In the past twenty years, a number of factors have changed the commercial context. The dramatic increase in the cost of energy, the escalating costs and risks associated with research and development, the ever shorter life cycle of goods and services, increased labor costs, the consumer preference for more customized just-in-time products, global competition, and smaller profit margins have all contributed to making the market-exchange and hierarchical models increasingly obsolete.
Global commerce is becoming more dense and sped up. No single firm can effectively compete as an autonomous agent working solely through a market-exchange mechanism. Today, going it alone is a prescription for extinction. Only by pooling resources and sharing risks and revenue streams in network-based relationships can firms survive. This means giving up some autonomy in return for the entrepreneurial advantages and security that come with networked arrangements. While competition still exists among firms—markets aren’t disappearing any time soon—cooperation in the form of outsourcing, co-sourcing, gain-sharing, and shared saving agreements are increasingly becoming the norm.
In a globalized economy where everyone is connected and ever more interdependent, the idea of autonomous free agents maximizing their individual self-interests in simple exchange transactions in markets seems woefully out of date. A network, in a very real sense, is the only corporate model capable of organizing a world of such speed, complexity, and diversity.
Although the network model is becoming more popular, little attention has been paid to the way networks change our very concept of the role of property and the philosophy of commerce. There has been even less discussion of the long-term implications that flow from a deep change in personal behavior that goes with the transition to the new economic model.
The first thing to understand about the shift from markets to networks is that borders become less fixed and more porous. In markets, borders are critical. A possession is an extension of one’s personal territory. It is exclusive to the owner. Sir William Blackstone, in his
Commentaries on the Laws of England,
wrote that property is “that despotic dominion that one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe.”
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In a market-based regime, property is rarely meant to be shared but only possessed or exchanged. The status of property is unimpeachable. It is either “mine or thine.” The time and place of the exchange between seller and buyer represent the frontier where the property leaves one hand and is transferred into another. The negotiation of the transaction is an adversarial event. Both parties hope to gain at the other’s expense. That’s why it’s called competition. To win is to come away from the exchange with greater value in personal holdings. The goal of market exchange of property is to enlarge one’s territorial dominion.
In networks, both physical and intellectual property stay with the producer and are shared with one or more other parties. Knowledge, information, and know-how, which are all forms of property, are similarly shared. What’s mine is also thine. The clear territorial boundaries that mark private property regimes in an age of market transactions melt. What was once a frontier separating the parties becomes common ground. Unlike market exchanges, which are expected to result in winners and losers, in network relationships, shared activity is expected to result in what is now called “win-win” situations.
The more conventional idea that competition for scarce resources is the essential nature of human behavior—the Hobbes/Darwin ethic—gives way to the radical notion that cooperation is more vital to one’s survival and advancement. If that is the case, then what are the implications for how we define personal freedom?
Belongings vs. Belonging
Recall that in the market era, freedom is defined as autonomy. One is free to the extent one is not dependent or beholden on another. To be independent, one needs to be propertied. With property, one can enjoy exclusivity and freedom. How does one secure property? By competing with others in an adversarial market setting. Network commerce suggests the very opposite definition of freedom. One’s freedom is secured by belonging, not by belongings. To belong, one needs access. With access, one can enjoy the freedom that goes with inclusivity. Freedom is found in shared relationships rather than isolation.
If freedom means the power to experience the full potential of one’s being in the world, is that potential fulfilled by being walled off from others and surrounded by territorial boundaries, or by deep communion with others on common ground? The “deathbed” test is the best judge of which of the two definitions of freedom is closer to the mark. Contrast the man or woman who spent a lifetime collecting possessions and pursuing autonomy with the man or woman who spent a lifetime exploring relationships and pursuing intimacy. Which of these two can be said to have optimized the full potential of their being, resulting in the most freedom?
Network commerce has consequences that go far beyond just a business model. Its assumptions about how best to optimize the individual good are deeply at odds with how we have come to define appropriate behavior and the good life in the modern era. Markets are based on mistrust, networks on trust. Markets are based on the pursuit of self-interest, networks on shared interest. Markets are arm’s-length transactions, networks are intimate relationships. Markets are competitive, networks are cooperative.
The changing nature of how we think about our relationship to property is forcing a fundamental re-appraisal of the human condition, just as it did in the early modern era, when our ideas about property radically changed. The “great transformation” from proprietary obligations on the feudal commons to property exchange in a market economy marked a watershed in our thinking about the nature and purpose of human intercourse. Likewise, today the transition from property exchange in markets to access relationships in networks is again changing the assumptions about the nature of human activity.
Unfortunately, there’s been scant discussion, either in academia or in public policy circles, about how to reconstruct our theories of property relations to bring them in line with the reality of network commerce operating in a globalized economy. A few scholars, however, have made attempts at revising our notions of property. The most important contribution to the discussion, thus far, comes from the late University of Toronto professor Crawford MacPherson, considered by many of his colleagues to be one of the distinguished contemporary authorities on the philosophy and history of property. (I first introduced MacPherson’s ideas in
The Age of Access,
published in 2000.)
MacPherson starts his analysis by reminding us that our current concept of property is largely an invention of the seventeenth and eighteenth centuries. We are so used to thinking of property as the right to exclude others from the use or benefit of something, says MacPherson, that we’ve lost sight of the fact that in previous times, property was also defined as the right not to be excluded from the use or enjoyment of something. MacPherson resurrects the older sense of property, the right of access to property held in common—the right to navigate waterways, walk along commonly used country lanes, and enjoy access to the public square.
