Will Capitalism Survive “Value Abundance”?

Editor’s Note: The article below is a reaction to the previous article by Christopher Land and Steffen Böhm, which first appeared on OOWBlog as part of our panel on Facebook.  This follow-up to Chris and Steffen’s piece, by Michel Bauwens, first appeared on Al Jazeera’s website under the title The $100bn Facebook Question: Will Capitalism Survive “Value Abundance? He has also published a second follow-up on Al Jazeera titled ‘Occupy’ as a business model: The emerging open-source civilization. Bauwens, whose full bio can be found here, is an active blogger for the Peer 2 Peer Foundation.

Does Facebook exploit its users, and where is the $100 billion in estimated value coming from?

This is not a new debate, and it resurfaces regularly in the blogosphere and academic circles evern since Tiziana Terranova coined the term “Free Labor”¹ to indicate a new form of capitalist exploitation of unpaid labor, first of the viewers of classic broadcast media, and now of the new generation of social media participants like Facebook. The argument can be summarized very succinctly by the catch phrase, “if it’s free, then you are the product being sold”.

It was recently relaunched by an often retweeted article by University of Essex academics Christopher Land and Steffen Böehm in their piece: “They are exploiting us! Why we all work for Facebook for free.²”  In this mini-essay, they make the very strong claim that “we can certainly position the users of Facebook as laborers. If labor is understood as ‘value producing activity’, then updating your status, liking a website, or ‘friending’ someone, creates Facebook’s basic commodity.”

In our opinion this is quite misleading because it conflates two types of value creation, that were already recognized as distinct by 18^th political economists. This distinction is of course that between use value and exchange value. For thousands of years, under conditions of non-capitalist production, the majority of the working population directly produced ‘use value’ either for themselves as subsistence farmers, or as tributes to the managerial class of the day. It is only under capitalism that a majority of the working population produces ‘exchange value’ by selling their labour to firms. And the difference between what we are paid and what the market bears for the products we are making is indeed the ‘surplus value’.

But Facebook users are not worker producing commodities working for a wage, and Facebook is not selling these commodities on a market to create ‘surplus value’.

Indeed, Facebook users are NOT directly creating exchange value at all, but instead communicative use value. And in open source peer production and open hardware production contributors are directly creating use value. What Facebook does is to enable this pooling of sharing and collaboration around their platform, and by enabling, framing and ‘controlling’ that activity, they create a pool of attention. It is this pool of attention which is sold to advertisers, for an estimated $3.2 billion per year³, which is barely $3.79 in ad revenue per user. We can of course argue that Facebook does a lot more than just selling the attention, and their knowledge of our our social behaviour, down to the individual level, has undoubted strategic value, for political power players and commercial firms alike. But is this surplus value really worth $100 billion? That remains a speculative bet. For the moment, it is most likely that the nearly 1 billion users of Facebook do not find $3.79 very exploitative, especially since they do not pay for it and are there as volunttary (though there is a price to pay for non-participation, in terms of relative social isolation from their peers who are on Facebook).

What is important however is that Facebook is not an isolated phenomenon, but part of a much larger trend in our society: an exponential rise in the creation of user value by productive publics, or “produsers”⁴ as Axel Bruns calls them. It is important to understand that this creates a huge problem for a capitalist system, but also for workers as we have traditionally conceived them. Markets are defined as ways to allocate scarce resources and capitalism is in fact not just a scarcity ‘allocation’ system but in reality a scarcity engineering system, which can only accumulate capital by constantly reproducing and expanding conditions of scarcity. Where there is no tension between supply and demand, their can be no market, and no capital accumulation. What peer producers are doing, for now mostly in the sphere of ‘immaterial’ production of knowledge, software, and design, is to create an abundance of easily reproduced information and actionable knowledge, that cannot be directly translated into market value, because it is not at all scarce, but on the contrary, over-abundant. And this activity is moreover done by knowledge workers, who are now being produced on such a massive scale, that their over-supply also renders them into precarious workers. Hence, an increased exodus of productive capacities, in the form of direct use value production, outside the existing system of monetization, which only operates at its margins. In the past, whenever such an exodus occurs, of slaves in the decaying Roman empire, or of serfs in the waning Middle Ages, that is precisely time when the conditions were set for huge and fundamental societal and economic phase transitions.

Indeed, without a core reliance of capital, commodities and labor, it is hard to imagine a continuation of the capitalist system.

The problem of the use value creation that internet collaboration has enabled is that it totally bypasses this normal functioning. The normal functioning of our economic system would require that increases in productivity are somehow rewarded and that these rewards enable consumers to derive an income and buy products. But this is no longer happening. Facebook and Google users create commercial value for their platforms, but only very indirectly and they are not at all rewarded for their own value creation. Since what they are creating is not what is commodified on the market for scarce goods, there is no return of income for these value creators. This means that social media platforms are exposing an important fault line in our system.

