Some Reflections on Anthropology and Political Economy

In Majid Al-Haj, Michael Saltman and Zvi Sobel (eds), Festschrift for Henry Rosenfeld, University of Haifa (in preparation)

Introduction

This essay attempts to draw together several strands of my work in the context of celebrating Henry Rosenfeld’s life. I never managed, as he has, to develop an anthropology rooted in the history of political conflict where I live; but I share with him a commitment to making anthropological writing relevant to understanding the forces that shape contemporary society. In particular, I have been drawn to examine the political economy of state capitalism and its alternatives, and I have found much that is inspirational in his historical political economy of Israel/Palestine during the period of state capitalism’s ascendancy. An anthropological approach to these questions must be vivid and particular in its treatment of people’s lives, as Henry’s invariably is. But, for the purposes of this short essay, I concentrate on outlining the abstract reasons that I have found for juxtaposing anthropology and political economy.

There are five loosely connected sections. In the first I approach anthropology’s relationship to political economy through an attempt to define ‘the human economy’. I then address the inequality of our world through the idea of apartheid as a universal principle of social organization. This is because the dominant social form of the twentieth century, state capitalism, combines the territorial imperative of agrarian civilization with the powers unleashed by the machine revolution. I go on to consider the possibility that the digital revolution in communications has spawned a successor phase, tentatively labeled ‘virtual capitalism’. Finally I develop a class analysis aimed at clarifying the issues at stake in the political economy of the internet. These explorations point to an anthropological method for grasping our moment in history on a scale appropriate to the forces transforming it.

The human economy

Civilization is conceived of largely as an economy these days. And that is a good thing, since most people care a lot about their own economic circumstances. The days are long gone when politicians could concern themselves with affairs of state and profess ignorance of the livelihoods of the masses. Hence Bill Clinton’s famous memo to himself, “It’s the economy, stupid!” For millennia, economy was conceived of in domestic terms, as household management. Then, when money, machines and markets began their modern rise to social dominance, a new discipline of political economy was born, being concerned with the public consequence of economic actions. For over a century now, this discipline has called itself economics and its subject matter has been allegedly the economic decisions made by individuals, not primarily in their domestic capacity, but as participants in markets of many kinds. People as such play almost no part in the calculations of economists and find no particular reflection of themselves in the quantities published by the media.

My main aim is to produce an understanding of the economy that has people in it. This makes the approach broadly anthropological, in two senses. First, I am concerned with what people have done by themselves, especially when free of control by large-scale organizations. The ethnographic tradition privileges experience of life over abstract ideas. Second, my interest is in the history of humanity as a whole, our past, present and future; and my examples are drawn from all over the world. Somehow we have to find meaningful ways of bridging the gap between the two. There are of course many economies at every level from the domestic to the global and they are not the same, but I speak of ‘the human economy’ in the singular because the prevailing approach to economic life is itself universal in pretension and because giving priority to people’s lives and purposes lends a certain intellectual unity to my efforts. At the very least, I hope to show that claims for the inevitability of mainstream economic institutions are false.

The twentieth century saw a disastrous experiment in impersonal society. Humanity was everywhere organized by remote abstractions — states, capitalist markets, science. And, as if that were not enough, the main common preoccupation was war. For most people it was impossible to make a meaningful connection with these anonymous institutions and this was reflected in intellectual disciplines whose structures of thought had no room for human beings in them. Whereas once anthropologists studied stateless peoples for lessons about how to construct better forms of society, such an exercise now seemed pointless, since we were all powerless to act. Of course, people everywhere did their best with a bad job, seeking self-expression where they could — in domestic life and informal economic practices. But the gap between individuals and society widened, even as most regimes claimed that they governed in the name of the people.

Part of the problem is intellectual. People’s lives do not figure prominently in the theorems of economists. If we are to make a meaningful connection with the economy, we must understand it in more human terms. Economics is also not very good with machines. Yet the world of economic possibility depends on whether we can harness the machine revolution to human ends. Curiously enough, economists are not very good with money either. Traditionally liberal economics considered money to be an insignificant lubricant of exchange; and in any case the dominance of money in contemporary social and spiritual life is a topic too big for the economists to handle. So the three most important components of modern economic life — people, machines and money — are not properly addressed by the academic discipline devoted to its study. This emphasis on people, machines and money echoes Marx’s in Capital (1867). There he reflected humanity’s estrangement in the face of the modern economy by putting abstract value (money) in the driving seat, with the industrial revolution (machines) as its instrument and people reduced to the passive anonymity of their labour power. Marx’s intellectual effort was aimed at reversing this order and that remains our priority today.

What might be meant by the term ‘economy’? English dictionaries reveal that the word and its derivatives (economic, economical, economics, economist) have a number of separate, but overlapping referents. These include:

1. Order

2. Conservation

3. Practical affairs

4. Money, wealth

5. The circulation of goods and services

6. A wide range of social units involved

The word comes from Ancient Greek, oikonomia. It literally meant ‘household management’, the imposition of order on the practical affairs of a house, usually a large manor house in the countryside with its slaves, animals, fields and orchards. Economic theory then aimed at self-sufficiency through careful budgeting and the avoidance of trade, where possible. The market, with its rootless individuals specialized in money-making, was the very antithesis of an economy that aimed to conserve both society and nature. So in origin ‘economy’ emphasized the first three above while focusing on the house as its location. For Aristotle and thinkers like him, it had nothing to do with markets or money nor with wider notions of society (Polanyi 1957).

