‘‘The Fragment on Machines’’
The scene is Kentish Town,
London, February 1858, sometime around 4am. Marx is a wanted man in Germany and is hard at work scribbling thought-experiments and notes-to-self. When they finally get to see what Marx is writing on this night, the left intellectuals of the 1960s will admit that it "challenges every serious interpretation of Marx yet conceived". It is called "The Fragment on Machines".
In the "Fragment" Marx imagines an economy in which the main role of machines is to produce, and the main role of people is to supervise them. He was clear that, in such an economy, the main productive force would be information. The productive power of such machines as the automated cotton-spinning machine, the telegraph and the steam locomotive did not depend on the amount of labour it took to produce them but on the state of social knowledge. Organisation and knowledge, in other words, made a bigger contribution to productive power than the work 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, outweighing the actual labour spent creating a machine, the big question becomes not one of "wages versus profits" but who controls what Marx called the "power of knowledge".
In an economy where machines do most of the work, the nature of the knowledge locked inside the machines must, he writes, be "social". In a final late-night thought experiment Marx imagined the end point of this trajectory: the creation of an "ideal machine", which lasts forever and costs nothing. A machine that could be built for nothing would, he said, add no value at all to the production process and rapidly, over several accounting periods, reduce the price, profit and labour costs of everything else it touched.
Once one understands that information is physical, and that software is a machine, and that storage, bandwidth and processing power are collapsing in price at exponential rates, the value of Marx's thinking becomes clear. People are surrounded by machines that cost nothing and could, if one wanted them to last forever.
In these musings, not published until the mid-20th century, Marx 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 has imagined something close to the information economy in which the world lives today. And, he wrote, its existence would "blow capitalism sky high".
Neoliberalism, then, has morphed into a system programmed to inflict recurrent catastrophic failures. Worse than that, it has broken the 200-year pattern of industrial capitalism wherein an economic crisis spurs new forms of technological innovation that benefit everybody.
That is because neoliberalism was the first economic model in 200 years the upswing of which was premised on the suppression of wages and smashing the social power and resilience of the working class. If one reviews the take-off periods studied by long-cycle theorists—the 1850s in Europe, the 1900s and 1950s across the globe—it was the strength of organised labour that forced entrepreneurs and corporations to stop trying to revive outdated business models through wage cuts, and to innovate their way to a new form of capitalism.
The result is that, in each upswing, people find a synthesis of automation, higher wages and higher-value consumption. Today there is no pressure from the workforce, and the technology at the centre of this innovation wave does not demand the creation of higher-consumer spending, or the re-employment of the old workforce in new jobs. Information is a machine for grinding the price of things lower and slashing the work time needed to support life on the planet.
As a result, large parts of the business class have become neo-luddites. Faced with the possibility of creating gene-sequencing labs, they instead start coffee shops, nail bars and contract cleaning firms: the banking system, the planning system and late neoliberal culture reward above all the creator of low-value, long-hours jobs.
Innovation is happening but it has not, so far, triggered the fifth long upswing for capitalism that long-cycle theory would expect. The reasons lie in the specific nature of information technology.
People are surrounded not just by intelligent machines but by a new layer of reality centred on information. Consider an airliner: a computer flies it; it has been designed, stress-tested and "virtually manufactured" millions of times; it is firing back real-time information to its manufacturers. On board are people squinting at screens connected, in some lucky countries, to the internet.
Seen from the ground it is the same white metal bird as in the James Bond era. But it is now both an intelligent machine and a node on a network. It has an information content and is adding "information value" as well as physical value to the world. On a packed business flight, when everyone's peering at Excel or PowerPoint, the passenger cabin is best understood as an information factory.
But what is all this information worth? There is no answer in the accounts : intellectual property is valued in modern accounting standards by guesswork. A study for the SAS Institute in 2013 found that, in order to put a value on data, neither the cost of gathering it, nor the market value or the future income from it 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. Something is broken in the logic one uses to value the most important thing in the modern world.
The great technological advance of the early 21st century consists not only of new objects and processes, but of old ones made intelligent. The knowledge content of products is becoming more valuable than the physical things that are used to produce them. But it is a value measured as usefulness, not exchange or asset value. In the 1990s economists and technologists began to have the same thought at once: that this new role for information was creating a new, "third" kind of capitalism—as different from industrial capitalism as industrial capitalism was to the merchant and slave capitalism of the 17th and 18th centuries. But they have struggled to describe the dynamics of the new "cognitive" capitalism. And for a reason. Its dynamics are profoundly non-capitalist.
During and right after the second world war, economists viewed information simply as a "public good". The US government even decreed that no profit should be made out of patents, only from the production process itself. Then crisis managers began to understand intellectual property. 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. He noted: "precisely to the extent that it is successful there is an underutilisation of information."
One can observe the truth of this in every e-business model ever constructed: monopolise and protect data, capture the free social data generated by user interaction, push commercial forces into areas of data production that were non-commercial before, mine the existing data for predictive value—always and everywhere ensuring nobody but the corporation can utilise the results.
If one restates Arrow's principle in reverse, its revolutionary implications are obvious: if a free market economy plus intellectual property leads to the "underutilisation of information", then an economy based on the full utilisation of information cannot tolerate the free market or absolute intellectual property rights. The business models of all modern digital giants are designed to prevent the abundance of information.
Yet information is abundant. Information goods are freely replicable. Once a thing is made, it can be copied/pasted infinitely. A music track or the giant database one uses build an airliner has a production cost; but its cost of reproduction falls towards zero. Therefore, if the normal price mechanism of capitalism prevails over time, its price will fall towards zero, too.
For the past 25 years economics has been wrestling with this problem: all mainstream economics proceeds from a condition of scarcity, yet the most dynamic force in the modern world is abundant and, as hippy genius Stewart Brand once put it, "wants to be free".
There is, alongside the world of monopolised information and surveillance created by corporations and governments, a different dynamic growing up around information: information as a social good, free at the point of use, incapable of being owned or exploited or priced. Economists and business gurus are attempting to build a framework to understand the dynamics of an economy based on abundant, socially-held information. But it was actually imagined by one 19th-century economist in the era of the telegraph and the steam engine. His name? Karl Marx.
Vol. 48, No. 7, Aug 23 - 29, 2015