Wolfgang Hoeschele and the Economics of Abundance

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With the Escuela de los Commons (E2C) in Barcelona we have the pleasure and honour to invite prof. Wolfgang Hoeschele (Bios: Shareable, Truman University, P2P-F) for a session about Abundance Economics and the Economy of the Commons. Hoeschele teaches and does research at the Truman University in the US and is currently on tour through Europe. His message comes at an excellent timing. When mainstream politics and economists have hardly any interesting story or plan to “recover” or “restructure” our economies, and the word “crisis” is still all too much used, a vision for transitioning towards a sustainable economy and society based on freedom, equity and social justice is much needed.

The session is on Friday 3 August 2012, from 16:00-19:00 in Barcelona. Location: Vilaweb: C/Ferlandina 43. If you want to participate, subscribe to the E2C mailing list and let us know. More about the E2C: at P2P-F wiki, article in the Future of Occupy magazine.

Now let me intent to summarise Wolfgang Hoeschele’s book “The Economics of Abundance” – A Political Economy of Freedom, Equity and Sustainability. 2010. Published by Gower.
The creation of scarcity

In the first part of the book, Hoeschele addresses the production of scarcity. The mechanisms designed to create artificial scarcity he calls “scarcity generating institutions“. This concept proves a strong guide to analyse the root causes of social wrongs, or in his words: “the economic concept of scarcity as a window on the entire political economy of today”.

While mainstream economics defines economics as a science about the allocation of scarce resources, most resources are considered scarce in the light of unlimited human wants. Instead we can observe that human wants are in fact not unlimited, but capitalist institutions seek to continuously generate new forms of scarcity by creating ever new needs. “Once scarcity has been generated, it can be exploited to accumulate power and yield profit.” Scarcity is a means toward the end of profit maximisation. In order to counter this vision of the economy, Hoeschele brings together alternative approaches, which challenges the most basic current suppositions, and aims at putting an end to scarcity by creating abundance.

First of all we can take a critical look at human wants: instead of asking whether our needs are indeed unlimited, we could revise which wants are real needs. The multiplication of desires leads to unhappiness. “But contemporary economic discourse discourages from considering any methods to increase happiness that do not maximise consumption. Modern economic thought is the first system of thought to support the idea that greed is good, or at least that it is universal among our species, and that it can be used as a force for “progress”. While greed maybe widespread among our species, it is also a trait that makes it more difficult, if not impossible to be happy. The greedy person deludes herself into believing that acquiring the next thing will make her happy, and it is this very powerful delusion which is exploited by the forces that promote economic growth. The aim of this exploitation is not happiness, but profit, which is itself a delusion, because the greedy person grabbing the profit has come no nearer to happiness herself.”

About the radical monopoly of the car: once most people own a car and public transport is destroyed or limited, neighbourhood shops disappear because they cannot achieve the economies of scale enjoyed by the big stores that can attract customers from large distances. The downtown declines, because it becomes difficult to access, instead, suburban towns take over. After a point, it becomes impossible to reach many destinations without a car. In short, car ownership is enforced, even for people who must go into debt to buy a car. The same can be observed with mobile phones. Once most people own a mobile phone, those few who don’t, get isolated. Similar with Internet access. In many social contexts certain levels of consumption are considered obligatory in order to “belong”. Thus, constantly escalating consumption is enforced. This represents a loss of freedom for those people who either do not want to buy these things or cannot afford them. However, increased consumption is always represented as pure progress…

About the depletion and degradation of natural resources Hoeschele observes that fossil fuels have been treated as more abundant than renewable energy resources. They are however only “abundant” in the sense that, once they have been located, mined, and transported, very large quantities can be used at any given place and time. They are ultimately scarce, because they cannot be regenerated within a timescale relevant for human civilisation.

Scarcity can be generated in three ways: a) by reducing the total amount of a good or service ; b) by placing barriers between people and a good (a bottleneck), c) new wants or needs can be creaed, or existing ones modified, so that demand for a commodity exceeds supply.

