Postcapitalism: A Guide to Our Future - Paul Mason (2015)
We are now engaged in a grand scheme to augment, amplify, enhance and extend the relationships and communications between all beings and all objects.
Kevin Kelly, 19971
Chapter 5. The Prophets of Postcapitalism
The jet engine was one of the core technologies of the post-1945 long wave. Invented during the Second World War, the turbofan - to give it its proper name - is a mature technology and should not be producing surprises. Yet it is.
It works by sucking compressed air in at the front and firing a flame through it so that the air expands. This drives a set of fans at the back, which transform the heat into energy. But turbofans are highly inefficient. The first jet engines converted 20 per cent of the heat into thrust. By the year 2001 they had achieved 35 per cent efficiency, with one industry veteran cautiously predicting 55 per cent ‘during the second quarter of the 21st century’.1
Why should we care? Because by 2030, manufacturers expect the number of airliners in operation to double. That means 60,000 new turbofans.2 They will boost the airline industry’s contribution to global warming from 3.5 per cent in 2005 to something like 5 per cent at mid-century.3 So the efficiency of a turbofan is not a geek issue, it’s a global survival issue.
Over the first fifty years of its life, designers managed to improve the turbofan’s efficiency by 0.5 per cent per year. Today, however, they are making innovative leaps: 65 per cent efficiency is within reach and radically new kinds of engine are on the cusp of being deployed. What’s driving the change is a mixture of carbon emission rules and the price of fuel. What’s allowing it to happen is the core technology of the fifth long wave: information.
In the living memory of the people who make them, fan blades were hammered from solid metal. From the 1960s they were cast - that is, moulded from liquid metal. But cast metal contains imperfections, making the blades prone to failure.
Enter one of the most spectacular engineering solutions you have probably never heard of. In 1980, engineers at US aviation manufacturer Pratt & Whitney grew a fan blade out of a single metal crystal formed in a vacuum.4 The result was a metal with an atomic structure that had never before existed. A single crystal blade can tolerate higher speeds. With superalloy metals, the blade can cope with air hotter than its own melting point. So the official roadmap5 for aircraft engines now sees gears being added in 2015, a weird-shaped open fan system by 2020 and, sometime after 2035, a self-cooled engine that should take thermal efficiency close to 100 per cent.
Information technology is driving every aspect of this evolution. Modern jet engines are controlled by a computer that can analyse performance, predict failure and manage maintenance. The most advanced engines beam their data from the plane in flight back to the manufacturer’s HQ in realtime.
Now consider what information technology has done to the design process. There are aircraft still flying that were designed on paper, stress-tested using slide rules, constructed from full-sized templates drawn on silk. New aircraft are designed and tested virtually, on a supercomputer. ‘When we designed the tail fin of the Tornado fighter we did twelve stress cases on it,’ one veteran engineer told me. ‘With its replacement the Typhoon, we did 186 million.’
Computers have revolutionized the building process as well. Engineers now build every element of the aircraft ‘virtually’, using 3D digital mockups on supercomputers. In these models, every brass screw has the physical qualities of a brass screw, every sheet of carbon fibre bends and flexes as if real. Every stage of the manufacturing process is modelled before a single physical object is made.
The global market for turbofans is worth $21 billion a year, so what follows is a $21 billion question: how much of the value of a turbofan lies in the physical components used to make it, how much in the labour, and how much in the information it embodies?
You won’t find an answer in the accounts: in modern accounting standards, intellectual property is valued by guesswork. A study for the SAS Institute in 2013 found that, in an attempt to put a value on data, neither the cost of gathering it, nor its market value, nor the future income it might generate could be adequately calculated. Only through a form of accounting that included non-economic benefits and risks could companies actually explain to their shareholders what their data was really worth.6
The report showed that while ‘intangible assets’ were growing on US and UK company balance sheets at nearly three times the rate of tangible assets, the actual size of the digital sector in the GDP figures had remained static. So something is broken in the logic we use to value the most important thing in the modern economy.
However, by any measure, it is clear that the mix of inputs has altered. An airliner looks like old technology. But from the atomic structure of the fan blades, to the compressed design cycle, to the stream of data it is firing back to its fleet HQ, it is ‘alive’ with information.
This phenomenon, merging the virtual world with the real, can be seen across many sectors: auto engines whose physical performance is dictated by a silicon chip; digital pianos that can pick from thousands of samples of real pianos, depending on how hard you stroke the keys. Today we watch movies that consist of pixels instead of grains of celluloid and contain whole scenes in which nothing real ever stood before a camera. On car production lines each component is barcoded: what the humans do, alongside the whizz and purr of robots, is ordered and checked by a computer algorithm. The relationship between physical work and information has changed.
The great technological advance of the early twenty-first century consists not of new objects but of old ones made intelligent. The knowledge content of products is becoming more valuable than the physical elements used to produce them.
In the 1990s, as the impact of info-tech began to be understood, people from several disciplines had the same thought at once: capitalism is becoming qualitatively different.
Buzz phrases appeared: the knowledge economy, the information society, cognitive capitalism. The assumption was that info-capitalism and the free-market model worked in tandem; one produced and reinforced the other. To some the change looked big enough to conclude it was as important as the move from merchant capitalism to industrial capitalism in the eighteenth century. But just as economists got busy explaining how this ‘third kind of capitalism’ works, they ran into a problem: it doesn’t.
There is a growing body of evidence that information technology, far from creating a new and stable form of capitalism, is dissolving it: corroding market mechanisms, eroding property rights and destroying the old relationship between wages, work and profit. The first people to say this were an awkward squad of philosophers, management gurus and lawyers.
In this chapter, I am going to survey and critique their main ideas. Then I am going to propose something even more radical: that information technology is leading us towards a postcapitalist economy.
DRUCKER: ASKING THE RIGHT QUESTIONS
In 1993, the management guru Peter Drucker wrote: ‘That knowledge has become the resource, rather than a resource, is what makes our society “post-capitalist”. It changes, and fundamentally, the structure of society. It creates new social dynamics. It creates new economic dynamics. It creates new politics.’7 At the age of ninety, the last surviving pupil of Josef Schumpeter had jumped the gun a little, but the insight was correct.
Drucker’s case rests on the assertion that the old factors of production - land, labour and capital - have become secondary to information. In his book Post-Capitalist Society, Drucker argued that certain norms essential to capitalism were being replaced. Writing before anybody had seen an internet browser, Drucker observed the information-rich capitalism of the 1980s and imagined in broad outline the network economy that would emerge in the next twenty years.
And that’s what visionaries are for. While many around him saw ‘info-tech plus neoliberalism’ as capitalism perfected, Drucker allowed himself to imagine info-capitalism as a transition to something else. He noted that, despite the rhetoric about information, there was no theory of how information actually behaves in economic terms. In the absence of such a theory, he posed a series of questions about what a postcapitalist economy might entail.
First, he asked, how do we improve the productivity of knowledge? If previous eras of capitalism had been based on the increased productivity of machines and labour, then the next must be based on the increased productivity of knowledge. Drucker guessed that the solution must be to connect, creatively, the different knowledge disciplines: ‘The capacity to connect may be inborn and part of that mystery we call genius. But to a large extent to connect and thus raise the yield of existing knowledge, whether for an individual, for a team or for an entire organisation, is learnable.’8
The challenge was to train knowledge workers to make the kind of connections that the brain of an Einstein would make spontaneously. Drucker’s solution was straight out of the playbook of management theory: a methodology, a project plan, better training.
Humanity came up with a better solution: the network. This was not the result of any centralized plan or management group, but the spontaneous interaction of people using information pathways and forms of organization that did not exist until twenty-five years ago. Nevertheless, Drucker’s focus on ‘connection’ and the modular use of information as the key to productivity was inspired.
