“What the inventive genius of mankind has bestowed upon us in the last hundred years could have made human life care free and happy if the development of the organizing power of man had been able to keep step with his technical advances. As it is, the hardly bought achievements of the machine age in the hands of our generation are as dangerous as a razor in the hands of a 3-year-old child.”
Albert Einstein, 1931, “The 1932 Disarmament Conference”
A common pattern in mainstream Western political discussions is to imagine an ideally just society and seek to correct deficiencies of our present society relative to this benchmark. Implicit in this construction is the notion that we can easily know what such an ideal political economy would look like and that all we need do is correct a few injustices of present democracy or “market failures” to arrive there. This attitude differs profoundly from the way the same culture approaches technology, where no one believes we are even close to imagining, much less achieving, perfection. Einstein’s words above invite us to be similarly ambitious in reimagining our social institutions as we are with physical technology.
Over the past two hundred years, communications technology has advanced dramatically with the invention of the telegraph, telephone, television, video conferencing, and more. Each generational stage of technological development allowed more aspects of in-person human communication accessible at long distances. We can think of the primary tokens of our present formal political economic systems, money and state-issued individual identities, as the telegraph of political economy, conveying as they do so little of the richness that constitutes informal social relations and value creation.
The RadicalxChange (RxC) movement is a community of artists, researchers, entrepreneurs and activists working to imagine, design, experiment with, and execute political changes based on radically innovative political economies and social technologies that are truer to the richness of our diversely shared lives. The diversity that the movement aspires to, and has begun to instantiate, requires it to frequently code switch, expressing ideas in the idioms and values of a range of social groups and holding itself accountable to those value systems. For all its attitudinal differences from analytical political philosophy at a broad level, this is one of the many languages it must speak to be effective.
This article aims to express many of the political values central to the social innovations RxC has promoted and with which communities have begun to experiment. These include a social data and identity structure Intersectional Social Data (ISD), a voting system Quadratic Voting (QV), a matching-based framework for funding organizations Quadratic Finance (QF), a property regime/asset management system Self-Assessed Licenses Sold by Auction (SALSA) and a framework for data governance Data Dignity (DD). Readers interested in the details of these specific designs and how they are being applied can follow the links above. Those inclined to think in terms of political philosophy should read on.
Abraham Lincoln wrote, “The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves—in their separate, and individual capacities.” The possibility that many people, working together, can achieve more than the total of what each could achieve separately is what economists call the phenomenon of “increasing returns”. The greatest chance of enabling broad human flourishing lies in understanding increasing returns and structuring markets and governance to unleash their shared value to humanity while avoiding the ills they can provoke—monopoly, opportunity hoarding, majoritarian exclusions, tragedies of the commons. A central goal of any effort to build a new political philosophy or fresh paradigm for political economy should be to lay out approaches to markets, governance, and community that capture the benefits of increasing returns without falling into the traps that increasing returns phenomena can generate.
A historical name for this philosophy is Liberal Radicalism, though the RxC neologism may be more appropriate given the misunderstandings that crop up around the word “Liberal” in the US. Liberal Radicalism was a philosophical tradition that took “radical” critiques of liberalism’s limits seriously and sought to design a liberalism that can work in a fundamentally diverse, but social, world. It attempted, wherever possible, to combine the flexibility and dynamism of capitalism with democracy’s public spirit and inclination towards the common good. Classical liberalism was instantiated by capitalism and the one-person-one-vote concept, but no equally simple, formal institutional ideas have as of yet instantiated Liberal Radicalism. A core goal of the RxC movement is to develop such institutions.
This manifesto begins by laying out why increasing returns are so important and explains how classical liberalism, or reigning paradigms of capitalism, statism, nationalism, and technocracy, fail to deliver on the value for human well-being of increasing returns, while also generating a range of problems – from failures of freedom to poor economic outcomes—from their mode of handling the increasing returns problem. Finally, it ends with an attempt to articulate a set of principles to guide the alternative to institutional design that we advocate.
2. Why Are Increasing Returns So Important?
Civilization is definitionally about increasing returns. Through organizational forms like cities and complex economies, we increase what is available for all of us to consume—whether of food, water, or other goods. We could not all live in isolated huts or villages and be just as well off as we are today absent increasing returns. Cities, which are etymologically joined to the foundations of modern society through terms like “citizen” and ”bourgeoisie” are increasing returns phenomena.
The power of human cooperation to generate increasing returns should be harnessed for the general well-being of humanity. Instead, many of our most significant contemporary political problems are all failures to harness the power of increasing returns for the social good. Sometimes the increasing returns structure generates monopolies; sometimes it leads to failures to achieve up-front investment; sometimes it leads to failures of governance over matters of common concern. Here are some examples of the problems:
- Network and data economies of scale are classic increasing returns phenomena and are widely seen as the reason for extreme market power in technology. Treating such systems as private property inevitably leads to monopoly.
- There are huge economies of scale in portfolio management that are responsible for the horrific institutional investor monopoly problem.
- The issues around zoning and land use on which so many left-libertarians focus these days are largely disputes over complementarities across plots’ use and spillovers at different levels.
