Digital Depression: Information Technology and Economic Crisis

Digital Depression: Information Technology and Economic Crisis

by Dan Schiller

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Digital Depression: Information Technology and Economic Crisis by Dan Schiller

The financial crisis of 2007-08 shook the idea that advanced information and communications technologies (ICTs) as solely a source of economic rejuvenation and uplift, instead introducing the world to the once-unthinkable idea of a technological revolution wrapped inside an economic collapse. In Digital Depression, Dan Schiller delves into the ways networked systems and ICTs have transformed global capitalism during the so-called Great Recession. He focuses on capitalism's crisis tendencies to confront the contradictory matrix of a technological revolution and economic stagnation making up the current political economy and demonstrates digital technology's central role in the global political economy. As he shows, the forces at the core of capitalism--exploitation, commodification, and inequality--are ongoing and accelerating within the networked political economy.

Product Details

ISBN-13: 9780252080326
Publisher: University of Illinois Press
Publication date: 09/15/2014
Series: Geopolitics of Information Series
Edition description: 1st Edition
Pages: 376
Product dimensions: 5.90(w) x 8.90(h) x 1.10(d)

About the Author

Dan Schiller is a professor in the Graduate School of Library and Information Science and the Department of Communication at the University of Illinois at Urbana-Champaign. He is the author of How to Think About Information and Digital Capitalism: Networking the Global Market System.

Read an Excerpt

Digital Depression

Information Technology and Economic Crisis

By Dan Schiller


Copyright © 2014 Dan Schiller
All rights reserved.
ISBN: 978-0-252-09671-6


Network Connectivity and Labor Systems

The direct historical precursor of our own moment is not the Great Depression, but the early to mid-1970s. I borrow from David Harvey, Vijay Prashad, and others in arguing that the response to the recession of the 1970s was profound; and that this response set us on a course that eventually led on to the crash of 2008. My account departs from theirs in emphasizing how these decades brought forward information and communications technology as the beating pulse of capitalist development; and I situate this shift into networks within three encompassing trends—in production, finance, and U.S. military activity.

The U.S. stock market lost nearly half of its value between 1972 and the end of 1974, plunging the market system into what was then the worst recession of the postwar era. "[T]he economies of world capitalism ground to a halt," recalls Kim Moody: "The twenty-four richest countries saw their growth rates go from 5% in 1973 to zero in 1975." Unemployment rose, not only in the United States but also throughout Western Europe, and economic inequality—held in check for a quarter century—began to increase. World trade declined in 1975 for the first time since the Second World War. The price of oil, control over which no longer expressed the preferences only of big oil companies and state agencies in the United States, Britain, and a few other imperial powers, suddenly spiked, as the Organization of Petroleum Exporting Countries demonstrated new political muscle; the U.S. price at the pump shot up 31 percent during the twelve months to April 1974. Inflationary pressures increased further, owing to the U.S. escalation of its debt-financed war in Southeast Asia.

The successful rebuilding of capitalism in Western Europe and Japan after the Second World War had engendered massive surplus productive capacity, as renewed intercapitalist competition had overtaken a succession of manufacturing industries, including steelmaking, automobiles, chemicals, textiles, and consumer electronics. Once-mighty engines of U.S. manufacturing sputtered, as a glance at the devastated industrial base of the Midwest soon would confirm. As profit rates were pinched by competition and overcapacity, political conflict further compounded the pressure on U.S. capital.

Internationally, a "Third World" political project with substantial support from the (internally conflicted) socialist Second World constrained capital's regenerative potentialities. Countries continually threatened to break out of the orbits traced for them by the U.S. State Department. Meanwhile, within the United States, profits were threatened by the rank-and-file militancy that broke out among wage earners as a "golden age" of prosperity came to a close. There continued to be millions of people—not only poor whites but also, and disproportionately, African Americans and Mexican Americans—for whom an adequate standard of living was a mirage. Equitable access to good education, health care, housing, and other standard features of social well-being simply did not exist. This said, for the unionized U.S. working class, wages and benefits had improved markedly between the early postwar years and the early 1970s, and shop-floor strength remained considerable. The growth of interlacing movements for civil rights and for women's rights, and against the U.S. war on Vietnam, populated the working class with militants disposed to combat both management's demands for concessions and trade union leaders' indifference to their working conditions. From the perspective of corporate executives, workers were becoming a wild card, inhibiting and constraining accumulation strategies and threatening to burst the institutional framework of "business unionism" that set the framework for labor relations for the one-third of U.S. workers represented by trade unions.

The social contours and outcomes of the 1970s crisis quickly exceeded any narrow profit compulsion. In process was a multifaceted struggle in which owners and their allies sought to subdue a restive working class domestically and, at a global level, to combat the movement for a "New International Economic Order" and a "New International Information Order" then being pursued by the Non-Aligned Movement of Third World Countries. In light of these market and class pressures, and of insurgencies real and imagined, U.S. companies turned to remake the operations of production.

