Sharing Economy as a Way Out of the Crisis
* Book: Enrico Grazzini. The Good of Everyone. The Sharing Economy as a Way Out of the Crisis (Editori Internazionali Riuniti, 2011),
"The thesis of this book is that, to overcome the current dramatic economic and ecological crisis, it is necessary to create and develop a polycentric economy based on common goods and not just on market monoculture or state intervention1. We firmly believe that neither the spontaneous market forces nor a public intervention alone can solve the problems created by this double crisis. Quite the contrary, things could even get worse. It is necessary to promote a different type of economy based on the sharing and the self management of common goods, that is, those goods that need to be shared by communities due to their very nature – such as science, the Internet, information, the environment, air and water, currency, natural resources, means of communication, transport, etc.. It is also necessary to encourage economic democracy and the workers' participation on company boards to thwart speculation and develop a stronger, fair, sustainable economy."
"Grazzini’s book is inspired by Nobel prize Elinor Ostrom’s studies on the Commons, and is based on the seminal works of some preeminent authors, such as: Peter Barnes, who, in his book Capitalism 3.0, sustains that non profit trusts should own and manage the Commons in behalf of public interest and concerned communities; Yonchai Benkler, who advocates a new horizontal mode of production that rests upon “peer to peer” relationship; David Bollier, co-founder of the Commons Strategy Group, a partnership to help advance the commons as a paradigm in diverse settings, both in theory and practice; Lawrence Lessig, who promotes Creative Commons, Open Science and more balanced intellectual property rights.
The essay argues that, in order to come out of the current dramatic crisis – wich is both economic and enviromental –, we need to develop a polycentric economy which should comprise three main sectors: the commons, the market and the public sector. The new sector of the commons – which includes the resources that are shared by large communities, such as knowledge, Internet, information, water and environmental resources, software, communications and networks – should be open to everyone without discrimination. The new economic sector should acquire a pivotal role (and not a subsidiary one, as the current so called Third Sector). The basic common resources should be safeguarded and available to everyone and allow a real market competition.
On the contrary, privatization of the Commons leads to monopoly, opacity, crisis; their nationalization leads to privilege, corruption and inefficiency. Grazzini argues that the spontaneous market forces and the state intervention cannot solve the problems which caused the economic and environmental crisis: quite the opposite, it is very probable that these problems will worsen. It will be necessary to promote the sharing economy, economic democracy and cooperative management of the Commons by the interested communities. Anyway, the Internet, Wikipedia, free software and open source, are already managed by non profit institutions in behalf of the concerned communities.
To get out of the crisis, to curb speculation and develop a more fair, sustainable and intelligent economy, it will be also necessary to encourage industrial democracy and provide for co-determination and employees' representation at company board level – as it already happens in Germany and Sweden -.
In short, Grazzini’s essay:
- analyzes critically the roots and dynamics of the global crisis, which so far proceeds in two different ways: on the one hand, Europe and USA suffer badly and, on the other, Asia and emerging countries drive the markets. Until unemployment decreases and society does not acknowledge the right (and central) value of work, we won’t go out of the crisis.
- finds out three structural causes of the global crisis: the severe and growing inequality in income distribution; the information asymmetry and the opacity which pervades financial market; the concentration of political power by élites who are strongly related to financial groups and very biased in favor of deregulation.
- affirms that no one structural problem which caused the crisis has been faced and solved.
- harshly criticizes the neoliberal theory of “self-regulating markets” because, according to Karl Popper criteria, it is falsified by hard facts. This false ideology legitimized complete deregulation of financial markets and growing inequalities, and contributed to fuel the global crisis (that anyway was easily predictable, if one would have considered many national and regional crisis which occurred in the last 20 years);
- solicits more open mindedness in economics - against the “pensée unique”, which dogmatically transforms the market into a fetish – and more openness towards to different (and until now marginalized) schools of thought – such as the Sharing Economy;
- proposes the reconciliation of economics with other human sciences – such as sociology, history, politics and ethics – and focuses its analysis on the value of work – and particularly on intellectual and creative work, the main force of production in the knowledge economy;
- states that in the advanced economies the role of the Commons is absolutely crucial: in fact pure public goods – that is, following Ostrom’s criteria, non exclusive and non rival goods such as knowledge and information – are strategic not only to compete but also to develop economy and society in a sustainable way; and effective management of the common environmental resources is becoming more and more essential to survive
- affirms that the current production and consumption models are becoming more and more unsustainable, and that the environmental crisis is bound to worsen because billions of new consumers in the developing countries are entering into the global market. The effects of the energy crisis are already evident: oil price volatility and wars caused by oil.
- ecology is an evident case of “market failure”. Indeed market is not able to solve pollution problems, which are considered by the dominant economic science as “externalities”, that is unexpected consequences of private contracts: in fact market sets lower prices for products which pollute compared with non-polluting goods.
- any ecological policy will necessarily affect a reduction in the sphere of market to curb “negative externalities” and will involve the crucial state intervention to finance scientific research, promote alternative technologies, tax the production of carbon dioxide, transfer technological resources to the developing countries in order to defend environment.
- the current pattern of market economy will be necessarily modified from its very foundations. But state intervention can be positive or negative for economy and society. Without control from the bottom and without transparency, state intervention implies very high risks of corruption, privileges, wastes and inefficiencies.
- the hope is that communities of scientists, researchers and citizens will organize themselves autonomously and become key players in the environmental policy: this is the only way for communities to become really effective in defending the “common garden” and public interest.
communities should manage environmental resources setting up non profits economic organizations, such as trusts and cooperatives, in order to get sustainable development.