- Insurance pools have increasing returns because of selection dynamics, and many of the issues around social insurance of various sorts should be thought of as issues of increasing returns.
- Investment in information goods, whether “innovation” or news quality, is an extreme example of increasing returns where the cost to create news for one person to consume is the same as the cost to produce it for all to consume, but the benefit to consumption of high quality news by all produces a phase shift in value to society.
- Most environmental issues are best seen as conflicts over resources that bring benefits to many people if preserved. Global change is the most extreme example, where anything we do to the climate affects the welfare of literally everyone living on the planet.
The power of human beings to generate increasing returns through cooperation should be one of the greatest assets of humankind. If instead it is a source of our worst political problems, this is because our reigning paradigms of the economy and of governance have failed us, and it is time for radical change in those paradigms. What follows is a critique of the reigning economic paradigm of capitalism and the reigning governance paradigm of majoritarian nationalist statism.
3. Beyond Capitalism
The default politico-economic ideology of today’s elites is capitalism or what is sometimes called neoliberalism. While many of the core arguments for capitalism are well-expressed by thinkers such as Milton Friedman (for example, in his classic Capitalism and Freedom), the target here is not some caricatured or extreme form of capitalism. Moreover, the critique here is offered in the language of economics that is central to the traditional formulation and justification of capitalism, as it is most useful to critique a worldview as much as possible on its own terms. Nor do we treat all the problems with capitalism. Instead, we focus here simply on the fundamental inability of capitalism’s core concepts to grapple productively with the issue of increasing returns.
Most capitalists would agree with the argument above that increasing returns are the central theoretical problem of political economy, in addition to being, as a practical matter, at the heart of many of our day’s major political questions. Yet capitalism offers no coherent framework for grappling with increasing returns.
An endless stream of work shows that the type of private property-and-competition based markets capitalism utilizes do not work well in contexts with increasing returns. Classic results include the inefficiency of average cost pricing under increasing returns famously associated with Harold Hotelling and the free-rider problem associated with Paul Samuelson. There are different ways to phrase it: with increasing returns, marginal cost pricing does not cover average costs; there is a natural monopoly with increasing returns; there is a free-rider problem; private provision of public goods leads generically to only one contributor.
The basic problem is that capitalism is based on the principle that every contributor should be paid her marginal contribution. Yet the key feature of increasing returns is that everyone together achieves much more than all can achieve individually. This implies that everyone’s marginal contribution, once all others are participating, is far greater than her proportional share of the total produced. In such situations, capitalism simply outputs an error. If you want a capitalist system based on private property you have to decompose the final product into the components of what each person contributed, at least on the margin, but the definition of increasing returns phenomena is that such decomposition is impossible.
The point can be made the other way around as well, by focusing not on the production of increasing returns goods but on their consumption. Consider the common rhetoric from technologists that “Google is the best deal we have ever gotten.” Google, so the argument goes, makes only $10-20 off each of us a year, while most of us would be willing to pay $10-20k to keep its services. Regardless of whether these numbers are precisely right, one must immediately ask what else that we pay little for that we would be willing to pay a lot for. For example, running water, sewage, electricity, vaccines, city streets (yes, it is not hard to find historical and present times and places without safe sidewalks), and, for that matter, livable weather, air to breath, etc. If you added our willingness to pay for all of these, you would arrive at far more than any of us have available to pay for them. Asking for an accounting of the fraction of value in our lives attributable to these various causes is like asking what fraction of a body’s life depends on the heart, lungs, or brain. Matters grow yet worse if we recognize that each of these technologies and elements constituting our well-being itself grew out of the increasing returns collaboration of millions of people who e.g. created the websites that Google indexes, built Google’s algorithms, contributed the data that trains them, etc.
Such is always the case with increasing returns phenomena. Private ownership is economically incoherent because of the collective nature of value creation in modern economies. The best deal we have ever gotten is the possibility of civilization, powered by increasing returns, and which makes such a linear accounting for the sources of our well-being on which capitalism relies impossible.
Now the problem with capitalism’s failure to grapple with phenomena that cannot be decomposed into individual contributions of production or consumption is that goods that depend on a costly up front investment (for instance, news) can fail to be produced in a capitalist environment, can be become co-opted into monopoly power, or can be non-universally distributed. You can put band-aids on this problem: a little tax-funded R+D here, a bit of social insurance there, a sprinkling of antimonopoly policy, but ultimately these are all precisely the sort of unsystematic and often discretionary state intervention that capitalists tend to fear. To the extent that there is any method behind all of this, it is statist, an expectation that nation-state investments can compensate for the failures of market-capitalism to deliver public goods. If such band-aids are the capitalist answer to the problem of political economy, capitalism itself does not really offer an answer. Capitalist thinking as currently constituted, because of the previous points, is an intellectual cul-de-sac and a dangerous distraction from the serious project of responding to the challenges of our time. Political economy still has a theoretical and practical question to resolve.