Capital and the capitalist state cast about for what David Harvey calls a "spatio-temporal fix" or, as Kim Moody spells it out, for "alternative means of recovering profitability and improving competitiveness." What followed was no mere mechanical exercise, but a many-sided and contingent mutation. Vij ay Prashad underlines that "the U.S. government authorized a major assault on its own economy, to reshape it, to follow the axiom of the German sociologist Werner Sombart, so that 'from destruction a new spirit of creation arises.'" At the center of this destructive creativity were information and communications, which animated wrenching changes in production.

A basement-to-attic redesign touched everything from the content of specific jobs to the technical division of labor within companies and entire industries, to the location of discrete and now increasingly isolable production processes. This "great transformation," as Kim Moody (recalling Karl Polanyi) calls it, encompassed both the location and character of capital expenditures and the types and quantities of labor mobilized by that investment. "Lean production," followed by "total quality management" and "re-engineering," were catchphrases that lent an unjustified aura of thoughtfulness to savage attacks on existing practice; "just-in-time inventory," "teamwork," "outsourcing," and "downsizing" fell into the same category. Behind the jargon, long-familiar processes of cost cutting and transformation ripped through communities of wage earners in the United States and Western Europe. In the global south, meanwhile, the reorganization of production concurrently brought millions of peasants and rural producers into the circuits of wage labor.

I will study this "Great Transformation" from two vantage points. The first concerns the labor process, the second, the wider commodity chains within which labor has been mobilized.

* * *

This, of course, was not the first time that production was restructured. From its historical origins in English agriculture, capital had fixated continually on a need to wring out inefficiencies, increase profits, and reassert control over refractory workers. This was not a straight-line rational progress. Misplaced priorities, fantasies of managerial control, ignorance of the workaday processes of production, and worker resistance prevented capital from any wholesale realization of its programs to change work and to bend workers to its wishes. Cycles of revision, pushback, and adjustment were continual. Within these limits, however, the labor processes on which production relied were recurrently revolutionized.

A tripartite conception of the history of the labor process was developed by Marx, through his reading of English factory inspectors' reports and parliamentary papers in an effort to comprehend the high-tech labor process of his own day—in Britain's factory system. The process of capitalist development had set in motion within the labor process, Marx found, a long-term progression: from handicraft, to manufacture, to what he called large-scale industry.

On the skilled handiwork of the artisan rested craft production of every sort, from printing to blacksmithing; craft labor, in which a single artisan often produced an entire commodity, placed stringent limits not only on productivity but also on the inroads which capital might make in assuming control over the labor process. A subsequent stage, which Marx called manufacture, he detected in portions of sixteenth-through-eighteenth-century Europe; manufacture bespoke capital's success in establishing a more productive technical division of labor. Over time, jobs, once the preserve of a single individual, were broken up into components, so that the repetition of each of a number of activities could be assigned to separate workers. What characterized this division of labor in manufacture, Marx related, was that previously independent workers became subjected to the discipline of capital, so that a "hierarchic gradation" beyond ad hoc cooperation characterized the transformed labor process. He was respectful toward this phase: manufacture ultimately "towered up as an economic work of art, on the broad foundation of the town handicrafts, and of the rural domestic industries." Dozens of separate trades, each with its own skills and practices, supplied the "associated labour" needed to realize productivity that remained unattainable for artisans laboring in small workshops. The age of manufacture coincided with the world of labor memorably chronicled by Adam Smith, in which the making of a seemingly simple pin rested on dozens of distinct operations.

Only the historical appearance of a third form, however—"large-scale industry"—transformed the labor process "to its very core." Under renewed pressure to increase the productiveness of labor, capital moved unevenly and incompletely beyond the subordination of labor "on the basis of the technical conditions in which it historically finds it." Through the application of science and the related introduction of specialized machinery powered by inanimate energy, the skills of individual craft workers were progressively eclipsed "as the regulating principle of social production": "Along with the tool," Marx asserted, "the skill of the workman in handling it passes over to the machine. The capabilities of the tool are emancipated from the restraints that are inseparable from human labour-power. Thereby the technical foundation on which is based the division of labour in Manufacture, is swept away."

The tools of production, as they shifted from the artisan's workbench to complex and interlinked machines, compelling labor from dozens, hundreds, and eventually thousands of coordinated workers, signified a fundamental vector of labor-process analysis. Large-scale industry progressively transformed "the instruments of labour into instruments of labour only usable in common"—which, not coincidentally, enabled "the economizing of all means of production by their use as the means of production of combined, socialized labour."

The archetype of "instruments of labour only usable in common" was the nineteenth-century English factory. Cooperation and division of labor had become widely used practices during the late eighteenth century; but subsequent innovation of machines powered by steam and then by fossil fuels spelled unprecedented increases in output and productivity. Eric Hobsbawm, a historian not given to hyperbole, states: "The Industrial Revolution marks the most fundamental transformation of human life in the history of the world recorded in written documents." The labor process lay at the center of this sweeping shift. With machine technology, as David Harvey sums it up, "the speed and the continuity are determined internally to the machine system, and workers have to conform to the movement of, say, the assembly line." Symptomatic of the widespread application of machines in Britain during the first half of the nineteenth century were, Marx showed, both an extended workday so that the costly plant could hum without interruption, and intensified work.

