The $100bn Facebook question: Will capitalism survive ‘value abundance’?

Posted on February 29, 2012 

Is Facebook really worth $100bn – and where is this value coming from? [GALLO/GETTY]

Chiang Mai, Thailand - Does Facebook exploit its users? And where is the $100bn in the company’s estimated value coming from?

This is not a new debate. It resurfaces regularly in the blogosphere and academic circles, ever since Tiziana Terranova coined the term “Free Labour” to indicate a new form of capitalist exploitation of unpaid labour – firstly referring to the viewers of classic broadcast media, and now to the new generation of social media participants on sites such as Facebook. The argument can be summarised very succinctly by the catch phrase: “If it’s free, then you are the product being sold.”

“We can certainly position the users of Facebook as labourers. If labour is understood as ‘value producing activity’, then updating your status … creates Facebook’s basic commodity.” - Christopher Land and Steffen Böhm

This term was recently relaunched in an article by University of Essex academics Christopher Land and Steffen Böhm, entitled “They are exploiting us! Why we all work for Facebook for free“. In this mini-essay, they make a very strong claim that “we can certainly position the users of Facebook as labourers. If labour is understood as ‘value producing activity’, then updating your status, liking a website, or ‘friending’ someone, creates Facebook’s basic commodity.”

This line of argument is misleading, however, because it conflates two types of value creation that were already recognised as distinct by 18th century political economists. The distinction is between use value and exchange value. For thousands of years, under conditions of non-capitalist production, the majority of the working population directly produced “use value” – either for themselves as subsistence farmers, or as tributes to the managerial class of the day. It is only under capitalism that a majority of the working population produces “exchange value” by selling their labour to firms. The difference between what we are paid and what the market pays for the products we are making is the “surplus value”.

But Facebook users are not workers producing commodities for a wage, and Facebook is not selling these commodities on a market to create surplus value.

Indeed, Facebook users are not directly creating exchange value at all, but instead communicative use value. What Facebook does is to enable this pooling of sharing and collaboration around their platform – and by enabling, framing and “controlling” that activity, they create a pool of attention. It is this pool of attention which is sold to advertisers, for an estimated $3.2bn per year, which is barely $3.79 in ad revenue per user.

We can, of course, argue that Facebook does a lot more than just selling the attention. For instance, their knowledge of our social behaviour, down to the individual level, has undoubted strategic value – for political power players and commercial firms alike. But is this surplus value really worth $100bn? That remains a speculative bet. For the moment, it’s likely that the nearly one billion users of Facebook do not find the $3.79 in ad revenue per user very exploitative, especially since they do not pay to use Facebook, and are using the website voluntarily. That said, there is a price to pay for not using Facebook, in terms of relative social isolation from their peers who are users.

“Capitalism is in fact not just a scarcity ‘allocation’ system but also a scarcity engineering system.”

Engineering scarcity

What is important, however, is that Facebook is not an isolated phenomenon, but part of a much larger trend in our society: an exponential rise in the creation of use value by productive publics, or “produsers“, as Axel Bruns calls them. It is important to understand that this creates a huge problem for a capitalist system, but also for workers as we have traditionally conceived them. Markets are defined as ways to allocate scarce resources, and capitalism is in fact not just a scarcity “allocation” system but also a scarcity engineering system, which can only accumulate capital by constantly reproducing and expanding conditions of scarcity.

Where there is no tension between supply and demand, there can be no market and no capital accumulation. What peer producers are doing, for now mostly producing intangible entities such as knowledge, software and design, is to create an abundance of easily reproduced information and actionable knowledge.

This cannot be directly translated into market value, because it is not at all scarce – it’s over-abundant. And this activity, moreover, is done by knowledge workers, whose ranks are steadily expanding. This over-supply threatens to make knowledge workers’ jobs precarious. Hence, an increased exodus of productive capacities, in the form of direct use value production, outside the existing system of monetisation, which only operates at its margins. In the past, whenever such an exodus occurred – of slaves in the decaying Roman Empire, or of serfs in the waning Middle Ages – that is precisely the time when conditions were set for major societal and economic changes.

Indeed, without a core reliance on capital, commodities and labour, it is hard to imagine a continuation of the capitalist system.

