U.S. Election May Undo Efforts to Control Climate Change

November 15, 2016

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Early indications from Donald Trump are that he is poised to carry out his threat to repudiate the Paris climate agreement and dismantle the EPA regulations intended to implement it. Reuters reported yesterday that his advisors are looking into a number of ways to withdraw from the Paris accord, which is not necessarily a simple process. Trump has also appointed Myron Ebell, one of the most prominent climate change deniers, to lead the transition at the EPA, with the responsibility to recommend key personnel and set new directions for the agency. Ebell directs environmental and energy policy for the Competitive Enterprise Institute, a libertarian advocacy group partly funded by fossil-fuel companies. He argues that the EPA’s Clean Power Plan is bad for the economy and exceeds the agency’s legal authority.

What follows is a little background on the climate change issue.

The threat of climate change

The great majority of climate scientists now agree that global average temperature is rising, that the rise is largely due to human changes in the atmosphere due to greenhouse gas emissions, and that continuing the trend will have serious negative consequences: stronger storms, longer droughts, loss of farmland to desert, food shortages, rising sea levels and coastal flooding. Could the science be wrong? Perhaps, but who is Donald Trump to say that it is?

If the science is not wrong, then slowing global warming is a serious economic and technological challenge. It is also a moral challenge, since the benefits and costs of burning fossil fuels are distributed differently. The benefits are distributed economically, going primarily to the biggest sellers, buyers and consumers of fossil fuels, as well as the workers whose livelihood has depended on those industries. The costs will be distributed more geographically, since whether your land turns to desert or your city is submerged will depend on where you live. The path we are on has great potential for environmental injustice, as some people enjoy economic benefits at the expense of others, many yet unborn. If the environmental damage and the resulting social upheaval are severe enough, everybody may lose in the end.

Responding to climate change will require global and national cooperation. Although market incentives have a role to play, such as the incentive to save on fuel bills by buying energy-efficient homes and cars, international agreements and strong national policies are also necessary. This is not a great time to return to nineteenth century nationalism or laissez-faire economics!

The Paris Accord

In December of 2015, the world’s first comprehensive climate agreement was approved in Paris. It set the goal of “holding the increase in the global average temperature to well below 2 degrees Celsius [3.6 degrees Fahrenheit] above pre-industrial levels.” The agreement itself does not tell each nation exactly how much to control greenhouse gas emissions. It allows countries to set their own “nationally determined contributions” to the goal, requiring only that they be ambitious, progressive over time, and designed to meet the overall objective.

Even before the U.S. election cast doubt on this country’s commitment, environmentalists were already calling attention to the many possibilities for failure. The temperature goal itself may not be strict enough; the agreement lacks an enforcement mechanism to insure compliance; and even countries with the best of intentions could fail to deliver on their promises.

The agreement stipulated that it would go into effect only when countries producing at least 55% of the world’s greenhouse gas emissions formally approved it. That threshold was reached this month when the European Union ratified it, just a few days before the U.S. election. As it stands now, 109 countries representing 76% of emissions are now on board. Since the United States represents 18% of emissions, U.S. withdrawal wouldn’t kill the agreement, but it would be a serious blow to its prospects for success, especially since some other countries might follow suit. If the world’s largest economy is not going to bear the costs of change, why should others?

The Clean Power Plan

Under the direction of President Obama, and under the authority of the Clean Air Act, the Environmental Protection Agency issued the first national standards to address carbon pollution from power plants. According to the EPA, power plants account for 31% of the country’s greenhouse gas emissions. The new regulations are intended both to reduce emissions from power plants powered by fossil fuels and to promote alternative forms of energy.

Taking into account the regional energy distribution system, the EPA sets emission goals for states, while allowing the states some flexibility in how they go about meeting the goals. Specifically, the regulations aim to (1) make improvements in coal-fired plants to reduce their carbon emissions, (2) move away from coal toward lower-emitting natural gas, and (3) promote renewable energy sources like wind and solar. The plan includes a Clean Energy Incentive Program to induce states to move in that direction.

The regulations try to balance the need to reduce emissions with the need to maintain the reliability of the country’s electricity supply. To avoid disruptions, emissions reductions are phased in over a period of up to 15 years.

Over 100 companies and 28 states are litigating some aspect of the Clean Power Plan. In February of this year, the Supreme Court stayed implementation of the plan pending further judicial review. The Supreme Court itself is likely to weigh in sometime next year.

