It’s a Wired World

Citigroup bank employed 25,000 software developers and spent an estimated $4.9bn on information and communication technologies – ICT —  (exclusive of operating expenses) in 2008 – just before it had to accept a $45bn bailout from the US government. Before Lehman Brothers collapsed in September 2008, that firm ran 3,000 applications on 25,000 servers on several continents. So when the financial crisis erupted in an obscure corner of the market system’s core, there were network linkages ready to pulse its death-ray out to what we used to call the periphery. (See the IMF’s  April 2009 study, “How Linkages Fuel the Fire: The Transmission of Financial Stress from Advanced to Emerging Economies.”)

The role of the communications industry in the global economic crisis of 2008 is still largely overlooked. So also is  the way finance and communications are profoundly interrelated.

In response to a prior downturn in the early 1970s, elites seized upon information and communications as an element in what David Harvey calls a “spatio-temporal fix.” The purpose was to help capital find a means of reigniting profitable market growth. Massive growth in and around the information sector was an effect before it began to function as a cause. Profit-seeking investment flooded into ICTs and the idea that we were transitioning into a benign information society was the new common sense.

But ICT investment was not merely a function of finance. After the 1970s profit squeeze, capital accelerated its reorganization of the system of production through sustained growth of foreign direct investment: capital outlays to purchase factories, offices, mines and plantations outside a company’s domestic market. This imperative again gave information and communications a primary role.

To restructure production, transnational corporations spent heavily on ICTs: networks made their cross-border supply chains function. Corporate information systems were repeatedly re-engineered with continual shifts in corporate strategy, public policy, market access and networking technology. From the late 1980s, ICT and software expenditures accounted for half of overall corporate capital investment. Prodigious sums are involved: in 2008, US companies and governments spent $1.75 trillion on technology.

As communications and information came to lead growth of capitalist development, technological advances wiped out entire spheres of commerce. Skype, which provides an internet phone service for free (and better quality for a fee), claimed 400 million users in 2009. In five years, Skype has become the world’s largest supplier of cross-border voice communications. With other VoIP services, Skype puts fierce competitive pressure on existing carriers that no longer find much profit by completing telephone calls. Their focus has turned to broadband and mobile; specialized network offerings aimed at business users also remain important.

Cheap network service is supporting a partial re-centralization of computing and software services, and these challenge the autonomously configured desktop and notebook computer. Mobiles threaten the growth of computers and television. There are roughly 4.5bn mobiles, and they are beginning to function as a ubiquitous and strategic third screen. In the nine months after Apple opened its first iPhone App Store, 25,000 applications were published for the iPhone and iPod Touch, and there were 800m downloads. (That has increased substantially with Apple’s conquest of China and South Korea.)

Apple, Amazon and Google are demolishing longstanding oligopolies in music, book, gaming and film markets. Digitized texts and audiovisual commodities, and new devices (iPods and e-book readers), draw this inter-corporate rivalry. As CD markets collapse, the four transnational conglomerates whose music subsidiaries channel most global musical recording are being compelled to cede profits to Apple. The half-dozen transnational conglomerates whose film subsidiaries control global distribution contend with Google’s YouTube.

If this seems chaotic, that’s because it is. Our communications and information system is being thoroughly transformed. Both its quantity and quality contrast with prior historical patterns, characterized by small avant-garde projects to revolutionize painting, or the novel, or film; and by the market-based assimilation of individual new media, such as radio. Today, the system of information and communications overall is being reordered. Unlike the pattern set by social revolutions in individual countries in 1789, 1917 and 1949, patterns of cultural change are being worked out internationally and, so far, the leading role has been taken not by popular social movements but by capital. Oppositional impulses have only occasionally become organized at a politically meaningful level.

As the technologies of message processing and communication are revolutionized, wage labor and markets are driven ever farther into society and culture. The internet is the most important enabling mechanism for these enlargements of capitalist social relations. That is one reason why power over the internet is both jealously coveted and fiercely sought.

Role of the state

The US role remains disproportionate. Although, in an arresting development, the Obama administration has recently ceded some authority over the internet, giving other nations a measure of participation [and to outflank potential breakaway internets], it would be unwise to conclude that its power over this crucial infrastructure has been neutralized. Ultimate decision-making over the domain name system is exercised by a shadowy mix of US military and state agencies working with a non-governmental organization and private corporations.

