Postcapitalism and the city

Keynote at Barcelona Initiative for Technological Sovereignty

CCCB, 7 October 2016: The idea of postcapitalism consists of two hypotheses, about the unique effects of information technology.

First, that information technology is preventing the normal adaptation process, whereby capitalism — as a complex system — reacts to crisis, to the exhaustion of old business models, to the low profitability of old businesses and old sectors.

Second, that information technology makes utopian socialism possible.

More precisely: information technology makes possible a transition towards relative abundance, through the rapid cheapening of some things, the automation of work, and through highly intelligent utilisation of capacity — of things, raw materials, energy and human services.

Francesca Bria, Renata Avila, Paul Mason and Evgeny Morozov at BITS launch

In a short space of time I can only outline the basics — because for this audience — of radical, networked people in a self-proclaimed rebel city — I want to propose some rebel actions, achievable at city scale.

My argument is that information technology changes the economy in three ways.

First, it dissolves the price mechanism. The economist Paul Romer pointed out in 1990 that information goods — if they can be copied and pasted infinitely, and used simultaneously without wear and tear — must fall in price under market conditions to a value close to zero.

Whether you use marginalist economics or Marxism, the same holds true: the act of copying and pasting takes up energy, mass and some labour. But the amounts are so small that the production cost is negligible.

Of course — and Romer anticipated this — capitalism responds by inventing mechanisms that put a price on this zero-cost product. Monopolies, patents, WTO actions against countries that allow copyright theft, predatory practices common among big technology vendors.

But it means the essential market relationships are no longer organic. They have to be imposed each morning by lawyers and legislators.

This information effect on price is affecting the physical world not just the world of information goods. Just as the price of bandwidth and processing power has fallen exponentially over the past 30 years, so has the price of DNA sequencing, or the number of defects in an engineering process.

So information is having a dramatic downward impact on the cost of production of real things, and the same vortex of cheapening happens everywhere.

The second impact of information is to automate work faster than new work can be invented.

Around 47% of all jobs are susceptible to automation, say Frey and Osborne (2013). And information does more to transform work: it makes it modular, loosening the link between hours worked and wages; and it makes work possible to do outside the worplace — blurring the division between work and life.

So falling prices and the automation of work have a very disruptive impact on the normal process of adaptation.

The typical process of adaptation involves: while old processes are automated and jobs destroyed, new processes are innovated requiring high-skilled work. The products command high prices. Wages rise in the new sectors, allowing high value consumption. The whole thing meshes together into what Carlota Perez calls a new techn-economic paradigm.

It’s happened four times in the history of industrial capitalism: the industrial revolution itself, the 1850s, the Belle Epoque before 1914 and then the post-1945 boom.

Today it is not happening.

Automation is destroying high value jobs faster than it creates them; the zero price effect fights against the need to raise production costs; neoliberalism has suppressed workers’ ability to demand higher wages — and the falling cost of inputs also suppresses this.

Instead of high productivity we have low productivity plus what the anthropologist David Graeber calls millions of bullshit jobs — jobs that do not need to exist. Like the car wash, which in the space of a lifetime has changed from being typically a machine to typically five men with rags.

Capitalism’s response mechanisms — apart from the imposition of monopolies and monopoly pricing; are

a) to maximise capacity utilisation of low-skilled labour and of assets. So we get Uber, Deliveroo and AirBnB are effectively capacity utilisation businesses. Or:

b) to artificially inflate the price and profitability of labour inputs: so housing becomes the major thing wages are spent on — and healthcare and university education.

Things that in all previous eras of capitalism the elite desired to be as cheap as possible — to ease wage pressures — are now made as expensive as possible, and capital migrates away from production and from private-sector services towards public sector services.

If we do not break this cycle, you can easily see capitalism being replaced by a stagnant neo-feudalism.

The growth enigine is the central bank, pumping money into the system; and the state, propping up effectively insolvent banks. The typical entrepreneur is the migrant labour exploiter; the innovator someone who invents a way of extracting rent from low-wage people — like Uber or AirBnB.

Fortunately there is a third impact of info-tech. It has begun to create organisational and business models where collaboration is more important than price or value.

