ECONOMIES of INFINITE SUPPLY
‘The Zero Marginal Cost Society’, by Jeremy Rifkin
Review by Richard Waters / Financial Times / March 21, 2014
“Machines are about to change what it means to be human. According to social theorist Jeremy Rifkin, they will undermine our sense of private property, take away our jobs and turn us into free agents in a new global “sharing economy”. For good measure, they will also destroy capitalism before the middle of the 21st century. If you’re already thinking that The Zero Marginal Cost Society belongs to the genre of techno-futurism that resorts to extreme predictions to attract attention, then you’d be right. The value of this book, however, doesn’t lie in the accuracy of its specific forecasts, but rather in the extrapolations of current trends that enable Rifkin to reach them. On that measure, this is a thought-provoking read that pushes some of the most important new technologies to their logical – and sometimes scary – conclusions.
Take the machines that underpin the book’s central argument. They will be self-replicating, capable of producing their own spare parts and propagating themselves indefinitely. They will be powered by an alternative energy source like the sun, allowing them to run more or less forever. And they will be connected by the coming “internet of things”, a self-organising network that will allow them to operate as part of a new pervasive intelligent infrastructure. These machines will also be fully automatic and require no human labour to operate. As a result, they will throw off products at virtually no cost, save the minimal one of supplying the basic raw materials.
This gets to the heart of Rifkin’s argument. If the marginal cost of producing each additional item falls to essentially nothing, then everything becomes free. In their pursuit of profit, businesses will have irrevocably undermined their own margins: capitalism will have destroyed itself. But don’t despair. Rising in its place, Rifkin argues, will be a civilisation based on a new and more fulfilling communitarianism, free of the hang-ups that have characterised the materialistic individualism of the late capitalist age.
Though only 300 or so pages, this is sometimes a dense book. Besides detours into subjects such as the economic history of the human race from earliest times, there are sections that pack in extensive descriptions of some of the key technologies. They include 3D printing; open-source software; the internet of things; the sharing economy; the online courses that are reshaping education; and the artificial intelligence enabling machines to replace many types of human labour. An extensive bibliography shows that Rifkin has read widely and compressed the results into his latest tome – though, to be fair to his previous work, he has also written entire books himself on several of the themes that converge here. That makes this something of a grand unifying theory of his thinking over four decades.
Three of Rifkin’s predictions serve to illustrate both the breadth and the finality of his arguments. One is that the “sharing economy” (think letting out your spare room on Airbnb or summoning a car on Uber) will overthrow some of the biggest companies on the planet. It will only take between 10 and 30 per cent of a particular market to shift to these self-help networks, argues Rifkin, for the thin profit margins of giant companies to shrink to nothing.
A second prediction is that a decentralised network of alternative energy sources will replace the existing vertically integrated, carbon-based energy industry. It will be made up of “prosumers” generating their own power and networked together through a smart grid that routes power to where it is needed. By the middle of this century, says Rifkin, 80 per cent of electricity will be generated this way – an estimate he claims is conservative.
A third trend is the elimination of work, as the machines take over. According to Rifkin, workers – and the profitmaking companies that employ them – can look forward to one last hurrah. This will cover the 40-year period it takes to build the world’s smart, self-replicating infrastructure. After that, it will be the end of history for labour: apart from a few people needed to programme and monitor the machines, it’s all over for the wage slaves and salarymen.
This all sounds ominous. But Rifkin reaches an optimistic conclusion. He anticipates a world of plenty where individuals will lead more fulfilling lives than they do now, with their material wants taken care of and their days of toil at an end. Fulfilment, he argues, will come from building “social capital”. Freed from the need to earn a living, people will get closer to the things that really matter: collaborating – and empathising – with other people.
There are obvious quibbles to be had with much of this. One is that capitalism has proved pretty adaptable so far. When markets are commoditised and profits evaporate, capitalists have been good at either monopolising industries or finding new sources of value to build on top of the commoditised markets of the past. Just because, from the blinkered present, we can’t see what the markets of the future will be, it doesn’t mean they won’t exist.
A second quibble is with Rifkin’s assumptions about how human nature will change to accommodate the new realities he describes. After all, if everything is free, won’t that lead to an even greater materialism that wrecks the planet for good? The way Rifkin sees it, replacing scarcity with abundance will spell the death of materialism. When everything is in plentiful supply, why gather and hoard? Rather than outright ownership, the humans who populate his future will be content with access to material goods, many of which will be shared – just as they are already becoming accustomed to accessing digital goods in a world of infinite supply.
