Dystopian Digital Economics

The New Feudalism, Part III

If it sounds twentieth-century, it is. Yet, in 2023, conservatives still complain about communism and, leftists, feudalism.

Lords of the manor. London, December 2022.

Particularly in the United States, where Cold War binaries remain the political norm, and populists like Donald Trump deride the Democrats as Marxists.

Underlying it all is a world economy in which the historic pillars of capitalism (free markets, free trade) are suggestions to be ignored when they create the slightest inconvenience.

It’s not hard to understand why. Capitalism is increasingly characterised by oligopoly, monopoly, and monopsony in the industrialised and post-industrial world.

Its sheer extremity is a recipe for nostalgia of every kind. Class has never been more inscribed in our lives, and if it doesn’t inspire conformity, antimarket fantasies abound.

As Cory Doctorow and Rebecca Giblin point out in their recently published Chokepoint Capitalism, companies like Amazon and Google have insulated themselves from competitive pressures by inserting chokepoints between people who create content and those wishing to consume it, using this market position to reap super-profits from both.

The various chapters in Chokepoint Capitalism detail a range of horrendous abuses perpetrated by corporations against content producers. The most telling horror stories come from the music business, where stories of income diverted from artists to labels take on dizzying proportions.

The transition to an economy centred on information and technology should have changed the equation since information is plentiful and much of it is nonrival, meaning it can be used by a practically infinite number of people simultaneously.

To combat this, corporations have relied on restricting flows of information backed up by intensive lobbying to give the chokepoints they create the force of law.

From the use of proprietary operating systems to mandatory digital rights management software to the decades-long hoarding of intellectual property rights, modern corporations have found myriad ways to ensure they retain their dominance over producers and consumers.

This is different from how it was supposed to be. Adam Smith has likely spent the last forty years rolling in his grave at the thought of the things his name has been invoked to defend.

As Doctorow and Giblin note, although Smith is often name-checked as a foundational opponent of government distortion of markets, he was more concerned with the effects of rentiers.

Smith was clear about this. In his discussion of price formation in the first book of The Wealth of Nations, he noted:

As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them.

Yet conservatives, even those attached to the society that bears his name, feel the need to defend tech oligopolists against the depredations of the free market and government oversight.

In January, the Adam Smith Society website hosted a post that slated Financial Times commentator Martin Wolf for having the temerity to associate big tech with rentier capitalism.

The line taken was that Amazon’s effect on the market amounted to substantial consumer savings.

No mention was made of the grinding exploitation of content producers by Amazon’s monopsonistic control of the retail book market (if they aren’t the only buyer in town, they are the only one that matters). After all, lower prices are what US antitrust law is all about.

Unfortunately, even the purported benefits to consumers from the so-called “Amazon effect” are what Amazon thinks they should be.

In September 2022, California sued Amazon for anti-competitive practice. In the suit, the state claimed that “Amazon has coerced and induced its third-party sellers and wholesale suppliers to enter into anticompetitive agreements on price” to entrench its dominance.

The case shines a light on the business practices that have resulted from the failure of the federal government to pursue its trust-busting powers with sufficient vigour.

As Doctorow and Giblin note, this is a result of the long-term influence of the Chicago School.

Starting in the 1960s, economists and jurists associated with the University of Chicago promoted an extreme brand of laissez-faire regarding trusts and oligopolistic markets.

Whereas in the era of the New Deal, American antitrust legislation was used to break up entities whose very size was viewed as prejudicial to competition, under the Chicago School theory, that standard was consumer welfare.

If corporate behemoths were willing to promise not to price gouge once they’d eliminated the competition, that was good enough.

Overlapping with the formation of oligopolies in markets for books and music was the rise of what Harvard Business School professor Shoshana Zuboff termed surveillance capitalism.

Corporations were already moving out of direct production, preferring to outsource it while focusing on selling brands and lifestyles. What followed was the move by big tech like Facebook to collect their users’ behavioural surplus data and sell it for microtargeted advertising.

Did this advertising work? The evidence on the ground is thin.

According to Zuboff, the collection of behavioural surplus data is an existential threat to human society, with the power to advertise effectively made part and parcel of the power to alter people’s political inclinations.

Doctorow is less alarmed about the possibility of behavioural surplus data functioning like a mind control ray from some B-grade 1950s science fiction movie.

This is based on his scepticism about the actual efficacy of advertising based on behavioural surplus data.

Still, the process of concentration in the economy is having political effects.

Sources of well-grounded information are dwindling, mainly due to the concentration of broadcast media and the increasing difficulties of newspapers earning revenue from advertising.

What has emerged is a situation in which major corporations have become, in effect, large, planned economies in which the forces of competition have been walled off.

While the ideology of free markets and competition to drive innovation and reduce consumer prices remains the dogma of modern capitalism, that’s what you tell the saps to keep them coming back.

Those interested in accumulating serious wealth aren’t interested in competition. They want to find a line to separate themselves from others to achieve unrestrained profitability.

Likewise, Saluting the flag is the sort of thing you get the suckers to do while you’re looking for an underregulated zone where you can operate without paying into welfare states.

There is an interesting nexus between Doctorow and Giblin’s account and Quinn Slobodian’s narrative of capital seeking spaces safe from government interference.

In both cases, the model in question is not one of competitive innovation but something more along the lines of, if not simply reduceable to, rentier capitalism.

The debate about the degree to which this approximates feudalism is interesting but ultimately is less critical than the need for collective action to address it, whether what is happening is feudalism or capitalism or some hybrid of the two.

Doctorow and Giblin spend the final third of their book proposing a range of initiatives that would see power returned to producers.

The changes that they recommend tend to be systemic, and they acknowledge that individual solutions will be ineffective in addressing the concentrations of wealth and power that created the problem in the first place.

What emerges in the final pages of their book is a call for a technologically-informed market socialism.

Doctorow and Giblin see a place for competition. However, they acknowledge that market forces have to be reined in by a commitment to the defence of human culture and human solidarity.

Although much of the narrative presented in Chokepoint Capitalism is grim, there are bases for hope, if not precisely optimism.

As Doctorow and Giblin point out, the spread of the chokepoint strategy means that there are also many areas in which those opposed to chokepoint capitalism can start fighting back.

There have also been some signs that governments might be taking a more robust role.

California’s suit against Amazon is one such indication, as is the appeal of a similar failed suit in the District of Columbia.

In the EU, where regulation of anticompetitive practices is taken more seriously, Google has been charged with significant antitrust violations and may be compelled to sell off its lucrative advertising business.

These are starts, but there is a long way to go. It is difficult to fight corporate power at the best of times.

The rise of national populism has complicated matters, with many people more worried about Disney turning their children gay than its propensity to gobble up producer revenue without compensation.

For those focused on the prospect that Donald Trump or Viktor Orbán will save them from the dangers presented by brown-skinned hordes, the question of corporate hegemony has difficulty making headway.

Still, to quote Desmond Tutu, the only way to eat an elephant is one bite at a time.

Photograph courtesy of Duncan Cumming. Published under a Creative Commons license.