We have to link this emerging social economy, based on sharing creative expression, with the more authentic field of commons-oriented peer production, as expressed in the open source and ‘fair use’ open content economy, already estimated to be one sixth of U.S. GDP⁵. (and there is also no doubt that one of the key ingredients of China’s success so far has been the combination of the open-source like domestic Shanzai economy⁶ together with the patent-free policies that are imposed on foreign investors,which has guaranteed a nearly open shared innovation commons for the totality of Chinese industry).

Even as the open source economy becomes the default way to create software, and even as it creates companies that reach a turnover of $1b such as Red Hat, the overall effect is still deflationary. It has been estimated that open source annually destroys $60b in revenues for the proprietary sector⁷.

Thus, the open source economy destroys more proprietary software value that it replaces. So even as it creates an explosion of use value, its monetary value decreases.

The same effects can be seen to develop as the shared innovation commons approach (no use of IP restrictions through open soruce licensing of the designs) moves to the field of physical production, where it combines the open source approach to human production, with distributed machinery and capital allocation (already through crowdfunding and social lending platforms, but soon, through equity-based crowdfunding as well). For example, the Wikispeed SGT01, the 100 mile per gallon car that was developed by a team of volunteers in just three months, and achieved a five star security rating, is being sold for only $29,000, about a quarter of what a classic industrial automobile firm would charge, and for which it would have needed at least five years of development and billions of dollars. Local Motors, the fastest growing (crowdsourced) car company in the world, could already claim to develop five times faster than Detroit, with 100 times less capital, but WikiSpeed has achieved even faster design and production times. The WikiSpeed car is designed for modularity using software development techniques (agile, scrum, extreme programming), an open design, and local production by garages using additive manufacturing, desktop CNC milling, and other distributed manufacturing techniques, The $100 million turnover, Arduino open source circuit board economy already functions that way, and has the same effects on deflating prices in their sector. If Marcin Jakubowsky’s Open Source Ecology is successful, this will happen for at least 40 different types of crucial machinery. In every field where an open source manufacturing alternative will develop, and I predict that they will be developed in every single field, there will be similar pricing and income pressures on mainstream economic models.

Another expression of the sharing economy is collaborative consumption. As Rachel Botsman (What’s Mine is Yours) and Lisa Gansky (The Mesh) have demonstrated in their recent books, there is a rapidly growing sharing economy developing through product-service system, sharing marketplaces, and collaborative lifestyles. For example, there are 460 million homes in the developed world, with on average $3,000 worth of unused items available. Yes, there is an economic promise in re-using all these idle resources, but a lot of it will not be rented, but swapped and bartered for free in communities, and even the paid sharing economy will have a depressing effect on the buying of new products. Such developments are good for the planet, and good for humanity, but the larger question is: are they good for capitalism?

Indeed, what will happen with capitalism in the context of increased social media based exchanges, commons-based peer production of software and hardware, and collaborative consumption, on an increasingly massive scale?

What happens if more and more of our time goes into the production of use value, a fraction of which creates monetary value, but there is no massive return of income to the use value producers? In fact, far from diminishing the enthusiasm for sharing and peer production, the 2008 crisis and its after-effects in in fact accelerating the adoption of such practices. This is not just a problem for the increasingly precarious working population, but also for capitali itself, which sees its venues for accumulation and expansion dry up. Thus, faced with the crisis of extensive globalisation which is expressed as a global resource crisis, is added a crisis of ‘intensive’ development, because of social justice issues of increasingly income-less value creators. The knowledge economy turns out to be a pipe dream, because what is abundant cannot sustain market dynamics

Thus we have a continuing and exponential rise in the creation of use value, but only a linear increase in the creation of monetary value. If workers have less and less income, and are more and more precarious, who can buy the commodities that are offered for sale by companies.? This in a nutshell, is the crisis of value that we are facing as humanity, and it is a challenge that is just as big as climate change or the increases in social inequality in the mainstream capitalist economy.

We would argue that the meltdown of 2008 was already a prefiguration of this crisis. Since the advent of neoliberalism, wages of workers have been stagnating, and purchasing power was only maintained by an over-extension of credit throughout society. This phase was characteristic of the first phase of the knowledge economy, where only capital had access to networks, which it used to create globally coordinated multinationals.

As the knowledge society grew in size, more and more of the value of an enterprise was deemed to be immaterial (material assets representing on average about 20% of estimated value). The neoliberal stock market, and its speculative excesses can be seen as a way to evaluate the immaterial value that is added to the material stock by human cooperation, and this bubble had to burst.

The second phase of the knowledge society, where networks are diffused throughout society and allow productive publics to be directly engaged in peer production, created an additional layer of problems. Add to the wage stagnation the exodus out of commodity production and wage labour that peer-based use value creation represents, and we can see that the problem is not solvable within the present paradigm. Is there a solution? We believe there is, but that is for the next installment. The solution involves both a significant adaptation of capitalism to the potential of peer production, but also opens up the avenues of its transcendence.