For Marx, meaningful change would only come about when the workers seized control of the means of production. In his day that meant land, factory machinery and transport networks. Were he around now, I think he would probably cast a tired eye over the left’s moral crusading on executive remuneration and welfare payments and look instead with enthusiasm to what is stirring in the economy.
It is already widely noted how rapid technological change is transferring the power to design and manufacture from large companies into the hands of individuals and small networks. Less noticed is the way that a similar transfer of power is happening for other business practices associated with the service sector as much as manufacturing.
Marketing, for example, no longer requires expensive advertising or marketing departments but can be done through a skillful use of peer-to-peer online networks. Distribution can be conducted immediately and cheaply if your product is intellectual content but even if you are selling something with a physical form then firms like Ebay and Amazon offer sophisticated distribution infrastructures. R&D no longer requires an office full of pointy-heads as there is a sea of free advice out on the web if you know how to access it. Even the mysteries of the finance department are opening up to individuals and networks with the rise of crowdfunding and other investment sites.
what started as a consumers’ revolution is becoming a workers’ revolution
I have characterised this as a shift towards ‘self-generated value’ because consumers are creating the things they value for themselves rather than relying on business to do it. However, the capacity provided by the internet to generate this value for yourself also means the tools are now available to generate value for others. Millions of people are now producing on-line content or using the internet to provide fundamental support to their off-line activities. And many of those millions are finding ways to make money from that value generating activity. In effect, what started as a consumers’ revolution is becoming a workers’ revolution as people increasingly produce things directly for customers rather than having to work for a company to do this.
What Marx got wrong
However, Marx was very wrong about two things which explains why this is not a revolution he would entirely recognise.
Firstly, he believed fundamentally in the labour theory of value: the notion that the value of any commodity is determined by the work that has gone into producing it. For him the reason workers should seize the means of production is so they can lay claim to the full value that they, and they alone, have created.
Over the years, it is an economic theory that has taken a very serious intellectual battering. Quite rightly as it turns out because the shifts we are seeing towards self-generated value are not being driven by Marx’s concerns. Instead they owe far more to a strong desire to participate directly in the production of value for oneself and for others. Put another way, what is driving this is an entrepreneurial and creative spirit to generate value not a campaigning spirit to seize value.
Secondly, Marx saw the means of production being seized only when the workers acted collectively as a class to do so. Again, this is a theory that has been beaten to a pulp both intellectually and in reality as class allegiance has dwindled along with the industrial sector which Marx and Engels studied so closely. So the means of production are not being seized by unions and workers’ communes but by individuals and loose networks of individuals.
For these reasons, today’s Marxists who have noticed this shift to self-generated value either regard it as unimportant or as something to be appropriated by the ‘working class movement’ and transformed into a collectivist phenomena.
A new battle for economic control
Marx might have been more intellectually adventurous than today’s Marxists
I’d like to think that Marx himself might have been more intellectually adventurous. I wonder if what he might see in its very earliest stages is a conflict not over control of the existing means of production as such but over the right to use a new means of production free of the constraints imposed by those who control the older means of production. This is closer to what happened in the sixteenth and seventeenth centuries as merchants and early industrialists battled to loosen the old feudal nobility’s grip on property and trading law which had been established when the main means of production was the land.
So today we see those making wide use of new technologies struggling against the laws that served the interests of those who run the more centralised and closed economy of public corporations and large companies. Hence the battles over intellectual property law which is raging most acutely in the creative industries. The rather fraught relationship in the US between banking regulators and crowdfunding sites. And the emerging tensions between the users of the on-line currency Bitcoin and state officials.
However, the question Marx may have asked himself given his radical concerns is not only whether those who are seizing, or more accurately, transforming the means of production will triumph but whether their new power will be shared widely when they do. In short, is this really the coming of a new age of democratised ownership and trade or is it simply one elite facing down another?
I saw two main strands to the RSA’s recent Generation Enterprise report written by Adam Lent, our Director of Programme. One charts the increase in entrepreneurialism among today’s generation of young people and analyses its causes and effects. This was explored both by the headlines that the report received in CityAM, Evening Standard and in the RSA Event with Madsen Pirie and Martha Lane Fox. I want to explore the other, Adam’s identification and analysis of the social effects of what he calls ‘self-generated value’. ‘What’s that?’ you might ask:
“in a growing number of areas, the consumer no longer has to rely on the insight of the entrepreneur to obtain value. Instead, the consumer can generate that value for him or herself. Think, for example, how the most potent source of detailed factual knowledge across the world is now an online encyclopaedia written by its readers.” (See my colleague’s blog for some well-known examples of where SGV has been applied in practice).
As Adam, says, the phenomenon has been identified before, and called pro-sumption (the merging of the production and consumption). But he goes on to say:
“What is truly revolutionary about the new worm-hole [caused by the creation of the internet] is not the collapse of the distinction between production and consumption per se but the new capacity of individuals to start generating value for themselves in ways which continue the capitalist trend towards the creation of ever greater value for millions of consumers.”
