If we study the productive reality of the last thirty years, the changes turn out to be amazing. Among all of them, the most striking, the most unexpected, the one that most strongly contradicted the idea that the great economic systems of the twentieth century had about themselves, was not that the future would be full of computers, cellphones, and electronic equipment. That idea had already appeared in the ’40s and ’50s in science fiction and popular futurism. Nor was it globalization. The idea of a world united by free trade had been part of the Anglo-Saxon liberal ideal since the Victorian era, and from the foundation of the League of Nations, between the wars, it was part of the declared objectives of the great English-speaking powers.
No, the most shocking thing was the beginning of the end of business gigantism. From the State businesses of the USSR, to shipbuilding and metallurgy in Asturias, from Welsh mining to United Steel or the big automotive companies, the oligarchs that had been the model of “enterprise” for the contemporary industrial world, stopped hiring, collapsed, and fired tens of thousands of workers. It wasn’t just “de-localization”: the new Chinese or Vietnamese plants didn’t grow indefinitely, either. Markets like electronic products expanded year after year, and yet personnel and capital global used were reduced. It was said that the new labor-intensive industries would be services, especially services connected with the new dominant form of capital: finance. But soon, banks and insurers that employed hundreds of thousands of people at the turn of the century started to reduce personnel. Today, the great banks are on track to reduce personnel by 30% over the next decade.
What had happened was, in fact, amazing. Following the Second World War, the United States had become the great provider to the world. When the war ended, US GDP was around half of the global GDP. Benefiting from the European need for reconstruction and from peace treaties that, while not reaching the level of humiliation of Versailles, were openly asymmetrical, big Anglo-Saxon businesses globalized at great speed speed. It was a dream come true for their shareholders. It wasn’t at all strange to economists. At the time, if Marxists, Keynsians, and neoliberals agreed on anything, it was that businesses were able to, and in fact tended to, grow indefinitely. But by the ’50s, it was already obvious that something was going wrong. In the USSR and the countries of the East European, you could always blame the arbitrariness of the political system or the mistakes of the planners. But in the USA, it was different. And yet, it was there, present and invisible, like an elephant in a high-society gala. The first to realize it was a economist called Kenneth Boulding. Boulding noted that American businesses were reaching the limit of their scale, the point at which inefficiencies due to having to manage a larger size were not compensated for by the benefits of being bigger. Looking at the America of his time, he also warned that big businesses would try compensate for their inefficiencies using their weight in the market and in the State. We were under pressure long before “too big to fail” in the crisis of 2008, but he could already tell that Big Businesses would not hesitate to use the power they had as a result of employing tens of thousands of people to get made-to-fit regulations and thinly-veiled monopolies. Business over-scaling, warned Boulding, could end up being a danger to the two main institutions of our society: state and market.
But what came next was even more surprising. Businesses bet on improving their systems and processes. They discovered that information was important—crucial—to avoid entering the phase in which inefficiencies grew exponentially. It also became obvious that a business size that was inefficient for one market became reasonably efficient for a larger market. As a result, they used all their power to promote a branch of technology that had shone only marginally in the great war: information. With this same objective, as soon as the opportunity arose, they pushed governments to reach commercial agreements and, above all, frameworks for the free movement of capital, since the industry that had scaled fastest and had begun to give alarming signs of inefficiency was finance. Meanwhile, the champion in business scale, the USSR and the whole Soviet bloc, collapsed, to the astonishment of the world, in an obvious demonstration that operating life wasn’t infinite.
A true revolution in support of the feasibility of large scales in crisis was implemented in the West. The political result was called “neoliberalism.” It basically consisted of the extension of free-trade agreements, which expanded markets geographically; financial deregulation, which allowed the rise of “financialization,” or extension of markets over time; and a series of rents and monopolies for certain businesses, which were assured by regulations, like the hardening of so-called “intellectual property.”
The technological result was known as the “IT revolution,” which is to say revolution of information technology. But it came with a surprise, following a series of apparent coincidences in the search for ways beyond the limits on efficiency imposed by the rigid hierarchical systems inherited from the previous century. At the end of the ’60s, the structure of networks that connected big university computers, which was financed by defense spending, took a distributed form. This would not have brought about a radical change if a new field, domestic information science, had not evolved towards small, completely autonomous computers, known as “PCs.” The result was the emergence in the ’90s of an immense capacity for distributed and interconnected calculation outside the fabric of business and government: the Internet.
The revolution of scale
The Internet brought profound changes in the division of labor, which overlapped with the ongoing reduction of optimal scales, and changed the social results expected from delocalization, the first trend in globalization.
In the ’90s, when the “end of history” seemed go hand in hand with the consolidation of a new string of industrial technology giants (Microsoft, Apple, etc.), free software, which had been a subculture until then, built the first versions of Linux. Linux is the “steam engine” of the world that is emerging: the first expression of a new way of producing and, at the same time, a tool to transform the productive system. Over the next twenty years, free software would come to be the greatest transfer of knowledge and value in the contemporary era, equivalent to several times all foreign aid to development sent from developed countries to those on the periphery since WWII.
