Cyberlords as a Rentier Class

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= "The following essay on intellectual property, and how it is embedded in the current unequal political economy, will be of particular interest to inhabitants of the Global South."


Lords of Cyberspace: The Return of the Rentier by Roberto Verzola, Philippine Greens


The information sector: Economics 101

An information economy (previously called a post-industrial or knowledge economy, also called a cyber-economy) is an economy whose information sector has become more dominant than its industrial or agriculture sectors. The information sector is that sector of the economy that produces, handles, or transfers information goods. At the core of this sector are information and communications technologies (ICT) for generating, manipulating, distributing and using information.

Information goods, being non-material goods, are quite different from agricultural or industrial goods, which are material goods. The main cost of producing information is incurred at the research and development (R&D) stage – when the first instance or copy of that information product is created. The original copy can then be stored and reproduced electronically at very little cost. If digital format is used, then perfect copies of the original can be made very cheaply over unlimited generations of copies. Digital technology, with its unique capability to copy or transfer information without degradation, is the key that opened up the development of the information sector into a full-blown economic sector.

Understanding the information sector: what’s the key?

The very low cost of reproducing information lies at the heart of understanding this sector and the basic conflicts within it. Until one appreciates the implications and consequences of near-zero cost of reproduction, one will not understand why information goods are qualitatively different from other goods and why the information sector is qualitatively different from other sectors.

On one hand, for instance, information goods are easy to share freely. On the other hand, the potential profits from selling information goods are very high, because the marginal costs of production (the cost of making the next unit of the product) are very low. Here lies the germ of the basic conflicts within the information sector.

We share information all the time, reflecting the social nature of information. The easier to reproduce it, the more we tend to share it. But if information is freely shared, who would buy it at a high price? If one can get it for free, why pay for it?

Because the free sharing of information goods undermines their potentially high prices, commercial information producers want to prohibit the free exchange of information. Then, they can create an artificial scarcity, which enables them to keep prices -- and profit margins -- high.

This is the whole concept behind intellectual property rights (IPR) such as copyrights and patents. IPRs prohibit the public from freely sharing information; they give the information producer the exclusive right to use, make copies or sell the product. IPRs are, in effect, information monopolies. Today, they are the principal form of information ownership. The information economies of today are monopolistic information economies. Information monopolies make high profit margins possible in the information sector.

In a capitalist system, investments tend to go where the profit margins are highest. The high margins in the information sector encourage the shift of investments from the industrial and agricultural sectors to the information sector. The transformation of the U.S. economy from an industrial to an information economy is the simply the result of this natural movement of investments to areas which promise the highest rates of return.

Cyberlords: the rent-seeking class of the information sector

The most important property owners of the information sector are rent-seekers. They control or own an information resource or infrastructure and get their regular income from charging rents for it use. There are two types of cyberspace rentiers:

1. the software owners, who control the programs, the data, or the content; and

2. the hardware owners, who control the infrastructure, the servers, the facilities or the equipment for distributing, using, or consuming the information goods.

Rents take the form of patent and copyright royalties, license fees, subscription fees, entrance fees, usage charges, technology charges and so on.

These rentiers of the information sector are the landlords of cyberspace. They may therefore be called cyberlords.

Cyberlords who control the software may be called information cyberlords. These include the owners of software companies, database companies, music, video and film companies, publishers, genetic engineering firms, pharmaceutical and seed firms, and similar companies who earn most of their income from IPR rents.

Cyberlords who control the hardware may be called industrial cyberlords. These include the owners of communication lines and equipment, radio and TV stations and networks, Internet service providers, theater distributors and owners, cable TV providers and operators, integrated circuit manufacturers, and other firms. With these facilities converging towards a single global information infrastructure for data, voice communications, media, entertainment, financial transactions, payments, etc., the industrial cyberlords are consolidating, merging and creating huge new monopolies that control large chunks of these facilities.

