Digital Capitalism

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Dan Schiller:

"Great changes are ramifying around digital networks; at the same time, abiding political economic processes carry forward. I developed the idea of digital capitalism for this reason: a phase-change is occurring within capitalism.

Before turning to consider the problems that confront digital capitalism today, I will trace four features of its industrial profile and give an account of its political development.

Unevenly, across many decades, the industrial revolution gripped not only manufacturing but also agriculture, trade and, indeed, information. Aileen Fyfe captures this change in characterizing nineteenth-century British publishing as “steam-powered knowledge.” Similarly, the applications of digital networks today stretch beyond a discrete information sector. Digital systems and services have been bolted to all parts of the political economy.

This carries ramifications. One is that it is shortsighted to equate the digital merely with familiar consumer markets, as for search engines, smart phones and social networks. Consumer expenditures on digital goods and services account for an estimated 30 percent of the worldwide total. Nor is it sufficient to try to grasp the digital merely by focusing only on vendors – whether IBM and AT&T in the 1970s; or Microsoft and Intel a decade or two later; or Google, Amazon, Facebook and Apple today. Digital capitalism has been constructed, and reconstructed, not only by suppliers but also by corporate users on the demand side: the likes of Wal-Mart and GM and Exxon-Mobil and Monsanto and JP Morgan Chase. Later, we’ll see that these business users’ importance has been political as well as economic.


Capitalist development has undergone – and inflicted – violent historical dislocations in the past. The rise of agrarian capitalism in early modern Europe began the process of tearing small farmers and peasants from the land, more or less at the same time as European armies were subjugating indigenous peoples throughout Latin America, Africa and Asia. In reference to a second fundamental mutation within capitalist development, Maxine Berg underlines, “The machine was not an impersonal achievement to those living through the Industrial Revolution…it was an issue. The machinery question in early nineteenth-century Britain was the question of the sources of technical progress and the impact of the introduction of the new technology of the period on the total economy and society.”

So it is with respect to digital capitalism today, as we find ourselves living amid the shocks of network-enabled commodification. For most of the world’s people, whether profitable growth may be renewed, and by whom, actually are inconsequential questions. The life-and-death issues are different. The planetary ecological emergency is one, as digital capitalism continues to exalt growth rather than stewardship. Another is that digital capitalism is ripping the thin fabric of democracy, even where a semblance of it exists - as governments expand repressive practices, and corporations stake claims to profit out of public goods and institute 24/7 surveillance of workers and customers. A third is that a new wave of digitized automation threatens to turn an unprecedented number of jobs themselves into luxuries. Social actors apart from states and corporations are likely to respond to these attacks by renewing demands for a society beyond capital. Nothing else is likely to suffice." (


By John Naughton:

'Need a crash course in digital capitalism? Easy: you just need to understand four concepts – margins, volume, inequality and employment. And if you need more detail, just add the following adjectives: thin, vast, huge and poor.

First, margins. Once upon a time, there was a great company called Kodak. It dominated its industry, which happened to be chemistry-based photography. And in its dominance, it enjoyed very fat profit margins – up to 70% in some cases. But somewhere in the depths of Kodak's R&D labs, a few researchers invented digital photography. When they put it to their bosses, the conversation went something like this. Boss: "What are the margins likely to be on this stuff?" Engineers: "Well, it's digital technology so maybe 5% at best." Boss: "Thank you and goodbye."

Actually, it turned out to be goodbye Kodak: those fat margins on an obsolete technology blindsided the company's leaders. Kodak's engineers were right, of course. Anything that involves computers and mass production is destined to be commoditised. My first mobile phone (purchased in the 1980s) cost nearly £1,000. I've just seen a handset for sale in Tesco for £9.95. (And, yes, I know that Apple currently earns fat margins on its hardware, but that's because it's usually ahead of the competition and it won't last. What's happening in the much bigger Android market is a better guide.) And, if anything, the trend towards thin margins in non-hardware businesses is even more pronounced because online markets are relatively frictionless. Just ask anyone who's trying to compete with Amazon.

Then there's volume, which in the online world is astronomical. For example: 72 hours of video uploaded to YouTube every minute; more than 100bn photographs have been uploaded to Facebook; during the Christmas period, dispatched a truck filled with parcels every three minutes; to date, more than 40bn apps have been downloaded from Apple's iTunes store. And so on. Margins may be thin, but when you multiply them by these kinds of numbers you get staggering amounts of revenue.

These vast revenues, however, are not being widely shared. Instead, they are mostly enriching the founders and shareholders of Apple, Amazon, Google, Facebook et al. Of course, those who work at the heart of these organisations – the engineers, developers and the executives who manage them, for example – are richly rewarded in salaries, stock options and lavish perks. But these gilded employees constitute only a minority of the workforces of the big tech companies and most of their colleagues have decidedly more mundane terms of employment – and remuneration.

