Paul Mason: Postcapitalism

Paul Mason‘s Postcapitalism consists of three parts: an analysis of today’s faltering capitalist economy; a theory of how it fits into the wider destiny of capitalism; and a proposed way forward – the transformation from capitalism to postcapitalism.

Analysis: Neoliberalism is Broken

In 2008, the capitalist machine ground to a stuttering halt, and we have not been able to restart its engine.

This is not to say that capitalism is dead: It still works for many of us, and it may well survive, but weakened, with the poor and the middle classes paying the price. But harsher economic conditions could lead to hard left and extreme right governments spreading across the West. And on top of this, we’ll have to deal with a number of other issues: terror, climate change and ecological collapse, migration, crime cartels.

Mason concludes that we need to create a sustainable global order and restore economic dynamism, or else, “the decades after 2050 will be chaos“.

In order to understand how we could pull ourselves out of this hole, we first need to understand how we got here: We need to look at what brought neoliberalism to its knees. (Not surprisingly, the same things that initially made it flourish …)

  1. Out-of-control central banks and unlimited money supply not backed by gold but just by believe.
  2. Banks and people living on credit and fictional money.
  3. Global trade imbalances, currently stabilized by the mutual US-Sino dependence, but with the looming threat of collapse.
  4. Information Technology. This is the one positive element – and our potential path to a postcapitalist society.

Theory: How Does This Crisis Fit into Capitalism’s Overall Destiny?

Paul Mason’s analysis in ten steps:

  1. Russian economist Nikolai Kondratieff described capitalist long waves: About 25 years of upswing, and 25 years of downswing, at the end of which capitalism is forced to mutate and transform through the invention of new technologies. (Stalin didn’t like the idea of capitalist transformations: He had Kondratieff assassinated.)
  2. Austrian economist Joseph Schumpeter developed this theory from a capitalist point of view; leaning on Kondratieff, he came up with the concept of business cycles. Today’s leading Schumpeterist Carlota Perez believes IT to be the next such innovation cycle. She urges states to support info-tech, biotech, green energy – and promises a golden age in the 2020s.
  3. But somehow the expected transformation has stalled in 2008. Mason turns to Karl Marx to understand what drives and limits mutations. And what he finds is, of course, the working classes. Mason writes: In each long cycle, the attack on wages and working class conditions at the start of the downswing is one of the clearest features of the pattern … Only when capital fails to drive down wages and when new business models are swamped by poor condition is the state force to act: to formalize new systems, reward new technologies, provide capital and protection for innovators … Long cycles are not produced by just technology plus economics, the third critical driver is class struggle. And it is in this context that Marx’s original theory of crisis provides a better understanding than Kondratieff’s exhausted investment theory.”
  4. But Marx failed to see that capitalism had a valve – the outside world. It can expand into other regions and business models to prolong business cycles before it’s forced to innovate and transform. Such an outside world opened up in 1989, when the fall of the Iron Curtain prolonged the business cycle that had started 1948. But this prolongation has now come to a halt – we’re facing the need for transformation.
  5. To grasp the potential transformation ahead, we need to understand two things: First of all, neoliberalism was first and foremost an attack on labour. The working classes today seem to have lost their power to enforce a transformation. Secondly, info goods are changing the face of capitalism. (Interestingly, Karl Marx kind of foresaw this info revolution; he wrote about it in a little-known text Grundrisse, mainly in a section called Fragments on Machines.)
  6. The thing about info goods is that they change capitalism through corroding price mechanism. Digital goods can be “copy-pasted”, and the marginal cost of creating unlimited copies are hence zero. This sucks physical goods into the zero price vortex (think about Nike, where brand is more important than the physical good).
  7. But today, corporations still wear capitalist glasses: they cling on to the old order and create monopolies. Where they fail at enforcing IP rights, they try to live within the gap of falling prices and expanding markets and supply. And they have found a new field of action: Exploit socially produced information.
  8. In this new environment, the standard economy-textbook explanation of how the value of goods is determined is failing. According to the marginal utility theory, prices are determined by the market’s willingness to pay. But in “an economy based on information, with its tendency to zero-cost products and weak property rights, cannot be a capitalist economy”. Markets are unwilling to pay for freely produced goods.
  9. Karl Marx labour theory of value (and price) on the other hand, although snubbed by today’s mainstream economists, seems to provide a better explanation of how prices could be set in a zero-marginal-cost economy. Marx’ theory states that a commodity’s value is determined by the average amount of labour hours needed to produce it – not actual hours but by the socially necessary hours. Marx talks about living labour and finished labour (a machine used to make another machine was made through labour as well). Profit is created at the workplace, not in the marketplace.
  10. So here we are: a world of free info goods, with a capitalist elite clinging on to the old way of thinking and marginal utility price-setting, and a working class whose power to enforce change has been atomized. But luckily, a new type of human has risen: the networked individual. Mason writes: “In the past twenty years, capitalism has mustered a new social force that will be its gravedigger, just as it assembled the factory proletariat in the nineteenth century. It is the networked individual who have camped in the city squares, blockaded the fracking sites, performed punk rock on the roofs of Russian cathedrals, raised defiant cans of beer in the face of Islamism on the grass of Gez Park, pulled a million people on the to streets of Rio and So Paulo and now organized mass strikes across southern China.”

