06.12.2018

Competition and cooperation

Review of 'Elinor Ostrom’s rules for radicals' by Derek Wall, Pluto Press, 2017, pp160, £16.99

Elinor Ostrom is the only woman to have won the Nobel Prize for economics. She analysed ‘the commons’ - ie, that which is held in common - distinguishing between common-pool resources and common-pool property.

Ostrom had attended a lecture by Garret Hardin in the 1970s. In his 1967 book, Tragedy of the commons, he argued that individuals overuse commons, degrading resources. His argument is based on ‘the prisoner’s dilemma’ theory,but that actually demonstrates the need for cooperation, common ownership and control. Hardin proposed population control, including compulsory sterilisation after the first child, and strong government to impose control over resource usage. Ostrom rejected Hardin’s totalitarian conclusions from her observation of real-world examples.

The question of the commons and the development of cooperative structures is wider than environmental issues. Primary is the property question: ie, who owns the means of production, and what structures exist to exercise control over their use.

Ostrom was prevented from studying economics at university, since she was deemed not to have studied enough mathematics. She had been told at school that there was no need to study further maths, and was asked “what use trigonometry would be when she was ‘barefoot and pregnant in the kitchen’” (p4).So she did a PhD in politics.

Eight rules

Ostrom proposed eight rules for successful commons management.

1. Firstly, there must be boundaries - collective owners can use the resource within agreed rules. I agree with author Derek Wall’s comment, “While seen as an engine of injustice, it is easily forgotten that the corporation is a commons - a view echoed by the autonomist Marxist theorists, Hardt and Negri” (p55). But I do not agree with his conclusion that “corporations could be owned by a whole society.” A corporation is a legal entity: it can only be controlled rationally by the associated producers within it.

Orthodox economics views allocation as determined by the market, the state or a mixed economy of the two. But Ostrom shows in her Nobel lecture, ‘Beyond markets and states’, that there are other options. Marx promoted worker-owned cooperatives as the form in which democratic control over socialised capital was most readily achieved. The state is a bureaucratic, inefficient alternative to the market. Corporations have the advantages of the state, in terms of planned production, but control is exercised by shareholders, who protect their short-term interest above that of the corporation. Shareholders should be placed in the same position as other creditors.

Ostrom’s husband, Vincent, noted that Californian citrus farmers had established a system of land and water rights to protect their common interests and advised her to study the West Basin water source underlying Los Angeles, where citrus growers utilised that resource to the advantage of all. Elinor found this was true with the West Basin.

Competition and cooperation are strategies for maximising utility from resources. Cooperation may increase output, so all who cooperate can consume more. It may prevent overuse, where everyone gets an adequate level of consumption, but, where everyone is facing malnutrition, there is an incentive for each to grab whatever they can to ensure survival. Communism is premised upon capitalism developing the productive forces to a level where abundance becomes possible, but, so long as scarcity exists, humans will be driven by competition. Socialised capital does not change that. Cooperatives compete with corporations, which dominate the market. Worker-controlled corporations could change that, but it would require a political revolution, on a scale like what was needed to bring about political democracy and universal suffrage.

Wall engages in a discussion over the nature of revolutionary social change. He argues that changes at a micro level are always conditioned by, and subordinate to, changes at a macro level. That is true, but what brings about this macro-level transformation?

Wall notes the argument of Jon Elster that “until we replace the assumptions of mainstream economics that human beings are basically selfish and seek to maximise personal gain, an alternative economics will fail to provide an understanding of how humans work” (p50).

This is subjectivist. If humans are naturally selfish, why do some people risk their lives rescuing others from burning buildings, etc? If this behaviour is aberrant, then it is necessary to point to some powerful social force that causes it; but the most powerful social force we can see is that of capitalist competition, which acts to encourage all individuals to behave in a competitive, individualistic and selfish manner. Given that under capitalism competition, individualism, selfishness and so on are the norm, then its clear that altruism is aberrant for capitalism. It is impossible to speak of ‘human nature’ separate from the material conditions under which real human beings live their lives. To change human nature it is necessary to change those material conditions.

Capitalist productive relations engendered bourgeois social relations, forming the material basis for bourgeois ideas, norms and rules dominating society, and making possible the bourgeois political revolutions. The continued concentration and centralisation of capital leads to the development, growth and then dominance of socialised capital - the transitional form of property, engendering transitional forms of social relations and necessitating a political struggle to bring political structures into alignment with the material base: eg, a political struggle for industrial democracy. Marx’s point is that agriculture could not be developed, making possible large-scale industrial production, without the process of enclosure and capitalist production. Individual peasant producers would not cooperate to accumulate, and centralise, their scattered means of production, to leap from peasant to large-scale industrial production. That requires the capitalist, so these means of production must take the form of capital. That defines the progressive, historic mission of capital. But that is not the outlook of environmentalists. They seek to hold back the process of development. As Wall says of Ostrom, “She felt that part of the solution to environmental problems would come with us consuming less and downsizing” (pp2-3).

Let us move on to Ostrom’s other rules for successful commons management.

2. The rules for use of commons had to be specific. Rules appropriate for one are not appropriate for another. Rather than dismissing the potential problems of common-pool resources, Ostrom looked for solutions in the development of appropriate forms of common-pool property. Her study went much wider than political economy, taking in a range of disciplines.

Ostrom’s Governing the commons was published in 1990. Her analysis showed how forms of common-pool property across the globe were established to manage common-pool resources, including centuries-old legally binding contracts, and there were no recorded instances of resource depletion occurring. However, the interesting point is not the existence of such isolated examples, but, as Engels describes, the reason for its dissolution and the development of private property.

