Chapter 8: Sustainable financing for the commons
In the previous chapter, we defined what could be the initial regime of the Creative Contribution. We now reflect on its evolution in space and time. No doubt surprises will crop up in its implementation: how should it adapt to them? How should it be reviewed to address new challenges, in particular of scale? Can it be put in place in some countries first and others later?
As part of this exercise, we introduce a new way of looking at financing schemes that link the monetary economy to the non-market commons. The relevance of such schemes goes well beyond the cultural or information domain. They address a central problem: in the information age, how can we empower the members of a society to manage resources for the knowledge, environment and social commons?
The reader might be wondering why when [Oberholzer-Strumpf 2010] rightly stress that cultural sharing is a global phenomenon, we propose to manage resources for the financing of creative activity in national frameworks. There are good reasons for this initial choice: national frameworks are currently the only ones in which financial resources can be collected on the appropriate scale, the governance of the collected sums can be democratically controlled, and the debate on what is socially acceptable or not can effectively take place. It is a compromise, and we welcome the progressive development of resource pooling in other domains, at the level of global regional entities such as the European Union (a natural umbrella for more global schemes) or Latin America, or even globally in the field of health1 or the environment. Nonetheless, in fields such as culture and creativity, mature democratic arenas are presently lacking and must be developed before large-scale resource collection can begin. In parallel with national mutualized financing schemes, grassroots initiatives such as Flattr, an intermediary for the voluntary pooling of rewards to creative works set up by Peter Sunde, one of the founders of The Pirate Bay, or the participative funding and co-production intermediaries already mentioned in section Contribution to media production on chapter 7 will continue to explore the route of global resource pooling.
Within the limits of a given national territory, two relevant parameters will evolve: the sums collected, and the financing needs. The number of broadband Internet users will keep growing, though in some countries it will reach a plateau, because a fraction of the population will never become connected. There will be a small minority of dissidents (people who refuse the constraints and blessings of connectivity, which is a legitimate right), and a number (somewhat larger, unfortunately) of persons who live in conditions that are not compatible with access to the broadband Internet. The development of broadband mobile Internet, if it steers clear of discriminatory models favoring the transmission of some contents over others, will open new avenues of development. The payment of the Creative Contribution can be shared between fixed line and mobile broadband users, but the same individuals or households will ultimately be paying. Assuming a fixed level of contribution per household, the sums collected can be expected to grow by a further 20–30% in developed countries.2
Let’s now turn to the financing needs. Two of the choices we made when estimating them initially might need to be reviewed later. For rewards, we selected the number of people who should be rewarded at or above a given minimum level; for the financing of new works, production and the environment of creation, we selected an initial amount corresponding to 5–7% of all investment in producing new works in all (digital and analog) media today, plus an additional 10% of this amount towards the creation and maintenance of environments contributing to the early recognition of quality works.3 What if not enough potential rewardees show up? What if, on the contrary, the many-to-all cultural society model installs itself more quickly than we expected, and people who should be rewarded (in the opinion of many) are not, because of the limits we have set for the system? What if orphan activities in production prove to be a much wider domain, and despite the many other mechanisms that can contribute to finance them, one wants the Creative Contribution to play a bigger role there?
One can handle these uncertainties using three tools:
- Incorporating from the start, in the legal basis of the Creative Contribution, a plan for it to reach its set value only progressively over three years. This is probably necessary so that the collected resources are efficiently used. Those who stick to a compensatory approach will complain that the right to non-market sharing is going to apply immediately, while the financing side will be progressive. This is mistaken, because file sharing already exists, and the impact of its legal recognition4 will also be progressive. Of course, this impact will not necessarily be negative for established players or sources of production investment, but even it if were, it will take time to build up. More generally, the governance mechanisms that we discuss in chapter 9 should include enough flexibility for a smooth adaptation of, for instance, the share of rewards allocated to various media, and sufficiently strong democratic governance guarantees to minimize the risk of specific interest groups being the chief drivers for this adaptation.
- Planning, again as part of the law, a review of the mechanism five years after it comes into force. Such reviews are inserted in an increasing number of laws, but in many cases, they are a formality, and not always observed in some European countries. For the issue at stake, however, the public debate can be expected to be lively enough for the review to be a real one.
- Conducting, prior to the finalization of law proposals, a societal and stakeholder debate on the use of less-than-proportional reward functions. As pointed out above on chapter 7 and detailed in appendix B, they are a key instrument of distributive justice, and a management tool with which one can better handle the uncertainty surrounding the initial evolution of popularity distributions. Those who believe that the present observed commercial popularity distribution is the product of individual preferences and a perfect cultural market will no doubt complain. But the debate will enable other views to be aired, describing the shape of commercial popularity distributions as having more to do with the strategies of a few commercial actors and a very imperfect media market.
