Postcapitalism – Mason

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Fucking beautiful.

Core Ideas

  • Neoliberalism is unsustainable.
  • Capitalism goes through 50 year “Kondratieff” cycles. The current one has stalled.
  • Information-technology has zero-marginal costs.
  • Non-market goods and services are taking over previous market niches.
  • Inequality is rising and unlikely to change if left unchecked.
  • The environment needs our urgent action.
  • The future will be non-market based, supported by a universal basic income.
  • Capitalism needs (and has always had) restraints to make it more moral.
  • Work and wages will be delinked, encouraging non-market contribution.
  • Renewable energy must become the dominant energy form.

The big three pressures

  • Climate – carbon emissions + renewable
  • Financial – debt + fiat money + financialisation
  • Demographics – ageing population + migration

Core ideas

  • Fiat money – is the move away from a gold standard and to floating international currencies where banks have the power to ‘create’ money (increase money supply) and governments have the ability to actually create money. This means money no longer represents value, but rather trust in a state.
  • Financialization – is the process of turning the general population into consumers of financial services that generate profits for the banks. As this sector grows, this becomes important as there is now a direct link between the wages of consumers and the profitability of the financial sector. Also however, Financialisation breaks the link between spending and saving in that previously all lending in the economy was a correlate of saving in the economy.
  • Kondratieff long-waves (cycles) – Kondratieff proposed a “long-wave” theory which describes 50 year cycles of GDP rise and fall. He said the waves were caused by the ****interplay between innovation, capital, and class struggle.
  • Crisis (or market failure) – can occur from overproduction, inadequate distribution of –wealth (between sectors or classes), or when the above balancing force (innovation – profit – prices) breaks down.
  • Reducing profits – One of Marx central ideas was that as capitalism searches for efficiency, it will create innovations raising profits, which once adopted across the industry will standardise and reduce profits. Over the long term capitalist production reduces profits and is always met with crisis when it can reduce no further.
  • Info-capitalism – the latest mutation of capitalism has been based on information technology which has zero-marginal costs. This disrupts the price-mechanism in market capitalism, and mason has argued, has caused the current long-wave cycle to stall.
  • Labour theory of value – states that the value of a good is based on how much labour went into creating it. Machines are dead-labour (the labour used to create them is stored in the machine) as opposed to living labour (humans operating the machine).
  • Marginal Utility theory – states that the price of a commodity is only as high as someone is willing to pay for it. There is no inherent value or profit. It is based on scarcity or commodities and money. That people only pay large amounts for things that are scarce, and that abundance will drive down prices. Zero-priced, zero-marginal cost goods break utility theory, but make sense in labour theory.
  • Surplus labour theory – is how Marx explained the source of profits. Workers price their labour based on how much it costs to sustain themselves, but their labour time applied to capital can create much more value. Hence the capitalist captures the difference as profit.
  • Scientific management –, as explored by Braverman in Labour and Monopoly, was about moving the “brain work” as far away as possible from the “manual work”. This stratified the working class skilled labourers into managers and manual unskilled labour.
  • National Socialism (nazism) – “The term “National Socialism” arose out of attempts to create a nationalist redefinition of “socialism”, as an alternative to both international socialism and free market capitalism. Nazism rejected the Marxist concept of class conflict, opposed cosmopolitan internationalism and sought to convince all parts of the new German society to subordinate their personal interests to the “common good”, accepting political interests as the main priority of economic organization.[4]” – Wiki

