Curated by: Luigi Canali De Rossi

Saturday, September 22, 2007

Successful Economies Require Successful Societies:The Wealth of Nations vs. The Wealth of Networks

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"It seems passé today to speak of "the Internet revolution". In some academic circles, it is positively naïve.

But it should not be.

The change brought about by the networked information environment is deep. It is structural. It goes to the very foundations of how liberal markets and liberal democracies have co-evolved for almost two centuries."

Photo credit: Kiyoshi Takahase Segundo

In 1776 a man called Adam Smith published The Wealth of Nations, a great essay that is considered to be the first modern work in the field of economics, and which made him enter history as the father of political economy and classical liberalism theories.

A couple of centuries 2006, Professor Yochai Benkler wrote The Wealth of Networks,a book defined by some as " indispensable guide to the political economy of our digitally networked world".

Media analyst and writer Alan Moore, analyzes the progressive disruption of traditional economic dogmas caused by digital revolution.

Though a good economic background may help you understand better the issues discussed here, Mr. Moore makes a great effort in trying to simplify a difficult topic while bringing to you selected thoughts and ideas from other economic commentators. His article here offers you a few key starting point for asking valuable questions about our present society and economic approaches.

Intro by Mirco Martinelli

The Wealth of Nations vs. The Wealth of Networks

by Alan Moore

Capitalism brought us energy, light, water and sanitation etc., it released us from natures hegemony over us.

But the sad thing is that the industrial revolution, mass media and mass consumption meant that companies in the end were not really developing capitalism for the true benefit of society, it was developing its machinery to feed shareholders pockets.

Just look at banking. Sean O'Grady writing in the Independent says:

" The British Bankers' Association dismisses the estimates of the amounts they will have to repay to their overcharged customers as "totted up on the back of a fag packet".

Such language betrays the very arrogance that has left them in this predicament. Even if the upper estimates of the sums involved are seen to be inflated, the banks will still have to return hundreds of millions of pounds.

This is unprecedented.

It is a sign that consumerism has come of age. It has done so, most unexpectedly, with the aid of a technology that was supposed to be atomising society.

Instead, the internet has given campaigning groups the sort of access to their constituency that was difficult before.

Even successful class actions, from the thalidomide case to moves against the tobacco giants, have suffered from an inability to organise and act quickly. The internet has changed all that.

We've seen similar activity in American politics, and we've witnessed the way it has revolutionised the availability of information. Now we know it can help us humble some of the biggest corporate beasts in the jungle.

Who's next? The boards of directors of fast-food firms, the big supermarket chains, every oil company and every airline will have to adjust to this emerging world.

If the internet helps consumers to break some of that exploitative pricing power, it will prove to be a far more powerful creator of wealth and happiness than we have yet thought possible."

Its an interesting point as being a fan of Yochai Benkler, perhaps we are in a process of radically redefining "consumers" (that's us) relationship with companies, organisations and institutions.

"Today we live in a networked society. Digital information technology, the economics of networked information production and the social practices of networked conversations, qualitatively change the role that individuals can play in cultural and knowledge production and dissemination.

Enabled by technological change, we are beginning to see a series of economic, social, and cultural adaptations that make possible a radical transformation of how we make the information environment we occupy as autonomous individuals, citizens, and members of cultural and social groups.

It seems passé today to speak of "the Internet revolution". In some academic circles, it is positively naïve.

But it should not be.

The change brought about by the networked information environment is deep. It is structural. It goes to the very foundations of how liberal markets and liberal democracies have co-evolved for almost two centuries."

And that may not be a bad thing if you subscribe to George Monbiot's treatise about a cabal of intellectuals and elitists hijacking the economic debate. How the neoliberals stitched up the wealth of nations for themselves - Benkler has his critics, but I believe that he is part of a much wider piece of research which cannot be ignored.

Monbiot salvoes:

"For the first time the UK's consumer debt exceeds the total of its gross national product: a new report shows that we owe £1.35 trillion. Inspectors in the United States have discovered that 77,000 road bridges are in the same perilous state as the one which collapsed into the Mississippi.

Two years after Hurricane Katrina struck, 120,000 people from New Orleans are still living in trailer homes and temporary lodgings. As runaway climate change approaches, governments refuse to take the necessary action.

Booming inequality threatens to create the most divided societies the world has seen since before the first world war.

Now a financial crisis caused by unregulated lending could turf hundreds of thousands out of their homes and trigger a cascade of economic troubles."

Monbiot gives us a history lesson:

"When the Mont Pelerin Society first met, in 1947, its political project did not have a name. But it knew where it was going.

The society's founder, Friedrich von Hayek, remarked that the battle for ideas would take at least a generation to win, but he knew that his intellectual army would attract powerful backers.

