New economy, internet, crisis

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During the 1970s, we were asked to believe that the economic crisis was due to a shortage of oil; then in the early 80s we were promised that "Reaganomics" would get us out of the crisis. But never since capitalism was once again confronted with its open crisis 30 years ago have we witnessed such a massive ideological campaign aimed at convincing us that the crisis is over, and that a new era of prosperity is opening up. The propaganda of the last few years would even have us believe in a 3rd Industrial Revolution. According to one particularly puffed protagonist of this campaign, "This is a historic event at least as vital as the industrial revolution of the 18th century (...) The industrial era was founded on the introduction and the use of new sources of energy; the "informational" era is based on the technology of knowledge production, information treatment, and the communication of symbols". On the basis of US growth figures in recent years, the media tell us endlessly that unemployment is about to disappear, that what they call the "economic cycle", characterised since the beginning of the 70s by low growth and periodic, ever-deeper, recessions, has given way to a period of uninterrupted growth, for which only the most superlative adjectives are adequate, and all that because we have entered a "new economy" born by a major technical innovation: the Internet.

What then is the content of this "revolution" that so enchants the ruling class? It is based essentially on the fact that the Internet, and the development of telecommunications networks generally, allows information to be stocked, and delivered instantly whatever the distance. Supposedly, this will bring buyers and sellers together on a planetary scale, whether they be individual consumers or companies. Since companies can thus do away with commercial services in order to buy and sell, commercial costs will diminish considerably. Markets will thus get bigger, since thanks to the Internet every producer will have instantaneous access to a planetary market. The appearance on the Internet of commodities requiring significant technical knowledge of a new kind will encourage the creation of new companies: the famous "start-ups" have a bright future before them in terms of growth and profits. This will encourage greater productivity within industry, since the circulation of information will allow better and cheaper co-ordination of services and factories. It will also be possible to reduce stocks, since production and sale will be instantaneously related, whence savings in the cost of buildings and storage. The costs of marketing will be reduced, since advertisements published on the Internet can potentially reach everyone connected to it. Another point, whose political consequences are particularly important, is the media's insistence on the new impetus given to innovation, since the Internet is based on knowledge alone and not on costly machinery; this is supposedly going to democratise innovation, and since innovation makes it possible to create start-ups, everyone will be able to get rich.

Yet despite these cries of triumph in the media, there are nonetheless a series of discordant notes which suggest thaat there may be some doubt as to the imminence of this wonderful new period: for one thing, everybody agrees that poverty is growing throughout the world, that "inequality" is getting worse in the developed countries, and that far from rising to their fabulous destiny in the new economy more and more start-ups are turning into shut-downs. A number of these new entrepreneurs, up to their necks in debt, are likely to join their employees in the army of the "new poor". Moreover, the extravagant rise in share prices, especially those associated with the new technologies, is a cause for alarm among many economic leaders who fear that such a rise runs the risk of causing a financial crisis which the world economy will be unable to absorb.

The myth of increasing productivity

If we are to examine the significance of the "new economy" seriously, we need to take account of the fact that many experts believe that the growth in the labour productivity of the US economy, after falling from its level of 2.9% annually at the end of the 1960s, has risen again for several years, to reach 3.9% during the 1990s. This is supposed to mean that capitalism has entered a new period.

First of all, these figures are debatable: for example, R. Gordon of North-western University in the US (writing in the Financial Times of 4th August 1999) estimates that growth in hourly labour productivity has risen from 1.1% prior to 1995, to 2.2% between 1995 and 1999. Moreover, for many statisticians these figures are not very strong arguments, for several reasons:


  • the direct profitability of all productive investment has only slightly increased, which means that the progression of labour productivity has only been achieved thanks to an increase in the intensity of work (line speeds), and hence in the exploitation of the working class;


  • productivity always tends to increase at the high point of a recovery (as was the case in the USA between 1998-99), because production capacity is used more intensively;


  • finally, the real increases in productivity have been achieved above all in the manufacture of computers, leading the Financial Times to comment that "The computer is the origin of the miracle of productivity in the production of computers" (ibid.).

Spurred on by competition, capitalism achieves technical progress, which does indeed increase labour productivity. But capitalism has always done this, and the figures certainly do not show us to be in an exceptional period that constitutes a real divide with the decades that went before.

Most importantly, however, the comparisons between the industrial revolution at the end of the 18th century and what is happening today are completely false. Steam power, and all the great inventions of the 19th century, made it possible for the worker to produce a far greater quantity of use values with the same amount of labour time; this allowed the bourgeoisie to extract a higher surplus value - which of course was the object of the exercise. Labour productivity has certainly risen during the 20th century, especially during the last 30 years, thanks to the automation of production. This has given the bourgeoisie and its specialists an argument to claim that the white-coated computer operator glued to his screen on the factory floor is not a worker (presumably the robots work by themselves!), and that the working class is consequently a disappearing species.

