Recently a friend in a reading group suggested that we read The Critical Net Critic. While the piece is somewhat long and meandering it is also very good at helping to answer some of those fundamental questions about what is changing in the present economy and how we should understand (Information Technology) IT in relation to the rest of the productive economy.
The work is somewhat meandering and deals with a number of threads that are perhaps not so clearly related (or if they are, the author, Rob Lucas, does not make it abundantly clear to me how they are related) but I’d like to highlight some ideas which I thought were very important.
Deflationary tendencies in some areas have perhaps even exceeded Carr’s expectations, cancelling or blocking the very commodity status of many it goods in the process. Access to major Internet services is often given away for free, in a bid for rapid expansion—to be ‘monetized’ at a future date, once a monopoly has been established—or in exchange for user data which can form the basis of marketing and advertising revenue. In this sense the analogy between it and the electrical grid which Carr sketched in The Big Switch may reach its limits: the revenue streams of the electricity provider are still derived from the sale of electricity, whereas it is only in a minority of cases that large tech companies derive revenue directly from a utility provided—Amazon’s ‘Elastic Cloud Compute’ (ec2) and ‘Simple Storage Service’ (S3), for example. Massive economies of scale and vast markets, combined with network effects, have given it companies an extremely strong tendency to monopoly-status, making the strategic counter-provision of services for free an economically rational practice for competitors.
The number of tech giants which this observation applies to is enormous. Carr, whom Rob Lucas is mostly reviewing, describes internet services as a sort of infrastructural service, which much of the same sorts of economic dynamics which one finds with electricity grids or railroads. Indeed the railroads provide an interesting analogy as the advantage of the railroad only becomes apparent with massive expansion as nobody wants a railroad which goes nowhere. This gave rise to huge expansion and indeed overproduction of railroads leading up to the long depression in the later half of the 1800s.
The peculiar nature of the monetisation of IT however breaks Carr’s analogy. There is still no obvious commodity to sell even after total monopoly has been acquired. Indeed, even as Facebook is monetising dissemination of information by allowing one to pay for increasing views of a given message, we see them essentially fulfilling the prophecy given above. The main form of monetisation is in 1) advertising and 2) the trading of personal information of users as a commodity for corporations. The first is what Marxian economists would call Department II production and the later Department I. In both cases, however, the production is entirely parasitic on another sphere of commodity production. That is, there has to be something to sell people in order to make advertising lucrative. The IT world as a new economy does not seem to offer any hopes for real growth if it’s only parasitic on the commodity production of consumer goods. This should be especially true when production of consumer goods seems so difficult to make serious profits from.
Another friend of mine recently pointed out to me a news piece in which Jaron Lanier, a Microsoft talking head, who discussed the present situation of IT. Jaron essentially mirrored this analysis given by Carr and refined by Lucas. He said we’re quickly approaching an economy which is built on all advertising with no sales. Eventually this castle made of sand is going to be in for trouble.
Even if we imagine an expansion in the commodity production arena, with physical goods which seem much easier to create and distribute with the aim of creating profit through sales, we have the problem of an accelerating trend in automation leading to huge productive capacities all the while relative to a shrinking segment of the total market. The pyramid which is being built on commodity production is going to become a truly inverted pyramid with the bulk of the economy relying on successful capitalist production in tiny segment of the economy. Further, Facebook has yet to make any money.
The sheer absurdity of having a corporation in control of such a critical section of our media and culture which is also unable even to function as a proper capitalist unit but instead is entirely parasitic on other commodity production and future speculation is sometimes overwhelming. But I think the trend within capitalism will necessitate even further moves towards “higher order” production – “higher order” in the sense that it is many times removed from the profit forming commodities. Commodity production simply can not remain a viable basis for most production going into the future and so capitalism will have to contort itself to accommodate this fact.
The great question of our time is how this will all pan out. I suspect however that we will see a number of features. It seems to me a movement towards rent seeking activities will continue. The inability to make profits in commodity production will encourage corporations and the rich to find bottlenecks and take advantage of property rights, limited monopolies etc mediated through the state in order to find income. I suspect further that the bank bailouts that we’ve been seeing will not be the last. The inverted pyramidal nature of the economy and the sheer arbitrariness of the access to accumulation as a section of the social product will mean that the state will be required for periodic recalibration of the financial markets when collapses take place.
There are other trends which might interact quite badly with this need of financial institutions to find knights in shining armour when bubbles burst. The states worldwide seem to be in retreat with global finance growing far beyond the ability of individual states to control them. But so too are currencies likely to become less controllable and global shadow banking to become a greater source of the generation of money than any state could hope to cope with. The current bailouts are essentially predicated on mortgaging the working class through increased taxation and decreased social services in order to fill the gaping whole left by the collapse which began in 2007. But if a further collapse takes place, how many times can they return for a pound of flesh?
There is also the possibility that we use the fact that the commodity production sphere of the economy is always shrinking to our advantage. That we find new and more egalitarian and indeed sensible ways of sharing out the social product and organising labour in the economy. That we avoid the periodic collapses due to speculation and non-productive parasitic activities by instead trying to organise labour such that activities are producing for use-value. However, this is exceedingly unlikely to be a course taken by those who are currently in control of the bulk of decisions regarding the economy and production. Indeed the rich have a huge vested interest in changing things as little as possible, and if they are forced into change, ensuring that they remain at the top irrespective of how irrational that system might be for the rest of us.