4. Beyond Statism
This basic critique of capitalism is far from new. It is at the core of many arguments for socialism. During the twentieth century, many nation states experimented with lodging the collective nature of value in governance of much of the economy by a (hopefully democratic) nation state. While out of fashion for some time, this “statist” approach has reemerged prominently in recent years.
The problem with “statism” is not the collective or “socialist” conception or value, evident in increasing returns phenomena. It is instead the valorization of “The State” –or more generally some historically derived but ultimately quite arbitrary polity, as the locus of collective action–and the effort to lodge authority and responsibility to govern increasing returns phenomena in this imagined actor. Many ideas for increased collective action at the level of the state (such as much higher marginal income or carbon tax rates funding a social dividend or free university tuition) may be more or less appealing, but are not at the core of problematic statism. The subset of really concerning ideas are those policies that aim to transfer significant discretionary power of often unprecedented scope to currently existing nation states. The relevant transfers of power are bound to interact with pre-existing mechanisms of governance intended to hedge unchecked power, yet little attention is given to the question of whether these new grants of power will obliterate those hedges, or whether they ought themselves to be hedged for the sake of preserving liberties, both negative and positive.
Examples of problematic statist grants of power include:
- Calls for nationalizing, placing under detailed discretionary state regulation or creating “national champion” versions of social media platforms like Facebook and Google.
- Plans to create a single payer health system for the entirety of the US that would administer prescription drug prices.
- Many of the (still vague) calls for a “Green New Deal”.
- A Social Wealth Fund (SWF), managed by the US federal government.
The last example provides a particularly clear example of the problem we have in mind, especially in the version proposed by leading contemporary statist thinker Matt Bruenig. A SWF, managed by the US federal government would come to be the dominant, voting shareholder in most publicly-traded American corporations. Either a democratically chosen administrator or the public directly would vote the shares (which would be held, roughly, equally by all Americans), and the fund would come to manage something like 30-70% percent of US public equities. To be clear, this SWF policy on which much of the critique below will focus is not the same as one where, say, 30% of equities are owned by a Social Wealth Fund and are passively managed with shares not being voted on and no corporate governance involvement. Statists usually explicitly oppose this option. They focus on the importance of nation state-based democratic control over corporate governance and the economy. But giving dramatically increased discretionary powers to existing simple democratic states to address present collective action problems is dangerous. These difficulties could be overcome by co-designing new governance structures (as Rodrik and Sabel would have to do) along with these increased powers that would help ensure they are used rather than abused.
But statism as critiqued here does not focus on this design and hopes that the state, controlled by some form of democracy, will act as a deus-ex-machina to solve large scale social problems. Just as classical liberal economists have failed to come to grips with the phenomenon of increasing returns at either a theoretical or practical level, political scientists with their focus on national level democracy have also failed to come to grips with the relation between governance and increasing returns at either a theoretical or practical level.
What political scientists have failed to grapple with is that the phenomenon of increasing returns often leads to a separation between natural polities (NP) (sets of people affected by and knowledgeable about a set of decisions) and actual polities (AP), that is, the electoral polities of democratic states. Many of the collective action problems we face today have a natural polity that lines up poorly with existing states, being smaller, larger or most commonly cutting across state borders. The examples invoked above also pertain here: new drug development, technology and news production, immigration, global inequality, and environmental questions are all phenomena where the increasing returns dimension of the good also disregards currently existing nation-state borders. In fact, it is challenging to find examples of increasing returns phenomena where current nation states are a good match to the NP.
When is it reasonable to expect a democratic state to succeed at governing an increasing returns phenomenon? We should expect simple democracy, based on some version of one-person-one-vote (1p1v) and without extensive “liberal” constraints (such as federalism, checks-and-balances, strong protections of individual rights, international treaties, etc.), to lead to good outcomes only when “the majority is right”. Majority rule is appropriate on issues where the preferences and knowledge of a typical citizen are reasonably representative of the overall good of society. This is commonly the case in reasonably homogeneous societies, where differences of interest and opinion are relatively “randomly distributed”, or on issues where this is the case assuming that all the relevant individuals for a decision are enfranchised. It will tend to fail dramatically when there are deep, consistent, and politically salient “fractures” that divide societies, at least on certain important issues, into aggrieved minorities. These minorities are either divided against the majority or are disenfranchised, such as in cases where many of the individuals most affected by important political decisions do not have a vote.
To formalize this, we can say that if the “actual polity” AP diverges in a severe way from the “natural polity” NP, we should expect simple democracy to lead to very bad outcomes. To keep matters simple, the focus here is on inclusion or exclusion from the polity as a 0-1 variable. In most cases in practice the AP and NP will both be weighted (some will have a more effective voice than others and some will be more or less affected by a decision), but this complication only further strengthens the argument because simple democratic mechanisms based on 1p1v have a hard time dealing with this subtlety.
Importantly, the failures of simple democracy when actual and natural polities diverge is one of the most persistent themes of political history. It is useful to divide historical cases into three buckets:
- AP>NP: this is the case of minority or local group oppression, when the actual polity is much larger than the natural polity for an issue.
- NP>AP: this is the case where important individuals are disenfranchised from the decision.
