Monday, October 10, 2016

"Postcapitalism and the City"

With full awareness of the copy-and-paste irony.

From Medium:
Keynote at Barcelona Initiative for Technological Sovereignty

CCCB, 7 October 2016: The idea of postcapitalism consists of two hypotheses, about the unique effects of information technology.

First, that information technology is preventing the normal adaptation process, whereby capitalism — as a complex system — reacts to crisis, to the exhaustion of old business models, to the low profitability of old businesses and old sectors.

Second, that information technology makes utopian socialism possible.

More precisely: information technology makes possible a transition towards relative abundance, through the rapid cheapening of some things, the automation of work, and through highly intelligent utilisation of capacity — of things, raw materials, energy and human services.

In a short space of time I can only outline the basics — because for this audience — of radical, networked people in a self-proclaimed rebel city — I want to propose some rebel actions, achievable at city scale.

My argument is that information technology changes the economy in three ways.

First, it dissolves the price mechanism. The economist Paul Romer pointed out in 1990 that information goods — if they can be copied and pasted infinitely, and used simultaneously without wear and tear — must fall in price under market conditions to a value close to zero.

Whether you use marginalist economics or Marxism, the same holds true: the act of copying and pasting takes up energy, mass and some labour. But the amounts are so small that the production cost is negligible.

Of course — and Romer anticipated this — capitalism responds by inventing mechanisms that put a price on this zero-cost product. Monopolies, patents, WTO actions against countries that allow copyright theft, predatory practices common among big technology vendors.

But it means the essential market relationships are no longer organic. They have to be imposed each morning by lawyers and legislators.

This information effect on price is affecting the physical world not just the world of information goods. Just as the price of bandwidth and processing power has fallen exponentially over the past 30 years, so has the price of DNA sequencing, or the number of defects in an engineering process.
So information is having a dramatic downward impact on the cost of production of real things, and the same vortex of cheapening happens everywhere.

The second impact of information is to automate work faster than new work can be invented.
Around 47% of all jobs are susceptible to automation, say Frey and Osborne (2013). And information does more to transform work: it makes it modular, loosening the link between hours worked and wages; and it makes work possible to do outside the worplace — blurring the division between work and life.

So falling prices and the automation of work have a very disruptive impact on the normal process of adaptation.

The typical process of adaptation involves: while old processes are automated and jobs destroyed, new processes are innovated requiring high-skilled work. The products command high prices. Wages rise in the new sectors, allowing high value consumption. The whole thing meshes together into what Carlota Perez calls a new techn-economic paradigm.

It’s happened four times in the history of industrial capitalism: the industrial revolution itself, the 1850s, the Belle Epoque before 1914 and then the post-1945 boom.
Today it is not happening.

Automation is destroying high value jobs faster than it creates them; the zero price effect fights against the need to raise production costs; neoliberalism has suppressed workers’ ability to demand higher wages — and the falling cost of inputs also suppresses this.

Instead of high productivity we have low productivity plus what the anthropologist David Graeber calls millions of bullshit jobs — jobs that do not need to exist. Like the car wash, which in the space of a lifetime has changed from being typically a machine to typically five men with rags.

Capitalism’s response mechanisms — apart from the imposition of monopolies and monopoly pricing; are

a) to maximise capacity utilisation of low-skilled labour and of assets. So we get Uber, Deliveroo and AirBnB are effectively capacity utilisation businesses. Or:

b) to artificially inflate the price and profitability of labour inputs: so housing becomes the major thing wages are spent on — and healthcare and university education.

Things that in all previous eras of capitalism the elite desired to be as cheap as possible — to ease wage pressures — are now made as expensive as possible, and capital migrates away from production and from private-sector services towards public sector services.
If we do not break this cycle, you can easily see capitalism being replaced by a stagnant neo-feudalism.