His philosophy, which later came to be known as neoliberalism, accorded with the interests of the ultra-rich, so the ultra-rich would pay for it.

Neoliberalism claims that we are best served by maximum market freedom and minimum intervention by the state.

The role of government should be confined to creating and defending markets, protecting private property and defending the realm. All other functions are better discharged by private enterprise, which will be prompted by the profit motive to supply essential services.

By these means, enterprise is liberated, rational decisions are made and citizens are freed from the dehumanising hand of the state.

And the net gain of all of this?

"This, at any rate, is the theory.

But as David Harvey proposes in his book A Brief History of Neoliberalism wherever the neoliberal programme has been implemented, it has caused a massive shift of wealth not just to the top 1%, but to the top tenth of the top 1%.

In the US, for instance, the upper 0.1% has already regained the position it held at the beginning of the 1920s.

The conditions that neoliberalism demands in order to free human beings from the slavery of the state - minimal taxes, the dismantling of public services and social security, deregulation, the breaking of the unions - just happen to be the conditions required to make the elite even richer, while leaving everyone else to sink or swim.

In practice the philosophy developed at Mont Pelerin is little but an elaborate disguise for a wealth grab.""

It sounds extreme, and it is. Monbiot rarely walks the middle ground. It is radical stuff.

But just look at the above story about UK banks. No wonder we are trying to get companies back in line. Its profits first/first/first and customers come a very poor second. Companies are from Mars and Customers are from Venus is not just a light hearted quip.

Yet it was The Economist back in 2005 that claimed:

"Many firms do not yet seem aware of the revolutionary implications of newly empowered consumers.

Only those firms ready and able to serve these new customers will survive."

Yet, gatekeepers rarely give up their wealth easily.

Monbiot presses on:

"But the most powerful promoter of this programme (neoliberalism) was the media. Most of it is owned by multimillionaires who use it to project the ideas that support their interests.

Those ideas which threaten their interests are either ignored or ridiculed.

It is through the newspapers and TV channels that the socially destructive notions of a small group of extremists have come to look like common sense.

The corporations' tame thinkers sell the project by reframing our political language (for an account of how this happens, see George Lakoff's book, Don't Think of an Elephant!)."

So is it the Wealth of Nations vs. the Wealth of Networks? And where does that take us?

In the US we see a transformation in political campaigning and, ultimately will those 0.1% be prepared to give up their wealth?

Today Will Hutton asked the question What price the life of a British Soldier?

"Diane Dernie's son, Ben Parkinson, lost both his legs in Afghanistan. Last week, she decided to challenge the Ministry of Defence's award of a mere £152,000 as compensation as an impossibly small amount to pay for a lifetime of decent care.

The same day, we learned that the average pay for Britain's leading chief executives had risen by 37 per cent to £2.85m. I can imagine no more eloquent commentary on today's values and the noxious impact that our collective indifference to huge inequality is having. "

It is an important question, because it takes us back to the start of the story.

Who does Capitalism serve? City bonuses hit record high with £14bn payout

" from the Office for National Statistics (ONS) shows that bonuses across the economy rose 24% this spring to £26.4bn, comfortably exceeding the country's entire transport budget. More than half, £14.1bn, was earned by the 1 million people in the financial services sector. The figure for 2006 bonuses was £10.9bn."

Will Hutton asks:

"If Eric Nicoli, the former chief of EMI, can leave with a pay-off of £3m, as he did last week after failing to solve the company's problems, be sure that if his job had led to him being disabled for life, the compensation would have soared towards £10m.

Yet an honest-to-God lance-bombardier, whose 37 war wounds are so severe that no other similarly injured soldier has survived, can expect a tiny fraction of such riches. The reason why the story had such resonance when The Observer first reported the offer a month ago is not just the low value the MoD places on disablement. It is our own unease about the entire cluster of values that sits behind the tariff - what its says about who gets valued and why and how it is that we live in a society in which such gross inequalities have become possible."

This question vexes me because we need successful economies, but we also need a successful society.

At the moment we seem somewhat out of kilter.

This article has been originally written by Alan Moore on Communities Dominate Brands with the title "The Wealth of Nations vs. The Wealth of Networks" on September 02, 2007.

About the author


Alan Moore is the originator of the term, philosophy and principles of Engagement Marketing. He started working on the concept in the late 1990's, which, culminated in his founding the first specialist Community Engagement Marketing company in 2001, SMLXL (Small Medium Large XtraLarge), and, the writing of the seminal book Communities Dominate Brands. SMLXL is a new type of marketing company that helps businesses and customers (to) better engage with one another. He lectures at Oxford University's short course on Mobile Social Networking.

Alan Moore -
Reference: Communities Dominate Brands [ Read more ]
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