The Next Stage of Capitalism

Since the dawn of capitalism, people have been in awe of both its productive and destructive capacities. Karl Marx and Friedrich Engels expressed their own wonderment in a widely quoted passage from the Communist Manifesto, published in 1848.

"The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature's forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers, whole populations conjured out of the ground. What earlier century had even a presentiment that such productive forces slumbered in the lap of social labor?"

Prodigious production, however, imposed an equally prodigious cost on nature and humanity. And humanity did not go quietly into the dark industrial night. So long as people could survive on the land, however minimally, they rarely chose to become industrial laborers. As Karl Polanyi explained in The Great Transformation, they became "Labor" because they had to.

The driving force that made them have to was the enclosure movement. English law and custom were reshaped to segregate and privatize land formerly available to all for grazing and farming. With less and less access to the Commons, impoverished peasants moved into the cities. Over many decades, they became a reluctant and restive industrial workforce.

In his brilliant and so very needed new book Capitalism 3.0: A Guide to Reclaiming the Commons, (Berrett-Koehler) Peter Barnes argues that each stage of capitalism spawns its own operating system, its own set of rules and institutions that reflect its historical situation. The enclosures laws reflected a time of shortages and scarcity he calls Capitalism 1.0.

Beginning in the late 19th century and increasingly evident in the late 20th century, we have moved into a period Barnes calls Capitalism 2.0. This era is characterized by surplus, not scarcity. The central economic problem no longer is increasing supply, but soliciting new demand. An increasing portion of the GDP is spent to persuade people to want increasingly superfluous output and to provide them the credit to buy it. Regulations curb corporate excesses; incentives ameliorate the damage caused by those corporations.

Capitalism 2.0 spawns a political battle that focuses on how the enormous wealth generated by capitalism's prodigious engines should be distributed. That battle gives birth to a new set of rules and institutions, including the regulation of corporate behavior, environmental regulations, and the creation of a safety net(minimum wage and maximum hour laws, Social Security, and universal health care -- everywhere but in the U.S.)

To Barnes, the costs of Capitalism 2.0 on humanity are clear: growing inequality, increasingly stressful lives, ever-widening holes in the safety net as capital spills across borders and corporate revenues and power begin to exceed those of many nations.

We need a new set of operating instructions, Barnes argues, that will usher in and guide the creation of Capitalism 3.0. In a remarkably brief 166 pages, Peter addresses and rather astonishingly, largely answers his question, "How do you revise a system as vast and complex as capitalism? And how do you do it gracefully, with a minimum of pain and disruption?"

Capitalism 3.0 grew out of a life of social and political activism and market entrepreneurialism. In the 1970s, Barnes started a profitable solar energy company. In the 1980s, he helped launch the much more profitable and enduring Working Assets phone and financial company. He opens his book with this self-description. "I'm a businessman. I believe society should reward successful initiative with profit. At the same time, I know that profit-seeking activities have unhealthy side effects. They cause pollution, waste, inequality, anxiety and no small amount of confusion about the purpose of life."