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For More Internet, And More Democracy, Forget Netmundial and ICANN

2014-04-22T08:50:03Z

As the Netmundial conference on the future of Internet governance starts, rather than asking "What can we expect from it?", perhaps we might ask instead whether this future might be more promisingly reformed by political, technical and architectural innovations than by a preach to a so-called multistakeholder choir convened in Sao Paulo.

Since Fadi Chehadé, chair and CEO of ICANN, flew to Brazil in October 2013 to soften President Dilma Rousseff's outrage after her famous anti-digital-US-surveillance speech at the United Nations General Assembly, Netmundial has been part of the visible US effort to embrace Brazil into its political multistakeholder (MS) digital discourse. This narrative has provided an effective smoke screen for maintaining the status-quo, which involves, due to historical and economic reasons, asymmetric oversight of Internet Governance by the US government, through the IETF, IANA, ICANN, ISOC, and thanks their digital rubber barons. Over the last 16 years since the establishment of ICANN, a Californian nonprofit under contract with the US Department of Commerce, the MS governance model has done very little on behalf of citizens and netizens in terms of protecting digital freedoms -- from absence of competition for broadband access in the US to global surveillance by the NSA of all netizens of the planet. The MS model's major achievement has been its ability to keep things under subtle but indefeasible control.

As Rousseff, joined by German Chancellor Angela Merkel, launched a digital revolt following the NSA scandal, the US government recognized it was facing something more serious than a bunch of UN experts or civil society activists from the South. Rousseff's statements were bold and clear: "In the absence of the right to privacy, there can be no true freedom of expression and opinion, and therefore no effective democracy" and "Tampering in such a manner in the affairs of other countries is a breach of international law and is an affront of the principles that must guide the relations among them, especially among friendly nations. A sovereign nation can never establish itself to the detriment of another sovereign nation. The right to safety of citizens of one country can never be guaranteed by violating fundamental human rights of citizens of another country." Her words still resonate for many.

Rousseff's comments were addressed primarily at the US and supporting countries for the US digital domination (UK, Sweden, Japan, Australia, etc). The ball was shot hard, and the US had no choice than to play it with the most dedicated attention. So, thanks to Chehadé's smooth assistance, Rousseff accepted to organize a conference jointly with ICANN. This proposal seemed a win-win. It provided a victory for Rousseff's external politics, by embedding Brazil in a so-called MS conference, while also giving ICANN another victory, because as co-organizer of such a conference it has been able to influence any kind of decision related to choice of content, committee, secretariat, panelists, speakers and ultimately any critical outcome. Of course, Brazil (through non-profit, CGI.br) would handle the guest list for the Brazilians invités, and help secure the coming of a few other token states to participate, including the "Twitter-friendly" Turkey, where the next Internet Governance Forum is supposed to be held... This setting would satisfy the US because the solutions that suit ICANN naturally suit the US.

With a 800-seat international conference, the co-organizers, ICANN and CGI.br still have had to make choices, even though the cost for traveling to Brazil already provided a natural selection in terms of attendance. To date, corporate delegates are to occupy more than 40 percent of the room. To make it a success a few other countries were needed to plump up the numbers of governments -- being those that were outraged in the first place, and kept at bay for so long by the US government and corporations. As the US has consistently told the world over the last three years, "governments represent a potential danger to Internet. They could seize control and deprive netizens of their rights". In the same breath, the digital jewels of Wall Street and US capitalism are, of course, requiring all the trade and intellectual property protections the world's governments can muster, as well as shying clear of tax in countries where they should. It is not part of the US narrative to speak about the detrimental impact of all of this on human rights and development in places where it would be most needed. So here we are, after six months of intense behind-closed-doors preparation, ready to attend Netmundial, a conference that claims to be 'multistakeholder', but which is really about launching the next stage of US global multistakeholder domination over the Internet, thanks to an ICANN++.

One very positive thing to come from Netmundial has been the 187 submissions expressing a large diversity of views, sometimes convergent, sometimes in strong opposition. This shows that the issues at stake are matters of fundamental importance. Collecting such a vast amount of ideas is the easy part of course; the hard part being what to do with them, especially if they are not all "converging". In a two-day conference, with so many different participants having diverse constituencies, values, roles and interests, it is hard to imagine that a dialogue can really take place. Therefore the two co-organizers began to set out a document based on the 187 submissions - a draft of which was publicized by Wikileaks -- and which was formally published on 14 April. Such a digest is not a gastronomic marvel. Some words that did not find their way to that final lap include: Democracy, social justice, and net neutrality. Some expressions have been mutilated such that we have "surveillance should be conducted..." instead of a "surveillance should only be conducted..." Still it has been suggested to everyone to comment on this document. Like with the rest of Internet governance multistakeholderism, participation is seen as an end rather than a means. Comments always make the people feel happy, even though their view doesn't make a difference on the final document.

MS is considered by its priesthood as the next best form of democracy with outcomes emerging from "convergence" (no voting here). Pick up everything that is "converging" and you get the final result. Add as many '+1' and you claim to have a legitimate conclusion. Indeed, that sounds like what the MS enhanced democracy pretends to be. It has no legitimacy, no vote, no checks and balances, no serious dialogue, no media counter power, and no trust.

Netmundial will not be a place to dialogue, nor a competition between ideas. It will just be another MS show. A jolly feast, with all invited, happily munching on their own courses, but net destruction, rather than creation. And it will come with a final statement by the co-organizers starting with a big thanks to all. Brazil, after happily devouring its Berners-Lee blessed Internet governance model-for-the-world will say "see our Marco civil for digital rights in Brazil just passed by the first Brazilian chamber of representatives and possibly, the senate. You, foreign governments, should do the same." For ICANN, the outcome will sound like: "We are so happy to see that everyone had a chance to participate and that we have a consensus over the value of a multistakeholder model of governance for Internet. Everyone at Netmundial was "converging" on that. We commend the US government for giving ICANN the responsibility to handle the IANA function, and we welcome governmental and civil society advice and support to achieve our new global mission. We have had so many participants in Sao Paulo and remotely contribute to and support the Netmundial initiative and conclusion. Please note that ICANN will fund the Internet Governance Forum in its role as a MS forum." All is well, let's have Caipirinhas.

To come to back to the very beginning of this post, I would say that there are three unseen, but very destructive, implications of this multistakeholder blessing as the outcome of Netmundial. The good news is that they take us to a clearer vision of the political, technical, and architectural possibilities that lie ahead.

The first one is simple. Netmundial will bring exactly the opposite of what the Brazilian President (and other governments and citizens) really wants: Democracy is losing ground to MSism, a Trojan horse for vested interests, especially since MSism enforces a simple idea: "equal footing" means rights for all participants, putting corporations and governments on the same starting and ending line when it comes to defining policies of public concern, in a digital space that is becoming more and more of an enclosed, corporatized version of what should be a public global commons. Even neoliberals never achieved any such a great tour de force. Netmundial is therefore currently failing democracy. It is not enhanced democracy: it is impoverished democracy.

The second implication is even more interesting. Netmundial is allowing ICANN to reinforce its power over its root zone, with little checks and balances and no oversight from anyone. By the same token it will reduce the digital space. ICANN defends a unique Internet, basically because it wants a unique root zone, under its surveillance, control and rulings; a unique space where a few private algorithms serve to dominate and collect the majority of all worldwide digital data, metadata, and revenues whether through advertising or copyrighting, more than half of it into Google's hands. It is completely physically feasible today that digital space can be expanded with very positive consequences for all citizens. However, ICANN, parroting the US government, warns us all against a balkanized Internet (and, again, echoing the "don't trust governments (except us)!" line, it says "don't balkanize (except with US monopolies)!".

Like any monopoly, ICANN argues that, thanks to its position, it preserves the Internet for the use of all, even though it really only serves for the benefit of a few. Reality could be much more refreshing. We know today that technical and architectural innovation can immediately lead to more digital space, more interoperability, more exchange, more safety and security, less spam, and less cyber-crime. And no, we are not talking of erecting national boundaries over interconnected networks. Just as we enjoy the Open Innovation, Open Source, and Open Data revolution, we are on the verge of an Open Root revolution. Among its leaders is Louis Pouzin, one of the founding fathers of the Internet.- Pouzin, an extremely distinguished French engineer, is advocating for, and building a proliferation of possible root zones. For a very reasonable budget, many extensions can be created through the Open Root project. He says: "There is a dire need to put the ICANN house in order and subject it to competition from other actors that are able to prove defend user interests in a way that ICANN has failed. In fact, starting in 1996, before ICANN was set up, there were many independent root registries created. Some were operated for several years, and a few are still in existence, e.g. Name-Space, Cesidianroot-Europe, OpenNic, Slash/dot, Name.coin, etc."

Open root is bringing a new life to that virgin part of digital space. Pouzin continues: "An unknown number of private registries operate outside of conventional institutions and are alive, but mostly invisible. The ICANN dogma is that what is needed is a single global (i.e. US controlled) root. Curiously Google and OpenDNS, which are not registries, use their own root, copies of ICANN's." This Open Root revolution is a great promise and lies in stark contrast to the heavily draped and ultimately highly unsatisfactory likely Netmundial outcome. The Open Root (OR) idea involves the realization of another technical and architectural innovation: interconnection, or interoperability of many root zones. No need to travel to China for your technology here: a Boston-based team (RINA) has already made it a reality. The OR will also allow each root zone to be defined under specific principles (political, societal, international), to which individual users can wittingly and proactively subscribe, such as the ones contained in the Delhi Declaration and edited by the Just Net Coalition. Right now, the ICANN root zone is a rogue in the hands of the US government and corporations. It should be put under the umbrella of a to-be-developed international law of the Internet , or what the Indian government suggests to call an 'Equinet'. By continuing to perpetuate the ICANN single root, Netmundial is failing innovation and fair competition in a so-called decentralized and open space.

Finally, this leads to the third negative implication: if new root zones are not nationally bound, but of global immediate reach, we do still remain with a major vacuum that we do not see being addressed at NetMundial: without a digital international agreement, law or framework, how could Brazil or one of its citizen sue a US, Indian, Russian or South African digital company that would not respect its right to privacy? Many in the civil society, such as the Web We Want initiative, IT for Change and others are understanding what is going wrong with the current state of Internet governance, and its MS approach. Even the European Commissioner, Neelie Kroes complained recently that NetMundial's drafted summary was not addressing in more concrete terms, the huge challenges to reform the current governance of Internet.

