The Peer-to-Peer Economy: Death Blow to the State
This morning I saw a lovely stained glass window, pulled out my smartphone, snapped a photo, and shot it around to my friends. It’s so automatic now that I don’t even think about it. It’s like a motor skill.
But wait just a moment. Also this morning, I was at the drugstore and saw a wall of film for sale, the kind you shove into a camera, send off for processing, and get glossies in return. Who does this anymore? Some people apparently.
We are in the transition phase from one type of technology to another, and such stores find it profitable to sell to the full range of users…for now. What’s going and what’s coming is pretty obvious.
It’s the same in music, movies, housing, transportation, lending, publishing, and a host of other areas. We are in a period of massive transition from one set of tools to another. The old world survives but a new one is being born by virtue of our technological preferences.
What is the consistent theme that is driving this? Let’s think about this.
In the past, to make a video for public release, I had to have connections, capital, and deals with third parties. There was no choice. I can open my laptop or smartphone and go to work, posting the results in minutes for whole world to see. I’m the producer working directly for consumers. Or I can be a consumer of other people’s direct production for me.
It’s the same with publishing. I can write a book and make it available directly, peer-to-peer. or download and reads books others have written directly from the author. I can do the same with housing when I travel: I can contact the owner and make a deal without having to rely on an intermediary. I can rent out a room in my house to someone else on the same terms. I can summon up a ride by broadcasting out a signal that drivers can respond to directly. I can become a driver myself and accept such signals from customers.
Our P2P dealings are so habitual that we don’t even think about them much any more. Last night I was listening to some bands cover the music of big-time pop stars. I heard them while using Google Play, and they were just as accessible as the originals. The difference is that these covers were essentially home productions by regular people, not well-funded, well-connected artists. The producer-consumer relationship is direct, or, at least, much more so than in the past.
Anyone can be a news broadcaster. If you don’t like what that news broadcaster is saying, you can make a response news broadcast and post it right where it can be seen by the same people.
We can safely predict that under Obamacare, P2P relationships in health-care provision are going to become more common. With insurers under ridiculous amounts of pressure to provide every conceivable service at controlled prices, service is going to decline, giving rise to direct fiduciary relationships between patients and caregivers. We are going to be cooperating directly.
The most radical application of this idea concerns money and finance. After one-hundred years of government production of currency, and government sponsorship of banking institutions, P2P networks are now providing payments systems, loan markets, and even currency units such as Bitcoin. The implications of this are of course remarkable to consider. It’s one thing to dispense with the need for film processing; its something else entirely to toss away central banks, regulated stock markets, and departments of treasury. These are the heart and soul of political power itself.
The term P2P originated as a description of file-sharing systems — used popularly only in the 21st century — in which each party has the capacity to be both a consumer and producer of the same good or service. I can download music and seed it. I can host or consume or both at the same time. The term here is “equipotency,” equal power.
Neither party has to rely on some third-party trust relationship or external intermediary to achieve the aim. There is not disproportionately in available tools. There are no external rule makers, rule givers, or rule enforcers. It’s structure evolves organically. When big shots try to get their way, they only incentivize entrepreneurs to find new ways to do the same thing. An example is the take down of online pharmacies ten years ago (they are all back) and the Silk Road only last year (distributed versions of the same are now everywhere). Attempts to control lead to loss of control. That’s why the distributed system is ever evolving in unpredictable ways.
Now we are seeing the term P2P being used to describe not just distributed Internet networks but social and economic systems. There is an emerging literature on the democratization of innovation, the makers movement, the open-source revolt against patents and copyrights, the movement of hactivists to bust old-style regulatory structures, new patterns of economic development, the sharing economy, and even the end of the nation-state in light of global P2P relationships. (I still don’t think the definitive treatise on this topic has been written.)
Free enterprise in the digital age is taking on a different form than in the past, or, at the very least, the trajectory toward connecting us ever more directly with each other — with equipotency as producers and consumers — is accelerating dramatically thanks to digital technology. And this could really matter for the future of how the debate over government control takes place. The institutions that people inhabit on a daily basis dictate their self interest, and that in turn influences the type of impositions on their freedom that they will and will not tolerate.
Great liberal thinkers have always understood that institutions matter for the resilience of freedom itself. Think back to the 18th century with Thomas Jefferson and his strong belief that agriculture and farming were somehow crucial to the defense of freedom against government.
Jefferson — among many others of his generation — believed that so long as people had a direct stake in the products of the land, as producers and consumers, they would be forever intolerant against leviathan. The obvious problem with that strategic outlook: history shows that most people really don’t want to be farmers. In any case, corporate farming today is on the dole as few other sectors. I get what he was saying but he was just wrong.