This ideal persisted in rural Europe up to the dawn of the modern age. The problem is that the economy has moved on in the last 2,500 years and especially in the last two centuries. In particular, a revolution in ideas led by Adam Smith (1776) switched attention from domestic order to ‘political economy’ and especially to the functioning of markets using money. Instead of celebrating the wisdom of a few patriarchs, Smith found economic order in the myriad selfish acts of individuals buying and selling commodities, the famous ‘hidden hand’ of the market.

Two things happened next. First, the market was soon dominated by large businesses commanding more resources than most, a system of making money with money eventually named as ‘capitalism’. One of capitalism’s chief features is a focus on growth, not on staying the same. Then states claimed the right to manage money, markets and accumulation in the national interest. And this is why for us ‘the economy’ usually refers to the country we live in. The question of world economy has encroached on public consciousness of late; and almost any aggregate from associations of states like the European Union to localities, firms and households may be said to have an ‘economy’ too. In the process, ‘economy’ has come to refer primarily to the money nexus of market exchange, even though we retain the old sense of efficient conservation of resources.

So part of the confusion with the word ‘economy’ lies in the historical shift from the self-sufficiency of rural households to complex dependence on urban, national and world markets. But that isn’t all. It is by no means clear whether the word is primarily subjective or objective. Does it refer to an attitude of mind or to something out there? Is it ideal or material? Does it refer to individuals or to collectivities? Perhaps to all of these — in which case, we should focus on the links between them. If the economists argue that economy is principally a way of reasoning, we can hardly say that all those people who talk of economies as social objects are wrong. Moreover, if the factory revolution shifted the weight of economy from agriculture to industry, mainstream economic life now takes the form of electronic digits whizzing around the ether at the speed of light. The idea of economy as provision of material necessities is still an urgent priority for the world’s poor; but for a growing section of humanity it no longer makes sense to focus on economic survival. The confusion at the heart of ‘economy’ reflects not only an unfinished history, but wide inequalities in contemporary economic experience.

Nor is the matter finished there. This paper is written in English and so have most of the foundational texts of economic theory and method. The term ‘economy’ is as specific to the English language as société is to the French. If the various meanings of the word are obscure in English, their translation into most other languages is even more problematic. In German, for example, the nearest indigenous term is either Ökonomie, referring mainly to household budgeting, or Sozialpolitik, with a meaning closer to public policy than economy in the English sense. Britain and America have dominated global capitalism in the 19th and 20th centuries respectively and so, gradually, the peoples of the world have come to absorb something of their economic terminology as common usage.

All of these issues and more have to be addressed if ‘the human economy’ is to be made a meaningful expression, so that we can talk about how world society might be considered as an economy. We must start from our moment in history, the world we live in today. So far, since the millennium, we have witnessed the collapse of the ‘dot com’ boom and the start of a ‘war against terrorism’. September 11th, 2001 was a turning point for sure. The world is in movement, but it is not obvious how we are to understand that. The second half of the 20th century brought the peoples of the world closer together, mainly through an expanded network of markets, transport and communications. We also became much more unequal in this period. We need a vision of world history anchored in the present, so that we might understand where we have come from and where we might be going.

So many of our methods for studying society were formed by the need to understand the new nation-states of the 19th and 20th centuries that it takes a considerable shift in perspective to study world society. I have begun elsewhere (Hart 2003) to explore a ‘cubist’ approach to the world we live in, based on my own lifetime’s experience of movement. It seems as if the world is subject today to a neo-liberal revolution imposed from above. What is the relationship between this and the liberal revolutions that inaugurated the modern age? This in turn requires us to understand how capitalism and the machine revolution were built on the unequal society bequeathed by 5,000 years of agrarian civilization. Our world is older than the ideologues of modernism claim, even as the last few decades have brought humanity into a single interactive network that is entirely new. The key to making sense of this is to see how national monopolies of economy and society were formed 150 years ago and why they may be giving way to larger- and smaller-scale processes now. To be human is to be individual and collective at once; the difficult part is to find social forms that are conducive to both. Following Marx and Engels, our task is to understand how the present phase of the machine revolution might support more democratic economic forms.

Apartheid as a universal social principle

In the Great Depression, Maynard Keynes (1936) offered a solution to national elites concerned that their governments would be overwhelmed by the mass poverty and unemployment generated by the economic collapse. The rich countries today are similarly cast adrift in a sea of human misery which includes most people alive. Marx used to say that the social relations of production act as so many fetters on the development of the productive forces, by which he meant that capitalist markets could not organize machine production for the benefit of society as a whole. At the most inclusive level the main fetter on human development today is the administration of economy by nation-states which prevents the emergence of new forms of economic life more appropriate to the conditions of global integration into which we have so recently stumbled. This also, of course, prevents the implementation of a Keynesian programme aimed at alleviating world poverty by transnational redistribution of purchasing power.

