Authors: Jeremy Rifkin
For example, while the benefit corporation is an attempt to modify the profit-making drive of capitalist firms to edge closer to the social and environmental priorities of nonprofits in the social Commons, nonprofit organizations are making their own modifications, edging closer to the profit orientation of capitalist firms. Nine states in the United States—Illinois, Maine, Rhode Island, Michigan, Louisiana, Wyoming, North Carolina, Vermont, and Utah—have enacted what are called L3C laws. These are variations of the laws governing limited liability companies that allow nonprofits to make a “low profit” as long as their primary objective is social goals. The L3Cs provide a legal means for nonprofits to have access to capital, which is becoming ever more important as they become more oriented to social-entrepreneurial ventures, while retaining their status as charitable organizations.
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Social entrepreneurship has become the hot item at scores of universities around the world. The Harvard curriculum includes courses with titles such as “Managing Social Enterprise” and “Introduction to Social Entrepreneurship.”
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The sociology department has an entrepreneurship “collaboratory” to immerse students in the sociological aspects of the new social economy. The President’s Challenge, another university initiative, distributes $150,000 to student teams engaged in academic and field work to find “solutions to global problems, from education to health to clean water and air.”
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Global networks like Ashoka, the Skoll Foundation, the Acumen Fund, and Duke University’s Center for the Advancement of Social Entrepreneurship serve as think tanks, trade associations, and funding agents to advance social entrepreneurship around the world. Bill Drayton, a leading figure in the social-entrepreneurial movement, is the founder of Ashoka. The organization runs competitions that draw social entrepreneurs from every corner of the world to collaborate on issues ranging from human trafficking to conflict resolution. Social entrepreneurs are encouraged to post their projects on Ashoka’s Changemakers website, where others can log in and collaborate to enhance their initiatives. Ashoka currently
supports the work of more than 3,000 social-entrepreneur fellows in more than 70 countries.
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The Skoll Foundation, another key player in social entrepreneurship, founded in 1999, has awarded more than $358 million in grants to 97 social entrepreneurs and 80 organizations on five continents that are involved in advancing social entrepreneurship.
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Success for social entrepreneurs is measured more by the improvement in the well-being of the communities served than on return on investment. Social capital is the critical asset and it, in turn, is a reflection of the bonds of solidarity and trust forged by the collaborative partnership between the social enterprise and the community. In this regard, nonprofit social entrepreneurs generally enjoy an advantage over profit-seeking social entrepreneurs, although not always, because the primary motivation is “doing good” rather than “doing well.”
There are several hundred thousand social enterprises in the United States that employ over 10 million people and that have revenues of $500 billion per year. These enterprises represented approximately 3.5 percent of the nation’s GDP in 2012. Some 35 percent of social enterprises are nonprofit organizations, and 31 percent are corporations or limited liability companies. Social enterprises have experienced a spectacular growth curve. Sixty percent of all U.S. social enterprises were created in 2006 or after, and 29 percent of them were created in 2011 and 2012.
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In the United Kingdom there were 62,000 social enterprises employing a workforce of 800,000 people and contributing £24 billion to the U.K. economy in 2010. Peter Holbrook, chief executive of the U.K. Social Enterprise Coalition (SEC), foresees a threefold increase in the social enterprises’ contribution to the nation’s GDP by 2020. The SEC is also lobbying for the government to formally recognize the social-enterprise sector as an entity distinct from the volunteer and private sectors, with accompanying tax incentives and other support.
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In Australia there were an estimated 20,000 social enterprises in 2010. In the nonprofit arena, 29 percent of the organizations had a business venture and 58 percent of the organizations provided fees for services.
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Social entrepreneurship, which today is rather equally balanced between for-profit and nonprofit businesses, is likely to increasingly gravitate to the latter in the coming decades as the social economy embedded on the Collaborative Commons continues to gain ground on the capitalist marketplace.
New Kinds of Employment
Social entrepreneurs are not the only ones in the workforce who are beginning to pass from the capitalist market economy to the Collaborative Commons. Millions of others have already done so. As discussed in chapter 8, the marginal cost of labor is heading toward near zero in the capitalist
marketplace, as IT, Big Data, advanced analytics, AI, and robotics replace millions of workers across the manufacturing and service industries and the knowledge and entertainment sectors.
