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The Silver Lining Of Anti-Globalism Might Be The Creation Of A True Digital Economy

Douglas Rushkoff argues that trade wars and closed borders might force us to break with the extractive capitalist system and use technology to create a better model: digital distributism.

The Silver Lining Of Anti-Globalism Might Be The Creation Of A True Digital Economy
[Illustrations: v_alex/iStock]

The folks at Davos this week are trying to behave as if everything is normal. Sure, England is Brexiting from Europe and the United States appears to be retreating from the global stage altogether. But somehow the word from Switzerland is that a mix of the right interest rates, investment strategies, and business optimism will keep free trade and globalization on course and safe from this boorish surge of populism.

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They’re missing the point. The rise of nationalist sentiments are not the cause of the economic shift underway, but a result of it. The real force energizing these changes is digital. While the digital economy has accelerated and amplified many of the mechanisms investors and corporations use to grow their capital, it has left most people with less money and less opportunity. This latest burst of fear stemming from that lack of opportunity is coming in the form of nationalism, and even protectionism, but it also could offer us a fleeting but real chance to turn our digital economy toward the needs of people instead of finance itself.

Don’t get me wrong. I’m all for prosperous businesses, digital and otherwise. But I’ve also witnessed with horror over the past 20 years as the potential for widespread, bottom-up prosperity unleashed by digital technology have been surrendered to the priorities of extractive global capitalism. This is not the way it was supposed to go, at least not according to me and my cyberpunk friends of the late ’80s.

Back then, the emergence of low-cost computers and networking appeared to augur a peer-to-peer, fluid, and more open economic landscape, one where we all step off the industrial-age, punch-the-clock treadmill and work in our own time, collaboratively, on creative pursuits, from home, in our underwear. Instead, we’re getting an exacerbation of some of extractive corporatism’s worst effects: joblessness, disenfranchisement, wealth disparity, corporate lethargy, artificial growth, and financialization.

Why aren’t we getting new, digitally enabled forms of community currency, worker-owned businesses, networked cooperatives, and peer-to-peer marketplaces? It turns out it is not because they don’t work; it’s simply because there are entrenched powers and limited visions preventing their rise. They find it hard to see digital technology as anything other than an investment opportunity. A company is not a provider of goods or services, but a “disruptor” capable of overturning an existing marketplace and generating 100x returns to the early shareholders. It doesn’t matter what the company does, if anything, after that.

So young developers in their dorm rooms may come up with a great idea for a revenue-generating and largely beneficial application. But then, almost automatically, they rush to find angel investors or venture capitalists to back their ideas. Along with the infusion of capital come unrealistically high valuations and unrefusable demands to “pivot” away from whatever the company may have once sought to accomplish. Instead, the company must focus on how to hit a 100x “home run,” usually by disrupting an existing marketplace and establishing the sort of temporary monopoly that convinces a new round of investors to buy the shares of the last ones.

Silicon Valley may trumpet its innovation bona fides, but this is a very old way of doing business, which digital technology should have rendered obsolete instead of amplifying. But most business leaders, bankers, and even economists tend to accept venture capitalism as a pre-existing condition of nature. It is not. The rules of capitalism were invented by human beings, at particular moments in history, with particular goals and agendas. It’s like a computer program, with accumulated lines of code written by developers throughout history with specific functions in mind. By refusing to acknowledge this, we end up incapable of getting beneath the surface. We end up transacting, and living, at the mercy of a system–of a medium, really.

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In fact, there are precedents to the digitally distributed economy so many of still imagine. And they are often characterized by a retreat from international ambitions and restored focus on the power of local, circulatory economics.

The last example of this happening on a grand scale was back in the late Middle Ages, just after the expansionism of the Crusades. As European soldiers returned home, they brought with them many innovations from the Arab world. One of them was the bazaar, or what became known as the market. It was a local economic innovation that turned market activity into a bottom-up, generative, and local affair. Former peasants began to trade the goods they made with one another, instead of simply paying up to the lords. They also imported the idea for market moneys that were good just for one day–like poker chips, except representing a loaf of bread or pound of grain–and optimized for priming transactions. And they began to get wealthy.

