The Information Economy

A central prop in _Star Trek: The Next Generation_ is Computer. Computer is capable of replicating almost anything the crew needs. Picard and company regularly request food, new parts, clothes and other necessities from this remarkable machine. Assuming for the moment that such a thing is theoretically feasible (after all, the replicator is only recombining molecules -- production at its most fundamental level), could a society with those capabilities tolerate homelessness, starvation, illiteracy, or preventable or curable diseases?

Four centuries separate the crew of the starship Enterprise from today. But technologically, the distance is not really that great. The NeXT factory in Fremont was able produce $1 billion worth of computers a year with eight workers (until the company shut down production because it was unable to sell its machines). Bioengineers deploy bacteria to produce plastics in a vat -- no need for the labor that goes into exploring for oil, drilling it, building the pipelines, transporting it, processing it, or for that matter, sending armies overseas to claim it. From raw material to finished product, less and less labor is required to produce more and more with robotics, biotechnology, "smart materials", computers, digital telecommunications, and new technologies on the way.

In today's high-tech production, raw materials, capital and labor are replaced with refined information in the form of computer programs, designs, formulas, compression algorithms, DNA sequences, and so on. Two inter-related processes are at work. On the one hand, Science is extracting what Marx called the _in situ_ benefits of nature, yielding useful things with _less_ work, via better knowledge of the way the world works. On the other hand, the host of technologies surrounding computers enable machines to effectively record a workers actions, or even simple thought processes, and repeat them _ad infinitum_, for all practical purposes, in the absence of the worker. One could measure the changeover in a number of ways: the shrinking size of production runs that represent more design per unit; the rise in embedded "intelligence" in ROMs in products; the increase in education required to contribute in any given field; the percentage of design effort vs. duplication effort in a product; or the mushrooming percentage of people employed in information-related work (one study estimates that by 2000, two- thirds of those employed will work in education or information- related jobs). Described by Alvin Toffler and others as akin to the shifting of tectonic plates, the move to the information- based economy is upsetting the social applecart.


Toffler observed almost ten years ago that "[i]f you use a piece of information, I can use it too. In fact, if we both use it, the chances are improved that we will produce more information. We don't 'consume' information like other resources. It is generative... That by itself, knocks hell out of conventional economic theories." To put it more bluntly, production based on the information-intensive technology just isn't compatible with traditional forms of ownership and distribution.

The incompatibility develops because information, the growing core of all products, can be reproduced and distributed at a tiny fraction of the effort of the original. Contemporary production is more a matter of replication than manufacture. Marx and other economists noted 100 years ago that the value of an older machine (or really, any commodity) falls as cheaper but equivalent versions become available. This is equally true of computers, steel mills, toasters or corn. And so it is with information. A copy of PageMaker that cost $500 has the same value as an unauthorized copy made using a few floppy disks and a couple of minutes of PC time. Once information gets out and about, its value drops to the cost of its duplication.

For products like music, books, databases, computer programs, films, etc., that point is already here. For other products, it is fast approaching, because more and more manufacturing processes are becoming information-based, whether it be digital production, or molecular level manipulation, or genetic code modification. To quote Toffler again, "Second Wave industries used brute force technologies--they punched, hammered, rolled, beat, chipped and chopped, drilled and battered raw materials into the shapes we needed or wanted ... The Third Wave industries operate at an altogether deeper level. Instead of banging something into shape, we reach back into the material itself and reprogram if to assume the shape we desire."

As this situation continues to ripen, what with molecular electronics, nanotechnology, and desktop manufacturing -- to name but a few new technologies -- in the pipe, how can traditional forms of distribution hold? How does one price something that effectively has no value (because its duplication cost approaches zero)? Much less profit from it? If products (as various formations of information) face virtually no limits in their replicability, why not have copies of whatever for everyone who needs it?

In the Summer '91 issue of _Intertek_, author Bruce Sterling made some particularly observant comments about the information economy: "Information does want to be free -- it doesn't want to be $5 a baud. There's something stupid about that... But the idea of information as a commodity is just wrong. I mean, people say, 'if you could go into Sears and steal chairs they wouldn't stay in business.' Well if you had a device that could make infinite chairs for free, Sears would never have come into existence."


