Part of the Series
Despair and Disparity: The Uneven Burdens of COVID-19
Spurred on by the coronavirus pandemic, global capitalism is on the brink of a new round of worldwide restructuring based on a much greater digitalization of the entire global economy and society. This restructuring began in the wake of the 2008 Great Recession but the changing social and economic conditions brought about by the pandemic will vastly accelerate the process. It is likely to heighten the concentration of capital worldwide and worsen social inequality. Enabled by digital applications, the ruling groups — unless they are pushed to change course by mass pressure from below — will turn to ratcheting up the global police state to contain the coming social upheavals.
The emerging post-pandemic capitalist paradigm is based on a digitalization and application of so-called fourth industrial revolution technologies. This new wave of technological development is made possible by a more advanced information technology. Led by artificial intelligence (AI) and the collection, processing and analysis of immense amounts of data (“big data”), the emerging technologies include machine learning, automation and robotics, nano- and biotechnology, the Internet of Things (IoT), quantum and cloud computing, 3D printing, new forms of energy storage and autonomous vehicles, among others.
Computer and information technology (CIT), first introduced in the 1980s, provided the original basis for globalization. It allowed the emerging transnational capitalist class, or TCC, to coordinate and synchronize global production and therefore to put into place a globally integrated production and financial system into which every country has become incorporated. Just as the original introduction of CIT and the internet in the late 20th century profoundly transformed world capitalism, this second generation of digital-based technologies is now leading to a new round of worldwide restructuring that promises to have another transformative impact on the structures of the global economy, society and polity.
If the first generation of capitalist globalization from the 1980s involved the creation of a globally integrated production and financial system, the new wave of digitalization and the rise of platforms have facilitated since 2008 a very rapid transnationalization of digital-based services. By 2017, services accounted for some 70 percent of the total gross world product and included communications, informatics, digital and platform technology, e-commerce, financial services, professional and technical work, and a host of other non-tangible products such as film and music.
It is hard to underestimate just how rapid and extensive the current digital restructuring of the global economy and society is. According to United Nations data, the “sharing economy” — that is, activity mediated by platforms — will surge from $14 billion in 2014 to $335 billion by 2025. Worldwide shipments of 3D printers more than doubled in 2016, to over 450,000, and were expected to reach 6.7 million by the end of 2020. The global value of e-commerce is estimated to have reached $29 trillion in 2017, which is equivalent to 36 percent of global GDP in that year. Digitally deliverable service exports amounted in 2018 to $2.9 trillion, or 50 percent of global services exports. By 2019, global internet traffic was 66 times the volume of the entire global internet traffic in 2005, whereas global Internet Protocol (IP) traffic, a proxy for data flows, grew from about 100 gigabytes (GB) per day in 1992 to more than 45,000 GB per second in 2017. And yet the world is only in the early days of the data-driven economy; by 2022, global IP traffic is projected to reach 150,700 GB per second, fueled by more and more people coming online for the first time and by the expansion of the IoT.
The coronavirus pandemic has spotlighted how central digital services have become to the global economy. But more than shine this spotlight, the pandemic and its aftermath, to the extent that it accelerates digital restructuring, can be expected to result in a vast expansion of reduced-labor or laborless digital services, including all sorts of new telework arrangements, drone delivery, cash-free commerce, digitized finance (or fintech), tracking and other forms of surveillance, automated medical and legal services, and remote teaching involving pre-recorded instruction. The pandemic has boosted the efforts of the giant tech companies and their political agents to convert more and more areas of the economy into these new digital realms.
The giant tech companies have flourished during the contagion, their digital services becoming essential to the pandemic economy, as hundreds of millions of workers worldwide moved to remote work at home or through enhanced platforms, or became engaged in digitally driven service work, and as in-person services were replaced by remote digital services. The post-pandemic global economy will involve a more rapid and expansive application of digitalization to every aspect of global society, including war and repression.
New Capital Bloc Led by Tech, Finance and the Military-Industrial Complex
Digitalization has been spurred on by the capitalist crisis. The coronavirus was but the spark that ignited the combustibility of a global economy that never fully recovered from the 2008 financial collapse and has been teetering on the brink of renewed crisis ever since. But the underlying structural causes of the 2008 debacle, far from resolved, have been steadily aggravated. Frenzied financial speculation, unsustainable debt, the plunder of public finance, overinflated tech stock, and state-organized militarized accumulation have kept the global economy sputtering along in recent years in the face of chronic stagnation and concealed its instability. (Militarized accumulation refers to the accumulation of capital — that is, profit-making, through ever-more expansive systems of warfare, transnational social control and repression.)
There are three types of capitalist crises. The first type is cyclical, or the business cycle, involving economic downturns or recessions approximately once a decade. There were recessions in the early 1980s, the early 1990s and at the turn of the century. The second type is structural and appears about once every 40 to 50 years, and the third is systemic, which I will refer to by way of conclusion. They are called structural or restructuring crises, because their resolution involves restructuring the capitalist system. The restructuring crisis of the 1930s Great Depression was resolved through the rise of a new type of capitalism based on redistribution and state intervention to regulate the market, and led to the social welfare systems of the 20th century. The next structural crisis hit in the 1970s and led to globalization and the rise of a TCC from the 1980s and on.
