vendredi 18 janvier 2013

Anti Market E02.

Tomas Saraceno, Galaxies Forming along Filaments, Like Droplets along the Strands of a Spider's Web, 2009.

What would one expect to emerge from such populations of more or less centralized organizations and more or less decentralized markets ? The answer is, a world-economy, or a large zone of economic coherence. The term, which should not be confused with that of a global economy, was coined by Immanuel Wallerstein, and later adapted by Braudel so as not to depend on a conception of history in terms of a unilineal progression of modes of production. From Wallerstein Braudel takes the spatial definition of a world-economy : an economically autonomous portion of the planet, perhaps coexisting with other such regions, with a definite geographical structure : a core of cities which dominate it, surrounded by yet other economically active cities subordinated to the core and forming a middle zone, and finally a periphery of completely exploited supply zones. The role of core of the European world-economy has been historically played by several cities : first Venice in the fourteenth century, followed by Antwerp and Genoa in the fifteenth and sixteenth. Amsterdam then dominated it for the next two centuries, followed by London and then New York. Today, we may be witnessing the end of American supremacy and the role of core seems to be moving to Tokyo. (16)

Interestingly, those cities which play the role of core, seem to generate in their populations of firms, very few large ones. For instance, when Venice played this role, no large organizations emerged in it, even though they already existed in nearby Florence. Does this contradict the thesis that capitalism has always been monopolistic ? I think not. What happens is that, in this case, Venice as a whole played the role of a monopoly : it completely controlled access to the spice and luxury markets in the Levant. Within Venice, everything seemed like "free competition", and yet its rich merchants enjoyed tremendous advantages over any foreign rival, whatever its size. Perhaps this can help explain the impression classical economists had of a competitive stage of capitalism : when the Dutch or the British advocated "free competition" internally is precisely when their cities as a whole held a virtual monopoly on world trade. 

World-economies, then, present a pattern of concentric circles around a center, defined by relations of subordination. Besides this spatial structure, Wallerstein and Braudel add a temporal one : a world-economy expands and contracts in a variety of rhythms of different lengths : from short term business cycles to longer term Kondratiev cycles which last approximately fifty years. While the domination by core cities gives a world-economy its spatial unity, these cycles give it a temporal coherence : prices and wages move in unison over the entire area. Prices are, of course, much higher at the center than at the periphery, and this makes everything flow towards the core : Venice, Amsterdam, London and New York, as they took their turn as dominant centers, became "universal warehouses" where one could find any product from anywhere in the world. And yet, while respecting these differences, all prices moved up and down following these nonlinear rhythms, affecting even those firms belonging to the antimarket, which needed to consider those fluctuations when setting their own prices. 

These self-organized patterns in time and space which define world-economies were first discovered in analytical studies of historical data. The next step is to use synthetic techniques and create the conditions under which they can emerge in our models. In fact, bottom-up computer simulations of urban economics where spatial and temporal patterns spontaneously emerge already exist. For example, Peter Allen has created simulations of nonlinear urban dynamics as meshworks of interdependent economic functions. Unlike earlier mathematical models of the distribution of urban centers, which assumed perfect rationality on the part of economic agents, and where spatial patterns resulted from the optimal use of some resource such as transportation, here patterns emerge from a dynamic of conflict and cooperation. As the flows of goods, services and people in and out of these cities change, some urban centers grow while others decay. Stable patterns of coexisting centers arise as bifurcations occur in the growing city networks taking them from attractor to attractor. (17)

Something like Allen's approach would be useful to model one of the two things that stitch world-economies together, according to Braudel : trade circuits. However, to generate the actual spatial patterns that we observe in the history of Europe, we need to include the creation of chains of subordination among these cities, of hierarchies of dependencies besides the meshworks of interdependencies. This would need the inclusion of monopolies and oligopolies, growing out of each cities meshworks of small producers and traders. We would also need to model the extensive networks of merchants and bankers with which dominant cities invaded their surrounding urban centers, converting them into a middle zone at the service of the core. A dynamical system of trade circuits, animated by import-substitution dynamics within each city, and networks of merchants extending the reach of large firms of each city, may be able to give us some insight into the real historical dynamics of the European economy. (18)

Bottom-up economic models which generate temporal patterns have also been created. One of the most complex simulations in this area is the Systems Dynamics National Model at MIT. Unlike econometric simulations, where one begins at the macroeconomic level, this one is built up from the operating structure within corporations. Production processes within each industrial sector are modeled in detail. The decision-making behind price setting, for instance, is modeled using the know-how from real managers. The model includes many nonlinearities normally dismissed in classical economic models, like delays, bottlenecks and the inevitable friction due to bounded rationality. The simulation was not created with the purpose of confirming the existence of the Kondratiev wave, the fifty-two year cycle that can be observed in the history of wholesale prices for at least two centuries. In fact, the designers of the model were unaware of the literature on the subject. Yet, when the simulation began to unfold, it reached a bifurcation and a periodic attractor emerged in the system, which began pulsing to a fifty year beat. The crucial element in this dynamics seems to be the capital goods sector, the part of the industry that creates the machines that the rest of the economy uses. Whenever an intense rise in global demand occurs, firms need to expand and so need to order new machines. But when the capital goods sector in turn expands to meet this demand it needs to order from itself. This creates a positive feedback loop that pushes the system towards a bifurcation. (19)

