholic Church and its monasteries created a global open design community at the scale of Europe, and the monks mutualized the physical infrastructures of production and became the engineers of the first medieval industrial revolution (Gimpel, Jean. The Medieval Machine: The Industrial Revolution of the Middle Ages). Note that this was NOT a smooth transition, and took almost five centuries of instability before its consolidation after the first European Revolution of 975 (the Peace of God movement led by the monks which created the new feudal social order that would blossom in the 10th to 13th centuries).

Reality check today: the free software, free culture, open design and hardware movements are mutualizing knowledge, while the sharing economy and the hackerspace/makerspace/fablab/coworking movements are mutualizing physical infrastructures. Just as after the 5th century, the transition towards economies of scope has started.

The third lesson is crucial: political and social revolution is preceded by the emergence, within the old system, of the new productive system and its value logic. Not the other way around, as the socialist and marxist tradition has claimed. Today, in the very womb of capitalism, the new mode of production, the new way of value creation and distribution, is already emerging and growing, but under the domination of the old system still, but, as its logic is fundamentally different of the logic of capital, it cannot possibly be subsumed forever, and prepares the ground for a structural transformation. This structural transformation, or 'phase transition', will make the emergent subsystem into the new dominant logic. Today, the economy based on common knowledge pools is already estimated at 1/6th of GDP in the US (17 million workers). Netarchical capitalism, the forces of capital that are funding and enabling the transition towards the collaborative commons, though under their own conditions, are a increasingly strong sector of the economy, but their very parasital mode of operation (i.e. expropriation of nearly 100% of the value created by human cooperation), makes it impossible for them to be the next ruling class. A capitalism that doesn't pay its value creators simply cannot exist in the long term as a stable system. This is why Jeremy Rifkin is entirely correct in his prediction for the future.

2. Looking at the already existing collaborative commons economy.

So what is the existing commons economy? It's the economy of commons-oriented peer production, first described by Yochai Benkler in The Wealth of Networks. It consists of productive communities of contributors, paid or unpaid, who are contributing, not to privatized knowledge, but to common pools of knowledge, code and design, which fuels a new commons-oriented economy. It's the economy of open knowledge, free software, open design and open hardware, more and more connected to practices of open and distributed manufacturing. It's the economy fueled by the exodus from waged labor, into a freelance economy of young urban knowledge workers, who live from the market economy, but produce more and more for open knowledge pools.

It has a fairly clear institutional structure that prefigures the commons society to come.

Unlike proprietary capitalism, the value is deposited by a community of contributors in a common pool ; this is the core of the new value creation; this is the sphere of abundant knowledge that can be shared and reproduced at marginal cost; the infrastructure of cooperation is empowered and enabled by a new type of for-benefit associations, which do not command and control the production, but make it possible. They are most often foundations, like the Apache Foundation or the Gnome Foundation; around this is constituted a entrepreneurial coalition of enterprises, which provides employment to an increasing number of peer producers: 75% of linux contributors are paid by enterprises who operate on the market , and create market value on top of the commons. Other forms of peer-driven economies are constituted around distributed labor (crowdsourcing), social media (Facebook, Twitter). This new form of netarchical capital (the hierarchy of the network, hence 'net'-'archical') that at the same time enables and empowers social cooperation and collective value creation through sharing and the commons, also captures the value.

In this transitional model, still capital-based but already working around a commons that has an entirely different logic, that is already no longer a commodity, that is already no longer based on a command hierarchy, that is based on the self-allocation of effort through a distribution of tasks instead of a division of labor. In the more extreme variants of this model, we see 100% of the value creation carried out through free human cooperation, but also 100% of the value capture done by the proprietary platform owners. This 'value crisis', where no value flows back to the value creators, clearly show that it is a transitional model, not bound to last. How could a capitalism function, where none of the created value returns to the value creators. Who will buy the products?

Hence the increasing contradiction in a system where the ability to directly create use value in the commons rises exponentially, but the capacity to monetize these efforts only grows linearly, and is captured without return in terms of livelihood.

Thus the need to harmonize the value distribution mode, in an increasingly dysfunctional capitalism, with the value creation mode. Bottom-up, the new type of enterpreneurs are experimenting with new types of open business models, which recognize the characteristics of the commons. But this will not be enough, restoring the value loop between value creation and value realization will be the key challenge of the phase transition.

3. Facilitating the transitions

The most interesting experiment is happening in Ecuador, where the author of this article has been asked to be the research director of a research project to plan a national transition towards a social knowledge economy. It is the first time that a nation-state recognizes the necessity of such a transition.

They have asked a team of research to create a framework and ten policy papers, that create both the material and immaterial conditions to re-orient the economy, and hence the social and economic system, around open knowledge commons in every field of social, economic and political activity. Following Rifkin's lead, the internet of knowledge creation, driven by common-based pools; could be matched with an internet of energy and manufacturing. Imagine that the neo-colonial economy of Ecuador, which still experts raw material like oil and bananas with low added value, and has to import consumption and production goods with high added value, would develop its own domestic industries, by combining cooperation with global open design communities, and local communities of practice (say in the field of open agricultural machine design and production), and would actually produce these tools and machines locally, close to the place of need. Today, in the neoliberal globalized economy, the cost of transportation is three times the cost of production, and IP-based profits trump the profits in material production. This is why open hardware can be produced consistently at about one eight of the cost of production of proprietary hardware. Imagine that a country like Ecuador, would systematically follow the advice of Joshua Pearce in his book, Open Source Lab (Pearce, Joshua M. Open-Source Lab. Elsevier, 2013), which shows how scientific labs can be built at about 10% of the cost, by systematically opting for open scientific instruments ? It is to early to tell to which degree Ecaudor will indeed follow the recommendations, but that it is contemplating such a transition, shows that the maturity of the emerging mode of production, is much more advanced than most analysts believe. This national effort is already matched by remarkable experiences at the local (city) and regional level in different parts of the world.

4. In conclusion: some recommendations

Our own recommendation is the following (in detail here): open design communities should move to the use of reciprocity-based commons licenses, which unlike the General Public License, allows for the creation of cooperative and reciprocity-based forms of material production, i.e. 'ethical', 'not-for-profit' enterpreneurial coalitions, formed by the commoners themselves. Once constituted, the members of such coalitions, operating in solidarity around the same commons, could move forward to new practices such as open book accounting and open supply chains. If this were done, peer production would become capable of insuring its self-reproduction outside of the sphere of the accumulation of capital.

Through mutual coordination, the already existing, stigmergy-based mutual coordination of 'immaterial' production, would become applicable to material production. In other words, the system of allocation of resources through market price signals, as well as the internal planning that takes place in large enterprises, would be matched by an emerging sphere that would allocate resources through mutual coordination. If the micro-economic model that we discussed in section 2 would grow to become a societal model, we would see that the core of society would have become a productive civil society, organized around contributory commons; we would see that the state would have been transformed into a Partner-State, which like the micro-economic for-benefit associations, would enable and empower autonomous social production on a societal scale; finally, a post-capitalist market economy would have been constituted by ethical enterpreneurial coalitions, who would use their surplus and profit to realize their social goals.

Originally posted on Huffingtonpost.com.