Notes

  • Fiat money is the move away from a gold standard and to floating international currencies where banks have the power to ‘create’ money (increase money supply) and governments have the ability to actually create money.
  • This means that money no longer represents value, but rather trust in a state.
  • Financialization is the process of turning the general population into consumers of financial services that generate profits for the banks. As this sector grows, this becomes important as there is now a direct link between the wages of consumers and the profitability of the financial sector.
  • FInancialisation breaks the link between spending and saving in that previously all lending in the economy was a correlate of saving in the economy. The more people save, the more banks could lend. This created a more stable economy. However now, when a bank lends money, the loan gets sold as a financial asset, meaning the bank can lend as much as possible and sell them off directly as financial assets. This creates a lending heavy economy.
  • Kondratieff proposed a “long-wave” theory which describes 50 year cycles of GDP rise and fall. He said the waves were caused by accumulation and distribution of capital.
  • As whole economies take advantage of mechanization, the advantage disapears and prices drop to their lowest possible level. This is a two way counterbalance on capitalist efficiency. Innovation increases profits, until innovation is widespread, at which point profits decrease, and innovation is again required to increase profits.
  • Above innovation can also include: taking advantage of class differences, sourcing cheap labour from overseas, oversupply of workers, etc.
  • Crisis (or market failure) can occur from overproduction, inadequate distribution of wealth (between sectors or classes), or when the above balancing force (innovation – profit – prices) breaks down.
  • The early 1900s was the era of monopolistic capitalism, protected by the state (state capitalism). Prices were set by the large companies, not the market.
  • One of Marx central ideas was that as capitalism searches for effeciency, it will create innovations raising profits, which once adopted across the industry will standardise and reduce profits. Over the long term capitalist production reduces profits and is always met with crisis when it can reduce no further.
  • Mason argues that Capitalism has inbuilt tendencies to reduce profits up to a certain point forcing new innovations and business models to be created, restarting the long-wave cycle.
  • Long-wave cycles are based on the interplay between innovation, capital, and class struggle.
  • The three ways to organise production are command structures (management), market forces (incentivise actions that lead to the right outcome), or non-market forces (modular collaboration, open source, etc).
  • In info-capitalism, measuring, capturing and benefiting from ‘externalities’ is everything.
  • Normal capitalist productions prices goods by the cost of their inputs (capital and labour), where as knowledge-capitalism cannot do this, the inputs are largely social (open source software, knowledge, etc) and the marginal costs close to zero.
  • In information-capitalism it is easier and more sustainable to boost productivity through knowledge increase than hour increase. Hence, knowledge-capitalism forces companies to ‘invest in the intellect of the worker’ as any increase in knowledge will result in increase of profit for the company.
  • Since “information capitalism” is based on information advantages gained by collecting “positive externalities” from your customers, it tends towards creating monopolies that can capture max externalities.
  • Question: How can you structure a team and work in a way that takes advantage of peer-to-peer collaboration. One that rewards contributions in some sort of fair model.
  • Labour theory of value states that the value of a good is based on how much labour went into creating it, however the market only loosely reflects this.
  • Labour theory of value, then supply and demand dictate prices.
  • Surplus value is the source of profit in capitalism – As a worker, I base my monthly pay of how much it costs to sustain myself plus a little extra. If it takes 30 hours of societies value to sustain myself (create my food, clothing, house, etc) but I work 60 hours, then the difference is surplus value, which the employer (capitalist) benefits from.
  • Profit is the exploitation of surplus labour value – finding applications of labour that can produce less than they cost to operate.
  • Surplus labour value applies to living labour as much as dead labour – If I can buy a machine that cost (labour value) 10K but can produce 20K worth of goods, then I gain the profit, but over time, the price of the good will reflect the new labour time. Hence over time profits reduce.
  • Marginal Utility theory states that the price of a commodity is only as high as someone is willing to pay for it. There is no inherent value or profit. It is based on scarcity or commodities and money. That people only pay large amounts for things that are scarce, and that abundance will drive down prices.
  • Mechanisation did not reduce skilled labour, it expanded it and made it more profitable. Skilled labour unions were effective in resisting the downwards pressure of capitalism.
  • Scientific management, as explored by Braverman, was about moving the “brain work” as far away as possible from the “manual work”. This stratified the working class skilled labourers into managers and manual unskilled labour.
  • Workers unions are about attempting to gain control; Nazism and facism during WWII was about completely removing that control.
  • National Socialism (nazism) – “The term “National Socialism” arose out of attempts to create a nationalist redefinition of “socialism”, as an alternative to both international socialism and free market capitalism. Nazism rejected the Marxist concept of class conflict, opposed cosmopolitan internationalism and sought to convince all parts of the new German society to subordinate their personal interests to the “common good”, accepting political interests as the main priority of economic organization.[4]” – Wiki
  • Post WW2 with the rise in living standard and pay of the white-collar workers, the working class no longer had the same unity and camaraderie to labour as the skilled labours pre-war did.
  • In socialist planned economies where money and prices do not exist, the only thing that can serve as a central “value” mechanism is labour.
  • While some may argue that a planned economy can mirror the price mechanisms and production distribution of a free market. To do so would be an immense task that would provide little value over the simpler solution (occums razor).
  • Transitions in modes of production (feudalism → capitalism) are not violent eruptions of new modes, but stagnation of an old mode which causes friction in the system allowing for the new mode to slowly develop.
  • The three externalities that are applying the most pressure to capitalism are: climate crisis, financial crisis (debt), demographics crisis (ageing population + migration).
  • Fucking beautiful.