Insights coming from running simulations like these can, in turn, be used to build other simulations and to suggest directions for historical research to follow. We can imagine parallel computers in the near future running simulations combining all the insights from the ones we just discussed : spatial networks of cities, breathing at different rhythms, and housing evolving populations of organizations and meshworks of interdependent skills. If power relations are included, monopolies and oligopolies will emerge and we will be able to explore the genesis and evolution of the antimarket. If we include the interactions between different forms of organizations, then the relationships between economic and military institutions may be studied. As Galbraith has pointed out, in today's economy nothing goes against the market, nothing is a better representative of the planning system, as he calls it, than the military-industrial complex. But we would be wrong in thinking that this is a modern phenomenon, something caused by "late capitalism". (20)

In the first core of the European world-economy, thirteenth century Venice, the alliance between monopoly power and military might was already in evidence. The Venetian arsenal, where all the merchant ships were built, was the largest industrial complex of its time. We can think of these ships as the fixed capital, the productive machinery of Venice, since they were used to do all the trade that kept her powerful; but at the same time, they were military machines used to enforce her monopolistic practices. (21)

When the turn of Amsterdam and London came to be the core, the famous Companies of Indias with which they conquered the Asian world-economy, transforming it into a periphery of Europe, were also hybrid military-economic institutions. We have already mentioned the role that French armories and arsenals in the eighteenth century, and American ones in the nineteenth, played in the birth of mass production techniques. Frederick Taylor, the creator of the modern system for the control the labor process, learned his craft in military arsenals. That nineteenth century radical economists did not understand this hybrid nature of the antimarket can be seen from the fact that Lenin himself welcomed Taylorism into revolutionary Russia as a progressive force, instead of seeing for what it was : the imposition of a rigid command-hierarchy on the workplace. (22)

Unlike these thinkers, we should include in our simulations all the institutional interactions that historians have uncovered, to correctly model the hybrid economic-military structure of the antimarket. Perhaps by using these synthetic models as tools of exploration, as intuition synthesizers, so to speak, we will also be able to study the feasibility of counteracting the growth of the antimarket by a proliferation of meshworks of small producers. Multinational corporations, according to the influential theory of "transaction-costs", grow by swallowing up meshworks, by internalizing markets either through vertical or horizontal integration. (23)

They can do this thanks to their enormous economic power (most of them are oligopolies), and to their having access to intense economies of scale. However, meshworks of small producers interconnected via computer networks could have access to different, yet as intense economies of scale. A well studied example is the symbiotic collection of small textile firms that has emerged in an Italian region between Bologna and Venice. The operation of a few centralized textile corporations was broken down into a decentralized network of firms, in which entrepreneurs replace managers and short runs of specialized products replace large run of mass produced ones. Computer networks allow these small firms to react flexibly to sudden shifts in demand, so that no firm becomes overloaded while others sit idly with spare capacity. (24)

But more importantly, a growing pool of skills is thereby created, and because this pool has not been internalized by a large corporation, it can not be taken away. Hence this region will not suffer the fate of so many American company towns, which die after the corporation that feeds them moves elsewhere. This self-organized reservoirs of skills also explain why economic development cannot be exported to the third world via large transfers of capital invested in dams or other large structures. Economic development must emerge from within as meshworks of skills grow and proliferate. (25)

Computer networks are an important element here, since the savings in coordination costs that multinational corporations achieve by internalizing markets, can be enjoyed by small firms through the use of decentralizing technology. Computers may also help us to create a new approach to control within these small firms. The management approach used by large corporations was in fact developed during World War II under the name of Operations Research. Much as mass production techniques effected a transfer of a command hierarchy from military arsenals to civilian factories, management practices based on linear analysis carry with them the centralizing tendencies of the military institutions where they were born. Fresh approaches to these questions are now under development by nonlinear scientists, in which the role of managers is not to impose preconceived plans on workers, but to catalyze the emergence of meshworks of decision-making processes among them. (26)

Computers, in the form of embedded intelligence in the buildings that house small firms, can aid this catalytic process, allowing the firm's members to reach some measure of self-organization. Although these efforts are in their infancy, they may one day play a crucial role in adding some heterogeneity to a world-economy that's becoming increasingly homogenized.

Manuel De Landa, Markets and Antimarkets in the World Economy, 1996 (via Alamut). 


16. Fernand Braudel, op. cit., Vol 3., p.25-38.
17. Peter M. Allen, Self-Organization in the Urban System in William C. Schieve and P.M.Allen (eds.), Self-Organization and Dissipative Structures : Applications in the Physical and the Social Sciences, University of Texas, Austin, 1982, p.136.
18. Fernand Braudel, op. cit., Vol 3., p.140-167 
19. J.D. Sterman, Nonlinear Dynamics in the World Economy : the Economic Long Wave in Peter Christiansen and R.D. Parmentier (eds.), Structure, Coherence and Chaos in Dynamical Systems, Manchester Univ. Press, Manchester, 1989.
20. John Galbraith, op. cit., p. 321.
21. Fernand Braudel, op. cit., Vol 2., p. 444.
22. Vladimir Lenin, The Immediate Tests of the Soviet Goverment. Collected Works, Vol 27, Moskow 1965. 
23. Jean-Francois Hennart, The Transaction Cost Theory of the Multinational Enterprise in Christos Pitelis and Roger Sudgen (eds.), The Nature of the Transnational Firm, Rutledge, London, 1991. 
24. Thomas W. Malone and John F. Rockart, Computers, Networks and the Corporation in Scientific American, Vol 265, Number 3, p.131. Also : 
Jane Jacobs, op. cit., p.40, 
Fernand Braudel, op cit, Vol 3, p. 630.
25. Jane Jacobs. op. cit., p.148.
26. F. Malik and G. Probst, Evolutionary Management in H. Ulrich and G. Probst (eds.) Self-Organization and Management of Social Systems, Springer Verlag, Berlin, 1984, p. 113. 

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