Economics

First of all, I’m a big fan of the _idea_ of open source hardware (OSH).  (For reference, an excellent compendium of the idea has been growing here at the P2P Foundation wiki.) The notion of a global OS design database, a distributed network of fablabs, and a market driven not by the price signal but by collaborative communication, is very alluring — especially to nerds.

But I have lingering doubts…Certainly the movement is increasingly technologically feasible, and likely to create some sort of fringe guild ecology over the next 10 years.  But from an economic and social viewpoint, much remains to be sorted out in any rigorous way.   I should clarify here that my goal is to critique the OSH movement’s ability to have a meaningful impact for the welfare of the world’s poorest, or to meaningfully change the ecological footprint of the global economy.  Key to this dual goal are speed and scale: the OSH economy must grow at least as fast as the ‘traditional’ economy, and preferably should outpace it by an order of magnitude.   In other words, how can the OSH community lay plans to grow revenues by 25% per year for the next 10 years?

And in sorting out whether OSH has legs, we need to think about whether it will be able to harness the three forces that drive successful product/service growth: a business model that keeps investment dollars coming in, keeps producers gainfully employed, and keeps consumers happy.  I’ll look into possible business models for OSH in a later post.

Man, if I could write run-on paragraphs like my man RBF, I’d be stoked.  If you haven’t read him before, enjoy…A timely excerpt from Grunch of Giants by R. Buckminster Fuller:

“Greater justice and economic improvement for the many is not always the result of social revolution. The Europeans’ guns overwhelming of the American Indian bow-and-arrow weapons was in most ways a retrogressive social revolution implemented by design-science revolution. It is always the design revolution that tips the social scales one way or the other. However, sum totally the combined design and social revolutions ultimately favor the many. Between 1900 and today, 60 percent of humans in the U.S.A. have attained a standard of living far in advance of those of the greatest potentates of 1900 while concurrently doubling the life-span of that fortunate 60 percent.

“Never before in all history have the inequities and the momentums of unthinking money-power been more glaringly evident to so vastly large a number of now literate, competent, and constructively thinking all-around-the-world humans. There’s a soon-to-occur critical-mass moment when the intuition of the responsibly inspired majority of humanity, in contradistinction to the angered Luddites and avenging Robin Hoods, faced with comprehensive functional discontinuity of nationally contained techno-economic system, will call for and accomplish a world-around reorientation of our planetary affairs. At this critical moment will occur a realization by the responsibly inspired majority that the adequate capacity of the invisible technology to sustainingly support all humanity depends on all the resources, physical and metaphysical, being always and only employed for all of world-around humanity as a completely integrated techno-economic system operating entirely on its daily income principally of Sun-emanating energy.”

A growing chorus of international development professionals are recognizing the scale and the seriousness of the tax haven problem as it relates to international development.  The World Bank endorses [pdf] third-party estimates that show the illicit outflows of revenues from the developing world, facilitated by tax havens, dwarf the aid flowing in to those countries by a factor of 10.   And more recently, in an interview with Reuters, a top OECD official made a point to reiterate that negative effects of tax havens disproportionately impact developing countries. Find the link here.

As an MBA candidate with an international development background, I think that the damage done by secrecy jurisdictions is an overlooked ‘area of moral clarity.’  With regards to global poverty eradication, there is little debate that that resource-rich, governance-poor countries are prime targets for international organized crime.  The resulting industry for ‘corruption services’ is lubricated by tax havens.  While demand for corruption services may be difficult to staunch, the supply for these services is a really a question of international, and in some cases national, regulation.  Unfortunately these services are still big business in the developed world, with the UK, Singapore, Switzerland, and the US being the biggest offenders.

Until this question lands squarely on the regulatory agendas of the EU, UN, US, and ASEAN, the $80bn of aid money from the countries of the North is throwing good money after bad.  Until tax havens are recognized as accomplices in global corruption that drains tax revenue from the poorest nations, humanitarian aid will continue, perhaps inadvertently, to perpetuate aid-dependency around the world.