His second question was equally profound: who is the social archetype of postcapitalism? If feudal society was epitomized by the medieval knight, and capitalism by the bourgeoisie, then who is in the historical scheme of things the bearer of postcapitalist social relations? It’s the same question that preoccupied Karl Marx, but Drucker’s answer would dismay most traditional leftists, who think it’s the proletariat. It would be, Drucker proposed, ‘the universal educated person’.
Drucker imagined this new kind of person emerging as a fusion of the managerial and intellectual classes of Western society, combining the manager’s ability to apply knowledge with the intellectual’s ability to deal with pure concepts. Such an individual would be the opposite of the polymath - those rare people who are simultaneously expert in Mandarin Chinese and nuclear physics. This new type of person would, on the contrary, be someone able to pick up and run with the products of expert research in narrow fields and apply them generally: applying chaos theory to economics, genetics to archaeology, or data-mining to social history.
Drucker made a plea for the emergence of such people as the ‘leadership group’ of the new society: ‘a unifying force … which can focus particular, separate traditions onto a common and shared commitment to values, onto a common concept of excellence, and onto mutual respect’.9
Since he wrote that, such a group has emerged: the T-shirted techno-bourgeoisie of the early twenty-first century, their information stored in the Cloud and their ultra-liberal attitudes to sexuality, ecology and philanthropy seen as the new normal. If all we are talking about in the next fifty years is a fifth long wave of capitalism based on information, then we already have the new men and new women that the theory of long waves would lead us to expect. The problem is, they show no interest at all in overthrowing the old capitalism, and scant interest in politics at all.
However, if we are talking about postcapitalism, then this universal educated person would have to exist in large numbers and have some interest opposed to that of the big hierarchical firms that dominated the twentieth century. They would have to fight, as the bourgeoisie did, for the new economic model and to embody its values in their behaviour. They would have to be, as in the materialist approach to history, the bearer of the new social relations inside the old.
Now look around you.
On the London Underground, I’m in a carriage where everybody under the age of thirty-five has white wires connecting their ears to a device on which they’re listening to something they’ve downloaded via a network. Even those obviously going to business or management jobs have a studiedly informal air and mode of dress. Some - even here where there is no wifi - are working through emails on their smartphones. Or maybe they’re playing games, for the physical actions and intense levels of concentration required are the same. They are glued to digital information and the first thing they’ll do on emerging at street level is to plug back into the global network via 3G.
Everybody else in the carriage fits into a demographic from the twentieth century: the elderly middle-class couple in their hats and tweeds; the stubbly manual worker reading his newspaper; the guy in the suit typing on his laptop, too busy for headphones, but who’s taken the time to polish his shoes (i.e. me).
The first group consists of what sociologists call ‘networked individuals’, adept at drawing down knowledge from a relatively open and global system. They behave in a networked way - from work to consumption to relationships and culture. Thirty years on from Stewart Brand’s famous claim that ‘information wants to be free’, they instinctively believe that under normal circumstances it should be free. They will pay for their drugs at a dance club but still find it an imposition to pay for downloaded music.
This group is already so large and well defined that in some cities - London, Tokyo, Sydney - it is the twentieth-century types that are the minority: still consulting analogue maps instead of GPS, still confused by the coffee options available at Starbucks, appalled and fascinated by the mercurial lifestyles that the other group sees as normal.
The networked individuals of the early twenty-first century - the ‘white wire people’ - conform exactly to the kind of person Drucker expected to emerge: the universal educated person. They’re no longer confined to a niche techno demographic. Any barista, or admin worker, or legal temp can become, if they want to, a universal educated person - as long as they have a basic education and a smartphone. In fact, with the rise of the mobile internet, the most recent studies show that even Chinese factory workers have become - in the face of stringent work discipline and long hours - avidly networked people in their non-work time.10
Once you understand how information behaves as an economic resource, and who the new social archetype is, you are part of the way to understanding how the transition to postcapitalism could occur. But this still leaves the question: why should it occur? Drucker’s answers are speculative but they provide the first glimpse of the framework on which a rigorous theory of postcapitalism would have to be based.
Drucker divides the history of industrial capitalism into four phases: a mechanical revolution lasting most of the nineteenth century; a productivity revolution with the advent of scientific management in the 1890s; a management revolution after 1945, driven by the application of knowledge to business processes; and finally an information revolution, based on ‘the application of knowledge to knowledge’.
Drucker, a pupil of Schumpeter, was consciously using the Kondratieff long cycles here (although merging the first two together), but seen from the viewpoint of the individual firm. This leads to Drucker’s most profound observation: that none of these turning points can be grasped without understanding the economics of work. From Virgil to Marx, he argued, nobody had bothered to study what the farmer or factory worker did on a day-to-day basis. Only in the late nineteenth century did capitalists notice what their workers were actually doing, and try to change it.
‘There is still no history of work,’ Drucker complained, and twenty-five years later the history of work remains under-explored. Labour market economics continues focused on unemployment and pay rates, and occupies a lowly status in academia. But once we understand what information is doing to work, to the boundaries between work and free time, and to wages, the scale of the change we’re living through will be apparent.
In the end, Drucker left us with a series of questions. They were the right questions, but twenty-five years on we still have no synthetic theory of info-capitalism, let alone postcapitalism. However, mainstream economics has - accidentally - come close to discovering one.
INFO-GOODS CHANGE EVERYTHING
In 1990 the American economist Paul Romer blew apart one of the key assumptions of modern economics and in the process thrust the question of info-capitalism into the mainstream.
In their search for a model that could predict a country’s rate of growth, economists had listed various factors: savings, productivity, population growth. They knew that technological change influenced all these factors but they assumed, for the purposes of the model, that it was ‘exogenous’ - external to their model and therefore irrelevant to the equation they were trying to write. Then, in a paper titled Endogenous Technological Change, Romer reset the whole argument.11 He demonstrated that, since innovation is driven by market forces, it cannot be treated as accidental or external to economic growth but must be an intrinsic (‘endogenous’) part of it. Innovation itself has to be situated within growth theory: its impact is predictable, not random.
But as well as completing a neat piece of algebra about capitalism in general, Romer had come up with a proposition specific to info-capitalism, with revolutionary implications. He defined technological change in a deliberately facile way, as an ‘improvement in the instructions for mixing together raw materials’. That is, he separated out things and ideas - for that is what ‘instructions’ are. Information, for Romer, is like a blueprint or recipe for making something either in the physical world or in the digital world. This led to what he called a new fundamental premise: ‘that instructions for working with raw materials are inherently different from other economic goods’.12
An information product is different from every physical commodity so far produced. And an economy primarily based on information products will behave differently from one based on making things and providing services. Romer spelled out why: ‘Once the cost of creating a new set of instructions has been incurred, the instructions can be used over and over again at no additional cost. Developing new and better instructions is equivalent to incurring a fixed cost.’13
In one paragraph Romer had summed up the revolutionary potential of the tiny gesture I just made to extract that quote out of a PDF and put it into this book: copy and paste. Once you can copy/paste a paragraph, you can do it with a music track, a movie, the design of a turbofan engine and the digital mockup of the factory that will make it.
Once you can copy and paste something, it can be reproduced for free. It has, in economics-speak, a ‘zero marginal cost’.
Info-capitalists have a solution to this: make it legally impossible to copy certain kinds of information. For example, while I’m allowed to quote Romer for free in this book, downloading the PDF of his famous 1990 paper cost me $16.80 on the JSTOR academic website. If I tried to copy and paste the design of a turbofan engine I could end up in jail.
But intellectual property rights are notoriously messy: I can legally copy a CD that I own into my iTunes folder, but it’s illegal to rip a DVD. The laws of what you can and can’t copy are unclear. They are enforced socially as much as by law, and like the patents of the pre-digital era, they decay over time.
If you are trying to ‘own’ a piece of information - whether you’re a rock band or a turbofan manufacturer - your problem lies in the fact that it does not degrade with use, and that one person consuming it does not prevent another person consuming it. Economists call this ‘non-rivalry’. A simpler word for it would be ‘shareable’.
