Sweet Intentions and a Faustian Bargain: Capitalism 3.0

Published online 17 November 2007.

This is a review of Peter Barnes’ book Capitalism 3.0; Barnes, an eco-entrepreneur from the flowing meadows of northern California (where I got my Master’s degree), still “believes in” capitalism, but offers a number of ideas worthy of consideration to non-capitalists as well, as well as a fairly sketchy version of capitalist history and a theory of the commons that, though sloppy on the details, is worthy of consideration.  Barnes’ book can be regarded as an especially ethical example of a current vogue in thinking: eco-capitalism, and it will here be both praised and critiqued as such.

(Crossposted at Docudharma)

Part One: The Book Review

Book Review: Barnes, Peter.  Capitalism 3.0: A Guide to Reclaiming The Commons.  San Francisco CA: Berrett-Koehler, 2006.

A Siegel asked me a few days ago if I’d read Peter Barnes’ Capitalism 3.0, and since I hadn’t, I decided to read it, since both A Siegel and Peter Barnes appear to be more well-established as environmentalists than I think I am, and since Capitalism 3.0 touches on two subjects very near and dear to my heart, the history of capitalism and the critique of Garrett Hardin’s “tragedy of the commons” concept.  Barnes was also a president of Working Assets, my phone company.

The summary of Capitalism 3.0 is Robert Costanza’s review of this book in Nature is apropos:

He (Barnes) argues that the previous (1.0) and current (2.0) versions of capitalism that evolved up to the twentieth century, under conditions that no longer hold, are in serious need of an operating system upgrade.  Version 3.0 must address the conditions and problems we face now.  Barnes fully recognizes the benefits of capitalism, and does not recommend replacing it wholesale with something completely different.  But he also recognizes the major flaws in version 2.0, and describes some of the features that will be needed in version 3.0 to fix them. (673)

Now, I have pretty much gone on record as claiming that we ought to be looking at non-capitalist alternatives for the future, as I don’t see more capitalism arising from the future of capitalist history.  But this is the most innocuous defense of a “new form of capitalism” that I’ve seen yet, acknowledging the weaknesses of the current system and proposing alternatives to what “we” are doing now.

The body of this book is expressed in three parts.  Part One, “the problem,” offers us a “short history of capitalism,” and then gives us two chapters on government and privatization to suggest that his alternative involves neither.

“Part Two” is four chapters that suggest a wholesale reorganization of society; the meat of Capitalism 3.0.  Chapter 5 is about creating a “commons sector”; Chapter 6 is about creating trusts to hold power over the commons,” Chapter 7 is about leveling the playing field as regards life-opportunities; Chapter 8 is about culture.  The rest of the book, “Part Three,” is about what we can do to make Capitalism 3.0 possible.

Part Two: Barnes’ take on capitalist history

Capitalism 3.0 is based on the suggestion that there have been (so far) two stages of capitalism.  The first stage is what Barnes calls “shortage capitalism,” in which the reality was of scarcity.  That was Capitalism 1.0.  After 1950, Barnes tells us, we had “surplus capitalism,” Capitalism 2.0, in which an excess of goods and an excess of needs were produced, at great cost to the environment.  The environmental damage done by Capitalism 2.0 is the reason we need Capitalism 3.0.

Barnes’ notion of capitalist history is provincially US-centered.  Today’s “surplus capitalism” still doesn’t (and never did) grant the bottom half of the world’s income-earners a living beyond maybe $2/day.

The notion of “scarcity capitalism” appears as a sort of contradiction of the notion of capitalism that Barnes promotes in the Preface:

In retrospect, I realized the question I’d been asking since early adulthood was: Is capitalism a brilliant solution to the problem of scarcity, or is it itself modernity’s central problem?  The question has many layers, but of each layer led me to the same verdict.  Although capitalism started as a brilliant solution, it has become the central problem of our day.  It was right for its time, but times have changed.  (xii)

If capitalism was a brilliant solution to the problem of scarcity from the get-go, then what is “scarcity capitalism” about?  Might we better argue that it was the advent of “Capitalism 2.0” (and not 1.0) that solved the problem of “scarcity,” at least from the US viewpoint?