Many ways to delay

The transition to cleaner forms of energy was never going to be quick and easy. The fossil fuel industry is very powerful, and their influence on politicians considerable. Although Donald Trump promised to “drain the swamp” and fight the “special interests,” reducing the influence of Big Oil was probably not what he had in mind. Maybe he could be persuaded to take environmental regulation more seriously, but not if he surrounds himself with climate change deniers like Myron Ebell.

If President Trump persists in his disregard for science and the environment, he has many ways of blocking action on climate change. He would not have to completely renounce the Paris agreement. That would be difficult, since countries that have already signed it are not allowed to leave it until at least 2020. Leaving sooner would be a violation of the U.N. Framework Convention on Climate Change, the parent agreement that was ratified by the U.S. Senate and later produced the Paris accord. However, Trump could direct the EPA to revise the regulations that implement the agreement, a process that could take years, or just appoint administrators who decline to enforce them. The United States would simply endure the international embarrassment of missing its emissions-control targets.

Another thing Trump could do is carry out his threat to cut off contributions to the Green Climate Fund, which was set up for richer countries to help poorer ones with the costs of transitioning to cleaner energy. India has already declared that its participation in the global effort depends on such assistance.

I remember how, during the 1980s, the response to the international AIDS crisis was delayed by the Reagan administration. That was partly because of their fiscal conservatism, and partly because they thought of AIDS as a “gay disease” affecting only a morally suspect minority. (AIDS was once called GRIDS–gay-related immune deficiency syndrome.) A delay of several years in getting AIDS research funded no doubt cost many lives. I can’t help wondering how much environmental damage may be done before conservatives start taking the threat of climate change seriously. Scientists warn of a tipping point when the global warming trend becomes irreversible. Future historians may marvel that we worried more about Hillary Clinton’s email server than about the planet.


Postcapitalism (part 4)

May 18, 2016

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The last part of Paul Mason’s Postcapitalism discusses how the transition out of capitalism might unfold, with special attention to the role of the state in facilitating change.

To review, Mason expects information technology to liberate people from the capitalist market economy. We will be liberated as workers because fewer hours of paid work will be required to produce the necessities of life. We will be liberated as consumers because goods and services will be more abundant and less expensive. We will be able to devote more of our time to voluntary activity and sharing.

A rough road

If this sounds too rosy and idealistic, readers should take a close look at Chapter 2, “Long Waves, Short Memories,” and Chapter 9, “The Rational Case for Panic.” Mason does not expect a smooth, leisurely and pleasant transition beyond capitalism, but something more tumultuous. As the historical material in the book makes clear, the history of capitalism is not just a story of steady progress through technological innovation and rising productivity. It is a story of periodic crises as the profitability of existing industries wanes and capital has to find new opportunities elsewhere. The transition now underway is especially difficult because it calls into question the viability of capitalism itself. As production becomes more knowledge-based, the means of production become harder to own and maintain as sources of private profit. Since the 1970s, capitalists have been counteracting the tendency for profits to fall by holding wages down in the developed countries and exploiting the cheap labor of poorer countries, but at the cost of increasing inequality and social resistance.

To make matters worse, new environmental and demographic conditions are delivering “external shocks” to the economic system. The prime example is climate change, a problem that Mason does not believe the market can solve on its own. When the price of fossil fuels goes up, energy companies take that as a signal “that it’s a good idea to invest in new and more expensive ways of finding carbon.” When the price goes down, consumers conclude that they can drive more or buy less fuel-efficient vehicles. However the market fluctuates, the price does not factor in the externalities, the true costs of environmental impacts on the global economy.

Another shock is the “demographic timebomb,” the addition of another two billion people to the planet by mid-century, most of them in poorer countries. In the richer countries, falling birth rates and rising longevity are creating rapidly aging populations. With fewer working-age people to support more retirees, workers are under pressure to generate enough wealth to save for their own long retirement as well as contribute to the support of today’s retirees through payroll taxes. Demographic change puts additional stress on the economy in several ways: requiring the financial system to deliver high investment returns for retirement accounts, increasing the demands on public spending for the elderly, and increasing the flow of migrants from rapidly growing poor countries to slower growing but aging rich countries.

The world cannot afford a leisurely transformation to the postcapitalist economy Mason foresees. The world needs a rapid deployment of new technologies to produce as much as we can, but do it in a cleaner, greener way that mitigates environmental damage. The potential benefits are enormous, but the task of getting from here to there is daunting.