- NP≠AP: this the generic case when the natural polity cuts across the boundaries of the actual polity and is neither smaller nor larger; some members of the actual polity are in the natural polity, but not all, and there are members of the natural polity disenfranchised form the actual polity.
Some examples of recent extreme failures of democracy under these conditions are below. They are chosen to be particularly salient and persuasive to those who have statist inclinations, but nearly endless examples, contemporary and historical reaching back to the dawn of democracy, exist.
Disastrous examples of AP>NP:
- The Rohingya genocide: The end of military and the emergence of democratic rule in Myanmar was widely celebrated around the world. But, as has been widely noted, it appears to have only fueled long-standing sectarian divisions between the Buddhist majority and the Muslim Rohingya minority, precipitating an on-going genocide. Here the NP is local Rohingya communities and the AP is the Burmese nation state.
- Underrepresented communities in US cities: Many US cities have a variety of substantial minorities (viz. African American, various immigrant communities, artist communities, etc.) that are systematically underrepresented and neglected by majority-elected city administrations. Here the NP is these communities and the AP is the city.
Disastrous examples of NP>AP:
- Global change: Anthropogenic climate catastrophe is one of the greatest threats facing the world. Yet the effects being global, many nation states have strong incentives to free ride on mitigation efforts, leading to our present stalemate. Here the NP is essentially the cosmopolis and the APs are a bunch of nation states.
- Migration and global inequality: Inequality across countries is 2-3 times greater, depending on how you measure it, than is inequality within countries and millions of people around the world would be willing to take a substantial chance of death to have the opportunity for safety and economic advancement that wealthy countries offer. Yet wealthy countries are increasingly violently slamming their doors shut not just against the desperately and unjustly impoverished but even against those fleeing mass murder. Here the NP is the set of people who would like to live in wealthy countries and the AP is those currently living there.
Disastrous examples of NP≠AP:
- International waterways: Nature does not respect the arbitrary boundaries of nation states. Two of the largest rivers in the world, which supply crucial public goods and can easily be degraded by exploitation, are the Amazon and Nile, which each cross at least half a dozen countries. The free-riding by and conflicts among the nation states that lie along these rivers have contributed to systematic degradation, poisoning and deforestation. Yet the NP here is not simply the whole of these states, but instead those who live along and directly benefit from the river, which in most cases is a minority or even a small minority of each polity. Thus, the NP is the union of several national minorities, while the APs are a collection of national polities.
- The War on Drugs: The war on drugs in the Americas has been roughly, a war waged against poor and especially black and brown citizens of the Americas allegedly for the benefit of these same groups. Putting aside the opioid crisis (the policy response to which has been, unsurprisingly, very different) it wouldn’t be far off to argue that there has been virtually no drug enforcement against the well-off white Americans who many studies suggest consume most cocaine. The brunt of the drug war has fallen not just against black and brown US citizens who have been incarcerated at literally record-setting levels, but on the tens of millions in Central and South America whose lives have been shattered by resulting violence. The NP here is the black and brown minorities of the US plus the (sometimes minority, sometimes majority, depending on country) of Latin Americans directly impacted by drug violence. Yet the AP of American citizens has consistently supported doubling down on policies destroying the lives of much of the NP.
In short, it seems quite clear that not just in theory but in practice, significant divergences between the AP and NP tend to lead to very poor outcomes from statism.
Some claim that modern, democratic states can avoid this problem. One version of this argument sees this improvement over time resulting from the process of democratic dialog. Another version sees this improvement coming from the training of a mission-driven and expert bureaucratic technocracy. There is a great deal that could be said historically and empirically about these claims. But the primary problem is more abstract: they do not allow one to distinguish among different forms of governance in the first place.
Perhaps the leading contention of neoreactionary thinkers is that good governance will come from the appointment of a benevolent autocrat in the mold of Lee Kwan Yew, who will then create a mission-driven and efficient administrative bureaucracy beneath him (and it is almost always a him, in their imagining). A leading contention of many religious conservative defenders of capitalism is that capitalism will allow a space for the emergence of a benevolent civil society discourse and public-spirited business leaders who will elevate moral culture and address the failures of capitalism. A central argument among less democratically-inclined members of the contemporary global elite is that the quality of their discourse and reflection upon global challenges is likely to lead to policies that better serve the average citizen of the globe than would arise from distributing voice broadly. And, indeed, there are historical examples of these things occurring, as Lee’s case, many generous and effective philanthropists and moves by elites to establish supranational institutions with limited direct democratic involvement show. In other words, contemporary defenses of democracy often slip into defenses of bureaucracy and technocracy, not of democracy itself.
Yet policy-makers who claim that the modern democratic state has distinctive virtues would vehemently reject these arguments. They appear to think there is something about the formalism of democracy and the vision of some sort of equal voice and power for citizens that is critical to will-formation, establishment of a legitimate and successful bureaucracy, and productive collective decision-making. Otherwise they would not be arguing for the assumption of power by such pre-existing democratic polities. Instead of arguing for the establishment of a SWF that owns most of the American corporate economy, they could simply focus on improving any of the plentiful bureaucracies or already existing opportunities for public discussion. But this leads one naturally to the question of what those distinctive virtues of democracy are. Formal rights to vote for some portion of a polity’s population, and democratic participation by those with voting rights, as well as their participation in a functioning civil service cannot suffice to deliver what those who defend democracy promise.