Furthermore, Grazzini’s book:
- foresees three scenarios as result of the current crisis: the “everything almost like before” scenario (unfortunately, the one which is currently happening); the “progressive scenario”, exemplified by Obama politics and by the scandinavian pattern of “sustainable capitalism”; the “alternative scenario”, in which Commons economy gains a central role. In the last scenario, the Commons would be democratically managed by concerned communities.
The reform proposals which characterize “the alternative scenario” foresee: strict regulation and deep democratization of finance thanks to international cooperation led by the UN; increase of the value of work, especially of knowledge and creative work; expansion of the sharing economy, of the economic democracy and the Internet democracy; defense of the welfare system and promotion of the green economy and renewable technologies; anti-trust policy to develop competitive and regulated market
The alternative scenario envisages some kind of direct democracy in the economic field. It foresees the management of the commons by the interested communities thanks to the creation and empowerment of non profit organizations at local, national and international level; and it advocates for industrial democracy – as it currently happens in Germany and Sweden, where workers elect their own representatives in company boards.
There is a remarkable difference between tangible and intangible commons that consequently should be managed in different ways. In fact knowledge economy is an economy of abundance based on cooperation and on increasing returns; on the contrary, the economy of physical goods is grounded on scarcity, competition and decreasing returns.
Intangible goods could be managed by the interested communities much more easily than the material goods, because they are cooperative and no rival resources. It’s not by chance that the Internet, Wikipedia, free software, open source and scientific knowledge, are already managed by the concerned communities and by non profit organizations, and that these commons are expanding despite the strong privatization trends. On the contrary, the collective management of rival and scarce commons – such as water, forestry, pastures and other natural resources – is more difficult and complex.
Since advanced economic systems are more and more based on knowledge, knowledge workers will play an essential role both in global competition and in the domain of economic democracy and management of the commons. In the advanced economies knowledge workers – that is workers with a medium or high level of education – are already the majority of the employed people – that is more than the 45% of the total workers – and control the most important means of production: knowledge. These workers have the expertise to run the economy, and, especially because they are badly affected by the current economic crisis, could also be eager to manage industrial democracy to develop a more sustainable, equitable and innovative economy.
A polycentric economy – based on Commons, market and state intervention – is strongly needed to face the economical and ecological crisis and to prevent and stop the spreading of crisis’ viruses. A fair and sustainable economy cannot develop from the anarchy of competitive forces (as it happens in the market economy) or if depends on the decisions of only one sovereign, the state. The commons should be managed by civil society and its non profit organizations, such as trusts and cooperatives."
"Re-Founding Economics: The Need For a New Paradigm
Every deep crisis marks a practical and theoretical turning point.
It is important to think outside the box and avoid old, disastrous and misleading ideologies. Hard facts have proved neoliberal theories to be wrong: philosopher of science Karl Popper would say that the grim reality has completely falsified neoliberal theories without the right to appeal. The market does not allocate resources properly, it can not regulate itself and it is not made of rational agents but it is rather led by eager speculators and chaotic dynamics. The competitive market, profit maximization and an obsessive search for maximum value for the shareholders bring nothing good to society - let alone the Pareto optimal outcome, that is, one such that maintains that no-one could be made better off without making someone else worse off. The fact is that the total amount of self-interests leads to systemic chaos, not to welfare and common good.
To escape this narrow-minded ideology based on market dogma and capitalism as “the end of history”, it is necessary to lay new theoretical foundations, both realistic and logic, and also begin to elaborate “pragmatic utopias”. These utopias will outline new, possible, desirable and better worlds, but starting from existing trends and phenomena, not from illusions and dreams.
First of all, saying that the crisis could not have been forecast is not true. Some economists, such as Robert Shiller and Nouriel Roubini, foresaw it, but nobody listened. The signs were clear for those who were willing to see them. Unfortunately, most economists (and the media, the governments and the monetary authorities) preferred to turn a blind eye. Therefore economics has not just lost its aura of sacredness, but also its legitimacy. Its credibility is at stake because, so far, this science has been dominated by a hyper-liberal school of thought that has always been aggressive and intolerant towards other points of view, while being servile to well-established powers. The danger for economics as a science is to be seen as an ideology whose only scope is to legitimize the present reality.
The point is that orthodox economists have not only failed to foresee this crisis, but they have even worsened it by prescribing savage deregulation. A vast majority of the most acclaimed economists applauded financial innovations, such as derivatives and credit default swaps, and supported deregulation. That is why we need to re-found economics and emancipate it from the market fundamentalism taboo and transform it into an open, pluralistic and non dogmatic science. Economy ought to be strictly linked to history, sociology, ethics, politics and all other humanistic sciences.
We need to recognize that there is not just one encompassing economic theory to explain all the phenomena and to suggest valid prescriptions against the current dramatic crisis. First of all, it is necessary to fuel an open-minded debate on different economic theories, i.e. the commons economy, the knowledge economy, the environmental economy, complexity theories, the participation economy, the behavioural economy, the happiness economy, and so on. We need new theories and paradigms like fresh air in order to get out of this economic and environmental crisis.
It is also absolutely essential for economic and social studies to be focused on women and men's work, because work is the very basis of economy and society. In advanced economies, it is especially important to focus on knowledge work, because it is crucial for handling the most precious commons, namely science, culture and the environment, and for dealing with energy issues and sustainability by applying new technologies.