“Project Zero”

Because of the urgency of the situation, Mason believes that a spontaneous process of increasing information-based activity is not enough. The process needs to become a conscious project, based on the insight that “a new route beyond capitalism has opened up, based on promoting and nurturing non-market production and exchange, and driven by information technology.” He calls it “Project Zero” because “its aims are a zero-carbon energy system; the production of machines, products and services with zero marginal costs; and the reduction of necessary labour time as close as possible to zero.”

The state has a special role to play in Project Zero because only the state is “centralized, strategic and fast” enough to address the urgent problems. However, Mason rejects the old socialist idea of a centrally planned economy, arguing that a centralized bureaucracy cannot respond to new data fast enough to keep up with the pace of change in the information society. Recall the earlier point that the key agent of change will be the educated and networked individual, which implies a high degree of decentralization.

Limits on private capital

So what can the state do to facilitate the transition to postcapitalism? First, it can curb private economic power in industries where it has become a danger to the public good. The energy industry would be one, as the discussion of the climate issue illustrates. The state should actively discourage fossil fuel production and encourage cleaner sources of energy. Mason also sees a much larger role of government in the financial industry. One proposal sure to provoke controversy is that the state take control of the central bank in order to implement a monetary policy that helps debtors more than creditors. That would be a looser monetary policy that keeps interest rates low but allows the inflation rate to be somewhat higher. Over time, that erodes the real value of debt, in contrast to a strict monetary policy that protects wealthy lenders by placing primary emphasis on fighting inflation. Since government itself is a large debtor, that would help governments recover from the fiscal crisis resulting from demands for both low taxes on capital and high spending on social programs to assist struggling wage-earners.

Mason would also reorganize the banking system to make it less profit-driven, by encouraging non-profit banks, credit unions, peer-to-peer lenders, and “a comprehensive state-owned provider of financial services.” He would regulate the remaining profit-oriented banking to curb wasteful speculation and encourage its proper role of efficiently allocating capital to productive activities.

In the economy as a whole, the state would act to insure that what profits remain would be a reward for entrepreneurship, and not just a “rent” based on ownership. Creators of new knowledge would get the rewards of intellectual property rights, but those rights would be short-lived to encourage the flow of knowledge and the continued incentive for further innovation.

Liberating workers

Another thing the state can do is strengthen the legal rights and protections of workers to give them more bargaining power in their relationship with capital. This will indirectly encourage the fuller application of new technologies that can produce economic abundance. “If we legally empowered the workforces of global corporations with strong employment rights, their owners would be forced to promote high-wage, high-growth, high-technology models, instead of the opposite.” Owners would try to make each worker as productive as possible if they could no longer profit from paying such low wages.

An obvious objection is that higher wages and productivity would have the downside of less employment. But for Mason, less employment in capitalist workplaces where owners profit by overworking and/or underpaying workers is ultimately a good thing. Ideally, workers would be better paid for the hours they worked, but also have the option of working fewer hours. They could then experience the decline of paid employment as a liberation, not an involuntary displacement.

The other side of the transformation of work is the increasing opportunities for work outside of traditional profit-centered firms, such as in non-profits and co-ops. Mason recommend that the state “reshape the tax system to reward the creation of non-profits and collaborative production.”

Liberating consumers

The replacement of millions of workers by automated systems is unlikely to be experienced as a good thing unless it has benefits for people as consumers, not just as workers. Here the state can facilitate the transition by providing a basic income to all households, to support those who are voluntarily or involuntarily outside the system of paid employment. That can improve the safety net for those who are displaced by new technologies. It also “gives people a chance to build positions in the non-market economy” by subsidizing participation in volunteer work, co-ops and adult learning opportunities. Market work would still be rewarding as long as minimum wages were higher than the basic income.

In the long run, the abundance of things made available by hi-tech production methods would bring the monetary cost of living down and reduce consumers’ dependency on earned income. People could rely more heavily on non-market forms of sharing, since they would have more time for unpaid but socially useful activity. As the income tax base became smaller, government’s ability to pay a basic income would decline, but so would people’s need for one.

Can democracy survive the transition?