Religion and ideology places barriers between people and spiritual development. They act as a bottleneck between people and their own peace of mind. Additionally, most religions and ideologies have created hierarchies, distinguishing people who are considered superior from those considered inferior. Privileging of men and subordination of women ranks surely as one of the most ancient forms of hierarchies in human society and create dependency releationships, and thus scarcity.

Some form of violence is involved in arguably all modes of scarcity generation. Oppressed people will resist if they can, which is however suppressed in many cases. The means of violence are controlled by a small group, constituting another “scarce” commodity: security.

About property: Hoeschele discusses public, private and common property and observes how unlimited wants in the West deplete fishing waters in other regions. At the same time, a commons, or common property, as governed by its own members can constitute a practical form of abundance, in the case of fishing, with fishing seasons and rules set to manage the fisheries despite the commercial pressures.

When private ownership is more or less equally distributed, a private property regime can lead to abundance. However “a highly unequal distribution of property allows for the emergence of monopolies and oligopolies. If only a few sellers (or a few buyers) dominate a market, they can create botllenecks and therefore scarcities for others by manipulating prices, and therefore secure extraordinary profits.” And that is what we see in many of the most profitable economic sectors.

As we have observed elsewhere, patents are one of the most used legal instruments to create oligoplies (see also Michel Boldrin and David Levine: Against Intellectual Monopoly). Hoeschele discusses the damage patents have caused by creating artificial scarcities in many industries. Initially he handles the issue of patents with caution, presenting it as a “two-edged sword: excessive patent protection will enable the creation of overly powerful monopolies that are extremely difficult to destroy, but insufficient patent protection would slow technological progress.” This is indeed the rationale behind patent rights as they were initially designed. However, in the Age of the Internet, innovation has shown to evolve much more rapidly when developers and inventors can freely build on the ideas of others, leading to dynamic, accelerated innovation. It has been argued by a growing numer of researchers that with the increasing complexity of high-tech products and production processes, one can easily infringe on an idea of others, and a legal minefield has grown, which tends to slow down innovation and leads to stark market concentrations. Cf. the mobile phone market or software. Software patents in particular have been fiercely resisted by small companies and civil society in Europe (FFII/software patents) and also in the USA, one of the few countries where software patents are instituted. As Hoeschele correctly points out: “more research may be needed to find out whether one’s own innovations violate some patent or copyright, than to develop the software itself”.

On a more critical note he points out the geography of scarcities, “..if patents either did not exist or provided far fewer privileges for patent-holders, it would be extremely difficult for any group of countries to retain a monopoly over the technologically advanced industries of the world, and hence it would not be necessary to discuss the “problem” of technology transfer. Far more people all over the world would be enabled to make use of new techologies, and technical knowledge would be used to empower rather than to control.”

Development: if the goal is to end poverty, it is primarily necessary to redistribute productive assets to the people who actualy use them (by such means as “land to the tiller” agrarian reform, for example) and to provide for comprehensive basic education and health care, deploying teachers, doctors and nurses from within the country who can be paid in local currency. This goal requires practically no foreign currency (as happened in Kerala, India). If the goal is to promote domestic industries geared towards producing affordable goods for ordinary people, a modest degree of protectionism plus a disregard of foreign patents will also be quite effective, while requiring little finance from abroad. Such policies will produce no miracles, but neither will they produce long-term debt dependency, nor require governments to be responsible to foreign sources of finance rather than to their own people.

Let us analyse the conditions for monetary transations in a market that can create abundance for all parties involved: a) both parties to the exchange must be free to withdraw from the exchange if they wish; b) both buyers and sellers have good information about the market and the goods offered, c) no outside force (such as a State) imposes prices or somehow manipulates supply and demand, d) there is little fraud, e) there are means available to resolve conflicts and enforce contracts. These conditions were first expressed for a “free market” by Adam Smith and were later further developed by many others. It is clear that in many actually existing markets these conditions are not fulfilled or not completely and they create scarcity for some of the participants. Or to put it more bluntly: no real free market has been observed ever. In the book “Markets not Capitalism” edited by Gary Chartier and Charles Johnson (book), the concept of the Freed Market is introduced, to signify a non-capitalist market that adheres to the above mentioned conditions. As markets can contribute, and have done so for millenia, to enhance the freedoms of its users to exchange their produce, maybe we should indeed talk about freed markets (or liberated markets) to avoid confusion with neoliberal “free market” discourse.