The experience of the twentieth century with nation-states, and the hope that democratic but exclusionary forms within them will lead through a process of bureaucratization and democratic dialog towards justice, is an unhappy one. Zionists who escaped (originally democratically-elected) Nazi terror hoped to establish a Jewish democratic state. That state excluded from political influence most of the Arab people whose ancestral lands it occupies. Every year of the boisterous democratic debate in Israel, more vital than anywhere in the world, seems to be leading Hatikvah bat shnot ‘alpayim (the hope of two thousand years) ever more in the direction of oppressive and exclusionary ethno-nationalism. This is clearly not a result of insufficiently active democracy or an incompetent civil service; quite the reverse. It seems quite clearly a result of an exclusionary construction of the polity. And with increasing returns phenomena that cross the borders of APs, we have new levels of exclusion to contemplate. Given the tremendous effects each nation has on others—e.g. through global warming and the War on Drugs—any policy focused on empowering current nation-states simply deepens the problem of APs dominating NPs whose members they exclude.
Still, we needn’t abandon the concept of democracy, just its tight connection to the existing nation-state framework. In contrast to majoritarian democratic nation-states that have perfected the politics of exclusion, a specific set of nations and regions have made progress in developing democratic and civil service cultures of the “progressive” sort that proactively seek inclusion and alignment of actual polities with natural polities. Despite their differing individual political histories, Singapore, Scandinavia, and Taiwan were all deeply influenced by the Liberal Radical tradition and by ideas about decentralization of power. Henry George and other Radical political economists were central to the cannon shaping thought in these locations to an extent unlike anywhere else in the world.
These countries and regions have exceptionally efficient bureaucracies, use market mechanisms of an enlightened community-oriented variety extensively, have (except for Singapore) among the best democratic cultures and most vital civil societies in the world, etc. This suggests that the same types of institutions that effectively decentralize power may also be conducive to, in other less clear and formal ways, improving democracy and governance. Importantly, we will see below in the final section on imagining alternatives, mechanisms for governance by decentralization need not be limited in their function to geographies that align with nation-state boundaries. Instead, these mechanisms can be deployed for use across the public sphere created by NPs.
Successful exercises of state power have co-evolved tightly with detailed governance structures that help align actual polities and natural polities through checks and balances. While such systems are described by extreme capitalists as “statist” or “central planning” they are not statist in the sense here: they involve simple, transparent, widely understood legal or quasi-legal regimes that decentralize power, in a way that is quite different from and much more effective than simple capitalism. They constrain the discretionary power of the democratic state, as well as that of private wealth. There are also international equivalents, such as restraints on nuclear weapons, rules of war and trade barriers, that try to deal with NP>AP and NP!=AP cases; while these have been relatively ineffective, there are increasing experiments with creative new means of international cooperation, such as blockchains and open source software collaborations. Such systems are precisely what we need to build.
The important point, coming out of the Georgist tradition, is that social institutions need to be worthy of the trust we place in them to deliver good governance while protecting freedom roughly in parallel to our entrusting them with powers based on that trust. We should not entrust power to social institutions that have proven themselves unworthy of our trust, or where no work has been done to assess their trustworthiness from the point of view of governance and results. Trust can be earned based on clear arguments about why power is appropriately distributed, by good empirical performance on average, by clearly visible experiments, and so forth.
Along all these dimensions, we have little reason to trust in the likelihood of success for policies that rapidly give great amounts of power to majoritarian states with few pre-designed checks and balances. Many of the sort of disasters that have occurred in previous mismatches between NP and AP are likely to occur if the discretionary authority of actual polities is dramatically increased in the ways that current statists are advocating. We have no more reason to trust democratic statism on matters of governance than to trust neoliberalism on economic policy.
It is worth concluding this section by returning to the example of the SWF to draw out in more detail the likely failures of governance we should expect from such a policy. As a detailed example, consider the SWF where, remember, either a government-appointed board or a democratic majority would effectively become the controlling shareholders of most US public companies. The natural polity here would be the workers and product consumers of these corporations and the actual polity would be the US electorate. What could go wrong from this divergence?
Many employees and customers of US companies are abroad. Given extreme recent nationalism and protectionism, it seems quite likely that US national democratic control of these companies would lead to protectionism by owner preference, probably of such an extreme form that the US’s status as a “market economy” under WTO rules would be suspended. Observe the behavior, prior to checks from the European Union, of European state-owned national champions.
- Public companies would probably do everything within existing laws to stop hiring undocumented and perhaps even certain types of documented migrants.
- Efforts of US companies to combat climate change, which are increasingly gaining steam, would probably be stopped in their tracks given the widespread skepticism of the American public about climate change.
- Efforts at diversity and inclusion by corporations would probably be significantly reduced, based on current public opinion on these issues.
- Investments in research and development on speculative or unpopular projects would likely be squashed, while investment in wasteful white elephant schemes that are attention-grabbing would probably be greatly increased.