The cyberlord class also includes highly-paid professionals who are indispensable to the economic viability and growth of cyberlords. These include top-level managers, lawyers, and others whose income are mainly payments from cyberlords they work for. Lawyers, in particular, are absolutely necessary for the enforcement of the copyrights, patents, and other IPRs of information cyberlords.

The social nature of information continually asserts itself. Thus, information products tend to spread themselves globally as soon as they are released, regardless of the will and intentions of the producers. Cyberlords, therefore, have no choice but to globalize their operations as well, and to follow where their information products go. They push the globalization process incessantly to ensure that every country, every nook and corner of the globe, is within the reach of their mechanisms for rent extraction. Thus, cyberlords are an important social base of globalization. As they gain political dominance in a country, a new ruling class of rentiers will emerge, ushering a neo-feudal era ruled by cyberlords.

WTO: enforcing the cyberlords’ property rights

To strengthen their global reach, cyberlords needed a global legal infrastructure for extracting rents. This turned out to be the World Trade Organization (WTO). Under the WTO's persistent pressure, various international agreements have been concluded or are being pushed that protect and advance the interests of cyberlords. The most important agreement, without which cyberlords would not be able to realize their high profit margins, was the TRIPS agreement under GATT, which bound all WTO members to very high standards of IPR protection.

The TRIPS agreement was followed by other WTO agreements essential to the growth and expansion of the information sector, and which have been or are in the process of being concluded. These include: the e-commerce agreement, the information technology agreement, and the agreement on telecommunications. These agreements ensure low-duty or tax-free transactions, an increasingly deregulated playing field, the lifting of restrictions to the entry of foreign firms, and other policies beneficial to cyberlords who operate globally. These also include agricultural agreements, in so far as they ensure markets for the genetically-engineered agricultural products (which may be seen as information products of the genetic variety) of information economies.

Three types of economies

With the emergence of powerful information economies led by the U.S., we can distinguish between three major categories of economies in the world, depending on the production sector that is most dominant: the information economies, the industrial economies and the agricultural economies.

Compare the prices of typical products: an agricultural crop like sugar; a industrial manufacture like a small refrigerator; and an information product like software. A $100 software on a CD can be copied within minutes for less than a dollar. A $100 refrigerator would need a lot of metal, plastic, glass and other materials, as well as sufficient energy to process and mould them into a working appliance. To produce $100 worth of sugar, one needs to plant lots of sugar cane, grow them for months, harvest them and then process some several hundred kilos of sugar. Yet, in a WTO-ruled world, these products are supposedly of equal value. Clearly, the greatest returns will be enjoyed by the information economy and the lowest (often, negative) by the agricultural economy, with the industrial economy somewhere in between.

In the past, industrial economies enjoyed a favorable pattern of trade with agricultural economies. This colonial trade pattern kept the erstwhile colonies under the economic control of the former, although the latter had gained formal political independence. Similarly, we can expect information economies to enjoy a favorable trade pattern with industrial and agricultural economies. The higher profit margins in the information sector will allow information economies to continue to extract large amounts of resources from developing agricultural and industrial economies. Agricultural economies try very hard to industrialize, in the hope of extricating themselves from the colonial trade pattern with their industrial trade partners. But they will not necessarily succeed in doing so. By the time they reach industrial status, the U.S. and Europe will have become full-blown information economies, thereby remaining in a very good position to continue such a colonial trade relationship.

Historically, therefore, the emergence of the global information economy can be seen as the third wave of a continuing globalization process. The first wave involved direct conquest through colonialism. The second consists of the post-colonial expansion of industrial economies producing material goods. The third is the emergence of the global information economy.

High initial costs filter out the poor

Can we not leap-frog development stages and right away become an information economy? Won’t the new information and communications technologies (ICTs) democratize benefits and make it possible for poor countries to catch up with the developed economies? Not likely. In fact, new ICTs are bound to exacerbate the existing gap between rich and poor countries, and between rich and poor sectors in every country.

