Digital Capital Is Still Capital, And There Is Nothing About It That Marx Would Enjoy

Tim W. Shenk

This article was written based on a discussion in the University of the Poor Political Economy group on Ryan Avent’s June 2018 article, “A Digital Capital That Marx Might Enjoy” published in MIT Technology Review. This article is a product of the collective intelligence of the UPoor Political Economy group, reflecting the comments of the group’s members. 

On the topic of digital technology and automation, the business world has woken up to concerns that organized auto workers in Detroit have been raising since the 1970s.

Digital technology and artificial intelligence have revolutionized the way business is done in every major industry. Technology no longer simply reduces the need for human labor in production and circulation. In many cases, computers and robots replace people altogether.

Labor-replacing technology has transformed industries from Southern agriculture to Northern manufacturing since the middle of last century, with the mechanical cotton picker and the mechanization of auto plants as two examples. Yet ever-expanding computing power and machine learning have changed the economic landscape completely, leaving everything including the future of capitalism in doubt.

This topic used to be the realm of science fiction: think Bladerunner, The Terminator and The Matrix. Now, in addition to the big screen, serious debate about the impact of technology on society is taking place in the pages of The Economist, The Wall Street Journal and Foreign Affairs.

Much of the data in these articles is useful. Analysts show digital technology’s impacts on everything from agriculture to trucking to major surgery. Economists project how many jobs may be lost to technology in the next decade or so. (The consensus: up to half of current U.S. jobs are in danger.)

Yet when it comes to real solutions, most of these so-called experts drop the ball. Their proposals amount to telling people which are the best chairs on the deck of the Titanic. In the face of capitalism’s perennial crises and increasing poverty, these economists end up arguing about how to save “the economy,” whatever that means, instead of arguing for the right to live of millions of people whom this system is in the process of discarding.

Economics must be more than numbers, and activism must be more than sentimentalism. Our responses to society’s big questions like the role of technology in the economy must be based in sound science.

Drastic economic changes

As a way to approach potential answers, we must learn to identify wrong paths and false solutions. We’ve chosen one article to discuss in some depth: “A Digital Capital That Marx Might Enjoy,” written for MIT Technology Review in June 2018 by Economist senior editor Ryan Avent. This short piece is provocative from the title on, as the author invokes 19th Century social scientist Karl Marx.

Avent starts well. As do many others, he acknowledges that automation and artificial intelligence (AI) are bringing about monumental changes, and that these changes will continue and are irreversible. He states, "While the world of industrial capitalism was shaped by the conflict between [labor and capital], there was nonetheless a certain balance of power, since they also needed each other to unlock the riches made possible by technological change. Digital capitalism is different." He is right that the relationship between capital and labor is shifting.

What he doesn’t take into account is a foundational idea about economics first noted by British economist Adam Smith, that human labor is the source of all value. Today, since human labor is being replaced by machines, new value isn’t added to products, which creates a crisis of profitability for the owners of capital. This crisis will eventually reach a point where it endangers the profit-making system itself. Rather than acknowledging that the system is unworkable, Avent mentions proposals to stabilize the system and minimize inequality such as making data a public good or using sovereign wealth funds to share the profits from “digital capital.” He concludes hopefully, “With new capital comes a new capitalism—perhaps one, finally, that Marx could warm to.”

Capitalism cannot solve the crisis of profitability, and the fact that time appears to be running short is not lost on capitalists. That’s why they’re burning the midnight oil, trying to come up with policy solutions that will preserve most of their wealth and keep the mass of the population from taking back the fruits of our labor.

More important than whether Marx would enjoy Avent’s proposals is whether they are workable for today’s working class. In short, we find that Avent misleads his readers on most points. A correct understanding of how capitalism works is necessary to analyze the current digital revolution and its implications.

Defining capital

Avent bases his argument on an incorrect definition of capital. He writes, “For most of industrial history, capital meant tangible things like looms and furnaces and other machines that you could see and smell and fall into if you were insufficiently cautious.” This definition is tempting, maybe because it paints a concrete picture in the mind, but it is incorrect and therefore misleading.

For Marx, capital isn’t “tangible things.” Capital is a process, not a thing. It’s a social relation, a relationship among people that’s transmitted by things. Capital can indeed take the form of looms and furnaces that are used in capitalist production. This is called productive capital. But machines aren’t capital’s only form.

Capital’s other two general forms are money and commodities. First, money. Money comes into workers’ hands as wages, and it’s how we buy what we need to eat and keep a roof over our heads. Money in a capitalist’s hands, though, is capital, necessary for the production process and a way to make more capital.

