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At a time when the practices of technology companies continue to attract fierce criticism, this book asks what it actually means to hold a 'monopoly' in the tech world and how it might affect the way in which an organization operates.
Combining new and traditional Marxian perspectives, the authors offer an in-depth analysis of how these technology giants are produced, financialized, and regulated.
As technology firms continue to shape our political and socio-economic landscape, this book will be an invaluable resource for scholars and students who seek to understand the function of technological monopolies in contemporary capitalism.
Reports, debates, and calls for challenging the power of tech giants are common in business and daily press. Outrage over socially damaging practices is found across the public sphere with issues ranging from tax avoidance and anti-competitive behaviour to disinformation and hate speech distribution, privacy abuse, surveillance, and labour disputes. These regular signs of dissatisfaction put the political system on notice and create a sense of urgency for political action in the form of regulatory and policy responses.1 Despite widespread debates and clear indicators of their excessive power, very rarely do we encounter discussions as to what does it actually mean to hold a monopoly and what are the specific features of digital monopolies in the capitalist mode of production. Digital platforms as monopolies lead to a peculiar set of economic, political, and social configurations and consequences, whose negative tendencies remain to be adequately understood. In this book, we provide theoretical and empirical arguments for a better understanding of the character and consequences of digital monopoly platforms in contemporary capitalism.
Much of the existing research on digital platforms tries to follow the latest technological developments by providing entirely new theoretical concepts. It is, however, common that new concepts suffer a double fate. First, they become outdated when new products and services appear in radically new forms, when they take the shape of new technological forms and social forms of wealth. Techno-optimism surrounding so-called user-generated content on social media and its alleged democratization potential in the public sphere is one case in point.
The capitalist mode of production in which digital monopolies dominate as the most valuable companies is filled with contradictions. New material for commodification and capital accumulation is surface and background data, collected and processed from web search, social networking, cloud computing, apps, and other products and services. Much of the economic processes follow a familiar story in the history of capitalist development. Monopolies, seen by mainstream economics as nothing but aberrations from perfect competition, are, in fact, regularly occurring phenomena in the history of capitalism (Foster & McChesney, 2012; Harvey, 2014; Christophers, 2016). Yet, ‘perfect monopolies’ are equally hard to find as ‘perfect competition’ since there is almost never a single seller of a commodity in the market. Nonetheless, whether we talk about oil companies, banks, airlines, pharmaceutical companies, retailers, car manufacturers, or digital services, capital always has a tendency for concentration and centralization.
It is partially an economic process driven by the need to reduce uncertainties of competition, secure growth, maintain profit rates, control and exploit labour, and harness efficiencies of scale and scope. It is also a legal process since the state(s) organize market conditions for the exchange of commodities and boundaries for capital accumulation, expansion, and reproduction. Commodification of data requires multiple legal and regulatory interventions, primarily through privatization of scientific and technical discoveries, which is evident in the rise of intellectual property rights. Privatization of knowledge leads to private appropriation of wealth from technological innovation, usually funded in the early stages by massive public investments.
In this chapter, we focus on the core dynamic between gathering and processing data with algorithms as means of production for generating and extracting surplus value, protected by patents, trade secrets, and copyrights. We do not know exactly what data companies collect, nor do we know exactly how algorithms process collected data. To study algorithms and data we are largely left with two main options: either to trace the flow of value in the form of money through technological forms, corporate production, and circulation, or to look at consequences of the deployment of (corporate) algorithms in various aspects of society (for example, credit scoring, recommendation systems, automobile navigation, personal assistants, news distribution, and so on). Taking the first option allowed us to focus on monopolization, advertising, regulation, and financialization in Chapters 3, 4, and 5. Now we turn to the social consequences of these techniques.
We do not argue that technological forms through algorithmic techniques establish full-blown, dystopian, and static control. Data-driven companies usually provide a range of behavioural options in line with their assessments of users and their data, thus providing a dynamic balance between flexibility and prediction. Yet, as instruments of perception, analytical techniques focus on human attentiveness of people and things of interest while, at the same time, discarding much of the context from which these persons and things emerged (Amoore & Piotukh, 2015). Control through technological forms is, therefore, a conditioning and structuring mechanism in which the range of options is constantly adapted and individualized in real time to allow profit making and commodity exchange to occur seamlessly in the background.
