The Digital Securitization Of Labor

David Golumbia English, Media Studies, and Linguistics University of Virginia Digital Play and Labor New School for Social Research New York, NY Nov 12-14, 2009

The Digital Securitization of Labor Current popular (and to some extent, academic) discourse about computerization often makes sweeping claims about absolutely central features of human life—social organization, mind, self, work—but frequently sets out to prove or disprove these claims via an almost-exclusive focus on computer phenomena. So I am very excited to see work emerging that frames many of the topics we talk about in digital terms as embedded in similar questions in the world at large. With regard to social networks, for example, I am especially taken by work like Connected by Nicholas Christakis and James Fowler, almost the entirety of which is devoted to studying how human beings connect with each other in general, and the functions and meanings of these connections. This work suggests that while Facebook may have drawn our attention to social networking as a critical part of the lifeworld, we benefit most from using that focus to look at the whole question—not just the computer question—when we deal with the broad questions of social networks. The deep question we need to ask about digital labor, too, is not digital labor itself—labor that can be and is performed on the computer—as it is with the politics of labor in the contemporary world itself, and how mass computerization changes that politics. Here, I’m going to approach the question along two abstract axes: first, to ask what capital expects out of, and so how it shapes, the technological innovation that produces computerization. The second is to ask in an economic sense, following a recent line of economic inquiry, whether the benefits of computerization, especially with regard to its emphasis on innovation, “trickle down” to those in the lowest economic strata. I want to ask at the world-system level, without reference to particular industries, to what degree is it possible that there could be a digital

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“revolution” of labor that would transform the practices of those with whom theories of labor are most typically concerned—the economically disenfranchised and those who are sometimes called “low-skilled” workers. 1. Creative Destruction and Information Elites One of the critical supports for much speculation on the effects of global computerization comes from a popularized version of neoliberal economics: not merely an analogy between the economic free market and a kind of free market of information (see McChesney 2008 for a thorough examination of this unfortunate parallel), but a specific economics emerging in part out of technological progressivism. At the heart of this policy is an intriguing figure, Joseph Schumpeter, from whom a single concept, “creative destruction,” is taken, usually well out of context. The context is important because Schumpeter was a brilliant economist who engaged deeply with Marx, and despite being lumped today with true neoliberals like Milton Friedman, in fact has a view quite different from theirs, and much more closely associated with Marxist analysis. Schumpeter, unlike today’s neoliberals, recognized that creative destruction, while tremendously valuable for capitalists, often has devastating effects not just on capitalists themselves but even more so on those who don’t have control over capital. In other words, creative destruction walks hand-in-hand with severe social inequality. For this reason, Schumpeter thought a transition to socialism, while unwelcome from his point of view in an economic sense, was inevitable. (This is why Schumpeter has been known for a long time among Marxist economists; Paul Sweezy, for example, attributed much of his own economic theory to the time he spent studying with Schumpeter at Harvard.) The connection I want to draw, which I don’t hear aired enough in discussion of computerization, is between technological innovation on the one hand, and the existence of a “permanent,” relatively technologically-unskilled and consumption oriented population—perhaps, statistically, a majority—who as a class must be denied parallel access to innovation in order for the contemporary system of capital to run. This, again, is the Archimedean lever-point at which the notion of a “digital divide” comes to structurally parallel enforced social and economic stratification so profound that it resembles programs

