Center for a Stateless Society
A Left Market Anarchist Think Tank & Media Center
The Third Industrial Revolution: Not As Easy to Co-opt as the Second.

In the late 19th century, the decentralizing potential of the Second Industrial Revolution — the introduction of electrical power into industry — was a common theme in social analysis.

The idea was that electrical power was destroying the technical rationale for large factories. The main reason for the Dark Satanic Mills of the First Industrial Revolution was to economize on power. The prime movers that powered industrial machinery — typically steam engines or water wheels — were very large and expensive, so it made sense to concentrate as many machines as possible in one building and power them all with belts running to a central drive shaft.

The electric motor eliminated this imperative. Since you could build a prime mover into each machine, it became economical to site it near the point of consumption and then scale its output to fit demand. The ideal production model for taking full advantage of this new technology’s potential would be craft production in small shops using general-purpose electrical machinery to produce for the local market on a lean, just-in-time basis — in other words, what job shops in places like Italy’s Emilia-Romagna district do today.

The liberatory, decentralizing potential of electrical power was the theme of works like Pyotr Kropotkin’s “Fields, Factories and Workshops,” which envisioned a world of small-scale relocalized industry integrated into village economies with raised-bed intensive horticulture. To repeat, this would have been the most natural use of electrically powered machinery — what Lewis Mumford called the “Neotechnic” revolution, in contrast to the Paleotechnic Era of coal, steam, iron and Dark Satanic Mills.

(The Paleotechnic Era itself — the First Industrial Revolution — was of course thoroughly statist in its origins. Its choice of production technologies and industrial focus were determined by the interests behind it: an alliance between the absolute states whose gunpowder armies had suppressed the free towns of the late Middle Ages, the big landed interests who switched to capitalist agriculture and enclosed peasant land, the mining and armaments industries, and the imperial fleets and colonizing corporations that plundered the globe.)

But a funny thing happened on the way to the Neotechnic Revolution. To make a long story short, the state happened. Neotechnic technologies like electrical power were co-opted and enclosed by the existing economic interests that controlled the state in the U.S., Britain and Germany.

Instead of small, general-purpose machines making a wide variety of products in short runs as orders came in from the local market, electrical machinery was organized according to the mass production system. Large, product-specific machines engaged in long production runs to utilize maximum capacity and minimize the unit costs of the expensive, capital-intensive machinery. And all this was done in giant factories, with machines lined up in endless rows, just like in the Dark Satanic Mills. The new wine of neotechnical industrial technology was poured into the old bottles of paleotechnic institutional structure.

This was only possible because the state intervened to make it economical. Large-batch production in round-the-clock shifts could only be feasible if market areas were large enough, and shipping costs low enough, for the factories to dispose of their output. The whole system could never have come about in the first place in the United States, had not the federal and local governments massively subsidized the creation of the national railroad system and created a unified national market with artificially low shipping costs.

Because of the enormous capital outlays required for mass-production machinery, and the imperative of utilizing capacity to amortize those capital investments, it was also necessary to create political and social mechanisms for guaranteeing the entire output would be consumed. This mean cartels based on patents and other forms of regulation to stabilize control of industry in the hands of a few big producers, so that they could use monopoly pricing to pass the costs of idle capacity on to the consumer. It meant the use of mass consumer credit (and debt) to increase aggregate demand. It meant a planned obsolescence model which relied on the patent system to criminalize generic spare parts and design for interoperability, and on the schools and other organs of cultural reproduction to stigmatize homemade goods, conservation and reuse as “old-fashioned” and even “un-American.” And it meant, finally, direct state action to utilize idle productive capacity when all else failed, through things like building the civil aviation system and the Interstate Highway System, or the permanent war economy we’ve had since about 1940.

By all these means, the state and the coalition of interests that controlled it were able to stave off the threat liberatory technologies posed to their centralized power. The Second Industrial Revolution, which offered to destroy the factory system, free labor from the domination of capital, destroy decentralize production to the neighborhood and village, and abolish the divisions between both town and country and hand-work and brain-work, was instead co-opted into the institutional framework of the First Industrial Revolution. The technology that should have destroyed the old system of power was instead harnessed to serve it.

There are many today who fear that the big players in the corporate economy will enclose the technologies of the Third Industrial Revolution — based on micromanufacturing technology and networked communications — the same way their great-grandfathers enclosed those of the Second. Hilary Wainright (“Peer-to-peer production and the coming of the commons,” Social Network Unionism, September 2, 2012)  asks, what is to prevent distributed, peer-to-peer production technologies from being integrated into capitalism, rather than replacing it? “…[I]f the most intelligent predator companies are already exploiting commons production, what is to stop the corporations from fencing this commons in?”

