Kevin Carson on Hierarchy and Intellectual Property

While we're on the topic of intellectual property, take a look at Kevin Carson's recent article published in The Freeman: Hierarchy or the Market. Unlike many left-wing anarchists who see hierarchies as inherently unjust and undesirable, Carson views hierarchies as artificially prevalent, a result of market distortions creating by state subsidies and interventions. Remove those distortions and we still might have some hierarchical social structures, but not nearly as many as we have now.

The problem is not hierarchy in itself, but government policies that make it artificially prevalent. No doubt some large-scale production would exist in a free market, and likewise some wage employment and absentee ownership. But in a free market the predominant scale of production would likely be far smaller, and self-employment and cooperative ownership more widespread, than at present. Entrepreneurial profit would replace permanent rents from artificial property and other forms of privilege. Had the industrial revolution taken place in a genuine free market rather than a society characterized by state-backed robbery and privilege, our economy today would probably be far closer to the vision of Lewis Mumford than that of Joseph Schumpeter and Alfred Chandler.

Carson gives intellectual property laws special attention as a source of state-subsidized market distortion:

The state’s so-called “intellectual property” laws, especially, are a powerful force for cartelization. Many oligopoly industries were created by controlling patents (for example, AT&T was based on the Bell patent system) or exchanging them (GE and Westinghouse). Patents also enable corporations to restrict the supply of replacement parts for their goods and thus render artificially expensive the choice to repair an old car or appliance as an alternative to buying a new one. This facilitates a business model based on planned obsolescence, large production runs, and “push” distribution.

“Intellectual property” also artificially promotes hierarchy even in industries where the minimum level of capitalization has ceased to be an effective barrier to self-employment. One of the original justifications for corporate hierarchy was that the enormous scale of even the minimum capitalization, in entertainment and information, was an entry barrier: To start a newspaper, radio station, movie studio, publishing house, or record company required, at minimum, an outlay of several hundred thousand dollars. As a necessary result, media and entertainment were concentrated in the control of a few gatekeeper corporations.

But as Yochai Benker observed in The Wealth of Networks, the digital revolution has reduced the cost of the basic item of capital equipment—the personal computer—to under a thousand dollars. And supplemental equipment and software for very high-quality desktop publishing, sound editing, podcasting, and so on can be had for a few thousand more. The ability to replicate digital information on the Internet, at zero marginal cost, renders the corporate dinosaurs’ marketing operations obsolete.

The gatekeepers’ only remaining basis for power is the state’s “intellectual property” monopolies—which explains why Microsoft, the RIAA, and MPAA have pursued such draconian copyright legislation to protect themselves from market competition. The intrusive DRM (digital rights management) used by Microsoft and the entertainment companies, and the legal penalties for circumventing it, in effect outlaw precisely what computers are made for: the replication and exchange of digital information. Without copyright and patent monopolies, peer production by self-employed information and entertainment workers would likely be the norm in software, music, and publishing. (It’s probably no coincidence, by the way, that industries dependent on such “intellectual property” monopolies are the main profitable sectors in the global economy. It’s a case of artificial “comparative advantage,” created by state-erected barriers to the diffusion of knowledge and technique. The most profitable industries are those whose profits amount to rents or tolls for access to artificial property.)

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Couldn't corporate managers maximize profits and link effort to reward by outsourcing to co-ops if they are more efficient? One member of the attackthesystem yahoo group said the reason that didn't take place was that manager's desire dominance.

And they may for a very good

And they may for a very good reason. If a Company A outsources a deparment to Company B, Company A is then a client to that department (Company B). If Company A keeps a department within their firm, Company A is then a boss to that department.

Company B is likely to have more than just Company A as a client. Thus, by outsourcing, that department now cares less about Company A than they did previously. A lot of times this is fine and via specialization will make everyone better off. Sometimes not, though. Usually happens in cases where time is very important and having someone able to call that department as their boss, as opposed to a client, is worth an awful lot of money.

The company I work for had a joint venture with a company in India, but has since opened their own office in the same Indian town and hired away many of the employees from that Indian company because the joint venture didn't deliver the level of accountability needed.

Thanks a lot for the link,

Thanks a lot for the link, Micha.

Price discrimination

Artificially high prices for replacement parts aren't necessarily a bad thing, are they? If a product breaks more often if it is used more (seems like a fair assumption), being able to charge monopoly rents on those replacement parts makes price discrimination possible. Which is a good thing.