More thoughts from a seminar. It was organised by one of the North London CLPs and was advertised as a look at the Digital Economy. So what did I learn and what did I think?

On asking how transformational is the Digital Economy, I am reminded that CV 19 has shown who are essential workers and raises the question as to why they are so poorly paid and that the Digital Economy is not yet ubiquitous. Distribution is not yet virtual and will never be, although with AI driven trucks and airborne drones, a lot of jobs can still be eliminated but I am reminded of Carlota Perez’s comments that the railways created demand for more horse drawn freight miles. The other work apart from the obvious health service workers that cannot be virtualised is cleaning and security.

One thing that was not said is that the platform companies and their software benefit from massive economies of scale, and the critical scaling factor is the number of market participants i.e. the consumers and suppliers; for Air BnB, room providers and renters, for Uber, drivers and riders. While some market place creators have applied massive imagination and science to the problems of IT scalability to support their global marketplaces, the IT plant is not at the heart of the value of these market places although we need to recognize that we’ll have to pay for cycles and the power they consume.

Copyright and closed source makes the software monopolistic which is then applied to the relationship with Labour, and in the case of both Air BnB & Uber non software capital is outsourced to the supplier! The value of the company is based on this market activity, not the value of capital employed and not the so-called cost of the software; the software expropriates the surplus value from the suppliers and the size of these markets acts as a further barrier to entry for competitors.

Copyright since it inhibits copying of the software, also underwrites the share value. This is important as we consider if these monopolies should be placed under common ownership. We need to recognize that copyright enables rental income on an infinitely available resource i.e. the software.

These problems are not new, it’s about how combine labour and the world’s natural resources to produce new stuff, the market is meant to optimise this and the platform companies break these economic rules, but fortunately we know how to regulate monopolies.

There is a need for some new thinking about the value of software and how markets might ensure optimal resource allocation but today the basic facts are that software copyrights enable the expropriation of surplus value and establish a rental income yielding super-profits, super-profits funded by the consumers.

The relationship between these marketplace platform companies[1] and their suppliers is exploitative, copyright laws add to the barriers to entry. Their practices are contrary to decent behaviour and the monopolistic nature of the enterprise, together with the subversion of the capital markets undermines their economic justification.

That’s the problem for socialists

[1] Banks are platform companies.

The digital economy, surplus value and monopoly
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