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Capitalism 3.0: Planning a Big Upgrade

by Worldchanging DC local blogger, Graham Webster

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I'm just back from Peter Barnes' talk about his new book Capitalism 3.0 at Busboys and Poets. The book, it should first be noted, is so committed to the concept of the commons that it is available free as a PDF online. (Wryly acknowledging the oddity of giving away a book with the word "capitalism" in the title, he writes, "I invite you to peruse the downloadable version, and if you’re so moved, engage in a commercial transaction that microscopically boosts GDP.")

It's that somewhat sardonic but ultimately rational outlook that Barnes brought to Washington, D.C., tonight—the end of a three-week book tour. "I've been a talking head for about three weeks, and I'm almost talked out," he began, to the knowing assent of a District crowd less than 24 hours after the State of the Union. He proceeded from that point to summarize the big-idea significance of the commons and then a sense of how, bit by bit, our real-world society might institute the changes he calls for.

For those unfamiliar with the book, Barnes argues that there is private wealth and then there is common wealth—in the form of nature, structures supported by the community and society (such as parks, streets, capital markets, the internet), and cultural and intellectual wealth (the wealth of ideas). Private wealth, he argues, is produced partly by appropriating common wealth, and private profit often externalizes costs into the commons. And he proposes a solution. Austin local WorldChanging blogger Michael Strong wrote in October:

Barnes, whose father is an economist, is revolutionary because he completely acknowledges the decades-old argument that government failure is endemic. His version of the argument is accepted by progressives because, for the first time, he offers what amounts to a non-governmental solution: Create private trusts with a public interest in order to ensure the long term preservation of key elements of the commons.

Barnes places a lot of faith in the institution of the trust—one in which certain individuals are charged with custodianship of resources owned by beneficiaries. The easy example is the "sky trust" (explored in Barnes' older book Who Owns the Sky?), which would regulate private interactions with the atmosphere by selling the right to dump pollution into it. As they sell less and less of such rights, the cost of pollution rises, and pollution decreases. The graceful flourish is that companies paying for the right to pollute would then be adding monetary wealth to the sky trust. And we're all beneficiaries. Barnes envisions a system in which we would all get paid dividends from our share of the collective.

This won't be easy, but Barnes suggests the way to achieve this is to scale up models like the Alaska Permanent Fund, which takes "at least 25 percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses received by the state" [1] and puts it into a common fund that pays dividends to Alaskans.

The clearest hurdles would be the need to get something like the state constitutional amendment that enables the Alaska model enacted on a national scale, let alone in the international context. Barnes' faith in the bottom-up entrepreneurial process may stem from his own success as a businessperson concerned both with profit and ethics. (At one point, he said, his company Working Assets opted not to be publicly traded despite certain increase in the value of shares because of the constraints they would see when subject to Wall Street-style expectations and measures such as quarterly profit margins.)

Barnes was responsive to the inquisitive crowd at Busboys and Poets, which he said he regarded as part of the D.C. commons. Prodded by a sympathetic but critical questioner, he acknowledged that, indeed, consumers would bear a significant cost in the renewal. But he noted that they'd also get dividends from the trust—the sort of thing only possible if what amounts to taxation can be channeled into a fund separate from the general treasury.

Ultimately the question is, as Barnes put it, "how to install the upgraded operating system" he envisions. "It will be a 20-30 year task, and it has to happen at all levels," he said. Let's hope the development of something like Capitalism 3.0 doesn't get bogged down the way, say, Windows Vista did. And with some luck, Capitalism 3.0 would have better multilingual and global compatibility than Windows ever has.

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Mm, not sure why you would have to monetize public goods when the state is perfectly capable of defending and protecting them (via taxes and tenders) without turning them into a commodity.

Maybe there's another approach. In Belgium (known for its good health care system), the last elections brought to power a group of maoists medics ("doctors for the people") in one community. Everyone was astouned, they even made the international headlines. The reason for their surprising victory: they had singlehandedly introduced the so-called 'kiwi-model' for health care in their large community.
Health is a public good. Capitalism has made it impossible for many people to buy even the most basic drugs. Under the kiwi-model the community writes out an order for generics on which capitalist pharmacos can bid. The company that wins, gets all its costs for the development of the drug paid back. So they make no loss, only a massive, guaranteed profit.

The result: drugs now cost an astounding 50 to 90% less than before! Capitalist competition is allowed to work, but the community and the state is the driving force.

The kiwi-model has now become a national Belgian policy and it is going to be applied to very many sectors (carbon-neutral energy, communications, etc...). This is the model of the future. Controlled capitalism. All privatizations (energy and public transport for example), have proved to be disastrous, so now the tide is turning.

Many countries in Europe are now looking into the idea. But I'm not sure whether it can work for more abstract public goods (like the sky).

Maybe I'm also confusing public goods and 'the commons'. I've never heard of that word 'the commons'.