A new restructuring crisis began with the 2008 financial collapse. Leading the way in this restructuring were the giant tech companies — among them Microsoft, Apple, Amazon, Tencent, Alibaba, Facebook and Google, and to which are now added Zoom and other companies boosted by the pandemic. These companies have experienced astonishing growth over the past decade. Apple and Microsoft registered an astounding market capitalization of $1.4 trillion each in 2020, followed by Amazon with $1.04 trillion, Alphabet (Google’s parent company) with $1.03 trillion, Samsung with $983 billion, Facebook with $604 trillion, and Alibaba and Tencent with some $600 billion and $500 billion, respectively. To give an idea of just how rapidly these tech behemoths have grown, Google’s market capitalization went from under $200 billion at the end of 2008 to over $1 trillion at the start of 2020, or a 500 percent increase. Meanwhile, in just two years, from 2015 to 2017, the combined value of all platform companies with a market capitalization of more than $100 million jumped by 67 percent, to more than $7 trillion.
A handful of largely U.S.-based tech firms that generate, extract and process data have absorbed enormous amounts of cash from transnational investors from around the world who, desperate for new investment opportunities, have poured billions of dollars into the tech and platform giants as an outlet for their surplus accumulated capital. Annual investment in CIT jumped from $17 billion in 1970, to $65 billion in 1980, then to $175 billion in 1990, $465 billion in 2000, and $654 billion in 2016, and then topped $800 billion in 2019. As capitalists invest these billions, the global banking and investment houses become interwoven with tech capital, as do businesses across the globe that are moving to cloud computing and AI. By the second decade of the century, the global economy came to be characterized above all by the twin processes of digitalization and financialization.
The rise of the digital economy involves a fusion of Silicon Valley with transnational finance capital and the military-industrial-security complex, giving rise to a new bloc of capital that appears to be at the very core of the emerging post-pandemic paradigm. This new bloc will emerge even more powerful than it was going into the health emergency, spurring a vast new centralization and concentration of capital on a global scale. At the head of this bloc, the tech behemoths are larger financial entities than most countries in the world and are able to wield enormous influence over capitalist states. New York Gov. Andrew Cuomo showcased this emerging capital-state relation when, in early May, he appointed three tech billionaires — Eric Schmidt of Google; former Microsoft CEO Bill Gates; and Michael Bloomberg — to head up a Blue Ribbon Commission to come up with plans to outsource public schools, hospitals, policing and other public services to private tech companies. Such “public-private partnerships” privatize to capital traditional state functions while converting public funds into corporate subsidies.
The third leg in this triangulated bloc of capital is the military-industrial-security complex. As the tech industry emerged in the 1990s, it was conjoined to the military-industrial-security complex and the global police state. Over the years, for instance, Google has supplied mapping technology used by the U.S. Army in Iraq, hosted data for the CIA, indexed the National Security Agency’s vast intelligence databases, built military robots, co-launched a spy satellite with the Pentagon and leased its cloud computing platform to help police departments “predict” crime. Amazon, Facebook, Microsoft and other tech giants are thoroughly intertwined with the military-industrial and security complex. The rise of the digital economy blurs the boundaries between military and civilian sectors of the economy and brings together finance, military-industrial and tech companies around a combined process of financial speculation and militarized accumulation.
Worldwide, total defense outlays grew by 50 percent from 2006 to 2015, from $1.4 trillion to $2.03 trillion, although this figure does not take into account secret budgets, contingency operations and “homeland security” spending. By 2018, private military companies employed some 15 million people around the world, while another 20 million people worked in private security. The new systems of warfare, social control and repression are driven by digital technology. The market for new social control systems made possible by digital technology runs into the hundreds of billions. The global biometrics market, for instance, was expected to jump from its $15 billion value in 2015 to $35 billion by 2020.
Laborless Production and Surplus Humanity
Crises provide transnational capital with the opportunity to restore profit levels by forcing greater productivity out of fewer workers. The first wave of CIT in the latter decades of the 20th century triggered explosive growth in productivity and productive capacities, while the new digital technologies promise to multiply such capacities many times over. Specifically, digitalization vastly increases what radical political economists, following Marx, refer to as the organic composition of capital, meaning that the portion of fixed capital in the form of machinery and technology tends to increase relative to variable capital in the form of labor.
In layman’s terms, digitalization greatly accelerates the process whereby machinery and technology replace human labor, thus expanding the ranks of those who are made surplus and marginalized. One National Bureau of Economic Research report found that each new robot introduced in a locale results in a loss of three to 5.6 jobs. In 1990, the top three carmakers in Detroit had a market capitalization of $36 billion and 1.2 million employees. In 2014, the top three firms in Silicon Valley, with a market capitalization of over $1 trillion, had only 137,000 employees. This increase in the organic composition of capital aggravates overaccumulation and social polarization, which has reached unprecedented levels worldwide. As is now well-known, just 1 percent of humanity owns over half of the world’s wealth and the top 20 percent own 94.5 percent of that wealth, while the remaining 80 percent have to make do with just 5.5 percent.
