The Occupy Wall Street movement is a model for a new economic paradigm, in which value is first created by communities.

Chiang Mai, Thailand – Last week I discussed the value crisis of contemporary capitalism: the broken feedback loop between the productive publics who create exponentially increasing use value, and those who capture this value through social media – but do not return these income streams to the value “produsers”.

In other words, the current so-called “knowledge economy” is a sham and a pipe dream – because abundant goods do not fare well in a market economy. For the sake of the world’s workers, who live in an increasingly precarious situation, is there a way out of this conundrum? Can we restore the broken feedback loop?

Strangely enough, the answer may be found in the recent political movement that is Occupy, because along with “peer producing their political commons“, they also exemplified new business and value practices. These practices were, in fact, remarkably similar to the institutional ecology that is already practiced in producing free software and open hardware communities. This is not a coincidence.

America’s Occupy Wall Street turns online for basics

Let’s look back at the workings of Occupy Wall Street at Zuccotti Park, when it was still in operation in the autumn. At its centre was a productive public, reaching consensus through the General Assembly and offering all kinds of templates (“Mic Check”, “Protest Camping”, “Working Groups”, et cetera) which, in a true open-source way, could be copied and practiced by similar communities the world over, but also modified to suit local needs.

This community had all kinds of needs: physical needs, such as food, shelter and healthcare. Did they resort to the market economy for this?

The answer isn’t a simple yes or no. Occupy Wall Street set up working groups to find solutions to their physical needs. The economy was considered as a provisioning system (as explained in Marvin Brown’s wonderful book, Civilising the Economy), and it was the “citizens”, organised in these working groups, who decided which provisioning system was appropriate given their ethical values.

For example, organic farmers from Vermont provided free food to the campers, but this had a negative side effect: the local street vendors, generally poor immigrants, did not fare too well with everyone getting free food. The occupiers cared about the vendors and so they set up an Occupy Wall Street Vendor Project, which raised funds to buy food from the vendors.

Bingo: in one swoop, OWS created a well-functioning ethical economy that included a market dynamic, but that also functioned in harmony with the value system of the occupiers. What is crucial here is that it was the citizens who decided on the most appropriate provisioning system – and not the property and money owners in an economy divorced from ethical values.

The free software economy

Before you shrug this off as a one-time utopian experiment, let’s consider the larger institutional logic of the now-mature free software economy, which we can fairly say is the standard for present and future software production.

In commons-oriented peer production (first theorised by Yochai Benkler in his The Wealth of Networks, a “p2p” updating of Adam Smith), core value creation occurs through contributors to a shared innovation pool, a commons of knowledge, software or design. The contributors may be volunteers or paid employees. Importantly, even paid contributors add to the common pool. Why?

Because shared innovation makes an enormous difference in costs (give a brick, get a house), and it is also hyper-competitive. A recent study by the makers of the Open Governance Index, which measures the openness of software projects, confirms that more open projects do much better in the long-run than more closed projects. In other words, it makes sound business sense: open businesses tend to drive out business models based on proprietary IP. So it doesn’t matter whether you are a “commonist” free software developer, or a capitalist shareholder of IBM. Both sides benefit and they outcompete or “outcooperate” traditional proprietary competitors.

The second player in open-source software production are the so-called FLOSS Foundations, such as the Apache, Gnome, Eclipse, Perl Foundation and the Wikimedia Foundation. These non-profits do not manage or “command and control” the production process, but enable it. In other words, they maintain the infrastructure of co-operation, just as the provisioning Working Groups enable the occupation to continue to operate.

Finally, just as with the street vendors of Zuccoti Park, successful open-source projects create an economy of players that create added value on top of the commons, through all kinds of derivative services, which create monetary exchange value on the marketplace. They sell their labour and consulting prowess, training and integration. IBM, for example, managed to overcome its long-term decline by transforming itself from a hardware company into a giant Linux consulting firm.

What is the relationship between this entrepreneurial coalition and the commons from which they derive their value? For one, they turn Linux into what is partly a “corporate commons”, as explained by Doc Searls. The Linux Journal editor explains:

“Linux has become an economic joint venture of a set of companies, in the same way that Visa is an economic joint venture of a set of financial institutions. As the Linux Foundation report makes clear, the companies are participating for a diverse set of commercial reasons.”

A Linux Foundation report on the work on the Linux kernel makes this very clear:

“Over 70 per cent of all kernel development is demonstrably done by developers who are being paid for their work. Over 14 per cent is contributed by developers who are known to be unpaid and independent, and 13 per cent by people who may or may not be paid (unknown), so the amount done by paid workers may be as high as 85 per cent. The Linux kernel, then, is largely the product of professionals, not volunteers.”