With purely physical goods, consumption by one person generally blocks their use by another: it’s my cigarette not yours, my hire car, my cappuccino, my half-hour of psychotherapy. Not yours. But with an mp3 track, the information is the commodity. It can technically exist in many physical forms, and at a scale so small that it allows me to carry around every piece of music I have ever bought in my life on a 2-inch flash drive, a.k.a. an iPod.
Once a commodity is ‘non-rival’, the only way you can defend your ownership of it is by what economists call ‘exclusion’. So you can either put a bug into the software that makes it impossible to copy - as with a DVD - or you can make copying illegal. But the fact remains, whatever you do to protect the information - bug it, encrypt it, arrest the pirate-DVD seller in the car park - the information itself remains copiable and shareable, and at negligible cost.
This has major implications for the way the market operates.
Mainstream economists assume that markets promote perfect competition and that imperfections - such as monopolies, patents, trade unions, price-fixing cartels - are always temporary. They also assume that people in the marketplace have perfect information. Romer showed that, once the economy is composed of shareable information goods, imperfect competition becomes the norm.
The equilibrium state of an info-tech economy is one where monopolies dominate and people have unequal access to the information they need to make rational buying decisions. Info-tech, in short, destroys the normal price mechanism, whereby competition drives prices down towards the cost of production. A track on iTunes costs next to zero to store on Apple’s server, and next to zero to transmit to my computer. Whatever it cost the record company to produce (in terms of artist fees and marketing costs) it costs me 99p simply because it’s unlawful to copy it for free.
The interplay between supply and demand does not come into the price of an iTunes track: the supply of the Beatles ‘Love Me Do’ on iTunes is infinite. And, unlike with that of physical records, the price doesn’t change as demand fluctuates either. Apple’s absolute legal right to charge 99p is what sets the price.
To run a multibillion dollar business based on information, Apple does not only rely on copyright law, it has built an entire walled garden of expensive technologies that work together - the Mac, iTunes, the iPod, the iCloud, the iPhone and the iPad - to make it easier for us to obey the law than break it. As a result iTunes dominates global digital music sales, with around 75 per cent of the market.14
With info-capitalism, a monopoly is not just some clever tactic to maximize profit. It is the only way an industry can run. The small number of companies that dominate each sector is striking. In traditional sectors you have usually four to six big players in every market: the big four accountancy firms; four or five big supermarket groups; four big turbofan makers. But the signature brands of info-tech need total dominance: Google needs to be the only search company; Facebook has to be the only place you construct your online identity; Twitter where you post your thoughts; iTunes the go-to online music store. In two key markets - online search and mobile operating systems - there is a two-firm death match, with Google currently winning both of them.
Until we had shareable information goods, the basic law of economics was that everything is scarce. Supply and demand assumes scarcity. Now certain goods are not scarce, they are abundant - so supply and demand become irrelevant. The supply of an iTunes track is ultimately one file on a server in Cupertino, technically shareable by everyone. Only intellectual property law and a small piece of code in the iTunes track prevent everybody on earth from owning every piece of music ever made. Apple’s mission statement, properly expressed, is to prevent the abundance of music.
So Romer’s new theory was simultaneously bad news for mainstream economics and reassuring news for the emerging giants of info-capitalism. It tied together in a single explanation many of the anomalies conventional economics had struggled to explain. And it gave a tacit justification for the market position of tech monopolies. The journalist David Warsh summed up its impact:
The fundamental categories of economic analysis ceased to be, as they had been for two hundred years, land, labour and capital. This most elementary classification was supplanted by people, ideas and things … the familiar principle of scarcity had been augmented by the important principle of abundance.15
On the publication of Romer’s paper in 1990, then, did the world of economics start singing ‘Hallelujah’? It did not. Romer was greeted with hostility and indifference. Critics of mainstream economics, Joseph Stiglitz at their head, had been saying for years that its general assumptions - of perfect information and efficient markets - were wrong. Now Romer, working inside the mainstream and using its methods, had knocked down the mainstream’s defence against these critics. For Romer’s research had shown that, once you move to an information economy, the market mechanism for setting prices will drive the marginal cost of certain goods, over time, towards zero - eroding profits in the process.
In short, information technology is corroding the normal operation of the price mechanism. This has revolutionary implications for everything, as the rest of this book explores.
If they’d understood capitalism as a finite system, Romer and his supporters might have explored the massive implications of this extraordinary statement - but they did not. They assumed the economy was, as in the textbooks, composed of price makers and price takers: rational individuals trying to pursue their self-interest through the market.
Those who did see the bigger picture were not to be found in the world of professional economics but among the tech visionaries. By the late 1990s they had begun to understand what Romer did not: that info-tech makes possible a non-market economy and creates a demographic prepared to pursue their self-interest through non-market actions.
THE RISE OF OPEN SOURCE
There is a chance you are reading this on a tablet: a Kindle, Nexus or iPad. They rarely crash and you would not even dream of programming them but they are computers nonetheless. The chip in an iPad Air has one billion transistors etched into a single piece of silicon - that’s equivalent to the processing power of 5,000 desktop computers thirty years ago.16
The base-layer of software needed for an iPad to work is the operating system: iOS. Because computing is today so easy, we barely comprehend the challenge that operating systems presented to the pioneers in the 1970s. In the early years of software, a struggle began over operating systems, which spiralled into a struggle over who should, or can, own information.
For the first thirty years, computers were big and rare, and computing took place in businesses and universities. When desktop PCs were invented in the mid-1970s, they were little more than an assembly of electronic boards and a screen. And corporations did not build them, hobbyists did.
The Altair 8800 was a breakthrough machine, sold via magazine ads to a subculture of geeky people who wanted to learn programming. You needed a programming language to make the computer do what you wanted, and two Seattle-based guys came up with one: Altair BASIC, distributed on a reel of paper with holes punched through it, price $200. But soon they noticed that sales of the language were lagging behind sales of the computer. Users were copying and distributing the punched paper reels for free. In an angry ‘Open Letter’ the software’s author urged them to kick pirates out of computer club meetings and to pay up: ‘Most of you steal your software. [You believe] hardware must be paid for but software is something to share. Who cares if the people who worked on it get paid.’17
The author was Bill Gates, and he soon came up with a solution: to own the operating system as well as the programming language. Gates designed Windows, which became the standard operating system on PCs. Soon Windows built a near monopoly of the corporate desktop and Gates became a billionaire. His ‘Open Letter’ would go down as the second most important document in the history of digital economics.
Now here is an excerpt from what I think is the most important document:
If anything deserves a reward, it is social contribution. Creativity can be a social contribution, but only in so far as society is free to use the results. Extracting money from users of a program by restricting their use of it is destructive because the restrictions reduce the amount and the ways that the program can be used. This reduces the amount of wealth that humanity derives from the program.18
That was Richard Stallman in The GNU Manifesto, which launched the free software movement in 1985. Stallman had been irked not just by Microsoft but by the attempt by makers of much more powerful business computers to ‘own’ a rival operating system called Unix. His plan was to write a free version of Unix, called GNU, distribute it for free, and invite enthusiasts to collaborate on improving it - with the proviso that nobody could own or make money out of it. These principles have become known as ‘Open Source’.
By 1991 GNU had incorporated Linux - a version of Unix for PCs developed by hundreds of programmers working collaboratively, for free, and licensed under the original legal contract that Stallman had designed.
Fast-forward to 2014 and maybe 10 per cent of all corporate computers are running Linux. The ten fastest supercomputers in the world all run Linux. More importantly, the standard tools for running a website - from the operating system to the web server to the database and the programming language - are Open Source.
Firefox, an Open Source browser, has currently around 24 per cent of the global browser market.19 A staggering 70 per cent of all smartphones run on Android, which is also technically Open Source.20 This is in part due to an overt strategy by Samsung and Google to use Open Source software to undermine Apple’s monopoly and maintain their own market position, but it does not alter the fact that the dominant smartphone on the planet runs on software nobody can own.
