Topic: Telecom, Internet & Information Policy

Yochai Benkler and the Libertarian Center

If you haven’t been reading Cato Unbound this month, you should be. Brink Lindsey defends his notion of libertarian centrism from left, right, and, um, Julian.

I found Jonah Goldberg’s follow-up contribution particularly interesting. He points out that much of what was wrong with the progressive movement of the early 20th century was due to its infatuation with centralizing institutions that were ascendant at the time: the army, heavy industry, and later, large-scale scientific endeavors like the Manhattan Project. Bigness and centralization were in, and intellectuals believed that the entire country should be governed in a similarly hierarchical fashion.

Goldberg thinks liberals will just discard the economic argument for central planning and move on to another one: public health, the environment, whatever. But I wanted to point out that there are also some liberals who are adopting a more appropriately skeptical attitude toward central planning itself.

One reason to think the 21st century is going to be more libertarian than the 20th is that the defining technology of our generation, the Internet, is radically decentralizing. After a century in which our cultural and economic lives were dominated by large, vertically-integrated corporations, we’re entering an era in which decentralization and disintermediation are the dominant trends. Instead of producing components in house, they develop networks of independent suppliers, knit together by sophisticated supply chains. And instead of vertically-integrated media companies like the New York Times and NBC, we’re increasingly moving toward a world in which writers, musicians, and other creators can reach their audiences directly.

The left, which has always fancied itself the party of modernity, is already beginning to be affected by these cultural currents. No work typifies the shift better than Yochai Benkler’s The Wealth of Networks, a book about how the emergence of the Internet is reshaping the cultural landscape. What’s striking about the book is how much Benkler draws on the thought of libertarian thinkers like Smith, Hayek, and Coase in explaining how he envisions the media landscape of the 21st century. Indeed, on page 16 Benkler, who is not a libertarian by any stretch of the imagination, concedes:

My approach heavily emphasizes individual action in nonmarket relations. Much of the discussion revolves around the choice between markets and nonmarket social behavior. In much of it, the state plays no role, or is perceived as playing primarily a negative role, in a way that is alien to the progressive branches of liberal political thought. In this, it seems more of a libertarian or an anarchistic thesis than a liberal one. I do not completely discount the state, as I will explain. But I do suggest that what is special about our moment is the rising efficacy of individuals and loose, nonmarket affiliations as agents of political economy.

Benkler’s argument is too long to summarize in a blog post. You can get a taste for it in my review of Wikinomics, a book that draws heavily from Benkler’s insights. But I’ll just note the possibility that just as the technological developments of the early 20th century pushed progressive intellectuals in a socialist direction, so the emergence of decentralizing technologies like the Internet will push liberal intellectuals like Benkler in a libertarian direction.

An even more extreme example is Eben Moglen, the free software movement’s leading lawyer. He’s definitely a left-winger, and he has a lot of opinions that libertarians would not find congenial. But I find it striking how often he finds himself coming to libertarian conclusions almost despite himself. For example, check out this excerpt from a speech about the success of the free software movement:

People out there who had money to burn said: “Wait a minute. This software is good. We won’t have to burn money over it. And not only is this software good as software, these rules are good. Because they’re not about ambulance chasing. They’re not about a quick score. They’re not about holding up deep pockets. They’re about a real cooperation between people who have a lot and the people who have an idea. Why don’t we go in for that?” And within a very short period of time they had gone in for that. And that’s where we live now. In a world in which the resources of the wealthy came to us, not because we coerced them, not because we demanded, not because we taxed, but because we shared. Even with them, sharing worked better than suing or coercing. We were not afraid. We did not put up barbed wire, and so when they came to scoff, they remained to pray.

You may not share Moglen’s belief that proprietary software is inherently evil. I don’t. But as libertarians, we do have to respect the fact that he’s advanced his beliefs, and produced some great software, using entirely non-coercive means. In another era, Moglen might have been calling for the nationalization of the steel industry or the creation of a cradle-to-grave welfare state.

Instead, his policy agenda, to the extent he has one at all, is deregulatory. He believes that copyright and patent law are infringing on the freedom of programmers to do as they please with their computers, and so he wants to repeal the Digital Millennium Copyright Act and software patents. Not all libertarians would agree with those goals, but they’re a far cry from nationalizing the software industry.

