1.

It is supremely ironic that the Internet, the long-ballyhooed champion of increased consumer power and cutthroat competition, seems, in the end, to be more a force for monopoly. To be clear, the Internet is still crystallizing as an area of capitalist development, and historically speaking, appears quite dynamic, so it is premature to act as if the dust has settled. Nevertheless, the monopolistic tendencies in the overall economy are powerful, and the Internet adds a couple of additional wrinkles of its own to the mix.

2.

In sum, the Internet, left prey to capitalism—to having the hunt for profits dictate its development—has veered off in a direction that downplays and undermines, rather than exploits and accentuates, the most revolutionary and democratic aspects of its technology.

The following is an interesting essay in the Monthly Review, critiquing the embeddedness of the internet in capitalist logics.

* The Internet’s Unholy Marriage to Capitalism. John Bellamy Foster and Robert W. McChesney

It starts with the obligatory paragraph critiquing the cyber-utopianism of the early 90’s.

Here’s what they write:

There was going to be a worldwide two-way flow, or multi-flow, a democratization of communication unthinkable before then. Corporations could no longer bamboozle consumers and crush upstart competitors; governments could no longer operate in secrecy with a kept-press spouting propaganda; students from the poorest and most remote areas would have access to educational resources once restricted to the elite. In short, people would have unprecedented tools and power. For the first time in human history, there would not only be information equality and uninhibited instant communication access between all people everywhere, but there would also be access to a treasure trove of uncensored knowledge that only years earlier would have been unthinkable, even for the world’s most powerful ruler or richest billionaire. Inequality and exploitation were soon to be dealt their mightiest blow.

The assumption is that nothing of the sort happened, but that is a little short isn’t it. Because indeed, horizontal flows of communication did happen, and on an unprecedented scale; corporate mishandlings have been exposed and consumerist struggles won; government secrets have been exposed; and many people from the poorest and remote areas, have access to material they did not have access to before. Nothing of this is an ‘automatic’ result of the technology itself, but of what constructive, resisting and struggling people have made of it. There is therefore nothing utopian about these relative, emerging, but nevertheless real achievements and structural changes in our society. These changes have taken place within capitalism, but also given new tools to working people everywhere. Of course, at the same time, many things have not changed, a lot of things have gotten worse, etc… But I feel this article goes off to a wrong start by ignoring the structural changes that have taken place. The important thing here is to take into account the longer-term flow of history. The print revolution, i.e. how it eventually undermined the continuation of the monopoly of the Church and feudal structures, took at least four generations, but in reality a few hundred years of chaotic change. A lot of things got worse, but the communication and political logic of society had to change, and changed. What is missing in this article, which is really in the end a plea to put the internet back under public regulation if not ownership, is a sense that technologies such as the internet are objects of struggle, and that it is not a matter of automatic evolution, either in a utopian or a capitalist sense, but rather of how citizens and working people can organize themselves to actually realize the potential of the new technological affordances. Even if the maximum promise of the technology is not attained, and attaining that is of course very unlikely, the choice is not between just a continuance of monopoly capitalism that quietly integrates the new media, but is between a new social compact that integrates the reality of the new technology in an adapted structure, or, as we claim here at the P2P Foundation, that is carries the possibility of a phase transition towards a new type of society and civilisation, based on the core potential of the technology being realized. There is of course, nothing automatic about such developments.

In this sense, despite its interesting features and commentaries, the article is quite disappointing.

The rest of the article focuses on the domination of the market logic over the internet’s development, and is more interesting as a survey of this.

It makes the entirely valid point that under the domination of the logic of profit maximisation, the internet will not fullfill its promise, but can and will become a tool for monopoly, control, and surveillance.

Here is an excerpt explaining the gist of the article:

“This economic context points to the paradox of the Internet as it has developed in a capitalist society. The Internet has been subjected, to a significant extent, to the capital accumulation process, which has a clear logic of its own, inimical to much of the democratic potential of digital communication, and that will be ever more so, going forward. What seemed to be an increasingly open public sphere, removed from the world of commodity exchange, seems to be morphing into a private sphere of increasingly closed, proprietary, even monopolistic markets.

Our argument is not a socialist argument against capitalism’s anti-democratic tendencies per se, which we then extend to the case of the Internet. Although we would not be uncomfortable taking such a position, it would make something as extraordinary and unique as the digital revolution too much a dependent variable—and it would allow those opposed to socialism to dismiss the argument categorically. Instead, we base our argument on elements of conventional economic thought, produced by scholars who, by and large, favor capitalism as a system. Our critique, derived from classical and mainstream terms of analysis, will repeatedly demonstrate the weaknesses of allowing the profit motive to dictate the development of the Internet.