Though I will be reading Tapscott and Williams’ Macrowikinomics and Doc Searls’ The Intention Economy to find out more, I wanted to illustrate my initial understanding of this through some of the RSA Fellows’ ventures supported by RSA Catalyst in a few different areas of value-creation. In one sense, these examples don’t really do justice to what Adam is focusing on. His focus is on quite conventional products and services purchased in the private sphere (music and t-shirts) rather than any kind of service in the social sphere (personal education, food waste and care). Indeed, half the point was to show the value to society of improvements in private consumption. But I think hope these examples demonstrate the trends Adam identifies in the private sector to an audience from the public and third sectors, drawing on manufacturing and commercial expertise to deliver more effective undertakings explicitly for the public good.
Production of knowledge-based goods. Services like facebook and twitter offer blank slates upon which users inscribe their own value and meaning, together creating huge value for its participants.
- Omnifolio is building a service for users to track their traits, work experience, formal and, crucially, informal educational (such as books read, lectures attended). They hope resulting profiles will help people find, train for and better communicate one’s suitability to potential employers.
Pricing and distribution. Adam gives some examples of sites dedicated to getting consumers to club together to negotiate on price over a product the ‘crowd’ desires and how consumers now exert greater control over when their purchases are delivered.
- Plan Zheroes; rather than businesses throwing away and paying councils (sometimes by the tonne) to take good food to waste, this map makes it simple to find a charity nearby and organize to drop off surplus food to a local soup-kitchen, community group or food redistribution programme. Over 300 businesses have signed up so far. By giving the market small amounts of information about waste, participants are helping others provide a service that takes away the guilt of throwing away edible food at the end of the day.
Marketing. It may seem strange to see marketing as an integral part of creating value. But it is indeed since advertising can make low-value product look or feel valuable and that consumers are swamped with a huge variety of products and services, the difference between which is increasingly meaningless.
- Rate My Care; an online platform for rating social care providers, providing a resource for people unsure where they should residential to an elderly loved-one. As well as opening up marketing of particular services, these ventures also emphasise the need for consumers of services to give input into the re-design and improvement of the services.
The Generation Enterprise publication is a good read and the lecture a good listen. I hope it sparks ideas for a new solution for people to generate value for themselves. If it does this, feel free to throw your idea into the Catalyst programme.
The phrase “I shop therefore I am” is generally taken to be an indictment of the consumerist years that sprung up during the mid-80s. Made popular by the artist Barbara Kruger, it came to express in a few words the feeling among social commentators of the time that people’s identities were becoming increasingly defined by what they bought, not just what they did and believed.
Today, the feeling is still present in all political quarters: the right lament the profligacy of people who spend beyond their means, while the left criticise consumerism as a means of extracting value from those at the bottom of the ladder and of keeping them in tow to the dominant elite.
While there’s some measure of truth in all of this, it’s also the case that consumerism is beginning to take on a wholly different shape, in many cases as a powerful force for the creation of new value (see Adam Lent’s pamphlet on ‘self-generated value’ for more detail). Specifically here I’m referring to the way in which some acts of consumption are becoming blurred with – and are actually driving – acts typically classed as production.
Alvin Toffler and Don Tapscott famously used the term ‘prosumption’ a few years back to describe something similar, but what interests me is not the specific act (e.g. the consumer choosing the design of a t-shirt) but more the journey that people travel from sole consumers to active producers and the role that new consumption methods (e.g. hacking and ‘collaborative consumption’) play in this movement.
Does, for instance, the act of customising products like cards, clothes and food lead people to think more about what they could create themselves? Or does the ability to share existing assets like spare rooms and cars encourage people to think more entrepreneurially about what they could sell?
The below table spells out some initial thoughts about the different activities that might form this journey towards the creation of greater self-generated value (if it can even be described as a journey).
What creates economic growth? You might think this is one the economics profession had sown up decades ago but strangely not. Economists still struggle to explain precisely why we keep on producing things of greater value and they particularly struggle to explain why we have got so much better at doing this over the last 250 years.
Largely as a result of this problem there has been something of a mini-revival in recent years of an approach that places technological breakthroughs at the heart of our understanding of growth. It seems a better explanation of the rather messy and fitful way growth has alternately leapt forward and stalled over the last two and a half centuries than the more stately and calm progress one might expect from mainstream economic models.
One important aspect of this approach is a focus on so-called general purpose technologies (GPTs). These are the technological breakthroughs that can transform a whole economy because they can be applied in many different sectors. GPTs famously include things like steam power, electricity and ICT. These GPTs bring about revolutions in productivity that allow massive leaps forward in growth. Put simply we can produce lots more value at far less cost and, as a result, all (or most) of us get wealthier over time. In addition, new technologies allow the production of new commodities which create new markets stimulating demand and investment.
This huge growth potential has led to an intellectual hunt for the next or current GPT. This is hardly surprising at a time when many worry we may be trapped in a very long period of stagnation .
