[p2p-research] Seeds of a new growth cycle

[Michel Bauwens]

 Dear friends,

It's becoming clear to me that the next phase of my own p2p work is geared
towards a operational policy that can serve as a transitional program to a
new growth cycle.

The following is an early short synthesis, and of course reactions are
welcome,

Michel
<http://blog.p2pfoundation.net/debating-parecon-4-final-response-to-parecons-challenge-to-p2p-theory/2009/05/24>

Conditions for the next long wave <http://blog.p2pfoundation.net/?p=3234>
[image: photo of Michel Bauwens]Michel Bauwens
25th May 2009

 This is a somewhat more fleshed out version of my previous thoughts
<http://blog.p2pfoundation.net/the-next-long-wave-what-comes-next-after-the-current-meltdown/2009/05/15>on
the conditions for a next long wave.

*Text:*

This is a general presentation of the nature of the present crisis, and how
we can realistically expect a renewed period of growth, and on the role that
peer production can play in this process.

*The Nature of the Present Crisis*

My understanding of the present crisis is inspired by the works on long
waves by Kondratieff, and how it has been updated in particular by Carlota
Perez, in her work: Technological Revolutions and Financial Capital. This
work has recently been updated and re-interpreted by Badalian and
Krovorotov.

The essential understanding of these approaches that economic history can be
understood as a series of long waves of technological development, embedded
in a particular supportive institutional framework. These long waves
inevitably end up in crisis, in a Sudden System Shock, a sign that the old
framework is no longer operative.
These waves have a certain internal logic. A period of gestation, in which
the new technology is established, creates enthusiasm and bubbles, but
cannot really emerge because the institutional framework still reflects
older realities.

This is followed by a period of maturation, marked by institutional
adaptation, massive investment by the state, and productive investment by
business, leading to a new growth cycle.

Finally, this is followed by a period of relative decline, in which the
state retreats, business investments become parasitic, leading to a
contraction cycle with speculative financial bubbles, which ends in a Sudden
Systemic Shock (1797, 1847, 1893, 1929 or 2008).

To understand the current period, some dates are important:

- 1929 as the Sudden Systemic Shock of the previous period
- 1929-1945: gestation period of the new system
- 1945-1973: maturation period, the high days of the Fordist system based on
cheap domestic oil in the US
- 1973: inflationary oil shock, leading to outward globalization but also
speculative investment and the downward phase ending in the
- Sudden Systemic Shock of 2008

The important thing is this, every long wave of appr. 50-60 years has been
based on a combination of

1) *a new form of energy* (f.e. the UK domination was based on coal, the US
domination was based on oil); in the beginning of a new wave, the newly
dominant power has particular privileged access to a cheap domestic supply,
which funds its dominance; when that cheap supply dries up, a (inflationary)
crisis ensues, which forces that power outwards, to look for new supplies.
This results in both dynamic globalization, but also in the awakening of a
new periphery. This newly awakened periphery is the germ of a newly emergent
power for a new long wave.

2) *some radical technological innovations* (no more than 3 according to the
authors);

The 3 last ones were: 1830: Steam and railways • 1870: Heavy engineering •
1920: Automotive and mass production

3) *a new ‘hyperproductive’ way to ‘exploit the territory’*; This is where
land use comes in. In the last period: industrial agriculture and the ‘Green
Revolution’ where responsible for a hyperproductive (though ultimately
self-destructive) agriculture

4) *an appropriate financial system*: the new public companies, New Deal
type investments (such as the Marshall Plan) in the growth cycle phase,
morphing into the parasitic investments of casino capitalism in the second
phase. Importantly, Badalian and Krovorotov note that each new financial
system was more socialized than the previous one, for example the joint
stock company allowing a multitude of shareholders to invest.

5) *a particular social contract.* Here also, we can see waves of more
intensive ‘socialization’. For example, the Fordist social contract created
the mass consumer in the first phase, based on social peace with labour,
while in the second parasitic phase, the part going to worker’s was
drastically reduced, but replaced by a systemic indebtedness, leading to the
current Sudden System Shock.

6) As we mentioned above, *each wave has been dominated by a particular
great power* as well, and in the second phase of expansion, a new periphery
is awakened.

*Roots of the current crisis*

It is important not to forget the essential characteristics of the
contraction cycle:what enables growth in a first phase, becomes an
unproductive burden in the second declining phase of the wave.