The Commons at the Centre of a Polycentric Economy
This essay suggests that, to overcome the present deep economic and ecological crisis, it is necessary to develop and experiment new and alternative ways to manage economy and run common goods. We believe that the commons – i.e. the goods that by nature can not but be shared, such as science, the environment, the Internet, information, culture, air, water, currencies, natural resources, communication and transportation networks – should be owned by the concerned communities and managed according to the principles of self-government, direct democracy, accountability and transparency. So, directly or indirectly, the commons economy could help to overcome the root causes of the crisis: inequality in income distribution, information asymmetry and excessive concentration of political power. Moreover, the commons economy and the communities are decisive for solving ecological problems.
In advanced economies and globally, the commons – especially knowledge and the environment – are considered to be extremely important because they drive the development. Yet, the importance of commons in economy has been underrated, as they have been mainly privatized – think about the major part of natural resources and communication networks – so that they do not appear to be commons; or, the importance of commons is underrated because they do not have a monetary value so they do not generate commercial income directly – like, for instance, air, or theorems.
Common goods, though, are the building blocks of economy. Science, information and the Internet are the leverage of development and competitive advantages; moreover, a sustainable management of environmental common goods has become crucial also for the reproduction of the human species. However, knowledge and the environment can hardly be treated simply as a commodity.
Knowledge in particular is considered to be the strategic resource of advanced societies, but it is also a “strange good” because it can not be anyone’s exclusive property, it does not perish and its value does not decrease if other people use it. Hence, For these reasons knowledge is a pure public good: it is a global and no rival good. The more it circulates, the more its value increases and multiplies. So, in principle, knowledge economy is an economy of abundance, characterised by no exclusivity, extra-market exchange and cooperation; but this is completely the opposite of the actual capitalist economy based on scarcity, property exclusivity, market exchange and super-competition for the possession and use of limited resources.
The growing centrality of common goods for the social and economic development creates an urgent need – even though society has not become fully aware of it yet - to radically change the old, well-established paradigm, in theory and in practice. The commons economy makes a radical shift from the dominant economic and social rules. It is based on totally different, innovative and original elements: freedom and autonomy are stronger than discipline; teamwork beats hierarchy; altruism and reciprocity work better than egotism and utilitarian exchange; and cooperation prevails over competition. In fact, without cooperation it would be impossible to develop knowledge and deal with ecological issues that concern all communities on local, national and global level.
Although they are very diversified, all commons have a particular feature: as Nobel Prize Elinor Ostrom says, common goods can be managed in the most effective and efficient way only if there is collaboration among the members of the concerned communities, be itather we're talking about a productive communities – such as researchers, scientists, journalists, producing science and information – or users communities, such as communities using water wellsresources or pastures. We see that, in general, neither the market nor state intervention can protect or develop common goods. So, we had better avoid the false but widely posed alternative: Which is better – the market or the state,? Of the two, which holds the key for the way out of this crisis – the market or public intervention? We believe it is necessary to stimulate and support initiatives coming from the communities and the civil society aimed at managing strategic commons such as knowledge, the Internet and the environment. In fact, no one more than the concerned communities is more motivated to manage common goods in the best possible way, in a sustainable and efficient manner, and no one has more experience in the field. Thus, the communities are by far the most motivated to protect and develop common goods.
Intellectual Property and Open Science
Let us not be naïve though: we can not take the success of the sharing economy for granted. American, Chinese and European corporations exert much coercion to privatize common goods such as, like scientific discoveries, natural resources, communication networks, water, trying to seize them from the population and create new monopolies. The states, too, are trying to take possession of the commons for the advantage of the few privileged. The obstacles to creating and developing a non-profit sector for the protection of common assets are huge because many powerful economic and political forces are trying to monopolize and exploit them.
The sharing economy will certainly not become a success overnight. Ostrom has discovered a series of preconditions for the successful management of the commons. These preconditions, however, should not be taken for granted in all the communities. In fact, an effective management of commons requires the concerned communities to share homogeneous values and interests, combined with great competences and skills, conflictual the ability to deal with conflicts, to be rational in arguing, to be able to negotiate and to debate, and to make lasting compromises. We are all aware that, unfortunately, these qualities are still rather rare, even in advanced societies.
It is important to point at the substantial difference between communities sharing natural assets like mineral resources, forests and water, and the those producing intangible goods such as knowledge and information.
We will try to demonstrate that the sharing economy develops more rapidly and deeply in the strategic and emerging sector of intangible economy, rather than in the sector of physical and rival goods. In fact, communities producing non tangible goods, such as knowledge, have less problems when it comes to self-regulating on economic, political and juridical level.
But it is true that knowledge resources, just like mineral or water resources, also allure companies trying to seize them possibly for free; and that laws on copyright and patents go more and more in favour of semi-monopolistic knowledge and information corporations. Today, intellectual property rights laws reward creative efforts more than fairly and R&D actually create knowledge monopolies. The Monsanto, Microsoft and Big Pharma cases are already well known. However, the movements that stand for an open and fair access (not necessarily cost-free access, though) to cultural heritage, software and basic technologies are on the rise.
The scientific world, historically characterized by free access and a free exchange of knowledge, has begun to vigorously thwart excessive restrictions caused by the current intellectual property rights laws. Initiatives for an open (but regulated) access to cultural contents and science discoveries – such as Free Software, Open source and Creative Commons related to copyright issues, or such as Open Science to promoting cooperative science and open access to data and discoveries – are already in place.
