The Limits of P2P

[Repost with permission (ask here) from a series of articles on P2P & Marxism: part 3, also read part 1 and part 2]

By Jonathan Clyne

In the previous parts of this article, peer-to-peer production was presented as a radical new way of organising production and different from other forms of collaboration. Instead of following the instructions of a top-down hierarchy working in a competitive environment, which is the norm in most businesses, people who felt passionately about a particular project got together on a voluntary basis to create something that was available for anybody who wishes to use it, as long as they did not turn it into private property. That is, it remains in the commons.

They are involved in what has become known as distributed production – the aggregation of many small and geographically dispersed inputs coordinated through the internet. Solar production on individual houses, linked up through a ‘smart grid’ maximizing the efficiency, is an example of actual physical production organised in distributed production. It is also becoming a factor to be counted with. In Germany, on 25 May 2012, a Saturday, solar power reached a new record. It feed as much as 20 nuclear power stations into the German power grid, enough to satisfy 50% of the midday electricity demand.

The paradox is that the precondition for distributed production is centralisation, whether it be in the form of factories producing laptops or giant server halls or an integrated electricity grid where a decision has been taken to adopt a standard that allows the different parts of the grid to communicate with each other.

Centralisation and concentration of ownership

Thus Acer, the world’s second largest PC producer, just opened a factory in Chongqing that will produce 40 million laptops per year. Server production is controlled by a few giants; broadband distribution in the USA is controlled by an oligopoly (although wifi might change that); components such as semi-conductors are produced in a few huge factories.

This physical production, which is much more than producing the means of communication, is generally run by different economic principles than P2P. Rather than distributed production, it is economies of scale and specialisation that matter.

Economies of scale and specialisation, given the present system, imply a concentration of ownership. At KickStarter.com one can collect a few million dollars from individuals for a film they want to see made, but Acer is hardly going to get $ 150 million for something as uninteresting as a factory in China. A recent study of all 43,060 transnational companies by the Swiss Federal Institute of Technology in Zurich estimates that through various forms of direct and indirect ownership 1,318 companies control 80 percent of world revenue. This is the necessary result under capitalism, if economies of scale and specialisation are going to take place, because IPO’s and Mergers and Aquisitions are important means to achieve this. Bank loans are another, but under capitalism this had led to an integration of finance and production. The increase in the number of billionaires and the proportion of global wealth they own has proceeded apace. And globally there has been a wave of privatisation, putting more of production into fewer and fewer private hands.

Two billion people are connected to the internet today. They engage in P2P to various degrees, from the simplest sharing of photos with their peers to involvement in elaborate projects. Yet most earn their living in the sector in the capitalist sector and are subject to strict hierarchies. The old working class, although somewhat transformed during the last decades is therefore far from dead. It would be wrong to say that it is only the industrial sector that is subject to centralisation. The world’s biggest single employer is McDonalds. An accountancy firm such as Deloitte employs 193 000 people. Factories have tended to become fewer and more centralised, but due to automation they have also tended to becomes smaller. That process has only begun in services. The hierarchies in these giant service industries are as strict as in factories, possibility even stricter in for example Walmart’s than in some of the more advanced automated factories.

The concentration of ownership has given a shrinking group of people more power and they have been using it to what they perceive as their advantage. The weakening of the labour movement combined with the pressure of unemployment has enabled them to jack up the intensity of work. In for example car plants, “lean production” in some plants has reduced the amount of “idle time” from 15 seconds per minute to 3 seconds. At Toyota, line speeds with an “idle time” only 2 seconds per minute have been recorded.

Experiments at for example Volvo in the seventies and eighties at abandoning the assembly line in favour of groups of workers producing a whole car have been jettisoned. This was not because it was less productive either in terms of labour or capital or that the quality was worse than a traditional factory. On the contrary, it was better. However, when it came to screwing up the pace of production to an intolerable pace, to compete with what other car factories were doing, that could not be implemented. There was no lever to be pulled that simply increased the speed of the assembly line.

Performance and education

Large groups of knowledge workers have suffered a similar fate. The largest group of knowledge workers, those involved in education, are among those that have suffered the most. In almost all developed countries, there has been a strong tendency towards tightening things up at all levels of education. This means less “free” time for preparing classes. But it also means that instead of encouraging teachers’ creativity, education has to be regimented around national tests.

Since that has gotten worse results rather than better, a further tightening is being implemented. About half of all OECD countries reward teachers according to their performance. How performance is measured varies, but it is common for teachers whose students achieve higher scores in national tests to get higher salaries. Therefore, teaching is further geared towards test results rather than developing children into knowledgeable confident individuals. The predominant trend has not been towards P2P forms of education, but towards an industrialisation of education. This is in line with the needs the big companies that need a disciplined work force.

Job satisfaction in the US has fallen from 61 percent in 1987 to 48 percent in 2006. The fall among young people under the age of 25 has been more, from 56 percent to 39 percent. Probably not only reflecting the worsening of conditions, but also a raise in expectations as young people engaged in P2P activities on the internet are more familiar that things can get done well without a hierarchy.