Just about every one of Mason’s political suggestions goes against conservative thinking, which sees the free market as the creator of wealth and the limited state as its supporter. In the conservative view, the state should tax and regulate capital as little as possible, protect wealth against inflation with tight monetary policy, and keep people dependent on paid employment by providing only the most meager welfare benefits. Mason ends his book by warning that if the democratic state tries to facilitate a transition beyond capitalism, the economic elite may decide that preserving capitalism is more important than preserving the democratic state!

How long will it take before the culture of the Western elite swings toward emulating Putin and Xi Jinping? On some campuses, you can already hear it: “China shows capitalism works better without democracy” has become a standard talking point. The self-belief of the 1 per cent is in danger of ebbing away, to be replaced by a pure and undisguised oligarchy.”

We can already see the beginnings of an alliance between right-wing autocrats and blue-collar workers fearful of losing their jobs, especially in doomed occupations like coal mining or pipeline construction. If such alliances succeed in taking over the governments of developed countries such as the United States, then things could get pretty ugly in the next few decades.

In the last great transition of capitalism, in the early twentieth century, authoritarian politics had to be defeated before the democratic state could help create a broader-based prosperity. (Third-world peoples and racial minorities remained excluded however.) We should not be surprised if the same turns out to be true of the twenty-first century, as we struggle to create a more inclusive and sustainable prosperity.


Environmental Debt (part 2)

January 23, 2015

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Amy Larkin argues that by failing to factor in the future environmental costs of present economic activity, businesses are incurring debts that will have to be paid by someone. Externalizing such costs from business to society at large, and even future generations, boosts profits and makes environmentally damaging practices seem more economical than they really are. Since environmentally friendly practices are often less profitable in the short run, how can a free-market economy embrace them?

Private initiatives

One hopeful sign is that some corporations and their accounting firms are beginning to see the need for more “integrated” accounting, which includes environmental costs in financial calculations. “In November 2011, Puma became the first multinational corporation to create an integrated report that converted environmental information and data into monetary terms. The company’s 2010 Environmental Profit & Loss statement (EP&L) quantifies and monetizes environmental impact and integrates it into the operational P&L.” The results were startling: Puma found that its earnings would have been 75 percent lower if it had been charged the full cost of its operations.

Integrated accounting is challenging. Ideally it would include the cost of a product from “cradle to grave,” including the cost of disposing of it safely. Puma only got as far as “cradle to gate” accounting, the costs incurred in getting products to market. The more costs are considered, the more production and consumption practices may need to change to reduce them.

Larkin provides many examples of companies that are looking beyond short-term profits and trying to develop more sustainable ways of operating. Tiffany’s has taken initiative to reform mining practices, where “irresponsible mines, large and small, caused serious problems with water pollution, dislocation of local people, cyanide and heavy metal pollution and human rights abuses.” One incentive for Tiffany’s was to disassociate such practices from the image of their jewelry, which is supposed to be about “celebration and pleasure and memorializing love.”

Walmart shocked the retail world in 2006 by launching its sustainability initiative, vowing to “be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain people and the environment.” This has been controversial with the company’s own shareholders, some of whom accused the leadership of socialism. (What socialist idea will they come up with next–decent wages?)

Unilever is the world’s largest ice cream company and a leader in methods of refrigeration. They decided to phase out hydrofluorocarbons (HFCs, a major contributor to climate change) from their coolers because they anticipated future regulations. They didn’t want to “get caught in costly and difficult supply problems reacting to a new regulatory framework imposed upon us,” in the words of their Vice President of Sustainability. They also went a step further, setting up an advocacy office to push for new industry standards and stricter regulation.

This brings up the point that social problems require social solutions. If only one company incurs the short-term costs of change, it may put itself at a competitive disadvantage and be punished by the market. The goal has to be for environmentally friendly innovations to be adopted throughout an industry, either through cooperative agreements or new regulations, or both. Larkin herself was a keynote speaker at the Sustainable Refrigeration Summit of the Consumer Goods Forum, an organization representing 400 retailers and manufacturers. Shortly after, the CGF board approved a recommendation to phase out HFCs.

Public initiatives

Larkin also praises far-sighted government initiatives when they have occurred. She cites the substantial health and financial benefits that have come from the Clean Air Act of 1963. More recently, however, “government is actually proving less reliable than business these days when it comes to environmental protection.” She doesn’t get into the politics of it, but clearly one of our major political parties has become steadfast in its opposition to new environmental legislation. The White House solar panels are a clue: Jimmy Carter had them put in, and Ronald Reagan had them taken out.

