Presentation For Delivery to Digital Capitalism Communication Symposium
16 May 2023
Warm thanks to Rector Nazife Güngör for this invitation, and to Dean Süleyman İrvan for hosting us.
1. Origins and Structure of Digital Capitalism
With the erection of a permanent war economy to support US global power during and after World War II, new digital technologies were innovated and enlisted.
A digitally anchored political-economy gradually emerged. It strengthened during the 1970s and 1980s, as computer networking expanded and the state authorized major privatization projects. A massive phase-change was underway. The form and location of production processes, the composition of capital investment, the commodities that generate high profits, the valued categories of labor, the profile of consumption: all were altering. At the same time, long-engraved imperatives of profit-maximization, cost efficiency, and labor control still carried forward. It was, and is, still capitalism – but with a digital character.
New frontiers of commodification based on digital technologies continue to be explored. The transnational companies that control 30% of global production and 80% of world trade are repeatedly rebuilding themselves around digital structures and dynamics; worldwide IT spending was forecast to increase to $4.6 trillion in 2023. In short, digital capitalism still has plenty of room in which to expand.
The digital growth pole has been activated generally across every economic sector, not just the familiar consumer marketers – Google, Meta, Amazon, and Apple. Farm machinery manufacturer John Deere outfits tractors with software to collect soil data – in order to sell both tractors and these productivity-enhancing data to agribusiness. The biggest US bank, JP Morgan Chase, boasts an IT staff of 57,000 and a tech budget of $14 billion; it also hosts roughly 6,000 apps. Tesla is estimated to have gathered eight times more profit on each of its high-priced, software-saturated vehicles in late 2022 than Toyota.
Capitalism’s multifaceted crisis tendencies also persist; indeed, fifteen years after the crash of 2007-2008, it is arguable that this rolling catastrophe continues. In March 2023 a new bank panic began. Gigantic black holes of unregulated activity constitute sources of unaddressed financial peril. More than fifty poor countries are facing severe debt crises; and inflation has reached calamitous levels in a number of nations. Local governments in China suffer from extreme indebtedness, and insolvent property developers there have fallen into managed bankruptcy, while China’s party-state has recently reworked regulations to try to steady things. So the financial side of today’s digital capitalism is far from secure.
2. Geo-Political Economy
This unstable political economy is also marked by an increasingly grave structural cleavage. This split had not yet occurred in 1999, when I first framed an account of digital capitalism.
During the 1990s, the US enjoyed unchallenged primacy. Indeed, with the collapse of the Soviet Union; the decision by China’s party-state to reinsert China into global capitalism; and the immobilization of the Non-Aligned Movement – the anti-imperialist bloc formed decades before by nations of the Global South – the United States seized the opportunity to reorder the world.
A 1992 Pentagon document declared the strategy of US primacy, asserting that the US’s overarching mission must be “to insure that no rival superpower is allowed to emerge.” Meanwhile, as transnational investment flows surged and pundits, politicians and executives trumpeted a US-centric “globalization,” the US also promoted a new mode of computer networking. The internet functioned as a hegemonic popular force, a basis for additional cycles of commodification, and an infrastructure for coordinating the offshoring of manufacturing investment to low-wage regions – especially China. US digital capitalism was riding high.
A quarter-century later, however, things look starkly different. Free-market verities were mothballed during the crisis of 2008, when the US government stepped in to rescue the collapsing financial system. The unipolar epoch ended when, despite Washington’s desires, China grew into a first-rank power. Digital capitalism continues, but on altered terms.
Because its profit potential renders it a uniquely important growth-pole, US leaders are determined to maintain pre-eminence over digital technology. Nevertheless, they face mounting difficulties.
The chief threat to US dominance stems neither from Europe nor Japan. Despite rumblings of discontent and specialized competition, these potential rivals remain broadly in thralldom. The true challenge, again, comes from China. How do the US and China stand with respect to digital technology?
Just a few decades ago, China remained an impoverished country. Its fortunes changed only after its leaders embraced state-controlled inward foreign investment, export-led industrialization, and massive domestic infrastructure investment. China then quickly became the center of world manufacturing; and, though US officialdom overlooked it at the time, China simultaneously developed a protected internet industry. Chinese tech companies also plunged into international markets for PCs, telecommunications infrastructure, mobiles phones and, ultimately, games and internet apps.
After the financial crisis of 2008 Chinese leaders focused policy on high technology fields. These efforts redoubled after Xi Jinping became President in 2012; Xi framed policy increasingly on autonomous development and self-reliance in technology. Initiatives spanned the gamut of digital innovation, from electronic and autonomous vehicles to supercomputers, satellites and satellite navigation systems, quantum computing, 5G and 6G wireless systems, cloud computing services, and submarine cables. Xi Jinping declared that China plans to dominate artificial intelligence by 2030. The party-state also prioritized advanced semiconductors, though in this field – critical to virtually all the others – China has not yet shown outstanding success. China is, however, the world’s second largest spender on research and development and it is closing the gap with the United States.
Between 2016 and 2021, the digital sector of China’s economy doubled, to $6.6 trillion. China was not only reorganizing its national political economy, but also bringing other countries into its digital orbit – in short, it was attempting to reconfigure the overall political economy of digital capitalism.