In the film Annie Hall, Woody Allen says that he doesn’t feel like eating out tonight because of all those starving millions in the Third World (Hart 1995). The audience laughs, uneasily. The gesture rings false: why tonight and not every night? No-one could live consistently with that proposition — could they? We might well ask how people live with economic inequality. And the short answer is that they don’t, not if they can help it. Most human beings like to think of themselves as good. This normally involves being compassionate in the face of others’ suffering. The worst thing would be to imagine that we are responsible for that suffering in some way. Better to explain it away as having some other cause: perhaps the people deserve to suffer or are just pretending to be poor. Better still not to have to think about it in the first place. In the last resort we can ignore the problem by defining them as less than fully human (not like us). Distance (in every sense — physical, social, intellectual, emotional) is the answer to the unwelcome conflict between inequality and human compassion. And, while each of us engages in thousands of voluntary acts distancing ourselves from the suffering of others, the task is performed more reliably, at the communal level, by institutions.

An institution is an established practice in the life of a community or it is the organization that carries it out. (The root sta-, to stand or set up, is shared with ‘establish’ and, of course, with ‘state’, the institution that secures all others in society). What they have in common is the idea of a place to stay, in opposition to the movement, flux and process of life itself. Institutions and agriculture go together. The conflict between fixing society in the ground and reinventing it on the move underlies our contemporary global crisis. The maintenance of inequality depends on controlling the movement of people. If the poor are to be kept at a proper distance, it would not do to have them invade the protected zones of privilege established by the rich. Better by far that they should know their place and stay there.

The two principal institutions for upholding inequality, therefore, are formal political organization (laws administered by states) and informal customary practices widely shared by members of a community (culture). The most important task of both is to separate and divide people in the interest of maintaining rule by the privileged few. Classifying people is as old as language and society; and, as Durkheim and Mauss (1905) pointed out, it can help to define solidarity within and between groups. But, it is equally well-known that labeling people differently is a means of preventing them from combining. One of the main ways that modern ruling elites everywhere have come to terms with the anonymous masses they govern is to pigeon-hole them through systems of classification. The intellectuals have devoted themselves to devising and maintaining such categories. Social science itself would be impossible if individuals were not subordinated to these impersonal systems of thought and enumeration.

To the extent that society has become a depersonalized interaction between strangers, an important class of categories rests on overt signs which can be recognized without prior knowledge of the persons involved. These are usually visual — physical and cultural characteristics like skin colour or dress; speech styles may also sometimes be taken as revealing social identity. Modern states are, of course, addicted to documentation, identity cards, preferably with a photograph of the bearer. By a standard symbolic logic, these sign systems are often taken to reveal underlying causes of behaviour — trustworthiness, ability and much besides. On this arbitrary basis, personal destinies are decided, people are routinely included and excluded from society’s benefits, inequality is made legitimate and policed, the world is divided into an endless series of “us” and “them” and monstrous crimes against humanity (like genocide) are carried out.

After the second world war, South Africa’s ruling National Party set out to institute what they called apartheid. Despite the close integration of people of European and African origin in the country’s economic system, they decided to separate the ‘races’, by allocating to ‘blacks’ a series of homelands (themselves fragmented according to ‘tribal’ origin) and denying them the right to reside in the cities, where the ‘whites’ mainly lived, except with a pass (work permit). Within the cities, black and white areas were kept apart and were unequally endowed with resources. Establishing and keeping up such a system required the systematic use of force, although collaborators were, as usual, not hard to find. Internal resistance built up gradually and the rest of the world expressed variable degrees of outrage, eventually translated into an intermittent boycott. The release of Nelson Mandela in 1990 signaled a retreat from this policy which culminated quite soon in African majority rule. But apartheid can’t be abolished by the stroke of a pen.

The South African experiment was ugly, but not the most extreme form of inhumanity known to the 20th century. Stalin and Hitler between them were responsible for much worse; and even as the ANC was being peacefully elected, a million people lost their lives in Rwanda, while Bosnia revealed that genocide was alive and kicking in Europe. Yet the Afrikaners managed to provoke the most coordinated international opposition since the second world war. Why? What they did was obnoxious, but was it so exceptional? Perhaps their main crime was to be explicit, even boastful about their method of maintaining inequality. For the same method could be said to operate everywhere, without being acknowledged so openly or practiced so violently. I believe that South Africa became a symbol of a universal institution about which people were feeling generally uneasy. It offered a limited target, outside the societies of its international critics, which could be vilified and rejected as an alternative to more painful introspection. For do not people like to think of themselves as good? Opposing evil elsewhere is a way of displacing our ambivalence over how we handle inequality closer to home. In any case, after the official demise of apartheid in South Africa, something similar to it is the ruling principle everywhere by which the inequalities of world society are managed today.

This principle can be stated briefly as follows. Inequality is intrinsic to the functioning of the modern economy at all levels from the global to the local. The rich and poor are separated physically, kept apart in areas which differ greatly in their standards of living. It is impossible to prevent movement between the two areas in any absolute sense, if only for the fact that the rich need the poor to perform certain tasks for them on the spot (especially personal services and dirty work of all kinds). But movement of this sort is severely restricted, by the use of formal administrative procedures (state law) or by a variety of informal institutions based on cultural prejudice. These rest on systems of classification of which racism is the prototype and still the single most important means of inclusion and exclusion in our world.