In this nightmare scenario, corporate assembly lines full of 3D printers churn out goods, billionaires and cowboy CEOs get even richer — and millions fall victim to technological unemployment.

And make no mistake:  The dominant economic interests today would love to do just this.

The new technologies of liberation, if allowed to develop according to their own interior logic, render obsolete the entire material rationale behind the wage system and the factory system, and threaten to destroy corporate power. The factory system and wage system originally came about because of the technological shift from individually affordable, general-purpose craft tools to extremely expensive industrial machinery. Combine this with a state of affairs in which the propertied rich of Britain had already robbed virtually the whole peasantry of its rights in the land with the help of the state, and forcibly converted them into propertyless wage laborers, and you get a system in which only the very rich can afford to buy production machinery, and then hire factory laborers to work it for them.

The revolution in cheap, garage-scale CNC machine tools reverses this shift. The current trend is toward general-purpose machine tools whose most efficient use is in craft production in small shops. Open-source 3-D printers, cutting tables, routers and lathes can be had for $1000 or less apiece. When the cost of a garage “factory” is the equivalent of six months factory wages — how ya gonna keep ‘em down in the factory?

But the dominant economic interests of the day are doing their best to stave off this revolutionary threat by domesticating the new technologies, co-opting them into the existing corporate institutional framework, and enclosing their productive potential as a source of rents. GE’s [PDF] “Industrial Internet” report is a perfect illustration of their preferred model of the Third Industrial Revolution. Just imagine a sped-up and Taylorized version of today’s corporate economy, with all production and distribution everywhere integrated into one seamless flow by means of the same technologies Walmart currently uses to track inventory through its “Warehouses on Wheels” wholesale and distribution system.

INTELLIGENT MACHINES New ways of connecting the word’s myriad of machines, facilities, fleets and networks with advanced sensors, controls and software applications.

ADVANCED ANALYTICS: Harnessing the power of physics-based analytics, predictive algorithms, automation and deep domain expertise in material science, electrical engineering and other key disciplines required to understand how machines and larger systems operate.

PEOPLE AT WORK: connecting people, whether they be at work in industrial facilities, offices, hospitals or on the move, at any time to support more intelligent design, operations, maintenance as well as higher quality service and safety.

In GE’s power fantasy, all the digital machine tools are heavily DRMed, the digital designs are proprietary, and “intellectual property” law enables corporations to capture the unprecedented productivity for themselves via 2000% brand-name retail markups rather than passing the savings on to the consumer. Sound familiar?

Perhaps even worse, some members of the Left whose hearts are clearly in the right place nevertheless unwittingly advocate a vision of “progressive” economics that amounts to a greenwashed version of corporate enclosure.

Jeremy Rifkin writes of “a Sustainable Era of Distributed Capitalism” (World Financial Review) in which green, decentralized technologies will provide the basis of a new 21st century industrial boom. Such technologies will lead to long-term economic growth and jobs. The Green Party takes a similarly misguided view, promoting the so-called “Green New Deal” and “Green Jobs” as an agenda for economic growth.

All these people see new technologies like wind farms, smart grids, hydrogen power, high-speed bullet trains and 3D printing as the foundation of a new long-wave cycle of investment of the kind Kondratiev wrote about, in which building a fundamentally new system of infrastructure and rebuilding industrial plant and equipment will soak up surplus investment capital for decades — the same kind of industrial boom generated by building the railroad system and the civil aviation and highway systems.

The problem is that decentralized, ephemeral technologies are by their nature deflationary. They reduce the need for investment capital and for labor. They destroy exchange-value. They do so for the same reason that the replicators in Star Trek: The Next Generation make it impossible to make a profit or earn a wage selling “tea, Earl Grey, hot.” Open-source, garage-scale CNC machine tools reduce the capital outlays for manufacturing by two orders of magnitude. A desktop computer costing a few hundred dollars can do the work of a TV station or newspaper publishing facility costing many hundreds of thousands of dollars.

Rifkin, God bless him, says — entirely accurately — that the new technologies will enable each person to be their own manufacturer, power company and media production company. What he fails to realize is that it’s pretty hard to make large amounts of money in an economy like that.

Even in the heyday of mass production, the economy was plagued with a chronic tendency toward having more investment capital than it could find profitable outlets for, and more plant and equipment than it could run at capacity and still dispose of its full product. The recent revolution in ephemeral technologies — technologies that require one, two or more orders of magnitude fewer material inputs to produce the same goods or serve the same function — has accelerated this tendency beyond belief. According to Douglass Rushkoff (“How the Tech Boom Terminated California’s Economy,” Fast Company, July 10, 2009), the implosion of capital outlay costs required for production in the information industries rendered most of the venture capital previously invested in those industries obsolete.

