Markets and Monopoly Mayhem.
The Great Convergence: Information Technology and the New Globalization, Richard Baldwin, Belknap Press, 344 pages
Each of these books represents one half of an elite consensus--the forces driving the rise of "right-wing populism" and the basis of that populism in error or misapprehension. Though written with a distinct aloofness, The Great Convergence reflects the Davos class's interpretation of the current economic order, and its conclusions lie behind every centrist politician who has suggested that working class jobs "aren't coming back" and that the great unwashed "learn to code." The Age of Surveillance Capitalism gives voice and grand historical sweep to the post-2016 anxieties of the political, technological, and media elite about the extent to which large technology companies and social media are driving and profiting from extremism, "fake news," and the destruction of democratic discourse in favor of "hive collectives" that terrify them on both the Left and the Right. While each book has serious insights to offer, what each leaves out reveals the delusions and taboos of our ruling class.
In The Great Convergence, Richard Baldwin argues that globalization underwent a fundamental shift at the end of the 20th century. If the first globalization was about a radical lowering in the cost of moving goods that made new kinds of economic structures profitable, the New Globalization was the result of a radical lowering of the cost of communications and moving "ideas," by which Baldwin means everything from intellectual property and manufacturing know-how to up-to-the-minute data on parts inventories. The result was that capital and know-how could move labor (outsourcing) anywhere across the world, not only at the level of a final product, but for any aspect of the global supply chains that underlie modern economics.
Baldwin makes some subtle distinctions that are often lost in discussions about deindustrialization and outsourcing. Because success in the New Globalization is about the optimal production in global supply chains, the unit of international competition has shrunk from the sector or firm level to that of subcontractors and individual jobs. But, paradoxically, some of this unbundling actually makes it easier to keep manufacturing in developed nations; outsourcing the manufacture of automobile wiring harnesses to Vietnam means lost American jobs, but a vehicle whose every component was "made in America" would be globally uncompetitive. These changes have made 20th-century industrial policy hopelessly out of date. Tax cuts or subsidies for research and development will not necessarily have job-creating spillover effects if firms intend to off-shore actual production while maintaining management and profits in the developed country.
Driven by the political and economic geography of global supply chains, the narrowness of the New Globalization is astounding. The titular convergence is the convergence of developing and developed world economies, but all relative growth in developing-world GDP and the vast majority of the billions of people lifted out of poverty in the 20th century came from just 11 developing nations that benefited directly or indirectly from the global supply chain revolution. The reason, according to Baldwin, is that the reduced cost of sharing ideas is a necessary, but not sufficient, condition for unbundling, which still requires strong property and contract rights, reliable and reasonably skilled labor, accessible transportation (for when in-person visits are required), and entree into a particular global supply chain, particularly those of manufacturing behemoths Germany, Japan, and the United States. As a result, particular patterns of integration emerged: Germany-Poland, the United States-Mexico, and Japan-Taiwan-China.
But Baldwins explanation for these colossal re-workings of the global economy fall short. He attributes almost the entire movement to the rise of information and communications technologies, lending everything an air of technological inevitability. The demise of American industry was just as inevitable in his telling as the emergence of global trade in the Age of Sail. The obvious alternatives are not considered. American manufacturing in China developed in the aftermath of the Chinese switching sides in the Cold War, and was part and parcel of an overarching and geopolitically aware development strategy. It was not technology that kept German and American companies out of Polish and Mexican towns only miles away, but the legal and political barriers.
A more radical narrative would look at the Great Convergence as the ultimate fruit of an atomistic, anti-nationalist vision for economic order. The postwar American project, in seeking to try to make the world safe for capitalism, faced two entangled challenges: to reduce barriers to trade, and to stave off working-class discontent. While at first export-oriented, it became clear by the 1980s that the combination was equally powerful in the other direction: reducing barriers to imports (driven by the GATT process) could place the working class into a vise between outsourcing and cost-reducing compromise. Labor recalcitrance could be punished by outsourcing, while outsourcing sent a message to American workers to get with the program and provided political cover for the pursuit of anti-labor policies for the sake of "competitiveness." The end of the Cold War spread this vision around the world with alarming speed, because it left the United States and its allies in substantial control of international investment, development aid, and the global financial system. Contra Baldwin, the developing world changing its tune on trade protectionism was not due to education or enlightenment, but the firm carrots and sticks of the Washington Consensus.
That doesn't mean that information technology doesn't play an important role in this process. Baldwin is correct that new communications links make a certain intensity of competition of coordination more viable (like outsourcing just-in-time parts deliveries or customer service phone calls). But it plays a role in appeasing the disenfranchised working class as well; hundreds of thousands of young men who can't find decently paid work are compensating with alluring entertainment and video games. But outsourcing wasn't the inevitable result of technological change, and encouraging the "onshoring" of American jobs isn't just about productivity and labor costs, but about creating a level playing field that compensates for foreign protectionism, subsidies, financial manipulation, shoddy regulation, and a tax structure that rewards shipping American jobs overseas.