In short, the corporate sector would come to inherit all the dysfunctions of the public sector (though, admittedly, some of the dysfunctions of the corporate sector, such as chronically low investment, low wages, and exploitation of US consumers, would be thereby eliminated). But now, rather than these two dysfunctions checking and balancing each other, every US company would come to look like the current US government and would be roughly equally likely at any time to be ruled by nativist protectionism, capitalist conspiracies, or a moderately progressive agenda.
This seems quite disastrous. For all the monopolization and cruelty of the current corporate economy, at least companies seek workers and customers in a reasonably flexible and adaptive manner that makes the base they serve, even if poorly, somewhat heterogeneous and diverse. Furthermore, to the extent that not all companies have precisely the same set of investors, the capitalists in control are, while all wealthy elites, at least a range of different power centers rather than a single actual polity. Effectively nationalizing all of these would eliminate that tendency and homogenize the control of much of the world’s economy under a single wildly unrepresentative AP.
A natural response would be, it works in Alaska and Norway, why not in the US? The answer should be obvious: those countries are a tiny part of the global economy, while the US is a huge part. Thus, effectively those vehicles are purely for investment, and they are small investment funds relative to any of the problematic funds like those mentioned above. Their NP is thus their investors (the Alaskan and Norwegian polities) and pure investment services (with limited voting power) have the property that they are reasonably scale invariant. To the extent that there are harms from this concentration, they are felt by consumers and workers around the world who experience reduced competition, not by Alaskans and Norwegians in particular, so even if there are large harms, they would be hard to see. In short, the fact that things have gone reasonably well for Alaskans and Norwegians because of their large SWFs is simply a non sequitur with regards to the key problems with a US SWF.
Other examples of recent statist ideas pose quite clear similar risks. Placing global platforms like Facebook and Google under the discretionary control of the US democratic polity would likely result in far more rampant politicization of content (such as news), further erode civil society and could even be used as a weapon against the remaining governments of the Left in Europe. A single payer system for the entire US economy, which provides most of all funding for pharmaceutical research, would be qualitatively different than in other countries. Such a system would be very likely to regulate drug prices down to levels like those in other single-payer systems and thus cut off most of the funding for pharmaceutical research at present. A “Green New Deal” could easily become a protectionist football, used to favor domestic green projects over more-efficient Chinese ones, further escalating trade tensions with China.
Championing idealistic schemes to address public goods issues like inequality and the environment without parallel developments in effective governance mechanisms endangers both liberty and prosperity. If this approach captures the popular imagination, it will not solve the primary collective action problems we are facing. Instead it will further entrench the non-alignment of APs and NPs, fostering resentment in those who are excluded from decision-making and oppressed as a result. This will only worsen existing conflicts.
5. Imagining an Alternative
So, if we are to reject capitalism and statism (and what they further imply: nationalism and technocracy), what’s left? The RadicalxChange movement has produced several policy ideas that steer away from these pitfalls and illustrate a different approach to social imagination and harnessing increasing returns for the good of humankind. Many of the policy ideas are quite specific, however, and it is easy to get lost in details. The focus here is therefore on broader principles, with brief mentions of illustrative formal designs. These principles are broader in their application than any specific design, as specific designs may succeed or fail in instantiating the broader principles depending on social and historical context. For example, some instantiations may be more appropriate to a longer-term, more fundamental redesign of social institutions, while others may work better in the near term.
All can be derived, however, from the same underlying philosophy—the power and public goods created by increasing returns phenomena require governance mechanisms that align natural polities and actual polities; this in turn typically requires decentralization.
Many thinkers and social systems have tried to piece together, in a time and place, institutions that capture this core philosophical tenet of liberal radicalism or RadicalXChange. Core examples include:
- The system of checks and balances in the US Constitution defended in The Federalist Papers by Alexander Hamilton and James Madison, and the Girondin constitution of the Marquis de Condorcet.
- The diverse system of different levels of government and civil society that sustained American democracy according to Alexis de Tocqueville.
- The emergence of democratically-governed labor unions and worker board representation to combat the problem of corporate power, as celebrated and theorized by Beatrice and Sydney Webb.
- Antitrust policies aimed at combating monopoly power and taxes on land rents created by urbanization, as promoted by Henry George.
- The “council system” of self-selection into political leadership proposed by Hannah Arendt and Rosa Luxemburg.
- The liberal and social democratic welfare states of the mid-20th century in Europe and the US.
- The liberal international order of restraints on the power of nation-states that emerged especially in the wake of the Second World War.
These examples are diverse in a variety of ways and there are many things on which the relevant thinkers and actors who advocated them would disagree. Yet the core idea of RxC is to try to build formal institutions that roughly have the character of the above examples and are as clearly articulated and as broadly applicable as “capitalism” and “majoritarian statism.” We therefore recommend a form of institutional design for increasing returns phenomena that adheres to the following principles:
- Beyond Capitalism v. Statism: Both capitalism and democratic statism are fundamentally flawed, as discussed above. At minimum they must check and balance each other. Yet wherever possible we should strive not just for a compromising middle path between them but for institutions that genuinely combine their strengths. In particular, we should seek to combine the entrepreneurial spirit of capitalism in generating new technologies and creating organizations that supply emergent demands based on these technologies on the one hand with the on-going responsiveness to the community served that democratic nation-states allow. The QF public matching fund system offers one formal structure for creating such institutions.
