The technological dynamism of capitalism has always been a powerful argument in its defense. But one of its secrets is that at the heart of this change we find neither bold entrepreneurs, venture capitalists, nor established firms.
Investments pushing the frontiers of scientific knowledge are just too risky. The advances sought may not be forthcoming. Those that do occur may not ever be commercially viable. Any potentially profitable results that do arise may take decades to make any money. And when they finally do, there are no guarantees initial investors will appropriate most of the resulting windfall.
There is, accordingly, a powerful tendency for private capital to systematically underinvest in long-term research and development. Despite popular perceptions that private entrepreneurs drive technological innovation, the leading regions of the global economy do not leave the most important stages of technological change to private investors. These costs are socialized.
In the quarter-century after World War II, the high profits garnered by American corporations due to their exceptional place in the world market allowed corporate labs to engage in “blue-skies research” projects. But even then, public funding accounted for roughly two-thirds of all research and development expenditures in the United States, creating the foundations for the high-tech sectors of today.
With the rise of competition from Japanese and European capital in the 1970s, private-sector funding of research and development increased. However, long-term projects were almost entirely abandoned in favor of product development and applied-research projects promising commercial advantages in the short-to-medium term.
Basic research continued to be funded by the government, like the work in molecular biology that supported the move of agribusiness companies into biotechnology. The same was true for projects of special interest to the Pentagon — the developments associated with the Defense Advanced Research Projects Agency, for instance, which paved the way for modern global positioning systems — and other government agencies.
But medium-to-long-term R&D in general was in great danger of falling into a “valley of death” between basic research and immediate development, with neither the government nor private capital providing significant funding for it.
For all their rhetoric touting the “magic of the marketplace,” those in the Reagan administration recognized market failure when they saw it. They began to offer federal and publicly funded university laboratories various carrots and sticks to undertake long-term R&D for US capital.
New programs were created to provide start-ups with resources to develop innovations prior to the “proof of concept” required by venture capitalists. Under Reagan, the Small Business Innovation Development Act even mandated that federal agencies set aside a percentage of their R&D budget to fund research by small firms. These and other forms of public-private partnership have granted US capital enormous competitive advantages in the world market.
It’s no surprise that Apple’s tremendously successful line of products — iPads, iPhones, and iPods — incorporate twelve key innovations. All twelve (central processing units, dynamic random-access memory, hard-drive disks, liquid-crystal displays, batteries, digital single processing, the Internet, the HTTP and HTML languages, cellular networks, GPS system, and voice-user AI programs) were developed by publicly funded research and development projects.
It hasn’t been the dynamics of the market so much as active state intervention that has fueled technological change.
The Promised Golden Age
Technology is more than just a weapon for inter-capitalist competition; it is a weapon in struggles between capital and labor. Technological changes that create unemployment, de-skill the workforce, and enable one sector of the workforce to be played against another shift the balance of power in capital’s favor. Given this asymmetry, advances in productivity that could reduce work time while expanding real wages lead instead to forced layoffs, increasing stress for those still employed and eroding real wages.
Two ongoing technological developments further strengthen the power of capital. Advances in transportation and communication now enable production and distribution chains to be extended across the globe, allowing capital to implement “divide and conquer” strategies against labor to an unprecedented extent.
Astounding new labor-saving machines are also becoming more and more inexpensive. A recent exhaustive study of over seven hundred occupations concluded that no less than 47 percent of employment in the United States is at high risk of being automated within two decades. Anything approaching this level of labor displacement will yield more misery, not progress, for ordinary workers.
But the lower cost and higher capacities of machines have also led to change of a better sort. As the prices of computer hardware, software, and Internet connections have declined, many people can now create new “knowledge products” without working for big capitalists.
Multitudes across the globe now freely choose to contribute to collective innovation projects of interest to them, outside the relationship of capital and wage labor. The resulting products can now be distributed as unlimited free goods to anyone who wishes to use them, rather than being scarce commodities sold for profit.
It is beyond dispute that this new form of social labor has generated innovations superior in quality and scale to the output of capitalist firms. These innovations also tend to be qualitatively different.
While technological developments in capitalism primarily address the wants and needs of those with disposable income, open-source projects can mobilize creative energies to address areas capital systematically neglects, such as developing seeds for poor farmers or medicines for those without the money to buy existing medications. The potential of this new form of collective social labor to address pressing social needs across the globe is historically unprecedented.
In order to flourish, however, open-source innovation requires free access to existing knowledge goods. Leading capital firms, hoping to extend their ability to privately profit from publicly supported research, have used their immense political power to extend the intellectual property rights regime in scope and enforcement, severely restricting the access open-source projects require. Copyright, after all, was extended for twenty years at the turn of the century, just as Internet access was starting to balloon.
Despite these barriers, the success of open-source projects shows that intellectual-property rights are not required for innovation. Further evidence is provided by the fact that most scientific and technological workers engaged in innovation are forced to sign away intellectual property rights as a condition of employment. These rights actually hamper advancement by raising the cost of engaging in the production of new knowledge, and by diverting funds to unproductive legal costs.