While this dual notion of property still exists, the right of public access and inclusion is becoming increasingly marginalized and diminished by the right of private ownership and exclusion, as the market economy comes to dominate more and more of the social domain. Consider the example of the changing pattern of home ownership in the U.S. Over the past forty years, growing numbers of Americans have taken up ownership in what are called common interest developments (CIDs). In these gated communities, not only are the homes privately owned, but even the streets, sidewalks, town squares, and parks are privately owned by the members who live there. Nonmembers often must seek permission at the gates to drive down the streets, walk on the sidewalks, stroll in the parks, or visit shops in the square. More than forty-seven million Americans—nearly one-sixth of the American population—already live in these private communities, and the numbers are growing dramatically.
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CIDs may become the dominant living arrangement by mid-century.
We Americans have, in just two centuries, come up against a basic contradiction that lies at the heart of the American Dream. We have long sought both autonomy and mobility and believe that the two are mutually reinforcing. Now millions of Americans have transformed large swaths of America’s public space into privatized communities, denying millions of other Americans access to and mobility through whole parts of America. A country that once prided itself on its openness and expansiveness—its lack of boundaries—is being systematically walled off into exclusive domains at an alarming rate, changing the very character of the American landscape and the American experience. There is nothing comparable to this vast privatization of living space in Europe.
MacPherson notes that a private property regime was used for structuring human relationships in a world of physical scarcity. Now, notes MacPherson, at least for the top 20 percent of income earners, securing the right to a material revenue has been solved, and therefore their interest is turning to the more expansive and deeper issue of securing a quality of life. MacPherson argues, in turn, that property needs to be redefined to include the “right to an
immaterial
revenue, a revenue of enjoyment of the quality of life.”
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He suggests that “such a revenue can only be reckoned as a right to participate in a satisfying set of social relations.”
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In a society of true abundance, the idea of excluding others becomes increasingly unimportant in structuring property relationships. If everyone has more than he or she needs, then what practical benefit is there in excluding others? In a society that has vanquished scarcity, immaterial values assume greater importance, especially the pursuit of self-fulfillment and personal transformation. The right not to be excluded from “a full life” becomes the most important property value people hold. Property in the new era, argues MacPherson, “needs to become a right to participate in a system of power relations which will enable the individual to live a fully human life.”
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Of course, for the four-fifths of the human race who still labor under conditions of abject poverty or bare subsistence, economist Hernando de Soto’s plea to catch up with the wealthy nations by establishing a private property regime, like the one Europe and America have enjoyed for the last two hundred years, makes some sense.
There is, however, another reason why the developed societies find themselves between an old property regime based on the exchange of products in markets and a new property regime based on the right of access to one another’s assets in networks—that is, the increase in vulnerability that inevitably accompanies the change in the complexity and density of human interactions and the shrinking of space and time in a globalized world.
I had the opportunity, twenty-three years ago, to visit with the late Ilya Prigogine, the Belgian physical chemist. His theory of “dissipative structures,” for which he won a Nobel Prize, offers some guidelines as to why our thinking about property relations and our notions of freedom are radically changing.
Prigogine brings together assumptions from thermodynamics and cybernetics in his analysis. He observes that all living things as well as many nonliving things are dissipative structures. That is, they maintain their structure by the continuous flow of energy through their system. The flow of energy keeps the system in a constant state of flux. The fluctuations are generally small and can be adjusted to by negative feedback. However, occasionally, says Prigogine, the fluctuations may become so great that the system is unable to adjust, and positive feedback takes over. The fluctuations feed off themselves, and the amplification can easily overwhelm the whole system. When that happens, the system either collapses or reorganizes itself. If it is able to reorganize itself, the new dissipative structure will exhibit a higher order of complexity and integration and a greater flow-through than its predecessor. Each successive ordering, because it is more complex than the one preceding it, is even more vulnerable to fluctuations, collapse, or reordering. Prigogine believes that increased complexity creates the condition for evolutionary development.
Our complex, high-energy flow-through global economy is a prime example of Prigogine’s dissipative structures. A dramatic change in energy flux anywhere in the system can traumatize the entire system and lead to either collapse or reorganization to a higher, more complex level of performance. In the modern era, when distances were still significant, time was more plentiful, and density of exchange less tight, energy fluctuations anywhere in the world were generally localized in their impact, rarely affecting the entire planet. That is no longer the case. In a globalized economy where space and time are increasingly dense, and everything is more interdependent, any event occurring anywhere in the system can make everything else in the system vulnerable. Networks are the only business models that can accommodate a vulnerable high-risk global economy. Networks bring together interested parties with the specific objective of pooling resources and risk to mitigate losses. Only by cooperating in extended business-to-business and business-to-consumer networks can firms enjoy the kind of just-in-time information, knowledge, and response capacity to adjust rapidly to fluctuations anywhere across the entire global economy.
In the modern era, when there was still an expansive frontier of untapped resources, labor, and potential wealth to tap all over the world, the combative, autonomous individual—the cowboy mentality—was the ideal commercial prototype, and the market mechanism was the most effective arrangement to expropriate and exploit the many economic possibilities.