This tightening up of discipline has been going on despite widespread and long-established scientific evidence that it is not the best way of increasing productivity. Almost one hundred years ago the Harvard Business School made an analysis over a period of eight years of a group of workers and their different responses to attempts to increase productivity:

Essentially the studies progressed through a succession of hypotheses, dismantling each one. Neither changes in physical conditions (better illumination), nor in work schedules (more rest breaks), nor even in incentive systems could fully explain why productivity steadily improved among a set of young women—always labeled “the girls”—assembling parts in a test room. After years of experiments it began to dawn on Mayo, an Australian psychologist who had joined the HBS faculty, that at least two factors were driving the results. First, the women had forged themselves into a group, and group dynamics—members encouraging one another—were proving a strong determinant of output. Second, “the girls” had been consulted by the researchers at every step of the way: The intention of the experiment had been explained to them, and their suggestions had been solicited. From such heady stuff were distilled the basic insights of the human relations school—that workers were not mere automatons to be measured and goosed with a stopwatch; that it was probably helpful to inquire after what they knew and felt; and that a group had substantial control over how much it was prepared to produce.

Year by year the basic ideas of the Human Relations School of Management have been confirmed scientifically (and P2P confirms it in practice), but to what avail? Short-term profits are normally more important than long-term productivity, and especially in times of crisis. When the balance of power shifts in favour of capital, as it has done for the last three decades, then this kind of ‘short-termism’ is pushed into many other spheres as well, including education.

The contradictions

Another clear trend that has resulted from the shift in the balance of power has been the increase in working time. This diminishes the time available for voluntary activities. After the seventies, a century long decline in the normal working week was broken. In almost all developing countries, the working week has edged upwards since then. However, if one looks at the amount of time that a normal family works the change has been more dramatic. In the USA, the typical middle income family with children has added 25 percent to its working year from 1979 to 2000.

On top of that there is a drastic increase in inequality, which has all kinds of negative effects on productivity.

So, there are two trends in the economy that have been developing rapidly during the last decades – P2P / distributed production and the centralisation of production and ownership, with the former resting on the latter.

The main part of the economy works according to different economic principles than P2P. Principles that are irreconcilable.

• Voluntary association vs. turning up at work on time to pay the bills
• More free time vs. less free time
• Freedom of thought vs. industrial discipline
• Authority based on merits vs power based on ownership
• Free products vs. products sold for a profit
• Distributed production vs. centralised production

Being opposites does not mean that there are no overlaps and common interests. Even the Soviet Union and the USA had some common interests. They also traded with each other, although not through normal market channels. So it is with P2P and private capital.

Companies dependent upon selling and making profits will use P2P as much as possible. After all, it is of high quality and free. Astra Zeneca, the pharmaceutical company, has sacked thousands in its R&D department, because it is cheaper and better for them to rely on the contributions created via P2P. But this has not changed anything for the majority of its workforce and its production facilities are as confined to as few factories as ever.

Companies cannot earn money from P2P directly. You cannot sell what is free for anybody to get a mere click away. This is even more true if it is protected by a creative commons licence, which is a legally valid licence that explicitly forbids sale. However, companies can earn money from selling services and products connected with the commons. Software adaptations for the needs of a particular company; the actual pill that has been developed in the commons; and of course advertising. For this they need to employ people. It is from people employed to make products and providing services that can be sold that money can be made.

With the exception of those people employed to interact with P2P, private owners normally like to keep a tight control over those people that earn them their bread and butter. And they want to press them as hard as possible to increase their profits. IBM employs 300 people to work with the Linux kernel and gain insight and cred in the open source world, but it employs 400,000 other people.

Affecting the reality

The development of P2P production and its voluntary and free forms of organisation does have an effect on how some businesses are run. Google rose to predominance because the essence of its business is based on P2P production. The success of its algorithm for finding things on the internet is due to the fact that its founders understood early on that the most effective way to find something is by relying on how internet users themselves value a site, i. e. how many linked to a site.

Naturally, Google has embraced a work style closer to P2P. Employees are allowed to spend 20 percent of their time on “passion projects”. This has yielded as much as half of all the successful spin-offs to Google’s search machine.

It is relatively easy for a company that is in the forefront of development, knowledge based and highly profitable to have a more collaborative approach to its employees. Most companies cannot be in that segment. Nor is it easy for any company whose profits are squeezed in a crisis, to get a collaborative agreement on squeezing wages and working conditions. Therefore, most companies would not even contemplate anything even close to it at the best of times. However, even at Google the absence of a top-down hierarchy based on a mandate from the owners is not one Google’s many perks. Nor is distributed production one of its attributes. Fully 8,000 of its 25,000 employees work at the same place — GooglePlex, its headquarters. The rest are also collected at relatively large workplaces. The revelation that Google has been playing footsie with the NSA reveals that Google’s motto (“Don’t be evil”) is just like any other company’s motto when it comes to defending their interests – an advertising slogan.

