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The Gift Economy

  • Economists are missing one important factor among the causes of the chronic unemployment at the end of the Great Recession of 2008-09.
  • In 2006 YouTube only had 60 employees, but it was managing 100 million videos. The YouTube employees were not making the videos: millions of people around the world were donating them to YouTube. If a Hollywood studio had decided to create 100 million videos, it would have had to hire hundreds of thousands of people to act them, direct them, produce them, edit them, and upload them.
  • In 2004 Craigslist only had ten employees moderating more than a million advertisements posted every month. A newspaper handling the same amount of advertisements would have to hire hundreds of editors.
  • In 2005 Flickr only had nine employees, but they were managing a repository of millions of pictures. Those pictures were taken around the world, edited, uploaded, documented and even organized by millions of users. A magazine that decided to create a similar repository of pictures would have to hire thousands of photographers, tour guides and editors.
  • In 2005 Skype only had 200 employees, but they were providing telephone service to more than 50 million registered users. Any telecom in the world that provided a comparable service employed tens of thousands of technicians, operators, accountants, etc.
  • One of the fundamental discoveries of the "net economy" is that users of the Web around the world are happy to contribute content for free to websites willing to accept it.
  • This phenomenon obviously displaces workers who used to be paid to create that very content.
  • This phenomenon is not creating joblessness nor merely unemployment: it is creating unpaid jobs. Millions of people work (some of them for many hours a day) to create and upload content to other people's businesses (such as Wikipedia, Facebook, Twitter, Flickr and YouTube). They are working, but they are not employed: they work for free, out of their own will. Not even slaves did that.
  • Indirectly, the Web has created a broad new class of knowledge workers: volunteer amateur editors whose net effect is to displace the existing knowledge workers (photographers, journalists, actors, directors, researchers, writers, librarians, musicians, as well as all the engineers and clerical staff who provide services for them).
  • When thousands of knowledge workers lose their job, i.e. when their purchasing power collapses, inevitably this has repercussion on the entire economy and creates further ripples of unemployment.
  • Every time someone adds a line to Wikipedia, a professional knowledge worker becomes less indispensable and more disposable. Every time someone adds a picture to Flickr, a video to YouTube, news on Twitter, a notice on Facebook or an ad on Craigslist the job of a professional becomes more vulnerable.
  • In the past each wave of technological innovation came with a wave of new jobs that replaced the old ones. Society had to train millions of users of word processors to take the place of millions of typists; and companies had to churn out computers instead of typewriters, a process that involved hiring more (not fewer) people. In fact, each wave of technological progress typically created new opportunities for knowledge workers, and this class therefore expanded rapidly, creating more (not less) employment (and higher incomes). The expansion is still happening: there are now millions of people making videos instead of just a few thousands, and there are now millions of people taking pictures and millions posting news. The difference is that they don't ask to be paid: they do it for free. Therefore businesses can operate with a minimal staff: the old knowledge workers are replaced by free labor. Therefore the number of knowledge workers is still increasing (and even exponentially), but the number of those who are paid for their work is shrinking dramatically.
  • It is an illusion that YouTube is run by only a handful of employees: YouTube "employs" millions of "employees". It just so happens that 99% of them are happy to work (provide content) for free. Therefore there is no need anymore to actually hire people to create content.
  • Protectionists complain that developing countries are "dumping" cheap products on the USA market, which cause USA companies to go out of business. Protectionists inveigh against "unfair trade". But the real enemy of employment is free labor. Nothing kills jobs faster and more permanently than free labor. That is a form of competition that comes from inside the USA society, an accidental by-product of technological progress.
  • This accidental by-product is actually the dream of socialist utopians: the net economy has created production tools that are available for free to everybody. That is precisely Marx's definition of socialism: the collective ownership of the means of production.
  • This accidental by-product is also the dream of the hippy utopians of the San Francisco Bay Area. Stewart Brand of the WELL imagined precisely such a virtual community of people engaged in the free production and exchange of knowledge goods: a community of people investing their time and sharing their content for free.
  • The utopian society of Marx and Brand has materialized as a "gift economy" (a term coined in 1985 by Lewis Hyde and applied to the net economy in 1998 by Richard Barbrook) in which a few businesses provide the means of production to a mass of millions of volunteer amateur editors. The free labor of these many worker ants allow a very small number of queens to get extremely rich while causing millions of middle-class families to lose their income.
  • The irony is that they are often the same people. The very person who uploads a picture, a text or a video for free is the person who will (directly or indirectly) need to look for another (often less remunerative) job as a (direct or indirect) consequence of that act of free labor.
  • The Internet did democratize society: everybody can now start their own business. At the same time the Internet increased the value of knowledge, another step in the progress of human civilization from survival-based goods to knowledge-based goods. The problem is that the Internet also democratized knowledge production: everybody can now provide content, and they are willing to do it for free.
  • The net economy is, in fact, rapidly evolving towards an economy of one-man operations. There are now Web-based tools available to build, run and monetize a business that only require limited technical skills and no more than a few days of work. One person alone can de facto create an assembly line entirely on the Web to produce a mass-market product/service (in the same category as YouTube, Flickr and Craigslist). That assembly line does not employ any worker other than the founders who assembled it. Once the one-person business is up and running, its success only depends on how many people are willing to contribute content for free, i.e. how much free labor you can harvest. Therefore the startup of the future will require even fewer founders. If it succeeds (i.e., if it manages to attract millions of amateur content providers), it will employ even fewer people, and only those very few will benefit financially from its success.
  • The traditional economy tended to concentrate wealth in the hands of a few large companies that ran giant empires of hundreds of thousands of employees around the world. The gift economy is rapidly concentrating wealth in the hands of a few individuals who run giant empires of tens of millions of unpaid amateurs.

Further reading:
  • Lewis Hyde: "The Gift Imagination" (1985)
  • Richard Barbrook: "The High-Tech Gift Economy" (1998)
  • Jagdish Bhagwati: "Technology, not globalization, driving wages down" (2007)
  • Nicholas Carr: The Big Switch (2008)
Proof-edited by Alexander Altaras