Quotes

  • “That, in short, is the argument of this book: that capitalism is a complex, adaptive system which has reached the limits of its capacity to adapt.”
  • “Capitalism, it turns out, will not be abolished by forced-march techniques. It will be abolished by creating something more dynamic that exists,”
  • “In the popular version of economics, money is just a convenient means of exchange, invented because in early societies swapping a handful of potatoes for a raccoon skin was too random. In fact, as the anthropologist David Graeber has shown, there is no evidence that early human societies used barter, or that money emerged from it.26 They used something much more powerful. They used trust. Money is created by states and always has been; it is not something that exists independently of governments. Money is always the ‘promise to pay’ by a government. Its value is not reliant on the intrinsic worth of a metal; it is a measure of people’s trust in the permanence of the state.”
  • “The real problem with fiat money comes if, or when, this multilateral system falls apart. But that lies in the future. For now, what we know is that fiat money – when combined with free-market economics – is a machine for producing boom-and-bust cycles.”
  • “While paper money is unlimited, wages are real. You can go on creating money for ever but if a declining share of it flows to workers, and yet a growing part of profits is generated out of their mortgages and credit cards, you are eventually going to hit a wall. At some point, the expansion of financial profit through providing loans to stressed consumers will break, and snap back. That is exactly what happened when the US subprime mortgage bubble collapsed.”
  • “That illustrates another inherent problem with financialization: it breaks the link between lending and saving.”
  • “financialized societies, a banking crisis does not usually see the masses rush to take their money out – for the simple reason that they do not have much money in there to start with. It is banks that have money in the bank – i.e. in other banks – and, as we found in 2008, much of it is in the form of worthless paper.”
  • “Surveying the fall of the Netherlands as a trading empire in the seventeenth century, he wrote: ‘Every capitalist development of this order seems, by reaching the stage of financial capitalism, to have in some sense announced its maturity: it [is] a sign of autumn.’”
  • “The truth is, as finance has seeped into our daily lives, we are no longer slaves only to the machine, to the 9-to-5 routine, we’ve become slaves to interest payments. We no longer just generate profits for our bosses through our work, but also profits for financial middlemen through our borrowing. A single mum on benefits, forced into the world of payday loans and buying household goods on credit, can be generating a much higher profit rate for capital than an auto industry worker with a steady job.”
  • “Once every human being can generate a financial profit just by consuming – and the poorest can generate the most – a profound change begins in capitalism’s attitude to work.”
  • “The inevitable result of neoliberalism was the rise of so-called ‘global imbalances’ – in trade, saving and investment. For countries that smashed organized labour, offshored large parts of their productive industries and fuelled consumption with rising credit, the outcome was always going to be trade deficits, high government debts and instability in the financial sector.”
  • “Germany, China and Japan pursue what their critics call ‘neo-mercantilism’: manipulating their trade, investment and currency positions to accumulate a large pile of other countries’ cash.”
  • “The ‘network effect’ was first theorized by Bell Telephone boss Theodore Vail 100 years ago. Vail realized that networks create something extra, for free. In addition to utility for the user of a telephone and revenue for the owner, he noticed a third thing: the more people join the network, the more useful it becomes to everybody. The problem”
  • “that an information economy may not be compatible with a market economy”
  • “That, I will argue, is the root cause of the collapse, fibrillation and zombie state of neoliberalism. All the money created, all the velocity and momentum of finance built up during the last twenty-five years have to be set against the possibility that capitalism – a system based on markets, property ownership and exchange – cannot capture the ‘value’ generated by the new technology. In other words, it is increasingly evident that information goods conflict fundamentally with market mechanisms.”
  • “The most far-sighted among the global elite know this is the only answer: stabilization of fiat money, a retreat from financialization, and an end to the imbalances. But there are enormous social and political obstacles.”
  • “Industrial capitalism has gone through four long cycles, leading to a fifth whose takeoff has stalled:”
  • “At the centre of their disputes was the idea that human labour is the source of value and determines the average price of things. This is known as the ‘labour theory of value’, and in chapter 6 I will explain in detail how it helps us map the transition from capitalism to a non-market economy.”
  • “Marx identified the rise of finance as a more strategic counter-tendency: a proportion of investors begin to accept interest – rather than the outright entrepreneurial profit that comes from setting up a company and operating it – as the normal reward for owning large amounts of money.”
  • “In summary, Marx argued that crisis is the pressure valve for the system as a whole. It is a normal feature of capitalism and a product of its technological dynamism.”
  • “Finally, in volume III of Capital, Marx describes how financial crisis happens: credit becomes massively overextended, and then speculation and crime drive it to unsustainable limits where the bust inevitably overcorrects the boom – pushing the economy into a multi-year depression.”
  • “Luxemburg had ignored the fact that new markets are formed in a complex way, interactively, and that they can be created not only in colonies but within national economies, local sectors, people’s homes and indeed inside their brains.”
