In the period leading up to the dot-com bubble the opening of the information age was widely heralded. It was going to bring new dynamism to the economy and presented huge opportunities for profit making and expansion. It did of course lead to massive profits and massive expansion. However, a large number of companies were soon viewed by investors as vastly over-valued, leading to a contraction. The fantastic nature of the new economy did not lead to steady long-term growth in the same way that the industrial revolution had. It similarly failed to demonstrate the growth that the more recent post-war boom did. Instead it lead to a credit bubble. The first credit bust was mitigated by an expansion of cheap-credit. However, this culminated in the financial crisis of 2008.
During the French revolution, the masses demanded that there be a maximum placed on the price of bread. This was a move which they required to survive as inflation was causing the price of bread to rise rapidly. However, the repercussions of this demand were tremendous. The price of bread depended on the price of everything which was used to make the bread. In order to solve the problem of bread prices they had to solve the problem of the “general maximum”. The government constructed schedules to enforce the prices of general commodities, yet the profits which could be made from avoiding these schedules was tremendous. This created a huge incentive towards illegality. In the end, to save the general maximum required the imposition of extreme fines, and finally, at the demand of the masses, execution by guillotine. In the French revolution, to stop the manifestation of price in the capitalist system required terror.
In our new economy exactly the opposite problem will be realised. Only through treat and terror will the manifestation of price be saved. Political and economic forces are already gathering to ensure that this is the case. Something deep in the organisation of the economy will have to change. The only question which remains is: which way will we change?
The information age's capacity to change the way we live is very real. In 1983 hardly anyone would have imagined that in 2011 nearly everyone in the West would carry tablets and phones that would outperform the then-existing, and quite rare, mainframes. Even in underdeveloped regions many people have phones that outstrip the best personal computers of 1983.
The production of knowledge has become increasingly important. Software is now a large industry projected to be around 457 billion USD by 2013 . Two of the most well-known companies in the world are Microsoft and Google. Both have global recognition and global power. Facebook is now a household name and the number of people on social networks today exceeds the number of Internet users in 2006 . China's internet growth is so explosive that it now has internet penetration to 34% of the population and gained more users in three years than the US has in total . This process of an increasingly connected world is an inexorable trend.
The entertainment industry similarly is growing at breakneck pace in the third world. India expects its entertainment industry to grow by 15% in the next three years: this despite India being one of the largest producers of film in the world. China's film market has seen 64% growth in 2010.
At the same time we have seen an enormous increase in automation. Automation has always been a major factor in generating periodic crisis in capitalist economies. The famous Luddite revolt saw 19th Century English textile artisans suffering serious lack of income due to the introduction of automated looms. The increase in productive capacity from power-looms required fewer workers. So automation is no stranger to development.
However, automation is now reaching levels never before seen. From assembly lines and powered mechanical assistance has risen a new multi-purpose automating instrument: the robot. The automotive industry was one of the first enthusiastic customers of robotics and remains a major consumer. However, the number of robots being employed in diverse production is increasing at amazing rates. China is expected to see double digit growth in its robotics industry in 2011. Foxconn, the manufacturer of the iPhone and employer of almost 1 million employees, is now planning to obtain one million robots over the course of the next three years . The cost of the robots is expected to be about three times the annual wage of a worker but that cost is expected to be recouped within one year. These estimates are likely to be somewhat overstated by Foxconn; however it certainly does not bode well for workers in its workforce. The entire Pearl River Delta is seeing a booming trade in automation. As workers demand higher wages and become more discerning about working conditions, investors are searching for ways to weaken labour’s negotiating hand.
Since the beginning of the twentieth century there have been fears that labour would have its place in the economy stolen. In the 1950s, Luddite ideas of anti-automation began to gain prominence amongst workers in the United States and elsewhere . Yet while this automation certainly did lead to unemployment of particular classes of labour, the post-war period was one of the greatest periods of growth in history. While it was bad in an immediate sense for the workers in these industries, it was good in general for the working class as productivity was high and growing and unemployment remained low into the 1970s.
The increase in automation by itself does not necessarily lead to problems for capitalism. It can create "growing pains" when large numbers of workers are thrown out of productive employment. While the productive capacity per worker increases, the profits require that there are consumers of the goods produced. Automation can continue as long as new markets are available. If unemployment due to automation spreads generally, however, there is a crisis.
The greatest impediment to the stability of growth in the system, however, has to do with the interaction of these two elements. Modern automation is not exactly like the automation of the past. Modern automation is highly computerised and in ever-greater reliance on knowledge as a fundamental component of the means of production. Modern computerised mills, for instance, are very generic, requiring only a CAD (Computer Assisted Design) schematic in order to directly produce something as complex as a Geneva Moment (a very sophisticated gear assembly). Engines are assured to be within tolerances not by inspection by expert engineers but by robots assisted by laser assemblies capable of much greater coverage and precision. In the past cloth which was cut by hand for garments is now cut by robotically controlled lasers. For each of these, a new design requires little more than a schematic with a bit of supervision and testing. One can imagine that it is not long before this supervision recedes into irrelevance.
Automation can now spread more rapidly and more generally using the more general purpose tools of robotics and knowledge production efforts for software and patterns which radically increases its flexibility. Whereas the automated looms of the past required supervision and only created a textile, the current trend in automation threatens to take even very skilled jobs. The trend will not stop with manual labour. Indeed middle class service sector jobs are also being replaced. The bank teller used to be ubiquitous but the ATM has replaced her. Store clerks are being automated away by self-checkout. Manual stocking is being replaced by RFID tracked robotic stocking. How long is it before knowledge warehousing jobs such as tech-support will be automated by natural language query interfaces? Odds are good that this will happen within a generation.