The success of Open Source software is startling. It demonstrates that new forms of property ownership and management become not just possible but imperative in an information-rich economy. It shows there are things about information goods that even monopolies can’t monopolize.
According to standard economics a person like Richard Stallman should not exist: he is not following his self-interest but suppressing it in favour of a collective interest that is not just economic but moral.
According to market theory, it is those motivated by the pursuit of private property who should be the more efficient innovators. According to mainstream economics, large corporations such as Google should be doing what Bill Gates did: making a land-grab for everything and trying to destroy Open Source software. Now Google is a hard-assed capitalist firm, but in pursuit of its own interests it is forced to fight for some standards to be open and some software to be free. Google is not postcapitalist - but as long as it keeps Android Open Source it is being forced to act in a way that prefigures non-capitalist forms of ownership and exchange, even if, as the EU is investigating, they use this position to carve out dominance.
The birth of free software and the pursuit of collaborative software projects in the 1980s were just the opening shots of a war that is still raging, and whose battlefront is fluid. The Open Source movement also gave impetus to a movement for freedom of information, to Wikipedia, Wikileaks and a branch of the legal profession dedicated to writing contracts that could defend openness and shareability.
It was within this milieu, in the late 1990s, that the first systematic thinking took place about a question obvious to Drucker, but not to Romer: could an economy based on information networks create a new mode of productionbeyond capitalism?
SKATING TO THE EDGE OF CHAOS
There is a sound, now forgotten, that will remain hardwired into the memory of the generation born before 1980: a high-pitched whine, which fluctuates and then dissolves into a series of crackles, punctuated by two buzzy bass notes. It’s the sound of a dial-up modem logging on.
When I first heard it sometime in the 1980s, I was trying to get on to Compuserve. Compuserve was a private network, offering email, file transfers and a massive community of bulletin boards. It was a world of words only - in black and white. Even then it was brimming with anger, subversion and pornography.
In 1994 I left Compuserve and joined Easynet, one of the first internet service providers: same technology, different ballgame. Now, the manual proclaimed, I had access to ‘the whole road system, not just one service station’. It gave you access to the World Wide Web, a system for finding everything available on the linked-up computers of the world.
There was not much there. My workplace computer was linked only to the other computers in the building of the publishing company Reed Elsevier. When we tried to write our first web page the IT department refused to allow us to store it on ‘their’ server, which was for doing the payroll. There was no email on my workplace Mac and no web access. Computers were for processing data and were linked together for specific tasks only.
What a visionary, then, was the US journalist Kevin Kelly, to write this in 1997:
The grand irony of our times is that the era of computers is over. All the major consequences of stand-alone computers have already taken place. Computers have speeded up our lives a bit, and that’s it. In contrast, all the most promising technologies making their debut now are chiefly due to communication between computers that is, to connections rather than to computations.21
Kelly’s article in Wired triggered a moment of recognition for my generation. Everything up to now - the 5-inch floppy discs for the university mainframe, the green screens of the early Amstrads, the crackle and buzz of the modem - had been the prologue. Suddenly a network economy was taking shape. Kelly wrote: ‘I prefer the term network economy, because information isn’t enough to explain the discontinuities we see. We have been awash in a steadily increasing tide of information for the past century … but only recently has a total reconfiguration of information itself shifted the whole economy.’22
Kelly himself was no advocate of postcapitalism. Indeed, his book New Rules for the New Economy was a breathless survival manual for old businesses as they tried to engage with the interconnected world. But his contribution was important. It was the moment we began to understand that the ‘intelligent machine’ was not the computer but the network, and that the network would speed up the rate of change and make it unpredictable. In a statement that defines our era, Kelly said: ‘We are now engaged in a grand scheme to augment, amplify, enhance, and extend the relationships and communications between all beings and all objects.’23
The milestones between then and now are the launch of eBay (1997), which led to the dotcom boom. The first wifi-enabled laptop (a Mac) in 1999. The rollout of the broadband internet, which was always on and ten times faster than dial-up (2000). The expansion of 3G telecoms after 2001, which made the mobile internet possible. The launch of Wikipedia in 2001. The sudden arrival of cheap, standardized digital tools, which was dubbed Web 2.0, in 2004.
At this point, programs and data began to sit within the network rather than on individual computers; the archetypal activities became search, self-publishing and interaction, including through multibillion dollar online games.
Now came the launch of social networks with MySpace (2003), Facebook (2004) and Twitter (2006); and the launch of the iPhone (2007), the first true smartphone. The iPad and the Kindle in the same year sparked the rapid rise of e-book publishing, whose value has grown from under $1.5 billion in 2009 to $15 billion worldwide (2015). Desktop PC sales were overtaken by notebook sales in 2008. Samsung’s first Android phone was launched in 2009.24
Meanwhile, in high-end computing, the first computer to achieve one quadrillion calculations per second was an IBM, in 2008. By 2014, Tianhe-2 in China, running Linux, could do 33 quadrillion. In terms of data storage, 2002 was the year in which the volume of digital information in the world overtook the amount of analog information. Between 2006 and 2012 humanity’s annual information output grew tenfold.25
It’s hard to tell exactly where you are in a tech revolution but my hunch is the simultaneous arrival of tablets, streaming video and music and the takeoff of social media between 2009 and 2014 will be seen as the key moment of synergy. The rollout of billions of machine-to-machine connections, known as the ‘Internet of Things’, in the next ten years will then populate the global information network with more intelligent devices than there are people on earth.
To live through all this was exhilarating enough. Even more exhilarating now is to watch a kid get their first smartphone and find it all - Bluetooth, GPS, 3G, wifi, streaming video, hi-res photography and heart-rate monitor - as if it had always been there.
The network economy emerged, and has become social. In 1997, just 2 per cent of the world’s population had internet access. Now it is 38 per cent, and in the developed world 75 per cent. Today there are ninety-six mobile-phone subscriptions for every 100 people in the world, and 30 per cent of the earth’s inhabitants have an active 3G (or better) mobile. The number of telephone landlines per person is actually falling.26
In the space of a decade, the network has pervaded our lives. The average teenager with a smart device is living a more psychologically connected life than the geekiest computer nerd fifteen years ago.
When Romer and Drucker made their contributions in the early 1990s, the issue was still the impact of intelligent machines. Today we understand implicitly that the network is the machine. And as software and data have moved into the network, the debate about the economic impact of information technology has also begun to focus on the network.
In 1997, Kelly proclaimed the existence of an emerging new economic order with three main characteristics: ‘It is global. It favors intangible things - ideas, information, and relationships. And it is intensely interlinked. These three attributes produce a new type of marketplace and society.’27
Kelly accepted as commonplace what Romer had seen as new seven years before: the tendency of information technology to make data and physical products cheaper, so that the marginal cost of producing them declines towards zero. But, he assured his readers, there was a counterweight to endless supply and falling prices, namely endless demand: ‘Technology and knowledge are driving up demand faster than it is driving down prices … The extent of human needs and desires is limited only by human imagination, which means, in practical terms, there is no limit.’28
The solution, Kelly said, was to invent new goods and services faster than they could slide down the curve to worthlessness. Instead of trying to defend prices, you had to assume they would collapse over time, but build a business in the gap between one and zero. You had, he warned, to ‘skate to the edge of chaos’, to exploit the free knowledge customers donate when they interact with websites. By the late 1990s, the received wisdom among those who understood the problem was that capitalism would survive because innovation would counteract technology’s downward effect on pricing. But nowhere did Kelly explore what might happen if this failed.