Is there an alternative?
TINA: “There Is No Alternative” was Margaret Thatcher’s slogan in the 1980’s (“es lo que hay” in Spanish, “that is what there is”). In other words, people believe there is no freedom of choice about how we are to organise our economy and society. We’re trapped in the belief that real change is not possible.

Paths towards Abundance
Hoeschele points out several important aspects of the path towards abundance. In order to escape from the cycle of ever new scarcity generation, we need to create abundance-generating institutions and break down or reform scarcity-generating institutions so that they work towards abundance generation.

First of all, we should adapt our lifestyle to want what we really want. In line with the degrowth movement, he suggests to change from consumerism towards “wholeness and the art of living”. While this may sound a spiritual exercise, it is clear that we can’t go on to always want more; as Maslow showed with his pyramid of human needs, after material needs are covered, we can focus on self-realisation. But this can only be realised if income and GNP are much better distributed. Both social democratic reformism and communist revolution tend to regard increasing equity of income distribution as a zero-sum game: resources need to be redistributed from the rich to the poor; the gains of the poor are the losses of the rich. In both ways, state intervention is needed, which by doing so, reduces individual freedom.

Wholeness, or “life as art” contrasts with “life as profit maximisation”, which depends on others failing to make profits, in a regime where the desire for “freedom” is played against the desire for social justice, while ignoring that any freedom that not be enjoyed by everybody at once is merely privilege.

Imagining a society that revolves around life as art, Hoeschele foresees public action to reduce scarcities to enable people to practice life as art, even if one has little income, and by ensuring that everyone has access to the resources they need. To show the changed attitute he mentions: “The phenomenon that ssome people cannot be happy even at a high level of material consumption will not be seen as a justification for more consumption, but rather as a pathology akin to alcoholism or overeating.” He calls them the “pleonexics” or “consumptives” (the ancient Greeks called this the “malaise of the soul” or pleonexia).

Civil Liberties
The first requirement for an abundant life is that all individuals are free to live life as art as they see fit. This requires strong foundations for the civil liberties and human rights, like freedom of expression and well, in short, the founding principles and values we defined for the Free Knowledge Institute: diversity, equity, solidarity, transparency, …

Resource-Use Rights
Resources can differ in several forms, like whether its usage depletes the resource, has no effect or improves it, whether it is renewable or not, whether a resource can be effectively managed in case it is divided into parcels or small or bigger lots, etc. Hoeschele has designed a flowchart that helps to choose the most suitable property regime for different cases, be it Open Access, with or without incentives to further expand the resource (e.g. medical research), Common property (e.g. air, water, oceanic fisheries), Common or State Property (e.g. petroleum), Local Common Property or Private Property (quarries, aquifers).

Stakeholder trusts
In line with the ideas of David Bollier and Peter Barnes (Capitalism 3.0), Hoeschele argues for a commons trust that owns and protects our air. “… keeping air to breathe as an open-access resource demands air pollution be strictly limited, at the cost of the polluters.” Barnes proposes the set up of a commons trust that owns all the air of a country. Each citizen owns a non-transferable share and is represented in the management. The trust would auction a set number of permits to pollute the air on an annual basis. Oil and coal companies would have to buy these permits and pass on the costs to the consumers. The revenue of the trust would be paid out to everyone equally, providing a kind of Basic Income. On the one hand such system would make it expensive to deplete or degrade natural resources, and on the other it would provide a basic income. The latter in turn could liberate the labour market in unprecedented ways, if the income from the shared ownership of the natural resources would be sufficient to survive on, assuring that individuals would be free to withdraw from the labour market either fully or partially, if they would prefer so.

