Zero MarginalA Review of The Zero Marginal Cost Society by Jeremy Rifkin

Declaring the end of capitalism has long been it’s own mini intellectual industry. And with the economic adversity brought on by the Great Recession of 2008, it’s an industry that has seen exponential growth. One of the recent, and more thoughtful, entries into this genre is Jeremy Rifkin’s The Zero Marginal Cost Society: the Internet of Things, the Collaborative Commons and the Eclipse of Capitalism. “The capitalist era is passing” Rifkin writes on the very first page, “not quickly, but inevitably.” The architect of it’s demise, according to Rifkin, is not so much an alternative system or the public outrage over the 2008 financial crisis, but rather a sort of bug in the very system of capitalist enterprise, one that carries with it the seeds of capitalism’s fall from preeminence.  And that bug has everything to do with technology.

As technology evolves and the information economy becomes increasingly central to overall economic output, marginal costs begin to fall. Marginal cost simply means the amount it costs to produce every additional unit of a product beyond the fixed costs it cost to produce the original unit. In capitalism, profit is made on those margins. But as information technology works it way through the economy, margins collapse. For example, in a wired world, once an original song is recorded and put online, the production cost to sell each additional unit approaches zero. Copies can be made cheaply and easily and distributed anywhere in the blink of an eye. No need to pay a record company or agents. As new technologies improve production processes and reduce distribution costs, those middlemen are cut out, adoption rates scale laterally, and vertically integrated companies of a bygone age get flattened. “The near zero marginal cost phenomenon has already wreaked havoc on the publishing, communications and entertainment industries as more and more information is being made available nearly free to billions of people.” Rikfin writes.

And that’s just the beginning. Rifkin spends considerable time detailing the way in which a near zero marginal cost economic forces are ready to disrupt more sectors of our economy including the renewable energy sector (through the plunging costs of solar), higher education (though MOOCs, or Massive Online Open Courses), manufacturing (with 3D printing). In all these industries, upfront costs are still considerable, but they are fast decreasing, riding exponential adoption curves that will change the economy far faster than most experts predict. And all of it will be served, supported and empowered, Rifkin explains, by the “internet of things”, the global, intelligent network infrastructure that will be embedded everywhere in just about everything. Rifkin is not one for understatement. Early on in the book, he declares:

“Within the next two to three decades, prosumers in vast continental and global networks will be producing and sharing green energy as well as physical goods and services, and learning in online virtual classrooms at near zero marginal cost, bringing the economy into an era of nearly free goods and services.”

The Zero Marginal Cost Society is full of such claims. Of course, Rifkin, an economist by training, has evidence to back him up, marshaling research to show exactly how these changes are already working their way through the economy—some advanced, others in nascent form. As costs fall, more and more things will become free, or close to free, and our need for income will diminish, Rifkin predicts.  And that’s good, because there won’t be any jobs around, at least not the high paying middle class jobs that have been the backbone of capitalism’s progress. Rifkin, who once authored a 1995 book called The End of Work, laments that few took him seriously back then. After the economic dislocations of the last decade, no one is laughing anymore. There was a time when productivity gains were the gold measure of the economy, promising job growth and higher wages. But in recent years, those two measures seemed to have decoupled and higher productivity, driven by the computers, robotics and the Internet, is proving no boon for well-paying jobs, but rather concentrating wealth and capital in fewer hands, while increasing income inequality.

RifkinRifkin is not just reporting these trends. He is also their advocate, extolling the virtues of a new economic system that will free us from the downsides of capitalism, which “feeds off scarcity”. And like any serious new paradigm theorist, he has named the system that will follow the capitalist era—the “collaborative commons”, the economic paradigm of the coming “age of abundance”. By collaborative commons, Rifkin means what is often called the “social commons” or Civil Society—the massive, often unsung sector of the economy that involves nonprofits, NGO’s, volunteer organizations, community groups, philanthropy, online associations, social entrepreneurs, and every other kind of organization in which social capital plays an equal or more prominent role than financial capital. As more and more goods and services become essentially free, Rifkin sees a upsurge of engagement in the social commons, where we will be able to work and exchange goods and services in a way that is far more personally and socially rewarding than anything that capitalism can provide.

Rifkin’s vision of the collaborative commons is deeply felt. As someone who has lived and worked in that sector much of my adult life, I felt both appreciative of his attention to that sector as well as some concern. I have seen first hand how many people in that sector struggle with financial realities, how their idealism that perhaps brought them to the sector is often in deep tension with the needs of middle class life and how dependent so many in that sector are on the financial help, in some form, of the very rich. While Rifkin’s overall emphasis on the growing importance of that sector in our cultural future is energizing, such experiences also give me pause. Our society must go through significant changes before the collaborative commons, in whatever form, could ever be a stand-alone model of a self-sustaining economic system.  I worry that Rifkin’s predictive thinking and his wishful thinking may tend to blur.

At best, The Zero Marginal Cost Society is a tremendously informative book, outlining a forward-looking evolutionary vision of the massive technological changes confronting us. To his credit, Rifkin also acknowledges the role that the evolution of our cognition and consciousness must play in this process, and the need to develop into more empathic individuals who are deeply connected to the global human community and more aware of our deeply interconnected relationship with Earth’s biosphere. Still, there are moments when his book succumbs to being an unreflective mouthpiece of a best-case scenario, rushing headlong into profound, disruptive changes and assuming, perhaps naively, that they will be navigated with limited pain. Indeed, a certain giddiness about the end of capitalism and the rise of an “age of abundance” permeates the book—driven by a strong confidence that capitalism’s wealth creating function can easily be replaced by the free abundance of a technologically-advanced, zero marginal cost society combined with an full scale embrace of the collaborative commons. It’s a confidence worth questioning.

Rifkin’s book does acknowledge some potential hiccups on the way to the future—net neutrality, a corporate takeover of the Internet, Climate Change, and cyber-terrorism are a few that concern him. But for the most part, his is a “full speed ahead approach”. Perhaps the trends he is tracking will usher in the rise of the collaborative commons and ultimately be the vehicle for the virtuous transformation of society that he envisions. Perhaps a rising generation of a post-ideological, post-national, post-capitalist, post-ethnic millenials will indeed lead the way. There is much to aspire to in that vision, but also real obstacles, massive dislocations and tremendous challenges between here and there. Any future so bright will not be won easily, and staring too long at the sun will only blind.

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