The starting point of the research presented in this book is defined by the simple fact that the platform economy, however one conceptualizes it, has been a part of the capitalist landscape for more than two decades. This empirical reality can be approached from different theoretical traditions and levels of inquiry. Our principal goal is to show that this relatively new reality of contemporary capitalism can become intelligible within the Marxian theoretical framework, and that, in turn, the Marxian approach is responsive enough to include insights from other theoretical traditions and schools of thought. We start from a rather abstract level of Marxian theory of value and social forms in order to proceed to the more concrete features of actually existing platform capitalism. Starting from the presentation of the inner workings of the Marxian research programme is important for several reasons. Most importantly, delineating key assumptions brings more epistemic clarity. Furthermore, certain strands of post-Marxism, most notably Postoperaismo and proponents of the cognitive capitalism hypothesis, have formulated their understanding of the so-called knowledge economy on the assumption that Marxian value theory, in its most prominent aspects, is obsolete.
We will have more to say about the issues raised by Postoperaismo and related approaches in Chapter 4, but for now it will suffice to show that the key notions and concepts of the Marxian theory can be used to explain the rise and functioning of platform capitalism.
Accumulation of capital based on commodification of user data leads to privatization of many aspects of social and political life, previously outside of the process of commodification. Yet, regardless of widespread public outrage, major companies end up being largely unscathed in their economic, and especially financial, performance for three different reasons. First, concentrated and centralized capital creates high entry barriers (investment costs) for newcomers who could potentially challenge their power by providing alternative outputs. GAFAM invests substantial capital in research and development as well as in mergers and acquisitions putting innovation within the industry under their control. Moreover, accumulated data on web search history, social networking, and online purchases puts all newcomers at a significant disadvantage in providing alternative outputs. This is especially the case for the advertising financed digital platforms such as Google and Facebook: software and algorithms extract consumption preferences from the accumulated background data (obtained from the usage of pre-commodities), enabling production of higher quality targeted adverts (intermediate commodities).
Second, legal forms of financial regulation and financial profits enable scaling up and growth of tech business models and provide support for their international expansion, creating enormous personal wealth to shareholders and top executives, and sharpening economic inequality. We will provide evidence of how Google forged a path of trust building among shareholders and investors by acquiring new companies, and by entering legal struggles throughout its corporate development. Finally, the US regulation favours the growth of single large companies under current interpretations of antitrust legislation, and in merger and acquisition approvals.
Digital platforms have expanded their scope from venture capital supported projects, towards global operations and multi-billion dollar oligopolies. However, the platform model is not entirely new. It was a common business model for newspapers, radio, and television. Before increasing commercialization through cable and satellite television, broadcasting was, for the most part, a state-supported monopoly only partially commercialized and privatized in many European countries. Production either relied on state subsidies through mandatory subscription payments in the public service model, or on advertising in the market oriented model. For example, audiences could freely listen to radio stations, while the state or the advertising industry provided funding for content production. Similarly, some digital corporations derive profits by providing advertising space for boosting sales and creating demand through the increase of consumption of products produced in other parts of the economy, obtaining their revenue from the circulation of commodities and capital in the economy as a whole. Additionally, they also produce their own means of production, such as software systems, algorithms, and AI, whose sales serve as an additional source of income and profits.
What is new about the digital platform model, compared to traditional media, is the scope and scale of gathered data, along with automated and improved analysis. Analysing big data requires technical assistance because manual analysis is not possible, or even conceivable, in any reasonable or economically viable amount of time. While the traditional media model required separate firms and an entire industry for audience and market analysis (for example, Nielsen, PwC), platforms developed entirely new markets on their own, along with the tools for analysing those same markets.
There are various Marxian approaches towards understanding monopoly. The most direct and sustained is the monopoly capitalism perspective (for example, Baran & Sweezy, 1968; Magdoff & Sweezy, 1987; Foster, 2014a), tied to the Monthly Review magazine. This uniquely American school of thought takes monopoly as the latest developmental stage in the capitalist mode of production. Its main authors argue that the 19th-century capitalism was shaped by similar-sized producers in an environment of intense industrial competition. The main argument is that, since the 1970s, capital increasingly escapes production and enters a speculative domain of financialization. This results in monopoly-finance capitalism, a specific regime of capital accumulation benefitting a tiny minority of capital lenders and shareholders, transnational companies, and corporate owners and managers (Magdoff & Sweezy, 1987; Sweezy, 1994; Foster, 2016). According to these authors, capitalism has now entered a stage of increasing concentration of capital in the hands of fewer and fewer companies and owners.
While this thesis holds some weight towards describing the contemporary snapshot of GAFAM’s oligopoly, it cannot explain the specificities of the platform business model, commodity chains on digital platforms we described in Chapter 2, or legal forms necessary for the reproduction of capital through platforms. Moreover, it does not engage in theorizing value, surplus value, and money but, instead, replaces it with the concept of the economic surplus (Baran, 1956/1973; Barclay et al, 1975), thus severing ties with some of Marx’s central concepts.