One area in which Larkin sees a role for government is in building a new energy infrastructure, with a smart grid and new storage capacity technology. Because renewable energy will be less centralized, it is “more complicated to ramp up than building a new Hoover Dam or a big nuclear power plant. Decentralized energy means that many players, many financiers and many regulations must align before taking action.” Larkin says that building the new energy infrastructure will cost about as much as going to war with Iraq. (One wonders why it’s so much easier to get support for war than for a safer and more sustainable energy system.)

One state that has moved ahead on its own is California. The California Solar Initiative (CSI) provides free solar installations for building owners who will make a ten-year commitment to buying solar power. With an annual budget of $3 billion, CSI provides more energy than Duke Energy gets from a new coal plant with similar up-front cost. But the environmental cost is much greater for dirty coal than for clean solar. The refusal to make such social investments will cost society more in the long run.

The challenge

At the end of her book, Larkin describes our current dilemma very bluntly. “If coal and oil cost their true prices based on new financial rules, how will that melt down the economy? If coal and oil continue to be underpriced, how will that melt down the environment?”

Opposition to making businesses accountable for environmental costs is understandable, since doing so seems very threatening to our present economy. Consumer prices would go up; some businesses would fail; some workers would lose their jobs. But carrying on business-as-usual will cost us more in the long run. The solution is a transition to business practices that can succeed without imposing such heavy environmental costs. If we are willing to share the start-up costs, new industries can flourish. The solar and wind energy industries each employ more workers than the coal industry already.

[M]any phenomenal technologies and systems are just coming to market or in development for water and energy efficiency. They will be deployed rapidly and at full scale only when their competitors no longer receive a financial advantage by overusing and polluting these same natural resources with no financial penalty. That means that we, the public, might have to spend more in the short term to provide these first movers a strong market advantage.

Change is hard, and no doubt there will be winners and losers. But if we can make the transition, we should see a net gain in the health and prosperity of the nation.


Environmental Debt

January 22, 2015

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Amy Larkin. Environmental Debt: The Hidden Costs of the Changing Global Economy. New York: Palgrave Macmillan, 2013

Amy Larkin is an environmentalist with a background in marketing. She says that her “worldview connects an inherent love of nature with an abiding respect and admiration for the power and dynamism of business.” As director of Greenpeace Solutions, she has specialized in working with businesses to come up with economical solutions to environmental problems.

Although Larkin praises many businesses for being part of the solution, she is generally critical of big business for being part of the problem:

I think that corporations generally want it both ways. They want the rights of an individual to influence policy and the right to use unlimited money to influence elections. Most profoundly, executives and boards use the protection of the corporate veil against liability for their decisions that impact the economy, the environment and virtually anything else that affects people’s day-to-day lives.

That, of course, is not the way a free-market economy is supposed to work. Larkin uses the concept of “environmental debt” to explain how supposedly rational economic behavior can have destructive consequences.

Environmental debt

The heart of the problem is that businesses can make short-term profits while doing long-term damage. Environmental debt consists of “polluting and/or damaging actions that will cost other parties…real money in the future. And just like any other debt, at some point the bill will come due.” However, the businesses that did the damage will not necessarily be the ones to pay the debt.

One reason society has tolerated the accumulation of environmental debt is that we have regarded natural resources as inexhaustible. We thought there would always be enough fish in the sea, trees in the forest, clean water in the rivers and fossil fuels in the ground. Why pay the costs of protecting and replenishing resources, or of developing renewable resources, before an environmental crisis forces one to do so?

Larkin also uses a more conventional economic term that is closely related to environmental debt, and that is “externality.” An externality is a cost or benefit to someone who is not a party to an economic transaction. If toxic runoff from a production process pollutes a waterway, the health and cleanup costs may fall on people downstream rather than on the sellers and buyers of the product. Not having to bear those costs boosts profits for sellers and cuts prices for buyers, providing economic incentives to participate in that form of production. Businesses benefit in the short run by privatizing as much profit as possible while externalizing (or socializing) as many costs as possible. That’s both unfair and detrimental to society as a whole.

One result is that the market price of a product often fails to include its full cost. “A polluter is allowed to shift the environmental cost of its actions to other parties, so goods and services appear cheaper than their true cost.” For example, a study by Harvard’s Institute for Global Health and the Environment found that the true cost of using coal in the U.S. is between $350 and $500 billion a year higher than the market value of coal sold. “Its price is cheap only because it is subsidized by its own victims.”