Then came the dotcom crash. The spectacular fall of Nasdaq, beginning in April 2000, changed the perception of the generation that had struggled with dial-up modems and got rich. Following the disaster John Perry Barlow, a cyber-rights campaigner who’d lost 95 per cent of his money, drew the harsh conclusion: ‘The whole dot-com thing was an effort to use 19th and 20th century concepts of economy in an environment where they didn’t exist, and the internet essentially shrugged them off. This was an assault by an alien force that was repelled by the natural forces of the internet.’ And he pointed out where the debate might go next. ‘In the long term it’s going to be very good for the dot-communists.’29
A NEW MODE OF PRODUCTION?
In 2006 Yochai Benkler, then a law professor at Yale, concluded that the network economy was ‘a new mode of production emerging in the middle of the most advanced economies in the world’.30 Benkler had been trying to define a legal framework for Open Source publishing, known as the ‘Creative Commons’. In The Wealth of Networks, he described the economic forces that were undermining intellectual property, causing common ownership models and unmanaged production to spread.
First, he said, the rise of cheap physical computing power and communications networks had put the means of production of intellectual goods into the hands of many people. People can blog, they can make movies and distribute them, they can self-publish e-books - in some cases creating a million-strong audience before the traditional publishers even know the authors exist: ‘The result is that a good deal more that human beings value can now be done by individuals who interact with each other socially, as human beings and as social beings, rather than as market actors through the price system.’31
This, he argued, leads to the rise of non-market mechanisms: decentralized action by individuals, working through cooperative, voluntary forms of organization. It is producing new forms of ‘peer-to-peer’ economics, in which money is either absent or not the main measure of value.
Wikipedia is the best example. Founded in 2001, the collaboratively written encyclopaedia has, at the time of writing, 26 million pages and 24 million people registered to contribute and edit - with about 12,000 people regularly editing and 140,000 people vaguely taking part.32
Wikipedia has 208 employees.33 The thousands who edit it do so for free. A user survey found 71 per cent of them do it because they like the idea of working for nothing, and 63 per cent because they believe information should be free.34 With 8.5 billion page views per month the Wikipedia site is the sixth most popular in the world - just above Amazon, the most successful e-commerce company on earth.35 By one estimate, if it were run as a commercial site, Wikipedia’s revenue could be $2.8 billion a year.36
Yet Wikipedia makes no profit. And in doing so it makes it almost impossible for anybody else to make a profit in the same space. Furthermore, it is one of the most valuable learning resources ever invented and has (so far) defied all attempts to censor, subvert, troll or sabotage it, because the power of tens of millions of human eyeballs is greater than any government, stalker, interest group or saboteur can match.
The principle Wikipedia works on is the same the early Open Source programmers used on GNU and Linux, but applied to a mass consumer product. When we visit Amazon, and buy a camera or a book, our recorded choices help other users choose. In economics this is called a positive ‘externality’ - an unintended economic benefit.
With Amazon, it is the corporation that reaps most of the benefit, in the form of increased buying and selling power. With Wikipedia, there is only a human benefit: no kid ever again has to sit in a small town library, as I did, lost in a maze of mediocre and random knowledge, itself trapped for ever on sheets of paper that can never be updated or corrected without printing a completely new book.
Benkler draws out the economic lesson of a phenomenon like Wikipedia: that the network makes it possible to organize production in a decentralized and collaborative way, utilizing neither the market nor management hierarchy.
Economists like to demonstrate the archaic nature of command planning with mind-games like ‘imagine the Soviet Union tried to create Starbucks’. Now, here’s a more intriguing game: imagine if Amazon, Toyota or Boeing tried to create Wikipedia.
Without collaborative production and Open Source there would be only two ways to do so: by using either the market or the command structures of a corporation. Since there are maybe 12,000 active writers and editors of Wikipedia, you could hire that number, and maybe get away with some of them being outworkers in the sweatshop economies of the world, controlled by a better-paid managerial layer in the American sun-belt. Then you could incentivize them to write the best possible encyclopaedia on the web. You would give them targets, bonuses, promote teamwork through quality circles, etc.
But you could not produce anything as dynamic as Wikipedia. Getting a 12,000-strong corporation to produce 26 million pages of Wikipedia would be as pointless as the Soviet Union trying to create its own version of Starbucks. A 208-strong foundation would always do it better. And even if you could produce something just as good as Wikipedia, you would face a massive problem: Wikipedia itself, your major competitor, doing it all for free.
So maybe, instead of using a corporation to command Wikipedia into existence, you could try using market forces to trade it into existence. After all, doesn’t business school teach us the market is the most efficient system?
People would maybe pay small amounts of money for small chunks of knowledge, while being comfortable with the idea that the information rests in the public domain as free. Maybe the academics, amateurs and enthusiasts who write the pages would be glad to receive a small amount of money for each contribution.
This, in fact, is more like what actually happens - but it is not money the participants are exchanging. They are in effect exchanging gifts. And as anthropologists have long realized, the gift is only the physical symbol of something more intangible: call it goodwill, or happiness.
Wikipedia, like Linux, is radical in two ways. First, in the communal nature of what is produced: it is free to use but impossible to grab, own and exploit. Second, in the collaborative nature of the production process: nobody in a central office decides what the pages should be about; Wikipedia’s employees simply regulate the standards of creation and editing, and defend the whole platform against erosion by property and management hierarchies.
Benkler defines this as ‘commons-based peer production’ - and the concept challenges the certainties of mainstream economics some more. Nothing has changed about humanity. It’s just that our human desire to make friends, build relationships based on mutual trust and obligation, fulfilling emotional and psychological needs, has spilled over into economic life.
At the precise moment in history when it became possible to produce stuff without the market or the firm, significant numbers of people started doing so.
In the first place, the cheapening of computer power and network access puts the ability to produce information goods into the hands of many people, not the few. Next, you need what Benkler calls ‘planned modularity’: that is, a task is broken up into chunks small enough for people to complete on their own and then submit the outcome to a wider network. A Wikipedia page is a perfect example: adding a snippet of info or deleting an erroneous one is a modular task that can be done from the top deck of a bus on a smartphone, or from a PC in the web café of a Manila slum.
For Benkler, then, cheap technology and modular forms of production have driven us towards non-market, collaborative work. It is not a fad, he argues, but ‘a sustainable pattern of human production’. Though he uses the words ‘new mode of production’ Benkler does not say that this is something different from capitalism. He argues instead that it will lead to a radically different and more sustainable form of capitalism. He predicts a redistribution of wealth and power from dominant firms and elites to a wider mixture of individuals, peer networks and businesses that can adapt to the new situation.
The problem is, Benkler is describing the new forms of info-capitalism without describing their dynamics, which are necessarily contradictory.
Info-tech drives labour out of the production process, reduces the market price of commodities, destroys some profit models and produces a generation of consumers psychologically attuned to free stuff. But in the first full decade of its existence it has helped fuel a global crisis during which the poorest citizens of developed countries were reduced to scrambling through dumpsters, even as they eked out the last few cents of credit on their mobile phones.
Info-capitalism is real, but if we analyse the whole thing - the collision of neoliberal economics with network technology - we must conclude it is in crisis.
THE ECONOMICS OF FREE STUFF
In the late nineteenth century economists began to notice that not all the effects of capitalism could be understood through the act of buying and selling. Given most factories were by then surrounded by slag heaps, slums and stinking rivers, it was hard not to notice that capitalism has effects external to what is done in the marketplace. They called these ‘externalities’, and a debate began over how to account for them.
At first they focused on ‘bad’ externalities: if I buy coal-fired power from an energy supplier and it pollutes the air, that pollution is an externality. The solution to bad externalities is easy: you work out a way to allocate the cost to the buyer and seller. So with the dirty power station, for example, you impose a pollution tax.
However, there are also ‘good’ externalities - such as the lower hiring costs that arise when similar businesses cluster in the same neighbourhood. There is no need for a solution to good externalities, but they often show up as reduction in cost and activity.
