The digital economy and the age old problem of immaterial labor

The digital economy, and it’s main drivers in the knowledge industry, have opened up some rather unorthodox questions for economists who theorise the value of an individual’s labor. However they are not new questions; Karl Marx himself differentiated a person’s abstract from concrete labor in order to extrapolate what he called the “provision of time for the production of value regardless of the useful qualities of the product”.

From this perspective it almost looks as though Marx anticipated the difficulty dealing with abstract labor in the knowledge and digital economy, although for some, the opposite is the case. Andre Gorz, in his book Reclaiming Work: Beyond the Wage-based Society proposes that Marx’ labor theory of value is made obsolete by what he calls impossibility of “calibrating all performance parameters”.

Economists John Haltiwanger and Ron S. Jarmin (PDF file) note that the rapid growth of e-commerce has prompted U.S. statistical agencies to find ways of “adequately measuring the changes brought on by the IT revolution”. But on the subject of measuring labor value nothing has quite advanced measuring individual performance through observing final products – which as economic theorists from Marx to Maurizio Lazzarato (French sociologist well known for his work on immaterial labor) realise paints only a partial picture.

The digital economy, and the knowledge worker, have increased the form of labor often called immaterial labor, which also throws open interesting questions for labor theorists. Advocates of the strand of Marxism called Autonomism – whose main figurehead is the well-known theorist Antonio Negri – had many things to say about immaterial labor. Tiziana Terranova in her paper entitled Free Labor: Producing culture for the digital economy noted that Italian Autonomists, particularly Lazzarato – mentioned above – viewed immaterial labor as two things: the informational content of the commodity itself, which is to say the labor involving cybernetics and computer control, and the cultural content of the commodity which involves activities not often considered labor, such as fixing cultural and artistic standards, fashions, tastes, consumer norms and public opinion.

As these things are seldom considered labor, the term knowledge worker is a contested sociological category. For some, knowledge is the product, while the worker continues standard class relations. Andre Gorz held the opinion that the digital class struggle shifts from exploitation in the production process, to exploitation of the product (knowledge) itself. Even the Canadian business executive Don Tapscott, in his book The Digital Economy: Promise and Peril In The Age of Networked Intelligence (1997), opines that the brain acts, today, as a means of production – however he is less inclined to admit how far those means become alienated from the producer in the digital economy.

With the intense commodification of everyday internet life, the digital economy is the ideal means to bring about a digital Fordism – where a reduction in remunerated labor time (geeks and internet whizzes create programmes, applications and website platforms that companies hone in to invest and make marketable) is matched by an abundance of goods and mass consumption (many social networking tools were first created for close friends to use, out of free labor, that was eventually sold for a price to large corporations – no doubt the creators were rewarded well, but it was surely not linked to their labor value, or on how much revenue the product would eventually bring in).

Twitter, Facebook, MySpace are just some of the success stories, but the internet is host to hours and hours of free labor. Furthermore, work in the digital economy necessitates labor which is not evaluated according to usual measurements of labor. Though, much like how abstract labor was not immeasurable in Marx’ day, neither is immaterial digital labor immeasurable in ours.

Activities such as writing, reading, mailing lists, websites and online marketing may not be what Marx was talking about when he theorised upon abstract labor, but certainly there are parallels; in both abstract and immaterial labor, it is time which must be measured to understand a commodity’s value, “regardless of the useful qualities of the product”.

Ireland and the Euro

Will Hutton has said something about the Euro which I bring up every time I discuss it, with friends, colleagues or in blog entries. It is as follows:

Nobody pretends the euro is perfect. It was probably too ambitious to incorporate weak members with the strong so soon.

Too ambitious by half.

Plenty of bloggers are reminding themselves and each other that the euro is not to blame (lib dem voice; Phillip Legrain for example), and principally this is Hutton’s line as well, but rather thinks the union should be reformed – teasing out the difference between left and right wing euroscepticism along the way.

The right may have nationalist and sovereign interests as their main concern, but the left are not opposed to a single monetary union, just opposed to one geared at concentrated capital movement, reducing nations within that union to massive wealth disparities.

Though EU reformers recognise this, and it is precisely Hutton’s point – supporters of the EU, in the name of a free market, are not learning the lessons of history, favouring floating exchange rates and leaving the door wide open for explosions, caused by excessive deficits or surpluses.

The eurosceptic left were never principally opposed to european integration, but much of the convergence criteria in the Maastricht Treaty. But Hutton is one example of someone who is pro-EU addressing those very concerns. Ireland and Greece, if nothing else, will see those ideas taken far more seriously by politicians.


Reducing Chinese export dependency: an own goal

In October, Will Hutton said this about China’s economic model:

[It] is built on sky-high saving and phenomenal export growth

The by-line for the same article was:

As America and China square up, the chancellor is ignoring the bigger picture with his ill-advised spending review

But nevermind the CSR, the House of Commons yesterday missed the chance to set a strategic limit on our reliance on imported soy, through the Sustainable Livestock Bill.