Sterling's observation that Sears (read capitalism, and one might add socialism) belong to an era of scarcity raises an interesting question: Can capitalism coexist with the information age? And can the information age coexist with capitalism? Certainly, as even its most ardent critics have observed, capitalism drives forward technology by demanding a constant revolution in the way things are made. But squeezing the square peg of information into the round hole of the industrial-era economy shears off many of its benefits in the process. In the information economy, the old structures start to get in the way.

For example, if duplication becomes trivial, and anyone can do it, the only way that value can be propped up is through the rigorous enforcement of "intellectual property" laws -- erecting artificial monopolies to protect the patent or copyright holder. Or, as Tessa Morris-Suzuki has pointed out, knowledge can only assume a price when its distribution is strictly controlled. That is, only by holding information back, only by keeping it in its myriad forms from reaching its full potential by forcing it through the narrow channel of the market, can money be made from it.

So, as design and software -- information and knowledge -- become larger and larger proportions of goods, the economy moves onto the thin ice of "intellectual property" law. The precariousness of this kind of economy was evident last year when Advanced Micro Devices, maker of 386 clone chips, received an unfavorable jury verdict in its interminable copyright war with Intel. In one day, its stock dropped by 37% -- losing almost one-half billion dollars of its value. A federal judge order Borland to halt sales of one of its flagship products because aspects of their program were deemed violations of Lotus Corporations copyrights. The future of Microsoft's Windows (and Apple) was intertwined with a judge's decision on arcane copyright principles.

Problems emerge not just at the distribution end, but all up and down the line, starting with the most basic production decisions. When profitability becomes the determining factor in the knowledge production (research and development) and information distribution, society loses something. If information can't turn a profit, it won't be developed or stored, regardless of its social value. The president of commercial database vendor Dialog was quoted in 1986 as saying "We can't afford an investment in databases that are not going to earn their keep and pay back their development costs." When asked what areas were not paying their development costs, he answered, "Humanities." And our universe shrinks in the process. Pharmaceuticals (essentially information products) comprise perhaps a more dramatic example -- for instance, a 1991 World Health Organization report lamented the fact that development of new tuberculosis-fighting drugs all but stopped 25 years ago (even though three million die every year from the disease) because the drugs are "not a big profit maker." A judge recently held that Burroughs Wellcome's patent on AZT, a drug used by tens of thousands of AIDS patients to slow the onslaught of the disease, was valid, allowing the company to continue to sell the drug under monopoly conditions for several thousands of dollars a year. Another company had wanted to produced a generic version of AZT, but was prevented by the judge from doing so.

Science suffers as well. Competition breeds secrecy, and information not shared is information robbed of its potential (because of the synergistic, "generative" effect of combining bits of information). This is especially true in scientific research. As corporate funding of university research grows (estimated at $1 billion in 1989), "the information that is produced in the labs and studies of the faculty is no longer available," UC-San Diego Professor Herbert Schiller wrote recently. "It goes to the sponsoring company... It is no wonder that _Science_ [May, 1990] magazine finds it necessary to publish articles that inquire, 'Data Sharing: A Declining Ethic?' and to comment that, 'Commercial pressures and heightened competition [in the universities] are testing the notion that scientific data and materials should be shared'."

The strict adherence to "intellectual property" concepts constricts information production in other ways. The "legal" production of new intellectual products (i.e., products which do not violate other patents or copyrights) becomes increasingly difficult. Richard Stallman, a League for Programming Freedom founder, has gone so far as to argue that a person who enforces a copyright is "harming society as a whole both materially and spiritually... Copying all or parts of a program is as natural to a programmer as breathing, and as productive." Through sharing of ideas and code, newer, better products develop more quickly. "Arrangements to make people pay for using a program, including licensing copies," he continues, "always incur a tremendous cost to society through the cumbersome mechanisms necessary to figure out how much (that is, which programs) a person must pay for. And only a police state can force everyone to obey them." Under such circumstances, only large organizations, with the requisite legal resources, can bear the risk of such a development effort.