Stakeholder trusts could also be set up for other common property resources, such as municipal water infrastructures. Such customer-owned corporations would have an interest in minimising costs and maximise efficient service provision. Public regulation would however still be needed, “to ensure that these water companies maintain river water quality, but there would be no need to regulate prices.”

Anti-trust and policies to favour small over big companies
This is one of my favourites: instead of helping the big organisations, we could reform certain policies and legislations to help the small companies by hindering the big ones. After all, market dominance is one of the core problems of actually existing markets, and reduces the freedom of all other participants. A company’s economy of scale is only of social benefit if it is forced by its competitors to pass on the benefits to consumers. Hoeschele suggests three techniques: 1) reduce barriers to entry for new competitors, while weakening other mechanisms that favour market concentration; 2) transfer scarcity-generating mechanisms from the control of the monopoly to the control of a public institution, and 3) deprive the company of the scarcity-derived profits (rents) after the fact.

He makes a case for Open Access in research and the avoidance or limitation of patents: “if governments insisted that results of publicly supported research be made part of the public domain and generally restricted the scope of patent potections, new technologies would become available to many more new and existing businesses.”

With respect to the third point, he suggests that inheritance laws could be modified in such way that passing on a company to its employees would be burdened with far fewer taxes than passing it on to the owner’s descendants. Taxation could also help to reduce the size of companies: to make near-monopolies pay higher taxes in the benefit of smaller competitors, “thus gradually leading to a deconcentration of the respective economic sectors.” “Simply reforming the policy environments so that they hinder, rather than facilitate, the creation of monopolies, could have major positive impacts.” We should revert the current “small is beautiful, big is subsidised.”

Reclaiming self-reliance and cooperation
The last chapter of the Economics of Abundance deals with cooperation. Hoeschele mentions local exchange and trading systems (LETS), parallel currencies and even a different monetary design, with negative interest, such as suggested by Silvio Gesell and Lietaer. Furthermore the Tobin Tax is discussed. But the big absent in the book is the forms of cooperation that have emerged through the Internet, in particular digital commons, based on free and copyleft licenses. I would have expected the abundance generating mechanisms so clearly observed in free knowledge, free software and free culture projects as one of the building blocks towards abundance. Futhermore the third mode of production, peer production, as extensively discussed by Michel Bauwens and Yochai Benkler. Other authors who inspired Hoeschele or gave him feedback include Roberto Verzola, Lawrence Lessig and David Bollier, all of which describe clearly the emergence of commons-based peer production and free knowledge communities. Hopefully this part of the equation is included in other (or future works). I would suggest the inclusion also of the free hardware movement and its potential for a commons-based industrial production, very much in line with the abundance economics.

For the rest it was a very good read and impressive list of references Wolfgang Hoeschele has integrated into a coherent and sensible vision for a more sustainable and freedom respecting future for the world population. Let us hope more people can work on making important parts of this vision a reality.

Note 1: about access to the book

Unfortunately the book is published under exclusive copyright, one of the scarcity generating institutions in the knowledge society, o irony! Furthermore the book is sold at a considerable high price. I managed to purchase a second hand copy. Other ways to access the book content is to browse the ebook online. If digital copies circulate, I’d be happy to keep one on my harddisk, let me know.

Note 2: about software and copyright:

Hoeschele suggests (page 154) that “copyright protections are being inappropriately applied to an increasing number of different areas, such as computer code that counts as “literary works”. He references the work of May and Sell for this. While I can agree that copyright protections are inappropriately extended to many different areas, the case of software is a very particular one. Indeed computer code is protected as work of authorship under existing copyright regimes. And while abolishing copyright (for software) would seemingly make all software Free Software, this is not necessarily so. As software is generally written in source code, which after compiling delivers an executable binary, distributing the binary would give us only access to run the programme, but not necessarily to the source code itself. In order to assure a thriving software commons, Free Software developers use licenses that guarantee access to precisely this. And the current copyright system is instrumental in making these licenses enforceable. This has been pointed out by Richard Stallman in his criticim on the Swedish Pirate Parties proposal to reduce copyright duration to 5 years.