The problem is this: internet collaboration has enabled the creation of use value in a way that totally bypasses the normal functioning of our economic system. Normally, increases in productivity are somehow rewarded, and these rewards enable consumers to derive an income and buy products.

But this is no longer happening. Facebook and Google users create commercial value for their platforms, but only very indirectly. And they are not at all rewarded for their own value creation. Since what they are creating is not what is commodified on the market for scarce goods, these value creators do not receive income. Social media platforms are exposing an important fault line in our economic system.

We have to link this emerging social economy, based on sharing creative expression, with the more authentic field of commons-oriented peer production, as expressed in the open-source and “fair use” open-content economy, which oneestimate said made up one-sixth of US GDP. There is also no doubt that one of the key ingredients of China’s success so far has been the combination of the open-source – such as the country’s domestic “Shanzai” economy - together with the patent-free policies that are imposed on foreign investors. This has guaranteed an open, innovative commons for much of Chinese industry.

Even as the open-source economy becomes the default way to create software, and even as it creates companies that reach a revenue of more than $1bn, such as Red Hat, the overall effect is still deflationary. It has been estimatedthat open-source annually destroys $60bn in revenues for the proprietary sector.

Thus, the open-source economy destroys more proprietary software value than it replaces. Even as it creates an explosion of use value, its monetary value decreases.

Open-source manufacturing

The same effects occur when the shared innovation commons approach is used in physical production, where it combines an open-source approach with distributed machinery and capital allocation (using techniques such as crowd-funding and social lending platforms, like Kickstarter).

For example, the Wikispeed SGT01, a car that received a five-star security rating and can attain a fuel efficiency of 100 miles per gallon (roughly 42.5 kilometres per litre), was developed by a team of volunteers in just three months. The car is being sold for only $29,000, about a quarter of what a traditional industrial automobile firm would charge, and for which it would have needed at least five years of development and billions of dollars.

Local Motors, a rapidly growing crowd-sourced car company, claims to develop automobiles five times faster than Detroit, with 100 times less capital, but WikiSpeed has achieved even faster design and production times. The WikiSpeed car is designed for modularity, using sophisticated software development techniques (such as agile, scrum, and extreme programming), an open design, and local production by garages, using distributed manufacturing techniques.

And Arduino, an open-source electronics prototyping platform, works similarly to WikiSpeed and is driving prices down in its sector. If Marcin Jakubowsky’s Open Source Ecology project is successful, this will happen for at least 40 different types of machinery. In every field where an open-source manufacturing alternative develops – and I predict that they will be developed in every single field – there will be similar pricing and income pressures on mainstream economic models.

“What will happen with capitalism given social media-based exchanges, commons-based production of software and hardware, and collaborative consumption?”

‘Collaborative consumption’

Another expression of the sharing economy is collaborative consumption. As Rachel Botsman and Lisa Gansky have demonstrated in their recent books - What’s Mine is Yours and The Mesh, respectively – there is a rapidly growing sharing economy developing through product-service systems, sharing marketplaces and collaborative lifestyles.

For example, it’s estimated that there are about 460 million homes in the developed world, and that each home has, on average, $3,000 worth of unused items available. There is clearly economic benefit to be had by using these idle resources. Much of it will not be rented, however, but swapped and bartered for free. Even the paid sharing economy will have a depressive effect on the buying of new products.

Such developments are good for the planet and good for humanity, but the larger question is: are they good for capitalism?

What will happen with capitalism given social media-based exchanges, commons-based production of software and hardware, and collaborative consumption, on an increasingly massive scale?

What happens if more and more of our time goes into producing use value – a fraction of which creates monetary value – but there is not a substantial return of income to the use value producers?

The financial crisis beginning in 2008, far from diminishing the enthusiasm for sharing and peer production, is in fact accelerating the adoption of such practices. This is not just a problem for the increasingly precarious working class, but also for capitalism itself, which is seeing its opportunities for accumulation and expansion dry up.

Not only is the world faced with a global resource crisis, it is also facing a crisis of intensive development, because value creators are increasingly income-less. The knowledge economy turns out to be a pipe dream, because what is abundant cannot sustain market dynamics.

Thus we have an exponential rise in the creation of use value, but only a linear increase in the creation of monetary value. If workers have less and less income, who can buy the commodities that are offered for sale by companies? This, in a nutshell, is the crisis of value that we are facing as humanity. It is a challenge just as big as climate change or increases in social inequality.