Consider the nature of an information product, whether software, hardware, or a data connection: the initial costs (the development costs, the equipment costs, the leased line costs, etc.) are high, but the operating or recurring costs are low. Because the initial costs are high, few firms or individuals can afford them. These high initial costs serve as barrier, filtering out those who have little or no capital. But the rich who can afford the high initial costs then enjoy lower operating costs (the cost of reproducing software, running equipment, maintaining a leased line, etc.). This makes them much more competitive vis-a-vis those who have been excluded from the new ICTs because of the high initial costs. The more competitive rich will get richer, the less competitive poor will get poorer.

We might be able to overcome the high costs

The introduction of ICTs is clearly an expensive proposition for most developing countries. They compete for our peoples’ time, skills and attention, taking resources away from essential activities like food production, health services, basic education and so on. Yet, the possibilities of the new technologies are also tantalizing, and many people sincerely feel that these technologies also have some benefits to offer and, properly deployed, can facilitate solutions in providing for basic needs.

How does a poor country solve the problem of providing for its people facilities which are terribly expensive and which are hardly affordable? Here are five strategies that countries can try to reduce ICT costs:

1. Emphasize appropriate technology, make do without the online frills, and concentrate on low-cost off-line technologies, which can bring in the most essential services; these technologies include email-based approaches like Googlemail and www4mail, text-based approaches, storage-based (instead of connectivity-based) approaches like VCD players cum CDROM browsers; intermediate technologies like micro-power broadcast stations.

2. Use free/open software like Linux/GNU and OpenOffice whenever they are available, because they take full advantage of the benefits of pooling together the intellectual resources not only of a country but of the whole Internet community and their approach is in harmony with the nature of information, giving all users the freedom to use, to share and to modify software.

3. Apply genuine compulsory licensing where commercial software is the only option; GCL is an internationally-recognized mechanism that allows poor countries to access technologies on their own terms.

4. Set up public access stations that do not require the ordinary citizen to pay a fixed monthly charge; and

5. Work out a system of public or community ownership over the hardware infrastructure to minimize rent-seeking by private interests, which can lead to further concentration of wealth.

But can we overcome the technology’s built-in ideology?

While the preceding strategies may allow developing countries to deploy ICTs more effectively, these may not be enough. It was appropriate technology advocate E.F. Schumacher author of the widely-acclaimed book Small is Beautiful, who once warned that technologies often carry a built-in ideology which is so deeply embedded that one cannot have a technological transplant without getting at the same time an ideological transplant – the biases, values and mindsets carried by the technology.

This is as true of the Internet as with the earlier technologies that Schumacher cited, such as nuclear power and the Concorde jet.

On the Internet, we much watch out for the following built-in biases embedded in the technology: The superiority of the English language (and, by extension, culture?). The lingua franca of ICT is English. Programming languages, including the languages for programming hardware, are in English or derived from English. This forces technical persons to consider English a necessary language to learn, because it is a key to technology access. From knowledge of the language comes familiarity and identification with the culture behind that language. Automation. The ICT perspective is to replace men and women with machines. The process may create new jobs, but these new jobs are also subject to the same bias: they will also, in the future, be replaced by machines.

Hidden centralism and hierarchy.

This centralism and the corresponding power hierarchy is facilitated by the growing privatization and corporate control of Internet facilities as well as decision-making and can be seen in the following:

1. consolidation of control over information content and infrastructure, with a corresponding growth of enormous powers to those who wield such control;

2. assignment of IP network addresses, those dotted numbers which are needed to establish a permanent presence on the Internet, without which one is a second class Internet citizen, and the assignment of which is now largely corporate-controlled;

3. the domain name system (DNS), which is as important as the IP address in establishing a personality in cyberspace; and

4. the technical standards, which include communications protocols, packet formats, mail and document formats, sound and video formats, and all the different standards that make internetworking possible and without which there will be no Internet. These centralist elements, by the way, make the Internet a perfect listening post and control point for military and intelligence applications. Globalist bias. On the Internet, by the very design of the technology, the global players enjoy a hidden subsidy by local players, a perverse case of the poor subsidizing the rich. Whenever ISPs charge a flat rate regardless of destination, those who communicate with nearby contacts pay as much as those who communicate with distant contacts, even if the latter use more network resources. This is a hidden subsidy for globalization that comes with the design of the technology itself.