Inside a Chinese Factory

Via Tom, here’s a fantastic series of posts by the guy who’s setting the Chinese supply chain to manufacture the Chumby, an Internet-enabled alarm clock. Here you can see videos of a Chinese factory floor, with workers assembling sneakers. Here is a story about the fanatical level of dedication he has seen among the workers at the factory—dozens of employees stayed at work until 3 AM while he debugged a flaw in the first run of devices, and then showed up again at 8 AM to resume assembly. And finally, here are some videos of Chinese workers doing extremely detailed work quickly and accurately.

Some peoples’ instinctive reaction to this story is no doubt to wring their hands about the exploitation of Chinese workers. It’s not hard to see why; wages are only about $0.60/hour, and the jobs are tedious. And indeed, when I was in college in the late 1990s, there were a lot of activists who did just that, agitating for the shutdown of “sweatshops” in China and elsewhere. But I think this suggests a better way to look at the situation:

The amazing part is that the Shenzhen factories were complaining that labor rates were way too high. Apparently, minimum wage for factories in other regions is much less, so they are seeing contracts migrate away from their factories and inland where labor is cheaper. Think about it–Americans complain about work going to Hong Kong, Hong Kongers complain about work going to Shenzhen, Shenzheners complain about work going inland China, and to Vietnam (apparently Vietnam is the new hotness for cheap skilled labor).

The low wages and tedious work of the early sweatshops were a temporary condition. The author reports that the minimum wage in Shenzhen has been increasing by about 30 percent per year in the last couple of years. As the workers in Shenzhen become more skilled and the companies develop better business relationships with Western companies, demand for the area’s manufacturing facilities rise. The companies expand their facilities and hire more workers, and the competition for workers then pushes up wages. And that, in turn, will lead companies to increasingly transition to more complex and lucrative activities. Firms in Shenzhen will specialize in manufacturing more and more complex products, and eventually some of them will begin designing and building their own products.

That’s what happened in postwar Japan, South Korea, and Taiwan, all of which have since achieved Western levels of affluence. The anti-globalization activists meant well, but in reality, the opportunity to become integrated with the global economy will do far more to help the average Chinese worker than anti-sweatshop laws could possibly have done.

Secrecy is Unsafe

The latest issue of Foreign Policy includes a commendable piece by Jacob Shapiro, “Strictly Confidential” (summarized; full article behind paywall).

Shapiro makes an intelligent case that opening government improves security. “When government officials curb access to information,” he writes, “they cut themselves off from the brain power and analytical skills of a huge community of scientists, engineers, and security experts who are often far better at identifying threats, weaknesses, and solutions than any government agency.” Shapiro provides a couple of examples where openness has improved security systems.

“Putting information behind lock and key does not make targets safe from attack. It leaves security analysts unable to find solutions to other weaknesses in the future. It also leaves government and industry less motivated to find safeguards of their own.”

Good stuff.

Toward Open Wireless Networks

One of the hottest issues in tech policy this year is the regulation of wireless networks. The transition to digital television is almost complete, and the FCC is planning to conduct an auction next year to determine who will get to use the old analog television spectrum once the television stations are done using it. Some scholars have argued that the FCC should impose a variety of regulations on the winner of that auction to promote competition in the market for wireless services.

I’m skeptical of this argument, but I do think the critics are right about one thing: in the long run, open networks (like the Internet) do tend to be more innovative than closed ones (like AOL). This is true for much the same reason that free markets are superior to central planning; open networks facilitate decentralized decision-making and low barriers to entry for entrepreneurs. The people who founded Netscape, Google, eBay, Yahoo, and dozens of other successful Internet businesses didn’t have to ask anyone’s permission to do so.

Right now, the wireless networks are not as open as many people in the technology industry would like. Someone wanting to create a new cell phone or a new wireless application or service has to go through a long and cumbersome negotiation process with each wireless carrier. There are good reasons to think this is slowing down the pace of innovation in the wireless market. However, the big debate is over what to do about this. Some people think the FCC should step in and mandate open access to wireless networks. For reasons I laid out in TechKnowledge last month, I think that’s a bad idea. My view is that the wireless industry is still in its infancy, and that market forces will drive carriers to gradually open their networks over time.