NetMundial's entrapping schema question may be, "Do you support (a) preserving the internet under one root or (b) Internet fragmentation? Choose either (a) or (b)." Now obviously all nice meaning, good people of the world would choose "preserving" as opposed to "fragmenting" the Internet.

But what if the above question was constructed correctly as, "Do you support (a) a monolithic, hegemonic centrally-controlled internet or (b) A distributed, open, human rights respectful democratic internet? Choose either (a) or (b)." The survey results would be opposite.

Netmundial should be deemed a failure if it fails to enshrine words like democracy, social justice, innovation, open root, competition as well as human rights. It should be deemed a failure if it simply boosts the international credibility of Brazil and ICANN and the US, but it fails to address the very real deficiencies in how the Internet currently operates. At the moment, we are going backwards, not forwards in terms of democracy, innovation and the Internet. As more and more start to see what is at stake, let us hope that they see the charade of multistakeholderism for the vacuous reality that it is, and that they recognize that to truly advance democracy and the Internet, we need to break open ICANN's monopoly, break open control of the root system, and restore real choice in the hands of citizens and all the world's governments - rather than just one.

For those who understand why to get out of the digital ICANN reservation, there is more Internet, and more Democracy to enjoy.

Ukrainian Maidan And Nation-Building: Between A Nation-State And A Corporation-State

2014-02-26T13:11:11Z

The recent struggle of the Ukrainian people against president Yanukovych's rule, originally named as the Euromaidan, is a vivid illustration of the emerging brave new world. While the political crisis in Ukraine is still not completely resolved, several important observations can be made already. I would like to put forward three main theses here. First, Maidan is a manifestation of the battle between a nation-state and a corporation-state. Second, Maidan is a form of nation-building and reinforcement of the nation-state. And third, Maidan is a new and effective form of civil resistance in the post-modern world. I will first provide a background for each argument, then make a connection with the Ukrainian case, and finally demonstrate implications for the rest of the world.

Ukrainian state-building: nation-state vs. corporation-state

It has been claimed that globalization as a political and economic phenomenon of the later capitalism has weakened the national dimension of nation-states. The majority of scholars agree that nation-states are undergoing transformations. Yet the question is what these transformations will result in. Some speak about the world government, others advocate for civilizations, while still others highlight regional economies. Yet another opinion is that we are witnessing the birth of the corporation-state, a candidate for replacing the 'outdated' nation-state that reached its peak of development in the period of 1850-1970's. Corporation-state is an entity of a primarily economic character (vs. political in a nation-state) aimed at minimizing costs and expenses. Once economic competitiveness is declared to be the main objective of a state, its social and national components recede into background. The state starts acting as a corporation ruled by the economic effectiveness of the “survival of the fittest”.

Corporation-state must not be confused with the corporative (social) states like Italy in the 1920-1930's or Germany in the period of 1933-1945. The main features of corporation-state are desocialization, denationalization and deterritorization. While the 'social face' of the nation-state is a welfare state, corporation-state excludes 'extra' population since the market is regarded more important than social sphere, freedom than equality and justice, and police than army. This process has been conceptualized already in sociology by the '20:80' theory, meaning 20 per cent of the rich versus 80 per cent of the poor with no middle class which will be used as 'raw material' by the newly emerging corporation-states.

The process of constructing corporation-states is taking place all over the world. It is slower where there are civil societies, strong religious, historic and cultural traditions (especially non-Western ones) or national identities, or where the states are big in their territories. Where is nothing to confront with, the process is sweeping and even violent. The post-Soviet states, and Ukraine in particular, have been a vivid manifestation of the process.

In this regard, Maidan has been the struggle against such corporation-state built up by Viktor Yanukovych at the Ukrainian territory. In fact, similar systems are emerging in Russia, US, Europe, and even China with its strong influence of tradition and culture onto statecraft. However, it is Yanukovych who created the system of the criminal corporatocracy that other countries are yet to witness. In this system the state literally does not exist, with state authorities transforming into criminal structures aimed at serving corporate oligarch business at the expense of the middle class.

Why did this struggle became so fierce in Ukraine, and not any other place? Perhaps because the crisis of capitalism first starts from its peripheries, and only then moving to the core. It cannot be denied, however, that Maidan – as the battlefield of the nation-state against corporation-state – has made a tremendous contribution to the global justice movement, starting from anti-globalist protests and up until most recent “Occupy Wall-Street” movement and its affiliates.

As a preliminary conclusion, the case of Ukrainian Maidan demonstrates that only a renaissance of nation-state, and welfare-state as part of it, with individuals united for a common cause may be a viable alternative to “book a place” in the brave new world. It is this alternative that, optimistically, will make the world politically more stable and acceptable. This is a winding a road through thorns yet to the stars. As we all know, there is no victory without a battle.

Ukrainian nation-building: the “third way”

To restate one of the points above, the world of nation-states is irrevocably changing. This means not only the states as political entities, but the nations themselves are transforming too. Again, I assert that it is ultimately the struggle of the nation-state against corporation-state that will shape the future of nations. In this regard, Ukrainian Maidan gives room for interesting observations. Before looking into this however, let me recap definitions of some of the terms to be used.

A nation can be understood as either as a community of people with a common ethnicity, language and culture, or a political community of citizens of a sovereign state. The two approaches can be even combined by viewing a nation as a transformed ethnic group that acquired its sovereignty and statehood. The most important, however, is that a nation consists of individuals; it cannot be formed from tribes, clans, castes or other communities. These collective forms embrace individuals and prevent nation-building. It is not by chance that nations began to appear in Western Europe in the 17th - 19th centuries with the decomposition of communities of a pre-modern (traditional, or agrarian) society. While ethnic groups have existed throughout the world history, nations appear only in the modern (industrial) society.

We are now witnessing signs of the end of the Modern epoch that has lasted for about five hundred years. During this phase of historical development nations have been an important part of social classification and identification, in contrast to ethnic, religious, tribal and other forms of self-identification in the Pre-modern epoch. Moreover, emergence and rise of nations brought about nation-states that became the main form of political organization and proved to be effective in uniting populations of respective countries. Two important questions arise here. First, considering ethnic groups organize people in the traditional society, while nations do so in the modern one, what will the next development be in the Post-modern epoch? And second, if nations transform into something else (like ethnic groups did into nations), what type of identification will appear to replace the national identities?

Several possible scenarios can be drawn based on the existing empirical as well deducted data. These can be named the post-modern scenario, the counter-modern one and finally, the alternative way. Thus, in the first scenario the community of nations is to be replaced by a global non-ethnic post-modern society. On the practical policy level, the attempt to achieve this has been made in the European Union, for example, via the policy of multiculturalism. This strive for a global non-ethnic post-modern society, however, has been unsuccessful so far. The policy of multiculturalism has actually failed, with nationalism rising throughout the EU, and the political leaders of Great Britain, Germany and France advocating publicly for strengthening their nations.

However, it is the counter-modern scenario that has been pushed forward most of all. This is manifested in the already discussed emergence of corporation-states as opposed to nation-states, which inevitably leads to open conflicts like the one revealed by the Ukrainian Maidan. It is a counter-modern process as it re-invites the features of a pre-modern, or traditional society. For example, corporation-states keep the same characteristics of community (vs. individual in nation-states) and hierarchy, with the difference that now corporations act as communities. Also, compared to all other state forms, corporation-state is an exclusive, not inclusive entity with neo-patrimonial, neo-communal features. Finally, while a community is basic social element of a traditional society (forming ethnic groups), and an individual is the basic element in a modern society (forming nations), it is a clan that is an essential element of the corporation-state in the new world. Thus, counter-modern is a type of society similar to pre-modern, but artificially implanted in the Modern and Post-modern epochs.

To make a connection with the Ukrainian Maidan, it is worth asking why the world leaders were so slow and reluctant to impose the long-awaited sanctions against the Ukrainian governmental officials and oligarchs. This happened because the world ruling class received an excellent testing area for experimenting with the conflicts between representatives of the old national identity and the new criminal and corporate one.

There is yet an alternative way that may define the shape of nations in the new world. As already mentioned, European states are actually seeking to solidify nations in view of the ongoing crisis which is financial and economic on the top, but rather deep and structural in essence. In this regard, promoting nationalism as a way to strengthen a nation may become a necessity in the post-modern society. However, the idea of nation in this case will need to be re-determined. While in the Pre-Modern epoch people are organized via collective forms (communities), and in the Modern epoch communities decompose into social atoms (individuals) to create nations, in the Post-Modern epoch individuals must re-unite in collective forms in order to cope with the challenges posed. There is a major difference here though. In the traditional society man exists only as a community member, and does not see himself outside of it (if he leaves, then he leaves for another community). He cannot have interests other that those of the community (like a leg cannot strive to get away from a body). In the alternative scenario proposed, collectivism means uniting efforts of individuals in order to achieve a common goal; it implies having an individual who may have both common goals with the others as well his own ones. Collectivism is therefore a dialectic, and not an absolute opposite of individualism.

Maidan has been an excellent embodiment of the above principle. It has become an important element of nation-building, gave birth to new heroes, reinforced and expanded the boundaries of the community known as the Ukrainian nation. It is impossible to foresee which of the three scenarios discussed will take place in which parts of the world. Nor is it possible to tell whether national identities will be strengthened, or will fade away together with nation-states to give place to global and corporate identities. Still, the case of Ukraine may serve as an example that nation-building – ideally both from the bottom (by people) and top (by political elites) – is crucial in order to cope with the challenges of the newly emerging world order.

Ukrainian civil protest: from territorial to network communities

Maidan has also demonstrated the power of social networks in a civil protest. Network is the most effective communications system that can compete effectively with the state and corporate media. In this regard, social networks have proved indispensable in the conflict nation-state vs. corporation-state. By 'social network' here I mean not only any physical Internet networks like Facebook or Twitter that helped disclose the truth despite numerous manipulations in mass media. This is also a network of citizens that provide mutual trust, respect and cooperation. Yet most importantly, this is a principle of self-organization of the previously 'territorial' local communities. These communities managed to organize themselves into trusted connections and stand up against the system of criminal corporatocracy. Ukraine has survived so many times against the will of the state, that its civil society has now little or no affiliation with the state structures.

Maidan demonstrates that the network principle increases dramatically the capacity for survival in the conflict between the nation-state and the corporation-state. No state and corporate means can suppress an entity that can quickly and efficiently re-appear in any other place. Geography is no longer important for the networks of mutual supportiveness and donation. No criminal system can exist for a long time against the people's morale transformed into network communities.