Or, in the struggle to conquer markets, companies needlessly duplicate efforts to develop new technologies. In addition, the fruits of competitive research efforts are often products that are incompatible with each other, wasting learning time, complicating the flow of data, and adding to the overall economic overhead. Choosing among, say, competing incompatible database management products means that users are effectively forced into a product ghetto and handicapped when communicating with others who use different products.

Once the products make it to market, information companies, behind the barricade of copyright and patent protection, may demand prices far in excess of the cost of research, development, and production. This pricing prevents their wider distribution and use. Explaining why product piracy is so widespread in Third World countries, an economics professor noted, "A typical piece of computer software costs about as much as the annual earnings of an average Chinese person. An advanced textbook would cost a middle- class Indian a month's income."

At the same time, the private, corporate control of information challenges the democratic tradition. Through corporate ownership of most of publishing, broadcasting, telecommunications, computers, software, and so on, "the corporate voice, not surprisingly, is the loudest in the land," writes Schiller. "Institutions such as public libraries and the public educational system, which have provided free and open access to information and knowledge, are being brought into the corporate sphere, either through financial dependence or the transformation of information into a salable good. In either case, the erosion of equal access to information in the country progresses."


The above examples suggest that capitalism has not been entirely kind to the information age. At the same time though, one could argue, the information age will not be too kind to capitalism. For bigger problems emerge than just how to control and price goods that have a growing information content. As more and more production is replaced with digitalized forms of human effort and hyper-productive science, the information economy challenges the most basic assumptions of our economy.

The industrial era system of capitalism is based on the notion that people work in exchange for wages. These wages are then spent to purchase back things. The circulation of goods requires money. But if the cash nexus is broken -- because jobs, and hence wages, are no longer available -- the circuit is broken, and the system goes into a crisis. And this is what has happened. We have the awful contradiction of an incredibly productive economy, and at the same time at least six million homeless Americans, alarming illiteracy rates, and entire sections of society consigned to a life of permanent unemployment, drugs and prison. In the Third World, the situation is much, much worse.

Under the euphemism of "re-inventing the corporation" and "the virtual corporation", hundreds of thousands of jobs are being re- invented into oblivion. As digital technology speeds up communication within and among corporate blocs, layers of management become redundant, as value and capital and inventory are squeezed out of the production and circulation cycles. This is the trumpeted "big technology payoff" of just-in-time production, e-mail and computer networking. The migration of work to cheaper, usually overseas, labor markets, is itself a function of the new technology, made possible only by sufficiently fast transportation and communication technology to transmit orders and designs and receive finished products in a timely fashion. But in more and more instances, the labor content in products becomes so small that proximity to markets becomes a more overriding decision as to where to locate production.

The typical argument against any long-term technological unemployment is that as old industries fade into historical oblivion, new ones rise to absorb the displaced workers. But, as Tom Forester notes in _High Tech Society_, high technology will not absorb the numbers of people cast out of industrial manufacturing. And as for the hopelessly optimistic government figures for the future of employment in, say the software industry, even that industry has been hit with stagnation and retrenchment over the past few years. Improvements in object- oriented programming techniques and computer-aided software engineering (CASE) are targeted at reducing labor-costs in software development. And the globalization of the labor market, sped up by computer technology and digital telecommunications, is hitting software production as well. Edward Yourdon speculates in his recent book, _The Decline and Fall of the American Programmer_, that the U.S. programmer will go the way of the U.S. auto worker of the 1970's. Citing the rise of high-skilled, low- wage technology centers in places like India and the former Soviet Union, the once-privileged American programmer must now compete with fellow engineers overseas earning a fraction of American salaries.

