Philippa Thomas Online

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The Internet’s Unholy Marriage to Capitalism?

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This is my take on a fascinating article from John Bellamy Foster and Robert W McChesney, just published in Monthly Review. It argues that the internet should be treated as a public utility but is instead becoming the territory of capitalist robber barons, while the U.S. government is failing its citizens by standing aside. It’s quite rare to read a Marxist economic take on US communications policy, and I recommend the experience. We’ve just had a lively debate in our Kennedy School “2020 Vision” class about the assumptions made within this article; here are the points that stood out for me.

The internet has failed to deliver on much of the promise once seen as implicit in its technology.

This is a critique of the weakness of allowing the profit motive to dictate the development of the internet. [a critique, therefore, of conventional American capitalist wisdom.]

Do we agree with the premise? “The system’s overriding logic must be as an institution operated on public interest values, at bare minimum as a public utilty.”

Their brief history of the internet… Beginning as a non-commercial, even anti-commercial entity (the quaint idea of would-be salesmen being ‘flamed’). The early 1990s stringing together the values of innovation, deregulation and entrepreneurialism. [And I guess the last decade bringing the concept of “monetization” to the centre.]

Foster and McChesney say, if (IF) we assume that a genuinely free market is the best option, we should proceed to analyse the internet in that light. They find it lacking in three key respects.

1) ISPs: Internet Service Providers are in their view companies – like AT&T, Verizon and Comcast – with the great good luck to be living on government monopoly franchises. “They would not know a ‘free market’ if it kicked them in the corporate butt.” They are “the poster children of crony capitalism.”

“With dreams of converting the Internet into an expanded version of cable television, all of these firms have spectacular incentive to ‘privatise’ the Internet as much as possible, and to use their control over broadband access as a bottleneck where they can exact additional tolls on users.”

[Compare the Internet Access mkt with the Health Insurance mkt]
[This is entirely US-centric. How about International comparisons?]

2) Market concentration: One of the strongest arguments in the essay, I think, is that of “Wired” editor Chris Anderson, that the operation of Metcalfe’s law creates winner-take-all markets. Meaning that market concentration often goes well beyond that of the non-digital realm. It’s obvious when you look at it – so for example, Google has 70% of the search engine market – or think Amazon, Apple, Microsoft, Intel. With their vast cash reserves, firms like Google and Microsoft can then set up “monopoly base camps” to snatch up upstart competitors.

“The Internet seems, in the end, to be more a force for monopoly.”

“In much economic theory, natural monopolies should either be publicly owned or at the very least heavily regulated to prevent abuses.”

“Yet corporate political power has basically eliminated the threat of public ownership, as well as the government aggressively enforcing its anti-trust laws.”

And now – a step too far ??

“In the realm of the Internet, a state-corporate alliance has developed that is matched perhaps only in finance and militarism. It makes a mockery of traditional economics.”

And – whooooaaa!

“What is emerging veers towards the classic definition of fascism as right wing corporatism.”

3) Information as a Public Good.

On the matter of journalism, “this is where the failure of the Internet is most profound.”

They drop in an awesome statistic about the very earliest days of American journalism. “Were the US federal government to subsidize journalism in 2011 at the same percentage of GDP as it did in the 1840s, it would spend in the range of thirty to thirty-five billion dollars.”

They add that journalism’s current woes are partly self-inflicted. “The one thing news media had done that was unique – providing original coverage of events in their communities and on their beats – had been cut back. What they replaced it with – sports, entertainment news, trivia – could be found anywhere and had no connection to hard news.”

But still : “For the past decade, the great question has been : Will the Internet provide the market basis for resources sufficient to spawn a viable independent mass journalism? The answer is now in: no, it won’t.”

They describes this as “a public policy debate of the first order”. I think we’d all agree?

Then they move us on down the road to public funding. Is this desirable? Is it viable? At least in part – seed funding – subsidy?

“Journalism has many traits of a public good. It is something society needs and something a self-governing society requires… Public goods generally require public subsidy and explicit public policies to exist.”

They make their argument first on grounds of the cost of good journalism.
They also argue on the grounds of the diversity that makes for good journalism, drawing further on the central economic case that the internet tends towards monopoly.

The “long tail” doesn’t work in this regard. “The Google search mechanism strongly encourages implicit censorship in that sites that do not end up on the first or second page of a search effectively do not exist. As Michael Wolff puts it in ‘Wired’: “The top 10 Web sites accounted for 31 per cent of US page views in 2001… and about 75% in 2010.”.. What has emerged is “power law” distribution where a small number of political or news media Web sites get the vast majority of traffic.”

Is this far sighted analysis – or a case of extreme pessimism?
“There is no “middle class” of robust, moderately sized Web sites; that aspect of the news media system has been wiped out online [what about GlobalPost, ProPublica etc?] It leads [Hindman] to conclude that the online news media are more concentrated than the old media world. This is true, too, of the vaunted blogosphere, which has effectively ossified. Its traffic is highly concentrated ina handful of sites, operated by people with astonishingly elite pedigrees.” [Is this just a limited elite east coast view, or a general truth, that the stripping of funding from news is leading to the re-emergence of the gentleman journalist?]