The reality is the IoT is both a job killer and a source of employment. In the long run, the smart IoT infrastructure—the Communications Internet, the Energy Internet, and the Logistics Internet—is going to carry on much of the economic activity of civilization with a small supervisory and professional work force.
In the short and mid terms, however, the massive build-out of the IoT infrastructure in every locality and region of the world is going to give rise to one last surge of mass wage and salaried labor that will run for 40 years, spanning two generations. Transforming the global energy regime from fossil fuels and nuclear power to renewable energies is extremely labor intensive and will require millions of workers and spawn thousands of new businesses. Retrofitting and converting hundreds of millions of existing buildings into green micropower plants and erecting millions of new positive micropower buildings will likewise require tens of millions of workers and open up new entrepreneurial opportunities for energy-saving companies (ESCOs), smart-construction companies, and green-appliance producers. Installing hydrogen and other storage technologies across the entire economic infrastructure to manage the flow of green electricity will generate comparable mass employment and new businesses as well. The reconfiguration of the world’s electricity grid into an Energy Internet will generate millions of installation jobs and give birth to thousands of clean Web app start-up companies. And finally, rebooting the transport sector from the internal-combustion engine to electric and fuel-cell vehicles will necessitate the makeover of the nation’s road system and fueling infrastructure. Installing millions of plug-in electric fueling outlets along roads and in every parking space is labor-intensive work that will employ a sizable workforce.
In the mid to long term, an increasing amount of employment is going to migrate from the market sector to the Commons. While fewer human beings will be required to produce goods and services in the market economy, machine surrogates will play a smaller role on the Commons for the evident reason that deep social engagement and the amassing of social capital is an inherently human enterprise. The very idea that machines might someday create social capital is not entertained by even the most ardent technophiles.
The nonprofit sphere is already the fastest-growing employment sector in many of the advanced industrial economies of the world. Aside from the millions of volunteers who freely give of their time, millions of others are actively employed. In the 42 countries surveyed by the Johns Hopkins University Center for Civil Society Studies, 56 million full-time workers are currently employed in the nonprofit sector. In some countries, employment in the nonprofit arena makes up more than 10 percent of the workforce.
In the Netherlands, nonprofits account for 15.9 percent of paid employment. In Belgium, 13.1 percent of the workforce is in the nonprofit sector. In the United Kingdom, nonprofit employment represents 11 percent of the workforce, while in Ireland it’s 10.9 percent. In the United States, nonprofit employment accounts for 9.2 percent of the workforce, and in Canada it’s 12.3 percent. These percentages will likely rise steadily in the coming decades as employment switches from a highly automated market economy to a highly labor-intensive social economy.
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Despite the dramatic growth curve in Commons employment, many economists look at it askance, with the rejoinder that the nonprofit sector is not an independent economic force but rather largely dependent on government-procurement contracts and private philanthropy. One could say the same about the enormous government procurements, subsidies, and incentives meted out to the private sector. But this aside, the Johns Hopkins study of 42 countries revealed that contrary to the view of many economists, approximately 50 percent of the aggregate revenue of the nonprofit sector operating on the Commons already comes from fees for services, while government support accounts for only 36 percent of the revenues, and private philanthropy for only 14 percent.
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I expect that by midcentury, if not much sooner, a majority of the employed around the world will be in the nonprofit sector on the Collaborative Commons, busily engaged in advancing the social economy, and purchasing at least some of their goods and services in the conventional marketplace. The traditional capitalist economy will be managed by intelligent technology attended by small professional and technical workforces.
John Maynard Keynes’s futurist essay, written more than 80 years ago for his grandchildren and alluded to in chapter 1, envisioned a world where machines have freed up human beings from toil in the marketplace to engage in deep cultural play on the Commons in the pursuit of more lofty and transcendent goals. It might prove to be his most accurate economic forecast.
The business at hand will be to provide both retraining for the existing workforce and the appropriate skill development for students coming into the labor market to ease the transition into the new job categories and business opportunities that come with a massive build-out of an Internet of Things infrastructure around the world. At the same time, students will need to be educated for the new professional skills that come with the job opportunities opening up in the Collaborative Commons. Although a herculean effort will be required, the human race has shown itself capable of similar efforts in the past—particularly in the rapid shift from an agricultural to an industrial way of life between 1890 and 1940.