The meltdown of 2008 was a prefiguration of this crisis. Since the advent of neoliberalism, workers’ wages have been stagnating and purchasing power was maintained only by an over-extension of credit throughout society. This was the first phase of the knowledge economy, in which only capital had access to networks, which it used to create globally coordinated multinationals.

As the knowledge society grew in size, more and more of businesses’ value consisted of intangible, not physical, assets. The neoliberal stock market and its speculative excesses can be seen as a way to evaluate the amount of intangible value that is added to the stock’s value by human co-operation. This bubble had to burst.

The second phase of the knowledge society, in which networks are diffused throughout society and allow productive publics to be directly engaged in peer production, creates an additional layer of problems. Add to the wage stagnation and the exodus out of wage labour that peer-based use value creation causes, and we can see that the problem is not solvable within the present paradigm. Is there a solution?

There is – but that is for the next installment. The solution involves an adaptation of capitalism to peer production, but also opens up the avenues for a transcendence of capitalism.

Michel Bauwens is a theorist, writer and a founder of the P2P (Peer-to-Peer) Foundation.

Follow Michel on Twitter: @MBauwens

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial policy.

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P2P and Marxism: An Interview with Michel Bauwens

Last month I was in London where I attempted a lecture by Michel Bauwens on peer-to-peer dynamics. I wrote an article in Dutch for ‘De Wereld Morgen’, the main online newspaper of ‘civil journalists’ (but it has a professional editorial board and the project is financially supported by the trade unions). Fortunaletly, there is a edited version of the lecture on vimeo.

P2P and the Commons as the new paradigm from David Nixon on Vimeo.

After the lecture, I contacted Michel for an interview that I want to publish here in the hope to start a constructive discussion on P2P and Marxism.

1. We all know examples of P2P in the immaterial field: Linux, Wikipedia, Arduino. Can you give some examples of P2P in the ‘real’, material world, i.e. in the field of production? 

Arduino is already an example touching on material production since the collaboratively designed motherboards are already produced and sold on the market by companies using the Arduino trademark. An example I really like is the Nutrient Dense Project, a collaborative research network of farmers and citizen scientists that directly use nutrient research in their own immediate production. One of the most exciting areas is probably that of so-called open source cars, like the Rallye Motor and the Darpa-funded XC2V marine assault vehicle, the latter which is based on an input of more than 30,000 designs. The StreetScooter, an electric car based on a corporate design commons with over 50 companies participating is perhaps most exciting, since the orders have already rolled in and the car should be driving in German cities by 2013. In the p2pfoundation wiki section on Product Hacking (http://p2pfoundation.net/Product_Hacking), we've annotated nearly 300 open hardware projects but they are just the tip of the iceberg. It helps to distinguish the design phase, where crowd sourcing and collaboration are not qualitatively different from software collaboration, from the phase of 'making', which would require an infrastructure for open and distributed manufacturing which is only marginally available. But in the field of making we have exciting developments towards shared material infrastructures such as co-working and hacker spaces, product-service systems for car sharing and many other services, and the miniaturization of production via 3D Printing and Fab Labs, all of which also have open source versions and aspects.

2. You compare the transition from capitalism to P2P with the transition from slavery to feudalism, or with feudalism to capitalism. In both cases there was a mutual change from the top and the bottom. In London you only dwelled on the first one: slaves leaving the system and slave owners turning slaves into serves who were better off than before, but what about the transition from feudalism to capitalism? There was the birth of a new class and the transformation from noblemen to capitalists, but you can hardly say that workers were better off than before. So where is the positive change from the bottom?

A transition from one form of unequal class society to another is always problematic for the value producing classes at the bottom. One can argue that serfhood is an inherently better position than slavery but it was still exploitation and dominance, and many serfs had been free farmers before. The situation with capitalism is not that different, though there was, and is, a lot of hardship, the formal rights of workers are certainly an improvement, and at least for the western working class, there has been for a long while, substantial material improvement. But overall, the systems transitioned because the old system was no longer sustainable and the new one was overall more efficient in creating material riches. It all depends on the social contract and the relative strength of the forces at play. Strong labour movements have tremendously improved the situation of working people, and the situation in the Middle Ages between the 10th and the 13th century was also one of improving living standards. So the record is always mixed and the people themselves usually have a pretty clear picture of what needs to be improved. For example, what worker would want to a return to serfhood as a social condition? Since I have difficulties in imagining a classless society myself, I see peer producers in conflict with netarchical capital about their social condition, rights, and material livelihoods, until the moment that peer producers become the core social layer, and the commons the locus of core value creation. This is not a scientific scenario with a certain and unavoidable ending but rather a description of the field of tension in which peer production develops.