Threatened by the rise of a middle class, the aristocracy and monarchs “innovated” against the former peasants. They made market moneys illegal, and forced merchants to borrow from the central treasury, at interest. That allowed the wealthy to make money simply by controlling currency, while also setting in motion the growth trap we’re caught in today. The monarchs also restricted entrance to particular industries by issuing “monopoly charters” to their favorite businesses, in return for a stake in the profits.

So, as I’ve tried to show in my book Throwing Rocks at the Google Bus, from which the chart above is taken, the hands-on economy of the artisanal market was overtaken by the more extractive rules of early industrialism. Workers were disconnected from the value they created and paid by the hour instead. In this light, industrialism and mechanization were just ways to remove human beings from the value chain.

By Rushkoff’s book, Throwing Rocks at the Google Bus, here

That’s the economy we’ve been living in for the past 600-or-so years. The growth mandate was great for colonial powers looking to expand into new territories. As long as there were new people to enslave and resources to extract, capital could grow. But by the end of World War II, those people and places started to push back. Could we finally give up the global expansionist agenda of late medieval capitalism, and revisit an economic model that didn’t require the sort of growth that was proving impossible to maintain?

Now, digital technology should have been able to retrieve the values of pre-industrialism, and realize them in new ways. The human-to-human contact of the local marketplace is retrieved by the personalization of our digital networks. Market currencies can be retrieved by blockchains or even simpler authentication methods. Web-enabled cottage industries should thrive with their newfound equal footing and distributive power. Meanwhile, the commons and crowdfunding–enclosed and regulated out of existence during the corporate industrial era–find new life in an age whose foundational technologies are based in sharing processing cycles.

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But by the early 90s, the cyberpunks’ human-centered vision of a networked marketplace was replaced by another vision of digital business, the one espoused by the libertarian early editors of Wired magazine and the corporate-sponsored futurists of Cambridge, Massachusetts. They looked at digital technology and saw the salvation of the securities markets and the infinitely expanding global economy. The stock market had crashed in 1987, along with the bursting of the biotech bubble. But now digital technology was to restore the NASDAQ to its former glory, and beyond. Indeed, just when it looked like we had reached the limits of the physical world to supply us with more opportunities for growth, it seemed we had discovered a virtual world from which to extract still more value. This new digital economy would augur a “long boom” of economic growth: a digitally amplified, speculative economy that could literally expand forever.

To do that, however, technologies with the potential to distribute value throughout their marketplaces and generate long-term sustainable revenue streams are instead converted into powerfully extractive versions of themselves. Amazon, for one ready example, could have developed itself into a value-creating marketplace like eBay. Instead, it adopted a scorched earth approach to its markets. Amazon chose the book industry as its initial beachhead not because of Jeff Bezos love of reading, but because it was a no-growth, highly inefficient market, ripe for domination. Amazon’s purpose is not to make authors and publishers wealthier, but to use its capital to undercut existing players, establish a monopoly, and then used that monopoly to “pivot” into other “verticals.” It’s the same extractive model utilized by 20th-century behemoths like Walmart, except the total domination of a market occurs even more quickly.

Uber, likewise, could have developed a thriving taxi marketplace by letting local companies and drivers maintain their autonomy on the platform or, alternatively, allowing drivers to earn shares proportionate to the miles they’ve driven. At least that way, once robots replace the human drivers, they would still get some revenue from the platform they helped build with their labor. But that’s not Uber’s goal. The company is still on the chartered monopolist’s script. Only in this case, instead of using the King’s law to maintain their status, they use code. They can’t see that having wealthy customers and employees is actually good for the long-term health of their businesses because they’re trapped in an early colonial mindset that sees markets as territories to conquer, resources to extract, and people to enslave.

