Networker: Drowning in abundance


Radio highlights
Drowning in abundance

As the US economy balances on the edge of recession, information technology companies are suffering from their success. This is a peculiar aspect of capitalism as an economic system, pointed out by 19th century socialist economist Karl Marx. Crisis for capitalism is the result of too much being produced (for the available market), not the result of shortage as in previous economic systems. This contrasts with the Biblical four horsemen of the Apocalypse typical of pre-capitalist times: war, famine, pestilence and death.

Over-abundance may seem a surprising fifth horseman, but the economic evidence has been clear for the past two centuries, and the computer and telecommunications industries are once again proving it so.

In 1996 the Clinton administration changed the rules for investment in the telecommunications area. This was one of a long series of changes since the early 1980s that broke up the traditional US telephone monopoly and introduced "market forces".

The changes took place in the context of huge expected demand for enhanced consumer services made possible by new technologies. Every family that could afford it was expected to want cable television, cable internet and cable telephone services, on top of regular telephone services, broadcast television and satellite television. In the "information age" there was an expectation that a major spending shift would occur, fuelled by sport, pornography, home shopping and all the other wonderful products that make US media so valuable.

Phrases like the "information age", "information superhighway" and "national information infrastructure" abounded. Vice-President Al Gore was the most visible advocate of the vision (but became the subject of ridicule after claiming that he invented the internet).

This had nothing to do with what people needed. There was also no rational means by which the competing service offerers coordinated their activities. (Under capitalism this coordination usually takes the form of illegal anti-competitive price fixing. Because this area of investment is new, however, the monopolistic trusts are not yet established.)

The result was investment of US$1.2 trillion into networks to connect everyone up. Some 1700 companies are involved, driven until recently by expectations of massive profit.

Web Mergers & Acquisitions, a company that tracks this investment, has described the coming rationalisation of the industry as a competition Armageddon, leading to "extreme" consolidation. Where the internet electronic business collapse has led to 90,000 sackings, Web M&A estimates the US network shakeout will cost 250,000 jobs.

Reed Hundt was the chairperson of the US Federal Communications Commission, the government body responsible, at the time of the 1996 changes. In his memoirs from that period, You Say You Want a Revolution, he boasts that the changes "created more wealth and more opportunity to enhance the quality of life for all citizens than any nation has ever enjoyed". This being capitalism, however, the result is economic crisis.


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