But this is not the whole story. Timothy Lee explains that the corporatisation of Linux has not changed its underlying organisational model:

“…What matters is the way open-source projects are organised internally. In a traditional software project, there’s a project manager who decides what features the product will have and allocates employees to work on various features. In contrast, there’s nobody directing the overall development of the Linux kernel. Yes, Linus Torvalds and his lieutenants decide which patches will ultimately make it into the kernel, but the Red Hat, IBM and Novell employees who work on the Linux kernel don’t take their orders from them. They work on whatever they (and their respective clients) think is most important, and Torvalds’s only authority is deciding whether the patches they submit are good enough to make it into the kernel.

Community first, business second

Clay Shirky, author of Here Comes Everybody: The Power of Organizing Without Organisations stresses that companies that work with Linux, such as IBM, “have given up the right to manage the projects they are paying for, and their competitors have immediate access to everything they do. It’s not IBM’s product”.

This, then, is the point I want to make: that even with shareholder companies allied with peer production, the community’s value creation is still at the core of the process, and that the entrepreneurial coalition, to a substantial degree, already follows this new logic – in which the community is primary and business secondary.

For sure, in the present political economy, a key problem persists. Though the commons create core value, it cannot reproduce itself, apart from commoners becoming either entrepreneurs or wage labourers for for-profit companies. In other words, the commons remains dependent on the social reproduction of capital. But unlike the social media logic we discussed last week, at least here there is a form of payment and funding occurring, so that the value “produsers” do indeed generate an income. Here, in this model, to a substantial degree, the feedback loop has been restored (though perhaps insufficiently).

So why is it happening here and not in social media?

The answer derives from the network logic of how peers are associating themselves. In social media, we are there as individuals, sharing our creative expression, There are weak links among ourselves and as a result, we need third-party platforms to create infrastructures for us.

Dolphins and sharks

Occupy Wall Street protesters march on NY stock exchange

In the free software world, however, and in Wikipedia, we are creating joint objects of value that bind us together, and so make us into a community. These communities then create their own sovereign associations to which associated entrepreneurs are beholden. However, we have to acknowledge that for-profit companies with shareholders will always have to contend with an interior struggle between their inner “dolphin” (which wants to engage in “co-opetition” with the commons), and their inner “shark” (which wants to exploit or enclose the commons). These contradictory behaviours are well-documented in the open-source software world.

To improve the situation in social media, we need peer-producing communities to create their own social media infrastructure – as Occupy is now undertaking with its ambitious Global Square project, whose aim is to ultimately replace Facebook with a civic network.

But in peer production, we need a further hack as well. Instead of associating with shareholding companies, why not create our own entities: ethical company structures, in which the commons values are embedded within its legal structure, and do not have to be imposed from the outside? In other words, where the “invisible hand” needs not be theorised as an outside force, but is a clearly active “visible hand” that drives each individual, but commons-oriented, enterprise?

Dmytri Kleiner, who calls himself a “venture communist”, has proposed a clever new “peer production” license, which would open up the commons to ethical companies and other commoners – but not to for-profits, who would need to pay. This would create a self-sustaining feedback loop in an emerging commons-oriented counter-economy. Las Indias, another network of commons enterprises, proposes the creation of mutualist “phyles”: community-oriented, global co-operatives, operating much like the Venetian and Florentine guilds during the Renaissance.

‘Occupy’ as business model

In the title of this editorial, I describe Occupy as a business model and link it to the possibility of a new civilisational model. We can do this by expanding from the already-existing institutional logic of peer production in knowledge, software and hardware, to a vision of the macro-economy.

Today, we assume that value is created by for-profit companies and conceive of civil society as a “remainder” category: it’s what we do when we come home, exhausted after our paid work. This is reflected in the language we use to describe civil society, when we call them non-profits or non-governmental.

This system as a whole is managed by a state. But the social democratic welfare state has increasingly become a corporate-welfare state, in which the gains are privatised and the losses socialised. In other words, the state has become an extension of the corporation and is less and less a servant of the citizenry. We can see the progress of this model in how the so-called “troika” (consisting of the European Union, European Central Bank and the IMF) is now imposing slash-and-burn politics in Greece.

Occupy and open-source models illuminate a new possible reality, in which the democratic civic sphere, productive commons and a vibrant market can co-exist for mutual benefit:

At the core of value creation are various commons, where innovations are open for all to share and to build upon;

These commons are protected through non-profit civic associations, which empower that social production;

Around the commons emerges a vibrant commons-oriented economy comprised of ethical companies, whose legal structures tie them to the values and goals of the commons communities, not to creating private profit.

Where these three circles intersect, citizens decide on the optimal shape of their provisioning systems.

This model can exist as a submodel within capitalism, and to some extent already does so in the present system, as the open-source software business ecology. It could also become, with some necessary hacks, the core logic of a new civilisation. Occupy has not just shown us prefigurative politics, but prefigurative economics as well.

Michel Bauwens is a theorist, writer and a founder of the P2P (Peer-to-Peer) Foundation.

Follow him on Twitter: @MBauwens