New economy? Old exploitation!

By Chris Reynolds

Not a millionaire? Then you must be living in the "old economy"! Not wealthy? Then you haven't caught up with technology!

That's been the line from journalists, pundits and politicians. Blowhards like Bill Clinton and Tony Blair have suggested, with straight faces, that the answer to global poverty is to get more people on the Internet. Even radicals, like Ignacio Ramonet of France's Le Monde Diplomatique, opine that: "Information and communications technologies have combined with the digital revolution to carry us into a new era whether we like it or not... The Internet is effectively the heart and the synthesis of this great transformation... We could paraphrase... Marx... 'Give me the computer, and I'll give you globalisation'."

The Internet share crash has wiped away a few smirks, and maybe some of the half-appalled, half-enthralled grimaces of anguish too. Actually, what has been called "the new economy" will not end with the Internet share crash. It will almost certainly continue to boom. But that is in large part because it is not, and never was, a "new economy" at all. It is and was a new froth on top of the old brew of capitalist exploitation.

It is a froth of some size - like the foam on the top of the "new-economy" trademark capuccino - and, as we'll see, with some flecks of chocolate in it for socialists and the working class. But froth nonetheless.

The Internet explosion

In 1990 there were only about 300,000 people linked to the Internet. In 1995, 26 million. Today, about 300 million. The volume of Internet traffic doubles every 100 days. Trade over the Internet in the USA was zero a few years ago. In retail (B2C) it has risen to about $8 billion in 1998 and between $16 billion and $40 billion in 1999 (depending on which estimate you believe); in business-to-business (B2B), to $43 billion (1998) and $109 billion (1999). (All $ figures here are US dollars). E-commerce in Europe was about $10 billion in 1999. B2B trade worldwide was about $145 billion in 1999. Forrester Research has claimed that trade over the Internet worldwide will rise to $6,900 billion by 2004, and it's not impossible.

Estimates of advertising via the Internet in the USA in 1999 vary between $1.8 billion and $4.7 billion; by all accounts it is doubling each year.

To keep due proportion, remember that total US output is a bit short of $10,000 billion a year; e-commerce is between 0.7% and 1.4% of all retail sales in the USA; even in the sectors where Internet trade is strongest-established (books, computers, music) optimists estimate its share of the US market at only 10% by the end of this year; and Internet advertising is only between 2% and 5% of the whole US advertising budget. Most important of all, remember that the majority of the world's people never use phones or computers; that most struggle to meet their most basic "old economy" needs (food, clean water, elementary health care, basic education); and that global inequality is increasing fast. The Internet has spread much faster than any previous mass technology, much faster than TV, the telephone, cars, electricity, railways, or even the desktop computer. Although it is still trading at a loss, Amazon.com has been able to become one of the world's leading booksellers in a couple of years. Even Microsoft took longer to become a giant.

The "new technology" share-price boom became almost a Ponzi scheme at its peak - it "made sense" for wealthy people to pay ridiculous prices for dot.com shares, as long as they reckoned other wealthy people would pay even more ridiculous prices for them a few months later - but it arose on a real basis. Some dot.com companies will grow extraordinarily fast and come to dominate stable markets; the people who bought their shares when they were just starting out will become very rich indeed.

A technological revolution?

But this is not a technological revolution. On the contrary: the Internet boom could not have been anywhere near so fast were it not for the fact that technologically, it is not very revolutionary at all, and it has very little to do with any transformation of production. The technology of the Internet amounts, essentially, only to putting together three bits of equipment already well-established and made relatively cheap and widespread: the telephone line, the modem, and the computer. That is why it could spread so fast.

Hardly any commodities are produced on the Internet. For capitalist purpose, it is a channel to organise buying and selling and for advertising, and that's about all. Amazon.com has made no changes at all to the technology of book-production.

In the delirium of the last couple of years, some pundits have forgotten that buying and selling and advertising are not "wealth creation"! The goods and services to be bought, sold, and advertised still have to be produced, back in the boring "old economy"!

There has been a technological revolution in recent times, that of microelectronics, which has made production in a vast range of industries speedier and more flexible. But that started in the 1970s. It has played a part in the vast economic upheavals of the last 20 years. It has not produced unprecedentedly (or even respectably) speedy growth, or a new stability for capitalism. Less glamorous "new technologies", like containerisation in the ports, have been much more important to globalisation than the Internet or even the computer.