Last week, we saw two examples of how this might happen. First, Ed Felten, a computer science professor at Princeton, had a great post pointing out one way the iPhone could shake up the wireless marketplace:

An open system would provide more benefit overall, but most of that benefit would accrue to consumers. The carriers would rather get a big share of a small pie, than a small share of a big pie. In most markets, competition keeps this kind of thing from happening, by forcing producers to account for consumer preferences. You would expect competition to have forced the mobile networks open by now, whether the carriers liked it or not. But this hasn’t happened yet. The carriers have managed to keep control by locking customers in to long contracts and erecting barriers to the entry of new devices and applications. The system seemed to be stuck in an unstable equilibrium. All we needed was some kind of shock, to get the ball rolling downhill.

Only a company with marketing muscle, design mojo, and a world-historic Reality Distortion Field could provide the needed bump. Apple decided to try, in the hope of selling zillions of the new, more capable devices. The real significance of the iPhone, whether it succeeds or fails in the market, is that it will trigger the transition to more open networks. Once people see that a pretty good phone can be a pretty good mobile computer, they won’t settle for less anymore; and mobile networks will be pried open.

One of the issues that critics of the wireless carriers often cite is the fact that American carriers have refused to support cell phones with built-in WiFi connections, which could save consumers money by allowing them to save money on their calling plans by making free calls over the Internet. Critics charge that carriers refuse to allow that because they want to force you to make every call over their network, allowing them to soak you with per-minute usage fees. Today David Pogue has an article in the New York Times describing a new offering from T-Mobile that allows consumers to do just that: when the phone detects an Internet connection nearby, it will automatically route calls via the WiFi network, and the customer isn’t charged for the call. As Pogue points out, this is a direct result of T-Mobile’s desire to get a leg up on the competition:

Have T-Mobile’s accountants gone quietly mad? Why would they give away the farm like this?

Because T-Mobile benefits, too. Let’s face it: T-Mobile’s cellular network is not on par with, say, Verizon’s. But improving its network means spending millions of dollars on new cell towers. It’s far less expensive just to hand out free home routers.

Furthermore, every call you make via Wi-Fi is one less call clogging T-Mobile’s cellular network, further reducing the company’s need to spend on network upgrades.

T-Mobile has the smallest market share of the four national wireless carriers, so they have the least to lose and the most to gain from a shake-up of the market. As a result, they’ve proven most willing to take risks in order to gain market share. If this service proves to be a hit, as I suspect it will, it will force the larger carriers to follow suit or risk losing market share.

That’s how competition works–it steadily forces companies to offer more consumer-friendly products and services whether they like to or not. It’s frustratingly slow for people who are used to the rough-and-tumble of the promiscuously open Internet. But it’s moving in the right direction, and given the FCC’s poor track record when it comes to protecting consumers, I think it would be a mistake for Congress or federal regulators to try to “fix” it.

Let a Hundred Flowers Bloom

The most fascinating story in the world is China today, as the world’s most populous country struggles toward modernity.

The Chinese rulers seem to be trying to emulate Singapore’s success in creating a dynamic modern economy while maintaining authoritarian rule. But can a nation of a billion people be managed as successfully as a city-state? Since 1979 China has liberated its economy, creating de facto and even de jure property rights, allowing the creation of businesses, and freeing up labor markets. The result has been rapid economic growth. China has brought more people out of back-breaking poverty faster than any country in history.

And, as scholars such as F. A. Hayek have predicted, the development of property rights, civil society, and middle-class people has created a demand for political rights as well. Every week there are reports of actual elections for local posts, lawyers suing the government, dissidents standing up and often being jailed, labor agitation, and political demonstrations. It’s reminiscent of the long English struggle for liberty and constitutional government.

And it would be great if it turns out that modern technology can make that struggle shorter than it was in England. A hopeful example was reported this week. According to the Washington Post, hundreds of thousands of “text messages ricocheted around cellphones in Xiamen,” rallying people to oppose the construction of a giant chemical factory. The messages led to “an explosion of public anger,” large demonstrations, and a halt in construction.

Leave aside the question of whether the activists were right to oppose the factory. The more significant element of the story is that, as the Post reported, “The delay marked a rare instance of public opinion in China rising from the streets and compelling a change of policy by Communist Party bureaucrats.”

Cellphones and bloggers fighting against the Communist Party and its Propaganda Department and Public Security Bureau — and the “army of Davids” won. Reporters and editors afraid to cover the story followed it on blogs, even as the censors tried to block one site after another. This isn’t your father’s Red China.