It’s understandable that in a society
where the market imperative and capitalist mystique are so firmly entrenched in popular lore, not to mention in government subsidies, that the slew of new economic initiatives
and institutional arrangements flooding onto the Collaborative Commons are still being treated as mere supplements to the main economic currents. Few are suggesting that the quickening pace to near zero marginal cost that is beginning to impact the media, entertainment, and publishing industries; renewable energies; 3D printing of manufactured products; and open-source online higher education are any more than variations that can be fit comfortably within the existing economic paradigm. Even fewer are suggesting that the replacement of the global workforce with AI and automated technology, the shift from ownership to access, the transformation from markets to networks, and the emergence of a sharing economy represents a fundamental assault on the system itself. Even when confronted with the crowdfunding of capital, the democratization of currency, and the rapid spread of social entrepreneurialism, there is little worry that they pose any kind of significant threat to capitalism. Yet one can’t help but be awed by how these new models fundamentally diverge from the standard way we have organized economic life over the past two centuries.
These new approaches are so radically different from the existing economic paradigm, in both their overarching narrative and operating assumptions, that it is difficult to imagine how they might be absorbed, in total, into the current regime. It is more probable that as these various departures mesh and begin to feed off each other, they are likely to outgrow their capitalist context and at some point rupture the existing paradigm, giving birth to a new economic order whose life force is as different from market capitalism as the latter was from the feudal and medieval systems from which it emerged.
Part V
The Economy of Abundance
Chapter Fifteen
The Sustainable Cornucopia
C
lassical and neoclassical economic theory is mute once a society’s productive economic activity approaches near zero marginal cost. When marginal costs shrink to near zero, profits disappear because goods and services have been liberated from market pricing. They become essentially free. When most things become nearly free, the whole operating rationale of capitalism as an organizing mechanism to produce and distribute goods and services becomes meaningless. That’s because capitalism’s dynamism feeds off scarcity. If resources, goods, and services are scarce, they have exchange value and can be priced in the marketplace beyond what they cost to bring them there. But when the marginal cost of producing those goods and services approaches zero and the price becomes nearly free, the capitalist system loses its hold over scarcity and the ability to profit from another’s dependency.
Free
implies free in two senses of the term: free in price and free from scarcity. When the marginal cost of producing additional units of a good or service is nearly zero, it means that scarcity has been replaced by abundance. Exchange value becomes useless because everyone can secure much of what they need without having to pay for it. The products and services have use and share value but no longer have exchange value.
The notion of organizing economic life around abundance and use and share value rather than scarcity and exchange value is so alien to the way we conceive of economic theory and practice that we are unable to envision it. But that is what is just beginning to emerge in wide sectors of the economy as new technologies make possible efficiencies and productivity that all but eliminate the cost of producing additional units and services—that is, excluding the initial investment and overhead costs.
Defining Abundance
Abundance
is a slippery word. Traditionally the term meant sufficient access to resources to ensure a flourishing life. Biologists tell us that the average human being requires around 2,000 to 2,500 calories a day to maintain his or her physical well-being.
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Today more than 2 billion human beings live on less than that and a billion of them are classified as undernourished.
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With the human population expected to increase by 35 percent, or 2.5 billion people, by 2050, the United Nations Food and Agriculture Organization says that food production alone would have to increase by 70 percent to provide the nourishment needed to “adequately” ensure every individual’s well-being.
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The average American, by contrast, consumes 3,747 calories of energy a day.
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If all 7 billion people living on the planet today were to “sustain” their lives by consuming a comparable amount of resources as the average American, it would require four to five more Earths. The human race, rich and poor, is currently gobbling up the equivalent resources of 1.5 Earths—in other words it takes approximately one and a half years to regenerate what we consume in a single year. The United Nations projects that if population growth and consumption trends continue, even without an appreciable change in the quality of life of the world’s poor, by 2030 we will need the equivalent of two Earths to support our resource appropriations.
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Abundance, then, is in the eye of the beholder. The sustainability of the planet, however, is not. When it comes to reconciling abundance and sustainability, Gandhi’s observation, cited in chapter 6, that the “Earth provides enough to satisfy every man’s need but not for every man’s greed” remains the gold standard.