There is a great lie at the heart of modern politics. We live in self-proclaimed democracies where all are equally free; and we are committed to these principles on a universal basis. Yet we must justify granting some people inferior rights; otherwise functional economic inequalities would be threatened. This double-think is enshrined at the heart of the modern nation-state. Nationalism is racism without the pretension to being as systematic or global. So-called nations, themselves often the outcome of centuries of unequal struggle, link cultural difference to birth and define citizens’ rights in opposition to all-comers. The resulting national consciousness, built on territorial segmentation and regulation of movement across borders, justifies the unfair treatment of non-citizens and makes people blind to the common interests of humanity. As long ago as the Algerian war of independence, Frantz Fanon (1959) identified “the pitfalls of national consciousness” as the main obstacle to political progress in our world.

There are other ways of classifying the poor, of course, besides visible signs of ‘natural’ difference encoded as race. Nationality, ethnicity, religion, region and class can be signaled in many other ways. But the pervasive dualism of modern economies derives from the need to keep apart people whose life-chances are profoundly unequal. Engels (1887) noticed it when he came to Manchester in the 1840s. In medieval cities, the rich and poor lived together. Here the rich lived in the suburbs and worked in the city centre; and they rode to and from their businesses along avenues whose facade of shops concealed the terrible housing conditions of the slums behind. Post-apartheid Johannesburg takes this to extremes, with its rich white Northern suburbs policed by private security firms and poor blacks still crowded in monochrome townships like Soweto. The apartheid principle is now to be found everywhere in local systems of discrimination, more or less blatant. It is ironic that Israel, a society formed in part by the worst racial attack in history, is seen by many outsiders as the most blatant successor to the social experiment of the Afrikaners. Of course, passage though any of the world’s airports today shows how the ‘war against terrorism’ has universally strengthened state apparatuses in their attempts to control the movement of people.

Between agrarian civilization and the machine revolution

In the last 200 years, the human population has increased six times and the rate of growth of energy production has been double that of the population. Many human beings work less hard, eat better and live longer today as a result. Whereas about 97% of the world’s people lived in rural areas in 1800 and no region could sustain more than a tenth of its people in towns, half of humanity lives in cities today. This hectic disengagement from the soil as the chief object of work and source of life was made possible by harnessing inanimate energy sources to machines used as converters. Before 1800 almost all the energy at our disposal came from animals, plants and human beings themselves. The benefits of this process have been distributed most unequally and the prime beneficiaries have been the pioneers of western imperialism in the nineteenth century.

The1860s saw a transport and communications revolution (steamships, continental railways and the telegraph) that decisively opened up the world economy. At the same time a series of political revolutions gave the leading powers of the coming century the institutional means of organizing industrial capitalism. These were the American civil war, Italy’s Risorgimento, the abolition of serfdom in Russia, Britain’s democratic reforms, Japan’s Meiji Restoration, German unification and the French Third Republic. Karl Marx published Capital (1867) and the First International was formed. The concentration of so many epochal events in such a short time would indicate a degree of integration of world society. But in the 1870s, the share of GNP attributable to international trade has been estimated as no more than 1% for most countries (Lewis 1978); and the most reliable indicator of Britain’s annual economic performance was still the weather at harvest-time. The ‘great depression’ beginning in 1873 turned out to be an effect of American and German competition on the rate of return to British capital, while the rest of the world’s regions were booming. A century later in 1973, so great was the dependence of all national economies on world trade that the OPEC oil price rise set in train an economic depression from which we have still not recovered. Shortly afterwards, money futures markets were invented and within a quarter-century national governments were mostly adrift in a rising tide of money, known simply as ‘the markets’, conveyed at the speed of light over telephone wires as so many electronic bits (Hart 2001).

Capitalism has always rested on an unequal contract between owners of large amounts of money and those who make or buy their products. This contract depends on an effective threat of punishment if workers withhold their labour or buyers fail to pay up. The owners cannot make that threat alone: they need the support of governments, laws, prisons, police, even armies. Perhaps Karl Marx’s most vivid contribution to our understanding of the modern world was to imply that capitalism was actually feudalism in drag, with the owners of the means of production still extracting surplus labour from workers under threat of coercion. By the mid-nineteenth century it became clear that the machine revolution was pulling unprecedented numbers of people into the cities, where they added a wholly new dimension to traditional problems of crowd control. The revolutions of the 1860s were based on a new and explicit alliance between capitalists and the military landlord class to form states capable of managing industrial workforces, that is, to keep the new urban masses to an unequal labour contract. Germany and Japan were the clearest examples of such an alliance. I call this phase ‘state capitalism’, the attempt to manage markets and accumulation by means of national bureaucracies. It became general in the first world war and it may or may not be decaying in our day.