I hope everyone here understands the concept of externaltities — for it is crucial. Networked busieness models create massive positive externalities — network effects –where the data, or the wellbeing, or the utility created by network interactions is capturable and exploitable.

But as soon as technology allowed it, we started to create organisations where the postitive effects of networked collaboration were not captured by the market.

Wikipedia is the obvious example; or Linux; or increasingly the platform co-operatives where peopel are using networks and apps to fight back against the rent-seeking business models of firms like Uber and Airbnb.

But ask your tech people a more fundamental question: beneath the bonnet of our product, how much of what we use are tools commonly produced, outside the market sector, and maintained for free by a community of technicians? The answer is a lot.

In the 19th century the word for a strike was “taking tools out of the shop”. In the 20th century the management owned the tools. In the 21st century the tools are commonly owned, maintained and free.

The technology itself is in revolt against the monopolised ownership of intellectual property, and the private capture of externatlities.

The postcapitalist project is simply: recognise the transition, its enormous potential, and promote it.

We must stop fantasising about a third industrial revolution, or a third capitalism based on immaterial wealth.

We must promote the transition to a non-capitalist form of economy which unleashes all the suppressed potential of information technology, for productivity, wellbeing and culture.

I don’t have a programme for this transition but a basic methodology: involving three sectors of the economy: the market, the state and the non-market — or collaborative sector — in which things are produced and consumed outside of monetary exchange; where the externalities are collectively owned.

The strategic aim is: to reduce the amount of work done to the minimum; to move as much as possible of human activity out of the market and state sectors into the collaborative sector; to produce more stuff for free.

My guess is this will take the best part of a century but there are some things we can do tomorrow to make it happen.

If the aim is for humanity to do as little work as possible, you can do it through three mechanisms. One is to automate. The other is to reduce the input costs to labour, so that we can survive on less wages and less work. The third is to push forward rapidly the de-linking of work and wages.

I have a strong hunch that the city is going to be the primary venue of change in this process. Cities have stopped eviscerating their centres; young, networked people want to live right in the centre — sometimes two or three to a room — because they understand the city is the closest the analog world comes to a network. The city is where the networked individual wants to live — at least for some of their life, and for some of their working year or week.

So what can a city do to promote the post-capitialist transition?

First — be overt. Help people to conceptualise the transition by actually talking about it. The renaissance happened in key cities becaus they set up institutions and a public discourse about the transition. The Rialto in Venice, as a market, was such a public institution; so was the round theatre in which Shakespeare dramatised a story from the Rialto; so was the Waag, in Amsterdam, where goods were weighed.

I would like to see Barcelona become a city where the ideas of co-operation, free stuff, non-privatisation and overt post-capitalism become part of the public discourse.

Next — switch off the great neoliberal privatisation machine.

We know what it’s there for — to hand public assets to teh private sector so that the profits of decaying businesses are temporarily boosted — whtehr it by a prison controact, a smart city contract, a school maintainance contract.

Another way of understanding privatisation is to say: how can we do public services as expensively as possible?

You need to end it strategically. That does not mean the local state does everything — it has no expertise in engineering, in hi-tech, in transport infrastructure — and must trade with the market sector. But end the transfer.

The next proposal is more radical: model reality as a complex system.

Planning under socialism had a terrible reputation — the planned economy: nobody wants to return to that. But planning under neoliberal captailism is guesswork. We will look back at infrastrucutre planning in the late 20th century as negatively as we do on Stalinism’s 5 year plan.

We accept ludicrous cost-benefit proposals from engineers and architects for the big stuff we spend taxpayers money on. 50 years later, when the infrastructure fails to deliver the promised benefit, there is nobody around to care.

So we need accurate models. Behauvoural, complex system models that we can ask radical questions of: like — what happens if no Barcelona City employee can claim expenses for an Uber ride? Or what happens if we mandate the use of the FairPhone, not the iPhone?

If the models says — radical solutions don’t work, and cause more trouble than progress, then you listen to the model.

But right now we have no way of conceptualising transition — and I would say to Barcelona it could, together with some other world cities, sponsor big tech, at scale, to model the urban economy and the measures needed to survive in a long transition.

Next — promote the basic income.