"New economy" enthusiasts try to evade the verdict of the statistics in two ways. They point to the US statistics of the last couple of years, which show a somewhat higher rate of productivity growth, and plead that it always takes some time for the benefits of technological revolutions to work their way through. And they claim that the official statistics underestimate growth anyway, because they can't capture the qualitative improvements brought by new products (how many carrier pigeons equal one telephone?)

No new start for capitalism

On the second point, there is no reason to suppose that the underestimation is greater than before. What is greater than before is the overestimation of real growth by official statistics, for two reasons. First, they fail to set the costs of greater social decay, pollution, and environmental destruction against the benefits of people owning more gadgets. Second, they include as extra "economic output" an expanding mass of activity - advertising, financial manipulations, and so on - which is actually unproductive even from the point of view of capital-in-general (as distinct from the individual advertising or financial capitalists). On the first point, the upturn in productivity figures is confined to the USA, is unspectacular, and may be mostly an artefact of a revision of statistical methods. To claim that economic growth is driven by technological revolutions, but then say that the effects of those technological revolutions appear only after long and variable lags, gives you a theory that explains everything and nothing. Every surge of economic growth can be "explained" as a delayed result of whatever seems to have been the most recent technological revolution; every depression by the exhaustion of one technological revolution and the claim that the next has not "paid off" yet. The sober truth seems to be that rapid accumulation of capital - permitted by certain social and world-market conditions - generates rapid technical innovation, rather than vice versa.

The story of the dot.com boom from the capitalist point of view can be summed up in two sour comments from business experts. The Investor's Business Daily (10 April 2000): "It is the advertising industry that has gained the most from the dotcom boom as most ecommerce companies' capital went to advertising agencies, as eager startups sought to promote against the old exploitation.their brands". And the ActivMedia research company:

"Competition online is increasingly a race to run professional businesses that just happen to use a new communication tool, the Internet, as the primary marketing channel. It is rapidly becoming integrated into the world of traditional business..." From a socialist point of view there is, however, more to say. Much of the talk about an "information economy" is wildly exaggerated. No-one can eat, wear, live in, or travel by "information". Moreover, the ballyhoo is not even new: Marshall McLuhan was saying very much the same sort of thing in the 1960s, though basing it then on TV rather than the Internet.

However, "information" is becoming increasingly important in the sense that the economic application of science is increasing, and communications are becoming much quicker and more wide-ranging. This has double-edged effects. Capitalists use information technologies to increase their control over workers as producers, and to boost their efforts to manipulate workers as consumers.

Yet it is also true that information is harder to package into the commodity-form than other products. However hard the capitalists try, a lot leaks out - see, for example, the rise of "freeware" and the widespread pirating of commercially-produced software. The great bulk of what's on the Internet, and almost all of the most useful stuff, is put there for free. This is not unprecedented, nor something that capitalism cannot find ways round. Consider advertising, which Samuel Johnson reckoned had reached a peak beyond which no expansion or improvement was conceivable back in the 18th century. There, workers make a product which is bought - and buyers buy it not in order to consume it and thus satisfy their needs or wants, but rather to have others consume it in the hope that they will become dis-satisfied and develop new needs or wants. Consider radio and television: until the recent rise of pay-TV, these were "consumed" free, paid for by taxes or advertising revenues or (for public broadcasting in the USA) charity fund-raising

Openings for socialists

Advertising, radio and TV have not subverted capitalism. However, radio played a big part in the colonial liberation movements from the 1950s to the 1970s. TV played a part in generating the movement against the Vietnam war and in the East European revolutions of 1989.

The Internet has greater possibilities for subversion - more flexible, capable of transmitting more information, and harder to "jam" than rebel radio transmitters. Already the workers' movements of the less-developed countries - where Internet use is more difficult, and much less within the economic reach of the average worker - have started to use these channels on a large scale. The Workers' Liberty newsletter you are reading now would not exist but for the Internet, which makes it possible for a small and financially-strapped group to collect information, send articles to our editor, and distribute the finished newsletter electronically, to be printed locally.

There is no new economy. What may be coming into existence - what we can maybe help bring into existence by our activity - is a new global solidarity and a new international exchange of ideas for the battle against the old exploitation.