Despite a consistent barrage of propaganda telling us that we now live in a modern age of science and democracy, our dominant institutions are still those of agrarian civilization — territorial states, embattled cities, landed property, warfare, racism, bureaucratic administration, literacy, impersonal money, long-distance trade, work as a virtue, world religion and the family. This is because the rebellion of the western middle classes against the old regime that gave us the scientific revolution and the Enlightenment, as well as the English, American and French democratic revolutions, has been co-opted by state capitalism and, as a result, humanity’s progressive emancipation from unequal society has been reversed in the last century and a half. Nowhere is this more obvious than when we contemplate the shape of world society as a whole today. A remote elite of white, middle-aged, middle-class men, ‘the men in suits’, rules masses who are predominantly poor, dark, female and young. The rich countries, who can no longer reproduce themselves, frantically erect barriers to stem the inflow of migrants forced to seek economic improvement in their midst. In most respects our world resembles nothing so much as the old regime in France before the revolution (Hart 2002).

Africa is the most poignant symbol of this unequal world. Having entered the twentieth century with an extremely sparse population and next to no cities, Africans leave it having undergone a population explosion and an urban revolution of unprecedented speed and size. In 1950 Greater Europe (including Soviet Central Asia) had twice the numbers of Africa. Today Africa has a population 120 millions larger than Europe and Central Asia and is projected to be well on the way to double their size by 2010. Although the conventional image of Africa is of starving peasants ravaged by war and AIDS, the new social reality is burgeoning cities full of young people looking for something to do. Africa largely missed out on the first and second stages of the machine revolution and is far behind in the present one associated with digitalization. Today development there as likely as not consists of irrigation and ox-plough agriculture. In other words, Africa has only now been going through Childe’s (1954) urban revolution, erecting state bureaucracies and class society on the basis of surpluses extracted from the countryside. This is not without contradiction, given the pretensions of modern governments, the rapidly expanding population and the widespread failure to mechanize production. (Hart 1982)

This brief sketch throws new light on the relevance of Jack Goody’s work (e.g. 1976) to an anthropology of world society (Hart 2004). First, like Bruno Latour (1993), he has been saying that we have never been modern. The modern project of democracy has as its antithesis the unequal society that ruled the Eurasian landmass for 5,000 years. Goody’s contrast between Eurasia and Africa reminds us of the durable inequalities of our world and suggests that the reasons for them may be less tractable than we like to think. At the same time the rise of China and India underlines his warning against European complacency. The world is now simultaneously more connected than ever and highly unequal. A recent popular scientific text (Barabasi 2002) helps us to understand why this may be so. Left to their own devices, ‘scale-free networks’ exhibit a power-rule distribution where a few hubs are highly connected and most nodes are only weakly so. That is, the proliferation of networks, as in world markets today, would normally produce a highly skewed distribution of participants. The reduction of national political controls over global markets in the last two decades seems to have accelerated the gap between the haves and the have-nots everywhere, generating huge regional disparities in the process (Hart 2001). The task of devising institutions capable of redressing this situation seems further away today that it did in 1945.

Virtual capitalism

The digital revolution (the convergence of telephones, television and computers into a single digital system of communications) is driven by a desire to replicate at distance or by means of computers experiences that we normally associate with face-to-face human encounters. All communication, whether the exchange of words or money, has a virtual aspect in that symbols and their media of circulation stand for what people really do for each other. It usually involves the exercise of imagination, an ability to construct meanings across the gap between symbol and reality. The power of the book depended for so long on sustaining that leap of faith in the possibility of human communication. In that sense, capitalism was always virtual. Indeed Marx’s intellectual effort was devoted to revealing how the power of money was mystified through its appearance as things (coins, products, machinery) rather than as relations between living men (Marx 1867: ch 1) Both Marx and Weber (1981) were at pains to show how capitalists sought to detach their money-making activities, as far as possible, from real conditions obstructing their purposes. Money-lending, the practice of charging interest on loans without any intervening act of production or exchange, is one of the oldest forms of capitalism. So the idea of the money circuit becoming separated from reality is hardly new. Yet the changes taking place now deserve a distinctive label and ‘virtual capitalism’ will have to do.

In 1975, Milton Friedman, favourite economist of Ronald Reagan and Margaret Thatcher, set out, with a partner from the Chicago Mercantile Exchange, to prove that the age of Keynesian macro-economics was over (Hirsch and de Marchi 1990). The instrument he devised was intended to alleviate the uncertainties inflicted on midwestern farmers by wide fluctuations in exchange rates. If a farmer sells his pork bellies to German supermarkets six months ahead of delivery time, the dollar/deutschmark exchange rate may deteriorate and his actual earnings will be less. A futures market in money allows him to determine that exchange rate six months in advance and to stabilize his expectations. Others can buy and sell the piece of paper for the sake of making money; but the farmer gets paid reliably for his pork bellies.

From this unremarkable beginning, a new phase of capitalism emerged. In the mid-70s, almost all international currency exchanges financed the purchase of goods and services (like cocoa or tourist vacations). Today less than 0.1% of international money transactions are for that purpose; the rest is just money being exchanged for money, in a bewildering variety of instruments and forms. It is now possible to buy futures in anything, such as the likely level to be reached by the index of a major stock exchange. This was how a Singapore trader broke the British bank, Barings, by betting on the Tokyo Nikkei Index at a time when an earthquake depressed stock prices unpredictably. The advocates of derivatives claim that they are a powerful force for the integration of markets for diverse commodities. But there is also plenty of scope for ‘animal spirits’ (Keynes), for speculating on a hunch. There is a magical and a rational side to this development and it is by no means obvious which will win out.