One part of China’s “phenomenal exporting” is soy; indeed phenomenal is an understatement:

China, the largest soybean consumer, may import more than a forecast 46 million metric tons of the oilseed this year on increased demand for vegetable oil and animal feed and amid plunging soybean oil shipments.

Granted, there is more than one way of curbing dependency on Chinese exports, but opposition to the bill noted it’s “red tape” – that’s pretty lame, given the need for sustainability and the durability of the planet.

Plus, missing out on a clever way to promote maximised livestock production in this country – which the bill was set to do – will probably be another own goal.

Thoughts on loan sharks

Recently I penned an article, published today on the Guardian’s Comment is free section, drawing on the consumer credit (regulation and advice) bill drawn up by Stella Creasy, MP for Walthamstow.


After writing it I had some notes left over which I want to jot down here.


During her adjournment debate held on 9 November in the House of Commons, Creasy noted that of those who use credit over their means, 26% are male, and 34% are women, and of that latter 34%, 50% are recently divorced. And with 1 in 10 people, according to Creasy, struggling to finance themselves until pay day, it is clear to see that desperation leads individuals to something which would put the willies in most people.


Creasy also informs us that 1 in 10 customers of legal loan sharks earn under £11,000 per year, and that even lenders playing by the book are able to okay loans at 272% APR (compared to 9-10% by mainstream lenders).


Tim Worstall, who popped up in the comments section of my article, made the point that all short term loans are going to be high in APR to cover the loan application process itself. Furthermore, loan sharks don’t make as much profit than, say Lloyds bank, so by his account they can’t be so bad (or, perhaps he doesn’t think that, but that legal loan sharks needn’t feel so immoral).


Now call me a Maoist protectionist Nazi Communist if you will, but I don’t think it’s necessarily a bad thing that our government subsidise credit unions with the intention of making more individuals creditworthy, so they don’t end up lining the pockets of the likes of the chief executive of Provident – who recently stated that he expects growth in his target market as a direct result of the CSR.


This is not, as Mr Worstall has accused me of being before, because I am anti-market, anti-people making money. In actual fact, what informs my decision to dislike legal loan sharks, and want to campaign against sky high interest rates, has in recent times been contained by many conservatives and New Labourites alike – the view that having credit dependent and debt ridden consumers in the system is bad for a savings culture (and a savings culture is generally considered quite good).


Regardless of a person’s first principles, markets can’t run themselves, and so it seems appropriate to operate them – as best as possible – to bring about good. Forging a mechanism to limit the amount an agency can charge as interest, while using state subsidy to make more people creditworthy, while we simultaneously battle to cut credit dependency altogether, sits perfectly well with me.


Free marketeer Damian Hinds, MP for East Hampshire, who attended Creasy’s debate, made three points in response to the bill: it is not necessarily party political to support (or even, I suppose, take issue with) the bill; it is not necessarily new; and it is not in conflict with a diverse market. If this friend of the market can agree, why can’t others do the same.

Cuts in thirties Britain

The setting is the UK in the 1930s. It was hoped that depression in basic exporting industries – and, thus, working class unrest – would soon disappear and output be even with production. In short, it was hoped the UK could be more like the US, where reduction in socially necessary labour time was matched with an abundance of goods to sell on the market and where consumers consumed en masse (Fordism, not Marxism).

Instead, unemployment in Britain reached 3 million – 23% of all insured workers – in 1933 while output was commensurate with the slow and erratic recovery. There were restrictions placed on production rather than a more desirable reduction of costs, tariffs and cartels for fear of over-production, and a country pulling its hair out.

An economy assisted by the state became very appealing to members of parliament on both sides of the house. Harold Macmillan – then a backbench Tory MP – remarked of the mood in the thirties: “the structure of capitalist society in its old form had broken down, not only in Britain but all over Europe and even in the US”.

No, he wasn’t advocating socialism, but he, like so many then, and so many today, did feel that in order for capitalism to remain, it must be helped out by a very visible hand. I’ll no doubt have my knuckles slapped for this, but Marx was right when he asserted capitalism would come to destroy itself; perhaps what he didn’t anticipate was that government would periodically come to its rescue.

The tendency of British investors to export capital into the colonies meant that many industrial plants in this country were left to dry; much the same argument can be said about manufacturing now as it could both in the seventies and the thirties – basic industries were not moving fast enough to maintain pace with the rest of the world. As such, manufacturing was left lacking while Japan, Germany and the US reaped all market rewards.

Even when production saw a recovery in 1934, unemployment remained relatively high to the extent that one in every eight people able to work could not.

This was a reality for the high skilled too, not to mention the so-called middle class. Noreen Branson and Margot Heinemann in their book Britain in the Nineteen Thirties point out the rise of the Middle Class in the mid-thirties was, strictly speaking, the increase of clerical, technical and administrative jobs, still affected by unemployment and of comparable wages to more traditional skilled labour.