Where Baldwin provides an accessible framing of contemporary economics, Zuboffs Age of Surveillance Capitalism aims to conceptualize and clarify a new mode of capitalism. Her book is well-timed, as in the wake of 2016, Big Tech companies are under fire from the Right by conservatives upset about perceived platform bias and from the Left by those of our credulous elites who believe that Russian trolls buying political Facebook ads represents a vital threat to our democracy.
Zuboffs fundamental idea is that a new form of capitalism is emerging based around a new form of surplus--the capturing, storing, processing, and reselling of information about human behavior. This "behavioral surplus" is akin to the labor surplus of classical Marxist analysis (the gap between the cost of capital and labor and what products can be sold for), except that the exchange occurs not only within the realm of economic activity but in and across every area of life, as human activity is increasingly mediated through the digital realm. Whereas Marx's alienation of labor separated and commoditized human creativity from the human creator and their conditions of life, surveillance capitalism's alienation of behavior creates and commoditizes a golem of human life that is controllable and predictable (able to be repurposed for marketing, financial predictions, etc.) quite apart from, and perhaps opposed to the interests of, the human beings whose data is being threshed to create these predictive models.
The phenomenology of this book is better than its political economy. Zuboff captures something of the experience of living with surveillance capitalism, of having one's experiences captured, reprocessed, and resold to you with the poking and prodding and nudging of cybernetic systems. Zuboffs book is overflowing with sociological insight on subjects ranging from how the 1960s led to a change in how digital capitalism is experienced (by fostering a demand for individualization) to the role of the 2000 dot-com bust in forcing Google's premature embrace of advertising. Steady insight and clever anecdotes, matched with Zuboffs crisp writing, help maintain the reader's interest far longer than most inches-thick doorstoppers with "capital" in the title. But Zuboff seems enamored of the supposed "unprecedentedness" of her argument. She describes modern data scientists as the descendants of behavioral scientist B.F. Skinner but fails to contend with the classic critique of behavioralism: that it simply doesn't work. Nowhere in her 30-page index will one find mention of cybernetics, the postwar scientific discipline that gave rise to modern artificial intelligence research and had many of the same utopian aspirations as todays tech prophets, and faced many of the same critiques.
Zuboff constructs a new vocabulary to describe and elaborate her notions of "behavioral surplus" and the new institutional forms and practices it is leading to. At times, this comes across as tautological and hysterical. Zuboff seems to take for granted that Google displaying a search ad for Starbucks in the morning when one might be in want of a caffeinated buzz is a sinister "intervention] in our experience to shape our behavior in ways that favor surveillance capitalists commercial outcomes," with new "automated protocols designed to influence and modify human behavior at scale as the means of production is subordinated to a new and more complex means of behavioral modification." Could not one describe a Coca-Cola radio ad playing on a hot summers day the same way? As thinkers like Adorno understood generations ago, molding and hijacking desire is an essential aspect of modern capitalism. The surveillance capitalism might be using powerful new means, but it is hardly the "mutation" from some other hypothetical, more humanistic version of capitalism that Zuboff says it is.
This is a book to be wrestled with, and others are (Evgeny Morozov's biting 17,000-word review feels as long as the book). But no one has yet addressed what I believe to be the most telling problem with the book: that Zuboff is simply wrong about how companies like Google and Facebook make money. Zuboff asserts that, following Google's construction of a rudimentary ad personalization system, "henceforth, revenues and growth would depend upon more behavioral surplus." This is, in fact, the central claim of the book: that a new form of capitalism that depends upon the capture and exploitation of behavioral surplus is emerging. But she provides zero evidence for this claim and, for a business school professor, seems uninterested in analyzing Google and Facebooks sources of profit. She interviews data scientists and innovators, but no MBAs, accountants, or lawyers.
Facebook and Google make money when users click on ads. Surveillancebased personalization increases the click-through-rate (the percentage of ads shown that are clicked on) from the low single digits... to the slightly higher single digits. The most important surveillancebased marginal improvements in ad performance are the most trivial. If you submit a Google search for an appliance part or visit an online shop, you'll see ads for dryer motors and such for a little while. You can find them with about the same accuracy as TV-demographic or periodical advertisements. Google and Facebook have actually made high-quality, targeted advertising much more accessible to small businesses--large corporations have always benefited from the kinds of "behavioral modification" Zuboff is worried about. A minuscule fraction of these ads, of course, are actually clicked on: about 2 percent for search ads (where you are actively looking for the thing being advertised) and a whopping 0.3 percent for display ads on websites. If Google gave up all of the "surveillance" behaviors Zuboff identified and limited themselves to personalizing ads based on search terms alone, the quality of ads would decline only marginally. The volume of clicked-on ads, and the prices advertisers are willing to pay for them, determine revenues.