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Gandhi had an instinctual understanding of sustainability. Today, however, we can actively measure it with sophisticated metrics. It is called ecological footprint. Sustainability is defined as the relative steady state in which the use of resources to sustain the human population does not exceed the ability of nature to recycle the waste and replenish the stock. Ecological footprint is a direct measure of the demand human activity puts on the biosphere. More precisely, it measures the amount of biologically productive land and water that is required to produce all the resources an individual or population consumes and to absorb the waste they generate, given prevailing technology and resource-management practices. This area can then be compared with biological capacity (biocapacity)—that is, the amount of productive area that is available to generate these resources and to absorb the waste.
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The enlargement of humanity’s ecological footprint over the past half century is unprecedented. In 1961, our species’ footprint was approximately half of the planet’s biocapacity—which means, in ecological accounting terms, we were still drawing off of the ecological interest but had not yet eaten into the principal. By 2008, however, the ecological footprint
of 6.7 billion human beings alive at the time was equivalent to 18.2 billion global hectares (a hectare is equivalent to 2.47 acres), with an average footprint of 2.7 hectares per person, on a planet with only 12 billion global hectares of biocapacity available, or 1.8 hectares available per person. We were consuming Earth’s biocapacity faster than it could be recycled and replenished. The United States alone, with only 4 percent of the world’s population, was using 21 percent of Earth’s available biocapacity and the ecological footprint of the average American was a whopping 10 hectares of biocapacity.
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The statistics on ecological footprint become even more pronounced when the high-income population of the world is compared to the low-income population. The 1 billion wealthiest consumers—with a gross national income of $12,196 or more per person—are using up the equivalent of 3.06 hectares of biocapacity per person while the 1.3 billion poorest human beings—with a gross national income of $995 or less per person—are using the equivalent of 1.08 hectares of biocapacity per person.
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If abundance is tied to sustainability and measured by living only on the interest but not the principal of Earth’s biocapacity, the question is, how many human beings can live comfortably without destroying the biosphere’s ability to continually replenish the ecological resources necessary to maintain the health and well-being of each individual and our species as a whole?
Lester Brown, founder of the World Watch Institute—an organization that tracks the human impact on global resources—says that the answer depends on which diet we choose. If we look to the U.S. diet as a baseline—the average person takes in 800 kilograms (a kilogram is equivalent to 2.2 pounds) of grain per year in the form of food and feed. If everyone in the world had an equivalent diet, then the 2 billion metric tons annual world harvest of grain could support a global population of only 2.5 billion people. If, however, the Italian/Mediterranean diet of 400 kilograms of grain per person per year was used as the baseline, the annual world harvest could sustain a population of 5 billion people. Finally, if we were to use the Indian diet of 200 kilograms of grain consumed per person per year, the planet could sustain a maximum of 10 billion people.
Brown makes the point that populations that live too high or too low on the food chain do not live as long as those who eat near the middle of the food chain. Those engaged at the top suffer from diseases of affluence—including diabetes, cancers, heart disease, and strokes—while those at the bottom suffer from malnutrition and die of diseases of poverty—including rickets, scurvy, beriberi, pellagra, anemia, and xerophthalmia. Study after study indicates that people who eat a Mediterranean diet—consisting of meat, fish, cheese, and vegetables—live healthier, longer lives.
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To bring our human population in line with the biocapacity of the planet and transform our society from scarcity to sustainable abundance, we will need to address the great disparity in ecological footprint between
the rich and poor, while simultaneously lowering the overall human population on Earth.
What Makes Us Happy?
While the notion of ecological footprint provides a compelling scientific metric for reducing human impact on the biosphere’s carrying capacity, the spate of studies and surveys in recent years reporting on what makes people happy provides an equally compelling sociological and psychological rationale for equalizing the ecological footprint.
Virtually every scientific study on happiness concludes that it appreciates then depreciates along a classic bell curve. The more than 40 percent of the human race that lives on two dollars per day or less in dire poverty and barely surviving from week to week, are understandably deeply unhappy.
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Lacking the bare essentials of life, and unable to even feed and clothe their own children and provide the rudiments of shelter, they live in a despondent state, their lives sapped of vigor and hope. As the poor are lifted out of poverty, they begin to experience happiness. Each advance in income, wealth, and security makes them happier. But here’s where it becomes surprising. When individuals reach an income level that provides the basic comforts and securities of life, their level of happiness begins to plateau. Additional increases of wealth and accompanying consumption triggers diminishing marginal returns in overall happiness, until a point is reached, after which happiness actually reverses course and individuals become less happy. The studies show that the accumulation of wealth becomes an albatross and that profligate consumption becomes an addiction with fewer and shorter-lived psychological rewards. The possessions end up possessing the owners.