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we know under other names—“eugenics” being perhaps the most kind of them. Neoliberal “welfare” programs like “no child left behind” are crafted in part to address the spiraling acceleration of technological innovation, but inherently include a promise that is false almost by definition—almost like promising that every child will be above average. Intellectual and educational skills in a capitalist system cannot be distributed evenly, because capital will always seek to find the biggest advantage it can, like hiring the very smartest 1% of people in a business where intellectual smarts are key. This uneven development washes throughout the entire system. We are asking whether the transformation toward digital labor can unseat the fundamental problems of social stratification with which critical studies have long been concerned. In one of the most familiar stories of creative destruction, in the late 1970s and early 1980s, Microsoft developed a new technology—the PC-based operating system along with some other PC-based software—that effectively put IBM out of business. This new technology emerged out of a deep understanding of existing technological and business practices, and especially at the beginning, emerged from the particular vanguard understanding of technology among the brilliant minds at Microsoft, and today Google. To be generous, let’s suppose that 1% of the world population has enough education, intuition, background knowledge, and skill to work at Google, which is no doubt far too generous. What we have to notice is what is right on the surface: access to the vanguard of technological innovation is limited to a very small elite. Anyone who has spent any time around Google employees—and before them Microsoft employees—knows how very aware they are of this position, and how much it delights them. At the front, then, we see a vanguard to which many as a group simply do not have access— competition in the system will ensure that there is always a vanguard which only a few can attain. This is not to deny any specific individual, no matter how economically or educationally deprived, the possibility of rising to Googlehood; it is making the clear economic argument that as a class, those with lower economic power cannot rise to the forefront of innovation—that is to say that there is a cap on their social mobility, which is different from an economy not entirely based on Schumpeterian destruction. It used to

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be possible to rise to the top of the economic ladder as a corporation mostly by creating a different product that satisfied consumer needs in a new way, but that did not per se require intense technological innovation for its success. Today, more and more, technological innovation is an absolute requirement for economic advancement. This is part of the phenomena related to speed and acceleration that Paul Virilio draws our attention to, but which Marx himself had noticed as a profound tendency in capital—as a Marxist slogan adapted from the Grundrisse puts it, capital wants to move at the speed of thought. So here is the second point I want to make, about the “back end,” and it’s here that economic analysis points out something that may not be obvious. If your economy is oriented toward technological innovation as its premier method of growth, there is going to be intellectual competition for innovation itself. There are going to be real leaders in innovation, not just in companies but in sites of education, because the elite are going to make it their business to stay ahead of everyone else. If the elite sees the very tail end catching up, they will innovate even faster to stay ahead. They have to, at the peril of their own destruction. 2. The Securitization of Labor The non-obvious result of this system is the maintenance of a permanent underclass, aware of their status because aware that they cannot catch up with the elite. Here the concern is misplaced if we think about young people; the point is really about adults, the bottom 20% or so of skilled workers, people past their major educational periods, who at a surprisingly young age can no longer hope to advance toward anything like the forefront of technological vanguardism. Whatever employment they can hope for will be at the relative bottom of the economic ladder and will not be eligible for the majority of the benefits of creative destruction. This disparity does not exist because of personal choice or personality ability; it is built into the system of creative destruction. The French economist Gilles Saint Paul, in his 2008 volume Innovation and Inequality, proves out through a deep mathematical analysis that the kind of hyperinnovation found especially in information technology is likely to give rise to a class of super-wealthy capitalists who have become almost satiated through consumption of new products, and to perpetuate at

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least two levels of social underclass—low-skilled workers and the poor—who serve as a kind of anchoring “everyday” labor capital on which at least two kinds of elite—the wealthy but also the very highly technically skilled—depend. The very idea of securitization, which is to say derivatives, as Brian Holmes discusses in his fascinating paper for this conference, seems vital to understanding a logic followed by capital throughout all parts of the world system today, a logic that it seems to me was designed for use in a specific and relatively limited area, but forms part of an acceleration of the system of capital that very quickly eclipsed whatever specific domain it was intended to inform. In its most basic form, a derivative is a financial instrument that does not directly represent a stake in an institution of capital, but rather in another financial instrument. Rather than buying a share of Microsoft stock for $10 and hoping that it goes up to $15, a stock derivative—in this case, also called an option—can be formed so as to simply bet that the share price of Microsoft moves by $5, without conferring ownership to the investor. Such second-order bets were designed in the first place to create “hedges” against various kinds of loss, and almost function as a kind of insurance policy. While designed as “derivative” with regard to the main part of stock and bond trading, financial derivates soon became the most widely-used instruments on the market, since the trading volume in them is not directly dependent on the finite number of stock shares or bonds issued by a company. As Holmes notes, trading in these instruments reached the “potential or ‘notional’ value of $683.7 trillion in mid2008,” a figure “roughly ten times global GDP.” So when we look at world financial markets as largely dominated by trading in stocks, bonds, currencies, and commodities, we really overlook the bulk of the actions of that market, and as Holmes argues too, we may fundamentally misunderstand the role not merely of financial markets but the roles and functions of capital itself in contemporary financial systems. Here is where I see a disturbing analogy with and connection to the world of computerization and the world of labor. For while less true at the individual level, the global network allows capitalists to separate all kinds of real-world things into their “underlying” and “securitized” part—the “securitized”