Nobody can deny it is to the credit of trade unions at the time that real wages remained pretty steady after the crisis prior to the 1930s. Employers were simply unable to make wage cuts in line with the fall in prices – it would have been poison. Much like Britain of the seventies, the streets could be awash with concerned peoples at the drop of hat. On 21 September 1931, striking teachers caused the government to retreat on reducing wages in the public sector, and admit certain “classes of persons” were unfairly affected, while everybody was “in this together” to quote that familiar phrase.

Surprisingly for the government at the time, action had been taken by the Royal Navy after having their wages cut from 4s to 3s. Whitehall realised the error of their ways, backtracked, and further strike action called off on the promise no pay cut exceeded 10%, with no victimisation.

The latter promise was subsequently broken when 36 ringleaders were sacked and the Incitement to Dissatisfaction Act was later realised, with the aim of curbing subversive influences in the armed forces. In spite of this, however, the affair had a lasting effect on the working class movement who used it as proof of industrial action effectiveness.

The unfortunate grouping at the time were the unemployed. They were promised cut to benefit would not exceed 10%, though according to Branson and Heinemann it was more in the region of 20%. In June 1931 the Royal Commission advocated heavy reductions to benefit payments in their interim report (it was from this report too that a reduction in real wages was floated – in spite of unsettled opinion on it. The Macmillan report of July, which advocated this position on wages, even had as signatories Sir T. Allen of the cooperative movement and Ernest Bevin of the TGWU/TUC). It wasn’t until November 1933 that the Unemployment Bill, Part II restored the standard 10% cut in benefit.

Worse still, agricultural workers and domestic servants who lost their jobs were entirely excluded from benefit and would have to apply to the local Poor Law Authority – making times extremely tough had they no other means of securing money.

The cuts at the time were carried out so as to save the pound from collapsing, and as per usual everybody was in it together. Though, of course, some more than others. Strike action was the method of choice for keeping the government to check on the fairness of cuts, and indeed they were forced on some occasions to revise their sums and admit they had come down over-zealously on some over others.

It’s early days yet, but who can say what will happen in the future when people start to question the legitimacy and fairness of the cuts set by today’s coalition government.

0.8% growth Q3 still needs to be viewed with caution

Unfortunately, today’s growth figures act as a Rorschach test; the coalition government and its supporters see growth at 0.8% in the third quarter of 2010, and growth for the last six months at 2%. What the opposition will see is a drop of 0.4% when between April and June growth was positioned at 1.2%.

Since growth was forecasted far lower than expected, many – such as Vince Cable, who was said to have a big smile on his face this morning, possibly after finding out the data – are probably just pleased to see a higher figure, not because it is necessarily a good sign for the economy, but simply because it will make for easy smoke and mirrors. Look we can cut and grow, it’s easy.

Others may note that the worst of the cuts have not been factored into the figures yet. It’s important to note that cuts will have been factored in already; the squeeze for many councils started a while ago, redundancies are a reality now, and small and medium businesses (SMEs) are already checking their books with a grimace.

Construction was the real winner with contributions of 4% (p. 3), compared with an increase of 9.5% in the previous quarter, and 11% since Q3 2009 and Q3 2010.

Read in a certain way, today’s figures will prove politically opportune for the Tory/Lib Dem government, which may set back Labour’s current lead in the polls. But it is not mere politicking to point out that the severity of the cuts, spelt out in the CSR last week, have not been entirely factored in, and that growth really needs to be sustained and sustainable.

There is even tension within the government about the road to growth. Vince Cable has recently slammed David Cameron’s optimism, saying that the “sunlit uplands” strategy will not necessarily be the case. If he has any sense about him, Cable’s supposed smile this morning will be matched by caution.

In Cameron’s “new economic dynaims” vision, he wants to “make sure we have a banking sector that is really focused on small business lending … rather than the banks thinking how [they] can become bigger and bigger investment banks.”

Cameron hopes to get those banks which the government has a stakeholder share of, to start lending again and fuelling a private sector revolution.

According to a recent NEF report entitled Where did our money go? the 2009 budget noted that RBS needed to lend an additional £25bn (£9bn – mortgage / £16bn – business); Lloyds an additional £14bn (£3bn – mortgage / £11bn – business); Northern Rock an additional £5bn in 2009 / £3-9bn from 2010 onwards.

After the bailout, there was disappointment that the banks were increasing the bonus pot without actually kickstarting small businesses with money. In an ongoing discussion I had with an acquaintance, I was reminded that the bailout was paid in order to cover liabilities at the time, but the reason behind doing so, and not allowing them to fail, was so they could start lending again – for this is the reason why those banks are too big to fail.

George Osborne’s risky business

Context: From a Keynsian perspective, in a time of economic vulnerability, fiscal credability should be the plan for medium term, while support for the economy the plan inthe short term. Nowhere in history can anyone cite an example where cutting deep and quickly in a time of European, even global, economic unrest, is the right thing to do. Osborne is taking too much of a risk, not seeking the real alternatives, and not being fair upon the poor and those dependent upon welfare.

(Sources: Duncan / ConservativeHome / BBC / Left Foot Forward