- Beyond Individualism v. Collectivism: Both atomic individualism and hegemonic collectivism (such as nationalism) are flawed visions of personal identity. In a vibrant society, identity is constituted not overwhelmingly by membership of a single group or mostly by a vision of autonomy/self-reliance, but instead by memberships in a unique and evolving pattern of social commitments to a variety of communities. The sociology of Georg Simmel and the ISD built to formalize it offers a data structure instantiating this social theory.
- Against Isolation and Totalitarianism: The ultimate evils of a society are isolated individualism and totalitarianism. While these may seem opposites, they are ultimately two sides of the same coin, as both erase the diversity of social commitments that make an individual life rich and the diversity of individuals that make social life rich; think of the way that solitary confinement replicates many features of totalitarianism. Their opposite is diverse, overlapping and interweaving forms of social life.
- Emergent, Responsive Social Organization: New, emergent, responsive forms of social organization should be fostered to gradually replace increasingly irrelevant historical forms of organization, without abruptly discarding the past. Entrepreneurs who challenge business incumbents, new forms of governance (such as subnational, supranational and cross-cutting governance) that supplement incumbent governments and a wide range of civil society all deserve support, but none should be seen as a panacea. Democratic and accountable forms of organization, that seek to maximize the benefits accruing to those they serve, should be fostered wherever possible to supplant plutocratic, autocratic or profit-oriented organizations. The organizations most to be admired are those that are responsive, fitted to their time and social circumstances and democratically accountable to those they serve. At the same time, attempts to suddenly “build a new world” and wipe away past institutions that are still relevant should be resisted as they usually aim at totalitarian enslavement of individuals in the name of liberation from existing institutions. The combination of QF and the SALSA with mandatory sale requirement at the self-assessed value help formalize the idea of emergent, gradually decaying social structures.
- Aligning Social and Technological Innovation: Social and technological innovation are both desirable and should progress as much as possible in parallel. When social innovation runs ahead of the technologies needed to instantiate it, it usually fails and leads to violence. For example, new modes of governance usually require new information and communications technologies to support and formalize them or they can degenerate into dictatorship as in the French Revolution and Soviet Union. When technological innovation runs ahead of social innovation, it becomes the basis of dangerous private concentrations of power and erodes democracy. For example, heavy industrialism requires labor organization to avoid the domination of capital and a level of global governance to avoid climate catastrophe. Modern information technologies and transportation technologies that allow globalization require new forms of governance corresponding to the patterns of collaboration they allow. The idea of DD, that data producers should organize collectively to bargain for the value of the data they create, is an example of an attempt to update social organization to new production modes.
- Equilibrium Between Individuals and Communities: Communities and individuals should each flow from and be in equilibrium with the other. Community identity and interest should be derivable from an interaction of preferences, knowledge, and interests of the individuals that make them up. Individual identities and interests should be derivable from the emergent culture of communities. Monopolies by individuals over communities and commonwealth should be feared and fought, but so too should a monopoly by a single community over the identity of an individual. Duality theories between groups and individuals help formalize this concept.
- Diversely Shared Property: Absolute private property and absolute national sovereignty are both, and roughly equally, to be avoided. Both the financial benefits and the prerogative to use capital should appropriately be shared across many levels of community, roughly in proportion to the needs of those different communities to use them and the contributions their efforts made to create them. Freedom of movement within nations, across territory, including land typically considered “private property”, and freedom of movement across nations, including across typically closed borders, are both desirable, at least under some conditions, but neither should be absolute, free or possible with unlimited “private property” in tow. The COST, and variations on it that share property across many levels, help instantiate this idea.
- Equal but Flexible Voice: A narrow vision of democracy as absolute equality of influence, vote or voice on every issue within a fixed polity is undesirable. Instead, we should seek a process by which the political leadership of a diverse range of polities emerges through the bottom-up desire for engagement of citizens in these different polities to which they are committed to different degrees. While equality of dignity and voice overall is a central value, individuals will and should choose different leadership paths, some focusing on leadership within one community, others participating more lightly in several. Some of these communities will be narrower, but deeper, others broader but shallower. QV, a system in which citizens are allocated equal budgets of voice credits that they can spend on a variety of issues and candidates as they see fit, can be seen as a formalization of this ideal.
- Democratizing Capitalism, Blurring the State: Wherever feasible, we should seek to democratize agglomerations of private power and capital, by a combination (based on efficacy in the circumstance) of preventing or breaking up these agglomerations, democratizing them internally, or creating countervailing power to restrain them. Wherever feasible, we should seek to make the use of state power more flexible and responsive, by a combination (based on efficacy in the circumstance) of decentralization, enfranchising those without a voice in present exercise of state power, and the creation of cross-national democratic institutions. Economic democracy reforms and non-state-based visions of democracy may help formalize this goal.