Does it make sense to implement a scheme such as the Creative Contribution in a single country? A quick and easy answer is that it will prove so attractive that it should rapidly spread to other countries. In Europe, the idea has already propagated nicely. With some variations, proposals exist in Germany, Belgium, Sweden, Italy, the Netherlands and even in countries where statutory resource pooling is rare, such as the UK. It is being discussed elsewhere: in the US and Canada, of course, but also in countries such as Brazil.5 The reality will propagate even better than the idea.
One country will have to be the first. Let us call it country A, and place ourselves within it. How does usage in other countries interact with the Creative Contribution, or a similar mutualized financing scheme associated with a right to non-market sharing of digital works? First, we consider upload from other countries. Internet users in country B will naturally be inclined to exploit the recognition of non-market exchanges in country A, and the resulting existence of quality services in that country:6 they will make the works they have access to and like available via IP addresses located in country A. If the persons who have a claim to the rewards for these works are represented in country A, they will benefit, as they would from any export mechanism. The act of uploading from country B will remain illegal, but the courts in that country will have to take into consideration the added income possibly collected by those who claim damages.
It will of course be more difficult to control media chronology across multiple countries. However, the ability to control media chronology across borders is already very much undermined not only by unauthorized sharing but also by legal decisions, such as the recognition of the legitimacy of de-zoning for DVDs.7 In reality, when the Creative Contribution is generalized, it will create an equivalent of something that has been the dream of all digital commerce, but which is impossible to implement in a commercial context: a form of differential pricing, which can be termed differential contribution. Because the amount of the Creative Contribution is set while taking into account purchasing power parities (PPS) or another formula for adapting to differences in income, people in various countries will all have access to the commons of sharing while contributing an amount depending on the local wealth. This amount can and probably should be zero in the poorer countries.
More complex problems could arise with downloads from other countries. As with current on-line file sharing, whether legal or not, there will be no way to prevent users from country B from accessing works made available in country A.8 This leads to two questions:
- Does this go against the interests of creators in country A? It depends on what one compares this eventuality to. Certainly not compared to the present situation: a greater degree of international visibility (usually very limited, for the vast majority of productions) can only lead to increased export sales proceeds for works created in country A. Only a small fraction of works, those that are already massively exported, could conceivably lose revenue, though even that remains to be proven. The American example should serve to highlight the immense commercial and cultural influence benefits of exposing other countries to one’s domestic production freely and massively. On the other hand, country A would be justified in bemoaning the absence of a reward mechanism in country B, which deprives creators and other contributors of the returns they would get if such a mechanism was in place.
- Should this type of usage count when allocating the collected license fee amounts? This question cannot be answered conclusively without a more detailed study, but it seems preferable to avoid it. Although it would reflect the full usage patterns, the usage measurement mechanisms we propose9 would be harder to operate reliably in an asymmetric context, and it would depart from the idea of reward and resource pooling organized in one society.
The development of information technology and universal networks creates new spheres of non-market exchanges. This leads to a de facto demonetizing of some activities that were previously the object of monetary transactions, or creates a dual system where the same contents are accessible in both manners, through commercial transactions (generally with some added-value in comparison to non-market access) and by exchange between individual peers.
Scientific publishing is an example of a domain which is in the process of becoming entirely non-market on the access side, even though some publishers still cling to the belief of remaining monopoly dealers. As a result, it has to search for financing mechanisms for those parts of the scientific publication that remain essential to its aims: editorial selection, limited but real production costs (in particular when paper publication is still deemed useful) and post-publication processes such as commenting and revision. As most research work being published is publicly funded, the natural financing solution would be to make these publishing costs part of the research funding. Part of this solution was implemented by the European R&D funding programs, when they decided to allow authors to claim back publication fees. However, the fees are reimbursed whatever their cost, and proprietary journals often charge three times more for their “open access” option (where the author pays to ensure access to their publication is open) than journals with open publishing models. This amounts to a significant public subsidy for proprietary models and is clearly unacceptable. Aside from this debate, there is also a need to provide complementary financing for the publication of results from unfunded or insufficiently funded researchers, and researchers in poorer countries or institutions. This has been a test case for pooling resources for the creation of knowledge commons. In the case of the Public Library of Science,10 it is handled by a combination of support from foundations (in particular the Open Society Foundations) and donations from individuals. This solution will probably not scale up as fast as the needs it covers, as open publishing is increasingly becoming the dominant model.
In the cultural domain, direct public funding is less dominant: though it plays an important role in financing creative activity in many countries, it is indirect for a large part, a typical example being the employment of artists in public educational organizations. In fact, there would probably be strong opposition to a predominant funding from governments towards, say, the expression of individuals in the public sphere, or towards news media, for fear that it would lead to forms of censorship or influence on contents. It is thus natural to seek a direct society-wide pooling of resources, where the role of government is to set up the system and to act as a trustee for its transparency and democratic governance. It is the route we have followed with the Creative Contribution proposal, which, as an economics construct, is best described as a government-initiated society-wide pooling of resources for the conditions of existence of the cultural, expressive and information commons.
