Notes for week 1 of the CPGJ Platform Capitalism reading group. The notes below relate to Evgeny Morozov’s lecture below:
The question of ‘who owns digital capitalism?’ was posed for the conference but it was one which Morozov felt uncomfortable with because it implied a separation between ‘digital capitalism’ and financialised capitalism. To illustrate the problem with this assumption, he cites Apple’s status as the largest trader of private corporate bonds in the world, currently with $180 billion of privately issued corporate bonds. They are not seen as a finance company but they have their own financial trading firm. In parallel to this, we can see public stock and private investments in technology firms coming primarily from financial institutions, particularly sovereign wealth funds. Some of the largest owners of tech firms are sovereign wealth funds of countries such as Norway, the country most exposed to the technology industry in the United States.
These firms are now central to capitalism. The total increase of stock value in the big five (Apple, Microsoft, Google, Amazon and Facebook) from January 1st 2017 to November 2017 has been $950 billion. That’s bigger than the GDP of Norway, Denmark and Sweden combined. In China, two big firms have added around $450 billion to their valuations over a similar timescale. Every single sovereign wealth fund on the planet is trying to get in on the act, both established companies through the stock markets and unlisted companies through private investment. Investment funds are now raising money from governments, with the intention of channeling this money into new ventures which are far from being listed on public markets. These investments sometimes involve national collaboration, such as the Russia-China investment fund, lending this activity a geopolitical significance. Morozov stresses the importance of understanding these flows of capital because of the corporate possibilities entailed by them. He cites the example of Uber’s valuation of $60 billion and the freedom which comes from being able to attract such huge investments without going to capital markets. For this reason, firms themselves are increasingly disinterested in going public any more, representing a significant transformation in the financial system. Underlying this trend is the lack of returns which are viable through investments in other domains, representing a mechanism through which we can begin to recover the political economy of digital capitalism which has been suppressed by epochal thinking and technological hype:
Morozov argues there are three deficiencies in how we understand digital capitalism at present:
- We are quick to imagine digital capitalism as something recent, unique, exceptional and driven primarily by technological change. In contrast, Morozov argues that the capacity of platform organisations to scale to a global level, extracting value from all corners of the world, without significant capital investment has to be traced back to two previous crises of capitalism: the crisis of profitability in the 1970s and the financial crisis of 2007/8. Previous crises have invited a solution (financialisation: a move from an economy based on manufacturing and production) which has led to accumulating problems of its own, leading to the present predicament following from 2007/8. Asset-based welfare or asset Keynesianism has sought to compensate for welfare retrenchment and stagnant wages by inflating private assets. It’s in this context that something like AirBnb can operate as a lifeline to generate stable income for many in Southern Europe. Digital technology has introduced savings in consumer expenses (facilitating the enjoyment of services without paying their full costs, because vast influxes of capital represent a near-term subsidy by institutional investors) while also offering people ways to seek to make a living, often leveraging assets like homes and cars. Our entire digital infrastructure is underwritten by firms which use advertising to underwrite the delivery of free services which would otherwise be costed. How would things look if we could add these costs into our national accounting?
- We have a very hard time periodising the history of digital capitalism. We tend to think of it as driven by trends that are permanent, driven by factors such as advertising which are then projected forward into our expectations of how the corporation will make money in future. However this model is a vulnerable one, susceptible to disruptions through ad blockers, national regulation or global stagnation. Given the centrality of advertising based services to digital capitalism in its current form, we can expect such a transition in business models. Morozov makes as plausible case that this will pivot on the deployment of the data created for advertising to the development of artificial intelligence which can be offered to there other sectors of the economy. The competitive advantage these companies have in artificial intelligence is pretty much unassailable on a number of levels, as well as their obvious capacity to hoover up artificial intelligence researchers and startups. This has geopolitical implications.There are far higher profit margins on these services than there are on advertising. We can see a precursor to this movement in IBM’s transition into providing consultancy services. The consequences of this for the public sphere are enormous.
- We need a much more ambitious approach to political and policy interventions. How do we address the ownership of the data collected for purposes of advertising? How do we address who owns artificial intelligence services that have been built with this data? This involves moving beyond simply thinking about privacy concerns, important though they are. Likewise banning firms, which misses the structural dependence which has been inculcated on platforms like AirBnb. We need to move beyond city level regulation. What is it that we can do if we move beyond this? Given the centrality to data to the future model of tech firms, getting the regulatory regime right for data becomes more crucial than ever. Might this involve collective rights to data? Municipal ownership of data?
Questions for discussion:
- Should we talk about digital capitalism or platform capitalism? Does it matter?
- When did platform capitalism start? How do we contextualise it in terms of a longer history of capitalism?
- Is advertising the primary business model of platform capitalism? What other business models are there? Under what conditions might they be superseded and what might replace them?
- What might a political agenda for regulating platform capitalism look like? How might this vary regionally and why? What are the geopolitical implications of this?