Platforms as States

* Article / Chapter: Platforms as States: The Rise of Governance through Data Power. By Petter Törnberg. In book: Data Power in Action.

URL = https://www.researchgate.net/publication/376715056_Platforms_as_States_The_Rise_of_Governance_through_Data_Power

Description

"Recent years have seen the explosive growth of platforms such as Amazon, Alphabet, Airbnb, Facebook, and Uber – forming an ecosystem which is now central to contemporary capitalism while amassing unprecedented levels of money and influence (Langley and Leyshon, 2017; van Dijck et al,2018). As any fundamental shift, platformization is born and shaped from crisis. The Great Depression birthed Fordist–Keynesianism, the 1970s crisis brought post-Fordism and neoliberalism (Harvey, 2007), and the first steps of the incipient rise of a digital form of accumulation was birthed in the2008 financial crisis. Its dominance was cemented and made visible through the COVID-19 pandemic, and it appears now to be maturing through the subsequent financial and inflation crises. The large core corporations left following this process are emerging as a new form of ‘company-states’: firms with the capacity to control not only trade but also law, territory, and liberty – in other words, to regulate life. This role has not escaped the firms themselves, many of which view their governance as so central to their business model that they refer to their users as ‘citizens’. Platformization thus signifies a transformation of urban governance and politics, as ‘data is generative of new forms of power relations and politics’ (Bigo et al, 2019, 4).In this chapter, we will examine the impact of data’s transformation of governance. We here view the growing powers of data to shape human life as lying at the core of platformization.

On the basis of this perspective, the chapter will examine platformization in two parts.

• First, we will examine platformization as a form of capitalist accumulation based on employing data power to privatize regulation. emerged as proprietary markets owned and created by platform corporations –such as Airbnb or Uber ( Langley and Leyshon, 2017 ). The proprietary market business model is based on using the control over markets to extract monopoly rents. This has been described as a continuation of neoliberalism’s constant annexation of new fields by the market, reaching its logical endpoint in the market’s annexation of the market itself (Barns, 2020). However, the logic of platformization has since generalized to the use of data power to manipulate markets in order to extract profits through the concentration of political-economic power. Platformization can thus be understood as private actors employing digital technopolitical strategies to target vulnerabilities in local institutions, in the pursuit of control over market regulation. Platforms seek to claim regulatory control through data surveillance, while seceding from state control, thereby challenging the distinction between the economic power of corporations and the political sovereignty of states. The result isa gradual and variegated shift towards the private capture of governance, as capital supplants democratic institutions with private technological solutions.

• Second, we will examine the nature of regulation as it is pursued through data power. Platform regulation implies a fundamental shift in the way of seeing those governed, bringing a shift in the regime of power. Scott (1998)famously characterized how the modernist state made the social world legible and amenable to state power through a top-down population-based epistemology, exerting power through hierarchical command-and-control that spread from the Fordist factory to shaping society, cities, and even a period of modernity. The platform mode of regulation implies a new way of seeing, as platforms see those governed through the novel epistemology of Big Data – cluster-based, bottom-up, and relational – and exerting control through the design of programmable social infrastructures. This signifies a fundamental shift in the regime of power, lying at the heart of the societal transformations emerging from digitalization and platformization."

(https://www.researchgate.net/publication/376715056_Platforms_as_States_The_Rise_of_Governance_through_Data_Power)

Excerpts

Capital Accumulation Through Data Power

Petter Törnberg:

"Digitalization first emerged as part of the macro-trends of capitalist reorganization that followed the Fordist crisis of the 1970s: financialization, globalization, and neoliberalization. Digital technology provides the infrastructure for the global financial system, as financial products are fundamentally predictive mathematical and computational entities. The growing sophistication of digital data and algorithms enable the financialization and annexation into capitalism of an expanding field of social behaviour (Sadowski, 2019) – ‘liquifying’ areas previously inaccessible to capital (Lohr, 2015; van Dijck, 2014).But while digitalization was part and parcel of these macro-trends, it also brought with it challenges to existing capitalist institutions: as digital good are not scarce but can be copied with near- zero marginal costs, they pose a much debated dilemma for accumulation. By bringing an end to the scarcity on which profits depend, some scholars even speculated that digital technology would bring the arrival of a postcapitalist utopia (Mason, 2016).Capitalism’s solution to the dilemma posed by digital technology was the platform: a natively digital organizational form, which allows the creation of artificial scarcity by using digital technology’s capacity to centralize and control access to key resources. Platforms make use of the affordances of digital technology to curate programmable social infrastructures that enable buyers and sellers to meet; that is, to constitute a form of proprietary market(Langley and Leyshon, 2017). The platform business model can thus broadly be understood as leveraging digital technology to capture the market itself, and financialize its ownership and regulation. The rise of proprietary markets can be seen as a fundamental transition in the structure of capitalist regulation: if Fordism was defined by national markets with national state regulation, and post- Fordism by transnational markets with national regulation, then digital capitalism is defined by proprietary markets – owned and regulated by transnational private companies through digital technology. Seen through this lens, the platform model constitutes the convergence of several long-running post-Fordist trends: neoliberalism’s tendency to privatization and financialization of everything; the flexible formation of new financial conventions; use of digital code as means of shaping social institutions, and data as means of financializing them. While platformization began with the proprietary markets of ‘sharing economy’ platforms such as Airbnb and Uber, it has been gradually evolving into a broader capitalist logic. At its core, the platform model is founded on leveraging data power as mechanisms for market dominance: platformization implies seeking to claim control over strategic chokepoints for accumulation, enabling firms to manipulate the market and extract rents from producers by controlling access. As Peck and Phillips (2020) argue, platforms canthus be understood as situated in the Braudelian zone of the ‘antimarket’, constituting a ‘new machine with an old purpose: that of controlling markets from above and, in the process, generating significant concentrations of political-economic power’ (p 75). While Fordism pursued profits through wealth creation and rationalization of production, and post-Fordism through financial markets and wealth relocation, digital capitalism thus generates profit through rentiership – based on the capacity to control access to key resources (Langley and Leyshon, 2017). The platform strategy thus hinges on using data power to make markets uncontestable by raising steep barriers to entry (Baumol, 1986), thus allowing the extraction of monopoly rents. The monopolies of digital capitalism are thus fundamentally different from the steel and rail monopolies of the Fordist era: firms like Amazon are not even close to having a monopoly on retail – but are yet able to extract monopoly rents by drawing on data power ( Peck and Phillips,2020; Zuboff, 2019). Platforms use three forms of data power to achieve such market dominance. First, platforms use the strategic employment of infrastructuralization to produce lock- ins: platforms seek to provide basic functions that become entrenched, creating dependence on a privatized infrastructure (Larkin, 2013). As Rahman and Thelen (2019, 180) observe, ‘the very idea of the “platform” reflects an aspiration to be the foundational infrastructure of a sector.’ Second, the mediating position granted by ownership of infrastructures gives access to data flows, allowing platform companies to shape social pattern through global architectures of behavioural monitoring, analysis, prediction, and modification (Zuboff, 2019). The capacity to draw advantages from massive amounts of data, scalable at near-zero cost, results in feedback loops generating market concentration – what has been referred to as ‘digital monopolies’ or ‘dataopolies’. Third, through the strategic employment of demand- side economies of scale – so-called ‘network effects’ (Rochet and Tirole, 2003 ): since the value of using a platform is a function of the number of market participants, incumbents are strongly favored (McAfee and Brynjolfsson, 2017). The result is a ‘feedback loop that produces monopolies’ (Parker et al, 2016 , 6), leading to most mature platform markets being dominated by one or two giants (Peck and Phillips, 2020).As platforms become truly valuable only if they can claim control over a key resource, competition plays out as winner-take-all turf wars that systematically favour capital and scale, in which dominant platforms leverage power in one sector to override competition in others (Cusumano et al, 2020). Unlike the monopolies of the Fordist era, the new form of monopoly power is not based on vertically integrated corporations and direct ownership, but on digital capacities for market control and manipulation ( Peck and Phillips, 2020 ; Zuboff, 2019). The result is that corporations grow and expand according to a data-centric logic – continually spreading their roots to claim control of the infrastructure on which their rivals depend, and extend their data extraction into new areas – capturing and consolidating markets through what Srnicek (2017, 256) describes as a ‘rhizomatic form of integration.’ As a result of such horizontal expansion, platform firms spread and compete across a range of markets: Amazon (originally a bookstore), Google (originally a search engine), and Meta (originally a social networking website) are now engaged in turf wars to claim control over diverse market segments."

(https://www.researchgate.net/publication/376715056_Platforms_as_States_The_Rise_of_Governance_through_Data_Power)