For the convenience of those who have not read Kevin Carson’s “Industrial Policy,” a 2009 study commissioned by the Center for a Stateless Society, I have written a brief overview.

Carson’s thesis is that the existing capitalistic economy is a deliberate amalgamation of state-managed industrial policies meant to favor less-efficient centralized production infrastructures and that the removal of government privileges would promote the development of a self-organizing free market that, according to Brad Spangler, would “birth a ‘neotechnic’ economy of previously unmatched prosperity.”

The Unsustainability of the Existing System

Paraphrasing Einstein, you can’t solve a problem with the same thinking that caused the problem in the first place. Or as Ivan Illich said, the conventional solution is an “attempt to solve a crisis by escalation.”

Responsible and moderate solutions are those that are implemented through the current paradigm, according to statists. Any solution that challenges “the structural causes” will be labeled extreme. C. Wright Mils termed it “crackpot realism.”

The current system, as exemplified by GM’s Alfred Sloan, “is based on enormous market areas and costly, product-specific machinery,” which requires “large-batch production to utilize full capacity” that hinges on making people buying those products. It is commonly known as “supply-push distribution.” Goods are produced whether or not orders have been requested.

Existing state capitalism “has been plagued by chronic crises of overaccumulation and underconsumption,” Carson said, for well over 100 years since the 1890s, which accounts for the growth of government as a policy of “Open Door Imperialism” was pursued. Markets would be forcibly opened “to provide American industry with an outlet for excess goods and capital. Domestically, government resorted to Keynesian policies of aggregate demand management and redistribution of purchasing power, in order to mitigate the problem of underconsumption.”

The crisis that culminated in the 1930s was saved from self-destruction as WWII destroyed most of the developed world’s production capacity. After the war, the government provide additional subsidizes through construction of the Interstate Highway System and funding of research for products (such as jumbo jets and microelectronics) and guaranteed purchases from government.

The crisis the system faces currently is the diminishing availability of inputs available for government to absorb the wastes of overaccumulation and underconsumption.

The Seeds of the New System

For Carson, he envisions that the future economy will most likely consist of small-scale manufacturing that targets local markets. The closest living example of this exists in the Emilia-Romagna region, one of the wealthiest in Italy. Scaled, general-purpose machinery is used for craft production, switching between different product lines as needed. Products are produced as needed, so inventory costs are minimal.

The economy is more stable as there is no overproduction model of goods that has no relation to demand. This decentralized approach is made possible with the implementation of electrically powered machinery, which was a centerpiece of Peter Kropotkin’s “Fields, Factories and Workshops.” With electrical machinery, workers are able to bring the advantages of the workshop to the house.

Writing in the 1930s, Ralph Borsodi said, “the overall cost of manufacturing most light goods like food, textiles, and furniture in one’s home was actually lower than in the factory” because the electric motor made small-scale production possible on the same economic terms as large factories.

Once distribution costs are calculated, factory production is actually more expensive for the most part. Since the development of these “neotechnic” decentralized methods of production, their full impact have not been realized as they have been integrated to into the “paleotechnic” old-model modes of production.

Further distortions are kept in place through the “persistence of the corporate framework of marketing, finance and ‘intellectual property.’ ”

Carson gives some example of how intellectual property-based business models are being turned on their head. He cites how performing artist Radiohead distributes music for free, accepting donations for its work, and turns a greater profit by doing so. The cost of hosting the music online is about nill for every downloader, so any donation is almost pure profit.

Another legacy of intellectual property is planned obsolescence, where products are intentionally designed to fail or become unrepairable to the point that they must be replaced. The use of modular designs would encourage self-service and cheaper repairability.

Eric Hunter’s research suggests that emerging technology is making modularization possible “around common architectural platforms in order to compartmentalize and distribute development cost risk ….” The development of community workshops to repair appliances and other machinery could house privately owned tools, “providing work or a place for work for anyone in the locality who wanted to work …,” according to Colin Ward.

The same principle that allows for low-cost distributed peer-to-peer production in the software realm can be applied to the capital market, even where intensive investments are often required. Quoting Charles Johnson, “because of the way that peer production projects distribute their labor, peer-production entrepreneurs can also take advantage of spare cycles … So it’s not just a matter of cutting total aggregate costs for capital goods … small bits of available capital can be rounded up without the intervention of money-men and other intermediaries.”

Besides the obvious advantages of cutting government-laded administrative costs, low-overhead businesses can overcome economic downturns by having fewer fixed costs.

Carson then confronts the idea that large-scale production is necessary for a high standard of living. He argues that decentralized production could insulate a community from threats that a particular factory could relocate for the purpose of gaining special regulatory or tax privileges. By making entrepreneurship more accessible, the bargaining power of labor would also see drastic increases in influence and working conditions.

Pulling from Ralph Borsodi, who said, “Economic independence measurably improves your position as a seller of services. It replaces the present ‘buyer’s market for your services, in which the buyer dictates terms with a ‘seller’s market,’ in which you dictate terms.”

What Stands in the Way

The problem with implementing many of the self-organizing business models discussed is obvious. They are illegal in most cases. “You can’t do just a few thousand dollars worth of business a year, because the state mandates capital equipment on the sale required for a large-scale business if you engage in any business at all.” Government controls have the effect of artificiality mandating exorbitant overhead costs, which is not an accident, Carson believes. “The main function of licensing and regulations is to impose high minimum levels of capitalization, so that people are unable to meet a major part of their subsistence …” and thus have little option but to work for existing capitalists.

A transition from the existing economic model to a modern decentralized economy is inevitable, Carson said, as the status quo is unsustainable. The question of how disorientating the shift will be is whether politicians and government managers remove obstacles to progress or continue “to prop up the current systems until it’s too late to avert catastrophe.”

Carson’s preferred priority would be to remove transportation and utility subsidizes, which encourage “sprawl and monoculture.” Eliminating intellectual property laws would further reduce the barriers to competition and allow for low-cost production. As for taxes, Carson believes that depreciation allowances and interest deduction entrench capital-intensive modes of production.

One of the most important lessons to take away from this study is how diversified economies have greater protection from widespread economic downturns. More recent Center for a Stateless Society studies include examinations of the health care industry, intellectual property and labor rights.