Perhaps Maidan is a prototype of the alternative world. Its separate elements of the territorial, professional, and interest communities, as well political structures (such as the Council of Maidan) are able to give a viable response to the challenges of the system of criminal corporatocracy. Maidan as a phenomenon is a new reality of communities that make a nation rise against the corporation-state appearing all over the world. This is the reason why even the biggest political players, like US, Europe, Russia and China, are afraid of Maidan.

As a conclusion, Ukrainian Maidan is ultimately a reaction and a vector of resistance to the construction of the corporation-state. It is also is a dramatic example that there is a need for reinforcement of the nation-state (and the welfare-state as economic dimension of the nation-state) in order to cope with the challenges of the newly emerging world order. Finally, it shows that the concept of nation in the post-modern world needs to be redefined as a community of individuals united within the borders of a nation-state under the principles of collectivism and solidarity. Only a 'refined' nation-state with individuals united for a common cause may be a viable alternative to a corporation-state. The current situation, even if not on the brink of disaster yet, will become so by the middle of the 21st century or even earlier. This will be the moment of truth for the leaders and peoples, the moment of final choice between a nation-state and a corporation-state, between existence and non-being.

Freedom! Take it, It’s yours! Why ‘you’ should buy Bitcoins?

2013-12-09T19:50:22Z

Discussions around Bit coins can be as simple or as complicated as you desire. You could for instance, try and understand the hashing, the cryptography, the nuance of the nonce and the mechanics of the technology, which would be like trying to understand the manufacturing process of printing dollar bills. Or you could take a few moments to understand the currency conceptually. This article facilitates the latter.

Bit coin or all crypto-currencies can be seen as a dis intermediation process that can save hundreds of millions if not billions annually in transaction costs for consumers. A currency that has successfully created a system of transacting money that requires no intermediary between the person paying and the person receiving, yet there is complete transparency and record of all transactions on what can be described as a ledger that is visible to everyone and stored with everyone. Transactions can all be seen minus the identity of the people transacting if secrecy is needed.

The other significant advantage beyond the instant transactions and absence of intermediary costs is the fact that there will always only be a predetermined finite number of coins (21 Million) and this is ensured by a robust architecture that prevents anyone producing fake coins or fake transactions. What this means is that like Gold which no alchemy can produce and is therefore considered a store of value and a standard, Bit Coins if they were to be taken on by vast numbers of people, would be very valuable.

Now, where does that leave you. Yes specifically ‘You’? What should you do? Well you are a critical and active part of finance beginning today just like you have been important in communications for some years now. In Media, the days of one or two government backed broadsheets and broadcast channels controlling information or news or entertainment are a distant memory. Communication has been truly liberated and transformed by the Internet. Everyone can tweet, report, upload videos, interact on social media etc. From Tunisia and the Arab spring to Wikileaks and cute cat videos, individuals and social media have toppled governments, unleashed a wave of creativity and taken charge of communication. This is not a hypothesis but fact.

When it comes to money however, the vast public is still used to seeing finance and economics as the domain of government and big business. They see themselves as spectators, the helpless mass that works within the policies of left or right. Who operate within economic policy framed by interest groups and vote banks. Astonishingly most people see themselves as passive components of the socio-economic mix. Criticizing economic policies in the public sphere notwithstanding, there has been limited means for the average individual to free themselves from bad policy or inflation or vote bank economics or big bank monopoly.

All that is set to change. Like you could buy Gold earlier and not have to keep your money tied to a currency, you can now buy a crypto currency like Bit Coin. While Gold, Oil and other commodities are monopolized by people who’s land these commodities are buried under in their raw form, Bit coins or crypto currencies are not buried under someone’s land, they are ‘mined’ or produced by computers across the world wherever. Yes the machine’s required to mine now have become expensive and powerful as opposed to its early days when you could mine Bit coins on your computer at home. Despite that, there is no physical constraint on who mines the coins, in fact the more diverse the pool of people mining coins, the more robust the architecture. So you have in Bit Coins a means of putting your money in a format that no inflation can touch. Unlike your bank account in your local currency, low interest rates and high inflation cannot rob you of your spending power at the whim of a political party in government. This new currency can be transacted instantly anywhere in the world and converted to any other currency online on an exchange. It removes so many transactional hassles that it ends up producing significant competition for your money and efficiency in the use of it which make it better for the person whose money it is, namely you.

Yes, regulation is needed on money laundering and such activities, but beyond that, the genie is out of the bottle and cannot be stopped. There are plenty of Nay Sayers, who are either still tied to the old textbooks and theories on the nature of money or have vested interest in keeping this transformative innovation in finance out of the public’s imagination. But sure enough, the overwhelming strength of the concept of this technology is apparent in the statements of lawmakers in America, Germany, China and increasingly elsewhere in the world.

So, you need to get used to your new-found freedom. And like with any newly liberated population, the hesitation is understandable. But you have to remember that you have to act not because you want to speculate on the rising price of Bit Coins, but because you want to remove the hegemony and monopoly of deep pockets and not be found snoozing when the biggest revolution in finance of recent history is taking shape. More valuable than anti banker slogans, or protest marches is being part of this revolutionary change that will go a long way in transforming economics and making it more efficient and democratic. Whether you accept payments in Bit Coins for your business, buy it on an exchange or mine it on a powerful machine, you need to be part of it, because your participation will free economics from existing monopolies and be the path to financial freedom in the new age.

But even still, if taking part in the potential increase in Bit coin price is your incentive for joining this new economy then here are a few key things to understand. As per the talk given by Tuur Demeester (Editor MacroTrends) on 17th October 2013 in San Jose at the Bit Coin Conference, we are at the early stages of Bit Coin as a technology being adopted around the world. Projecting valuation of the currency, Mr Demeester presented the following figures:

The above presents a very bullish environment for Bit Coins. This still doesn’t represent the full potential of the Bit Coin economy as it doesn’t include a vast majority of Credit card transactions, many potential new uses or the latent geographic dispersion linked demand for the currency. Anecdotally, Sir Richard Branson announced that Virgin Galactic will accept Bit Coins as payment, Financial Times reported on 29th November 2013 that Alderney a small island in the English channel which is a British Crown Dependency, is considering minting physical Bit Coins to launch itself as the first international center for the new currency. The United States Senate has been holding hearings on digital currencies and have gradually decreased the regulatory risk on the currency. Germany has recognized Bit Coins as Private Money.

The currency has been used as a safe haven or as a means to getting money out of countries and economies where free capital movement is restricted by the State. China which till recently had become a large part of the Bit Coin world is a prominent example. Recent volatility, both the sharp rise and then the fall in the value of Bit Coin has resulted from first a rapid demand from the Chinese population and then statements from the People’s Bank of China, which announced that citizens trading in the digital currency were doing so at their own risk and that Banks were not allowed to deal in it like they are in other currencies. This raised the regulatory risk on Bit Coin and led to a fall in its value. The high volatility and evolving opinions of government, people and institutions is likely to keep the currency volatile in these early stages, however the strength of its core architecture, its transactional efficiency and its means as a democratizing force in money and store of value will see it rise as the backbone of payments, transfers and finance. One would therefore be advised to invest and transact in Bit Coins rather than speculate for a quick return.

As time passes and more people join the Bit Coin economy, it becomes increasingly robust and more and more valuable. The remarkable crowd sourced mining process makes Bit Coins a powerful financial innovation to surpass all in recent history. Welcome to the new economy.

The Long Arm of the National Security-Communications Industry Complex

2013-11-25T16:46:19Z

This is a story about more than just the national security implications of government surveillance, but it begins there.

The New York Times reported in a front page story earlier this month that the Central Intelligence Agency is paying AT&T in excess of $10 million annually for information from the company’s telephone records, including the international calls of U.S. citizens. The article pointed out that this work "is conducted under a voluntary contract, not under subpoenas or court orders compelling the company to participate, according to officials." The story adds yet another chapter to the still-unfolding revelations about National Security Agency surveillance. Every week seems to bring new reports about the close and almost seamless ties that bind the several intelligence agencies to the huge telecom and broadband companies that bestride our nation’s communications infrastructure.

When I became a Member of the Federal Communications Commission (FCC) in 2001, I assumed I would be privy to at least a credible amount of information about what the companies under FCC oversight were doing behind the scenes. My expectations went unfulfilled.

Did I expect the nation’s most sensitive intelligence information to be shared with me? No, I did not. But would it have been helpful for me to know more about how the industry executives who visited me on a whole range of non-national security communications industry issues were at the same time working hand-in-glove with the White House and these secretive agencies on a far more intimate and confidential basis than I was? Yes, absolutely.

Warnings about various special interest-government complexes hearken back to President Dwight Eisenhower’s 1961 farewell speech wherein he warned of the dangers that the military-industrial complex held for democratic government. Historians consider Ike’s admonition as a high-point of his Presidency. Since that speech almost 53 years ago, the influence of special interests and corporate power has only grown -- at the White House, in Congress, and among the federal agencies.

Maybe I’m a slow learner, or maybe I just wasn’t supposed to know, but it finally dawned on me that the CEOs and top management who came calling on me at the FCC were far better informed and connected than I was -- because their companies were the ones running these sensitive monitoring and surveillance operations in behalf of the national security agencies. It was, very often, their workers and their technologies that drove the process. Meanwhile, industry leaders themselves served on such influential but hush-hush boards as The President’s National Security Telecommunications Advisory Committee.

As I began to grasp the power of these huge companies to leverage their influence on non-national security matters, I also began to understand that my influence as a Commissioner at an independent federal agency was more limited than I had thought. In a lengthy July 25, 2013 article in the National Journal, Chief Correspondent Michael Hirsh traced in considerable detail how our nation’s leading telecom and tech companies supported -- and even helped create -- the “surveillance state.” It is, of course, a story going back long before Iraq and Afghanistan to the days of World War II, and it’s the stuff of a thriller novel -- except it’s not that entertaining.

Hirsh tells how the NSA became an influential voice in the evolution of our communications systems, becoming a “major presence” in such seemingly non-defense decisions as industry mergers and consolidations. But these transactions weren’t “non-defense” to the intelligence agencies. On the contrary, it was easier and more efficient for the agencies to deal with huge industry players where the number of decision-makers was narrowed and where the sheer power of size helped get the national security job done.