The fact is, most Internet businesses don’t require venture capital. The beauty of these technologies is that they decentralize value creation. Anyone with a PC and bandwidth can program the next Twitter or Facebook plug-in, the next iPhone app, or even the next social network. While a few thousand dollars might be nice, the hundreds of millions that venture capitalists want to–need to–invest, simply aren’t required.

And micromanufacturing technology is doing the same thing to physical production.

“Economic growth” is a perverse metric in which anything that increases the total cost of inputs consumed also increases the value of economic output. It’s essentially a cost-plus accounting system in which the consumption of inputs is by definition a source of value. Corporate management uses the same accounting system, running up enormous administrative costs and sinking billions into ill-advised capital expenditures and then incorporating the bloated overhead cost into the transfer prices of goods “sold” to inventory.

By the same token, anything that reduces the total cost of labor and material inputs required to produce a given standard of living will reduce GDP by the same amount. The natural course of affairs is for the drastic reduction in labor and capital required to produce goods, and the drastic reduction in waste production )like the military-industrial complex, planned obsolescence, the car culture and guard labor), to result in an implosion of nominal GDP.

The natural effect of networked communications technology and ephemeral production technology, therefore, is to shift a major part of economic activity to self-provisioning outside the cash nexus altogether, in the informal and household sector, and to reduce the total cost of the remaining portion of our consumption needs to the point that we can pay for them by working (say) ten or fifteen hours a week.

If such people on the Left should know better, there are others backing the same greenwashed capitalist vision — the Warren Buffets and Bill Gateses of the world — who know exactly what they’re doing. The future of the world, if these people get their way, lies with Buffet’s giant corporate wind farms (linked to distant cities with a heavily subsidized “smart grid”), Microsoft’s proprietary software, and Monsanto’s proprietary biotech.

The new technologies, if left to themselves, would destroy the profits of such people. They would give the rest of us historically unprecedented abundance, independence, leisure, and control over our working lives. This is the natural effect of technologies of abundance in a freed market, when market competition socializes the benefits of innovation and efficiency.

The only way the propertied classes, the rentier classes, can prevent this is by relying on the state to step in and snatch scarcity from the jaws of abundance. The masters of our corporate economy dream of a world in which factories full of 3D printers churn out $2 widgets that sell for $200 at Walmart, farmers have to plant each year’s sterile crop with new genetically engineered seed from Monsanto, and $50 e-books wink out of existence after five readings.

Throughout history, the propertied classes  — landlords, usurers, capitalists, state bureaucrats — have used artificial property rights, artificial scarcities and monopolies of all kinds to arbitrarily increase the amount of labor required for us to support ourselves. They have compelled us — as the price of being allowed to produce to feed ourselves — to work hard enough to feed the parasitic rentiers in addition to ourselves.

The paradigmatic example of this is the landlord, who imposes his rule on a population of peasants already peacefully supporting themselves on their own land, and demands rent for “providing” them land to work (i.e., not evicting them from it). Throughout history, they have set up toll gates between us and natural opportunities, between our own labor and the satisfaction of our needs, so as to collect tribute for the “service” of not preventing productive labor.

And that is what they want to do with the new economy of abundance.

Fortunately, as much as they desire this, this time around they can’t have it. The legal monopolies their artificial scarcity rents depend on are becoming unenforceable. What Wikipedia did to Britannica, what the file-sharing movement is doing to the record industry, open-source micromanufacturing will do to corporate industry.

No doubt corporate interests will make a valiant effort to lock their digital design files with “unbreakable” DRM, Congress will mandate the production of 3D printers only with massive built-in safeguards against patent infringement, and circumventing DRM will be massively criminalized. That’s what the record and movie industries already tried to do, with the Digital Millennium Copyright Act and subsequent legislation, to stop file-sharing. That worked out great, didn’t it?

The problem is, prohibiting the manufacture of “unauthorized” 3D printer and other machine tool models is a lot easier said and done, when the technology is self-replicating. What happens when a garage factory can churn out new tabletop machine tools, and the people working in it don’t care what the law is? And there’s 50,000 such garage factories, scattered through every neighborhood in America? On top of that, it’s a 100% certainty that CAD/CAM files will be available on torrent download sites, stripped of DRM, on the same day they’re created. The law, as the saying goes, is an ass — and it makes an even bigger ass of itself every day.

The new technologies of abundance, by their very nature, thwart the enforcement of state-imposed artificial scarcity. The present corporate-state order, exhausted and bankrupted from the sheer cost of subsidizing inefficiency and protecting it against competition against the superiority of free cooperative labor, has reached the breaking point. It is a dying system.