So even for work that does not lend itself to easy automation, or remains beyond the scope of current technology, the American worker must compete in the global labor market. Corporations seeking the maximum advantage are driving down wages to the world level. (Overall wages in the U.S. have been falling for the past 15 years.) At the same time though, they are pushing more and more of their goods beyond the reach of the shrinking paycheck. The primary ways in which American workers have managed to maintain their household standard of living is by having more members of the household (particularly women) enter into the workforce. The unavoidable compulsion by companies to maximize their return on investment demands that companies throw even more technology at production, to drive down costs further ("raise productivity"). This only makes the problem worse.

Nor is this to say that there aren't plenty of things that could be done: for example, environmental reclamation, care for our aging population, education, or the million different paths of cultural exploration. It's just that these areas will not generate a profit unless they can be converted into commodities; and if so, are pulled into the vortex.

The problem certainly isn't, as Democrats and Republicans alike have argued in the 1992 election campaign, one of productivity or "national competitiveness." Productive capacity well exceeds the market. Farmers are paid not to grow food, apartments sit empty (the national housing vacancy rate is 7%, far exceeding the number of homeless), and almost one quarter of factory capacity lies idle. The problem is not "productivity". The problem is the inability to _distribute_ the wealth of the economy to those who need it because the old model breaks down in the face of new technologies.


One of the top-ten best-selling management books, as of this writing, is Peter Drucker's _Post Capitalist Society_. Obviously, the theoreticians and apologists of capitalism are having to wrestle with the implications of the massive re-structuring of the world economy taking place. They are clear that it must take place within the framework of capitalist relations. In the brave new world of the future, that will spell disaster for those who have no place in the old productive relations, former workers left without work, or youth who will have no opportunity of participating in the capitalist, aboveground economy. One might even speculate that there is a new class in formation, a property- less class, proletarians in the Roman sense of the term, borne of the new technological order, as much as the wage-laborer and the capitalist were the products of historical efforts to grasp and put to work the science and technology of Renaissance Europe. This new class would need to fulfill _its_ historical role of reshaping productive relations, to create a space for itself in the new technological present.

A 1990 _San Francisco Examiner_ article reported on the work of computer scientists Hans Moravec of Carnegie Mellon University and Kalman A. Toth, of Silico-Magnetic Intelligence Corporation. They described a future where robots and other technologies have lifted the standard of living, and will have replaced most human labor. The article then posed, with typical newspaper understatement: "But if robots indeed are able to take the place of human labor, critical questions arise... First, how should the wealth produced by enterprises operated with robot labor be distributed to those who don't work or who work part time?"

In more and more neighborhoods in the U.S. this question is by no means an academic one. Communities like South Central L.A., or San Francisco's Tenderloin, or Cabrini Green, or Detroit, or hundreds of rural towns are inhabited by those expelled from production (or never even given a chance to participate). Capitalism as a system not only offers them nothing, but stands in the way of their survival. These communities are the advance guard of a future which many more of us will share, if we do not resolve the "critical questions."

The notion that big changes in the way a society produces things is somehow related to social organization is common currency among economic historians. And societies historically have re- constructed themselves (not automatically, and certainly not without some struggle) to correspond to new technologies -- whether it be around the development of agriculture, the water wheel, the steam engine or the programmable chip. We straddle such an historical cusp today. Our challenge is to envision and struggle for social forms that can not only accommodate new technologies, but can also unleash them for the benefit of all.

What might these social forms look like? Project Gutenberg, the Free Software Foundation, and the thousands of public domain and freeware software authors suggest some of the possibilities. But whatever specific shape they might take, they would emphasize cooperation, sharing and diversity, because these qualities spark more information -- social wealth. They would emphasize education, because education builds the infrastructure for creating new knowledge. And they would acknowledge the requirement that the social wealth be distributed on the basis of need, because the enormously lowered cost of production eliminates scarcity and wages.

"Computer: Earl Grey tea. Hot."

Jim Davis (1993)

An earlier version of this article appeared in _Intertek_, Volume 3.4. A two issue subscription is available by sending $8 to _Intertek_, 13 Daffodil Lane, San Carlos, CA 94070. Back issues are available. Thanks to Michael Stack .