Citizen blogger and eyewitness Wen Yunchao

said he and his friends have since concluded that if protesters had been armed with cellphones and computers in 1989, there would have been a different outcome to the notorious Tiananmen Square protest, which ended with intervention by the People’s Liberation Army and the killings of hundreds, perhaps thousands, in the streets of Beijing.

The cause of freedom is not looking so good in Russia these days. But in China a hundred flowers are blooming, a hundred schools of thought contending.

The Libertarian Case for Free Software

One of the most interesting trends in tech policy over the last decade has been the emergence of free software as a major force in the computer industry. For example, some of our readers probably use the Mozilla Firefox web browser, which was developed by a team of volunteers collaborating over the Internet. And in fact, you’re using free software right now! Cato’s own web servers use the Linux operating system and the Apache web server to serve up Cato’s website. Both Linux and Apache are free software, developed by volunteers and made available for free to the general public.

Free software has caught some flack among libertarians who fault it for its failure to rely on the traditional mechanisms of the market. In the latest edition of Cato’s TechKnowledge newsletter, I argue that this criticism is misguided.

Free software is precisely the kind of decentralized, voluntary cooperation that libertarians should be holding up as an alternative to the coercive power of the state. Free software is produced by volunteers donating their time, without a government program in sight. If that’s not a libertarian success story, I don’t know what is.

So why do we see so many libertarians criticizing such peaceful, but noncommercial, forms of social organization? Many are taking the bait offered by the subset of free software proponents who have adopted the rhetoric of the left to promote their goals. We’re used to arguing with these people, who advocate using the state to impose communal forms of organization. Libertarians criticize forcing employees to join unions, prohibiting organ donors from becoming organ sellers, and requiring children to attend government schools. In each case, we hold up markets, business, and money as the tools of voluntary alternatives to coercive government programs.

In these arguments, progressives often claim they can use state power to create and nurture the rich social structures that typify civil society. But they’re wrong. State intervention almost always results in bureaucratized and politicized institutions that pit us against one another in bitter struggles. For example, a lot of progressives laud the potential of public schools to create more unified communities. But in practice, the opposite is true: our public schools have become one of the most divisive institutions in American society. They’ve sparked pitched battles over what to teach our children about sex, evolution, religion, and many other topics. The reality is that you can’t create civil society by government fiat.

So libertarians are right to criticize policies aimed at accomplishing communal goals via coercive means. But some libertarians have gotten so used to defending the market against those who want to impose collectivism that they start criticizing purely voluntary efforts to organize people on more communal lines. They are forgetting that libertarianism is not necessarily about increasing the role of for–profit enterprise in every aspect of our lives. Commercial activity is one alternative to statism, and an extremely important one. But it’s just one possible mode of cooperation, and it’s not necessarily the best choice in every situation.

Tech and the Environment

Valleywag has an excellent rant on the problems with environmentalists’ blackmailing the technology industry:

To ignore the wider benefits of the digital revolution is obtuse. Here’s the fundamental truth: the more human activity is pursued online, the less the environmental footprint. Apple’s pioneering of desktop publishing did away with much of the filthy print industry; its easy video-conferencing will make some business trips unnecessary; Ebay’s person-to-person marketplace bypasses cumbersome retail logistics; and Google is replacing inefficient physical libraries and filing systems across the world. Frankly, if a few computers end up in dumps, rather than recycled: so what.

I can understand why it would be convenient to go after Apple. Steve Jobs’ computer maker is more easily pressured than most companies, because of its pristine brand, and because so many of its customers are environmentally conscious. Al Gore, the planet’s foremost defender, is on the board. Apple makes things, which are messy. And, given the holy war against climate change, and the political correctness that stifles critical thinking, the company can’t defend itself.

The green lobby may choose to target high-tech companies rather than, say, the oil, coal or auto industries. The ex-hippies in charge of Silicon Valley companies are easy targets. But any victory, in converting them to the cause, will be purely symbolic, useful for fund-raising, maybe, but ultimately meaningless. This campaign against Apple is, at best, moral blackmail and, at worst, a cynical shakedown. Shame on them.

Thanks to Joe for the pointer. There’s a broader point here, that was best articulated by Julian Simon: in the long run, free markets and technological progress are good for the environment, because reducing costs often means reducing waste, and reducing waste often means reducing your environmental footprint. Technological progress and rapid economic growth also allows us to devote more resources to cleaning up the environment. Plus it leads to more people having the luxury to spend their time hectoring companies like Apple for their environmental records.