Take Apple, for example. It makes grandiose claims about the number of jobs that it "directly or indirectly" creates or supports. But about two-thirds of the company's 50,000 American employees work in the US Apple stores, where many of them were earning about $25,000 a year in 2012 – when the mean annual personal income in the US was $38,337 (2010 figure).

Then there's the question of employment, a topic on which the big technology companies seem exceedingly sensitive. Facebook, for example, is given to engaging fancy consultants to produce preposterous claims about the number of jobs it creates. One such "report" claimed that the company, which at the time had a global workforce of about 3,000, indirectly helped create 232,000 jobs in Europe in 2011 and enabled more than $32bn in revenues. And Apple, stung by criticism about all the work it has outsourced to Foxconn in China, is now driven to claiming it has "created or supported" nearly 600,000 jobs in the US.

The really tough question that none of these companies really wants to answer is: what kinds of jobs exactly? Anyone seeking an insight into this would do well to consult a terrific report by Sarah O'Connor, the Financial Times's economics correspondent. She visited Amazon's vast distribution centre at Rugeley in Staffordshire and her account of what she found there makes sobering reading.

She saw hundreds of people in orange vests pushing trolleys around a space the size of nine football pitches, glancing down at the screens of their handheld satnav computers for directions on where to walk next and what to pick up when they get there. They do not dawdle because "the devices in their hands are also measuring their productivity in real time". They walk between seven and 15 miles a day and everything they do is determined by Amazon's software. "You're sort of like a robot, but in human form," one manager told Ms O'Connor. "It's human automation, if you like."

Still, it's a job. Until it's replaced by a robot." (

The Privatization of Networks

Dan Schiller:

"Big business users, tech vendors, multilateral agencies, and the US Executive Branch labored in behalf of policies to widen the scope of digital profit projects worldwide. Their achievement was breathtaking. Between 1988, when Chile privatized its incumbent telecommunications operator, and 2005, more than 80 less developed countries underwent network privatization. Western Europe and Japan were on board. Additional market-opening policies became enshrined via the International Telecommunication Union in 1988, and through a 1997 WTO treaty, the Basic Telecommunications Agreement. Significant national variations persisted but, as business users and independent equipment suppliers gained political priority, foreign investment policies, interconnection rules, and policies governing use of networks all were relaxed.

The Internet’s rise during the 1990s rested on these foundations; it, in turn, altered the center of gravity of networking. Monopoly national telecommunications systems operated by government ministries were supplanted – or at least overlaid - by decentralized “autonomous” systems operated and interconnected by transnational companies. systems operated by government ministries were supplanted – or at least overlaid - by decentralized “autonomous” systems operated and interconnected by transnational companies. At the same time (flouting the expectations of most leftists), network access began to expand beyond all precedent – far beyond the wealthy countries. FDI flowing into the less developed countries’ telecommunications systems increased tenfold during the decade after 1990. Though ravaging disparities did not disappear, networks drew more investment in poor-world countries—hundreds of billions of dollars—than any other industry. This expansion continued, as green-field projects replaced privatizations as the major growth nexus.

This spectacular enlargement of network access may have dampened awareness that the Internet in fact does possess a loose political-economic control structure – certainly, there was a lot of talk during the 1990s about how the Internet “routes around control.” Throughout its formative years, the Internet had been managed by the US Department of Defense. During the 1980s and 1990s, this arrangement underwent a series of transitions. Working with the National Science Foundation and its networking contractors, IBM and MCI, universities extended Internet access to a larger share of academics but, in the late 1980s and early 1990s, corporate providers and corporate users pressed to alter these largely noncommercial arrangements. Privatization of the Internet followed. Concurrently, this network of networks exploded internationally. During the later 1990s, the US Government vested management of a now-global Internet in a nonprofit California corporation, ICANN. ICANN possessed responsibility for the Internet’s system of unique identifiers and participated in its technical development. VeriSign, a shadowy corporation headquartered in spook-ish Virginia, was accorded a crucial operational role; while ICANN itself was legally bound to report to the US Commerce Department.

In practice, these arrangements conferred power on high-tech companies and corporate trademark owners and on the US Executive Branch. They are notable for downgrading the democratic remit of the US Federal Communications Commission, which ostensibly regulates civilian telecommunications. And they signified that US negotiators had succeeded in getting the international community to acquiesce in a US-centric extraterritorial Internet. From the outset, there was disagreement; but the US prevailed. This, after all, was the “unipolar” moment that followed the collapse of the Soviet Union and the restoration of capitalism in China." (