Toyota — the P2P archetype?

Some of the hype around the influence of P2P on private companies is illusionary. In his book ‘The Penguin and Leviathan’, Yochai Benkler cites the example of Toyota’s production system. It involves workers in controlling the quality of production and suggesting improvements in production techniques.

Actually, Toyota’s system pre-dates P2P. Elements of Mitbestimmung were introduced into many industries in the seventies. This was one of the gains of the labour movement during the struggles of the seventies. However, rather than spreading, the power of workers representatives at all levels has dissipated since then. In any case, it did not have much in common with P2P.

An American engineer, otherwise much impressed by worker’s contributions at Toyota, describes work on the shop floor. It is very unlike the conditions people worked in when they created Linux and Wikipedia:

A large group of company employees were lined up, military style, shouting company slogans. They were all dressed in Toyota company uniforms of one-piece jumpers and soft-brimmed hats. The hat was the same style used by Japanese soldiers during the Second World War, and it was standard issue for all employees at the company. One employee stood at the front directing the drill. He would shout one slogan and the group would shout back in unison. This display of group obedience reminded me of old films of the Japanese military. “But why here?” I wondered. “Why would a company engage in military drills?”

Toyota introduces more than a million new ideas per year, most of them come from ordinary workers. That puts the management in a vulnerable position. What if workers start to get the idea that an unelected management is not needed, that private ownership of the company is a drain on the resources the workers themselves put into the company? Military drills is a way of knocking those kind of thought out of the heads of workers, at the same time as their brains can be picked for ideas, cheaply.

What trend, what principle of economic organisation is going to win? P2P production or the continued concentration of ownership with all that goes with it? Yochai Benkler makes an important point when he states that

“No benevolent historical force will inexorably lead this technological-economic moment to develop toward an open, diverse, liberal equilibrium. If the transformation I describe as possible occurs, it will lead to a substantial redistribution of power from the twentieth-century industrial producers of information, culture, and communications.”

In other words, there is a battle going between P2P production and concentrated centralised capital, but the problem is broader than Benkler thinks. It is not only a confrontation between P2P on the one side and a few ailing Hollywood giants, Encyclopaedia Britannica and the major telephone companies on the other side. The very essence of P2P production is based upon principles that are counter to the core of private ownership of the means of production.

Just because P2P is better, does not mean it will win

Just look at what has been happening to national health services, transport services, and power supplies. The dismantling of publicly owned services has been proven, in case after to case, to be less efficient and more costly, and it provides a worse service for most, but it is still being pushed through.

The battle ground for trying to stop P2P from spreading has been chosen by its opponents – it is in the political, and not the economic sphere. With a few exceptions, those companies that benefit from P2P production have not been vocal in stopping the avalanche of legislation to protect intellectual property rights and thereby limit P2P.

One example is the tightening of patent laws. Patents are no longer merely granted for the actual invention, but also for business models and software. This is absurd and inefficient. Contrary to what is often propagated (the myth of the inventor who struggles day and night for twenty years to at the end benefit from the wealth he can get from his invention), patents do not encourage new inventions. Research about changes in international property laws in sixty countries over a period of 150 years shows that inventions decrease when patent laws are strengthened! This is logical. No invention is suspended in mid-air. It is always based on previous inventions. Every tightening of patent laws therefore restricts the ability to build on past inventions. Nonetheless, tightening is pushed through, to protect all companies “private property”.

Another example is the Anti-dilution Act passed in 1995. Because it left some loopholes, it was strengthened in 2006. It is no longer necessary to prove that dilution (a negative association) of a famous trademark has taken place, it was enough to show that it was “likely”. Thus a single store selling women’s underwear, among other things, called Victor’s Secrets was sued by Victoria’s Secrets, with hundreds of stores, and forced to change its name.

In 1996, the EU created the Database Directive, removing raw data from the public domain. Copyrights have been lengthened. The Millenium Digital Copyright Act prohibited the creation and use of technologies that could be used to get at encrypted material, such as CDs. It even prohibited the use of such technologies for sampling, which is legal. And so on…

Sentences are stiff for breaking the laws. When Aaron Swartz hanged himself, he was facing $1 million in fines plus 35 years in prison on numerous counts connected with systematically downloading academic journals.

Legislation is perhaps just a smaller and less effective parts of the limits that is being forced on P2P. Increasing working time and stress, the decline of the welfare state affect the majority of the population and despite the vastly expanding potential for P2P, put severe limits on people’s ability to participate in P2P. So far, participation in P2P during people’s free time has been at the expense of watching television, and shopping. A very positive development, but not one that continue indefinitely, given the other factors at work.

It is pointless to try to predict which of the two major trends in the economy during the last three decades will be the stronger one. We have to begin by acknowledging that two such contradictory trends do exist. Then we have to discuss how the negative trend can be pushed back to make more way for the positive one, assess what forces can do the job, and then get things rolling. That is the subject of the final part of this article.