Free software is a universal public good and, in an era in which information infrastructure is a fundamental part of any productive investment, a free form of capital. Free capital drove an even greater reduction in the optimum scale of production. But it also helped make value chains of the physical goods with strong technological component distributed. Globalization and delocalization had broken the links in value creation in thousands of products throughout the world, especially in the less-developed nations of the Pacific basin, but all those chains were re-centralized in the US, and to a lesser extent, in Japan, Germany and other central countries, where big corporations (from Apple to Nike) branded, designed, marketed, and hoarded the benefits of intellectual property. The possibility of free software was key for many of those chains to “insource” in countries like China, and produce all the elements, including those of greater value added.
The immediate result was prodigious economic development, the greatest reduction in extreme poverty in the history of humanity, the greatest increase in real wages in the history of China, and the appearance of new global centers of innovation and production in coastal cities. These cities play by a new set of rules that, not surprisingly, include an extreme relaxation of intellectual property, an accelerated reduction of scales, and production chains systems and assembly systems that allow a formidable increase in scope, which is to say, the variety of things produced.
The Direct Economy
As all these changes were set in motion in Asia, in Europe, the free software model was expanding into a whole spectrum of sectors. Soon, groups would appear that replicate the mode of production based on the commons (“the P2P mode of production“) in all kinds of immaterial content—design, books, music, video—and increasingly, in the world of advanced services—finance, consultancy—and industrial products—drinks, specialized machinery, robots, etc.
But while the “P2P mode of production” is a fascinating path for a transition from capitalism to abundance, its direct impact—how many people live directly from the commons—is relatively small. As in Asia, Europe, and the US, structural change will begin in an intermediate space that is also based on the digital commons: the Direct Economy.
The Direct Economy is all those small groups of friends—and therefore, a basically egalitarian organization—that design a product that generally incorporates software and free knowledge into itself or its process of creation, sell it in advance on a crowdfunding platform (making bank financing or “shareholders” unnecessary), produce it in short runs of a few thousands in a factory, whether in China or on the side of their house, and use the proceeds to improve the design or create a new product.
The Direct Economy is bar owners who invest 10,000 euros in equipment and begin to produce beer 100 liters at a time, or a few tens of thousands of euros and gain capacity to prepare almost 1,500 liters every 12 hours in continuous production—and then go on to bottle and begin distributing nearby and in networks of beer artisanal lovers. And of course, they will have more varieties than the big brewery in their are, higher quality, and a better quality/price ratio.
The Direct Economy is the academy or the high school that installs a MOOC or Moodle to be able offer its students services over the summer, independent app developers, the role-playing bookstore that buys a 3D printer and starts selling their own figurines, or the children’s clothes store that starts designing and producing their own strollers, toys, or maternity bags.
All of them are small-scale producers making things that, until recently, only big businesses or institutions were able to make. All of them have more scope than the scale model. All of them, at some point in the process, use free software and knowledge, which reduces their capital needs even further. All of them take advantage of the Internet to reach providers and customers for low costs—for example, by being able to reach very geographically dispersed niches or find very specialized providers. Most will not have to resort to banks or investors to finance themselves, but rather, will use pre-sale and donation systems on the network to raise money. And some of them use the “commodification” of the manufacturing industry and its flexible production chains for the process.
As for internal organizing, we’re generally looking at models that are much “flatter” and more democratic than conventional businesses. While traditional businesses are autocracies, or at best aristocracies based on hierarchical command and responsibility, the large majority of projects in the Direct Economy are “ad-hocracies,” in which the needs of the moment shape teams and responsibilities. This even happens in cases where big businesses decide to take a gamble on creating a spin-off and competing in a new field. Instead of an org chart, there are task maps. Rather than “participation in management,” there emerges the type of energy that characterizes any group of friends that make something “spontaneously.” If the legal process wasn’t still so arduous, if it didn’t require notaries and endless paperwork, we would say that the natural way to the Direct Economy is worker cooperativism.
But none of this is as important as the broader meaning of the Direct Economy to people’s possibilities in life. In Wage Labor and Capital, one of his more accessible works, Marx explained the trap in the narrative that exalts social mobility and equality of opportunities: wages can’t become capital. Or, rather, couldn’t… and it’s true that it continues to be unable to in a good part of the world and in many branches of industry. But we’re seeing something that is historically shocking—the reduction to zero of the cost of an especially valuable part of capital, which materializes directly knowledge (free software, free designs, etc.). And above all we see, almost day by day, how the optimum size of production, sector by sector, approaches or reaches the community dimension.
The possibility for the real community, the one based on interpersonal relationships and affections, to be an efficient productive unit is something radically new, and its potential to empower is far from having been developed. This means that we are lucky enough to live in a historical moment when it would seem that the whole history of technology, with all its social and political challenges, has coalesced to put us within reach of the possibility of developing ourselves in a new way and contributing autonomy to our community.
Today we have an opportunity that previous generations did not: to transform production into something done, and enjoyed, among peers. We can make work a time that is not walled off from life itself, which capitalism revealingly calls “time off.” That’s the ultimate meaning of producing in common today. That’s the immediate course of every emancipatory action. The starting point.
Translated by Steve Herrick from the original (in Spanish)