Unlimited growth.

A major criterion in Internet design is “scalability" -- that the design should allow for unlimited expansion and can be indefinitely extended to larger and larger scales. It is true that information, because it is non-material, can increase practically without limit. The problem is in extending this thinking to the material world. No accountability. The ease in establishing transitory social contacts on the Internet and hiding identity not only discourages the growth of social responsibility but also fosters unaccountable behavior patterns. As a result, the Internet has become the natural habitat of scam artists, spammers, and other anti-social elements whose brazen unaccountable behavior are tolerated by server system administrators.

It is as if the ideology of the cyberlord class had been embedded in the technology itself. To become a truly appropriate technology, the Internet needs a redesign based on a very different ideological perspective. In the meantime, unless ICT users are fully aware of and consciously reject these hidden, built-in biases, as they use these technologies, they are also getting a dose of the ideology behind them.

And can we defeat the cyberlords and their neo-feudal rule?

Feudalism has been defeated before. It can be defeated again. The feudal rule of landlords was defeated by land reform. Cyberlords can be defeated by a similar property reform which can be summed up as follows: stop the privatization of information, information resources, and information facilities; work for public domain information content, tools, facilities and infrastructure; and develop non-monopolistic ways of rewarding intellectual activity. The Philippine Greens, for instance, have formulated the following demands in the information sector:

1. The right to know. It is the government’s duty to inform its citizens about matters that directly affect them, their families or their communities. Citizens have the right to access these information. The State may not use ‘national security’, ‘confidentiality of commercial transactions’, or ‘trade secret’ reasons to curtail this right.

2. The right to privacy. The government will refrain from probing the private life of its citizens. Citizens have the right to access information about themselves which have been collected by government agencies. The government may not centralize these separate databases by building a central database or by adopting a unified access key to the separate databases. Nobody will be forced against their will to reveal any information they do not want to make public.

3. No patenting of life forms. Modified or not by human intervention, these may not be patented: life forms, biological and microbiological materials, and biological and microbiological processes.

4. The moral rights of intellectuals. Those who actually created an intellectual work or originated an idea have the right to be recognized that they did so. Nobody may claim authorship of works or ideas they did not originate. No one can be forced to release or modify a work or idea if he/she is not willing to do so. These and other moral rights of intellectuals will be respected and protected.

5. The freedom to share. The freedom to share and exchange information and knowledge will be recognized and protected. This freedom will take precedence over the information monopolies such as intellectual property rights (IPR) that the State grants to intellectuals. 6. Universal access. The government will facilitate universal access by its citizens to the world’s storehouse of knowledge. Every community will be enabled to have access to books, cassettes, videos, tapes, software, radio and TV programs, etc. The government will set up a wide range of training and educational facilities to enable community members to continually expand their know-how and knowledge.

7. Compulsory licensing. Universal access to information content is best implemented through compulsory licensing. Under this internationally-practiced mechanism, the government itself licenses others to copy patented or copyrighted material for sale to the public, but compels the licensees to pay the patent or copyright holder a government-set royalty fee. This mechanism is a transition step towards non-monopolistic payments for intellectual activity.

8. Public stations. Universal access to information infrastructure is best implemented through public access stations, charging at subsidized rates. These can include well-stocked public libraries; public telephone booths; community facilities for listening to or viewing training videos, documentaries, and the classics; public facilities for telegraph and electronic mail; educational radio and TV programs; and public access stations to computer networks.