Although I did not set it out in these terms, I effectively argued in my pamphlet , published last week, that the interactive web is the new GPT. It seems self-evident to me that this is a technology radically transforming business processes in a wide variety of sectors.
However, I think the focus on the technology at the heart of such a transformation can be misleading. What really matters in all GPT revolutions is not the technology as much as the way the generation of value is transformed. What drove big shifts in production processes such as the mechanisation of the industrial revolution or the assembly line of mass production was ultimately the capacity of entrepreneurs to create much greater value - in the form of cheaper, higher quality and more bespoke goods - and for their customers to enjoy that value. GPTs have never been simply about a smart piece of new kit that drives up productivity, they are really just one piece of a much more complex shift in our understanding and use of value that encompasses business organisation, consumer behaviour, cultural expectations and even politics.
This is why in the pamphlet I suggested that the real shift being wrought by the interactive web is the rise of ‘self-generated value’ (SGV).
We can see this, for example, in the music industry. The cost of purchasing music has dropped but quality has also improved with MP3 technology delivered by the web providing a more reliable and better listening experience than previous formats. But the really important shift is the freedom consumers now have to directly shape products to meet their own very specific needs. That can be seen in the freedom available to consumers to download music when and where they want, to combine music into playlists, to determine touring locations and dates but perhaps most radically to make their own music and share it on-line with other consumers. In effect, the consumer has been empowered to shape aspects of the product on their own terms to add value to the commodity. It is this shift in behaviour, expectations and business practices that tells us what is meaningful about the current transformation rather than a focus purely on the IT side and the productivity gains it can provide.
If the interactive web and the associated SGV genuinely is the new general purpose technology then we need to start understanding it quickly. GPTs can be major motors of higher growth and living standards but economists have known for a long time that it can take many years for the full benefits to be felt. This is because GPTs are highly disruptive – companies which fail to employ them quickly or competently enough lose business, shed jobs and can go bust. It can also take some time for different sectors to fully understand how to apply new techniques associated with a GPT meaning that productivity can even drop in the early stages of adoption. So, working out how to ameliorate this short and medium term damage without weakening the longer term benefit will be, in my view, one of the big economic imperatives we face over the next few years.
We all know the drill by now: stubborn unemployment, huge deficits, stagnant growth, unstable Eurozone. Up close, things certainly look grim. Up close, particularly for those on the sharp end of this crisis, they certainly are. But sometimes it is worth taking a step back to get a sense of perspective.
A very big step as it happens. The last 250 years of economic development have been truly astounding. In that time, we’ve had recessions, depressions and financial collapses just as serious as the current affliction. In every case, however, the economy has not just bounced back but actually powered ever larger parts of the world to unforeseen improvements in living standards and quality of life.
Great statisticians like Angus Maddison have estimated that average real income per head has grown ten-fold in the last two and a half centuries. In the most advanced economies, it’s closer to a twenty times increase. All the more remarkable when you consider that throughout the whole of human existence prior to that incomes probably multiplied by no more than three times.
It is the innovation and entrepreneurial spirit kick-started by the Industrial Revolution that has driven this positive change. Great entrepreneurs like Richard Arkwright, Andrew Carnegie, Henry Ford and Eiji Toyoda came up with new ways of producing things that got consumers, investors and other entrepreneurs very excited. In effect, they gave a long-term stimulus to the global economy that would leave today’s benighted policy-makers drooling.
The good news is that far from this spirit of innovation and enterprise being dead or dormant, it is more alive and kicking than ever.
As I explain in a new pamphlet published today, a whole new exciting way of doing business is emerging. No longer do consumers have to rely on the entrepreneur’s often unreliable interpretation of their desires to get what they desire. Millions can now download products when, where and how they want them. Consumers now make their own stuff and share it on-line much to the chagrin of the creative industries. Marketing is increasingly led by consumer run networks.
This ‘self-generated value’ revolution is every bit as profound as the mass production and flexible production transformations launched by Ford and Toyoda.
But none of this means the entrepreneur is dead. In fact, a new wave of entrepreneurialism has been unleashed particularly amongst the younger generation who are most engaged with the web and its possibilities.
The reason is simple: if you can use the web to create things of value for yourself, you can also use it to create things of value for others. The very websites and networks that have given the consumer so much more power are also empowering entrepreneurs. As a result, product development, distribution, marketing and even financing have become much easier and cheaper.
Survey this vibrant shift and you begin to realise that the coming spirit of the age might not be debt and deprivation but entrepreneurial dynamism.
We shouldn’t be too surprised. This has happened before. Both Ford’s mass production and Toyoda’s flexible production played fundamental roles in delivering the long booms of the post-war period and the 1990s/2000s respectively. But much of the groundwork for their techniques was carried out during the economically troubled period between the wars and during the 1970s.
Joseph Schumpeter said that pessimism always appears more profound than optimism. So at the risk of appearing criminally shallow, maybe it is time to accept we will not only escape the current mess within the next few years but exit it, in fact, with rockets strapped to the back of our economy.