The crux of the change is not simply the fact of automation itself. It is the flexibility of automation which allows innovation with information technologies to be immediately realised as new components to a commodity. What Marxists sometimes call “Deptartment I” production, that is production of commodities used by capitalists in production of commodities, is becoming increasingly dominated by designs and software, rather than the more concrete inputs of the past. Whereas in the 1950s a new commodity would require substantial changes to large and expensive fixed capital to automate a new process, it is now possible to simply change the software or the data which drives the software.
A fundamental contradiction
This meteoric growth in automation and the general economic dependence on knowledge production generates a calamitous contradiction. Knowledge itself is not a commodity. We are merely attempting to make it look like one.
Commodities are those goods which can be produced by the investment of capital to obtain some profit at the end of the production cycle by sale for a greater amount of money than went into the constituent input commodities and labour. This requires that the goods exhibit a scarcity which is limited by production. Air is not a commodity (yet) because its production simply requires breathing and as such it is difficult to sell*. By contrast, the light from street lamps is not charged for; not because it requires no productive effort, indeed it does, but rather because it is not scarce once produced. Such goods are called public non-rival goods.
Commodities really need to be private rival goods in order to serve their role of enabling profits. While in the past, knowledge in the form of books could simulate a commodity, if with some difficulty, by limiting the reproduction to relatively expensive printing presses. However, modern digital knowledge is almost a perfect non-commodity. A film costing 100 million to produce can be copied in a tiny amount of time for a tiny fraction of a cent. Once knowledge has been produced it is almost trivially possible to copy it.
We have been attempting to make knowledge look like a commodity with the use of copyright and patents. Both of these are legal means backed up with threats from the State of fines, or, likely soon, incarceration. Copyright is growing in influence and duration. There is an informal law known as the “Mickey Mouse” rule that copyright duration will always be extended to ensure that Disney has control of Mikey mouse. The rule has held thus far. Patents are also growing in their scope. They are now even being applied to mathematics itself .
However there are new legal trends emerging. Reverse engineering, the process of how something is done, even if not patented, is illegal in some circumstances. DRM, euphemistically known as Digital Rights Management, but which is really a strait jacket designed to decrease the usability of your knowledge by making it act as if it exhibits scarcity, has required that looking at how things are made is illegal. The reason for these legal changes is that it is technically impossible for those with access to general computation to be thwarted from sharing information provided for this general computation platform. This has led us to a new war: the war on general computation itself. Prophetically, Richard M. Stallman predicted this in a dystopian short story in 1997. At the time it was regarded by some as paranoid speculative fiction. Now we have seen the first shots fired in this war.
All of these legal forays have not yet deterred people from making use of what is not scarce. While a surprisingly wide demographic views so-called "piracy" with as much of a stigma as haircuts, teenagers are exceptionally tolerant. Fewer than 1 in 10 teenagers believe that music piracy is morally wrong . The youth of this generation are growing up in a world where information is viewed as equally ubiquitous and undeserving of charge as air itself.
Capitalism requires that capital be invested for profit in order to produce commodities. Commodities require scarcity or it is impossible to charge for them. If things are not commodities we cannot invest money in their production. Such is our present conundrum.
The liberal and technological savvy spectrum of commentators has widely stated that piracy is not a fundamental problem for the production of software, music, films or really anywhere else. They have advocated for loose or non-existent patents, copyright or DRM laws and called for the unshackling of the internet. While I believe them to be on the clearly correct side of the information war, they are completely wrong in their analysis. The analysis of the right-wing and the major content producers such as publishers, software companies, record companies and film producers are all correct. The unshackling of information will lead to certain disaster for the profit motive in knowledge production.
There really are only two choices before us. There is one world in which we save the value of goods. In this world we will need to force knowledge to act like a commodity. We must bring down ever greater State coercion in fines, seizure, imprisonment, censorship etc. We will need to generously expand the security State apparatus in policing this. We will need to generously expand the judicial apparatus of lawyers and judges in adjudicating it. We will need to generously expand the state bureaucracy in order to recommend correctives.
There is another world where we abandon the profit motive and turn to a system of production which does not require it. In this world information is widely available and enjoyed. The production of information is instantly available to any who would enjoy its utility. Real goods grow in diversity and their accessible quantity. Creativity is no longer horded but can be shared synergistically.
The only reason that anyone could sensibly argue for the first world over the second world is if they are already tremendously wealthy, or they don't believe the second world can exist. Since there is no point in convincing the former, It would be better to challenge the notion that the second cannot exist. While I have in mind some ways in which this second "utopian" world could be constructed, I think that even if I did not, the former world is so dystopian that any sane person would need to look long and hard to find an alternative before simply accepting it.
* Unless it compressed but that requires productive effort and compressed air is scarce.
 The Barna Group, Ltd. Study on Music Piracy
 DataMonitor - Abstract from Global Software Industry Guide - 2008
 Chinese Film Industry Races Close to Bollywood - Times of India
 Mary Meeker: Web 2.0 presentation
 Mary Meeker says the web does not revolve around the USA any longer
 Twist their robot arm: Foxconn automation plan a forced gamble
 Forging America - Ironworkers, Adventurers, and the Industrious Revolution, 2003.
 Appeals court says only complicated math is patentable, Ars Technica