Self-government

3. Commoners should be self-governing, democratically determining the rules governing use of the common resource, which facilitates restricting its use and preventing resource depletion. Another project she worked on was policing. She argued: “... input from local communities led to better policing” (p7).

The community is a commons. Self-government requires forms of democracy that enable workers to organise self-policing. Black communities, facing racist policing, and the 1984-85 miners’ strike, when Thatcher’s police imposed martial law on mining communities, show its importance. Democratically organised self-policing is a foundation for developing democratically controlled popular militia. In worker-owned cooperatives, daily involvement in decision-making is inherent. Longer-term planning implies democratic decision-making, even if execution is placed in the hands of managers.

The form of a co-op or corporation objectively opens up revolutionary possibilities, even though it is only in the case of the worker-owned cooperative that industrial democracy is inherent in the form. Existing technologies make possible local energy production systems, but who is to exercise control over them, and how is democratic control to be achieved? Local solutions, based upon cooperative ownership and self-government, can provide immediate solutions, without waiting for the state, or a socialist revolution, but these local solutions require them to be nested in a wider context. Local energy systems are only credible if the technology is developed on a sufficient scale for it to be cheaper than energy production based on fossil fuels.

Ostrom’s politics revolve around participation in decision-making, resulting from her concept of direct democracy. Whilst promoting localism and decentralisation, she notes that important ideas, decisions and functions can only succeed at a national or even transnational level: “... national governments are too small to govern the global commons and too big to handle smaller-scale problems” (p62).

Ostrom’s direct democracy, Wall argues, is an antidote to the rise of rightwing populism. However, it is important to recognise the Hobbesian basis of Bonapartist regimes. Atomised populations feel helpless and have difficulty coming together to overcome that condition, which is why they then give power to ‘the sovereign’ as their protector.

Ostrom did not believe that participatory democracy worked best on the basis of homogeneity. She thought that better ideas develop when contending views are argued out. However, this ‘agnostic pluralism’ requires that contending parties are open to argument, which in turn requires some homogeneity. Societies riven by sectarianism see division intensify, via such a process, leading to Bonapartism.

4. There needs to be effective monitoring. In the labour process, workers act as a check on each other, to limit free riders. At the higher level of organisation, the task is devolved to elected managers.

5. Graduated but effective sanctions must be used against those who break the rules. Some system is required to prevent rule-breaking or free riders, but it should be graduated, because someone may infringe a rule inadvertently. If they continue to break the rule, an effective sanction must be in place to deter such behaviour.

6. There should be a low-cost means of resolving disputes. There may be disagreement over the interpretation of rules and their infringement. This is why cooperatives still require trades unions.

7. There needs to be some minimal acceptance of the right to organise the commons. When the 1945 Labour government nationalised the coal mines, it also took over the cooperative mines, depriving miners of the right to organise those mines. Although it said all mines were the property of “the people”, the people were excluded from control.

8. Finally, effective commons must be nested within larger commons. As Marx said, individual cooperatives should be part of a cooperative federation. Wider democratic structures are required to govern intersections between the operational boundaries of commons. This implies longer-term planning, to meet the requirements of each commons.

Ostrom’s view of commons being nested is illustrated by the effects of wider ecologies on local resources: eg, climate change on local weather conditions. But Danish environmentalist Bjørn Lomborg argues that the answer - say for Bangladeshis - is to rapidly grow their economy, so as to be able to cope with effects of climate change, and to divert resources into development of new forms of energy technologies. Raising living standards enables households to utilise more efficient forms of energy. In the 1950s, Colin Clark demonstrated that the main determinant of family size is income. When incomes rise, family size declines, providing more efficient use of resources. Infant mortality rates fall, children grow up to be productive labourers, replacing the resources consumed in the production of their labour-power.

Law of value

Ostrom’s work is pragmatic - identifying problems, finding practical solutions, rather than starting with an ideology and then searching for opportunities to apply it. She saw herself as part of a collective effort, basing her work on popular involvement and listening to those immediately involved. Wall notes that appearance and reality differ. If we rely on empiricism, a collation and correlation of data, we can be led astray because of confirmation bias, a false interpretation of the data or the confusion of cause and effect. The scientific method requires a theoretical framework, the formulation of a hypothesis, tested by experiment or against reality. But, with economics, this is not straightforward because of the multiplicity of variables. Ostrom’s approach counteracts that by seeing research and the accumulation of knowledge as a collective effort, using a multiplicity of contested ideas and models. A creative commons must be free and open, although structured within agreed rules.

Wall refers to Ben Fine’s assessment that she ignores class struggle, and that her ideas amount to economic colonialism - applying mainstream economic logic to non-market areas of life. But the economy is not the same as the market. The law of value applies to non-market economic relations. Ostrom defined herself as a political economist, recognising that economic relations are not simply market relations, but structured within, and heavily determined by, institutions. Even in developed economies, much value creation is in the sphere of domestic labour, not captured in official data. Domestic labour operates under the law of value, seeking to maximise utility with the least expenditure of labour-time. Households adopted labour-saving devices when they became available at affordable prices, so labour-time saved could be used in other ways, including taking up paid labour.

Wall confuses cooperative with non-market production. He assumes that production undertaken by voluntary labour can be generalised, and that the labour creates no new value. Voluntary labour is only possible because those that provide it reproduce their labour-power by other means.

The law of value is central to the question of competition and cooperation discussed in chapter 7. They are poles united in a contradictory whole. Competition between firms exists alongside the cooperation required by the division of labour inside each firm, and the total social capital. This is not just a feature of capitalism. Under communism the law of value means available labour-time is allocated to maximise welfare. Each industry competes against every other to obtain resources. Competition adopts a different form compared to commodity production. The greater social productivity, the less the law of value imposes a constraint over available labour-time and, therefore, the greater the potential for building trust and cooperation.

Arthur Bough