- Subsidiarity Beyond Geography: Rather than either centralization or decentralization, a diverse ecosystem of polities should emerge based on the principle of subsidiarity. This principle can be stated either as “everything should be handled at the lowest level of government capable of capturing the crucial necessary spillover effects associated with that domain of policy” or “everything should be handled at the highest level of government capable of flexibly accommodating important local differences and information.” These may seem like opposite principles, but in practice they are overdetermined, as any structure will end up straining both local knowledge and the ability to incorporate relevant interactions. Given this, to form the best levels of organization, we should avoid focusing exclusively on physical locality and seek forms of organization that respond to the patterns of interaction and commitment (linguistic, cultural, social, network-based, interest-based, occupational, relation to environmental features) that are relevant to the common interests at hand. Again, more flexible substrates for democratic participation, not based on nation states, may help formalize this principle.
- Social Plasticity: Human conceptions of community are plastic to changing social dynamics; we should not be excessively attentive to the forms of social organization that characterized the past, especially when these do not themselves have deep historical roots. On the other hand, attempts to impose rather than to allow new forms of social structure to emerge should be resisted as authoritarian and forms of tradition with enduring value to the individuals who participate in them should be maintained and affirmed. We should seek formal polities that respond to social evolution at the same time as they shape it without seeking to monopolize the process of identity formation. Again, QF and SALSA together may help formalize this principle.
- Political Economy, not Economics and Politics: Sharp divides between the economic/private and the political/public should be avoided wherever possible. Agency, flexibility and choice of issues and communities to prioritize are important political values; reason, equality and cooperation deserve attention in the economy. Sharp divides between exit and voice should also be avoided and replaced by more gradual processes of shifting commitments. QF offers a natural formalization of this principle.
- Erosion and Taming, not Violent Overthrow: While the concentrations of power in institutions like states and corporations are to be resisted, attempts to rapidly change power structures without clearly tested alternative bases of legitimacy have typically ended up recentralizing power in more dangerously concentrated forms. Breaking existing power structures therefore requires a careful combination of concerted and growing bottom-up experimentation that can gradually replace existing power structures (“erosion”) and action through existing power structures to restrain and check the excesses of other such structures and bring attention to alternatives (“taming”). The dual foci of RxC on entrepreneurial efforts to build local and voluntary experiments in radical new political economy structures and pursuing at a broad political scale more modest regulatory constraints on capitalism and checks and balances of the state spring from this principle.
- Work Within the System to Replace It: To the maximum extent possible, erosion should occur in ways that harness and beat existing power structures at their own game, rather than through extra-system means that could precipitate violence. Within the democratic politics of nation states this means building political movements capable of winning widespread political assent and healing existing political divisions. Within capitalism this means build more-productive-than-capitalism entrepreneurial organizations that through their greater productivity accumulate capital that can be used to bring more resources under more just management. Only once such forms have robustly proven their legitimacy and the ability to offer sustainably liberal structures for social organization should they be formalized by supplanting existing capitalist and democratic institutions. Again much of the structure of RxC, from its focus on art as a way to build legitimacy, its attempt to form new political coalitions with nearer-term policies, and its small-scale but radical experiments structured often as for-profit start-ups spring from this principle.
- Collaborate with Power to Contain It: Efforts to tame existing concentrations of power must naturally run through existing institutions, through mechanisms like showing private companies how they can improve their profit by competing more vigorously, organizing politically for regulations that break concentrations of private power, and encouraging private companies to resist attempts by authoritarian states to concentrate power over information. These efforts will require collaboration with problematic existing power structures which are often worthwhile so long as excessive legitimation of those power structures compared to the reforms thereby achieved can be avoided. RxC’s cooperation with a range of existing nation states, political parties and large corporations, who differ from RxC values on many dimensions, spring from this principle.
- Live Your Values: The most important goal of social reform should be to build new, widely-shared visions of legitimacy that underpin a society in which violence is therefore of minimal importance. Building such widely-shared notions of legitimacy requires a broad social conversation and imagination, something impossible without incorporating a diversity of means of communication and community organization. Art, entertainment, and connections to a wide range of pre-existing civil society will be critical to facilitating such a conversation. Such approaches can build broad-based social movements capable of not just exercising power, but instantiating in their practices new forms of legitimacy. Such a diverse interlinking of social forces in turn mirrors fundamental RxC values. As such, building an RxC society requires living the values described here and, while constantly experimenting with how these can be formalized at smaller scales, formalizing them in the large only once they have pervaded social life. Internal RxC efforts to “eat our own dog food” on everything from publication structures, to internal governance and the emphasis on diversity and inclusion instantiate this principle.
While still quite broad, these principles may well offer enough to give sufficient clarity to inspire the social action RxC will need to provide answers to the puzzles associated with increasing returns, puzzles that ideologies like capitalism, statism, nationalism and technocracy have left unsolved to the detriment of humanity. If RxC succeeds, it will replace these failed paradigms with a pathway to a diversity of free and equal communities, on a healthy, prospering planet.