It wasn’t news to me that these huge companies wielded far-reaching power all across Washington. I just didn’t realize how much power until I had been there a while. Then I began to think: what difference does it make if one or two Commissioners at the FCC don’t approve of a pending merger between telecom giants? (And, goodness knows, there are plenty of such transactions!) I conjured up images of a national security agency meeting at the White House and someone saying, “This guy Copps down at the FCC is opposed to this merger.” And I could envision a White House or national security type saying, “So what? These companies are working with us on all kinds of secret projects, and that takes precedence over any Commissioner’s worries about diminishing competition in communications or about consumer protection.”

And so the consolidation bazaar rolls on, companies continue to merge, and we find ourselves in a world wherein a few dominant players drive the last spikes into the coffin of competition. I am not arguing that national security concerns alone brought us to this point; there are plenty of other reasons that Big Telecom wants to grow even bigger. I am saying that both parties to this national security-communications industry complex derived great benefits (in their eyes) from this partnership. I am saying the tentacles of this cooperative enterprise reach widely and deeply into many aspects of our national life. And I am saying the American people need to know more -- much more -- about this.

We can argue the pros and cons of national security surveillance, and it is a debate worth having. But this debate needs to be informed by facts. Maybe we can’t have all the facts in all their detail, but certainly we need more than we presently possess. There is a point where national security depends upon secrecy. There is also a point where national security depends upon sunlight. The balance is sadly out-of-whack right now, and we are paying the price in the loss of government credibility both at home and abroad.

Finally, we need to conduct this discussion in a broader context because it is part of even larger issues. Every day brings non-national security revelations about companies developing and deploying new ways to invade our personal space, capture every available fact about our daily lives and habits, and share them for purely commercial benefit. This is not an issue separate from what I have been discussing in this piece. And, as deeply troubling as the privacy and consumer issues are, the implications for democracy are just as severe. Open communications are a prerequisite of self-government. Any short-circuiting of this openness diminishes the ability of free people to chart their own democratic future.

[The Benton Foundation publishes articles penned by Commissioner Copps each month for our Digital Beat Blog.]

When is Prime Time?

2013-11-06T07:55:22Z

When open source started, techies revolutionized not just the info tech space but also some of the rules of doing business and providing services and products to customers. In other words, they transformed economics.

In the last decade, technology in general and information technology more specifically has not only given jaw dropping sci-fi style gadgets and Daily Prophet like interfaces but has also broken some long standing rules about how much businesses can charge for what and how. Dis intermediation is one outcome of this open source culture, but for some industries its more than dis intermediation, it is changing the production process, delivery mechanism and consumption patterns.

Some prominent examples of this in a snapshot are:

Music sharing for free that challenged the Music industry’s business model ending up with Apple’s I-tunes as the model of choice.

Hollywood’s traditional distribution methods are being challenged, with the likes of Netflix rapidly becoming the new way of delivering programming and film content.

Tailored and on demand news and information sharing by platforms like Zite and Slate etc. which send push through multimedia articles and domain specific content to readers from a wide variety of sources.

Kick-starter and Bit coins and a whole range of financial alternatives and financing models being currently tested and tried successfully that are seriously challenging an already brow-beaten financial services industry.

These technologies are powerful, seriously powerful things. Open source culture and now crowd sourcing have become ubiquitous. As open source allows many people to use available technologies to create and sell their products at low prices, there is considerable competition in things like gaming and entertainment and information, which means that the mechanics of charging customers have changed. Crowd sourcing in finance not only allows people to raise funds for an invention or a project without having to borrow or go to a major financial institution or a rich uncle but also allows producers to understand what products have a market. The customer is involved right from the start. The click is certainly mightier than the brick. The most significant revolutions and ‘regime changes’ that have happened in recent years started on social media, the famous social media led uprising in Tunisia followed by the Arab Spring being a case in point.

There’s been talk for a long time of how social media will change advertising, but most social media companies had so far failed to really tap into this. This too is now however set to change with social media companies’ especially Facebook’s Advertising and boosting options offering very powerful advertising options to businesses. This is a big threat to traditional broadcast media advertising. With targeted, referral based and cheaper alternatives available, small businesses, start-ups and individuals can reach the right psychographic and demographic across the globe without spending too much. Competition for advertising revenues coupled with cheap and free information and news that is delivered through multiple sources into our inboxes, hand-held or palm tops and soon into our sunglasses (think Google Glass), its about time broadcast and broadsheet media really considered their options and business approach going forward.

Alongside these seismic changes in access and distribution, there are dramatic developments in data visualization, information presentation, graphics and analytics. All these mean that not merely the messenger but the message is changing. While good journalism, creative writing, talented music composition and content creation is valuable and will perhaps always remain so, the tools of producing content, the mechanism of expressing an opinion and the very means of production and laws of economics and sociology are changing. While it will take academics years to perhaps piece together all the elements of this puzzle if at all they ever completely understand its implications, there is some very insightful work that has already been done by some academics viz Chris Anderson, Ethan Zuckerman, Robert Fisk etc. to name a few.

While we wait to get a grasp of what really is the true and lasting impact of these developments, there are things that media professionals can already do to better reflect and adapt to these changes. To start with, creating more interactive, creative content and deploying newer design elements and graphics and incorporating crowd-sourced content into mainstream reporting is essential. Too often one sees publications take a puritanical and conservative attitude to these inevitable changes. These are incredible opportunities for serious journalism to deliver hard-hitting and meaningful content. Up-skilling journalists to deploying these technologies while expressing themselves is another aspect of journalism that needs far greater attention. Rather than hire techies to work separately and journalists to continue in the traditional way, the two need to work together to develop stories and present them. Matrix structures for reporting as opposed to the classic approach of journalists chasing stories and analysts working separately to bolster the views and news with statistics may not be the most efficient way of telling a story anymore. How can a journalist for instance report on a news story accurately only through interviews and on ground observation, when multiple developments and aggregate actions of people influencing the story are being tracked through algorithms and when the key actors themselves are acting online and impacting developments on ground. A 3 dimensional news experience presented in simple formats while conveying all the complexity that goes into a situation is a tractable challenge with the aid of these technologies. One sees television studios transformed into many a different type of data visualization sets during elections for instance. While that is a start, it needs to be incorporated in everyday media interactions. While software is becoming increasingly available and simpler for everyone to use and design their presentation and analysis, media companies need to embrace this head on and explore the possibilities to the fullest degree as they happen. Like gaming and other industries, engaging customers now comes before asking them to pay. The model therefore needs a rethink. This needs to be a media revolution as much as it is a technological one.

Opinions voiced by Global Minds do not necessarily reflect the opinions of The Global Journal.

The New Industrial Revolution

2013-06-28T10:53:29Z

The world is on the cusp of another industrial revolution. New technologies allied with fresh thinking, increased customization and the leveraging of global networks connecting knowledge and materials are transforming traditional industries. In Sheffield - a center of past industrial glories - this latest evolution suggests a new role for the manufacturing sector in high-cost nations that have seen such business move offshore.

In a small factory in the British city of Sheffield, Brian Reece is buzzing with energy. A spare, intense 61 year-old with a background in tool making, Reece started Sheffield Precision Medical three years ago by acquiring an existing company making orthopedic implants. After spending £1.5m on new machines tools, he has pushed up the annual sales of his business threefold to £2.5m last year, in the process increasing employment from 13 to 30.

With the company’s products including highly accurate pieces of titanium and other metals used in artificial joints including hip replacements, Reece is preoccupied in installing a series of “web-cameras” inside the company’s workshops. “It’s so we can show our customers – which could be large medical device manufacturers anywhere in the world – precisely what we are doing at any time of the day and without them leaving their own headquarters,” he explains. Reece describes his company – with its roots in Sheffield’s long history of metalworking – as a “resurgent remnant.” He adds, “we are taking an age-old technology [metal-cutting] and refreshing it with modern ideas.”

Sheffield is one of the best places in the world to get a sense of how new thinking allied with clever technology and global marketing can transform traditional industries. I was in Sheffield to talk to Reece – and a number of other leading industrialists – in a visit geared partly to promoting my book The New Industrial Revolution, an account of the past, present and future for manufacturing that paints a fairly bright picture for this part of the global economy over the next 50 years.

In my book, I set out my case for the world moving through a new industrial revolution – the fifth such period of change to alter the field of manufacturing. I suggest this revolution will have a profound affect on boosting the capabilities of manufacturing businesses all around the world, but with a special impact in the high cost nations that have been somewhat disadvantaged in production industries over the past 15 years. The first industrial revolution took place over about 80 years from 1780, and involved a combination of technical changes in fields such as textile engineering, metallurgy and power systems (chiefly new steam engines) to deliver a competitive boost mainly in the United Kingdom and the rest of Europe, infiltrating the United States later.

The second industrial revolution took place between 1850 and 1900. It was brought about by a set of technology changes involving communications systems such as the railway, iron or steel hulled steamship and telegraph. The third industrial revolution occurred between 1870 and 1930. It was triggered by the stimulus of a number of new industries made possible by key science based discoveries, including ways to make metals such as steel and aluminum and other products (including pharmaceuticals) cheaply and in high volumes, with the new era greatly helped by the then-novelty of low cost and readily available electricity.

The fourth industrial revolution took place over half a century from 1950 and was based on the powerful impetus that cheap electronic computer processing provided to a huge part of the global economy, including manufacturing. The new industrial revolution started around 2005, and will probably last for about 50 years. It is characterized by seven principal themes.

These include: the intertwining and blending of a great many new and different technologies, taking in disciplines such as novel materials, automation and bio processing; the increasing separation of industry into pockets of specialty or niche activities; the growing importance of making products not on a mass scale but in a customized or personalized manner, where the characteristics of the item are suited to just a small number of users, or even a single person or organization; the evolving role of complex intellectual or material networks linking the world either with new thinking and ideas, or proving a conduit for the transfer of products and materials; the growth in importance of what might seem to embody the antithesis of the last feature but which is in fact complementary, and which concerns the effect of small concentrations of businesses and other organizations in specific geographic areas and which help each other to achieve greater global impact through cluster effects; the way in which China's recent and rapid re-emergence as a world economic superpower has not only helped companies and other groups inside this country but has also benefited other organizations around the world; and finally, the way manufacturers are using the power of their products (or the way the products are made) as a means to help the world to lessen the negative impact of other parts of human activity on the environment.

Sheffield – Britain’s fifth largest urban center by population – was known for decades as “steel city.” Iron-making has been important in the area since medieval times. In the 19th century, Sheffield became one of the cradles of the first industrial revolution – the set of changes in factory organisation and technology that radically altered life in Europe and the United States by boosting manufacturing productivity and increasing wealth. Probably the most famous episode in Sheffield’s history came in 1859.