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part being here the option, CMO, or other derivative instrument that is largely invisible to the underlying property, but that can in many ways determine almost everything about the real-world fate of those who do own that property. If we substitute “property” in this equation with “labor-power”—the amount of work a laborer can contribute to the firm—a pattern very much parallel to other kinds of derivatives seems clear. Capital has found ways to separate the low-return parts of labor from the high-return parts, in order to trade more and more and profit more and more from the derivative parts of the equation, which largely now has to do with mergers and acquisitions and the movement of superstar managers—much like the much-remarked-upon pay gap between those at the very top and everyone beneath them. If the argument developed by Saint-Paul has any validity at all, it suggests that in a global sense, companies at the forefront of technological innovation, and particularly of IT innovation, are beginning to treat the whole world of physical production as a kind of asset to be securitized. Because of their derivative nature, such transactions require a “pedestrian” set of assets that can be separated into their “simply productive” and “logarithmically productive” parts. One way of looking at Saint-Paul’s findings is to say that the vanguard of innovation serves as a kind of derivative instrument with regard to the rest of the laboring world—a world it transforms, trades, and treats as a kind of object to be manipulated, but within which most of us live, and which is required for the derivative trading to occur. As Saint Paul puts it, and as other recent authors like Christakis and Fowler have been showing, “one cannot simply think of ‘information technology’ as a black box that just shifts the relative demand of one category of workers” (x). What Saint Paul finds is that “technical change has a nonproportional impact on the marginal product of different factors of production” ( xiii). While those at the bottom of the income ladder may in some sense benefit from the introduction of newer goods to consume that trickle down from the rich, the problematic group in this system is precisely whom one might suspect—the workers at a level of employment and skill where it becomes very difficult to train up to an equivalent skill in a new industry. Thus because of the relative value of products and the price of labor, and as many observers have noted, “in recent years, economists… have noticed a worrying trend toward greater wage

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inequality in the United States and other countries. Not only has the distribution of wages widened, but real wages have fallen for the lowest paid workers (the bottom 20%, say), despite continuing growth in GDP per capita” (viii). I draw from Saint Paul’s suggestive analysis both that we need to think much more carefully than we seem to have so far about the effects of tying the hyperbolic growth of capital to the least “physical” of capital assets; and that in general analyses of the effects of computerization on the world need to take account not only of computerization but of the world as well.

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Works Cited Chirstakis, Nicholas A., and James H. Fowler. 2009. Connected: The Power of Our Social Networks and How They Shape Our Lives. New York: Little, Brown. Holmes, Brian. 2009. “Is It Written in the Stars?” Blog post. http://brianholmes.wordpress.com/2009/11/06/is-it-written-in-the-stars/. McChesney, Robert. 2008. Communication Revolution: Critical Junctures and the Future of Media. New York: New Press. Saint Paul, Gilles. 2008. Innovation and Inequality. Princeton: Princeton University Press. Schumpeter, Joseph. 1942. Capitalism, Socialism, and Democracy. New York: Harper Perennial, 2008.