A closer examination into the reasons why increasing wealth beyond the comfort level leads to malaise and despair shows that relationships with others become increasingly mediated by status and are driven by envy and jealousy. Individuals report that their relationships become superficial and valued only by what can be gained and lost in a strictly material sense.
Yet even when confronted with their own increasing unhappiness, materialistic individuals are far more likely to rev up their pursuit of material gain in the belief that the problem is not with their preoccupation with wealth, but rather, with not having enough. They reason that if only they can gain a bit more material success that their elevated status will earn them the abiding admiration of others and the pleasures they hope will come with indulging in even more consumptive behavior—what psychologists refer to as the hedonistic treadmill. Instead, each additional foray into this hedonistic fantasy brings them more unhappiness, pulling them ever downward in a vicious cycle of addiction from which there is no escape, until they get off the treadmill and pursue an alternative path to happiness.
Studies conducted around the world have shown a close correlation between materialist values, depression, and substance abuse. Materialists are more likely than others to exhibit possessiveness and to be less generous and trusting. Materialists also have more difficulty reining in impulses and are more aggressive toward others.
Psychology professor Tim Kasser, author of
The High Price of Materialism
, sums up the overwhelming evidence accumulated in years of studies on materialistic behavior. What virtually every study shows, he says, is that
people who strongly value the pursuit of wealth and possessions report lower psychological well-being than those who are less concerned with such aims. . . . The more materialistic values are at the center of our lives, the more our quality of life is diminished.
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Several years ago, I had the opportunity of visiting with the British economist Richard Layard, whose book
Happiness: Lessons from a New Science
caused a bit of a stir among economists. Layard was one of my faculty hosts for a lecture I gave at the London School of Economics. He took me back to his office and shared with me some interesting data he had collected on the increasing wealth of a society and the population’s sense of their happiness over time. I was quite interested in seeing the data on the United States. It turns out that while Americans today enjoy twice the income they did in 1957, the percentage of “very happy” had dropped from 35 to 30 percent.
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Nor is the United States an exception. Studies conducted in other industrialized countries tell pretty much the same story. Layard’s research shows that individual happiness rises until the average individual income hits about $20,000 per year—the minimum comfort level—after which additional increases of income result in diminishing returns in the level of happiness.
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Studies also show that the level of happiness of a society closely tracks with the income disparity of the population. The United States, which boasted the most robust middle class in the world in 1960, descended over the subsequent 50 years, with the top 1 percent becoming richer while the ranks of the middle class thinned and the number of people in poverty thickened. By 2012, the United States had the ignominious distinction of being ranked 28 out of 30 Organization for Economic Cooperation and Development (OECD) countries in income disparity—the gap between the rich and the poor—bettering only Mexico and Turkey.
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It’s not surprising that the increasing disparity in income has led to a drop in the overall happiness of society. Happiness studies show that countries that have the smallest gap between rich and poor score higher in their sense of collective happiness and well-being. Part of the reason lies in the
fact that increased poverty breeds unhappiness. But equally important, the gap between the haves and the have-nots is a breeding ground for mistrust. It creates a mental garrison with those on the top increasingly fearful of reprisal from the impoverished masses and more protective of their wealth and possessions.
I remember a moment my wife and I experienced in Mexico City nearly 20 years ago. We were riding in the back seat of an armored car that was ferrying us from a lecture presentation I had just given before an audience of distinguished business leaders to a dinner party at the home of one of Mexico’s wealthiest families. My host, a leading social reformer in Mexico who had dedicated much of his life to improving the lot of Mexico’s poor, was sitting in the front seat across from an armed driver. As we worked our way out of some of the city’s worst slums, with police on every corner, into a posh, fortresslike gated community protected by security guards, where the rich huddled together, he noted the irony, remarking that Mexico was a nation increasingly made up of imprisoned communities for the rich and the poor, with each fearful and mistrusting of the other’s intentions. As the United States has become more like Mexico, mistrust has risen as well. In the 1960s, 56 percent of Americans said that most people can be trusted. Today, less than one-third still do.
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