Capitalism has become virtual in two main senses: the shift in emphasis from material production (agriculture and manufacturing) to information services; and the corresponding detachment of the money circuit from production and trade. This in turn is an aspect of the latest stage of mechanization. The same developments that have been responsible for the growing integration of world society are also the cause of its increasing polarization. Long-distance trade in information services requires a substantial technical infrastructure. The internet has its origins in scientific collaboration between America and Europe during the Cold War. Its main language is English. Every stage of the machine revolution has been initially concentrated in a small part of world society; and this one is no different. Equally, diffusion of the new techniques has been quite rapid. Satellite and cellular telephony, as well as videotape, have brought telecommunications to many parts of the world where the old infrastructure of electricity grids was underdeveloped. But many poorer regions appear to be stuck in phases of production that have been marginalized by this latest round of uneven development.

The most problematic issue concerns the explosive markets for money that have injected a new instability into global capitalism. After the East Asian crisis of the late 90s, the dot com bubble burst soon after the millennium. Billions of paper assets were wiped out overnight. Mismanagement by the banks has reached colossal proportions. (Crédit Lyonnais made “errors of judgment” that amounted to losses equal to the debt accumulated by the French social security fund!) This apotheosis of capital, its effective detachment from what real people do, has made many huge fortunes, often for individuals controlling sums more than the annual budgets of Third World countries.

The situation is comparable to the interwar period when a stock market boom ended with the Wall Street crash of 1929. The resulting depression lasted over a decade. This was the opportunity for states to assert their own dominance over a capitalism that was then still more national than international. The subsequent period of about four decades was the heyday of state capitalism. What political forces are adequate to regulate the present money system in the interest of people in general? The world organization of money has now reached a social scale and technical form which make it impossible for states to control it. This may be good news for democrats and anarchists in the long run; but in the meantime Hegel’s (1821) recipe for state moderation of capitalism has been subverted, with inevitable results: rampant inequality at all levels and appalling human distress without any apparent remedy.

Virtual capitalism is built on abstraction and this is largely a function of ever more inclusive levels of exchange, as the world market becomes the principal point of reference for economic activity, rather than the nation-state. If we would make a better world, rather than just contemplate it, one prerequisite is to learn to think creatively in terms that both reflect reality and reach out for imagined possibilities. This in turn depends on capturing what is essential about the world we live in, its movement and direction, not just its stable forms. The idea of virtual reality goes to the heart of the matter. It expresses a particular form of movement — extension from the actual to the possible. ‘Virtual’ means existing in the mind, but not in fact. When combined with ‘reality’, it means a product of the imagination that is almost but not quite real. In technical terms, ‘virtual reality’ is a computer simulation that enables the effects of operations to be shown in real time. The word ‘real’ connotes something genuine, authentic, serious. In philosophy it means existing objectively in the world; in economics it is actual purchasing power; in law it is fixed, landed property; in optics it is an image formed by the convergence of light rays in space; and in mathematics, real numbers are, of course, not imaginary ones. ‘Reality’ is present, in terms of both time and space (seeing is believing); and its opposite is imagined connection at distance, something as old as story-telling and books, but now given a new impetus by the internet. Already the experience of near synchrony at distance, the compression of time and space, is altering our conceptions of social relationships, of position and movement.

I am less interested in the digital divide between people with and without access to the internet, the ‘wired’ elite versus the ‘unwired’ masses, than in how what we do off-line influences what we do on it and vice versa. In this, I have taken some inspiration from Martin Heidegger’s The Fundamental Concepts of Metaphysics: World, Finitude, Solitude (1930). He says there that ‘world’ is an abstract metaphysical category for each of us (all that relates to or affects the life of a person) and its dialectical counterpart is ‘solitude’, the idea of the isolated individual. Every human subject makes a world of his or her own whose centre is the self.. The world opens up only to the extent that we recognize ourselves as finite, as individual, and this should lead us to ‘finitude’, the concrete specifics of time and place in which we necessarily live. So ‘world’ is relative both to an abstract version of subjectivity and, more important, to our particularity in the world (seen as position and movement in time and space).

The internet is often represented as a self-sufficient universe with its own distinctive characteristics, as when Castells (1996) writes of the rise of a new ideal type, ‘network society’. The idea that each of us lives alone (solitude) in a world largely of our own making seems to be more real when we go online. But both terms are imagined as well as being reciprocal; they are equally abstract and untenable as an object of inquiry. We approach them from a relative location in society where we actually live. Therefore it cannot be satisfactory to study the social forms of the internet independently of what people bring to it from elsewhere in their lives. This social life of people off-line is an invisible presence when they are on it. It would be wrong, however, to deny any autonomy at all to ‘virtual reality’. Would we dream of reducing literature to the circumstances of readers? And this too is Heidegger’s point. ‘World’ and ‘solitude’ may be artificial abstractions, but they do affect how we behave in ‘finitude’. The dialectical triad forms an interactive set:

Diagram 1 Heidegger’s dialectical metaphysics

solitude ———————————- world

(individual) ? (humanity)

?