Posted by: Gio on 27 Jan 07

That's a neat idea, but it's important to remember that controlled capitalism isn't really capitalism. Any system that prevents a person or groups of people from getting their goods to the market directly violates the "pursuit of happiness" that has worked its way from a polite letter sent to King George into the American system of government.

Even the most beneficial drug has side effects, and so does capitalism. The way I see it, the biggest problem associated with capitalism is "the pursuit of happiness itself," or more precisely, how we measure that happiness.

Presently, success in private business and industry is measured in profit, and most business decisions focus on reducing cost and/or increasing income. Social and environmental impact are secondary considerations, and often times considered only when maximum profit is jeopardized. I'm glad Worldchanging is around to showcase the businesses that makes secondary considerations their primary concern.

Anyways, the key to positive change on a global scale is to change how we keep score. How should we measure success?

Right now the world of industry and business is like a basketball game: the goal is to score as many points as possible while denying your opponent as many points as possible. The game is strictly governed by referees, but when the clock is running out, it's okay to foul your opponent in order to prevent them an easy basket. You're also allowed many fouls before any type of meaningful penalty is enforced.

Low-impact businesses and industries should instead model themselves after a game of golf: there is no clock, and there is no way to deny your opponent scoring. Your objective is to score as few points as possible. In most cases, you may not disturb the course in order to improve your chances of success. As soon as you foul, you lose (or at least pay a meaningful penalty).

Keep in mind that the cheaper drugs aren't necessarily better drugs. As a former government employee, I can tell you first-hand that the lowest bidder almost NEVER supplies the best product, and once locked into a contract ("guaranteed profit"), the drive to innovate their products and services comes to a grinding halt.

Socialism is sometimes attractive because of the immediate and often positive impact experienced with new policies. However (to extend the sports metaphor), Socialism places too much trust in the referees. As someone who will probably always be a player and never a referee, this disturbs me.

To say "Capitalism has made it impossible for many people to buy even the most basic drugs" is incorrect because it is incomplete. The abundance of Capitalism coupled with an absence or misplacement of ethics would be more responsible.

Our goal as individuals (and we are ALL individuals), should be to create a fair system that relies as little as possible on officiating. Basketball is fun to watch, but let's play golf.

Posted by: David on 28 Jan 07

Hi David, I agree with your line of thinking, but I wanted to make a nuance: the kiwi-model (named so because New Zealand first used it in health care), does not hinder competition. On the contrary, even though the pharmacos were first hesitant, they bit, and now they're very satisfied, because once you get the government contract, you don't need to spend a penny on hugely expensive marketing campaigns or on blocking off the market for your competitors.

Hesitant at first, they now seem to feel ok with it.

The reality is that before, many could not afford the branded drugs. This is the reality. Now capitalists will say that this is not the fault of the free market. But let's not forget that pharmacos themselves have a double agenda: on the one hand, they cannot stand government intervention ("breaking the laws of the free market"), whereas on the other, they always tend to monopolies (the real hard kernel of free market capitalism).

In the Kiwi-model, the State satisfies both tendencies: (1) it allows the best company (price/quality wise) to dominate the market for a period of time and for one product (this is the wet dream of the pharmacos), but (2) competition is allowed to play itself out completely and transparently (pharmacos trying to get the mega-contract compete). This is socialism-light, but it proves to work, at least in countries where the model has been applied.

The point is that unregulated free market capitalism simply ends up being its opposite: a monopolistic universe in which the vast majority of people is blackmailed into paying way too much for basic goods (even Adam Smith recognized this). In reality, free market capitalism is a total myth, and the past decades of neoliberalism have proved this, because of their disastrous results. In Belgium, they've decided to go red instead - but only of course in the field of very basic common goods (such as health care).

One small point about the quality of the generic drugs: this is of course studied first, thorough quality control carried out by independent organisations. The company that wins the kiwi-contract offers the best quality-versus-price.

Posted by: Gio on 28 Jan 07

Everything you said rings true, but like many pharmaceuticals, I'll wait for the results of a long-term study before I jump in!

Posted by: David on 28 Jan 07

All these noisy commenters should read the book 1st before offering their opinions. I'm getting into it, great post, thankyou!

Posted by: Flannel Flower on 29 Jan 07

All these noisy commenters should read the book 1st before offering their opinions. I'm getting into it, great post, thankyou!

Sadly, most of us don't have time to read books on how to sustain capitalism. We read books on how to get rid of it instead. Hence the 'noise'.

Posted by: Gio on 29 Jan 07

The essential feature of the Kiwi model is that it is demand centred whereas capitalism tends to be supply centred. This demand centred feature is embodied in what I term Integrative Capitalism which is a component of Integrative Improvement: Sustainable Development as if People and Their Physical, Social and Cultural Environments Mattered.

Integrative Improvement can be applied by existing and start-up government, business and civil society organisations so could help facilitate and accelerate the sort of changes sought by Capitalism 3.0.

Posted by: Graham Douglas on 31 Jan 07



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