The essential merit of the sharing economy is that it promotes a swift spread of knowledge and encourages the creation of new, breakthrough technologies - something consolidated knowledge monopolies would rather impede to keep their supremacy -. So, the commons economy can become the single strongest success factor to stimulate and diffuse green technologies, that are often opposed by energy monopolies but that are also very needed to start a new investment cycle for a sustainable development.
The Commons Economy and the Non-profit Foundations
Peter Barnes, social activist and entrepreneur, in his essay “Capitalism 3.0” suggests that communities should create specific economic institutions to own commons property rights so as to be fully legitimized to manage them properly; according to Barnes, trusts (or foundations) are the most suitable bodies to manage common property. Broadly speaking, foundations are private, non profit, autonomous organisations that manage assets to be dedicated to specific purposes, according their own statutes, for public benefit.
According to Barnes, corporations tend to take limitless possession of free commons - e.g. mineral resources, but also myths and folk music transformed in copyrighted movies and songs – to monopolize them and to pull maximum profit out of them. They eventually dump negative externalities, like pollution, clear up costs etc., on the society. Foundations could play a crucial role in dealing with savage privatizations of commons. Elected and controlled by communities, they should own and manage the commons, preserving them from limitless exploitation, also for the benefit of future generations. Foundations could also give away excess goods or sell them into the market at a equitable price, thus creating opportunities for a fair market competition.
Barnes' theory should not be considered an abstract utopia. As a matter of fact, very important infrastructure and intangible primary goods, like the Internet, Open source software or Wikipedia, are already “owned” and managed by non profit community organisations. And many natural (e.g. forests in Brazil and in some African countries), cultural and artistic goods of primary importance are already managed by communities, foundations and cooperatives.
Also in the realm of science and technology, it could be useful to create foundations set up and managed by researchers, scientists, universities and research institutes. These foundations should own and manage open access to patents for the research carried out with public funds, in a direct, autonomous and transparent manner. So, on the one hand, public research could finance itself and develop, and on the other, knowledge could rapidly spread and become more accessible to companies, researchers and the society. Once again, egalitarian access to commons is the precondition for the market to become more dynamic, competitive and innovative.
The sharing economy also implies very important political aspects. First of all, state and politics should officially recognize the legitimacy of the commons and intervene to avoid the privatization of strategic common assets; then parliaments and governments should take positive actions to develop the non profit bodies as strategic assets for the society and economy; but this is a long and complex process and, obviously, it is everything but easy.
Knowledge Workers and the Crisis
The sharing economy has another advantage: it suggests communities should self-govern themselves; therefore, it brings together economy, democracy and ethics. Its strength is its ability to contribute to reinstating economy – currently seen as an external force, often opposed to civil society, democracy and ethics – in the society.
Our thesis is that, especially in the knowledge economy, democracy extended to property relationships could become a highly efficient production factor – in nations like Germany and Sweden this has already taken place -. Thanks to the self-regulation of commons and economic democracy, work could become more efficient and productive and develop more innovation. But, the crucial question is: are there social forces really interested in developing democracy and in the sharing economy? And, are these forces strong enough to oppose the privatization, or the nationalisation of the commons?
Fortunately, the answer is ‘yes’. There are social and cultural conditions to manage commons in a smart and collaborative way. Advanced societies already base their development and wealth on intellectual work and knowledge. The knowledge workers – that is, the workers with a medium or high level of education who handle signs and symbols (instead of tangible instruments and products, like the working class in Fordist capitalism) – already constitute the widest and most important class because they control economy’s principal means of production: knowledge, the major source of value in contemporary economy.
In terms of numbers, knowledge workers – office workers, technicians, doctors, researchers, teachers and professors, journalists, professionals, fully or temporarily employed or unemployed young people with a diploma/degree, etc. – prevail in advanced economies compared to other workers: in the United States, Japan, the United Kingdom, France, Germany and Italy, they account for more than 40 % of employees.
However, the common view of society and economy is still firmly anchored to the traditional, 20th century idea according to which there are two main classes: the proletariat – that is, the workers who apply manual labour and physical energy – and the national, industrial and financial, capitalistic class. This type of society has evolved, though. Currently, in the so-called post-industrial economies, there are two main conflicting classes: international financial speculators on one side and knowledge workers on the other side. Our hypothesis is that knowledge workers, badly hit by the crisis, are becoming the major social and economic transformation factor.
In advanced societies, knowledge workers already are the skeleton and the brain of democratic institutions, and they play the leading role in building an innovative and creative economy. Knowledge workers have already created the Internet and, on political level, the so-called “new movements” against unregulated globalization and savage liberalization, in favour of peace, ecology and democracy, have been mainly animated and joined by youngsters and intellectual workers. Educated workers, affected by the crisis that hit the middle class, disillusioned by the market and the state, represent a new social, cultural and independent force endowed with enough cognitive and relational competences to create, manage and develop non profit commons institutions.
How to Overcome the Crisis
We shall focus on three scenarios for overcoming the crisis, and hopefully we will give an insight into it, and present the solutions suggested by different economic and political forces. Obviously, none of these scenarios should be considered in a schematic and rigid way, and none of them will happen precisely in the same manner, as described herein. We would like also to inspire the reader to delve deeper into the potential outcomes of the crisis.
The main variable that will determine the different scenarios considered hereafter is politics. When economy falls into a very deep crisis and markets no longer work, politics becomes decisive and economics goes back to being political economy.