With some qualifications, Cisco leads the transnational supply of corporate routing equipment, Google leads on search engines and online video, Facebook social networking and Apple totemic consumer appliances. Intel dominates semiconductors, Microsoft desktop operating systems.

Of the top 25 global IT services/software/internet companies in 2004-5, only six were not American. (See Catherine L Mann with Jacob Funk Kirkegaard, Accelerating the Globalisation of America: The Role for Information Technology, Institute for International Economics, Washington DC, 2006.)

The US spares no efforts to spearhead the technologies of cyber-war: more than half of the 800-odd active satellites orbiting the globe are from the US. US-based companies not only lead supply, but also demand and use: from Wal-Mart to General Electric, US corporations’ integration of internet-based systems and applications set a global standard.

Those efforts continue to deploy information and communications as a pathway to renewed US global dominance. Structural change points the other way: the transition to a more multi-polar political economy will continue to generate more effective challenges to US dominance, in general and in communications.

If we encompass the top 250 ICT companies, there are fewer US-based firms in the 2006 top 250 panel than in previous years, and more from China, India, Taiwan, Korea, and Singapore, Brazil, South Africa, the Russian Federation, Egypt and other countries. Impressive units of non-US capital have been built in Europe, Japan and beyond: Samsung, Nokia, Nintendo, Huawei, Tata, SAP, Telefonica, DoCoMo, America Movil, Vodafone, China Mobile. Significant transnational network assets have passed for the first time in history to capitalists based in countries of the South: Mexico, India and China.

US leaders still turn to communications in their bid to renew US global power, and so the influence of the industry in US policymaking grows. Barack Obama is called the Silicon president , and his first major domestic initiative, to push through Congress a big fiscal stimulus package, built political momentum before his election by winning support from executives at Google, IBM and the Information Technology Industry Council. This group put information in the foreground of the recovery program. Its members lobbied to include in the stimulus legislation money for broadband deployment, computerized healthcare records and an ICT-intensive (smart) power grid, all likely to boost their own profits, and all provisions of the law signed by Obama in February 2009. Dean Garfield, president of the Information Technology Industry Council, said afterwards: “It is good to be heard”.

“The question is what will be the global growth engine?” asked Dominique Strauss-Kahn, the head of the IMF, in September – adding that “there is no easy answer”. Do communications have more potential to rejuvenate global capitalism as they did a generation ago?

For all the ballyhoo about a recovery, many of the world’s largest financial institutions remain on government life support. The US government has a controlling interest in two-thirds of the US automobile industry, and consumption and employment are not recovering. The crisis is biting deeply, but unevenly.

While corporate profits are beginning to lift, automobiles, financial services, agricultural raw materials, metals, electronics and minerals are still down.

What about communications? From October to December 2008, consumer and business markets for ICT collapsed. But within this gigantic industry, the pattern of impact has been uneven. Some top companies remain surprisingly strong. Early in 2009, Cisco had a cash hoard of close to $20bn; Microsoft $19bn; Google $16bn; Intel $10bn; Dell $6bn; and Apple $26bn. This list is top-heavy with US-based transnationals, although the only really flush major telecoms operator, with net cash of more than $18bn early in 2009, is China Mobile. These liquid assets give maneuverability, beyond reach for capital based in less fortunate market segments, economic sectors and geographic regions. Eventually, some of the money will buy struggling competitors.

Information and communications’ regenerative investment and profit potentials have not been exhausted. In 2008, total US media spending actually increased marginally (2.3 per cent) to $882.6bn, and the media is projected to be the third-fastest growing economic sector in the next five years. All the way through the recession, international internet traffic continued to surge, by 55 per cent in 2008 and by a projected 74 per cent in 2009. Network systems and applications permit corporations to prepare socio-cultural practice (education, agricultural biotechnology etc) for intensified exploitation, and to remake other sectors, such as medicine and energy distribution, around a comparable profit impulse.

DAN SCHILLER is professor of communication at the University of Illinois at Urbana-Champaign, and author of How to Think About Information, University of Illinois Press (Chicago, 2006)

This article appears in the December edition of the excellent monthly Le Monde Diplomatique, whose English language edition can be found at mondediplo.com. This full text is featured here by agreement with Le Monde Diplomatique. CounterPunch features one or two articles from LMD every month.



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