Where did corporations like Apple, Google, Amazon, Netflix and Facebook come from?
They are now among the largest companies on earth, collectively worth about 1.5 trillion dollars. That’s bigger than the entire Australian economy.
What makes this different to the great corporations that sold energy, transport and consumer goods throughout the 20th century is that culture and the art of making meaning are at the heart of these new corporations. As a result, the FANGs [Facebook, Apple, Amazon, Netflix and Google] are shaping the ways we live, the information we have access to, the stories we treasure. The old technology companies sold machines and systems, software and business solutions. The new mega-profitable firms make their billions by capturing and creating meaning and belonging: from news, video, music, and the information that is the sinew of every day life—directions, health, banking, and shopping. Theirs is an enterprise that is as much cultural as it is technological.
How did they come to dominate everyday life, the global economy, and political processes in the way they have?
These corporations are distinctive because they are networked, responsive, data-driven and participatory.
In order to understand the development of these corporations, and the way they have reorganised our media system, we have to take a few steps back.
Let’s go back to the managerial capitalism of the twentieth century.
Managerialism and the assembly line
The first half of the twentieth century was dominated by mass production.
Figures like Ford and Taylor ran factories that attempted to control the action of every individual in highly managed assembly lines. Power was exerted by commanders from above. While these factories were highly efficient, they were also inflexible. Once an assembly line was set up to produce one kind of thing – like a car – that was what it produced. It was difficult to retool the factory to produce anything else.
Henry Ford famously quipped, ‘any customer can have a car painted any colour that he likes, so long as it is black’.
By reducing the features and choice on the cars he produced, he could dramatically increase the scale of production.
The factories of the mass society were efficient at churning out standardised goods, but, they could not easily adapt to change or trust workers to solve problems as they arose.
This mode of industrial production changed dramatically from the 1970s with the emergence of flexible just-in-time production, computer assisted design and robotics.
The upshot was that where the industrial-era factory produced standardised goods for mass markets, today’s factories produce customised goods, responding rapidly, to multiple changing niche markets.
The rigid and highly planned industrial economies of the mass society ran into trouble because they got too big to manage.
Power relationships change when those in power run into some kind of trouble and new groups challenge them with new ideas and new ways of doing things.
In the case of mass industrial production, decision makers at the centre of large corporations and governments were no longer able to get and process accurate and timely information about the machines they managed. This meant they were unable to make the right decisions at the right time and became less efficient.
New organisations and technologies emerged that were able to manage complex processes much more efficiently. The mass industrialised economies were remade as a highly flexible, information-driven, global network.
So, in what follows, I’ll chart a very basic map of what happened.
Managing the mass society: Keynesianism and state socialism
As societies around the world industrialised throughout the nineteenth and twentieth centuries a distinctive cycle emerged.
Capitalist markets had frequent booms and busts.
Periods of massive investment and growth would push production beyond demand, and an inevitable crash or correction would follow.
The problem this generated for elites managing a society – the political and economic leaders – was that periods where busts happen were prone to social and political upheaval.
If people are out of work with no resources, no prospects, no access to the good life they could start to violently resist the current arrangements of power.
For political and economic elites this was a legitimate threat. They had to keep the mass populations in cities especially, more or less happy, or they risked their cities and societies becoming chaotic and unmanageable.
One key ‘fix’ to this problem of booms and busts in capitalist societies is what we refer to today as Keynesianism.
Keynesianism is named after JM Keynes, a British economist and share trader who advocated for a larger role of the state in managing the economy. Keynesianism promoted the creation of a large ‘socialist’ or ‘welfare state’.
This idea gained traction during to the Great Depression in the 1940s. As a response to mass unemployment and looming civil unrest, governments began to play a more direct role in managing society.
President Roosevelt’s New Deal in the US is a key historical example. The New Deal involved the government investing in large-scale infrastructure projects – like building dams – and other public works to directly employ people. If volatile markets could not provide jobs, the state would step in and provide them.
In the UK, the Labour government at the time adopted similar policies, in what was known as ‘post-war consensus’ creating manufacturing demand in addition to services like national health care until unemployment stabilised.
In New Zealand, Keynesian responses to the economic depression took the form of hardship reduction, providing increased social services and incentives in agriculture and forestry.
The Australian government did not adopt Keynesian policies in the interwar years. They viewed the economic recession to be both the fault and responsibility of foreign governments of which they were economically dependent. This was a terrible mistake. The unemployment rate rose to 32% and many families lost their land and homes. As a form of correction, the Australian government took on Keynesian policies, later, after WWII, to make up for their failure to do so in the interwar years and to assure their citizens a high quality of life. For more on this see Donald Markwell and Tim Battin on Keynesianism in Australia.
All Keynesian economic policies were ultimately concerned with stabilising citizen’s quality of life to prevent social unrest through different forms of government intervention. To promote the idea of an attainable ‘good life’.
This highly managed economy worked well into the 1970s. Most developed liberal-democratic societies had a sustained boom of growth from the 1940s to the 1970s.