We are going to analyse the following three scenarios:
1.The “business as usual” scenario, characterized by the persisting power of speculation and by the renewed central position of the market (especially of the financial market), perhaps with a few more rules and more public intervention to socialize the losses;
2.The reformist scenario towards a “fair and balanced capitalism” characterized by more profound reform projects and by a crucial role of public intervention in economy and society – quite similar to Barack Obama's plan (at least at the beginning of his presidency). Obama's aim was to intervene on three imbalances that caused the crisis: the increasing gap in income distribution; information asymmetry, lack of transparency and accountability in finance; extreme concentration of political power
3.The radical scenario, characterized by some radical reforms of the economic and financial system, by the growing role of civil society and knowledge work, by industrial democracy and by a fast development of a green economy.
The most probable scenario at the moment is halfway between being ultra-conservative and moderately reformist. The interests at stake are too strong and the most incisive proposal to reform the financial system (and the energy system) meets fierce opposition. We believe, however, that the crisis can be tackled only through the development of the sharing economy and through structural reforms in the realm of finance, economy and ecology.
To conclude this introductory chapter, we anticipate the main prescriptions to overcome the crisis with a stronger, more innovative, fairer and more sustainable economy:
- Enforce the banks to produce transparent balances and reports; break up the major banks; separate commercial from investment banks; promote a mixed, public, private and cooperative banking systemnationalize systemic banks close to bankruptcy and impose strict rules on the derivatives market; forbid the Credit Default Swaps for gambling on someone else's bankruptcy; reconsider pension funds; promote international institutions to monitor financial activities
- create public independent public authorities to supervise and endorse rating agencies and audit firms
- democratize finance and redefine the main goals of central banks: they should not only monitor inflation but also control financial and property bubbles, so as to develop a sustainable economy and create employment; promote a new international currency based on a basket of currencies and commodities/raw materials
- impose strict limits to the circulation of speculative capitals and introduce the Tobin Tax ; use its funds to address systemic risks and develop renewable energy
- promote the strategic role of the U.N. in the financial, economic, and environmental realms
- fight tax evasion and fiscal paradises; impose progressive taxation on incomes; impose a high taxation on financial incomes and, if necessary, an extraordinary tax on very rich propertiesgrant a minimum income for all the citizens, lifelong education and automatic wage increase in case of inflation
- empower the U.N. to reduce working hours and to introduce global rules to promote work and environment protection
- increase public welfare; cut military spending and promote social services and female employmentgive great value to work and create national public agencies to promote employment and knowledge working
- promote economic democracy, and employee and stakeholders participation on the company board
- grant the universal right to access the Internet and develop wiki democracyspread knowledge and rebalance intellectual property rights
- fund education and research; promote free innovation networks and venture capital; urgently develop a green economy
- promote new, independent, non profit institutions such as foundations and cooperatives, as owners of the commons
- promote anti-monopoly policies and market competition
A polycentric and diversified economic system based on three pillars – commons, market and state – could be the chance not only to overcome the crisis, but also to defy future speculation viruses that would otherwise spread very rapidly in the global world. Today, the global world is mono-cultural and based only on markets and monopolies, driven by speculation and greed. To come out of the crisis, we have to combine the sharing economy with the market and the state economy. Sharing is our future."
From the chapter on the Sharing Economy
Common Goods, Private and State Property
Managing common goods has become the main issue in advanced societies. Today some of the shared goods, such as knowledge and environmental resources, have indeed acquired major importance and it has become essential to address the highly complex issue of the commons to overcome the economic and ecological crisis. Paradoxically, this very ancient topic of managing the commons, arises again, but in new and original forms. In fact, we can state without fear of being proved wrong that human history began with common assets, that is, with goods shared by local communities. Nowadays, however, commons have acquired a global dimension as well.
In primitive societies, there was obviously neither state nor private or individual property: agricultural, hunting and pastures, water and natural resources were “common property” – not in legal but in factual terms – as they were controlled and managed by the community on the basis of well-established rules, sanctions, hierarchies and rites.
Individual property did not exist and control over common resources was exerted predominantly by adults and by the elders, whereas women and youngsters were generally excluded.
Even after formal institutions of private property and state have been developed and, through a slow and gradual process, eventually prevailed, important forms of common property still remain, such as pastures, catchment basins or fisheries and hunting areas.
Some types of sharing natural common goods by local communities have been studied in particular by Elinor Ostrom, the American scholar who won the 2009 Nobel Prize in Economics. Her researches focused above all (but not exclusively) on the modes of managing scarce and physical common goods, such as pastures, water basins and fisheries.
In fact, other intangible commons prevail in advanced economies – such as knowledge, science, information, the Internet – which, as we are going to see, are not scarce but, unlike physical commons, are limitless and have quiteqquite different characteristics.
Common Goods: Tangible or Intangible, Free of Charge or With Fee
Common goods can be tangible or intangible, free of charge or with fee. Nature and society spontaneously offer a bounty of free assets – land, forests, vegetation and wild animals, waterways, minerals, language, communication and many others – that have been managed and used by the communities from the mists of time. Only in the recent past some people have started transforming commons in private assets for their own exclusive use and benefit.
The very fact that many commons are spontaneously offered by nature and the society at no cost has certain effects. Firstly, free common assets are generally underestimated by economists, as they bear no immediate monetary value, while economic science (unfortunately) deals almost exclusively with monetary values. Secondly, common goods are often wasted – as in the case of air and water or public cultural assets – because they apparently have no cost, even though their value for human life and for economy in general is huge in the vast majority of cases.