This is not what is happening with the Internet. The worker still produces the same quantity of goods in a given time. The Internet changes absolutely nothing from the point of view of production. With all its noise about the "new economy", the bourgeoisie is trying to make us believe that capitalism is a world of traders, and to make us forget that before a commodity can be sold, it first has to be produced; they are thus trying to blind us to the fact that the working class is the real heart of society today, the class which for the most part keeps the rest of society alive.

The decline in commercial costs is not going to stop the crisis

Even if the Internet, or any other invention, were to reduce the cost of marketing in a manner analogous to the railways in the 19th century which divided the cost of transport by 20, thus reducing the price of goods, it would still not create new economic growth. The railways made powerful economic growth possible, because they transported goods for which there existed an expanding market: capitalism was in the process of conquering the entire planet, and using it as a source of new markets. Today, no such new markets exist. Selling on the Internet will simply lead to the disappearance of a whole series of commercial activities. The result? Jobs will disappear, and will not be replaced by new Internet jobs, precisely because the Internet makes it possible to reduce the cost of selling to the consumer or to other companies. The same is true of the progress that the Internet is supposed to bring to company reorganisation. None other than John Chambers, CEO of Cisco, one of the biggest companies in the new technology sector, tells us so: "We have got rid of thousands of unproductive jobs by using the Internet for relations with our employees, our suppliers, and our clients (...) the same is true for expense claims. As a result, there are now only two people checking the expense claims of our 26,6,000 employees (...) We have been able to cut 3,000 jobs from after-sales service" (quoted in Le Monde, 28/03/2000). And to make the message absolutely clear, he adds: "In ten years, any company that has not moved completely onto the network [ie has not eliminated all these jobs] will be dead". This implies a reduction in the wages distributed by these companies, which of course does nothing in itself to increase global solvent demand, which would be necessary for an economic recovery. In the absence of new external outlets, which is the case overall in decadent capitalism, innovation - whether at the commercial level or not - cannot resolve the crisis, just as it cannot create new jobs. True, Chambers tells us that he has "redeployed these 3,000 people to research and development", but this is only possible due to the sharp rise in Cisco's sales thanks to the wave of Internet and network installations; as soon as these installations near completion, Cisco will obviously no longer be able to pay for such substantial R&D.

The Internet bubble collapses

There is thus nothing really new in today's economic evolution, and however desperately the bourgeoisie seeks for signs of a new and rising "Kondratieff cycle", they won't find salvation there. We can see a proof in what can only be called a crash in technology shares during spring 2000. Between 10th March and 14th April 2000, the NASDAQ (the US high-tech stock exchange) lost 34% of its value; Internet companies like (financed by powerful financial groups such as J.P. Morgan Bank and the French businessman B. Arnault) went bust. This bankruptcy will be followed by others; the markets are already circulating lists of Internet companies in difficulty, one of the best-known being Amazon, the online bazaar as famous in its home town of Seattle as Boeing, and whose growing financial difficulties are causing new jitters on Wall Street. According to the Gartner Group, between 95% and 98% of companies in the sector are under threat (Le Monde, 13th June 2000), which is merely a confirmation of the fact that their apparently extraordinary take-off is nothing but a speculative bubble full of hot air.

And if the "new economy" does not exist, neither is the Internet the means to re-launch the economy as a whole, known today as the "old economy". One of the reasons that is on the verge of bankruptcy is that its entry into competition with the distribution majors has led the latter to react: Wal-Mart, the world's number one distributor, is also selling now on the Internet. Faced with the competition of these new companies threatening to "cannibalise" their markets, the "old" companies hhave not been long to react, as a manager in one of France's big distribution companies explains: "At Promodes, we came to the conclusion that if we didn't do so, somebody else would cannibalise our activity" (Le Monde, 25th April 2000). As this manager recognises implicitly, when he speaks of "cannibalising", the companies which decide to sell on the Internet (as we have already seen in the case of Cisco) do not create jobs but eliminate them. In the same issue of Le Monde, we read that the Internet is at least partially responsible for the loss of 3,000 jobs in the UK bank Lloyd's TSB, 1,500 jobs at Prudential Insurance, and that the American distributor of computer software, Egghead, has closed 77 shops out of 156.