Henry Bessemer, the prolific English inventor, chose the city as the place for the first of his ‘Bessemer converters’ – a system for making steel that cut enormously its price by increasing the metal’s rate of production and reducing the need for labor. It was in Sheffield where cheap steel – a commodity that has driven the global economy for the past 150 years – was made for the first time.

In the days when I was visiting, a resplendent mural was being unveiled in the city center to depict another of Sheffield’s favorite sons – Harry Brearley, a metallurgist who grew up and worked in the city and is credited with having discovered how to make stainless (or “rust-less”) steel 100 years ago. Later in the 20th century, Sheffield stainless steel became famous the world over, in applications such as cutlery and surgical instruments.

Today, Sheffield is still a place where – unlike in most other large British cities – manufacturing remains a highly visible part of everyday life. Outside the city center, factories remain well in evidence, even if many look rather shabby and have far smaller workforces than 50 years ago. The urban area, taking in the adjacent city of Rotherham, remains home to about 500 metals and engineering businesses, most of them with fewer than 100 employees, and many having connections to the area’s long production traditions.

Take London & Scandinavian Metallurgical (LSM), a maker of specialist metal alloys set up in 1938 in the Sheffield area by a trio of German engineers fleeing the Nazi regime. The company’s managing director is an outgoing Brazilian businessman Itamar Resende whose motto is “where others conform, we innovate.” The business is also highly international, with 87 percent of its £220m sales last year exported. By focusing on highly engineered forms of alloy with applications in sectors such as aerospace, automotive and machine tools, the privately owned company has doubled its revenues over the past seven years.

David Beare, LSM’s Corporate Director, told me “we have to keep finding new ways to use our metals, then we feel we are in with a chance.” The company has, for instance, been expanding recently in areas such as making new additive materials for use in tin-foil in the packaging industry, and in the field of high-power magnets.

Among other Sheffield companies, many have followed a similar path, avoiding commodity areas of industry and focusing on niche areas of production with fairly small numbers of competitors and where sales are made on the basis of original ideas and performance, rather than price. Another example is Gripple, a producer of specialist connectors for use in factory applications and fencing, which work by ‘gripping’ pieces of wire in unusual ways. Gripple was started in 1989 by Hugh Facey, a larger than life former wire salesman who remains in charge of the business as Chairman.

Facey has based his business philosophy on continually finding new forms of connection through encouraging experimentation. Nowadays the key work in this area is done in a 12-person “innovation centre” at his company’s headquarters. Referred to as “the madhouse” by Facey, the interior of the innovation centre is painted bright orange, with a key feature being a big red button displayed prominently on one of the walls. "When the people here come up with a particularly good idea they press the button,” confides Facey. He likes to surprise visitors by trying it out, triggering a loud screeching sound.

But for all the go-ahead demeanor of people such as Facey, it would be wrong to depict the city as without economic problems. Manufacturing in Sheffield has faced challenges, as indeed has the same branch of industry in much of the rest of the United Kingdom and further afield. The share of manufacturing in the GDP last year was only about 11 percent, down from almost 30 percent in 1970. Over this period the number of workers in manufacturing has fallen by about 5 million, to a little more than 2 million.

With manufacturing historically having represented a larger share of the local economy than in other parts of the country, Sheffield has found it hard to adapt to the new conditions for industry globally where smart thinking, rapid deployment of technology and a global mindset are all highly important. Unemployment in the city – as measured by the numbers claiming social security allowances on the grounds of long-term joblessness – is a fifth higher than the national average. Average wages are 16 percent lower than in the United Kingdom as a whole. This is a measure of the fact that – even with a relatively large number of engineering-related businesses in the city – overall employment remains skewed towards low-remuneration industries such as services or unskilled manufacturing.

A report by Sheffield First, a public/private organisation in the city geared to efforts to boost the economy, states: “Sheffield does not make sufficient use of the skills in its population, with a lower density of highly skilled private sector jobs than in other parts of the UK.”

While most of the local manufacturers are eager to link themselves to the long traditions of the city, not everyone among the city’s industrialists believes accenting the Sheffield link is a good idea. In the vanguard of this thinking is Andrew Cook, the idiosyncratic chairman and owner of William Cook, a Sheffield company that is the country’s largest maker of steel castings, used in industries such as railways, military vehicles and sub-sea engineering. One of the great survivors, Cook has been running William Cook since 1981 after he ousted his father from the job in a bitter family quarrel.

Today, William Cook employs 800 people and had sales last year of £90m, 90 percent of this exported. Cook always likes to speak of his company as being based in Yorkshire – the wider region where Sheffield is located – rather than in the city itself. He speaks witheringly of what he refers to as the “Sheffield manufacturing establishment.” The outspoken Cook reckons local business people do not do enough in adapting to new thinking and are too keen to look back at the “glory days” of past success. “They [other Sheffield manufacturers] have a misplaced belief in their embedded superiority,” he says.

However Peter Birtles, a director of Sheffield Forgemasters – another big metals business in the city – rejects this view. He says that his company, along with most of the other important manufacturers in the city, would not still be in business were Cook’s criticisms correct. “We [at Sheffield Forgemasters] have had to adapt to new pressures and become increasingly innovative in order to keep ahead of rivals from around the world – not just from countries such as Germany and the United States, but from new competitors including China and India.”

With sales last year of £100m and 800 employees, Sheffield Forgemasters – which can trace its roots back to some of the pioneering metals businesses in Sheffield of the 18th century – makes large metal parts for industries such as nuclear power and production systems for gas and oil fields. Some four fifths of its annual sales are exported. Since 2005, the company has spent more than £50m on new capital investments, such as improvements to its massive steel forging presses, while also putting £10m over the past four years into developing new production techniques and materials. For instance, to find more accurate manufacturing methods.

“We feel we have to do this if we are to have a future,” says Birtles. “Everyone keeps telling us the Chinese and Indians are catching up [in western know-how and technology]. Of course in 10 years time they will be up to the level we are now. So what we have to do is to move ahead over this period so that – when this time comes – we will be perhaps three or four years in front of where they’ve got to then.”

Having talked to people such as Birtles – part of the modern breed of European industrialist who shows a mixture of innovative verve mixed with resilience and technological acumen – my visit to Sheffield gave me some optimism about the future for the city in manufacturing. Sheffield made its name as a key center in the first industrial revolution that started to shake up the world 150-200 years ago. There is every reason to think Sheffield could have an equally big impact during the new industrial revolution that is now evolving.

Photo © Global Manufacturing Festival: Sheffield.

Importance Of Bioenergy Should Not Be Underestimated

2013-06-27T11:32:17Z

Over the next decade millions of tonnes of biomass will burn in power stations across Europe. But if we are not careful many of the benefits of using biomass could also go up in smoke. This has polarised opinion and caused criticism from NGO’s. Dr. Matthew Aylott from Bioeconomy Consultants NNFCC argues that, while concerns shouldn’t be ignored, they do not reflect the reality.

The abundance of biomass makes it one of the world's most important sources of renewable energy. But this resource is not evenly spread. The UK for example produces relatively small volumes of biomass but growing demand is resulting in a sharp increase in wood imports from countries like the US and Canada. In fact the UK is now one of the world’s largest importers of biomass. The meteroic growth of the UK biomass industry has been made possible by the public subsidies available to bioenergy generators. This has understandably led to intense scrutiny of biomass to ensure it not only delivers greenhouse gas savings but does so in a way that offers taxpayers value for money.

And this scrutiny is unlikely to diminish if predictions on the future use of biomass are correct. According to research funded by the Department of Energy and Climate Change (DECC) we are only at the tip of the iceberg. DECC claim that bioenergy could deliver up to 11 per cent of the UK's primary energy demand by 2020 (1) and will continue to play an important role in energy production until at least 2050 (2).

The use of biomass in energy production is, however, faced with three key criticisms. Firstly, it is expensive compared to other forms of low carbon energy. Secondly, it drives up the cost of wood used in other markets, like manufacturing and construction. And finally, it does not deliver greenhouse gas savings over meaningful timescales relevant to climate change targets.

If we take a worst case scenario then one or more of these statements may be true but when managed sustainably, biomass is an essential part of the portfolio of renewable energy technologies; delivering low cost, low carbon heat and power that can help reverse the decline in the global forestry sector.

The true cost of biomass

A study by ARUP for the UK Government in 2011 (3) – which NNFCC contributed evidence to – found that co-firing biomass in coal-fired power stations is among the cheapest forms of renewable energy. At scales, greater than 20MW biomass co-firing was found to cost around £167,000/MW with an operating cost of £30,000/MW/yr.

This makes co-firing biomass far cheaper than many other forms of renewable energy, such as wind and solar. For example, a 5MW wind turbine has a capital cost of around £1,524,000/MW and an operating cost of £57,000/MW/yr.

Incentives for bio-energy production are also likely to have wider economic benefits, such as investment and jobs in the UK. NNFCC estimates suggest that the biomass heat and power sector (excluding the manufacture of new equipment) could employ 50,000 people in the UK by 2020 (4).

The UK has already seen significant new investment in biomass handling facilities at major ports. In March 2013, Associated British Ports announced it was investing £100 million in new wood pellet handling facilities at the Ports of Immingham, Hull and Goole to support the conversion of Drax – the UK's largest power station – to run off 50 per cent biomass. The project will create over 200 new jobs.

However, if subsidies for bio-energy production were to increase the cost of wood and push other industries out of the UK, we could see a net loss in jobs. The panel industry-led 'Stop Burning Our Trees' campaign quotes unpublished research from consultants Pöyry, stating that energy production creates 2 man-hours of work per tonne of timber used, while making panels, joinery products and paper creates 178 man-hours of work per tonne of timber (5).

This, however, assumes that we are limited by the amount of low quality wood available and that the two industries cannot exist simultaneously. In contrast, evidence shows that both markets are still growing and forest production is increasing to meet this demand (6).

Impact on wood prices

If heat and power generators are incentivised to use biomass then this could artificially drive up the price of wood for other industries. This could have a negative impact on manufacturers and consumers.

The UK Wood Panel Industries Federation states that “the high price that energy companies are able to pay for UK trees may eventually mean it's uneconomic to make things with wood in this country. The factories that produce kitchens, windows, wardrobes, chipboards, building panels and many other useful things may have to move abroad, to places where costs are lower.”

There is also the concern that in cost-competitive markets, wood may be substituted for cheaper alternatives like plastic (7) and further research is needed on the environmental impact of substituting wood for other materials in manufacturing.