Another approach in building public domain information tools is to support non-monopolistic mechanisms for rewarding intellectual creativity. Various concepts in software development and/or distribution have recently emerged, less monopolistic than IPRs. These include shareware, freeware, “copyleft" and the GNU General Public License (GPL). The latter is the most developed concept so far, and has managed to bridge the transition from monopoly to freedom in the information sector.

9. The best lessons of our era. While all knowledge and culture should be preserved and stored for posterity, we need to distill the best lessons of our era, to be taught – not sold – to the next generations. This should be a conscious, socially-guided selection process, undertaken with the greatest sensitivity and wisdom. It is not something that can be left to a profit-oriented educational system, circulation-driven mass media, or consumption-pushing advertising. The key issue in the information sector is IPR. Information cyberlords will rise or fall depending on how this issue is resolved. In the software field, the short-term strategy is the expansion of various forms of compulsory licensing of commercial information products. Long-term strategies include protecting the people's freedom to use, share, and modify information tools and content through free software licensing; resisting the patenting of life forms; phasing in non-monopolistic rewards for intellectual activity; and encouraging the social sharing of non-material goods.

In the infrastructure area, we should advocate various forms of community/public control or ownership over backbone information facilities and infrastructures, to minimize private and corporate rent-seeking.

Such strategies run squarely against WTO principles, which are highly protectionist over IPRs and which favor corporate control over information facilities. As the legal infrastructure which cyberlords rely on for maintaining their high profit margins, the WTO will remain major arena of struggle in the information sector. The WTO setbacks in Seattle and in Cancun have opened windows of opportunity to question the various pro-cyberlord WTO agreements, particularly TRIPS. Developing countries must try to get these agreements postponed, reviewed, and modified, to weaken pro-cyberlord provisions and strengthen those provisions that increase public access and control over information content and facilities.

While the cyberlord class has become increasingly powerful, the source of its power is also the key to its weakness. This is the extremely low cost of reproducing information, which is the basis of the social nature of these goods. It is impossible to stop people from sharing information, regardless of the will of information producers and cyberlords. The more we freely share information that they want locked up under IPR, the weaker information monopolies will become.

This is how we can stop the return of the new rentiers.

Roberto Verzola World Social Forum, Mumbai, India January 18, 2004

Key Book to Read

Roberto Verzola’s pieces on the the information economy have been collected into a book, entitled Towards a Political Economy of Information: Studies on the Information Economy, which was launched in March 2004 by the Foundation for Nationalist Studies (FNS). He may be reached at [email protected].

The following is the table of contents of the book:

Part I. Information and Intellectual Property Rights (IPR)

1. The miracle of the loaves

2. A new offensive against the Third World

3. U.S. piracy in the 19th century

4. The “piracy" of intellectuals

5. GATT: Free Trade or Monopoly Growth?

6. IPR: a clash of value-systems

7. Towards a political economy of information

Part II. ICTs and the Internet

8. Expanding market for information economies

9. A hierarchy of access

10. ICT: job creator or destroyer?

11. A poor learning environment

12. An interactive idiot box

13. Private space controlled by rentiers

14. Perverse subsidies

15. Internet cafes: connectivity for the masses?

Part III. Genetic Information And Genetic Engineering

16. Turning farmers into “pirates"

17. Pirating genetic resources

18. Beware of modern vampires

19. Biosafety and genetic contamination

Part IV. Monopolistic Information Economies

20. Information monopolies and the WTO

21. Globalization: the third wave

22. Cyberlords: rentier class of the information sector

23. Testing the political strength of a cyberlord

24. Globalization: poor design?

25. What could be more important than efficiency?

Part V. Alternatives: A Non-Monopolistic Information Sector

26. A well-kept IT secret

27. IT or AT?

28. Community rights over biological material: property or moral rights?

29. Low-cost strategies for ICT deployment in developing countries

30. Greening the information sector

31. Alternatives to globalization