Open Source Economy?

I'm reposting this from a Buzz (eww) that I responded to; I'd appreciate feedback and comments.

The article:

Lobby Group Says Open Source Threatens Capitalism

My response:

That article is .. well, a silly summary. It's comparing apples to oranges in a way.

Open/Free Source Software creates a very low entry barrier to a variety of interesting possibilities. It means companies can leverage this to create their own solutions without necessarily having to spend a large amount of money on in-house development or expensively licenced solutions. In a way, Open/Free Source is forcing a large part of the commercial market to compete better.

But the question is how you make that sustainable. Do I think the current method that Open/Free Source is used in companies is sustainable? It can be. It can not be. I've worked on open source projects in both camps.

Everything looks fine right now with a large wad of Open/Free projects because the popular ones have a lot of inertia behind them. But I wonder if there's longer-term flow-on effects in the economy. Plenty of companies which use and abuse open/free software don't contribute very much back to the projects. The cost savings they're passing on sound great in theory, but in practice the "community" is mostly covering this without their investment.

So the interesting question is - at what point (if any) does open/free software use tip the software economy to the point where developing new solutions is just not cost effective enough to compete with the established open source base; and what does that mean for future software development.