It turns out that similar situations of having to finance the conditions of existence of commons (by definition outside the scope of market transactions) are also found well beyond the domain of information and culture. For instance, while local community action can do a lot for managing environmental resources, some need to be maintained on a more global scale. One such example is the preservation of biodiversity among plants and genetic resources of agricultural or medical interest. The industrialization and standardization of agriculture have led to a strong reduction in biodiversity, directly through the reduction in the number of cultivated varieties, and indirectly through the effects on natural biodiversity of agricultural landscaping, weedkillers and pesticides. In reaction, movements for a better preservation of vegetal biodiversity gained momentum. Two – probably complementary – forms of actions for this preservation exist: preservation storage of vegetal varieties in seed banks, funded by governments under the umbrella of international organizations, and the decentralized in situ reproductive management of biodiversity by farmers.11 Government action has, for a long time, de-incentivised the latter by installing costly certification procedures for seeds, whose requirements stood contrary to in-situ biodiversity preservation12 and by requiring certification for the commercialization or even the non-market exchange of seeds. Fortunately, grassroots farmer and amateur gardener efforts countered these trends, and we recently witnessed a return to a larger set of varieties in particular for fruits and vegetables. Pharmaceutical and cosmetic companies as well as agro-food companies themselves are now conscious of the value of global biodiversity preservation, even if they would rather free-ride on it, proprietarizing its most valuable components when industrializing them. There is a clear need to incentivise the in situ preservation and development of biodiversity, which turns out to be an activity to which many can contribute and from which all benefit. Some forms of this activity (biodiversity inventories, home gardening) have their own motivations and do not need further financial incentives. Others, such as the reproduction of seeds through the culture of cereals and other plants are costly and a societal pooling of resources would be useful.
Similar situations also arise in the management of social public goods such as health: everyone can contribute to a better knowledge of health conditions or problems encountered in the use of drugs. Furthermore, large-scale pooling of resources to search for treatments for rare or neglected diseases is already a reality, bringing together individual donations, governments and private~funds.
A specificity of information and knowledge commons is that the financing schemes they require must not create transaction costs within the flows of information and knowledge. In this sense, they are “purer” commons than physical commons or social public goods, where some transaction costs in economic incentives are acceptable, because there exist anyway other transactions to which they can be attached.
Within the landscape we have just sketched out, a new vision of schemes such as the Creative Contribution arises: they can be seen as, and could actually become, a healthy form of specialized currency creation. To see how this works, let us assume that we have an idea of how much new investment occurs every year to produce components of cultural commons in one country. We then divide this amount into equal parts for each individual, and distribute (virtually) the corresponding sum to each person above a certain age, empowering them to allocate it according to their usage (to reward works) and their preferences (to finance production). “Hang on a second,” you might say. “The Creative Contribution will come out of our pockets, not out of some virtually distributed pot of money that we receive.” This is true at the moment, but the alternative model we just outlined might be the one of the future. For it to become acceptable, there is one condition: the resources must be pooled among a community of peers, and the amount that leaks out of the system (e.g. in speculative investments) must remain limited. The annual distribution of individual credits must not lead to monetary inflation. Inflation would rise if too much of this currency ends up distributed to some individuals or organizations, over and above what they need to live on and to put together meaningful creative projects.
- 1. See the Knowledge Ecology International page on the WHO Negotiations on Public Health, Innovation and Intellectual property, http://www.keionline.org/whoiplusa and the funding of AIDS prevention and treatment by the first global tax on airborne passenger transport.
- 2. The number of households is growing, due to the increase in single-person or small households. However this also means that the average resources per household grow much more slowly or even decrease, for instance for single-parent families.
- 3. Thus, a total amount of 5.5–7.7% of the investment in the production of an initial copy of works in all covered media.
- 4. Even in comparison to the best first instance case law in Spain, the scope of legal sharing will be clarified and extended.
- 5. See http://www.vgrass.de/?p=193. Brazil is a specific case because there is a wider success of voluntary sharing in media such as music. See FAQ entry 16. It is incompatible with grassroots intermediaries in chapter 11 for an example.
- 6. We note that this leads to non-negligible economic development in country A. Given the importance of a head-start in Internet-based activities, this is likely to be sustained.
- 7. See for instance New Zealand 1994 copyright act n° 143, art. 226, http://www.legislation.govt.nz/act/public/1994/0143/latest/DLM346899.html, which explicitly excludes geographical zoning from protection against circumvention.
- 8. Except if country B blocks all IP addresses based in country A, an option which defies common sense but will certainly be considered by some interest groups in country B.
- 9. See chapter 10.
- 10. See http://www.plos.org.
- 11. For the former, see the Svalbard Global Seed Vault project where seeds are stored in a vault in the permanently frozen ground of an island of the Spitsbergen archipelago. For the second mode, see [Saunier-Meganck 1995] and the farmer’s seeds networks coordinated by the journal GRAIN.
- 12. Because they required genetic homogeneity of seeds.