These are the real effects of the so-called "new economy". The real measures that companies are adopting as regards the Internet are nothing but a moment in the deadly competition among capitalists, for a market which was saturated long ago. This trade war can also be seen in the wave of mergers and buy-outs, which has been going on for a decade and which is now on the increase. Today, the best way to dominate in the world market is to buy out the competition's market and productive apparatus: "During 1999, this market exploded by 123%, to reach 1,870 billion francs (...) a planetary race to increase in size has begun" (Le Monde, 11th April 2000). Within the framework of decadent capitalism, during these bouts of competitive fever every sector of the bourgeoisie always has at least one method of confronting the competition: attacking the living conditions of the working class. For example, it is well known that these monster mergers almost invariably lead to job losses.

The huge increase in "new technology" share prices, which boosted share prices in general throughout the developed world's stock markets, far from heralding a new period of economic growth is merely the fruit of the bourgeois state's attempts to confront an ever-deepening crisis by using debt: according to the managing director of Altavista France, you needed merely "to get together 200,000 francs with a few friends to attract 4 million francs from a venture capitalist; then you spend half of that on advertising in order to launch on the stock exchange and raise another 20 million" (L'Expansion, 27th April 2000); from the point of view of accumulation, this is simply absurd. Since there is no really productive outlet for investment, money can only be placed in unproductive activities such as advertising, which are connected to competition, and end up turning to speculation - whether on the stock exchange, the financial markets, or in oil futures. This is the only explanation for thhe way in which new technology share prices - before they collapsed - increased by 100% during the year, when most of the issuing companies had only ever lost money. There is nothing new in this either, since the bourgeoisie has been developing non-productive activity ever since it first understood that the 1929 crisis would not end in a spontaneous recovery as had been the case with the crises of the 19th century. Some bourgeois journals have been forced to recognise this: "The Net economy may correct the long-term tendency to [a decline in] productivity (...), but the mainspring of economic activity is the debt economy (...) The ascendant phase was prolonged by credit far more than by the rise in new technologies, which are merely an alibi for speculation" (L'Expansion, 13th April 2000). And this speculation can only, as we have seen for 20 years, lead to new financial convulsions like the one we are witnessing today.

The "new economy" hides economic attacks on the working class

The media propaganda around the Internet's transformation of society would see us all networking, taking part in the process of innovation, and contributing to the progress of our companies by becoming shareholders. The reality of the "new economy" shows us that this is all an immense bluff. There is every chance that the founding share-holderers of bankrupt start-ups will find themselves reduced to poverty, while all those who were conned by advertising into speculating in shares on the Internet - supposed to increase their income at the cost of a mere 20% down-payment on the price of their shares - have been forced, since the crash, to reduce their income for years to come in order to repay the bank loans they contracted to buy the shares in the first place. Paying wage-earners with stock options, or forcing them to buy shares in the company, does not transform workers into shareholders; on the contrary, it represents a two-fold reduction in wages. Firstly, the part of their income that the wage-earners accept to leave in the hands of the employer is nothing less than an increase in surplus-value and a wage reduction in the short term. Secondly, however enticing the offers made to get wage-earners to accept the idea of owning shares in "their" company, this in fact makes their income dependent on the company's future success: if share prices fall, the wage-earner's income falls also. Today's fashion for "people's capitalism" is a myth: it is the bourgeoisie, whether through the state apparatus or company management, which owns the means of production which function as capital, and it can only valorise the capital by exploiting the working class. The worker cannot gain all or part of this valorisation, precisely because for capital to be valorised, and to make a profit, the worker can only be paid the value of his labour power. If the bourgeoisie has created pension funds, or worker share-holding, it is because today's capitalist crisis is so deep that all methods are good to reduce the value of labour power today and tomorrow, by making it dependent on share prices. The collapse in technology shares today gives an idea of what will happen in the future to the workers' incomes which, in one way or another, are dependent on share prices.

In the final analysis the bourgeoisie's efforts to promote worker share-holding is nothing but another attack on their living and working conditions. The casualisation of employment allows capital, whenever necessary, to eject the worker from production overnight. Worker share-holding allows it to reduce the income of active or retired workers whenever the situation of the company, or of capital in general, deteriorates.

There is another economic attack hidden behind the deafening campaign over the "new economy". Connecting the company to the Internet means that information becomes instantly available, and that there is no longer any pause between two tasks: once one task is finished, the next is immediately presented via the network, any task can be instantaneously modified, etc.; tasks are assigned more and more rapidly, the rhythm becomes infernal to the point that we can easily understand that "at least one third of employees connected to the Internet work at least 6.5 hours a week at home - to get some peace and quiet�" (Le Monde, 13th April 2000). The apparently generous gift of a computer that some large companies are offering their employees (Ford 300,000, Vivendi 250,000, Intel 70,000) is particularly revelatory of this desire to have the workforce permanently at work. Repeated denials of any such desire are disingenuous to say the least, when Ford management declares that the aim is to make its employees "better able to respond to customers", and to give them "the habit of a greater exchange of information". More and more experts in workplace organisation consider that in the "information society" it is increasingly difficult to tell where work begins or ends, and that the notion of working time itself is becoming vague; this is confirmed by employees themselves, who say that since they can be contacted at home, "they never stop working" (Liberation, 26th May 2000). In fact the bourgeoisie's ideal is that all workers should become like the founders of a Silicon Valley start-up, who "work 13-14 hours per day, 6 days a week, in a workspace 2 metres square (...) who never take a break or even lunch, and never stop to chat in the cafeteria" (L'Expansion, 16th March 2000). And these working conditions are the general rule in every start-up in the world.