  • “The history of long cycles shows that only when capital fails to drive down wages and when new business models are swamped by poor conditions is the state forced to act: to formalize new systems, reward new technologies, provide capital and protection for innovators.”
  • “If the working class is able to resist wage cuts and attacks on the welfare system, the innovators are forced to search for new technologies and business models that can restore dynamism on the basis of higher wages – through innovation and higher productivity, not exploitation.”
  • “Long cycles are not produced by just technology plus economics, the third critical driver is class struggle.”
  • “The falling profit rate and its counteracting tendencies can be assumed to operate throughout the fifty-year cycle. Breakdowns happen when the counter-tendencies become exhausted.”
  • “Kondratieff’s account – which said that the fifty-year cycles were driven by the need to renew major infrastructure – was far too simplistic. Better to say each wave generates a specific and concrete solution to falling profit rates during the upswing – a set of business models, skills and technologies – and that the downswing starts when this solution becomes exhausted or disrupted.”
  • “Put simply: fifty-year cycles are the long-term rhythm of the profit system.”
  • “The long-wave pattern has been disrupted. The fourth long cycle was prolonged, distorted and ultimately broken by factors that have not occurred before in the history of capitalism: the defeat and moral surrender of organized labour, the rise of information technology and the discovery that once an unchallenged superpower exists, it can create money out of nothing for a long time.”
  • “Very little attention was paid to money. However, the crucial factor that underpinned economic reality in the 1950s and 60s was a stable international currency system, and the effective suppression of financial markets.”
  • “The neoliberals sought something different: atomization. Because today’s generation sees only the outcome of neoliberalism, it is easy to miss the fact that this goal – the destruction of labour’s bargaining power – was the essence of the entire project: it was a means to all the other ends. Neoliberalism’s guiding principle is not free markets, nor fiscal discipline, nor sound money, nor privatization and offshoring – not even globalization. All these things were byproducts or weapons of its main endeavour: to remove organized labour from the equation.”
  • “Unequal trade relationships forced much of Latin America, all of Africa and most of Asia to adopt development models that led to super-profits for Western companies and poverty at home.”
  • “It’s evident from this that much of the productivity boost from globalizing the workforce is over, and that the slowdown in growth in the emerging markets – from China to Brazil – is about to turn into a strategic problem.”
  • “‘The capacity to connect may be inborn and part of that mystery we call genius. But to a large extent to connect and thus raise the yield of existing knowledge, whether for an individual, for a team or for an entire organisation, is learnable.’”
  • “Drucker divides the history of industrial capitalism into four phases: a mechanical revolution lasting most of the nineteenth century; a productivity revolution with the advent of scientific management in the 1890s; a management revolution after 1945, driven by the application of knowledge to business processes; and finally an information revolution, based on ‘the application of knowledge to knowledge’.”
  • “Once you can copy and paste something, it can be reproduced for free. It has, in economics-speak, a ‘zero marginal cost’.”
  • “If you are trying to ‘own’ a piece of information – whether you’re a rock band or a turbofan manufacturer – your problem lies in the fact that it does not degrade with use, and that one person consuming it does not prevent another person consuming it.”
  • “The equilibrium state of an info-tech economy is one where monopolies dominate and people have unequal access to the information they need to make rational buying decisions. Info-tech, in short, destroys the normal price mechanism, whereby competition drives prices down towards the cost of production. A track on iTunes costs next to zero to store on Apple’s server, and next to zero to transmit to my computer. Whatever it cost the record company to produce (in terms of artist fees and marketing costs) it costs me 99p simply because it’s unlawful to copy it for free.”
  • “The interplay between supply and demand does not come into the price of an iTunes track: the supply of the Beatles ‘Love Me Do’ on iTunes is infinite. And, unlike with that of physical records, the price doesn’t change as demand fluctuates either. Apple’s absolute legal right to charge 99p is what sets the price.”
  • “The journalist David Warsh summed up its impact: The fundamental categories of economic analysis ceased to be, as they had been for two hundred years, land, labour and capital. This most elementary classification was supplanted by people, ideas and things … the familiar principle of scarcity had been augmented by the important principle of abundance.”
  • “For Romer’s research had shown that, once you move to an information economy, the market mechanism for setting prices will drive the marginal cost of certain goods, over time, towards zero – eroding profits in the process.”
  • “In short, information technology is corroding the normal operation of the price mechanism.”
  • “‘I prefer the term network economy, because information isn’t enough to explain the discontinuities we see. We have been awash in a steadily increasing tide of information for the past century … but only recently has a total reconfiguration of information itself shifted the whole economy.’ Kelly himself was no advocate of postcapitalism.”

sebastiankade

Sebastian Kade, Founder of Sumry and Author of Living Happiness, is a software designer and full-stack engineer. He writes thought-provoking articles every now and then on sebastiankade.com

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