But it remains unclear what impact, if any, bioenergy is having on the price of wood used in other industries. It is certainly true that the price of wood in general has risen above inflation over the last decade and this has coincided with the growth of bioenergy in the developed world. However, it is very difficult and potentially misleading to link the two.

In regions where bioenergy generation is subsidised, like Europe, the price generators can pay for wood remains lower than that the average price payable in other industrial roundwood markets (8). Bioenergy generators cannot afford the high quality wood demanded by other industries, like furniture or construction industries. In many cases without a bioenergy industry there would not be demand for the low quality feedstocks, such as diseased or damaged wood.

However, in supply-limited markets that require lower quality wood there may be greater competition with bioenergy generators, which could influence price. This again works on the assumption that we are limited by the amount of wood available.

Worldwide demand for industrial roundwood – i.e. non-fuel wood – is predicted to increase from 1668 million m3 in 2005 to 2165 million m3 by 2020 (6). The FAO predict that this increased demand will be met by increased production in areas like Europe and East Asia – where production is estimated to grow by 2 to 3 per cent per year up to 2020. And large bioenergy markets, like Europe and North America, are expected to remain net exporters of industrial roundwood up to 2020 and beyond.

In fact, industrial roundwood markets could benefit from the growing bioenergy sector, both economically and from a carbon sequestration viewpoint. Bringing neglected woodland back into management and actively managing forests to produce both useful timber products and biomass for heat and power production can increase carbon stocks and make forests more economically productive (9).

Greenhouse gas emissions from biomass

Biomass is not as carbon dense as fuel made from fossilised plant material (i.e. coal or gas) - so you need more of it to produce the same amount of power. For every megawatt-hour of electricity generated, biomass will initially release up to twice as much carbon dioxide as coal and up to four times as much as gas. But unlike coal or gas, we can re-absorb this carbon dioxide in just a few years by replacing the trees we cut down or thinning forests to make them more productive.

The time it takes for a new plant to absorb the same amount of carbon dioxide that was released during the harvest, transport and combustion of the felled plant is called the 'carbon payback' rate. This is important when considering the environmental benefits of using biomass.

Calculating this rate requires a life cycle assessment which takes into account all of the contributing factors to carbon dioxide emissions across the entire biomass supply chain. The rate varies according to the type of biomass being used.

Biomass that has come to the end of its life, such as inedible food residues, will rot if left to decompose naturally and release methane and carbon dioxide – both greenhouse gases. Similarly, forests tend to decline after a number of years and start producing more deadwood. This deadwood will decompose on the forest floor, again releasing methane and carbon dioxide.

If we manage forests by taking out thinnings and deadwood, we can improve productivity, prevent the release of greenhouse gases and create a feedstock for bioenergy generation. But there will also be emissions associated with the harvest and transportation of the wood, which must be paid off. Research tells us that the carbon payback from forest thinnings used in energy production can be as little as four years (10; 11; 12; 13). However, we are limited by the accessibility and availability of forest thinnings.

As we start producing bioenergy on a larger scale some NGO’s believe that the use of whole trees will increase. They argue that this will result in longer and less palatable carbon payback periods from bioenergy. Research (10; 14) suggests that it may take 40 years or more to payback the carbon released when using whole trees in electricity generation.

But what is an acceptable carbon payback period? This is a crucial political question. Europe has 2020 and 2050 emissions targets to meet and if we don’t see an emissions reduction from substituting coal or gas with biomass until after 2050 some will argue we shouldn't be using whole trees to generate electricity and should instead stick to using 'cleaner' alternatives. However, this oversimplifies a more complex picture.

A typical wind turbine can take around three months (15) to payback the carbon used or disturbed in its construction, while a solar photovoltaic panel has a carbon payback period of up to two and a half years (16). On the face of it wind and solar would seem to have an environmental advantage over biomass. However, wind and solar are intermittent and can't be used to meet peak or base-load power demands, unlike biomass.

Hydro-electric can be used in peak and base-load power production, while nuclear can also deliver base-load power, but each of these technologies faces considerable planning and cost barriers that are likely to stunt their future growth.

Without biomass our only alternative would be to use more coal, oil and gas to meet peak and base-load power demands; dwindling sources of energy whose carbon payback rates are not measured in decades but are instead measured in millennia.

The importance of bioenergy simply cannot be underestimated. We need to move away from single issue politics and look at the bigger picture, by considering the broader benefits and implications of utilising a diverse portfolio of renewable energy sources, including biomass.

Opinions voiced by Global Minds do not necessarily reflect the opinions of The Global Journal.

Photo © DR

References

(1) DECC. 2012. UK Bioenergy Strategy. Download at: www.decc.gov.uk/assets/decc/11/meeting-energy-demand/bio-energy/5142-bioenergy-strategy-.pdf

(2) DECC. 2010. 2050 Pathways Analysis. Download at: www.decc.gov.uk/assets/decc/What%20we%20do/A%20low%20carbon%20UK/2050/216-2050-pathways-analysis-report.pdf

(3) ARUP. 2011. Review of the generation costs and deployment potential of renewable electricity technologies in the UK. Download at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/147863/3237-cons-ro-banding-arup-report.pdf

(4) NNFCC. 2012. UK jobs in the bioenergy sectors by 2020, NNFCC 11-025. Download at: www.nnfcc.co.uk/tools/uk-jobs-in-the-bioenergy-sectors-by-2020-nnfcc-11-025

(5) Pöyry. Download at: www.stopburningourtrees.org/why_its_wrong.html

(6) FAO. 2009. State of the World's Forests. Download at: http://ftp.fao.org/docrep/fao/011/i0350e/i0350e.pdf

(7) The Royal Society for the Protection of Birds (RSPB), Friends of the Earth and Greenpeace. 2012. Dirtier than coal? Why Government plans to subsidise burning trees are bad for the planet. 2012. Download at: www.rspb.org.uk/Images/biomass_report_tcm9-326672.pdf

(8) FAOStat. 2012. Forestry Production and Trade. Download at: http://faostat.fao.org

(9) Sedjo R and Tian X. 2012. Does Wood Bioenergy Increase Carbon Stocks in Forests? Journal of Forestry, Vol. 110, pp. 304-311. Download at: www.ingentaconnect.com/content/saf/jof/2012/00000110/00000006/art00005

(10) McKechnie J, et al. 2011. Forest Bioenergy or Forest Carbon? Assessing Trade-Offs in Greenhouse Gas Mitigation with Wood-Based Fuels.Environ, Sci. Technol., Vol. 45, pp. 789-795. Download at: www.pfpi.net/wp-content/uploads/2011/05/McKechnie-et-al-EST-2010.pdf

(11) Manomet. 2010. Biomass Sustainability and Carbon Policy Study. Download at: www.manomet.org/sites/manomet.org/files/Manomet_Biomass_Report_Full_LoRez.pdf

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(15) Martinez E., et al. 2009. Life cycle assessment of a multi-megawatt wind turbine. Renewable Energy, Vol. 34, pp. 667-673. Download at: www.cynulliadcymru.org/sc_3_-01-09__p8__further_evidence_from_bwea_cymru_on_carbon_reduction_via_land_use.pdf.pdf

(16) Fthenakis VM, Kim HC and Alsema E. 2008. Emissions from Photovoltaic Life Cycles. Environ, Sci. Technol., Vol. 42, pp. 2168-2174. Download at: http://pubs.acs.org/doi/pdfplus/10.1021/es071763q

Superbugs, Humans And The G8: A Global Reckoning

2013-06-25T11:33:04Z

Let's ask the G8 to consider the case of Ms. D.

She was a mother of six, her youngest child two years old. She caught a cold on a Sunday. The cold weakened her and led to a bacterial pneumonia. It was 1943, and the world was busy making war. Ms. D stood at the threshold of the antibiotic era. But she never crossed it: her pneumonia killed her, efficiently, by Thursday.

Now consider the case of Mr. S, a twenty-eight year-old software engineer. Seventy years after the death of Ms. D, he planned an adventure vacation in North Africa. While there, he was involved in a bus accident. His lower legs were crushed, resulting in several open fractures. He was airlifted to his home country, Switzerland, but not before spending three days in a Cairo intensive care unit. By the time he arrived in Switzerland, several "superbugs" had nested and were growing happily in his leg bones; two of them were fully resistant to all known antibiotics save colistin. Colistin is an old drug that had all but vanished during the antibiotic era's golden years: it is rapidly toxic to the kidneys and nerves. Mr. S would need continuously high levels of this toxic drug in his blood for at least half a year to reach the bacteria in his broken bones; this would almost certainly lead to the death of both kidneys. So he was offered a choice by his physicians: try to save the legs--with a high chance of going on kidney dialysis for the rest of a shortened life at the age of 28, and an unknown chance of actually curing the infection--or amputate the legs before the infection spread to the rest of his body and killed him.

Mr. S chose a double leg amputation. He lived.

Both of these patients serve as "book ends" to the golden era of antibiotics. Both are real. There are differences, of course. Ms. D's generation lived with stories like hers. In the battle of Medicine vs. Fate, the balance of power lay firmly on the side of Fate. In our generation, however, we have believed that Medicine can shape and change Fate, because for us it always did. The younger among us have seen only the vaccine, not the deadly and deforming disease: few doctors under the age of sixty have ever encountered a case of measles. We have taken the antimicrobial, and within a few days, our only worry became remembering to swallow the pills-not having to take leave of our children before they were old enough to remember us. It is never easy to accept the abrupt end of a young life, and the loss of Ms. D still reverberates in the covered-but open-wounds of her children, seventy years on. But it may be harder for our generation to accept these sudden disappearances of life and limb--to witness this alteration in the balance of power--because we never questioned Medicine's superiority.

We need to, though. There have been no successful discoveries of new classes of antibiotics since 1987. Meanwhile, the Centers for Disease Control and Prevention recently warned the public of a four-fold increase in one group of "nightmare bacteria" known by doctors as carbapenem-resistant Enterobacteriaceae (CRE) in just one decade; up to half of patients who get CRE bloodstream infections die.

The G8 Summit taking place now in Northern Ireland has rightly prioritized global antimicrobial resistance as a "major health security challenge of the twenty-first century." Science ministers of the eight countries are calling for intensive international collaboration to achieve the concrete goals of (1) avoiding the misuse of remaining antibiotics and (2) streamlining and facilitating the development of new antibiotics as well as (3) rapid diagnostics to accelerate the identification and treatment of these resistant organisms before they spread to others.