The basic income is an idea whose time is coming, because there won’t be enough work to go around. For me the basic income is a one-off subsidy for automation — to un-hook humanity from bullshit job creation and promote hte delinking of work and wages.

However, it’s a transitional measure. It can only be paid for by the state taxing the market sector. As the market sector shrinks, that means you run out of taxes. So I never use the words “unconditional” or universal. I would make the basic income conditional on engagement with the demos of the city. For example, if you obliged peopel to take part in collective groups to manage the chronic diseases of poverty: mental illness, hypertension, stress, obesity; you could point to a payback from the basic income in terms of current spending.

Next — actively promote the collaborative sector over the market and the state. The building block is the co-op, the credit union, the NGO, the non-profit company, the peer-to-peer lender and the purely voluntary or social enterprise.

Most local enterprise models say they want high-tech businesses, but they often accept monopoly pricing or massive subsidies to entice monopoly tech businesses. OK fine. But if you only replaced the wasteful creation of low-skill, low wage businesses with a preference for businesses with some aspect of collaboration or sharing, you would spark a major change.

You have to understand the benefits of these entities are not completely measurable in GDP terms.

You have to promote new ways of measuring activity and progress.

A simple metric would be: how many hours work is performed for the state (for wages based on taxation); the market (wages paid out of business turnover, including inside a traditional co-op or NGO); and how much is provided not for wages at all?

Later on we can try and evolve metrics that capture complex social effects.

Finally, understand and fight the battle over the externalities. Whether it is in the roll-out of a smart city project; or public health data; or transport planning — the data produced by networks has value to the state, the market and the non-market.

I would not proceed from the absolute principle that “the state owns all the data”; or all public data should be held in common. But the state and eventually the commons should have first rights to all the data just the same as in a republic it owns all the land.

The state should ensire that network data remains anoymous — and that its collection is non-detrimental to the human rights of citizens. But then the explotation of the data should be a matter for negotiation. If you need to incentivise the roll out of innovative new city-wide data technologies that could promote equality, cheapess and utility for all, maybe you make a deal over the data.

Ultimately, however, the greatest good comes from the common ownership and exploitation of data, because it establishes the principle that this vast new information resource — which is our collaborative behaviour captured as data — is part of the commons.

Suppose Barcelona did these things:

Brand itself as a city of commons and collaborative production

End privatisation

Massively reduce the cost of basic services like housing, transport, education and health so that being in the precariat became more survivable

Build an agent based, complex model of the economy, with real inputs, so that participatory democracy could model complex decisions

Prefer and promote collaborative organisations over both the centralised state and the market solutions

Institute a citizens basic income, conditional on some participation on non-profit activities

Decree that the networked data of the population as it uses public services is non-ownable.

Would capitalism collapse?

No. The desperate, frantic “survival capitalists” would go away — the rip-off consultancies; the low-wage businesses; the rent-extractors.

But you would attract the most innovative capitalists on earth, and you would make the city vastly more livable for the million-plus people who call it home.

All the other challenges would remain: the environmental challenge — not just low carbon but the preservation of quality living environments in a city sometimes deluged with visitors. Also the ageing challenge and the debt challenge.

The agenda I have outlined is not — and never can be — the sole ownership of the radical left. I think it can provide a common platform for the left, for social democracy and for liberal captialism.

I think people like me on the radical left were among the first to start talkign about it because the elite of neoliberalism is so bereft of imagination: this is the first elite in capitalist history that reacted to a crisis by doubling down on the model that does not work.

I don’t think the postcapitalist era will be scarred by competitive empires, as early capitalism was. You will know that Genoa came first, to be followed by Amsterdam to be followed by London.

Right now, in the world, there are hundreds of towns in freindly competition to become transition towns — avhieveing as close as possible zero carbon footprints and radically changing energy use.

I could be completely wrong. But if I am right, it makes sense for all cities to ask themselves: could we become the first city to begin a demonstrable and tangible transition away from neoliberal capitalism, towards a society of high equality, high wellbeing, high collaboration?

If you really don’t like the word post-captialist use something else — like the collaborative city, the city of participatory democracy, the networked city. Or the human city. But do it.