3. To continue this analogy: do you see a new class arising under capitalism, or a sort of ‘enlightened capitalists’ turning to open source (as described in Wikinomics)?

Increasingly the commons is and will be the core of value creation, but value is still essentially captured by market economy, and netarchical capital is the fraction of capital which understands that change and want to profit from it. This means they have both to enable and empower social production, but also subject it to their own control, so that they can capture the value that is generated. The first part forces them to a certain type of strategic behaviour that fosters sharing, while the second requirement forces them to maintain a general context of continued dominance. This is in essence the new social tension of the emerging p2p age, between communities of peer producers and the platform owners. The key for peer producers is to gain control of their own livelihoods and social reproduction, and in my view this can best be done by creating their own cooperative/corporate vehicles, which I call, following Neil Stephenson in the Diamond Age and the lasindias.net suggestions, "Phyllis", i.e. community-supportive entities that allow commoners to sustain their work in the commons, and to substract it from the mainstream economy of profit-maximization.

4. Can you see a parallel between P2P and the cooperative movement born in the eighteenth century (utopian socialism), or with the hippies and the communes in the sixties?

The communal impulse is one of the permanent aspects of humanity, which ebbs and flows according to social conditions, and I think we are witnessing a revival of this impulse. However, there is a big difference, cooperative forms of organization can now work around open design commons and become hyper-innovative, and can obtain economies of scope to outcooperate shareholder-based multinations. Cooperatives and intentional communities are therefore no longer 'dwarfish forms' but actually the vanguard of the new p2p production system. If you combine shared open innovation commons (instead of privatized intellectual property which holds back innovation), with these new product-maximizing and commons-maximizing entities, you can obtain a quantum leap in productivity. This is why netarchical capitalists invest in platforms, and this is why the alternative ethical economy needs to do the same, and if they do, they could replace the for-profit corporation at the heart of our economy.

5. If you say that we need to prepare an alternative to capitalism, is the P2P-movement not a sort of ‘escapism’?

Infinite growth is not possible in a finite environment, and we are now reaching the limits of growth. This means that capitalism is increasingly unable to grow its way out of its problems and that the share of the 1% can only grow through dispossion, and this is what we are now witness in Europe, with Greece an advance example of what is in store for the working populations. So it is not a matter of escapism, the old system is dying and will be replaced, but it could be replaced by something worse, it could regress like in the early centuries after the fall of the Roman Empire, or it could reorganize itself to a higher level of achievement and complexity, which is what the p2p approach indicates.

6. You describe #Occupy as an example of peer producing political commons. In what way is this different from historical ‘anarchist’ or ‘communist’ movements like the Paris Commune, Barcelona 1937, or perhaps even the Russian Revolution?

If you observe an occupation, you see a community that is producing its politics autonomously, not following hierarchical or authoritarian political movements with a pre-ordained program; you see for-benefit institutions in charge of the provisioning of the occupiers (food, healthcare), and the creation of an ethical economy around it (such as Occupy's Street Vendor Project). This is prefigurative of a new form of society in which the commons is at the core of value creation; these commons' are maintained by non-profit institutions, and the livelihoods are guaranteed through an ethical economy. Of course there are historical precedents, but what is new is the extraordinary organisational, mobilization and co-learning potential of their networks. Occupy works as an open API with modules, such as 'protest camping', 'general assemblies', which can be used as templates and modified by all, without the need for central leadership. We can now have global coordination and mutual alignment of a multitude of small-group dynamics, and this requires a new type of leadership. The realization of historical moment of Peak Hierarchy, the moment in which distributed networks asymmetrically challenge vertical institutions in a way they could not do before, forces social movements to look for new ways of governance... but these are not given, and have to be discovered experimentally, and of course, there will be valuable lessons to learn from predecessor movements!