The Industrial Revolution was not an event but a complex, drawn-out process. Commencing with the application by British capital of the steam engine and the cotton mill, emergent forms of machine-structured production extended and ramified from this base: the process of change grew by twists and turns from industry to industry, labor process to labor process, and region to region. A spiral of innovation generated a cascade of new consumer commodities and capital goods: sewing machines, woodworking products, reapers, bicycles, and automobiles. Carrying forward from Britain, Glenn Porter writes about the U.S. experience of industrialization during the later nineteenth and early twentieth centuries: "Factory organization, specialized machines, precision manufacture, interchangeable parts, carefully coordinated work sequences and materials flows, and new methods for stamping and welding metal" became sites of sustained analysis, experiment, and reorganization. Manufacturing technology continually burst through prior limits on the scale of commodity production.

Achieved gains in manufacturing output depended on a trio of emerging network industries—in transportation, power, and telecommunications; these helped manufacturers to generate nationwide product markets. These great infrastructures likewise enabled a profound reorganization of manufacturing labor processes. Introduced into American industry between 1885 and 1890, electricity came to the forefront of industrial reorganization after the introduction of centralized power generation by electric utilities after 1900. The supplanting of coal and steam by electricity, however, went far beyond substituting one power source for another. When compared with the possibilities provided by electrical power delivery, Richard DuBoff showed, earlier methods, practices, and organizational designs suddenly stood out as "almost visibly redundant." Electrification thus became the pivot of a widening "reorganization in manufacturing techniques." "Cost cutting became possible over much larger ranges of output than under steam," DuBoff explains: "Subdivision and mobility of power units offered a wider array of labor, material, and capital equipment combinations." Electricity established a newfound ability to fractionalize power requirements, to diffuse power equipment throughout plants, and to decentralize and intensify individual operations.

An important concomitant was continuing growth in the information processing labor force itself. When we think of the Industrial Revolution, we may picture grimy smokestacks, a clattering din of machinery, and "unskilled" factory "hands." Even at its outset, however, the process of industrialization also gripped information generation, processing, and management. Corporate information processing bulked up to process the sales orders, support the accounting and financial initiatives, and—beginning in the late nineteenth century—develop the systematic marketing and technology research plans that were all predicates of national capital. Nonproduction employees as a fraction of U.S. total manufacturing employment had already reached around 19 percent by 1919 and hovered around this proportion throughout the crisis decades that followed; but the figure climbed after World War II, to 28 percent by 1979. In the science-based industries of electrical and electronic equipment, instruments, chemicals and petrochemicals, and machinery, the proportion was especially high, and industry leaders such as General Electric employed more nonproduction workers than did smaller firms. Symptomatic was the increase in the number of engineers in the United States, from 77,000 in 1910 to 1.2 million in 1970. But the occupational shift was much wider. Corporate managers, as well as skilled services workers in everything from accounting and advertising to telecommunications—professional, scientific-technical, clerical, and management occupations—all expanded.

As early as the 1920s, these multiplying information workers posed an identifiable cost problem for U.S. capital. In an insightful article published sixty years ago, Seymour Melman addressed the rise of what he called "administrative overhead" in U.S. manufacturing. Between 1899 and 1947, he found, administration personnel increased by 485 percent in U.S. manufacturing, to 2,672,000; production personnel increased by only 160 percent, to 12,010,000. Melman located the cause of this increase in the relative proportion of administrative employees not in declining efficiency but in "the addition of new functions carried out by the administration personnel." He explained that the substance of the shift lay in the "growing variety of business activities which are being subjected to controls," as management "attempted to control, in ever greater detail, production costs, intensity of work, market demands for products, and other aspects of firm operation." Other research confirmed and updated this trend in the occupational structure. And the buildup of U.S. foreign direct investment during the decades after World War II only further swelled the ranks of technical, managerial, and clerical labor, within and around transnational corporations. How could executives and owners improve their grip on this expansive—and expensive—cost category?


Excerpted from Digital Depression by Dan Schiller. Copyright © 2014 Dan Schiller. Excerpted by permission of UNIVERSITY OF ILLINOIS PRESS.
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Table of Contents

Acknowledgments ix

Introduction: A Contradictory Moment 1

Part I Digital Capitalism's Ascent to Crisis

1 Network Connectivity and Labor Systems 13

2 Networked Production and Reconstructed Commodity Chains 27

3 Networked Financialization 43

4 Networked Militarization 57

Part II The Recomposition of Communications

5 The Historical Run-UP 73

6 Web Communications Commodity Chains 83

7 Services and Applications 115

8 The Sponsor System Resurgent 125

9 Growth amid Depression? 142

Part III Geopolitics and Social Purpose

10 A Struggle for Growth 151

11 "A New Foreign Policy Imperative" 161

12 Taking Care of Business: The Internet at the U.S. Commerce Department 170

13 Beyond a U.S.-centric Internet? 185

14 Accumulation and Repression 211

15 From Geopolitics to Social and Political Struggle 229

Notes 247

Index 349

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