Now, I have no problem with the notion of Keynesian populism, if promoted as a transitional phase toward some version of ecosocialism; this is probably what Bolivia under Evo Morales is about.  But in depicting it as “Capitalism 2.0,” Barnes’ history dissolves in a muddle.  In the preface, Barnes says:

Part I focuses on our current operating system, a version I call Capitalism 2.0.  (Capitalism 1.0 died around 1950, as I’ll explain in chapter 2.).  I show how this system devours nature, widens inequality, and makes us unhappy in the process. (xiv)

With this concept of “Capitalism 2.0”, Barnes conflates the period of populist Keynesianism before 1973, in which America’s middle class was growing, and the period of neoliberalism after 1973, in which it was shrinking.  I think, however, that we do well to keep them analytically distinct, as many people in America would still like a return to populist Keynesianism while disdaining neoliberalism.

Barnes is on more interesting, though also contradictory, ground, when discussing his proposed solution to abrupt climate change.  Barnes wishes to get government to grant power to trusts, who will auction off CO2 pollution rights to highest bidders; the proceeds will then be granted equally to members of the public.

The plan seems to hinge on the notion that government’s proper role is to “assign common property rights to trustworthy guardians who will” manage the commons.  (47)    The solution is described on p. 91:

  • The pollutees (including future generations) are collectively represented by trusts.
  • The initial pollution rights are assigned by government to these trusts.
  • In deciding how many pollution permits to sell, the trustees’ duty isn’t to maximize revenue but to preserve an ecosystem for future generations.  The trustees therefore establish safe levels of pollution and gradually reduce the number of permits they sell until those levels are reached.  (91)

Barnes has some trouble here with the idea of “assigning” things.  Governments do indeed “assign” property rights in the sense he suggests, as waivers of general laws against pollution, but insofar as that symbolic game is at all meaningful, governments enforce such rights.  Barnes thinks, moreover, that he himself can assign “to preserve an ecosystem” as the role and duty of trustees.  Will the trustees of his system actually preserve ecosystems?  Maybe they will just “fake it,” or maybe they will be overwhelmed by circumstances beyond their control.  C’est possible?  Barnes thinks nonprofits should be empowered to bring the trusts to court if they neglect their duties; but, then, which way will the courts rule?  And will the nonprofits be sufficiently vigilant?

My point is that Barnes wants to put in all kinds of barriers to the politicization of the system of trusts in ways he hopes will protect the environment; granting the trustees lifetime terms in office for instance.  But in the end there’s really no escape, and government power will have to save the day for Mother Earth.  (Actually, I think the problem is too complex even for governments; the people-as-a-whole will have to learn how to live in a sustainable fashion.)  Barnes has just spent chapter 3 complaining that government has usually been in the domain of corporate control – but if his ideas are to actually happen, there would have to be some great degree of social consensus behind environmental protection.  If this consensus were to exist for the sake of doing something effective about abrupt climate change, in fact, it would have to marshal itself against activities that we today consider normal; idling cars in traffic jams, for instance.  Do remember the warning given in the Monthly Review:

The truth is that addressing the global warming threat to any appreciable degree would require at the very least a chipping away at the base of the system. The scientific consensus on global warming suggests that what is needed is a 60–80 percent reduction in greenhouse gas emissions below 1990 levels in the next few decades in order to avoid catastrophic environmental effects by the end of this century—if not sooner. The threatening nature of such reductions for capitalist economies is apparent in the rather hopeless state at present of the Kyoto Protocol, which required the rich industrial countries to reduce their greenhouse gas emissions by an average of 5.2 percent below 1990 levels by 2008–2012. The United States, which had steadily increased its carbon dioxide emissions since 1990 despite its repeated promises to limit its emissions, pulled out of the Kyoto Protocol in 2001 on the grounds that it was too costly. Yet, the Kyoto Protocol was never meant to be anything but the first, small, in itself totally inadequate step to curtail emissions. The really big cuts were to follow.

In creating his “Capitalism 3.0” framework Barnes is especially sensitive to the history of the commons, that area of “common ownership” outside of the sphere of private ownership demarcated by the term “real estate.”  The framework he chooses follows the economics of Ronald Coase, who thought the commons could be “privatized” — but “privatization” in this context merely means assigning rights within the commons so as to protect it.  And  there are all sorts of other commons protections in Barnes’ plan.  Chapter 7 suggests a series of “universal birthrights” – common inheritances for future generations – that will line up government power behind a series of rights that would greatly enable “equal opportunity” for future generations.  Single-payer health insurance is one of them.  Chapter 8 argues for a number of measures to strengthen the commons: taxes on copyright use, for instance.

