February 7, 2012

Now four weeks old, the Financial Times series on "Capitalism in crisis" retains my attention no so much for originality as for harmony. The main ideas have already been said, the melody stamped in memory, but new perspectives can still enrich our understanding, chords resonate in our ears.

"The US is wrong on the right balance between public and private power", says David Rothkopf (*). "Europe, along with countries such as Canada, has arguably done a better job balancing public and private goods than either the US or China" echoes Kenneth Rogoff (**).

Society must mix individual enterprise and social solidarity. Calling the result capitalism invites confusion. But under any other name, the question remains "how to strike a balance" between the two ingredients of the mix?

No state today can boast of having a sustainable answer. How could it be otherwise short of a world government when globalization deprives states of their strength in the face of non state actors? Yet who can blame capitalists for refusing to bear the costs of social solidarity if at all possible?

Globalization being nothing new, one may be tempted to ask History for an answer. Unfortunately the latter is littered with losing solutions. In the long term, neither the satisfied self-sufficiency of the QuianLong Emperor nor the elimination of individual enterprise in the Soviet Union could withstand external pressures.

Expansionist strategies have fared better in the past but war no longer promises rich rewards to swarming plunderers. Colonizing the moon, or Mars, is not a lunatic's dream in view of technical challenges but because, so far, nobody believes one can make one's fortune fast in the attempt.

Certainly any acceptable answer will rely on increased education. George Osborne calls for "good schools, world-class universities and investment in research and development that would enable [people] to charge more for their labour" (***). Kenneth Rogoff speaks to the "failure of modern societies to pay attention to ongoing adult education and literacy". Democracy itself requires citizens to know enough to resist electoral hectoring.

Yet even democracy is not an end in itself. Citizens still ask: where are the jobs which alone, short of slave labor, can support a social contract?

If George Osborne's answer is just to rely on a better system of education, it is downright dangerous. Jobs spring naturally from higher levels of education no more than social solidarity eliminates poverty. Guaranteed failure can but turn citizens against a tool as necessary as it is insufficient.

Not that I have the answer. My point is more modest. Caused by a bubble whose responsibility goes beyond the greedy bankers and cynical banks who stoked it, the current crisis unfolds not only in the context of globalization, but also at the dawn of the Information Age. To focus on the former and ignore the latter is short-sighted in the extreme.

Do I forget how consumed law makers have been of late with online copying? Doesn't this reflect how the Information Age undermines copyrights?

Read Bill Keller's sober postmortem on SOPA. "A complicated subject [...] has been turned into simplistic sloganeering by rival vested interests dressed up as the saviors of freedom" (****). Or David Jolly about efforts to "stop the international Anti-Counterfeiting Trade Agreement". For "Ron Kirk, the American trade representative", ACTA is "essential to American jobs in innovative and creative industries" (*****).

I condemn all plundering, especially when sanctioned by law as is the case for font design in the United States (1). But if History is to be heeded, we should realize the dawn of each previous age saw radical advances in property laws. In the Food Age, individual rights to own land favored agricultural jobs. In the Energy Age, copyrights and patents enabled content producers to earn a living on the profits of industrial reproduction.

The passing of an age does not abolish old means of property. The Napoleon code still paid attention to riverside owners when banks are shifted by a flood (2). Content producers fostered by copyright laws deserve as before to receive proper protection, as long as it is free from hubristic claims.

New jobs though do not lie in the past. Turning intellectuals into farmhands en masse has been tried to catastrophic effects. Rather hear Hernando de Soto complaining that "for the past 15 years, the records of western capitalism have been debased", "memory systems [have] stopped telling the truth" (******). He is onto something. In the Information Age, data has become as dubious as it is plentiful. There is the new need to be met.

Information is now a service more than a product. The whole world is looking for reliable information. Searching and matching call for speed and convenience but also for recommendation, verification, trust. Hernando de Soto is right. Do not count on "memory systems" as such. Only people can be relied upon (3) and the smaller the scale the better.

In our Age, everyone is promised a job because trust involves us all in a reciprocal exchange of limited, but valuable personal knowledge. But without new property laws, these new jobs will not materialize.

Perhaps this is all a mirage. Realizing he has been working for Facebook for free, Nick Bilton has computed "Mark Zuckerberg [...] owes [him] about $50" (*******), hardly a living wage, even with future growth thrown in.

Before despairing of the future, one must look at the long term as George Osborne says we should. It would be a mistake for instance to measure the productivity potential of agriculture by the yield of fields tilled by serfs. Initial market asymmetry leads to worker exploitation. Henry Ford was still a baby when Karl Mark took a jaundiced view of the crushing conditions offered by British industry to farmhands displaced by globalization (4).

Yet today Facebook is the prime target behind the recent European privacy proposal. No doubt Facebook is a threat. But protecting consumers is not the same as enabling them to become productive self-knowledge workers. The state ought to provide the legal framework for fair business models so they can till their own data, what they do, what they wish, what they think, and what they know about those whom they recommend.

The Information Age jobs will come from new forms of free exchange of information for value. This requires new markets fashioned from new laws.

Philippe Coueignoux

• (*) ............. Free-market evangelists face a sad and lonely fate, by David Rothkopf (Financial Times) - Feb 1, 2012
• (**) ........... Our ignorance will yield more crises in capitalism, by Kenneth Rogoff (Financial Times) - Feb 2, 2012
• (***) ......... The west faces a crisis of confidence, not a crisis of capitalism, by George Osborne (Financial Times) - Jan 28, 2012
• (****) ....... Steal This Column, by Bill Keller (New York Times) - Feb 6, 2012
• (*****) ..... Intellectual Property Pact Draws Fire in Europe, by David Jolly (New York Times) - Feb 6, 2012
• (******) ... Knowledge lies at the heart of western capitalism, by Hernando de Soto (Financial Times) - Jan 30, 2012
• (*******) . Facebook Users Ask, 'Where's Our Cut?', by Nick Bilton (New York Times) - Feb 6, 2012
• (1) XIXth century the United States found expedient to legalize the copying of European font designs.
  .... Later American font designers never acquired the clout necessary to buy protection from the US Congress.
• (2) I rely on crowdsourcing to find the source of what is an imperfect recollection of mine.
• (3) this trust can be extended to tamper-proof mechanisms once audited by an arm length trusted third party
• (4) see the repeal of the Corn Laws passed by the British government in 1846, in the wikipedia