The World is Flat?
Capitalism also hampers the ability of much of the world to contribute to technological advancement. Whole regions of the global economy lack the wealth to support meaningful innovation. Today, only four countries spend over 3 percent of their GDP on research and development; a mere six others devote 2 percent or more.
Capital in these advantaged regions has the opportunity to establish a virtuous circle, free-riding on the extensive public investment discussed above. Privileged access to advanced R&D enables capitalists to appropriate high returns on successful innovations; these returns allow those companies to make effective use of technological advances in the next cycle, setting the stage for future profits.
At the same time, enterprises in poorer regions, lacking access to high-level R&D, find themselves trapped in a vicious cycle. Their present inability to make significant innovations that would enable them to compete successfully in world markets undercuts their future prospects. Only a handful of countries — such as South Korea and Taiwan — have ever been able to move forward from this starting disadvantage.
Global disparities in technological change alone do not explain why 1 percent of people in the world now own 48 percent of global wealth. But they are a major part of the story; technological change is a weapon that enables the privileged to maintain and extend their global advantages over time.
The destructive effects examined above are not necessary features of technological change; they are necessary features of technological change in capitalism. Overcoming them requires overcoming capitalism, even if we only have a provisional sense of what that might mean.
The pernicious tendencies associated with technological change in capitalist workplaces are rooted in a structure where managers are agents of the owners of the firm’s assets, with a fiduciary duty to further their private interests.
But a society’s means of production are not goods for personal consumption, like a toothbrush. The material reproduction of society is an inherently public matter, as the technological development of capitalism itself, resting on public funds, confirms. Capital markets, where private claims to productive resources are bought and sold, treat public power as if it were just another item for personal use. They can, and should, be totally done away with.
Large-scale productive enterprises should instead be acknowledged as a distinct type of public property, and exercises of authority within these workplaces as acts of public authority. The principle of democracy must then come into play: all exercises of this authority must be subject to the consent of those impacted by it.
Though additional regulations would be needed if managers were elected and subject to recall by the workforce as a whole, technological advances in productivity would not typically result in the involuntary unemployment of some and the overwork of others, but rather in reduced work for all.
We know this because workers say they want more time to spend with their families and friends, or on projects of their own choosing. With democracy in the workplace, the drive to introduce de-skilling technologies would be replaced with a search for ways to make work more interesting and creative.
Suppose that decisions regarding the general level of new investment were also a matter for public debate, eventually decided by a democratic body. If there were pressing social needs, the overall rate of new investment could be increased; if this were not the case, it could be stabilized. These bodies could then set aside a portion of new investment funds to provide public goods free of charge, putting more useful goods and services outside the market’s reach.
The public goods of scientific and technological knowledge resulting from basic research and long-term R&D would be decommodified, too, as would the fruits of open-source innovation. The latter could be unleashed by abolishing intellectual property rights and by providing an adequate basic income to all — enabling anyone who wished to participate in open-source projects to do so. If special incentives were required, generous prizes could be awarded to the first to solve important challenges.
Remaining funds could then be distributed to other elected bodies at various geographical levels, each of which would determine what share would go to public goods in a region. The remainder would be distributed to local community banks charged with allocating them to worker enterprises.
Various qualitative and quantitative measures could be employed to measure the extent to which those enterprises used technologies to meet social wants and needs effectively, with the results determining the income beyond the basic level received by their members (and the members of the community banks that allocated investment funds to them).
Abolishing intellectual property rights would have the added benefit of ensuring that wealthy regions could not use technological knowledge as a weapon to create and reproduce inequality in the global economy. This danger would be all but eliminated if every region were granted a fundamental right to its per capita share of new investment funds.
Finally, if workplaces used productivity advances to free up time for their workers rather than to increase the output of commodities, resources would be depleted and waste generated at a much lower rate. Abolishing capital markets and replacing them with democratic control over levels of new investment would free humanity from the “grow or die” imperative and the environmental consequences that follow from it.
If enterprises were acknowledged as inherently matters of public concern, it would eliminate the obscene absurdity of having the fate of humanity rest on whether profit-driven oil companies have the political and cultural power to extract and sell an estimated $20 trillion of fossil-fuel reserves, as they clearly plan to do.
If open-source innovation flourished, the creative energies of collective social labor across the planet could be mobilized to address environmental challenges. If poor regions with fragile ecologies were guaranteed their fair share of new investment funds, the pressure to sacrifice long-term sustainability for the sake of short-term growth would be overcome.
Of course, all of these proposals are vague and provisional. Nonetheless, they show that the social consequences of technological change could be far different than they are today. We do not need private ownership of productive assets, or markets devoted to financial assets, to have a technologically dynamic society. With the necessary political shifts, technological change would no longer be associated with overaccumulation, financial crises, the stifling of open-source innovation, severe global inequality, or the increasingly palpable threat of environmental catastrophe.
We need to unleash the full potential of human ingenuity. The way technology advances is already socialized in important, if restricted and inadequate ways. We can finish the job and make sure that its fruits are put to the benefit of ordinary people.