Proposition: From Capitalism to Postcapitalism

Based on this analysis, Mason develops a vision for the way forward: the transformation from capitalism to postcapitalism. It’s not a step-by-step approach – he recognizes that human willpower (and ability to plan) is limited. Two professors – an economist and a computer scientist – who tried to describe a planned economy supported by modern computing – a cyber Soviet European Union if you will – have, according to Mason, failed to come up with a coherent plan.

The network doesn’t work according to a plan – it works according to principles. So what Mason provides us with is a vision board, a mixture of concrete suggestions and open ideas.

First he defines the key goals:

  1. Rapidly reduce carbon emissions.
  2. Stabilize the finance system between now and 2050 by socializing it.
  3. Deliver high levels of material prosperity and well-being to the majority of people, primarily by prioritizing information-rich technologies towards solving major social challenges.
  4. Gear technology towards an automated (no-work, low-work) economy.

Then he puts out a number of suggestions and ideas:

  1. Create a global institute or network for simulating the long-term transition beyond capitalism.
  2. Rethink the role of the state. Switch off the privatization machine, then reshape markets to favour sustainable, collaborative and socially just outcomes.
  3. Turn to collaborative business models. Corporations won’t do it themselves – legislation and regulation is needed, handing out strong employment rights to force the corporations to promote high-wage, high-growth, high-technology economic models. “It may sound radical to outlaw certain business models, but that’s what happened with slavery and child labour.”
  4. Provide key services at cost price: “The creation of monopolies to resist prices falling towards zero is capitalism’s most important defence reflex against postcapitalism. If true public provision of water, energy, housing, transport, healthcare, telecoms infrastructure and education was introduced into a neoliberal economy, it would feel like a revolution.”
  5. Let market forces disappear. “Once firms are forbidden to set monopoly prices, and a universal basic income is available, the market is actually the transmitter of the ‘zero marginal cost’ effect, which manifests as falling labour time across society.”
  6. Socialize the finance system. Nationalize the central bank, and introduce sustainability targets. This also includes a controlled debt write-down. “But the aim here is not to achieve some kind of mythical, steady state capitalism. The aim is to promote the transition to an economy where many things are free, and where returns on investment come in a mixture of money and non-monetary forms.”
  7. Pay everyone a basic income. [A first (failed) attempt at this was made in my home country this year.]
  8. And finally: Liberate the 1% from their unreal lives!

My view

Overall, an enlightening analysis of neoliberalism and how it fits into the wider picture of the history of capitalism.

There’s one major issue I have with Mason’s propositions: The role of the state. Plan Zero, as he calls it, would be feasible in a gone-by world of strong states and leaders. One would love to imagine a new Potsdam conference where the G7 decide upon things like creating a global institute for simulating the long-term transition beyond capitalism, legislation to counter market forces, and radically socializing the banking system – but somehow this sounds like a parallel-universe fantasy.

And isn’t there a contradiction? On the one hand Mason promotes a non-hierarchical world of networks and open source production, lead by principles not planning, while on the other hand we’d need to turn back time a few decades – to Potsdam, or even to the Vienna Congress – to a time when states and their leaders still had the power to create institutions, and even a new world order, from scratch.

And let’s not forget that much of today’s elite – capitalists and politicians alike – have little interest in transformation. Theresa May and Hillary Clinton represent the status quo – and their alternatives are called Trump, Corbyn or Sanders. Status quo warriors, populists, dogmatists, and demagogues. No forward-looking change leaders in sight. In Turkey it took a week to silence the voices for reform. Nobody is defiantly raising cans of beer in the face of Islamism on the grass of Gez Park anymore.

Nevertheless, Mason’s vision is an intriguing and positive one. But I don’t think it will be the states driving the change. If it’s to happen it will be piloted by Mason’s “networked individuals” and their thought leaders – it won’t by driven by, but happen despite of, Trump’s or Hillary’s government machine.

Lastly, I’d like to see Mason’s Postcapitalism challenged by the status-quo elite (who is the Cato Institute‘s smartest economist?), and by the non-dogmatic left (Yanis Varoufakis?).

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