The key element to the success of such initiatives is of course international collaboration. Microbes have been globalized along with the rest of the world. In the history of the planet, there has never been such rapid and distant microbial spread. Thanks to mass travel, Dengue (also known as "break-bone fever") has returned to the U.S. and may soon become endemic in some states. The West Nile virus, never before seen in the western hemisphere, also arrived by plane and rapidly spread across the nation. CRE, the nightmare bacteria, were first identified in the US in 2001; they have now been reported in all but seven of the fifty states. Data sharing among international infection control experts, institutions, and the biotechnology and pharmaceutical industries is essential. Facilitating the exchange of ideas for novel measures to combat the global threat of antimicrobial resistance is also essential.

Here in Geneva, will start in a few days the second biennial conference of the International Consortium for Prevention and Infection Control, made up of physicians, nurses, scientists and other personnel who have dedicated their lives to infection control in humans. From June 25th through the 28th, over 1,200 experts from eighty-four countries will gather to exchange ideas, strategies and local outcomes of recent and ongoing studies. What worked--and what didn't--will be discussed and scrutinized. Concrete strategies will be argued and debated; those that pass these tests will be laid down for further development and implementation. In these three days, the seedlings of international collaborative efforts--from laboratory experiments to multicenter clinical studies, both observational and interventional--will be planted.

Though we never knew her, we would like to think that Ms. D would be happy. Mr. S recently told us that he was.

From 25-28 June, over 1,000 world experts in the prevention and control of healthcare-associated infections will gather in Geneva for the 2nd International Conference on Prevention & Infection Control (ICPIC). Over the next two weeks, The Global Journal will showcase the inspiring stories behind the vital work being done to reduce the global burden of this preventable public health challenge.

Request the Special ICPIC Edition of The Global Journal.

Hungry For A Better Future?

2013-06-25T11:32:43Z

Eric Darier is a senior campaigner on Ecological Agriculture for Greenpeace International.

Let’s not mince our words: chemical intensive industrial agriculture is a failure. No doubt, future generations will wonder why we were so blind about its destructive impacts and hesitated so long before switching to ecological farming.

Systemic Failures

The jury has deliberated for too long. But the verdict is obvious: guilty. Let us revisit some of the evidence against the dominant and unsustainable industrial agriculture model. An increased dependency on polluting inputs (synthetic fertilizers, herbicides and pesticides that are also fossil-energy intensive) – too many potential toxic substances from agriculture are now in our air, water, soil and bodies. A reduction of the diversity of seeds and livestock due to increased corporate concentration that favors hybrid and genetically engineered (GE) seeds. A dogma of productivism that values higher production levels in the short-term while ignoring the negative impacts on ecosystems, biodiversity, rural communities, animal and human health.

The other ecosystem services that we all enjoy like clean air and drinkable water have been sacrificed to the alter of this unsustainable agricultural system. Huge public agriculture subsidies (read: taxpayers’ money) that transit via farmers but end up in the coffers of giants multinationals selling chemicals and seeds. Together with various trade agreements, international dumping of food commodities and policies (for instance Europe’s Common Agricultural Policy) depresses local food production in countries where there are so many needs. In some countries, agriculture subsidies result too often in the over-production of food commodities that can worsen the diet.

Despite the so-called (chemical) "Green Revolution," the number of people undernourished recently went up to 970 million despite the fact the quantity of food calories available exceeds what is needed now and in the future. Focusing nearly exclusively on food production, regardless of the direct and indirect costs, is simply irresponsible. Let us remember that: about 70 percent of water use by humans already goes to agriculture, 30-50 percent of food is never eaten; meat consumption is a very inefficient way to provide proteins while increasing pressure on deforestation to grow soya to feed livestock; and 1.4 billion people are now overweight, which can cause more illnesses such as heart disease, diabetes, some cancers and the like.

Increased extreme weather events – for instance drought and flooding – have negative impacts on agriculture, especially on industrial agriculture. Industrial agriculture is often less resilient in contrast to ecological farming, as the latter is better integrated into stronger ecological systems. This is one more reason why it is urgent to switch to more resilient and ecological farming. Industrial agriculture also creates conditions for the emergence of potential epidemics caused by unsustainable practices, especially those related to industrial animal farming such as avian flu, resistance to antibiotics and meat scandals (mad cow, horse meat).

No Shortage of Solutions for Feeding the World Ecologically

Feeding the world should be done ecologically in order to guarantee the long term survival of the human race. The entire food system has to be refocused around ecological imperatives. The good news is that we know already what has to be done and what is working. The new ecological food system must maintain food and agriculture systems based on biodiversity of seeds, breeds, soil, micro-flora and fauna, pollinators and diversity of diets. It must reduce food waste at all levels from production to consumption instead of increasing production and promote a more equal distribution of existing food resources. It must encourage balanced and healthy nutritive diets, which means for example lowering animal protein production and consumption to levels that are sustainable. It must reduce inequalities and extreme poverty, which are still the main causes of hunger and disease. It must abolish agriculture subsidies or de facto dumping trade practices that discourage ecological and small-scale farming. And it must encourage ecological farming that can produce roughly 80 percent more food per hectare in developing countries.

Practical policy changes to encourage ecological farming solutions already exist. For example, a 2008 United Nations process that involved 900 experts from 110 countries (International Assessment of Agricultural Knowledge, Science and Technology for Development - IAASTD) identified policy options that Greenpeace welcomes. The United Nations Special Rapporteur on the Right to Food also published several reports that presented solutions to food hunger.

The Transition To an Ecological Food System

While we already know the systemic causes of the problems and their solutions, policy-makers still fail to implement the necessary changes. The chemical industrial food system lobby managed to make us think there was no alternative. So half of the obstacle is to remind ourselves of the systemic failures of industrial agriculture and that ecological solutions are already there. Ecological farming is not only a solution to feeding an ever growing population – it is the only ecologically sustainable long-term solution.

The other half of the obstacle is to shift the money currently invested into chemical intensive industrial agriculture into ecological solutions. This can be done through a number of means. Firstly, by abolishing public subsidies for polluting industrial agriculture and using the funds to assist farmers to transition to ecological farming. Secondly, by changing our personal and collective food habits to organic foods, to low or no meat-based diet, to more seasonal and local produce. Thirdly, by building direct solidarity linkages between farmers and consumers, for instance the network of Community Supported Agriculture (CSA). Fourthly, by citizens getting involved in actual food production such as urban agriculture and community agriculture. Fifthly, by greater public participation in the growing citizen food movement that fights against some of the worse aspects of the industrial food system. Sixthly, by improving the life of the existing 2.6 billion small-scale farmers already producing the majority of the world’s food to empower them to provide more and better food to some of the poorest in the world – including themselves.

Finally, we should resist technological based solutions that promise the sky, such as genetic engineering or pesticides that often fail to deliver and create other problems making the situation worse. Our challenge is to re-learn to work with nature not against her. In agriculture, working with nature is called ecological farming. We are all eaters and we all must also reclaim and control our food.

Opinions voiced by Global Minds do not necessarily reflect the opinions of The Global Journal.

When Profit Meets Purpose

2013-06-25T11:28:05Z

As the first Internet stock bubble neared its popping point in 1999, IBM chief executive Lou Gerstner famously dismissed the dot-com start-ups of his day as “fireflies before the storm—all stirred up, throwing off sparks.” The Internet would truly achieve its disruptive potential, Gerstner argued, when thousands of big institutions around the world started using the new communication and technology platform to transform themselves. He was right. Although many of the dot-com players did not survive the 2000 market crash in technology stocks, they were indeed harbingers of a coming business revolution.

Nearly 15 years later, we see a new set of fireflies before a different storm. This time, an explosion of creativity in social entrepreneurship has unfolded against the backdrop of a crisis in global capitalism. Barely half of Americans polled in 2010 by GlobeScan said they believed in the free-market system, down from 80 percent in 2002. A large majority had lost trust in government. The most recent Edelman Trust Barometer found that trust in business has been below 50 percent for 8 of the past 12 years. Throughout Europe, only small minorities said they believed in free-market capitalism.

Meanwhile, social entrepreneurs are developing innovative business models that blend traditional capitalism with solutions that address the long-term needs of our planet. They are tackling chronic social problems, ranging from healthcare delivery in sub-Saharan Africa to agricultural transformation in East Asia and public-school funding in the United States. Social entrepreneurs are working in close collaboration with local communities, incubating groundbreaking (and often lifesaving) innovations; modeling synergistic partnerships with governments, companies, and traditional charities; and building business models that deploy technology and enable networking to create wins for investors and clients alike. “Social entrepreneurs are mad scientists in the lab,” says Pamela Hartigan, director of the Skoll Centre for Social Entrepreneurship at Oxford University. “They’re harbingers of new ways of doing business.”

We believe this collaborative approach offers intriguing hints about how enterprises of all sizes can deliver value for themselves and society. Below we suggest four ways in which social entrepreneurs are showing the way forward.

Using profit to fund purpose

Many of today’s leading social entrepreneurs have created organizations that are neither businesses nor charities, but rather hybrid entities that generate revenue in pursuit of social goals. While not entirely new (the Girl Scouts have been selling cookies for many years), this desire to blend purpose with profit has more recently been formalized in structures such as the US “benefit corporation” (B Corp), a corporate entity legally required to create benefit for society as well as its shareholders.

While B Corps are still rare, many nonprofit organizations generate revenue to advance the parent organization’s social goals. VisionSpring, for example, is a social venture that provides eye tests and glasses to lower-income customers in more than 20 countries, including Bangladesh, El Salvador, India, and South Africa. Initially, VisionSpring distributed its eyeglasses through a dedicated sales force of microentrepreneurs. Like many business owners before him, founder Jordan Kassalow soon learned that pushing a limited range of products through a single sales channel was a tough way to make a living. “There wasn’t enough money coming in to support our operations,” he says. “We realized we could either be a really nice, perpetually subsidized nongovernmental organization, or—better yet—change our business model so we wouldn’t need subsidies.”

Today VisionSpring operates vision stores that generate income via programs in which higher profit margins on more expensive glasses subsidize basic eyewear for the poorest customers. Kassalow also distributes eyeglasses and vision testing through large organizations like BRAC, a philanthropy in Bangladesh with a huge existing network for distributing healthcare services. VisionSpring calculates that one pair of its glasses increases the average recipient’s labor productivity by 35 percent, which works out to $216 in additional income over two years—a 20 percent rise. Kassalow plans to continue operating on a nonprofit basis while working toward profitability in every country where VisionSpring operates. (All profits are poured back into the organization.) His El Salvador unit is already profitable, and he expects VisionSpring’s India operations to achieve profitability by 2015.