In particular, we argue that applying the “Lauderdale Paradox” (or the contradiction between public wealth and private riches) of classical political economy makes a strong case that the most prudent course for any society is to start from the assumption that the Internet should be fundamentally outside the domain of capital. We hope to provide a necessary alternative way to imagine how best to develop the Internet in contrast to the commodified, privatized world of capital accumulation. This does not mean that there can be no commerce, even extensive commerce, in the digital realm, but merely that the system’s overriding logic—and the starting point for all policy discussions—must be as an institution operated on public interest values, at bare minimum as a public utility.

It is true that in any capitalist society there is going to be strong, even at times overwhelming, pressure to open up areas that can be profitably exploited by capital, regardless of the social costs, or “negative externalities,” as economists put it. After all, capitalists—by definition, given their economic power—exercise inordinate political power. But it is not a given that all areas will be subjected to the market. Indeed, many areas in nature and human existence cannot be so subjected without destroying the fabric of life itself—and large portions of capitalist societies have historically been and remain largely outside of the capital accumulation process. One could think of community, family, religion, education, romance, elections, research, and national defense as partial examples, although capital is pressing to colonize those where it can. Many important political debates in a capitalist society are concerned with determining the areas where the pursuit of profit will be allowed to rule, and where it will not. At their most rational, and most humane, capitalist societies tend to preserve large noncommercial sectors, including areas such as health care and old-age pensions, that might be highly profitable if turned over to commercial interests. At the very least, the more democratic a capitalist society is, the more likely it is for there to be credible public debates on these matters.

However—and this is a point dripping in irony—such a fundamental debate never took place in relation to the Internet. The entire realm of digital communication was developed through government-subsidized-and-directed research and during the postwar decades, primarily through the military and leading research universities. Had the matter been left to the private sector, to the “free market,” the Internet never would have come into existence. The total amount of the federal subsidy of the Internet is impossible to determine with precision.

As Sascha Meinrath, a leading policy expert, puts it: calculating the amount of the historical federal subsidy of the Internet “depends on how one parses government spending—it’s fairly modest in terms of direct cash outlays. But once one takes into account rights of way access that were donated and the whole research agenda (through the Defense Advanced Research Projects Agency, the National Science Foundation, etc.), it’s pretty substantial. And if you include the costs of the wireless subsidies, tax breaks (e.g., no sales taxes on online purchases), etc., it’s well into the hundreds of billions range.”4 For context, Meinrath’s estimate puts the federal investment in the Internet at least ten times greater than the cost of the Manhattan Project, allowing for inflation.”

Focusing on the monopolisation quote with which we started our treatment of this essay (see above), they then mention ‘network effects’ as a key process in achieving corporate dominance by monopolistic players:

“Most important, the Internet adds to the mix what economists term “network effects,” meaning that just about everyone gains by sharing use of a particular service or resource. Information networks, in particular, generate “demand-side economies of scale,” related to the capture of customers as opposed to supply-side economies of scale (prevalent in traditional oligopolistic industry) related to cost advantages as scale goes up. The largest firm in an industry increases its attractiveness to consumers by an order of magnitude as its gets a greater market share—similar to how a hurricane picks up speed as it crosses the ocean on a hot summer day—and makes it almost impossible for competitors with declining shares to remain attractive or competitive. Wired editor Chris Anderson put the matter succinctly: “Monopolies are actually even more likely in highly networked markets like the online world. The dark side of network effects is that rich nodes get richer. Metcalfe’s law, which states that the value of a network increases in proportion to the square of connections, creates winner-take-all markets, where the gap between the number one and number two players is typically large and growing.”

Google is a classic example of economies of scale and monopoly power; as it grows larger, its search engine becomes ever more superior to erstwhile competitors, not to mention it gains the capacity to build up traditional barriers-to-entry and scare away anyone trying to mess with it.”

They add, and we conclude our treatment, with these last two quotes:

1.

The idea that new technological breakthroughs will create competition online is increasingly absurd, and if it does somehow happen, it will only be a temporary stop on the way to more monopoly. The exceptional case is not actual competition—that is not even in the range of outcomes—but, instead when a new application avoids being conquered by an existing giant and creates another new monopolistic powerhouse (a new Facebook, for example) because the upstart is able to escape the clutches or enticements of an existing giant laden with cash, and create its own “walled garden” of economic value. The name of the game in such “walled gardens” of value is to exploit what economists now sometimes call “an enhanced surplus extraction effect,” that is, the increased ability to fleece those walled within.

2.

We are entering a world of digital feudalism, where a handful of colossal corporate mega-giants rule private empires. Advertising will be given every opportunity to exploit the system, and any meaningful notion of privacy will have to be sacrificed. “For once the fate of a network—its fairness, its rule set, its capacity for social or economic reformation—is in the hands of policymakers and the corporations funding them,” one of the earliest champions of the democratic Internet recently observed, “that network loses its power to effect change.