In a country like Australia this was a kind of Golden Age: there were more jobs then people, most had access to the ‘Australian dream’ of a house in the suburbs on a quarter-acre block, a motorised lawn more, and a muscle car in the driveway.
What else could you want?
More recently, you might remember when Prime Minister Kevin Rudd gave everyone $900 to spend at the height of the Global Financial Crisis.
This move by Rudd was classic Keynesianism: the state steps in when the market shrinks to prevent a dramatic downturn.
What emerges is a managerial form of capitalism. The state plays a large and active role in ‘balancing’ power relationships in society, seeing its position as making social and economic institutions stable over time, of ensuring that a basic standard of living is available at all times to most citizens.
Keynesianism involves the state playing this active role in flattening out booms and busts via a pattern of taxation and investment. In periods of high growth the state taxes industrialists, this flattens the peak, but saves money that the state can spend in times of recession to prevent a full-scale bust.
The 20th century was also characterised by another highly centralised managerial economic and social system: state socialism.
Keynesianism has often drawn comparison to forms of socialism, particularly in the United States. State socialism, especially in Eastern Europe, was on the rise alongside theories of Keynesian economics in the early 20th century.
State socialism in the Soviet Union, China and elsewhere is similar to managed capitalist economies in some important ways. The state places itself at the centre of social and economic life and controls the production and consumption process.
The state socialist model of course is much more centralised in its mode of decision making. It also promotes it’s own version of the good life by promising citizens a utopian future in exchange for their participation in state systems.
However, both the highly managed economies of the capitalist and socialist states run into a similar structural problem: they become too big and difficult to manage from a central commanding point.
Similar to large factories, in order to make complex decisions about when and how to intervene in the management of production and consumption of goods, they need more and more information and instruments, for which they build larger and larger bureaucracies.
But again, it becomes impossible to get the right information to the right people, to make the right decisions, and then implement those decisions at the right time.
In state socialism the bureaucracy became so big it broke down, similar to industrial capitalism. It was unable to provide citizens and workers with the basics of everyday life, let alone the good life.
At the same time this crisis engulfed state socialism, it must be remembered that the capitalist democracies of the West faced similar problems – and no one was sure at the time whether the socialist or capitalist system would collapse first.
In the West economies were so inefficient they were beset by ‘stagflation’ where prices were rising even as demand was falling, a situation economists describe as theoretically impossible.
For the West this was most evocatively illustrated by the oil shocks of the 1970s, when the US state was unable to control the flow of petrol into the economy. During the crisis, petrol stations had large queues of cars waiting for limited supplies of fuel.
In the Soviet Union especially, shortages of basic goods and services caused social unrest.
In the 1980s, the Soviet Union’s leader Mikhail Gorbachev initiated a series of reforms, most notably Perestroika and Glasnost, which basically aimed to open up both the economy and information, by removing forms of state management.
He aimed to make the socialist states more like the West by adopting aspects of the open market system.
But the reforms came too late. State institutions did not have the capacity to manage the integration of these changes into the already-existing state socialism. The Soviet socialist state collapsed and caused a ripple effect which led to the fall of state socialism throughout Eastern Europe.
A flexible, networked mode of production emerges
Meanwhile, In the 1980s in the West leaders like President Reagan in the US, Margaret Thatcher in the UK, and the Hawke and Keating governments in Australia undertook a series of reforms that are broadly characterised as neo-liberal.
For the sake of simplifying, the neoliberal move goes something like this: ‘OK if managerialists ran society with a huge bureaucratic apparatus that now does not work, let’s get rid of it’.
In the US, UK, Australia and elsewhere we see a massive retreat of the welfare state during this period.
Leaders like Regan, Thatcher, and in Australia Hawke, Keating and Howard sell public infrastructure, privatise public assets, outsource welfare, health, education, and transport services to private companies.
A range of institutions that were once owned by the state become commercial, privately owned and managed by corporations.
In Australia over the last generation things like employment and disability services, training and education services, railways, roads, banks, airlines, health insurers, telecommunications, and hospitals were just some of the institutions or elements of the state that have been sold to private providers and are now market institutions.
In a neoliberal society individuals need to take care of themselves. A consequence of the state retreat from employment, healthcare, education and other public utilities is that is safety net is no longer as comprehensive as it once was.
The reforms instigated in the West to make the state’s role in the economy smaller and more efficient helped, but they also got lucky in two important respects.
Firstly, the collapse of state socialism opened up new markets for Western expansion, more countries to consume products than ever before.
Secondly, the emergence of information technologies and computerisation enabled the West to seize the opportunity by building a new mode of economic production and management.
If the collapse of the socialist states opened up new regions for the West to expand into, information technology provided the means for managing a new global – rather than national – mode of economic production and consumption.
And, here is where digital technology and the transition from a mass to a networked economy intersect.
It is hard to imagine this now, you have to think a counterfactual, but imagine a period in history where elites recognise that both capitalism and communism are in a deep structural crisis and no one is sure which system will either collapse or emerge from the crisis first. There is an element of luck for the West in the socialist system collapsing because it opened up vast opportunities for the expansion of a new kind of economy: technology and information driven: fast, flexible and networked.