Kassalow’s blended approach to value creation is increasingly common. Living Goods, for example, is a US-based nonprofit that sells essential products such as fortified foods, pharmaceuticals, and high-efficiency cookstoves through an Avon-like network of microfranchisees in Uganda. According to founder Chuck Slaughter, this model provides a modest income to the franchisees while helping to fund his operating costs. “Avon has five million agents,” he says. “My thought was if you can make that kind of money selling discretionary stuff, imagine what you can do selling absolutely essential, life-changing goods.”

Similarly, Riders for Health is a UK-based organization that sells logistical services to health ministries in seven African countries. It runs a fleet of some 1,500 vehicles that deliver medical services to between 11 million and 12 million rural Africans. The organization funds its operating expenses in part by charging local health ministries a cost per kilometer that covers fuel, maintenance, replacement parts, and logistical costs. Originally founded to service health-ministry motorcycles in Lesotho, Riders for Health now operates in several African countries and has added a slew of logistical services to its product mix. The organization maintains ambulances and hospital generators, transports medical samples from rural clinics to labs for analysis, and manages compliance programs for patients taking medication. “We don’t charge profit of any kind,” says cofounder Andrea Coleman. “But from the beginning, our mission has been to earn as much money as possible from different income streams.”

Delivering individualized products that marry need and want

Successful social ventures leverage their small scale and intense customer focus to create products and distribution models that precisely match the needs and desires of the communities they serve. In this sense they are modeling a much broader economic trend. In a 2010 McKinsey Quarterly article, Shoshana Zuboff argued that the capitalist mode of production was going through a historic transition from mass consumption to the wants of individuals, a phenomenon that she called “distributed capitalism.” Obvious examples include various personalized shopping experiences enabled by interactive technology, also known as mass customization.

While we often associate distributed capitalism with digitized consumer transactions, the concept has broader application in the world of social entrepreneurship. Caerus Associates, for example, is a small consultancy that uses a combination of big-data analytics and local community knowledge to assess development trends, often in societies suffering from violent conflict. In an article that appeared last year in McKinsey’s special volume on social innovation, Caerus founder David Kilcullen explained how his social venture advises governments, corporations, and local communities on what he calls “designing for development.” The main idea here is that development programs must be designed with input from local actors because they call the shots on the ground.

Education delivery is another area where we can see the principles of distributed capitalism at work. In Bangladesh, a social entrepreneur named Mohammed Rezwan operates a fleet of solar-powered floating schools that provide mobile education to rural schoolchildren who are often isolated during the monsoon floods. Rather than building a school and asking children to show up, Rezwan brings school to the children, when and where they need it. Similarly, Pakistan’s Pehli Kiran School System is a network of schools for the children of impoverished migrant workers living in illegal settlements, or katchi abadis. Local authorities frequently raid and dismantle these settlements, forcing the families to move. Pehli Kiran schools move right along with them, with the goal of ensuring that students can continue their education no matter what happens to their homes.

Or consider how two social entrepreneurs have managed to customize the delivery of agricultural-development services in rural Myanmar. Jim Taylor and his partner Debbie Aung Din operate Proximity Designs, a social venture that develops innovative, low-cost products designed to raise agricultural productivity. Proximity Designs employs ethnographers and product designers who work closely with subsistence farmers in the countryside to develop products like solar-lighting systems and foot-operated irrigation pumps.

Proximity Designs funds its operations in part by selling the products through a network of for-profit agricultural supply dealers in small towns in Myanmar. To ensure that farmers can afford to buy its goods, Proximity Designs also developed a financing program that advances small loans at modest rates. “We look through the lens of what impact we can have,” says Taylor. “One farmer I met had piglets that were like children—they wouldn’t sleep at night unless the lights were on. He used to stay up all night with a lit candle because he was worried about burning the house down. Now that the farmer has our solar lights; the pigs are happy and he gets to sleep.”

It would be difficult to gather such granular insight from a product design lab in, say, California. By virtue of their small size and engagement with the communities they serve, social ventures like Proximity Designs are well positioned to deliver products that meet both the needs and the wants of their clients.

Crowdsourcing the solution

In a 2008 article, communications scholar Daren C. Brabham defined crowdsourcing as “an online, distributed problem-solving and production model.” Today we see crowdsourcing applications in many different realms, from open-source software development to financial-prediction markets and funding for creative projects through Kickstarter and similar sites. Crowdsourcing has been a particular boon to social entrepreneurs, who can use it to create disproportionate impact with modest resources.

Charles Best is the founder and CEO of DonorsChoose.org, a Web-based platform that raises money to fund class projects in American public schools. Individual donors contribute an average of $50 apiece to projects that typically cost about $500. DonorsChoose.org vets every project, pays all project costs directly, and makes sure that the teachers write thank-you letters to every donor. Best covers his operating costs by charging each donor an optional 15 percent administrative fee. “We’re one of the few charities that doesn’t go hat in hand seeking donations,” he says.

Best crowdsources quality control as well as fund-raising. He used to hire college students to vet all the projects, which he says was costly and often ineffective. Today he uses a network of trusted teachers who have already received DonorsChoose grants and volunteer their time to make sure that all new projects deserve funding. This year, DonorsChoose expects to receive at least 150,000 project submissions from public schools all over the United States, and it plans to disburse about $50 million in grants, 85 percent of them to teachers working in high-poverty schools. Best’s organization has been entirely self-sustaining since 2010. Since inception, a total of 145,000 teachers at nearly half the public schools in America have received grants through the site.

In recent years, we’ve also seen a boom in prize competitions that crowdsource solutions to difficult social problems. Information technology and social media now enable cheap and easy collaboration. For social ventures, this dramatically expands the pool of potential problem solvers and lowers the cost of developing solutions. Ashoka’s Changemakers initiative, for instance, is an idea factory that encourages social entrepreneurs to develop concepts that transcend the competition itself, essentially building a marketplace for innovation in an issue area in just a few months. Changemakers judges are also potential investors. By requiring participants to post their ideas and selecting a relatively large pool of finalists, Changemakers and similar competitions can help match competitors to new funding.

Working themselves out of a job

One important test of any social venture is whether it can create sustainable impact beyond its own projects. Some of today’s most farsighted social entrepreneurs have created business models that allow them to effectively work themselves out of a job by creating sustainable, lasting change in the communities that they serve.

I-DEV International, for example, is a New York–based impact investment firm that’s in the business of what it calls “market-based sustainable development.” In Peru, I-DEV helped impoverished farmers build an international business out of tara, a native tree species whose fruit had historically been consumed locally for medicinal purposes. However, plant researchers had developed new applications for tara in the global food, pharmaceutical, leather, and pet-food industries. I-DEV helped some 200 Peruvian farmers to organize a farming co-op that today is the largest and most successful supplier of unprocessed tara in Peru.

The co-op generates nearly $4 million a year in revenue for its members. I-DEV is currently gathering investors to help the farmers build a tara processing plant. Managing director Jason Spindler says the deal will be structured as a joint venture in which the farmers take the majority stake while I-DEV and equity participants are minority shareholders. “Nothing we do is for charity,” he says.

Other social ventures scale innovation by partnering with local governments. Ned Breslin is the CEO of Water For People, an international nonprofit that works with local communities to install water pipes, latrines, and other sanitation infrastructure in Africa, Latin America, and South Asia. His goal is to ensure that nobody in a district where Water for People works will ever need sanitation assistance from another international development organization.

To do that, Water for People mobilizes local authorities from the community level all the way up to the national government. It insists that all levels of government invest their own money alongside Water for People. The local communities are also asked to participate as investors, and their contributions must take the form of cash rather than sweat equity. Breslin maintains a low public profile for his organization, with the goal of ensuring that communities and local governments get the credit for improving sanitation and therefore feel ownership in the programs. “What we’re really challenging is the endless project-by-project approach of philanthropy,” he says. “The point of our investment is not to do another project. It’s to get the water flowing at scale so they never need another project.”

Social entrepreneurs and capitalism

Despite their early successes, social ventures in this new generation are still entrepreneurial start-ups. Some may survive and grow into major organizations. Others may disappear. Regardless of their individual fates, we believe these organizations demonstrate a way forward for the capitalist mode of production, one in which economic and social value creation are no longer seen as antithetical.

Social entrepreneurs are part of a broader conversation about the relationship between business and society that has been gathering steam since the Great Recession. In a recent Harvard Business Review article, McKinsey global managing director Dominic Barton argued that global capitalism was at a turning point. “We can reform capitalism, or we can let capitalism be reformed for us, through political measures and the pressures of an angry public,” he writes. Barton suggests that capitalism should return to the values of its founding philosopher Adam Smith, who believed that business and society were profoundly interdependent.

Similarly, Harvard Business School professor Michael Porter argues that capitalism has betrayed its promise by focusing on the narrow equation of value with short-term economic returns. Porter urges companies to think in terms of “shared value,” which involves generating economic value while at the same time creating value for society by addressing its needs and challenges.

Meanwhile, the author and consultant Dov Seidman makes a business case for ethical capitalism. Globalization, he argues, has made it increasingly difficult for companies to offer unique value propositions based on their products and services alone. At the same time, the ubiquity of electronic communication and the rise of social media have created a transparent business world in which bad behavior is more difficult to hide than ever before. As a result, ethical behavior has become a point of competitive differentiation. Companies that “outbehave” their competitors will eventually outperform them as well.

We can cite many examples of large organizations that are already putting these principles into practice. Elsewhere in this volume, leaders from The Coca-Cola Company, Hindustan Unilever, and Royal DSM explain how their companies blend profit and social purpose by deploying advanced supply-chain technologies that deliver lifesaving goods and services to some of the world’s poorest people. Meanwhile, the social ventures that we have profiled in this essay are testing many ideas about the proper relationship between business and society, some of which may eventually scale up and become standard practice for organizations of all sizes. While the solutions are diverse, most are based on the working assumption that profit and purpose need not conflict.

Social ventures that create new value chains while generating profit in pursuit of social goals are a direct challenge to Milton Friedman’s dictum that the social purpose of a business is to generate profit for its shareholders. With public cynicism about business at record levels, we may well see more organizations following their lead.

The article originally appeared in McKinsey's online publication Voices on Society

The article was co-authored by Danielle Sachs, Director of Social Impact for McKinsey & Company, and Richard McGill Murphy, the managing editor of Voices on Society a print and online publication from McKinsey & Company.

Opinions voiced by Global Minds do not necessarily reflect the opinions of The Global Journal.