The apologists of global capitalism claim that the digital economy will bring high-skilled, high-paid jobs and resolve problems of social polarization and stagnation. Yet many so-called cognitive labor and gig workers face low wages, dull repetitive tasks and precariousness. As “big data” captures data on knowledge-based occupations at the workplace and in the market and then converts it into algorithms, this labor could itself be replaced by AI, autonomous vehicles and the other fourth industrial revolution technologies. Digital-driven production ultimately seeks to achieve what the Nike Corporation refers to as “engineering the labor out of the product.” The end game in this process, although still far away, is laborless production.
A 2017 United Nations report estimated that tens if not hundreds of millions of jobs would disappear in the coming years as a result of digitalization. As an example, the report estimated that more than 85 percent of retail workers in Indonesia and the Philippines were at risk. The report also said that the spread of online labor platforms would accelerate a “race to the bottom of working conditions with an increasing precarity.” A series of International Labor Organization (ILO) reports documented these conditions. A 1998 study found already in the late 20th century, some one-third of the global labor force was under- or unemployed. The ILO then reported in 2011 that 1.53 billion workers around the world were in “vulnerable” employment arrangements, representing more than 50 percent of the global workforce. Seven years later, in 2019, it concluded that a majority of the 3.5 billion workers in the world “experienced a lack of material well-being, economic security, equality opportunities or scope for human development.”
Even before the pandemic hit, automation was spreading from industry and finance to all branches of services, even to fast food and agriculture. It is expected to eventually replace much professional work such as lawyers, financial analysts, doctors, journalists, accountants, insurance underwriters and librarians. AI-driven technologies are at this time becoming more widely adopted worldwide as a result of the conditions brought about by the contagion. The pandemic allows the TCC to massively push forward capitalist restructuring that it could not previously accomplish because of resistance to the digital takeover.
With heightened digitalization brought about by the pandemic, there will be tens or even hundreds of millions who lost their jobs but will not be reabsorbed into the labor force as technology takes over their former tasks. One University of Chicago study estimated that 42 percent of pandemic layoffs in the United States would result in permanent job loss. Moreover, large corporations will snatch up millions of small businesses forced into bankruptcy. Capitalists will use this mass unemployment as a lever to intensify exploitation of those with a job, to heighten discipline over the global working class and to push surplus labor into greater marginality.
The Coming Upheavals
The pandemic lockdowns served as dry runs for how digitalization may allow the dominant groups to restructure space and to exercise greater control over the movement of labor. Governments around the world decreed states of emergency and violently repressed those who violated stay-at-home orders. The lockdowns may have been necessary from the perspective of the health emergency. Yet they showcased how the TCC and capitalist states may more tightly control the distribution of labor power, especially surplus labor, by controlling movement and by locking labor into cyberspace and therefore making it disaggregated and isolated. As new digital technologies expand the cognitive proletariat and the ranks of workers in the gig economy, they also allow for a stringent surveillance and control of this proletariat through cyberspace.
Capitalist states face spiraling crises of legitimacy after decades of hardship and social decay wrought by neoliberalism, aggravated now by these states’ inability to manage the health emergency and the economic collapse. The pandemic will leave in its wake more inequality, conflict, militarism and authoritarianism as social upheaval and civil strife escalate. As the pandemic aggravates the structural crisis, the ruling groups will turn to expanding the global police state to contain mass discontent from below. Well before the contagion, the agents of this emerging global police state had been developing new modalities of policing and repression made possible by applications of digitalization and fourth industrial revolution technologies.
There has been a rapid political polarization in global society since 2008 between an insurgent far right and an insurgent left. The crisis is animating far right and neo-fascist forces that have surged in many countries around the world and will now seek to capitalize politically on the health calamity. But it is also rousing popular struggles from below, as we have seen in a wave of strikes and protests around the world. Capitalist crises are times of intense social and class conflict. Depending on how these struggles play out, structural crises may expand into the third type of crisis, a systemic one, meaning that the crisis must be resolved by moving beyond the existing socioeconomic system — in this case, capitalism.
Whether a structural crisis becomes a systemic one depends on a host of political and subjective factors that cannot be predicted beforehand. What is clear is that mass popular struggles against the depredations of global capitalism will now become conjoined with those around the fallout from the health emergency. As the world emerges from the pandemic, it will be remade, for better or worse. The battle is now underway for the post-pandemic world.
Not everyone can pay for the news. But if you can, we need your support.
Truthout is widely read among people with lower incomes and among young people who are mired in debt. Our site is read at public libraries, among people without internet access of their own. People print out our articles and send them to family members in prison — we receive letters from behind bars regularly thanking us for our coverage. Our stories are emailed and shared around communities, sparking grassroots mobilization.
We’re committed to keeping all Truthout articles free and available to the public. But in order to do that, we need those who can afford to contribute to our work to do so — especially now, because we have just 5 days left to raise $40,000 in critical funds.
We’ll never require you to give, but we can ask you from the bottom of our hearts: Will you donate what you can, so we can continue providing journalism in the service of justice and truth?