Calculating the true cost of something isn’t easy. The true cost of oil would have to include the costs of cleaning up spills, the health costs of automobile emissions, and the military costs of keeping Middle East oil in friendly hands, not to mention the largely unknown costs of climate change. Estimates differ, but generally peg the true cost at least two or three times the price at the pump (even without trying to factor in climate change). Another form of questionable accounting is to count as an asset some $22 trillion of oil to which companies have access, although the actual burning of all that oil would probably result in catastrophic global warming. Some analysts call that a “stranded asset,” an apparent asset that can never actually be used.

When many of the costs are externalized, market competition among buyers and sellers is unable to allocate resources economically among forms of production. To put it simply, people buy and sell too much of the wrong stuff, and not enough of the right stuff. Business-as-usual seems very economical, while cleaner alternatives seem too expensive to be adopted. Our environmental problems reveal a massive market failure, which helps explain why so many free-market conservatives are reluctant to address those problems. (Okay, Larkin doesn’t actually make that last point, but I doubt that she would disagree.)

“Nature Means Business”

Larkin proposes the “Nature Means Business (NMB) Framework” as a new set of principles to govern economic activity.

The first principle is that the environmental costs of production can no longer be externalized and ignored. “Pollution can no longer be free and can no longer be subsidized.”

The second principle is that decision-making and accounting have to look beyond short-term profits. Businesses that don’t start thinking longer-term are setting themselves up for failure down the road.

The third principle is that government has to stop subsidizing business without regard to environmental impact. Instead it should provide incentives for environmentally friendlier practices and disincentives for damaging practices.

I will discuss how Larkin elaborates on these principles in my next post.

Continued


The Zero Marginal Cost Society (part 2)

September 10, 2014

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The Collaborative Commons

In 1968, ecologist Garrett Hardin published his classic essay, “The Tragedy of the Commons.” Using sheep grazing on common land as his prime example, Hardin described how the pursuit of unbridled self-interest can be expected to destroy a common resource. Each individual keeps adding more sheep, since the benefits accrue to that individual while the costs are spread among many. Eventually the land is overgrazed and many sheep die. The conclusion: “Freedom in a commons brings ruin to all.”

For many years, economists could see only two models for managing resources: the capitalist model of private ownership and the socialist model of government ownership and top-down regulation. Yet the idea of the Commons refused to die.

In 1986—18 years after Hardin’s essay seemed to put the last proverbial nail in the coffin of Commons theory—Carol Rose pried open the casket, breathing new life into what many had already concluded was a dead idea. The Northwestern University law professor entitled her salvo “The Comedy of the Commons,” a scathing rejoinder to Hardin’s earlier thesis. Her spirited and rigorous defense of Commons governance rousted the academic community, spurring a revival of Commons scholarship and practice.

Long before strong centralized states and modern capitalism, many societies did in fact manage resources like pastures, forests and irrigation systems through informal systems of rights and responsibilities accepted by all. In 2009, Elinor Ostrom won the Nobel Prize in economics for her study of what makes such systems work, at least in certain contexts. I find it easier to imagine them working in small-scale settings like extended families or villages, but larger-scale societies with high-speed communications might also pull it off. Rifkin certainly thinks so. He envisions three kinds of Commons–Communications Commons, Energy Commons and Logistical Commons.

The Battle of the Century

Rifkin believes that the first half of this century will be dominated by the struggle between “prosumer collaboratists and investor capitalists.” Rifkin’s own involvement in that struggle began in 1979, when General Electric applied for a patent on a genetically engineered microorganism designed to consume oil spills. The US Patents and Trademark Office denied the patent, but the Supreme Court awarded it in a 5-4 decision. In 1987, the patent office ruled that any genetically engineered, multicellular organism could be patented. In 2002, the Foundation for Economic Trends, of which Rifkin is President, brought together 250 organizations from 50 countries in support of a “Treaty to Share the Genetic Commons.” It declared that the gene pool has an intrinsic value more fundamental than any commercial use, and it opposed the private ownership of genetic information in principle.

Private ownership of intellectual property may be necessary if such property is hard to produce without large investments of capital. But as the costs of acquiring and disseminating information plummet–the cost of reading DNA sequences is a case in point–Rifkin sees less to be gained by organizing society on the private ownership and profit model:

Patents and copyrights thrive in an economy organized around scarcity but are useless in an economy organized around abundance. Of what relevance is intellectual-property protection in a world of near zero marginal cost, where more and more goods and services are nearly free?