The third effect of commons being free of charge is that industries can easily take possession of the goods offered by nature and society and sell them profitably, possibly in circumstances of monopoly.
So, many of the common goods are freely available. But this does not imply that all the commons are without cost, or free of charge. For example, communication and transportation networks are man-made and their costs and prices are established by the market. In such cases, private firms and the state take possession of, and gain from, the “network economies” generated by common assets. Nonetheless, those networks, as we shall see, could also be controlled by the users’ communities.
Other commons can have a cost and still not be charged for, like free software for instance. Actually, software is a common as it is senseless using it only for ourselves instead of communicating with other users, thanks to compatible programs that share common standards. Free Software and Open source programs – those with an open code – are free of charge and in many sectors successfully defy expensive software with proprietary code, that is patented software with a code that is neither transparent nor modifiable1. Today, Free software and Open source are very important, so much so that the Internet is based on free software.
Producing them certainly entails costs in terms of time and money for programmers, be it volunteers or employees of big corporations like IBM or Oracle-Sun. In this case, the producer gives the program freely to a community of users hoping to make a profit indirectly. We shall elaborate the issue of Open source business later on.
For the moment, it is worth understanding that common assets can be free of charge or charged for, can be natural or man-made, tangible or intangible.
Commons Become Private
But, how could common goods become privately owned, in the course of human history? Where are the roots of the privatization of commons?
Throughout history work has been the main source of appropriation: e.g., if water, a free common, is directed to my home through a channel built by me, with my work and effort, then it becomes “mine”. In a sense, it legitimately becomes “private water”. If I cut some trees in a forest, if I prune, transport and use them to build my house, then they become “mine”, my private property.
Hence, work is the primary and legitimate basis for the privatization of common goods. But it is surely not the only one. In this matter, also exercise of power and violence plays a very important role.
In the course of history some people have obtained (and still do) some commons, by excluding communities through violence. History is filled of wars and conflicts aimed at monopolizing natural resources dispossessing communities.
Commons can become private in many ways. Some people, for instance, take possession of them by monopolizing a know-how freely supplied by society. Social and legal conventions and established institutions also play an essential role in the appropriation process Suffice it to consider the laws on intellectual property rights that recognize the rights of some, while excluding others' rights.
From the common goods, private and state property has developed more and more over the past centuries: but they are relatively recent forms of ownership.. We therefore distinguish three types of ownership (juridical or de facto): private property, state property and property managed by a community. In principle, any property can become private, state or community property.
The property type of a specific asset is not its ontological or essential characteristic. In short and medium terms, the typology of property that an asset assumes depends on the contingencies: it results from the power relationship among private capital, political elites and communities. The property typology depends on which of these contenders actually succeeds in imposing itself, by force or by consent, takes control over the assets and eventually institutionalizes the most convenient form of ownership for itself.
But we can assume also that, in the long run, those who manage the goods more efficiently – that is, exploit the diverse characteristics of the different goods better - will win; in fact, in the long run, those that prevail are the forms of ownership and the modes of production that guarantee greater advantages for the society and the biggest increase of the forces of production.
It is common knowledge that, as capitalism developed, material commons first, and intangible commons later on, were privatized: Karl Marx and Karl Polany described the process of expropriation and enclosure of the lands and the concentration of the means of production in the hands of the bourgeoisie. Then, Lawrence Lessig and Vandana Shiva have described the (still ongoing) process of “enclosure” and concentration of “knowledge capital” in favor of the big corporations that control the entertainment and the hi-tech industry.
Private and State Property
Private property imposed itself through both work and violence, but it has become the predominant form of ownership because capitalism has guaranteed a greater development of production forces and more affluence than primitive communities or planned state economy. Capitalism destroyed primitive forms of production and limited the role of the state, putting it in the service of its development and the accumulation of capital.
In the Western world, in the sphere of economy the state was bound to run public administration and basic infrastructures, such as the military, the judiciary, the police, schools and roads. But sometimes, during the crisis, the state had to intervene more directly in the economy. During the depression of the 1930s capitalism was saved thanks to the intervention of the state which transformed private losses into public ones and rescued the market with public demand. Moreover, after World War II, in many European countries governments developed partially or totally owned strategic industries and created a mixed – private and public– economy .
By the late 1970s, due to the Keynesian model of economy, the welfare state became partly independent from private capital and, thanks to social services universally accessible to all the citizens, it promoted an impetuous economic development, widespread affluence and almost full employment. However in the recent decades, with the triumph of the Anglo-Saxon ultra-liberalist model of capitalism, in the western world private property has finally triumphed over state property (and, unfortunately, over welfare).
In the communist countries like Russia and China, after the political revolutions and until the end of the 80's,, market was abolished and state property, managed by the political and administrative-bureaucratic class, replaced private property. Initially, state ownership of the means of production promoted rapid development in many poor countries, such as Russia and China, which succeeded in overcoming poverty, famine and slavery. National property promoted liberation from colonialism and feudal forms of production, and facilitated the centralization of industrialization efforts. However, in the long run, state property turned out to be a failure. Centralized and non democratic state planning generated inefficiency, corruption and privileges. Above all, it proved to be too rigid to meet the growing and complex needs of the society and to compete with the more flexible and decentralized capitalist economy. Despite the progress of science in the communist countries, owing to the strategic competition with Western countries, the diffusion of innovations was blocked by the bureaucratic apparatus of the state, and eventually the economy failed. The cause of the fall of the Berlin Wall and the collapse of the Soviet empire was not so much an external event, as an implosion.
