Alternatives To Traditional Market Economics

This past week I was in Portugal participating in the wonderfully imaginative Futureplaces. Portugal like many countries is currently imposing “austerity” measures on its citizens. Such measures are not unique to Portugal. Governments and financial leaders seem to have learned little from the recent global financial crisis. Post bailout the relentless pursuit for growth, GDP, and maximizing profit continue unabated. Imposing austerity measures on all citizens, including the poor, the elderly and those not well off when 40% of the worlds wealth is held by 1% of the worlds population seems like a recipe for rebellion.

And yet what alternatives are there to the traditional economy? Do open business models function in the same way as traditional business models or are they funadamentally different in some way?

Marjorie Kelly’s book Owning Our Future does a wonderful job depicting what she calls the “generative economy” as contrasted to the traditional “extractive economy”. Here’s what she has to say:

“Redesigning the models of ownership that form the base of our economy isn’t a mechanical, legal exercise. Ownership designs embody a worldview and a set of values. The dominant designs of our day are built around values of individualism, growth, and the pursuit of maximum financial wealth. An emerging ecological sensibility is shaping a new set of core values, such as sustainability, community, and sufficiency. This value shift creates the seedbed for new kinds of generative ownership and a profoundly new kind of economy. Instead of being rooted in the ethereal world of finance, this new economy finds fertile soil in the living earth and in human community. Some of the most compelling models embodying this new worldview are found in ownership of the commons.”

Her views are congruent with many of those expressed by Yochai Benkler at the Creative Commons Global Summit in Seoul Korea a couple of weeks ago. Yochai spoke of shifts from pure self interest to social motivations including robust systems of social exchange independent of market schemes. He spoke about people acting collectively to govern utilization of resources and the ethic of reciprocity. He noted that from a traditional market economy perspective Free Open Source Software, Firefox, and Wikipedia should be impossible and yet they exist and are successful. He observed that market based economies lose local knowledge and community based decision making.

Benkler suggests there are three kinds of commons:

1. The locally based natural resource commons (described in Elinor Ostroms work)

2. The digital information commons (enabled by Creative Commons)

3. The environment as a global commons (global warming being an example)

Marjorie Kelly’s work makes little reference to the digital information based commons or knowledge economy but I found her four broad categories of generative economy ownership design interesting to consider in the context of open business model designs:

Commons ownership and governance. Here assets are held or governed in common. The ocean, a forest, land, a park, a municipal power plant, is held or governed indivisbly by a community. Stakeholder ownership. This is ownership by people with a human stake in a private enterprise — as opposed to purely financial stake. It includes cooperatives, partnerships, credit unions, mutual insurance companies, employee-owned firms, and family-owned companies. But for these models to be generative, their purpose must be life serving (by which she means an economy that joins the interests of humans and the natural world). Social enterprises. These organizations have a primary social or environmental mission and use business methods to pursue it. They can be nonprofits, subsidiaries of nonprofits, or private businesses. Mission-controlled corporations. These are corporations with a strong social mission that are owned in conventional ways, yet they keep governing control in mission-oriented hands.They include the large foundation controlled companies common across northern Europe. A family or a trust can also be in control.

One form of new corporate model that has emerged is the “benefit corporation”. Benefit corporations have a broader purpose baked into their governing legal documents. Benefit corporations aim to benefit society and the environment in addition to their shareholders. This seems quite aligned to many Creative Commons based open businesses.

One form of the benefit corporation that seems to be gaining traction is the B Corporation. BCorps go through a private certification process that requires the company to declare a social purpose in their governing documents and to meet independent standards of social and environmental performance.

All of this provides me with considerable hope that there truly are alternatives to traditional market economics. It seems to me that open business models share a similar set of values and worldviews.

These alternatives provide a new lens through which to look at open business models. To what extent are existing open businesses using these new structures and practices? For startups wanting to be open businesses are these alternatives useful as possible structures they can adopt for their own governance and operation?