?

?

finitude

(position and movement in time and space)

The political economy of the internet

If we are to grasp the political potential of the current world crisis, we should step back and revisit classical political economy, the discipline that was formed to make sense of the first machine revolution’s economic consequences. Modern knowledge, as organized by the universities, falls into three broad classes: the natural sciences, the social sciences and the humanities. The academic division of labour in our day is concerned with nature, society and humanity, of which the first two are thought to be governed by objective laws, but knowledge of the last requires the exercise of subjectivity or critical judgment. Nature and humanity are represented conventionally through science and art respectively, but the best way of approaching society is moot, since social science is a recent and questionable attempt to bring the methods of the natural sciences to bear on a task that previously had fallen to religion. If science is the commitment to know the world objectively and art the means of expressing oneself subjectively, religion was and is a bridge between subject and object, a way of making meaningful connection between something inside oneself and the world outside. Now that science has driven religion from the government of modern societies, we must find new forms of religion capable of reconciling scientific law with personal experience.

The onset of the age of machines coincided with various attempts to develop a science of society, of which British political economy (Ricardo 1817), French sociology (Comte 1832-40) and German philosophy (Hegel 1821) all achieved a high level of definition in the years following the end of the Napoleonic wars. Political economy was concerned with how the distribution of the value generated by an expanding market economy might best be deployed in the interest of economic growth. Smith, Ricardo and their followers identified three types of resources, each thought to be endowed with the power of increase: the environment (land), money (capital) and human creativity (labour). These in turn were represented by their respective owners: landlords, capitalists and workers. Their concern was with the distribution of specific source of income — rent, profit and wages — which between them contained the key to the laws of political economy:. The conflict was then between landlords and capitalists; and the policy was to ensure that the value of market sales was not diverted from the capital fund to high rents. Only later did the main issue lie between capitalists and workers.

Political economy held that competitive markets lowered the margins available to distributive agents and forced capitalists to reduce their production costs through innovations aimed at improving efficiency. This was achieved through economies of scale, division of labour and ultimately the introduction of machines to factories (Marx 1867). The productivity of labour was thereby raised, allowing the resulting profits to be ploughed back into an expanded level of activity. Society’s manpower was thereby freed up for more elaborate forms of commercial production. The only threat to this upward spiral was if landowners raised their rents to take advantage of these newly profitable industries, diverting value into wasteful consumption. Worse, whereas the capital fund was inherently limitless, land was definitely in limited supply. Economic expansion meant population growth, thereby driving up food prices and squeezing the capital fund on the other side through wages. The solution was to expose Britain’s landowners to competition with cheap overseas suppliers; and this made free trade the great political issue of the mid-19th century.

The basic division between classes possessing the environment, money and human creativity persists today. Indeed, writers as diverse as Locke (1690) and Marx (1867) had visions of history in which a state of nature or society based on the land gives way to an age of money (our own) whose contradictions should lead to a just society based on fair reward for human creativity. So how are these broad classes of interest manifested in the struggle for the value generated by electronic commerce? If the owners of money and labour were first allied against the landlords (industrial capitalism) and then landlords and capitalists united to control the workers (state capitalism), how are the classes aligned in the present phase of virtual capitalism?

The landlord class has by no means rolled over and died; but the internet offers a means of escape from land shortage, indeed from spatial constraints of all kinds. The territorial controls once exercised by the landed aristocracy have largely now passed to national governments. Territorial states seek to extract taxes and rents from all money transactions taking place inside or across the boundaries of their jurisdiction. This has been greatly facilitated by the advances in bureaucracy made over the last 150 years; but it becomes more difficult when the source of value shifts from car factories and downtown shopping centres to commodity exchange conducted at the speed of light across borders. The system of involuntary transfers (taxation and rents on physical assets) could once be justified in terms of economic security for all. But that principle has been under attack by the neo-liberal consensus for over two decades now.

The capitalists have come a long way too. Having formed an alliance with the traditional rulers from the 1860s onwards, they absorbed and ultimately defeated the challenge posed by the workers. The recent revival of free market liberalism provides triumphal evidence of that victory. But the relationship of capital to the state has become increasingly moot. Money has always had an international dimension and the corporations that dominate world capitalism today are less obviously tied to their nations of origin than before. There are now some three dozen firms with an annual turnover of $30-50 billions, larger than the GDP of all but eight countries. Moreover, half of the world’s 500 largest firms are American and a third European. So the world economy is controlled today by a few firms of western origin, but with dubious national loyalties. Capital and the nation-state have always had a relationship of conflict and co-operation. The wave of anti-trust legislation that accompanied the rise of monopolists like John D. Rockefeller in the early 20th century is matched today by the feebler efforts of governments to contain the economic power of Microsoft and a few companies like it. The idea of profit as a form of rent (income from property) has been confirmed, even if the burden has shifted from workers to consumers. The state competes for a share of the value of commodities in the form of taxes. But both rent and tax depend on a system of legal coercion, on a realistic threat of punishment, to make people pay up. This remains a shared concern of governments and corporations alike.