But in an information economy, the externalities become the major issue. In the old world, economists categorized information as a ‘public good’: the costs of science, for example, were borne by society - so everybody benefited. But in the 1960s economists began to understand information as a commodity. In 1962, Kenneth Arrow, the guru of mainstream economics, said that in a free-market economy, the purpose of inventing things is to create intellectual property rights. ‘Precisely to the extent that it is successful there is an under-utilisation of information.’37
If you think about it this way, the purpose of patenting the advanced HIV drug Darunavir can only be to keep its price at $1095 a year, which is, as Médecins sans Frontières put it, ‘prohibitively expensive’. The information exists to place millions of people on this advanced HIV treatment, but thanks to the patent it is underutilized. Conversely, because India famously prevented pharmaceutical companies slapping twenty-year patents on other advanced HIV treatments, their cost has slumped since the year 2000, and the information on how to make them has been utilized.
In an economy where information is everywhere, so are externalities. If we survey the giants of info-capitalism, almost the whole of their business model is about capturing good external side-effects.
Amazon works, for example, by offering to sell you things based on your previous choices - information you provided for free and could not choose to withhold. The whole business model is based on the one-sided capture of externalities by Amazon. It works for supermarkets too: by aggregating their customer data and preventing its utilization by everybody else, big supermarkets such as Walmart or Tesco gain a huge commercial advantage.
Now imagine Walmart or Tesco were prepared to publish their customer data (suitably anonymized) for free. Society would benefit: everybody from farmers to epidemiologists could mine the data, and make more accurate decisions; individual customers could see at a glance whether they’d been making rational or irrational shopping decisions. But the supermarkets would lose market advantage; their ability to manipulate consumer behaviour using price points, sell-by dates and two-for-one deals would be reduced. The whole point of their vast e-commerce systems is that customer data is, as Arrow would put it, ‘underutilized’.
If we restate Arrow’s observation in a different way, its revolutionary implications are obvious: if a free-market economy with intellectual property leads to the underutilization of information, then an economy based on the full utilization of information cannot have a free market or absolute intellectual property rights. And this is just another way of saying what Benkler and Drucker understood: that info-tech undermines something fundamental about the way capitalism works.
But what does it create in its place? For the term ‘postcapitalism’ to be meaningful, you would have to describe exactly how network technology triggers a transition to something else, and what the dynamics of a postcapitalist world would look like.
None of the writers I’ve surveyed above achieves that - and for a reason: none of them is working with a fully rounded theory of capitalism itself. But what if somebody did anticipate the information-driven fall of capitalism? What if someone had clearly predicted that the ability to create prices would dissolve if information became collectively distributed and embodied in machines? We would probably be hailing that person’s work as visionary. Actually there is such a person. His name is Karl Marx.
THE GENERAL INTELLECT
The scene is Kentish Town, London, February 1858, sometime around 4 a.m. Marx is still a wanted man in Germany and has spent ten years becoming increasingly depressed about the prospects for revolution. But now Wall Street has crashed, there are bank failures across Europe and he is scrambling to finish a long-promised book on economics. ‘I’m working like a madman right through the night’ he confides, ‘so that I’ll at least have the outlines clear before the deluge.’38
Marx’s resources are limited. He has a pass to the British Library, giving him access to the latest data. By day he writes articles in English for the New York Tribune. By night he is filling eight notebooks with near-illegible scrawl in German: free-flowing observations, thought experiments and notes-to-self.
The notebooks, known collectively as the Grundrisse (which translates as ‘The Outline’), will be saved, but not read, by Engels. They will be stored in the HQ of the German social-democratic party until the Soviet Union buys them in the 1920s. They will not be read in Western Europe until the late 1960s, and in English not until 1973. When they finally get to see what Marx is writing on this cold night in 1858, scholars will admit that it ‘challenges every serious interpretation of Marx yet conceived’.39 It is called the Fragment on Machines.
The Fragment on Machines starts with the observation that as large-scale industry develops it changes the relationship between worker and machine. In early industry, there was a man, a tool worked by hand and a product. Now instead of a tool, the worker: ‘inserts the process of nature, transformed into an industrial process, as a means between himself and inorganic nature, mastering it. He steps to the side of the production process instead of being its chief actor.’40
Marx had imagined an economy in which the main role of machines was to produce, and the main role of people was to supervise them. He was clear that in such an economy the main productive force would be information. The productive power of machines like the ‘self-acting’ cotton-spinning machine, the telegraph and the steam locomotive was ‘out of all proportion to the direct labour time spent on their production, but depends rather on the general state of science and on the progress of technology, or the application of this science to production’.41
Organization and knowledge, in other words, made a bigger contribution to productive power than the labour of making and running the machines.
Given what Marxism was to become - a theory of exploitation based on the theft of labour time - this is a revolutionary statement. It suggests that - once knowledge becomes a productive force in its own right, vastly outweighing the actual labour spent creating a machine - the big question becomes not wages versus profits but who controls the ‘power of knowledge’.
Now Marx drops a bombshell. In an economy where machines do most of the work, where human labour is really about supervising, mending and designing the machines, the nature of the knowledge locked inside the machines must, he writes, be ‘social’.
Let’s use a modern example. If, today, a software developer uses a programming language to write code linking a web page to a database, then she is clearly working with social knowledge. I’m not talking specifically here about Open Source programming, just an ordinary commercial software project. Every layer of the process has been created by sharing information, pooling it, tweaking the code and the interfaces.
The programmer herself doesn’t own the code she’s working on, obviously. But equally the company employing her can’t own more than a fraction of it. It can legally patent every piece of code she outputs. It can even force her to sign an agreement that what she writes in her spare time belongs to them - but the code will still contain thousands of bits of previous code written by other people that cannot be patented.
Plus, the knowledge it took to produce the code is still in the programmer’s brain. She can, if market conditions allow, move to a different workplace and execute the same solution, should it be required. With information, part of the product remains with the worker in a way it did not during the industrial era.
It is the same for the tool she’s using: the programming language. It has been developed by tens of thousands of people contributing their knowledge and experience. If she downloads the latest update, it is sure to contain changes based on lessons learned by everyone else using it.
On top of that, the consumer data - the record left by each interaction with the website - may be wholly owned by a company. Yet it is socially produced: I send you a link, you click on it, or retweet it to 10,000 followers.
Marx couldn’t imagine a web server. However, he could observe the telegraph system. By 1858 the telegraph, running alongside the world’s railway lines and terminating at every railway station and business HQ, was the most important piece of infrastructure in the world. Britain alone boasted a network with 1,178 nodes outside London, and hundreds more linking the City, Parliament and the London docks.42
Telegraph operators were highly skilled but, as with the software programmer, the knowledge needed to work an electric key was insignificant alongside the knowledge embodied in the vast, cross-border machine they were actually supervising.
The memoirs of telegraph operators show clearly the social nature of the technology. Rule number one was that you could send information only as fast as the person on the other end could receive it. But in the complex telegraph systems, where rooms full of senders and receivers negotiated use of the crowded line capacity with far distant operators, ‘handling egos was as much a part of an operator’s work as handling a telegraph key. Considerate, helpful operators made work easier; domineering, cavalier, or self-righteous ones made work more difficult.’43 Their work was social, the knowledge embodied in the machine was social.
In the Fragment on Machines, these two ideas - that the driving force of production is knowledge, and that knowledge stored in machines is social - led Marx to the following conclusions.
First, in a heavily mechanized capitalism, boosting productivity through better knowledge is a much more attractive source of profit than extending the working day, or speeding up labour: longer days consume more energy, speed-ups hit the limits of human dexterity and stamina. But a knowledge solution is cheap and limitless.
Second, Marx argued, knowledge-driven capitalism cannot support a price mechanism whereby the value of something is dictated by the value of the inputs needed to produce it. It is impossible to properly value inputs when they come in the form of social knowledge. Knowledge-driven production tends towards the unlimited creation of wealth, independent of the labour expended. But the normal capitalist system is based on prices determined by input costs, and assumes all inputs come in limited supply.