If Google's profits do not, in fact, rely on "behavioral surplus," where do they come from? Whence sustainable profits in capitalism always come: monopoly. Even as internet usage has exploded worldwide, Google maintains 92 percent of all search market share. But search is only a small portion of Google's overall ad sales. The fundamental currency of the internet is not surveillance or data but attention. As internet video was first becoming feasible, Google bought YouTube. As display and banner ads sales on websites became automated, Google acquired Doubleclick, the market leader in web advertising. Google's profits emerge not because they are so good at personalizing ads to you, but because almost every ad you see on the internet is actually a Google ad.
Peter Thiel has Google's number. In a remarkable exchange with then-Google CEO Eric Schmidt, Thiel pointed to Google's then-$50 billion pile of cash as evidence that Google is no longer a technology company, but a monopolist (protected by intellectual property, network effects, and the ability to acquire or destroy any real competitors). Within Zuboff's framework, Google should be making capital investments to acquire ever more data. It generally isn't doing that; its biggest investments are in machine learning, data centers, cloud infrastructure, real estate, and acquisitions. It is heavily focused on competing for market share in enterprise cloud computing services (through Google Cloud) and maintaining market share for the future of advertising--mobile and voice computing. Within the logic of financial capitalism, the share value of a company depends on persuasive narratives of future profit, usually tied to how financial analysts see the growth trajectory of different sectors and business models over time.
So even if all of Google's profits are now and will for the foreseeable future emerge from network position and monopolistic control of huge swathes of internet architecture, the company cannot ever admit that, because it would indicate the company's future revenue growth had slowed and that it was vulnerable to antitrust action. It must therefore maintain what Thiel called "the ministry of propaganda"--"moonshot" high technology efforts like flying cars and quantum computing to achieve profitable breakthroughs. They seem straight out of science fiction because they are science fiction.
The profits and share prices of big technology companies also benefit from two specific legal strategies. The first is that they are businesses suspiciously well-tailored to avoid the enforcement of antitrust action, especially in the United States, where radically laissez-faire theories have made cost to the consumer essentially the only criterion (free service, no cost to consumers). More importantly, the ephemerality of internet companies makes it easy to book profits wherever one wishes. American businesses can sell ads to American consumers on American servers run by American engineers, but Google can book the profits in Ireland by claiming that its profits come from its intellectual property held there.
When Zuboff is writing on Silicon Valley's utopian aspirations, subtle new forms of manipulation and control, and how surveillance and information systems are being used to shape our minds and desires, she is compelling. But despite writing a book about capitalism, Zuboff has failed to follow the money. No doubt companies like Google and Facebook represent a new development in the history of capitalism. But that is due to as much to the combination of rapid scalability, monopoly, and effect on human consciousness as to surveillance or data accumulation. She has identified a real new struggle for power and profit, but one whose greatest impacts are yet to come.
An overemphasis on the exotic blinds Zuboff to the quotidian manipulations of attention, market power, and profit that are actually driving our new Gilded Age. And a focus on for-profit surveillance leads to almost no grappling with the role the state will play. The province of control and discipline has always been far more the interest of the state, and the greatest innovator of surveillance power is the Communist Party of China. Zuboff assumes that surveillance and data-based control systems in the West will be market-led; advanced surveillance systems coming home from the War on Terror should make us question this conclusion.
Perhaps a far more troubling problem for Zuboff s model is that it excludes precisely the kinds of behavioral modification that ought to worry us. For Zuboff, the concern is the gap between personalization aimed at the user's interests and personalized targeting for the surveillance capitalist's profit (again, advertising). And yet, targeted, paid advertisements make up an infinitesimal fraction of how users experience platforms like Facebook and Google. All the evidence suggests that the organic behavior of users, and the ways it is amplified and channeled as personalized content to other users for the purposes of maximizing engagement, is the real challenge of these platforms for their content, and one that corporations are truly at a loss as to how to counter. What James Poulos calls the techno-gnostic empire of memory, hyper-individuation, and behavioral control is going to be way bigger, weirder, and more coercive than Google.
Baldwin claims his titular Great Convergence is the inevitable result of technological imperatives. Zuboff offers some minor tinkers to restrain the surveillance parts of surveillance capitalism, but still clings to the vision of capitalism restored to "serve our genuine interests" as consumers. Neither reckons with the philosophical and historical roots of the present populism. The outsourcing of American jobs was not the product of technological inevitability, but geopolitical shifts and a bipartisan elite assault on American workers. The new Gilded Age is not the product of "the capture of behavioral surplus" (real challenges though it raises), but of the exploitation of the American legal and political system to lock in extravagant shareholder returns on the backs of the American taxpayer. While these books have much to offer, do not accept their counsels of despair. The American people may yet assert the primacy of politics over economics, of self-government over artificial and usurious profit, and restrain the financial and corporate order built upon their backs.
by JONATHAN ASKONAS
Jonathan Askonas is an assistant professor of politics at the Catholic University of America and fellow at the Center for the Study of Statesmanship.
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|Publication:||The American Conservative|
|Date:||Sep 1, 2019|
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