The attack on working class consciousness

The monstrous media campaign has yet another aim, still more important. The reality behind the "new economy", where everyone networks, is transformed into an "innovator" or a shareholder, shows that this is all a great bluff, but it is a bluff with a purpose.

First of all, it claims that society, at least in the developed countries, is undergoing a real improvement, and that if working conditions come under attack in this or that company or state administration then this is an exception, a special case. It claims that if the workers try to resist, then their struggle can only be an anachronistic rearguard action, and that as a result they are bound to be isolated. The propaganda about the "new economy" is first and foremost a means to demoralise the workers, to avoid their discontent being transformed into combativity.

Moreover, it claims that society is changing to such a point that capitalism itself is being transformed, so that any project of overthrowing capitalism has become meaningless. We are told that whoever takes part in the "new economy" will become rich: he will go beyond his condition as a member of the working class. But whoever does not enter this network-innovator-shareholder trilogy will become the victim of a "greater inequality of income", a new "fracture" in society, which is no longer divided into bourgeoisie and working class, but into the members of the "new economy" and those excluded from it. To drive the point home, we are told that participation in the "new economy" is a matter of intelligence and determination. According to the review Business 2000, "You are either rich or a cretin".

All this is completed by propaganda proclaiming the transformation of the company, where value is created, where labour power is exploited, and where classes are defined. Just as someone who has access to wealth thanks to his participation in the "new economy" cannot be described as a worker, so the enterprise - where wealth is produced - is no longer divided into the bourgeois (who possess capital) and the workers (who possess nothing but their labour power): "the 'new economy' means more teamwork: the employees are a real 'team', they are associated with the wealth of the company by stock options", according to the director of BVRP Software (Le Monde Diplomatique, May 2000).

In fact, the underpaid, casual, or unemployed workforce, who are not part of the "new economy", represent the vast majority of the working class. The wealth-producing class is not represented by the student in Silicon Valley or elsewhere, who is conned by the mirage of riches just within his grasp. The wealth-producing class, the working class, is exploited more and more by the bourgeoisie, and when it can no longer be exploited it is ejected from production by unemployment. Confronted with these attacks, the working class has no choice but to fight back. And for this, the workers' consciousness of the struggle's necessity and perspectives is essential.

In the final analysis, the themes and objectives of the propaganda around the "new economy" are the same as that around the collapse of the Eastern bloc in 1989.

On the one hand, there is the attempt to strip workers of their class identity, by presenting society as a community of "citizens", where social classes, and the division and conflict between exploiters and exploited have disappeared. Yesterday this claim was supposedly proven by the bankruptcy of the "socialist", "workers'" regimes, today by the myth that workers and bosses have the same interests because they are all shareholders in the same company.

On the other hand, the aim is to deprive the working class of any perspective outside capitalism. Yesterday this was supposedly demonstrated by the "bankruptcy of socialism". Today,ay, by the idea that even if capitalism has its faults, even if it is incapable of eliminating poverty, or wars, or disasters of every kind, it is nonetheless capable of functioning, of guaranteeing progress and of overcoming its crises.

But the very fact that the bourgeoisie needs to use such extensive ideological campaigns, the fact that it is preparing new economic attacks, means that it scarcely believes itself in the fairytale land of the "new economy". The sophisticated economic policy deployed by Alan Greenspan, head of the US Federal Reserve, to ensure a "soft landing" for the US economy, after years of debt and trade deficits and just as inflation is on the rise, is scarcely an indication of a new period of unimaginable economic growth. "Soft landing", or a more serious recession: these real facts confirm what marxism has already shown: that capitalism's reconstruction after World War II has been followed by a decline into a new economic crisis, which capitalism is absolutely incapable of overcoming, and that this crisis is plunging an ever-growing part of humanity into absolute pauperisation, and making life ever more difficult for the whole of the working class. Capitalism's future offers us nothing more than a continuing degradation. Only the proletariat can create a society ruled by abundance, because it alone can be the basis for a society which produces for the satisfaction of human need and not for the profits of a minority. This society is called communism.

JS, June 2000