So where does that leave the rest of us? If Marx and Engels (1848) could identify the general interest with a growing body of factory workers tied to machines owned by capitalists, the majority of us now enter the economic process primarily as consumers. Economic agency is largely a matter of spending money. Despite the collapse of traditional industries in recent decades, there are still those who argue that workers associations, unions, remain the best hope for organized resistance to big business. State capitalism once made people believe in society as a place with one fixed point. But now the internet points to a more plural version of society composed of mobile networks. The mass of its ordinary users have a common interest, as individuals and pressure groups, in avoiding unreasonable regulation and retaining the economic benefits of their equal exchanges. So we may provisionally accord to the ‘wired’ a class identity in opposition to governments and corporations.

Table 3 The three classes of political economy

World

Nature

Society

Humanity

Knowledge

Science

Religion / Science

Art

Resources

Environment

Money

Human

creativity

Factors

Land

Capital

Labour

Classes 1

Landlords

Capitalists

Workers

Income

Rent

Profit

Wages

Classes 2

Governments

Corporations

Persons

Income

Tax / Rent

Profit /Rent

Exchange

The main players in the political economy of the internet are thus governments, corporations and the rest of us, the people (the minority who are wired). The landed interest, following a class alliance between landlords and capitalists forged in the mid-19th century, now takes the principal form of territorial power, the coercive capacity of states to extract taxes and rents on threat of punishment or by right of eminent domain. Capitalist profit is now concentrated in a handful of huge transnational corporations whose interest is to keep up the price of commodities and to guarantee income from property (rent) in the face of resistance to payment. On an analogy with the workers who tended the factory machines (themselves initially a very small minority), we could start by looking at the wired, the ordinary people who exchange services as equals on the internet, as representatives of the general human interest. Governments and corporations need each other, for sure, but their interests are far from coincident. Both may be vulnerable to self-conscious use of internet resources by democratic movements. The main threat to us all is the jealous concentration of state and corporate power to block our collective potential to build a just society with shared responsibility for life on this planet. We could do worse then than return to Ricardo’s focus on how wealth is distributed in human society and, in particular, on the contradiction between coercive demands for tax and rent and the formation of a world market where people freely exchange services as equals, using money instruments of their own devising (Greco 2001).

This rather abstract formulation can be seen at work concretely in current conflicts over intellectual property rights. The fight is on to save the commons of human culture, society and environment from the encroachments of corporate private property (Lessig 2001). This is no longer mainly a question of conserving the earth’s natural resources, although it is definitely that too, nor of the deterioration of public services left to the mercies of privatized agencies. The internet has raised the significance of intangible commodities. Increasingly we buy and sell ideas; and their reproduction is made infinitely easier by digital technologies. Accordingly, the large corporations have launched a campaign to assert their exclusive ownership of what until recently was considered shared culture to which all had free and equal access. Across the board, separate battles are being fought, without any real sense of the common cause that they embody. The ‘napsterization’ of popular music, harbinger of peer-to-peer exchange between individual computers, is one such battle pitting the feudal barons of the music business against our common right to transmit songs as we wish. The world of the moving image, film, television and video, is likewise a site of struggle sharpened by fast-breaking technologies affecting their distribution and use. In numerous subtle and not-so-subtle ways, our ability to draw freely on a common heritage of language, literature and law is being undermined by the aggressive assertion of copyright. People who never knew they shared a common infrastructure of culture are now being forced to acknowledge it by aggressive policies of corporate privatization. And these policies are being promoted at the international level by the same American government whose armed forces now seem free to run amok in the world.

In the case of the internet, what began as a free communications network for a scientific minority is now the contested domain of giant corporations and governments. The open source software movement, setting Linux and an army of hackers against Microsoft’s monopoly, has opened up fissures within corporate capitalism itself. The shift to manufacturing food varieties has introduced a similar struggle to agriculture, amplified by a revival of ‘organic’ farming in the context of growing public concern about genetic modification. The pharmaceutical companies try to ward off the threat posed to their lucrative monopolies by cheap generics aimed at the Third World populations who need them most. The buzzword is ‘intellectual property rights’, slogan of a corporate capitalism determined to impose antiquated ‘command and control’ methods on world markets whose constitutive governments have been cowed into passivity. The largest demonstrations against the neo-liberal world order, from Seattle to Genoa, have been mobilized to a significant degree by the need to oppose this particular version of global private property. The events of September 11th 2001 have temporarily diminished this movement, especially in North America, just as they have added to the powers of coercion at the disposal of governments everywhere. In this sense, the global movement for greater democracy and less inequality has suffered a reverse.

It is a widely shared and justified belief that the age of money, whose culmination we are witnessing today, is not in the interest of most human beings, that the American government and giant corporations are indifferent to that common interest of humanity. The rest of the world needs Americans to join them in the struggle for decent human standards in social life. They bring tremendous resources of technology, education and economic power to that struggle, but above all they bring their country’s liberal political traditions. It would be a pity if the effect of September 11th was to obscure that possibility of global democratic solidarity, leaving the world stage to Texas oilmen and Muslim fanatics, with their mutual conspiracy to divide and rule.

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