This agricultural model of social organization was clearly out by the 20th century, and the debate between state control and free enterprise came to be recast again. It was set up as a great choice — and a false choice! — between being ruled by public-spirited political elites and rapacious captains of industry. Never mind that they have been working hand-in-hand for more than one hundred years.
This false choice is nicely summed up in a statue outside the Federal Trade Commission called “Man Controlling Trade.” The style is the “socialist realism” popular in the 1930s, and it features an implausibly bulked-up dude reigning in a wild horse.
The horse is supposed to represent corporations and their tendency toward reckless madness. The dude is supposed to represent government, which we as a people — as the mythology would have it — have given the responsibility of maintaining some semblance of order. It’s straight from New Deal lore.
Such has been the framing of the debate over the free economy for all these years. We have been invited to either back government (the man) or corporate power (the horse). The interventionist favors government as some sort of impartial third-party agency that works for the good of all. Backers of a free market say that’s nonsense. But then they get on the defensive, explaining that corporations really aren’t powerful but for the buying and selling decisions of consumers and stockholders.
Of course it is absolutely true that the horse — despite the artistic dehumanization — does actually constitute real live people, at least in a free economy. No corporation not on the public dole can survive without the willingness of consumers to buy. They all struggle for our business, and all face that great crucible of dealing with profit and loss in an uncertain future. This is a point that opponents of a free market will never seem to get.
Still, what both the statue and the terms of this debate between big business and big government leave out is you and me and everyone else. This is what the emerging technologies of the P2P world is fixing for us. We are gaining new types of tools that underscore in the most salient possible way that a free economy really is about relationships between people. It is about much more of course — property rights, prices, large-scale production, capital, free information flows — but most fundamentally the free economy is about mutually beneficial exchange.
How will this affect our future? There are three main implications.
First, this inaugurates a new political dynamic. P2P systems give every person a direct stake in free economic structures. It makes a liberal economic order in everyone’s self interest. We’ve seen this already when city officials try to shut down things like Uber taxis or Airbnb rentals or marijuana dispensaries. Those who benefit from these services — not via giant corporate third parties but directly — can get quite annoyed. The case for reigning in the supposed power of private parties is not as compelling when these relationships are P2P. They resist and stand up for their rights.
Second, there are implications for the effectiveness of the state itself. Distributed systems have no central point of failure. Government can regulate only that which it can control, and it cannot control a distributed system. It is far easier for politicians and bureaucracies to make a deal with General Motors than with a network that lives on millions and billions of servers, and can move and be adapted to conform with market needs that are ever changing. Governments are good at the physical world, but not so hot at managing the distributed digital world and its P2P energy. Government can slow it down but it can’t stop it.
Third, P2P systems care nothing for the nation state. Think about the latest apps from among the millions available that you might have downloaded for your smartphone or your tablet computer. What is the nationality of the maker? You don’t know and there is no reason to care. In a P2P world, we are all citizens — consumers and producers — of the world. Economic relationships delineated by arbitrary lines on a map, as drawn by politicians, just don’t matter.
Murray Rothbard wrote that after industrialization, humankind would never tolerate going back to a world of feudalism, poverty, and dependency. He was right, despite fits and starts on the way toward the gradually emerging anarchist world order.
What he said is even more true of the P2P world. We wouldn’t tolerate going back 15 years ago before file sharing was invented. We wouldn’t tolerate going back 10 years ago before open-source software development came to fruition. We wouldn’t tolerate going back to a 5 years ago when we couldn’t video phone with anyone in the world or share images instantly with the globe with the push of a button.
The P2P economy is the next stage in the great march of history away from despotism toward freedom. It’s all happened without much mainstream attention and virtually no public consciousness. The emergence of it has been spread out over some 15 years, too slow to notice with full awareness and too fast to fully dissect and understand. It is now a fixture and a foreshadowing of a world to come.
That doesn’t mean we don’t have to fight for it. But this fight is no longer about muskets and barricades. It’s about innovation, cleverness, and being the revolution in our own lives and economic relationships.
Think back to that image at the Federal Trade Commission. Maybe, and only now, the state is the horse and we are the man. In this struggle, maybe the state — the final third party and most vicious intermediary ever invented — will finally lose.
The Economics of Life Itself : Beautiful Anarchy is the writing platform of Jeffrey Tucker, in which he covers economics, art, popular culture, and politics from a pro-liberty, anti-state point of view.