Private property in capitalism and state property in “real socialism” were the two absolutely predominant forms of ownership in the 20th century. Common property nearly disappeared in the developed countries while it survived as a secondary form of ownership in underdeveloped countries. Eventually, both economies – those based on state ownership and others based on private ownership – failed, even if in very different ways and at different times.. As we have seen, the former crashed in the late 1980s and the latter fell in a crisis more recently, starting from 2007. The failure of the centralized planning first, and the global recession of financial speculation later on, has taught us that both regimes have “flaws”, evidently different but recurrent, as well as structural limitations.
Ecology and the Commons
Why is the economy of the commons on the rise again? And why is it going to be so important? Because nowadays it no longer merely concerns the relatively marginal or traditional aspects of material economy, such as pastures, state property areas or fishing rights, but goes at the heart of intangible economy, based on science, technology, communication, information, management know-how, and so on; and because competitive advantages and economic growth are increasingly based on these intangible forces of production.
The other fundamental factor that in current times secures a strategic role to the commons economy is the urgent need to address the dramatic ecological issues. We have already seen that green economy concerns common assets, such as the environment and the climate, shared by all human beings. We have also pointed out that the market system is not appropriate for dealing with those goods as it treats them as “externalities”, that is, as indirect and negligible consequences of private contracts. We have already said that pollution is a typical example of externality. In fact, it is an indirect result of ruthless competition to reduce production costs without caring about the social costs of pollution, which unfortunately are not reflected in the market prices. However, it has become indispensable to pay very much attention to these “externalities” – that is, the “collateral effects” of market competition which are ignored by the market – as taking care of these “unexpected children” has become absolutely crucial not just for the economy but also for the preservation of the human race. As a matter of fact, we are currently faced with an “economy of externalities”, that is, an economy more and more conditioned and pervaded by collateral effects of private contracts and market activities.
Evidently, public intervention is absolutely necessary to deal with externalities, to maintain the ecological balances and develop a green economy. But, most of all, the development of clean economy and renewable energies requires social intervention, that is, intervention by the scientific and the territorial communities which are the most interested in protecting the environment against increasing pollution.
In fact, so far, all ecological issues have been raised by the communities directly affected by pollution and ecological risks. In this field, companies should by no means be trusted as they are ready to take big risks (and to offload them to the citizens) just to make a profit.
The market on its own can not solve the issues related to pollution, waste and depletion of fossil energy resources. On the other hand, state intervention, although necessary, can not solve the problem either. The most important success factor to develop the green economy is the mobilization of scientific and territorial communities. Nothing is as vital for the development of clean economy as the contribution of the concerned communities.
Common Goods, Exclusivity and Rivalry
Why do common goods, which have been abandoned, expropriated and privatized for centuries, turn out to be so important at this particular phase in history? The existing theories on the commons can help us find a satisfactory explanation.
Drawing on the studies initiated by Elinor Ostrom, we assume that, in the long run, the type of ownership most suitable for a particular asset depends primarily on its inherent characteristics of the good itself, that is, by its structural and functional features with regard to two criteria: “excludability”, that is the possibility to exclude other potential beneficiaries from its use, and rivalry of consumption (or “subtractability of use”). As a matter of fact, some goods are exclusive, i.e. they can be easily enclosed and protected if other people try to take them away. Typically, material goods can be easily bound and protected. On the other hand, intangible goods like science, language, mathematics, television and radio programs which everyone can watch or listen to, can hardly be exclusive – they slip out of hand and they “are expansible over all space, like fire”.
Furthermore, certain assets are “subtractable”, that is, are rivals or limited, because their use by some precludes the use by others. They can be utilized by one user at a time (e.g. clothes, food, wrist watches, mobile phones, etc). On the contrary, knowledge, communication networks, roads and television or radio programs are not rival or competitive goods and they can be – or better, they must be – used by a large number of users.
Applying the two criteria of exclusivity and “subtractability” or rivalry, Ostrom classifies four broad types of goods: private goods, toll goods, common-pool resources and public goods.
We should bear in mind, however, that the four types are purely ideal and in reality their boundaries are fluid. Still, the categories are practical and explicative and they serve to understand the main differences between the goods.
We can easily see that some goods, especially those from the categories of “rival” and “exclusive”, such as food, cars and personal computers, can easily move into the “private property” category (again, the boundaries between categories are volatile, e.g. personal computers and cars are sometimes shared). Other goods– the so-called tool goods – can be exclusive but at the same time shared among the members of certain communities. For instance, theatres, private clubs, daycare centers are shared by the population of specific communities, while others are excluded.
Some commons are “unfortunate” enough to be not really exclusive but contestable, and, at the same time, scarce and rival, e.g. the common-pool resources such as Indian Reservation lands or fisheries, forests and fossil deposits. Struggles for the ownership of such assets can lead to severe clashes.
When it comes to public goods, it is difficult to exclude anyone. They are (fortunately) neither rival nor limited, e.g. air and sea water. In this case also, the boundaries escape fixed definitions. Some public goods were not scarce in the past, but are becoming or have already become so, e.g. the ozone layer, or clean water and air.
The “purest” public goods, those that can hardly become exclusive and rival, are intangibles, like science, language, information, knowledge and the Internet communication protocol.
Sir Thomas Jefferson, one of the fathers of the American Constitution, in the second half of the eighteenth century explained that knowledge is by nature a social asset that spreads like fire, without consuming itself, and therefore ideas can not be anyone’s exclusive property – except for certain temporary and partial exceptions – and they constitute the only foundation of human progress.