 8. In order for P2P to really blossom, we need to get rid of intellectual property rights, copyrights, patents, etc. How do you think we can achieve this?

I'm personally not a pure abolitionist, because I believe a lot of artists and creators believe in the necessity of author's rights, so I think we can do number things. Bring back protection to reasonable amounts of time, no more than the original 14 years of protection, or less, the Pirate Party proposes a five-year limit. Next is to offer choice to creators, by popularising choice-based licenses such as the Creative Commons. But the priority is to find new ways to fund creation ... this can be done through collective licensing and other forms of public funding, promoting and sustaining open business models, and ultimately, through a basic income, which recognizes that, every citizen is a value contributor and creator. These goals can be achieved partly through the social innovation that results from peer production communities, who are intensively experiment with open business models, and partly through stronger social and political movements, such as the free culture movement, the Pirate Parties, and other expressions of the new sharing culture.

9. It seems to me that P2P is creating a sort of ‘whole new world’, but without any references or links to the present political system. If Occupy represents an alternative was to engage in politics, what is the link between peer politics and bourgeois democracy and political parties?

That is a very difficult question and results from a paradox. One is the increasing social awareness that our present democracy is a facade, and that the state has been taken over by a predatory financial faction, while classic politicians see no other way out than to succumb to their blackmail. But the other side is that people's freedoms and rights and private and social income is increasingly under pressure, which leads to political and social mobilization as well as effective policy engagement. The first aspect leads to continuous democratic innovation from the new p2p culture, think about the peer governance mechanisms in peer production communities; new inventions such as dynamic voting, and while these mechanisms operate outside the mainstream, they are also embedded in the new forms of value creation, new p2p social institutions, and therefore, poised to grow. The second aspect leads to new political and social forces that work within the present system, such as the emerging Pirate Party. In Brazil, I heard that the vibrant Eixo do Foro cultural movement, which has a functioning counter-economy around music, is also politicising and engaging with local politics. The second leads to what I call diagonal politics, i.e. mutual adaptation between emerging p2p forces and practices, and the old institutional realities. To the degree that this is ineffective, it pushes from the solution coming from the first aspect, i.e. prepares for a more radical and revolutionary re-ordering of our institutions. Tellingly, a Swedish pirate party member once wrote that the Pirate Party is the last chance to avoid revolution. To the degree that the present system refuses adaptation, to that degree they heighten the need and push for more radical transformations.

10. How do you estimate the impact of P2P on the labour movement? Doesn’t it also undermine the bureaucratic structures of workers organisations?

I'm in touch with young labour and union activist who are strong believers in networked labour movements and we also see how the Occupy movement has already radicalized the U.S. labour movement. But ultimately, the old institutional and hierarchical structure of the unions, as well as their increasing inability to protect social achievements within the present regressive system, must also lead to a profound renewal of the labour movement. In a way, the p2p movement is actually an expression of the new dominant layer of cognitive workers, who in the West are the mainstay of productive labour. P2P is their culture and what needs to happen to do productive and useful work. In that sense, the P2P movement is the new labour movement of the 21st century, with the Indignados and Occupy as the first expression of that new labour but also civic, sensibility.

11. You claim that P2P makes a new, ‘higher’ form of society possible. Before, that was not the case because the technology did not exist. Marxists make this claim already for more than 150 years. Do you think they were wrong then, perhaps correct today, or it P2P something ‘completely different’?

I consider Marxism, and the other forms of socialism and anarchism, ultimately as an expression of a dichotomy within the industrial capitalist system, and proposing other logics to manage the industrial model. But P2P is the expression of the evolving class and social dynamics under cognitive capitalism. And while the former was essentially anti-capitalist, and could not really point to a new hyperproductive model of organising production (socialism was a hypothesis, and its real life examples inevitably disappointed, there was no emergent socialism within capitalism and only 'state capitalism' outside of it), what is different for the p2p movement is that it can point out to already existing models that are outcooperating and outcompeting classic capitalist models, i.e. it is already post-capitalist. Marx was right about capitalism, but wrong about socialism and I believe the politically driven model of social change, when not based on an existing prior new productive model, was ill-conceived. The P2P movement is therefore poised to realize what the 19th and 20th century social movements couldn't, because the hyperproductive alternative was not available to them. The politics of P2P flow from an already existing social practice, that is a really key difference.

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