The Prophets of Postcapitalism
The Information Revolution
In this chapter, Paul begins to set out his case that what is different about this current long wave is that it is driven by information. He starts by examining the role of information technology in transforming existing technologies, such as jet engines. Its an idea I have also discussed previously. Computers and rapidly developing processing power, combined with the ability to embed microprocessors within almost every device – including human beings – is transformative, in almost every sphere of science and of life.
Paul sets out this role of information technology, in the design of new products and materials, as well as in the production process, but we see it also in the products themselves, such as with SatNav systems, which combined with robotics makes possible driverless vehicles of all kinds. Again echoing a point I have been making for a long time, Paul notes that where the value of the basic component of many products is falling, as a result of the rise in productivity, this technological revolution has brought about a situation where a growing part of the value of these commodities derives from the complex labour used in their production.
The majority of the actual production and assembly of an iPhone takes place in China, undertaken by large numbers of workers. However, 90% of the value of an iPhone is produced in the US. That is because the actual materials consumed in production, as well as the labour of assembly is largely de minimis in relation to each unit, compared with the labour of the software and hardware designers. Even in terms of the materials used, an increasing proportion of their value is itself attributable to complex labour, because the materials themselves are increasingly the products of material science. That is the case, for example, with the single crystal carbon, used in the production of jet engine blades. But materials science is almost annually coming up with new materials with esoteric qualities, useful for a range of new products.
I have written about this previously. It means that, for example, in the pharmaceutical industry, the scientific labour, used in the development of new drugs, acts more like fixed capital. The new value it produces is determined, as with any other labour, by the amount of abstract labour it represents. Let us say that, for some drug this represents 1 million hours. But, that is a fixed value, like the value of machines. Exactly how much of this value is embodied in each unit of production depends on the volume of production. The more units of any particular drug produced, the more this value is spread across the volume of production, so that it is thereby reduced. And, like fixed capital, in addition to transferring this value piecemeal to the value of output, it also suffers depreciation. The longer a given drug has been on the market, the more likely generic alternatives are available, at lower cost, and the more likely some later drug, that is more effective, will come along to replace it, bringing about a sort of moral depreciation.
If we look at the decoding of the human genome, its cost has fallen from around $3 billion, for the first one, to $1,000, and is likely to fall to around $100 in the next year or so.
Paul points out that the jet engine, via the same information technology, constantly passes information back to the engine producer, in real time. This is the same technology that sends back telemetry from a Formula I car to the pit crews. It is also what allows a family car to monitor its own performance from fuel consumption, tyre pressures to fault diagnosis. All of this provides useful information to the companies that can collect this data. The same thing applies to the supermarkets that collect the data on our shopping habits, as well as the tech companies that collect data on our internet browsing habits, the media companies that collect data from our smart TV's and so on.
The value of this big data has started to be realised, and was brought to light with the activities of Cambridge Analytica. Yet, as Paul says, little of this value is reflected in company balance sheets, and existing accounting practices have difficulty in being able to measure it.
However, for reasons I'll set out later, I'm not convinced that any of this means that, in terms of production and distribution, capitalism has become qualitatively different, as Paul claims. Different yes, but only in the same way that industrial capitalism was different to capitalism at a time when agriculture was dominant, and in the same way that service industry has become dominant. It does have implications for the Marxian law of a falling rate of profit, but for the reasons already set out, this too does not represent a qualitative change.
Paul believes that this qualitative change arises also because not only is accounting unable to value this information, but orthodox economic theory also cannot cope with a technology that drives marginal costs to or near zero. Again, I don't think this is true, but I will deal with that in the coming chapters, when Paul sets out his argument in relation to that, and his understanding of the Labour Theory of Value. Suffice it to say, here, near zero marginal costs are not zero, and this is something that is not essentially new for capitalism, but is simply the logical conclusion of existing laws when applied to ever larger volumes of output. Moreover, as I will set out, in part, Paul's error, in this regard, stems from a basic error in his understanding of the Labour Theory of Value.
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