Like Jaron Lanier in Who Owns the Future?, Rifkin deplores the efforts of Big Data companies like Google and Facebook to collect, own and sell vast amounts of information collected from Internet users. He expects users to fight back, not by trying to charge for the information they provide, as Lanier would have it, but by “demanding that their knowledge be shared in open Commons for the benefit of all, rather than being siphoned off and enclosed in the form of intellectual property owned and controlled by a few.”

In the realm of energy, the battle will be between a centralized energy grid dominated by large producers and a decentralized grid where users produce and distribute a lot of their own renewable energy. Just this week, the New York Public Service Commission proposed such a “distributed” energy network.

The “Logistical Commons” would have a similar decentralized organization. Instead of big companies distributing products from a few warehouses and distribution centers, more sophisticated and standardized tracking would allow many enterprises to share the same facilities as needed.

The Sharing Society

In the Collaborative Commons described by Rifkin, people will get their information more from one another and less from centralized sources. Advertising will decline as people rely more on peer product reviews. Ownership will decline in value while access to shared resources will rise in value. That quintessential example of private property, automobile ownership, will become less important as car-sharing networks expand. Peer-to-peer lending and crowdfunding will compete with bank financing.

This rosy picture of the future depends, of course, on the assumption that high productivity and general abundance will have made rugged individualism largely obsolete. People won’t feel as strong a need to rely on what is mine, but will be more comfortable benefitting from what is ours.

When the marginal cost of producing additional units of a good or service is nearly zero, it means that scarcity has been replaced by abundance. Exchange value becomes useless because everyone can secure much of what they need without having to pay for it. The products and services have use and share value but no longer have exchange value.

Rifkin does acknowledge two main threats to abundance that we will need to overcome: climate change and cyberterrorism.

A human transformation

Taking a very long view of history, Rifkin connects revolutions in communications and energy with revolutions in human consciousness:

The great economic paradigm shifts in human history not only bring together communication revolutions and energy regimes in powerful new configurations that change the economic life of society. Each new communication/energy matrix also transforms human consciousness by extending the empathic drive across wider temporal and spatial domains, bringing human beings together in larger metaphoric families and more interdependent societies.

The latest communications and energy revolution takes this process farther than ever before:

Is it not possible to imagine the next leap in the human journey— a crossover into biosphere consciousness and an expansion of empathy to include the whole of the human race as our family, as well as our fellow creatures as an extension of our evolutionary family?

Seeing society as a Collaborative Commons makes it easier to see the entire biosphere as a Commons as well:

By reopening the various Commons, humanity begins to think and act as part of a whole. We come to realize that the ultimate creative power is reconnecting with one another and embedding ourselves in ever-larger systems of relationships that ripple out to encompass the entire set of relationships that make up the biosphere Commons.

Finally, Rifkin contrasts the new “social entrepreneurialism” with the “commercial entrepreneurialism” that has been embedded in capitalist markets:

The new spirit is less autonomous and more interactive; less concerned with the pursuit of pecuniary interests and more committed to promoting quality of life; less consumed with accumulating market capital and more with accumulating social capital; less preoccupied with owning and having and more desirous of accessing and sharing; less exploitive of nature and more dedicated to sustainability and stewardship of the Earth’s ecology. The new social entrepreneurs are less driven by the invisible hand and more by the helping hand. They are far less utilitarian and far more empathically engaged.

I am inclined to be skeptical of utopian visions, and I’m usually willing to assume that capitalism will continue, although hopefully with some egalitarian reforms. Rifkin’s extrapolations from current trends do not seem unreasonable, however. The fact that we can’t seem to create enough gainful employment to distribute the benefits of our own productivity does not bode well for capitalism. How long will people accept a system that maintains technologically unnecessary scarcities for the many while generating great abundance for the few? The fundamental principle of the Collaborative Commons, that all people have access to valued resources so they can both produce and consume, may prove irresistible.

After reading Lanier’s Who Owns the Future?, I had second thoughts about my own information-sharing activities because of concerns about the companies that collect and sell information that people provide for free. Rifkin helped restore my confidence that sharing is a good thing, and that the sharers will ultimately prevail over the monopolizers. One can certainly hope so.