For Marx, knowledge-based capitalism creates a contradiction - between the ‘forces of production’ and the ‘social relations’. These form ‘the material conditions to blow [capitalism’s] foundation sky-high’. Furthermore, capitalism of this type is forced to develop the intellectual power of the worker. It will tend to reduce working hours (or halt their extension), leaving time for workers to develop artistic and scientific talents outside work, which become essential to the economic model itself. Finally Marx throws in a new concept, which appears nowhere else - before or after - in his entire writings: ‘the general intellect’. When we measure the development of technology, he writes, we are measuring the extent to which ‘general social knowledge has become a force of production … under the control of the general intellect’.44
The ideas outlined in the Fragment were recognized in the 1960s as a complete departure from classic Marxism. In the twentieth century, the left had seen state planning as the route out of capitalism. They had assumed that capitalism’s inner contradictions lay in the chaotic nature of the market, its inability to fulfil human need and its propensity to catastrophic breakdown.
In the 1858 Fragment, however, we are confronted with a different model of transition: a knowledge-based route out of capitalism, in which the main contradiction is between technology and the market mechanism. In this model, scribbled on paper in 1858 but unknown to the left for more than 100 years, capitalism collapses because it cannot exist alongside shared knowledge. The class struggle becomes the struggle to be human and educated during one’s free time.
It was the Italian leftist Antonio Negri who described the Fragment on Machines as ‘Marx beyond Marx’. Paolo Virno, one of his co-thinkers, pointed out that its ideas ‘are not present in any of his other writings and in fact seem alternative to the habitual formula’.45
The question remains: why didn’t Marx pursue this idea more widely? Why does the general intellect disappear as a concept except on this one unpublished page? Why does this model of the market mechanism being dissolved by social knowledge get lost in the writing of Capital?
The obvious answer - beyond all the textual discussions - is that capitalism itself at the time did not bear out the proposition. Once the 1858 panic was over, stability returned. The socialization of knowledge inherent in the telegraph and the steam locomotive were not sufficient to blow the foundations of capitalism sky-high.
In the following decade, Marx constructed a theory of capitalism in which the mechanisms of exchange are not exploded by the emergence of a general intellect, and in which no mention is ever made of knowledge being an independent source of profit. In other words, Marx retreated from the specific ideas in the Fragment on Machines.
The emergence of twentieth-century Marxism as a doctrine of state socialism and crisis-driven transition was no accident; it was grounded in the Marx of Capital.
Here, though, I am not concerned with a history of Marxism, but with the question: is there a route to postcapitalism based on the rise of information technology? It is clear from the Fragment that Marx had at least imagined such a route.
He imagined socially produced information becoming embodied in machines. He imagined this producing a new dynamic, which destroys the old mechanisms for creating prices and profits. He imagined capitalism being forced to develop the intellectual capacities of the worker. And he imagined information coming to be stored and shared in something called a ‘general intellect’ - which was the mind of everybody on earth connected by social knowledge, in which every upgrade benefits everybody. In short, he had imagined something close to the info-capitalism in which we live.
Furthermore, he had imagined what the main objective of the working class would be if this world ever existed: freedom from work. The utopian socialist Charles Fourier had predicted that labour would become the same as play. Marx disagreed. Instead, he wrote, liberation would come through leisure time: ‘Free time has naturally transformed its possessor into a different subject, and he then enters into the direct production process as this different subject … in whose head exists the accumulated knowledge of society.’46
This is possibly the most revolutionary idea Marx ever had: that the reduction of labour to a minimum could produce a kind of human being able to deploy the entire, accumulated knowledge of society; a person transformed by vast quantities of socially produced knowledge and for the first time in history more free time than work time. It’s not so far from the worker imagined in the Fragment to the ‘universal educated person’ predicted by Peter Drucker.
Marx, I think, abandoned this thought experiment because it had scant relevance to the society he lived in. But it has massive relevance for ours.
A THIRD KIND OF CAPITALISM?
To the neoliberals, the emergence of info-capitalism seemed like their greatest achievement. They could barely conceive that it might contain flaws. Intelligent machines, they believed, would create a post-industrial society in which everybody did high-value, knowledge-based work and in which all the old social conflicts died out.47 Information would enable the idealized capitalism of the textbooks - with transparency, perfect competition and equilibrium - to become reality. In the late 1990s the literature of the mainstream - from Wired magazine to the Harvard Business Review - was filled with celebratory descriptions of the new system. But there was an ominous silence about how it worked.
Ironically, it fell to the people who had rediscovered the Fragment on Machines, the far left disciples of Antonio Negri, to make the first attempt at a theory of info-capitalism, which they dubbed ‘cognitive capitalism’.
Cognitive capitalism, say its proponents, is a coherent new form of capitalism: a ‘third capitalism’, following the merchant capitalism of the seventeenth and eighteenth centuries and the industrial capitalism of the last 200 years. It is based on global markets, financialized consumption, immaterial labour and immaterial capital.
Yann Moulier-Boutang, a French economist, believes that the key for cognitive capitalism is the capture of the externalities. As people use digital devices, they become ‘co-producers’ with the companies they are dealing with: their choices, their apps, their friend lists on Facebook can all be given monetary value by the company that provides the service and harvests the information. ‘Capturing positive externalities,’ writes Moulier-Boutang, ‘becomes the number one problem of value.’48
In cognitive capitalism, the nature of work is transformed. Manual labour and industry don’t stop, but their place in the landscape changes. Because profit increasingly comes from capturing the free value generated by consumer behaviour, and because a society focused on mass consumption has to be constantly fed coffee, smiled at, serviced by call centres, the ‘factory’ in cognitive capitalism is the whole of society. For these theorists, ‘society as a factory’ is a crucial concept - vital to understanding not just the nature of exploitation but resistance.
For a pair of Nike trainers to be worth $179.99 requires 465,000 workers in 107 factories across Vietnam, China and Indonesia to produce to the same exact standard. But it also requires the consumer to believe that the Nike swoosh makes these chunks of plastic, rubber and foam worth seven times the average US hourly wage.49 Nike spends $2.7 billion a year on getting us to believe just that (compared to $13 billion actually making the shoes and clothing) - and that marketing budget buys way more than advertisements at the Superbowl.
In fact since Nike got its head around the rules of cognitive capitalism in the early 2000s, its spend on TV and press adverts has fallen by 40 per cent. Instead, the focus is on digital products: Nike+ for example, which uses an iPod to log runners’ performances, has recorded - and fed back to Nike - 150 million individual jogging sessions since its launch in 2006.50 Like all businesses, Nike is in the process of becoming, effectively, ‘information plus things’.
This is what the cognitive capital theorists mean by the ‘socialized factory’. We are no longer in a world of clearly delineated production and consumption, but one in which ideas, behaviours and customer interactions with the brand are critical to generating profit; production and consumption are blurred. This partly explains why struggles against the new capitalism are often focused on consumer issues, or brand values (e.g. corporate social responsibility), and why protesters behave more like the ‘tribes’ in marketing demographics than a unified proletariat. For cognitive capital theorists - as for Drucker - the primary activity of the new workforce is ‘the production of knowledge by means of knowledge’.51
However, the cognitive capitalism theory contains a major flaw. It would be one thing to say ‘a new kind of info-capitalism has been born within late industrial capitalism’. But the key cognitive capitalism theorists say the opposite: many of them believe cognitive capitalism to be a fully functioning system already. Factories in Shenzhen, slums in Manila, metal-bashing shops in Wolverhampton may look just as they did ten years ago - but to these theorists their economic functions are already transformed.
This is a technique common in European speculative thought: to invent a category and apply it to everything, thus reclassifying all existing things as sub-categories of your new idea. It saves you the trouble of analysing complex and contradictory realities.
It leads cognitive capitalism theorists to underestimate the importance of the rise of old-style industrial production in the BRIC (Brazil, Russia, India and China) countries, and for some to downplay the significance of the post-2008 financial crisis, or to see it as merely the teething troubles of the newborn system.