 In addition, capital can be embodied in commodities, which can be sold for a profit.  If there’s no profit to be made, a capitalist has no reason to produce. To say it another way, if capitalists could make money without producing anything at all, they would certainly do it! (That’s the realm of speculation and the financial sector, which is a topic for another day.)

Capital, then, is much more than looms, furnaces and machinery. It is a process that allows capitalists to accumulate wealth. Let’s return to Avent. His suggestion is wrong that capitalists aim for “maximization of factories’ output above all else.” They are rather compelled to seek the maximization of profits above all else. 

We’re not just being picky about words here. Having a correct understanding of what capital is, allows us to figure out where arguments like Avent’s mislead us about the solutions to humanity’s most basic and pressing problems.

New forms of capital?

Avent introduces the term “intangible capital,” that is, data and information, that he says today’s corporate giants have come to rely on. Since he defined capital as “tangible things,” intangible capital seems to be something entirely new and different. It isn’t.

Avent suggests that the most valuable capital today is information that “lives in neurons and silicon rather than on factory floors.” We agree that information embedded in a computer chip is certainly intangible. You can’t hold that digitized information in your hands in the same way as you can hold a silver dollar or an accountant’s ledger.

Yet information as capital is nothing new. Information has been traded as an essential part of commodity capital for centuries. Who would invest in a ship and a crew and sail for months from England to China without compasses, maps and sextants, with no information about what they would buy there, and without knowing how they would make a profit when they got back?

Data, or capital that you can’t see or smell, isn’t new. What is new in the digital era is the ability to produce commodities with no or almost no input of human labor.

Avent writes: “Machine-learning programs are an odd form of quasi-labor, trained on data generated by people to do tasks previously done by people. Yet they are owned and controlled by firms in the same way a truck or computer would be.”

Here Avent has named a crucial contradiction of the current system: We are moving quickly toward more privately owned production without human labor. However, while Avent names the contradiction, he doesn’t take the argument to its logical conclusion. As automation advances, less human labor is needed. More and more people will be thrown out of work or be required to work harder and faster for lower wages, forced to compete against machines. The capitalist who wants to “be nice” and pay his workers “a fair day’s pay for a fair day’s work” will be driven out of business. Continually lowering costs is the only way for an individual capitalist to survive in a competitive market. Lower profits translate into capital flight by investors and spell ruin for the capitalist.

From the perspective of capital, the prospect of large numbers of people being out of work is potentially disastrous. Here are two reasons.

First, capitalists need people to go to work and get money to buy what they’re selling, or else the whole cycle of production comes to a halt. Second, large numbers of people out of work get hungry and desperate. They can take measures like marching, blocking roads and taking what they need from stores, and in history have been known to make revolutions to appropriate capitalists’ property. While Avent describes digital capitalism as dangerous for workers, it is in fact dangerous for capitalists as well.

Avent takes another pass at the idea that technology is replacing human workers. He writes that AI “is very nearly a pure substitute for labor.” This could have been the beginning of an acknowledgement that the current system is done for, that it has outlasted its usefulness to humanity. He could have challenged his readers to imagine an economic system in which everyone could benefit from our collective intelligence and labor.

Yet Avent takes the argument in the opposite direction. He writes: “As it [AI] spreads across the economy, labor will lose both leverage within the workplace and the moral claim to a share of the economy’s profits that working provides.”

He is correct about labor losing leverage in the workplace. Union jobs continue to decline, and right-to-work laws and the recent Janus v. AFSCME ruling have dealt further blows to organized labor’s ability to defend itself against the tidal wave of capital.

Where he is dangerously and insidiously wrong is the suggestion that people who don’t or can’t work will lose a “moral claim the economy’s profits.” First, our right to exist does not depend on our relationship to the economy. There is a higher moral law that society must respond to: everybody has a right to live. We can’t be tricked into thinking that our only value in the world is based on being able to go to work. Second, all of the technology that is now replacing workers was created by workers. We all have a right to what our class has collectively produced.

Avent’s article finishes with a series of improbable proposals about making information accessible to all as a way to deal with the deepening crisis. Because he has started with an incorrect explanation for what capital is and how capitalism works, he can’t possibly propose logical solutions to the problems capitalism causes.

To the end, Avent is more concerned with saving capitalism than saving people hurt by capitalism. Rather than “a new capitalism,” our collective proposes an alternate ending. With new capital comes the potential for the end of capitalism—and a new system that all of the working class could warm to.