Is Digital Capitalism Aligned With Public Interest? Probably not.

2017 has been (another) very eventful year. The consequences of the shift to digital are more apparent and far-reaching than ever. When reflecting on the trends that currently are reshaping the world, one can take many perspectives. What I consistently end up with when pondering current events, is the following question: In the digital age, is “traditional” capitalism still sufficiently aligned with the interests of the people? And my answers is: probably not. Read on why, and what Swiss cheese has to do with it.

The basic idea of capitalism is clever: acknowledging that the pursuit of self-interest is the best motivator for people to get stuff done, and then building a framework which ensures that the results of this pursuit are channeled into overall improvements for everybody. Genius. And this approach indeed has led to unprecedented wealth, growth and prosperity, over many decades, if not centuries (depending on where you look and when you start counting).  

Capitalism, freedom and transgression

In capitalism, the framework of rules, laws and norms is supposed to guarantee that everyone’s self-interested actions don’t cause irreversible damage to the systems in which self-interested individuals pursue their goals – to prevent capitalism from destroying itself. Considering how capitalism has lifted hundreds of millions out of poverty and, in the process, created a large number of stable democracies, this approach has worked fairly well – even though one can argue that the capitalism of the 20th century came with a “bug” of externalized, concealed costs that generated forms of collateral damage which only became apparent in hindsight, particularly when it comes to the negative effects on the environment and climate. But capitalism already has created the solution to this problem, in the form of renewable energy sources, electrical transportation and so on.

The framework in which capitalism of the past had been embedded in wasn’t perfect. Actually one cannot design a set of perfect rules that are never violated for a system which strives to give as much freedom to the individual as possible. If you want to offer freedom, you have to allow for the existence of room for transgression of rules. Otherwise there is no freedom. Loopholes and exploitable flaws are the consequence of providing freedom. The key is to be successful in incentivizing the majority of the participants in the system to not overstep the rules, and to make sure that those few who severely exploit the loopholes and those who break the rules, cannot threaten the stability of the system itself. For a long time, that goal had been achieved.

Then came information technology and the internet and everything changed.

The framework that now looks like a Swiss cheese

The internet created a completely new space for individual self-expression, commercial activity and innovation. It multiplied the freedom that people and organizations already enjoyed in the analogue capitalist era. But it also started to weaken the established framework which previously had ensured a state of equilibrium between self-interest and collective interest. Either by offering new ways for circumvention, or by simply not offering any enforceable rules at all. The phenomenon of the internet first was too new, and then it became too big too fast to control it.

Global connectivity weakens the effectiveness of national laws and undermines existing gatekeepers. It dramatically reduces the costs to reach a global audience. It creates a global, very competitive marketplace of ideologies. It allows a small number of organizations to morph into gigantic corporations which, powered by economies of scale and accumulative advantage, capture market by market while hoarding vast amounts of money. It enables individuals to earn money in sometimes genius, sometimes absurd ways. Nowadays people can even can make a pretty good buck by writing made-up news about politics or creating disturbing videos for kids on YouTube, influencing millions of minds in the process.

The internet has been a boon for the pursuit of self-interest, completely in line with the spirit of capitalism. This would not be a problem, hadn’t the framework tasked with preventing the capitalist system from eating itself, suddenly become toothless and featuring more holes than a Swiss cheese. Without checks and balances, the individual pursuit of self-interest by millions inevitably directs resources and attention away from public interest.

The way I see it, capitalism in the digital age has lost its equilibrium. In aggregate, the goals of self-interested players in the digital sphere are not aligned anymore with what’s good for today’s societies. Facebook, just as one and possibly the most significant example right now, simply cares about self-preservation and continued growth. There is nothing Mark Zuckerberg can do about it. He can’t just wake up tomorrow, shocked by what he has created (like some of his former colleagues), and decide that it might be better for the world to just shut the service down. I have called this “Zuckerberg’s lock-in effect“. Therefore, whatever mission this company or any other tech giant comes up with, has to be considered meaningless post-rationalizations.

The bright side

Fortunately, there is a bright side: The absence of effective frameworks to bring digital capitalism in balance with the interests of the people also provides new wiggle room for individuals who do care about the bigger picture and the public interest. The digital age’s freedom is there for everyone to leverage (as long as uncensored internet is available, of course). The freedom offered by the capitalism of the 20th century was rather limited in comparison to the opportunities today. Back then, structural, technological and geographical boundaries prevented out-of-the-box thinking and the creation of large-scale cross-national networks of ideas. Today is very different. This results in all kinds of powerful movements and emerging concepts for new paradigms, such as basic income, the rise of women or the philosophy underpinning the blockchain.

What happens next is anyone’s guess. If the interest of digital capitalism’s entities indeed has become too decoupled from the interests of society at large, as I suspect, then the already frequent shocks to political systems, institutions and the democratic way of living as a consequence of this misalignment will likely keep getting stronger and even more numerous – which would feed the current rise of anti-tech attitudes. On the other hand, the emerging “native” movements and paradigms of the internet era could, theoretically, lead to an upgrade to capitalism, aligning it back with public interest, and helping to break the accelerated concentration of capital, data and (information technology) knowledge in the hands of very few.

If that ends up happening, then capitalism will have won, after all.

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Photo: Flickr/Filter Forge, CC BY 2.0