THE LAUDERDALE PARADOX

The essay digresses into a primer on Marxist economics – pointing us to the Lauderdale Paradox, a classical economic concept (from 1804), that of an inverse correlation between public wealth and private riches, such that an increase in the latter often served to diminish the former. [The very opposite of the trickledown theory!] If goods become scarce they are valued – so formerly common goods become sources of private profit. A theory that’s obviously taken on by Marx. And a theory rejected by neoclassical economists who focus upon the expansion of wealth as a desirable end in itself.

THE PARADOX OF THE INTERNET

The authors see this analogy: that capitalism is working to create scarcity – and hence profit – on the internet where it does not naturally exist.

Like the elimination of free land in the United States, the Internet is being transformed into a few dominant spaces that are thereby able to exploit their scarcity value… Competitive strategy revolves around the concept of the lock-in of customers…

They add that this is only possible “with the cooperation of the public sector” and here I think we have a really powerful argument about what’s going on with broadband, with the struggles of muni wifi, with net neutrality arguments, and what is NOT taking place in term of any anti-trust crackdown.

Their case: “The privatization and monopolization of the Internet requires a state which, in partnership with capital, neither provides the population with the alternatives necessary to develop access to this public domain, nor protects it against Internet robber barons.”

“The FCC’s approval of the 2011 merger of Comcast and NBC Universal is a case in point.”
Do we agree?

This from the opinion of the sole dissenting FCC commissioner Michael Copps: the merger “opens the door to cable-ization of the Internet.” IT creates “the potential for walled gardens, toll booths, content prioritization, access fees to reach end users, and a stake in the heart of independent content production.”

The state, in effect, looks the other way”. Is this a conspiracy-reading theory of a far messier reality, or does this cut to the heart of what is really going on? If so, what should be done in public policy terms?

How do we regard this pessimism? Is it right – or does it in fact too much faith in the ability of today’s corporate Internet giants to continue to sweep the global market ? And too much emphasis on the most publicised part of the internet while ignoring the power of the long tail, and all that lies around?

And if we accept the argument that unfolds here, do we accept the call to arms?

“A global network of resistance is both necessary and feasible… How this battle plays out will go a long way toward determining our future as social animals. “

Author: philippathomas

I've been a BBC newswoman for 28 years: reporting from around the world. Currently to be seen anchoring BBC World News TV. Main interests - politics, diplomacy, tech, media, arts and all things American. I began this personal blog as a 2011 Nieman Journalism Fellow at Harvard. You can also find me talking daily news on Twitter at @PhilippaBBC, and sharing anything from travel photos to my year in books on Instagram at @philippanews. Thanks for reading!

6 thoughts on “The Internet’s Unholy Marriage to Capitalism?

  1. The analysis, like so many on both Left and Right, confuses plutocracy and capitalism.

    Moreoever, it’s sad but revealing that there doesn’t seem to’ve been any mention of the US plutocratic/media campaign to at least marginalize Usenet, the oldest and biggest and most powerful net-forum of all, decentralized, robust and officially anarchic (ruled so by the US Supreme Court), one of the mainstays of the Internet from the beginning–but not readily controllable or monetizable.

  2. Your take lacks conclusions. Do you disagree that monopolies are bad? If so, why?

    Do you disagree that ISPs are monopolies? If so, why?

    Do you disagree with the idea that concentrations of wealth are “bad” insofar as they lead to political corruption, and then abuses by the wealthy (in this case corporate wealth)? If so, why?

  3. Pingback: The Internet’s Unholy Marriage to Capitalism? (via Philippa Thomas Online) | Top world news online

  4. Ms. Thomas: The Marxist School of Sacramento will be reading and presenting a Point Of View panel about this article May 2012. The connection between the Internet and news journalism is profound. The US-based AlterNet (San Francisco & New York) gives an idea of what can be done in the Left’s critique of Capital. For example, a local guy, Dan Bacher, writes in-depth about western water wars (he works for FishSniffer magazine). As Sam Clemens once wrote, whiskey’s for drinking, and water’s for fighting. These are the unpaid margins into which real journalism is confined. McChesney makes an effective argument that a relatively small investment ($35B today) would revive US journalism, and pay journalists to write stories and report the news. I don’t read fiction, because I find reality far more entertaining. And the Lauderdale Paradox explains a lot of the dynamics of the forced creation of scarcity we experience under the controlling hand of Capital. BTW, thank you for your thoughts on the article.
    Michael Monasky, Elk Grove, California

  5. The event is tonight at the Sol Collective in Sacramento.
    I can attach the power point presentation if you contact me through my email.
    I can also send a link to the audio recording of the presentation and panel discussion.
    Please advise. Thanks.
    Mike Monasky

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