Reinforcing all this is a shareholder mentality obsessed with growth and a tax code that favors capital gains over real earnings. No wonder companies focus on stock price, IPOs, and acquisition over real, taxable revenues. Most digital companies’ shares are their only true product.

So instead of moving to the last column of the chart–digital distributism–we have ended up stuck in the third: a digitally amplified version of the same old global industrialism. Digital industrialism is characterized more by the destruction of value and its conversion into share price than the creation of value and its distribution to the stakeholders who made it possible. Digital industrialism exacerbates the imbalance between the traditional factors of production – land, labor, and capital, giving voice only to the needs of the venture capitalists and their mindless pursuit of growth.

But it’s working too well for its own good. These corporations are great at extracting capital from the markets they enter but really bad at deploying it. Corporate profit over size has been declining steadily for decades, now. They grow obese and lose the ability to innovate. So, Google becomes Alphabet, a “holding company” that buys and sells technology companies because it can no longer innovate, itself. Facebook’s biggest moves are not technology developments but acquisitions. Digital industrialism turns its biggest players into vacuum cleaners that suck out the value, and maybe park it in share price or, worse, overseas–but don’t know how to distribute it or even put it to work.

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That’s because they’re trapped trying to run 21st-century digital businesses on a 13th-century printing-press-era operating system. The real problem with the digital economy as it is currently constituted is not the digital, but the economics.

The nationalism and protectionism of today’s anti-globalists may be based in jingoism and xenophobia, but it could also–at least temporarily–create the boundary conditions necessary for something more like local, circulatory economic activity to take root. Such boundaries, like closing borders or enacting harsh import tariffs, don’t just prevent the leak of jobs overseas. They discourage businesses from thinking of their markets as global, much less infinite. The markets in which they operate are decidedly finite.

This forces them to stop thinking of themselves as simply sucking up all the cash in a particular territory and then moving on to the next. They must develop local economies that are capable of renewing themselves and delivering ongoing revenue. Instead of earning 10 dollars once, businesses must figure out how to earn the same dollar 10 times. That means promoting not the extraction of capital from a market, but the velocity of money through a market. What goes around comes around.

With any luck, businesses will take a cue from those who already operate this way, such as the US Steelworkers Union. Faced with the declining stock market of 2007, the steelworkers were looking for alternative investments for their pension fund. Instead of outsourcing their funds to S&P index funds, they got the fantastically circular idea to invest in construction projects that hired steelworkers. They invested in a project that not only earned them equity but paid them back their investment as wages.

Such strategies are actually more consonant with digital networks, which circulate information in a distributed fashion and share resources more easily than they hoard them. They are not infinitely expanding; they are bounded and self-sustaining. But they are really difficult to execute in an economic environment characterized by rapid growth startups and infinitely scaling corporate growth. The real world doesn’t scale.

A momentary withdrawal from that game forced by anti-globalist protectionist policies may actually allow for some digital distributism to gain traction. It will force us to remember that an economy doesn’t require global scale or growth to function; it simply needs people with skills, people with needs, and a means of exchange. The finance ministers and corporate chiefs attending Davos–as well as the decisions they make–are inconsequential to this activity. Their effort to salvage the global economy is really just an effort to keep us back in the third column of the chart, the digital industrialism that extracts value from people by evermore technologically creative means.

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In contrast, a genuinely distributed economy requires those on the ground to develop strategies for economic and social viability from the bottom up. Don’t be surprised to see labor cooperatives, commons-based approaches to resource management, and even local currencies emerge to fill in where federal action falls short. While these mechanisms may not have worked convincingly before, digital technologies may just lend us the decentralized methods of accounting and authentication we lacked in the Middle Ages.

Whether we like it or not, it’s again time to return from the Crusades, and try a second time to build a new economy here at home.

Douglas Rushkoff is an author, teacher, and documentarian who focuses on the ways people, cultures, and institutions create, share, and influence each other’s values. His latest book is Throwing Rocks at the Google Bus.