Charlie Harvey, IA260

Critical assessment of “Changing Economies For Global Companies”, By Frank R. Smith

2005-01-16

Table of Contents

Introduction	3

Commodity and Gift	3

Enclosure	4

Conclusion	4

Introduction

In this essay I'll attempt critically to assess “Changing Economies For Global Companies”, By Frank R. Smith. I was interested in Frank's comparison of the way in which Trans-National Corporations (TNCs)(most notably Microsoft) approach the ideas of ownership and economics in the oil and digital Intellectual Property (IP) industries.

I hope to be able to expand and clarify on the themes he has introduced, by focussing on two of the central themes that I felt were crucial to his argument - the distinction between commodity and gift exchange and the similarity between the enclosure of oilfields and cyberspace.

Commodity and Gift

“FLOSS is using the Internet and new technologies to create level playing fields for all to use.”

One of the distinctions that I felt Frank didn't explicitly draw was between capitalist commodity and gift exchange, which is fundamental to the way in which FLOSS and proprietary software are produced, if not consumed. One of the strongest comparisons between a proprietary software vendor, and an oil TNC is the fact that they are both producing a “pure” commodity in the capitalist sense. In the free software world the software production process is very much orientated around a gift exchange.

A commodity is defined by wikipedia thus:

“an undifferentiated product whose market value arises from the owner's right to sell rather than the right to use”

Eric Raymond was the first to observe that FLOSS was, in contrast, based around gift exchange production. He writes:

“In gift cultures, social status is determined not by what you control but by what you give away.”

As can clearly be seen proprietary software companies and oil TNCs are commodity producers in the sense above (although, as Frank rightly points out they may both offer ancilliary services, as well)

I expanded somewhat on Eric's observations about the FLOSS movement being orientated toward gift exchange in “Free Software as DIY culture” . The production methods of FLOSS rely heavily on gift exchange, a feature absent from the capitalist model on which TNCs are built. It should, of course be pointed out that many of the large FLOSS companies (cf. RedHat, SuSE, etc.), whilst being gift exchange producers are very much still commodity purveyors. In that sense there's no reason not to extend the comparison between Oil and Software companies to embrace these parts of these FLOSS companies, too.

Enclosure

“Once you own the land where oilfields are found you control the sale of the oil.”

One of the strongest comparisons that Frank drew was between the way that proprietary software vendors and oil companies are able to use laws, and even less socially acceptable methods , effectively to build fences around spaces.

During the agricultural revolution in Britain the state and large landowners used “Enclosure Acts” effectively to remove the occupants of previously commonly held land. This created both an industrial workforce for newly emergent cities, and a more centralized, commodity based market in agricultural production.

The similarity both to current practices within the oil industry and proprietary software vendors attempts to enclose the “digital commons” is undeniable. In Nigeria, Shell Oil continue to make massive profits (£30bn p/a) in Ogoniland, whereas the people of that land suffer from immense poverty.

It is clear that companies like Microsoft have much to gain from new legislation designed to bolster their de-facto monopoly on home software. Perhaps the most dramatic example is pointed out by Frank, when he quotes Steve Ballmer alleging that GNU/Linux potentially infringes 228 patents. It is clear that large vendors have much to gain from the proposed EU Software Patents legislation . In the software patents advocates vision, FLOSS developers without access to arsenals to “cross patent” with, will be forced, like 18th century peasants, from their cyberspatial commons.

Frank argues that these similarities between oil and digital IP, make them almost synonymous. However, to balance the argument, it's necessary to point out that there are very clear differences in other fundamental economic features of the two. Of these, Frank touched on the most compelling - that digital information has a near zero transaction cost. Oil producers have to transport their oil to the consumer, this is unavoidable and has an economic cost. Digital IP producers have no such cost, and so are, if anything, more dependent on states to enforce their oligopoly.

Conclusion

Frank has pointed out an extremely important similarity between the way two industries work. As the oil industry is more mature than the digital IP industry, it may provide clues as to how that industry is likely to develop in the future. This analysis may well be enhanced by moves already afoot in the enclosure of cyberspace. It's important, however, to note that many FLOSS companies are essentially purveyors of commodities, though they may also participate in a gift exchange based production process.

All internet references correct as of 2005-01-16

http://www.informatik.gu.se/~jonas/osfs-vt2004/changing_economies_IA0260.sxw

In the sense used in the agricultural revolution, cf. http://www.cssd.ab.ca/tech/social/tut9/lesson_2.htm

http://www.informatik.gu.se/~jonas/osfs-vt2004/changing_economies_IA0260.sxw

http://en.wikipedia.org/wiki/Commodity

Eric S. Raymond, “Homesteading the noosphere” from “The Cathedral and The Bazaar”, Ed. 3 O'Reilly, 2001 p.81

on-line at: http://www.catb.org/~esr/writings/homesteading/homesteading/ar01s06.html

http://charlieharvey.org.uk/cgi-bin/writings.pl?seen=1&id=13

http://www.informatik.gu.se/~jonas/osfs-vt2004/changing_economies_IA0260.sxw

“How you get to this point is immaterial in some parts of the world.” http://www.informatik.gu.se/~jonas/osfs-vt2004/changing_economies_IA0260.sxw

http://www.cssd.ab.ca/tech/social/tut9/lesson_2.htm

http://www.essentialaction.org/shell/issues.html

http://swpat.ffii.org/

http://en.wikipedia.org/wiki/Transaction_cost

Charlie Harvey IA260: Critical Assessment	4/4

2005-01-16T17:20:36