In fact, the system we live in is not a new, coherent and functioning form of capitalism. It is incoherent. Its tense, febrile and unstable character comes from the fact that we’re living in an age of the network alongside the hierarchy, the slum alongside the web café - and to understand the situation we have to see it as an incomplete transition, not a finished model.
POSTCAPITALISM: A HYPOTHESIS
The debate on postcapitalism has come a long way since Peter Drucker, yet in another sense it has gone nowhere. It has been marked by speculative thinking, technobabble and a tendency to declare the existence of new systems rather than to explore their relationship to old realities.
Benkler, Kelly and Drucker each declared something akin to a ‘new mode of production’, but none advanced an explanation of what its dynamics might be. The Ontario-based economist Nick Dyer-Witheford, in his 1999 book Cyber-Marx, produced a decent speculative account of what information-based communism might look like.52 But the debate on this has rarely achieved the status of economics.
Jeremy Rifkin, an influential management consultant, came closest to describing current reality in his 2014 book The Zero Marginal Cost Society.53 Rifkin argues that peer-production and capitalism are two different systems; currently they coexist and even gain energy from each other, but ultimately peer-production will reduce the capitalist sector of the economy to a few niches.
Rifkin’s most radical insight was to understand the potential of the Internet of Things. The most enthusiastic consultancies - for example McKinsey - have valued the impact of this process as up to $6 trillion a year, mainly in healthcare and manufacturing. But the vast majority of that $6 trillion is in reduced cost and increased efficiency: that is, it contributes to reducing the marginal cost of physical goods and services in the same way as copy and paste reduces the cost of information goods.
Rifkin points out that the impact of wiring every person and every object into an intelligent network could in fact be exponential. It could rapidly reduce the marginal cost of energy and physical goods in the same way as the internet does for digital products.
Like all books destined for the business shelves at airports, though, Rifkin’s is light on the social dimension. He understands that a world of free stuff cannot be capitalist; that the free stuff is beginning to pervade the physical as well as the digital world, but the struggle between the two systems is reduced to a struggle between business models and good ideas.
Conducted among social theorists, lawyers and tech visionaries, the postcapitalism debate exists in a parallel universe to the debate among economists about the crisis of neoliberalism, and the debate among historians about the problematic takeoff of the fifth long wave. To move forward, we need to understand how the new economics of info-tech, the post-2008 crisis and the long-cycle pattern fit together. What follows below is a first attempt to do that. It’s a hypothesis - but it is based on evidence and can be tested against reality.
Since the mid-1990s, a revolution in the way we process, store and communicate information has created the beginnings of a network economy. This has started to corrode the traditional property relations of capitalism in the following ways.
It corrodes the price mechanism for digital goods, as understood by mainstream economics, by pushing the cost of reproducing information goods towards zero.
It adds a high information content to physical goods, sucking them into the same zero-price vortex as pure information goods - and often, as with the trainers, making their value dependent more on socially created ideas (the brand) rather than the physical cost of production.
It makes financialization necessary, creating two streams of profit flowing to capital from the general population: as workers producing goods, services and knowledge; and as borrowers generating interest payments. So, while it’s true to say ‘the whole of society has become a factory’, the mechanisms of exploitation are still first of all wages, then credit and only finally our mental collusion in the creation of brand value, or the giveaway of externalities to tech companies.
It is in the process of revolutionizing the productivity of physical things, processes and energy grids, as machine-to-machine internet connections begin to outnumber person-to-person links.
If information corrodes value, then corporations are responding with three types of survival strategy: the creation of monopolies on information and the vigorous defence of intellectual property; the ‘skating to the edge of chaos’ approach, trying to live within the gap between expanded supply and falling prices; and the attempt to capture and exploit socially produced information such as consumer data, or by imposing contracts on programmers that say the company owns code they write in their free time.
However, alongside the corporate response, we are seeing the rise of non-market production: horizontally distributed peer-production networks that are not centrally managed, producing goods that are either completely free, or which - being Open Source - have very limited commercial value.
Peer-produced free stuff drives out commercially produced commodities. Wikipedia is a space in which commerce cannot operate; with Linux or Android there is clearly commercial exploitation, but at the edges - not based on ownership of the main product. It is becoming possible to be both producer and consumer in the same process.
In response, capitalism is beginning to reshape itself as a defence mechanism against peer-production, through info-monopolies, through allowing the wage relationship to weaken and through the irrational pursuit of high-carbon business models.
Non-market forms of production and exchange exploit the basic human tendency to collaborate - to exchange gifts of intangible value - which has always existed but at the margins of economic life. This is more than simply a rebalancing between public goods and private goods: it is a whole new and revolutionary thing. The proliferation of these non-market economic activities is making it possible for a cooperative, socially just society to emerge.
The rapid change in technology is altering the nature of work, blurring the distinction between work and leisure and requiring us to participate in the creation of value across our whole lives, not just in the workplace. This gives us multiple economic personalities, which is the economic base on which a new kind of person, with multiple selves, has emerged.54 It is this new kind of person, the networked individual, who is the bearer of the postcapitalist society that could now emerge.
The technological direction of this revolution is at odds with its social direction. Technologically, we are headed for zero-price goods, unmeasurable work, an exponential takeoff in productivity and the extensive automation of physical processes. Socially, we are trapped in a world of monopolies, inefficiency, the ruins of a finance-dominated free market and a proliferation of ‘bullshit jobs’.
Today, the main contradiction in modern capitalism is between the possibility of free, abundant socially produced goods, and a system of monopolies, banks and governments struggling to maintain control over power and information. That is, everything is pervaded by a fight between network and hierarchy.
It’s happening now because the rise of neoliberalism disrupted the normal fifty-year patterns of capitalism. And that’s another way of saying that the 240-year lifecycle of industrial capitalism may be nearing its end.
So there are two basic possibilities ahead of us. Either a new form of cognitive capitalism does emerge and stabilize - based on a new mix of firms, markets and networked collaboration - and the remnants of the industrial system find an orderly place within this third capitalism. Or the network erodes both the working and the legitimacy of the market system. If so, a conflict will take place that results in the abolition of the market system and its replacement by postcapitalism.
Postcapitalism could take many different forms. We’ll know it’s happened if a large number of goods become cheap or free, but people go on producing them irrespective of market forces. We’ll know it’s underway once the blurred relationship between work and leisure, and between hours and wages, becomes institutionalized.
Because its precondition is abundance, postcapitalism will deliver some form of social justice spontaneously - but the forms and priorities of social justice will be negotiable. Whereas capitalist societies always had to worry about ‘guns vs butter’, postcapitalist societies might fight over growth vs sustainability - or the timeframe for delivery of basic social goals, or challenges like migration, women’s liberation and demographic ageing.
So we have to design the transition to postcapitalism. Because most theorists of postcapitalism either just declared it to exist, or predicted it as an inevitability, few considered the problems of transition. So one of the first tasks is to outline and test a range of models showing how such a transitional economy might work.
Today we are used to hearing the word ‘transition’ to describe tentative local attempts to build a low-carbon economy; local currencies, time banks, ‘transition towns’ and the like. But transition, here, is a bigger project.
To make it happen we need to learn the negative lessons of failed transition in the USSR. After 1928, the Soviet Union tried to force a route through to socialism via centralized planning. This produced something worse than capitalism, but among the modern left there is a strong aversion to discussing it.
If we want to create a postcapitalist society, we have to know in detail what went wrong, and to understand the fundamental difference between the spontaneous non-market forms that I’ve been describing here and the Five Year Plans of Stalinism.
To go forward, we need to know how, exactly, information goods corrode the market mechanism; what might happen if this tendency was being promoted instead of restrained; and what social group has the interest to make the transition happen. We need, in short, a better definition of value and a more detailed history of work. What follows is an attempt to provide them.