Much of what Barnes has in mind is greatly appealing, and could be used effectively, I reason, as preliminary steps toward – socialism!  The most important thing about the notion of the commons is that with social order that grants a stake to everyone, allegiance to common interests can be aligned – most importantly, the common interest in environmental sustainability, in a future with an ecosystem robust enough for survival.  Capitalist societies develop a sense of community, as well; but capitalist community tends to be a shallow source of real power -– what really counts, under capitalism, are contracts between individuals, or class interests.  The future world-society will need a form of social power to be exercised for the sake of everybody, and is best nurtured by a society in which everyone has a stake.

Part 3: What do you say to those caught up in capitalism?

Barnes tells the capitalists: “give up some of your excess takings now, and the rest when you die” and “if fellow citizens ask for an upgrade” to Capitalism 3.0, “don’t fight them.” (158)  I’d probably say that, too.  Is there a better thing to say to the capitalists?  I’m looking for an “in” within a system in which most people have little power to do much of anything.

Barnes’ heroes of the present day are, ultimately, what he calls the “commons entrepreneurs.”  Here are his words of praise for them:

A commons entrepreneur, like a private entrepreneur, is a visionary, a catalyst, a starter.  You see a need that isn’t being met, and a way to meet it.  You bring people together, come up with a plan, and make it happen.  (158)

What private entrepreneurs do, really, is match “effective demand” (i.e. consumers with money) to a product for sale – but never mind.  Barnes continues:

Sometimes it works, sometimes it doesn’t.  The difference is, a commons entrepreneur doesn’t get stock.  You’re motivated by a different force, a desire to give back.  You aren’t selfless; you enjoy success, recognition, and even money.  But on balance, your desire to contribute to shared wealth outweighs your desire to accumulate private wealth.  Accordingly, you choose the commons over the corporate sector.  (158)

How is being a “commons entrepreneur” supposed to work?

As a commons entrepreneur, your work is more difficult than your corporate counterpart’s.  That’s because you’re treading in uncharted waters.  The commons you seek to protect will probably lack property rights, and getting them can take years or decades.  In fact, rounding up property rights will frequently be the first thing you do.  That’s in addition to rounding up money, which is tough enough.  (160)

Now, this is vague enough to be anything, which is probably as it should be.  “The commons,” here, is any commonly-held asset, and “property rights” are rights to use it.  This is metaphoric language, rich and versatile.  One could, for instance, imagine Che Guevara as a commons entrepreneur, whose commons was the ability of the people to rise up and declare themselves the owners of their labor-time, and whose property rights were to be asserted via revolution.  (Now, let’s not get into a shouting match about Che — the example is meant to show how versatile Barnes’ concept is.)


Barnes expects a capitalist system where “private corporations and organized commons enhance and constrain each other” and where “the state maintains a level playing field.”  (77)  One of the main arguments against capitalism given in Saral Sarkar’s “Eco-socialism or eco-capitalism?” is that, if the capitalist system is to be brought in line with the requirements of ecological sustainability, either enormous (nigh, impossible) increases in efficiency must be invented from whole cloth, or there needs to be a contraction of the capitalist system itself.  Saral Sarkar says this about the possibility of the latter:

Planning would be absolutely necessary in the transition period to ensure an orderly retreat from growing, capitalistic economies.  Only through a planned retreat would it be possible to absorb the strong negative impacts of the destruction of capital to prevent mass unemployment, and so to avert the danger of the economy and society collapsing into chaos, war, and civil war. (179)

So if we are to establish Barnes’ level playing field, government will have to push corporate interests back to a point where the capitalist economy will become sustainable, while at the same time assuring the public a minimum of human necessities.  This will have to be accomplished by maintaining power while going directly against the tendency of capitalist economy to grow.  I don’t, frankly, see how it can be done unless some sort of ecosocialism, if even just temporary, is allowed to flourish.  Since such an event is universally regarded as “unrealistic,” I suppose the next disaster will have to decide things for us, by which time it may be too late.  For capitalism, or “Capitalism 2.0” in Barnes’ jargon, is the Faustian bargain the privileged have struck with the devil of ecological disintegration.


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