The millennial generation, as he sees it, is already hankering for this more collaborative, altruistic society. He also sees an automatic stabilisation that brings the human race into a permanent equilibrium with the planet. As living standards rise, birth rates in poorer parts of the world will fall: the global population will gradually fall back to a sustainable 5bn (though it isn’t clear why Rifkin picked this level). Alternative futures seem equally plausible. Wealth and income inequality could become more accentuated, as a winner-takes-all capitalism takes hold. The millions emerging from extreme poverty in developing countries could find themselves in a world of limited opportunity. The loss of employment may create a permanent – and growing – underclass. How we deal with the consequences is up to us.”
GLOBAL COLLABORATIVE COMMONS
by Jeremy Rifkin / June 6, 2014
“A new economic system is entering onto the world stage. The collaborative commons is the first new economic paradigm to take root in recent years and is allowing hundreds of millions of people to produce information, energy, and goods and services at near zero marginal cost and exchange them with each other in a sharing economy. Not surprisingly, the emergence of this new economic system is coming at a time of low growth, rising unemployment and greater inequality. The triggering agent that’s precipitating this great economic transformation is zero marginal cost. Marginal cost is the cost of producing an additional unit of a good or service after fixed costs have been absorbed.
The near zero marginal cost phenomenon wreaked havoc across the information-goods industries over the past decade as millions of consumers turned prosumers and began to produce and share their own music via file sharing services, their own videos on YouTube, their own knowledge on Wikipedia, their own news on social media and even their own free ebooks on the World Wide Web. The zero marginal cost phenomenon brought the music industry to its knees, shook the film industry, forced newspapers and magazines out of business, and crippled the book-publishing market. Meanwhile, 6 million students are now enrolled in free massive open online courses that operate at near zero marginal cost and are taught by some of the most distinguished professors in the world. They are receiving college credits, forcing universities to rethink their costly business model.
Now, a powerful new technology revolution is evolving that will allow millions — and soon hundreds of millions — of prosumers to also make and share their own renewable energy, and an increasing array of 3-D printed physical products and services, at near zero marginal cost. The communications Internet is converging with a fledgling energy Internet and nascent automated transport and logistics Internet, creating a new technological infrastructure for society that will fundamentally alter the global economy in the first half of the 21st century.
Billions of sensors are being attached to every device, appliance, machine and contrivance, connecting every thing with every human being in a seamless neural network that extends across the entire economic value chain. Already 14 billion sensors are attached to resource flows, warehouses, road systems, factory production lines, the electricity transmission grid, offices, homes, stores and vehicles, continually monitoring their status and performance and feeding big data back to the communication Internet, energy Internet and logistics and transportation Internet.
It is estimated that by 2030 more than 100 trillion sensors will connect the human and natural environment in a global distributed intelligent network. Business enterprises and prosumers will be able to connect to the Internet of Things and use big data and analytics to develop predictive algorithms that can speed efficiency, dramatically increase productivity, reduce the use of natural resources and lower the marginal cost of producing and distributing renewable energy and 3-D printed physical products to near zero. Then they will be able to share what they’ve made with others on a vast global collaborative commons, just as billions of prosumers now do with information goods.
Hundreds of millions of people are transferring bits and pieces of their economic life from conventional markets to the global collaborative commons. Forty percent of the U.S. population is already actively engaged in the collaborative sharing economy. Some 800,000 individuals in the U.S. are now using car-sharing services. Each car-share vehicle eliminates 15 personally owned cars. And millions of apartment dwellers and home owners are sharing their dwellings with millions of travelers, at near zero marginal cost around the world, via online services like Airbnb and Couchsurfing, weakening the traditional brick-and-mortar hotel industry.
In a zero marginal cost society, extreme productivity decreases the amount of information, energy, material resources, labor and logistics costs needed to produce and distribute economic goods and services, once fixed costs are absorbed. And the goods and services that are produced at near zero marginal cost are redistributed and shared over and over again on the collaborative commons, dramatically reducing the number of things sold, meaning fewer resources are used up and less global warming gases are emitted into the Earth’s atmosphere. The shift from the exchange economy in the conventional marketplace to the shareable economy on the collaborative commons offers the possibility of dramatically narrowing the income divide and democratizing the global economy in the first half of the 21st century.
Global companies, operating in the profit-driven capitalist marketplace, will likely remain far into the future, albeit in an increasingly streamlined role, primarily as an aggregator of network services and solutions, allowing them to flourish alongside the collaborative commons as powerful partners in the coming era. The capitalist market, however, will no longer be the exclusive arbiter of economic life. People are entering a world partially beyond markets where they are learning how to live together in an increasingly interdependent global collaborative commons.”
IRRIGATING the COMMONS