If we review the 6 factors, it’s easy to see where the problems are:

1) *The era of abundant fossil fuels is coming to an end*; after Peak Oil,
oil is bound to become more and more expensive, making oil-based production
uneconomical

2) *The era of mass production, based on the car, requires a too heavy
environmental burden to be sustainable*

3) *Industrial agriculture destroys the very soils that it uses and is less
productive than smart organic agriculture*

4) *The financial system is broken and the $10 trillion bailout drains
productive investments towards unproductive parasitic investments*

5) *The Fordist social contract, broken in the 80s, has led to the increased
weakening of the Western middle class and a generalized precarity*, which no
longer functions after Sudden System Shock

6) The old dominant power, *the U.S. can no longer afford its dominance*,
and has awakened the periphery.

*Seeds of the new*

1) The technology for *renewable energ*y has been developed, but needs at
least $150b annual investments in the U.S. alone, in order to become
‘economic’. A Green New Deal would jumpstart the new energy era. The
wasteful heavy energy usage of the fossil fuel era will need to be replaced
by smart precision-based energy usage.

2) The era of mass production is ready to be replace by *more local
production in small series*, based on developments such as flexible and
rapid prototyping based manufacturing, mass customization, personal
fabrication and additive fabrication, multi-purpose machinery

3) *Post-industrial smart organic agriculture* has already proven more
productive than destructive industrial agriculture, but needs to be
generalized; land use needs to be re-expanded within cities where vertical
agriculture can be developed more intensively

4) The seeds of *the new financial system, based on increased socialization
towards civil society*, have been developed in the last few decades: 1)
sovereign wealth funds re-insert the public good in investment decisions; 2)
Islamic banking and similar mechanisms avoids the hyper-leveraging that
destroyed the Wall Street system; 3) microfinance broadens entrepreneurship
and financing to the ‘base of the pyramid’; 4) crowdfunding mechanisms,
social lending and various credit commons approaches expand the availability
of credit; 5) flow money approaches through a circulation charge to
discourage parasitic investments

5) The periphery of newly emergent countries has been awakened and will in
all likelihood lead to a dominance of the East-Asian region.

*Peer to peer and the new social contract*

A new long phase has been historically associated with an upsurge of the
role of the state and the public sector, which alone can undertake the
necessary investments which private investment cannot take up in the early
phases.

However, we need to be aware of one of the fundamental characteristics of
the new period, which is a revival of the role of civil society. The
internet has enabled the self-aggregation of civil society forces in the
creation of common value, i.e. to peer production. Global communities have
shown themselves capable to be hyperproductive in the creation of complex
knowledge products, free and open source software, and increasingly, open
design associated with distributed manufacturing.

This means that a hybrid form of production has arisen that combines the
existence of global self-managed open design communities, for-benefit
associations in the form of Foundations which manage the infrastructure of
cooperation, and an ecology of associated businesses which benefit and
contribute from this commons-based peer production. These companies, which
enable and empower the social production of value, have become the seeds for
the dominant companies of the future (Google, eBay, etc..). Companies will
need to open up to co-design and co-creation, while the distribution
(miniaturization) of the means of physical production, liberates the
possibilities for smaller more localized production units to play more
essential roles. We believe that the role of solely profit driven
multinational companies, without any roots in local communities, is reaching
its historical end, and will be replaced increasingly by new models of
entities combining profit with the realization of social and public goods.
Socially-conscious investment, sovereign wealth funds, micro-finance, social
entrepreneurship, fair trade and the emergence of for-benefit entities point
to this new institutional future of entrepreneurship. For the state form,
this means morphing from the welfare or neoliberal state models, to that of
the Partner State, which enables and empowers social production.

*The new social contract therefore will mean*:

1) Expanding entrepreneurship to civil society and the base of the pyramid

2) New institutions that do well by doing good

3) Social financing mechanisms based on peer to peer aggregation

4) Mechanisms that sustain social innovation (co-design, co-creation) and
peer production by civil society

5) Focus on more localized precision-based physical production in small
series, but linked to global open design communities


-- 
Working at http://en.wikipedia.org/wiki/Dhurakij_Pundit_University -
http://www.dpu.ac.th/dpuic/info/Research.html -
http://www.asianforesightinstitute.org/index.php/eng/The-AFI

Volunteering at the P2P Foundation:
http://p2pfoundation.net  - http://blog.p2pfoundation.net -
http://p2pfoundation.ning.com

Monitor updates at http://del.icio.us/mbauwens

The work of the P2P Foundation is supported by SHIFTN,
http://www.shiftn.com/
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