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Monday, April 13, 2015

Thinking Economics (2)

Many economists, historians and social critics are questioning whether capitalism, especially its American variety, is in demise. They see us caught in a 19th century utilitarian, social Darwinian pattern of thought and behavior that may have been useful for some who captured earths resources and furthered the Industrial Revolution while wrecking havoc on small farmers and industrial workers. That is until they organized for reforms during the Progressive ages of the two Roosevelts aided by labor unions and progressive leaders of industry. These reforms inducing government regulation and initiative moved large numbers into the middle class during the mid 20th century to enjoy the fruits and technologies of the industrial age as well as its nationalism, colonialism, and wars.

Study after study shows that the middle class is now threatened and diminishing within a new Gilded Age of plutocrats. The Right, now solidly organized in the Republic Party, blames government intervention and would roll back the clock to the laissez-faire approach in which government stops trying to distribute wealth and let wealth accrue to the wealthy who will make the economy work for everyone. "Let the Market decide," the Right proclaims. The Left, now solidly organized in the Democratic Party, blames the plutocrats (e.g. "Wall Street") who have bought government officials, lobbied successfully to shrink government regulation of too-big-to-fail financial institutions, to defund "entitlements" and programs for the poor, and to effectively reduce progressive taxes on the rich with the promise that they will trickle down to the deserving poor. "Let Government defend the 99%," the Left proclaims.

Both assume the economic system as both Adam Smith and Karl Marx described it and as Milton Friedman and John Maynard Keynes attempted to adapt it to the 20th century. This is a "free market" system of "producers" separate from "consumers" in a "supply and demand" cycle constituted by the millions of individuals furthering their individual "self-interests." This is a system where "capital" consists of material resources owned privately and exclusively that are measured in money and that can be used in making things and providing services that consumers will buy over and above the cost of making or doing them. This accumulates additional capital through "surplus value" or "profits" to owners who can invest in new enterprises thus growing wealth for themselves first and desirably for all. It is the system that government defends by enforcing free trade when it doesn't impede local business, fighting pirates and countries that impede American businesses, ensuring a free market in which competition can thrive, correcting abuses, and mediating conflicts.

But that is not the way the system works any more, say many new entrepreneurs and economists. Or at least the way it should when it is clear that it is causing record climate change, disparity in wealth, high levels of imprisonment, push-back terrorism, and political dysfunction. There are thousands of experiments in what economists are calling "new economy," "beyond capitalism," "social capitalism," and more. To identify and catalogue many of these experiments and the new emerging economic theory to explain them, I recommend consulting with the Next System Project being organized by Gar Alperovitz, Gus Speth, Joe Guinan, and hundreds of other activists and intellectuals. This is the opening of a conversation that calls for a rethinking of the total political economy, its assumptions, its values, its policies, and the narrative that gives it meaning.

Jeremy Rifkin, The Zero Marginal Cost Society, attempts to do just that. He traces the development of the two Industrial Revolutions of the 19th and 20th centuries into the third that is coming to fruition in the 21st. He shows how the Internet of Things, which began with the Internet of Communication, is now pursuing the Internet of Energy and soon the Internet of Logistics, has reduced marginal costs of production almost to zero, has promoted more emphasis on access to things than ownership of them, and is reducing the distinction between producer and consumer. He sees that the Market theory of economics supported by 19th century utilitarian ethics, Calvinist Protestantism of divine favor by wealth, and the failure of feudalism and mercantilism led to personal property rights, financial capital as human fulfillment, competitive nationalism, and individual self-interest as the highest desire and drive of humanity.

He predicts and encourages a new political economy which he calls the "Collaborative Commons" to replace the private Market economy. He sees this already occurring in "prosumers" creating and sharing their products at near zero marginal costs. Prosumers are also using and sharing bikes, cars, and homes, enrolling in free online university courses, and even bypassing banks through crowdsourcing and alternate currencies. In the Collaborative Commons social capital (including intellectual, spiritual, and cultural) is more important than financial capital, consumerism gives way to sustainability, and lateral peer-to-peer governance overrides vertical integrated management. Rifkin sees that capitalism and the market economy will be with us for a while but will be diminishing in influence as progressive corporations and government link into and try to profit in the growing Collaborative Commons.

Here is the model that I think Rifkin is developing:


Let me describe it by discussing some of my own experiences.

My son and his spouse have developed their own enterprise: A Mighty Girl. They have created a website for both social and business purposes. They support themselves frugally in a way they enjoy all the necessities of a good life by promoting girl empowerment. They interact with thousands of parents who help each other in the upbringing of girls to become powerful women. They offer books, clothing, toys, movies, communications, organizations, and services they have reviewed at no extra costs to parents and teachers of girls. They get a small commission from retailers like Amazon, Google, and others to sustain themselves. Recently they spent time in India at the invitation of the government on the occasion of the Year of Women to discuss girl empowerment with parents, teachers, students, and other web entrepreneurs. I think this is exactly the type of Collaborative Commons enterprise to which Rifkin is referring.

My wife, Bernie, and I just moved into Asbury Methodist Village, a non-profit Continuum of Care Retirement Community, to spend our last 30 years. (I'm 77, she 72.) I compare our arrangement to a reverse mortgage with long-term care insurance. We sold our home and plunked the proceeds down (with some of our savings) as an entrance fee over which, after five years, we will have no claim. We pay a monthly fee that takes up our Social Security and our small pensions payments but will cover our housing with lots of amenities, our meals, and our medical needs forever even if we use up all of our other savings. We own almost nothing; but we want nothing; and I am able to volunteer regularly in pursuit of my vocation. Most important this is an open community in which you see many children and grandchildren, in which people run their own university and classes for continuing education, their own computer centers, sports programs and galas, pastoral care, work with local schools, and really take care of one another. I just wish every aging person had this opportunity and am thankful for Social Security, Tax Deferred Annuities, Pension Plans, and Medicare for our ability to participate and to the diverse Asbury Community starting with the early Methodists who created this sharing community.

I worked in many non-profit organizations supported through philanthropy, United Way, churches developing self-help community development organizations and cooperatives in neighborhoods. I once lived in a religious order which shares its work and proceeds so that everyone who continues to commit to the community has all that is needed to live a good life and participate fully in society.

Each of these enterprises are hybrids of a sort, using and being used by private corporations and public agencies and assuming many of the non profit and non governmental organizations that serve and are supported by corporations and governments. In the age of Rifkin's Third Industrial Revolution, will the Collaborative Commons grow to assume more of the Market Economy and Government and bring with it the Empathic Civilization that he and many of us envision?

But again I remind the reader that my primary purpose is not promoting a certain political, cultural, or economic model of thinking and behaving. I simply want to remind us that our present dogmas, idols, and mythologies are not fixed and sacrosanct. I want to promote thinking and rethinking partially for the delight of it, but mostly because it is our way to preserve and progress.

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An after note: I just finished reading The Bully Pulpit by Doris Kearns Goodwin. She made it clear that though the greater majority of the population wanted reform and to dethrone the political bosses and their patronage system and subservience to the robber barons, Teddy Roosevelt could do little until people were informed and mobilized through their organizations and associations. Change is not a merely a matter of big donors and huge rallies, but day to day organizing in neighborhoods, churches, workplaces where publics might emerge to preserve and extend the commons.

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