“If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density at any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property”.
It is difficult to exclude anyone from Pythagoras’ theorem or from listening a radio/TV program. Moreover, he/she who teaches the theorem of the Greek mathematician communicates it to her or his students without giving it up. Those who produce radio programs also do not give them up. Economists define non-exclusive and non-rival goods “pure public goods” and distinguish them from other tangible commons that allow more easily exclusion and rivalry, such as pastures, forests, groundwater basins, schools or fisheries.
Immaterial economy concerns to a much greater extent pure public assets, such as information, knowledge and language, which are the fruit of society and result from collective intellectual production (general intellect). Language, for instance, is a free common asset and it could never be the property of a single person or of a firm or the state.
Nevertheless, public commons very often are the very base of private property. All entertainment corporations draw upon legends, fairy tales and popular music, while the millennial heritage of traditional and community knowledge in the field of agriculture, breeding and medicine is increasingly privatized by agricultural, food and pharmaceutical industries.
Obviously, information and knowledge can also be reduced to private or state property, but reducing them to exclusive property and limiting their spread is somehow unnatural, expensive and, in the long run, inefficient. Reducing knowledge to private property and imposing barriers against a fast diffusion of innovations slow down economic development and constitute a waste of the most precious human resource.
In fact, there is something peculiar about sharing intangible goods such as knowledge: sharing multiplies the initial resources. Knowledge is actually both an input and an output, and so it is a resource that can be infinitely increased provided it circulates freely, without limits or barriers. Knowledge economy is therefore an economy of abundance as opposed to the economy of scarcity that characterizes the physical goods.
The huge success of Google, which assists the Internet users in orienting themselves in the endless labyrinths of information and knowledge, proves that the main problem of the new intangible economy is how to manage excess, not scarcity.
Economists should finally become aware of the fact that in the knowledge economy the problem is managing abundance not scarcity, and that all the parameters of traditional economics – based on the market as the optimal means for allocating rival or scarce assets – are radically turned upside down.
The more we speak a language, the richer it becomes. The more knowledge scientists and researchers exchange among themselves, the easier it becomes to come up with new knowledge, innovations and discoveries. Knowledge economy is an economy of increasing returns.
So, the core paradigm of capitalism – based on exclusive property of rival resources that are consumed with use, just like the physical goods – is now completely reversed.
According to classical economic theories, it is due to scarcity that competition and the market are necessary in order to allocate the limited resources in the best way.
But knowledge economy, where sharing means also multiplying, totally reverses traditional economic paradigms. Theories on knowledge economy are still in the initial phase. It is nevertheless clear that the three pillars of capitalism – private property, competition and the market – are not what characterizes this new emerging economy, based instead on communities, cooperation and mutual extra-market exchanges. Paradoxically, the very foundations of capitalism seem to be outdated by the most advanced sector it created: knowledge.
To conclude: all goods, or each asset, depending on its inherent features, in the long run can be managed most efficiently in only one particular regime – private, state or community. Goods managed within an inappropriate regime are managed inefficiently. For instance, private residences and agricultural land can be managed by the State. Police force and the army can be private. Knowledge can be controlled and utilized by the few privileged due to unfair and excessively severe intellectual property rights laws. But, in such cases, the goods in question are managed within property regimes that are inappropriate because they do not match their inherent distinctive features. If property and management systems do not suit the structural and functional characteristics of the goods in question, serious inefficiencies follow, and, on a long or medium run, the old mode of production becomes ineffective: therefore it becomes possible that it is replaced by a new and more effective mode of production.
Luciano Gallino notes, though, that knowledge can not be considered sic et simpliciter as “ontologically” public and perfectly accessible.
In fact, the actual forms of access to “public” knowledge depend to a great extent on how it is produced, distributed and used in the various social formations: and the capitalist and profit based economy attempts – often successfully – to turn public knowledge into private property and mere commodity.
Gallino points out that, although knowledge and information appear to be “perfect” public goods, in reality they have many limits and are subject to strong constraints. This is primarily the case with intellectual property rights, military secrets and the need of the beneficiaries to have the right codes to understand and use information and knowledge; but to get the right codes one has to be well educated and trained (and education and training are relatively expensive and scarce resources).
Knowledge is not, thus, a public asset for being a divine gift or for some kind of metaphysical “essence”. In our society it is subject to rigid control and severe limits.
Gallino's analysis is certainly not wrong; however we can not underestimate new sweeping and far reaching innovative factors such as the arrival of the Internet, Wikipedia, Open Source software, and the massive spreading of mobile and interactive communications services and technologies, which clearly indicate that knowledge and information are inherently open, in spite of the efforts to enclose them.
Without degenerating into technological determinism, it is evident that each product has specific structural and functional features, in the sense that a bicycle can not be used as a tricycle or a horse7. And it is also evident that, unlike information, a motorcycle can not be produced spontaneously by human beings and easily reproduced in thousand copies. Moreover a motorcycle can not be simply adapted for a thousand uses and transformed easily and cheaply from a motocross into a racing motorcycle. But information can easily adapt: in fact information and communication technologies are very flexible. The public can easily interact and use them according to its own demand. One needs only to consider how the young mobile users reinvented SMS or how political activists use social networks to organize demonstrations against authoritarian regimes instead of using them to find college mates (as initially expected by the founders of Facebook)."
From the same author: Knowledge Economy Beyond Capitalism, (Codice Edizioni, 2008).