Starting in 2013, its trillion-dollar Belt and Road initiative built infrastructure in countries throughout Eurasia, and then also in the Middle East, South America, and Africa. China has established multilateral organizations: the Global Security Initiative, the Global Development Initiative, the Global Civilization Initiative, and the Asian Infrastructure Development Bank. Alongside its efforts to internationalize its currency, the renmimbi, these “seek to position China as a country with which nations that are wary of U.S. hegemony can do business.” Within this wider context, they create institutional bases for bringing countries into China’s burgeoning transborder digital infrastructure projects. Scores of nations, especially in the Global South, have joined up.
A few quick indicators of China’s newfound prominence in global digital capitalism. TikTok, the social media app owned by the Chinese company ByteDance is available in 155 countries and 75 languages, and claims over a billion monthly active users. The US is presently considering a ban on TikTok and, perhaps, other Chinese apps.
Huawei, a transnational leader in telecommunications equipment, cloud computing, and cybersecurity, had completed or initiated 104 cable-laying contracts nearly everywhere apart from North America – about one-quarter of the global total as of 2019. To the chagrin of US officials, in December 2022 Huawei signed agreements to provide cloud computing and high-tech infrastructure to Saudi Arabia. The US reacted by threatening a total ban on exports to Huawei.
China’s Beidou satellite navigation system, finally, exceeds in capability the US Global Positioning System. The largest network of global positioning satellites ever built, Beidou’s 35 satellites observe capital cities in 165 countries more frequently than the 31 satellites used by the US’s GPS. The Beidou system is integrated into China’s Belt and Road initiative, and provides navigational services to BRI countries.
Noam Chomsky sums up the general ramifications of all this: “China refuses to surrender its technological development. It cannot be intimidated, and it does not follow orders…That’s the real problem for the United States.”
The specific problem is that China is asserting a leadership role in the global political economy of digital capitalism. How has the United States responded to China’s sudden ascendancy?
Only after the worst of the financial crisis of 2008 had passed did President Obama initiate a foreign policy “pivot to Asia.” Forceful and wide-ranging tariffs were thereafter imposed by the Trump administration; and both Obama and Trump applied US market restrictions to Huawei and ZTE, another leading Chinese tech company. Only after Joe Biden was elected in 2020, however, did US policy for digital capitalism begin to be systematically recast. With bipartisan support, Biden explicitly specified that the US objective was to hinder and slow China’s forward motion in high technology.
Evident were several interlocking initiatives.
The US has been committed to a policy of global free flow of information for a century. This policy formed the basis of US global expansion in communications after the Second World War, and it underwrote the worldwide growth of the US-centric internet during the 1990s and 2000s. As recently as 2013, the Council on Foreign Relations – the country’s leading foreign policy thinktank – trumpeted a need to defend “an open, global internet.” However, in 2022 the same CFR conceded that this cornerstone of US policy had crumbled; and its 2022 Report signaled an extraordinary strategic retreat.
“The era of the global internet is over,” the Report began. The US “has been unable to counter the persistent advance of the concept of cyber-sovereignty,” embraced especially by China and Russia, but also by other countries. In the face of spiraling fragmentation, the Report recommended that the US construct a “digital trade bloc” with like-minded countries, including the EU, Japan, and others. The “strongest possible alliance” – really a protectionist wall – should be created first and foremost among the US’s chief military allies. The US has been attempting to actualize this policy, with mixed results.
The Report also embraced increased investment in digital infrastructure and in strategic fields including AI and quantum computing, to preserve technological superiority; and it recommended export controls. Export controls were indeed imposed on advanced semiconductors in October, 2022; pressure was directed at high-tech suppliers of microelectronics manufacturing technology in Japan and the Netherlands to bring them into line with US directives. Passage of the CHIPS and Science Act in August 2022 provided multibillion dollar incentives for bringing back some semiconductor manufacturing to the United States. 6G wireless technology was yet another site of coordinated effort.
In addition, the Committee on Foreign Investment in the United States (CFIUS) now routinely interposes executive power into ostensibly independent Federal Communications Commission authorizations for submarine cables that may connect to China (and elsewhere). A US Naval analyst asserts that such actions may presage “a decoupling of the internet’s infrastructure, with US companies increasingly building the pipes connecting allied nations, while China invests in those connecting much of Asia and Africa.”
The CFR Report also endorsed a mobilization of US state power, encompassing “diplomatic and economic pressure on adversaries, as well as more disruptive cyber operations.” And it bears emphasis that hard-power often does overtly predominate in US policy calculations. The 2023 US military budget officially totals about $843 billion; of the US’s 750 overseas military bases, spread out across eighty countries, 313 are located in East Asia.
Protectionism backed by military power is supplanting open borders for the US side of digital capitalism.
An Unresolved Paradox
Yet a paradox underlies the US-China fight for supremacy over digital technology. Since Deng Xiaoping’s reform and opening-up policy decisions, the US and China have bound themselves together through innumerable business and financial linkages: US foreign direct investment, intra-corporate trade, and heavy financial flows. Symptomatic is that the largest and most valuable company in the world – Apple – is essentially dependent on its China-based manufacturing, where 95% of its iPhones, iPads, Macs and AirPods are made. China is the US’s third-largest trading partner; and the second-largest holder of US Treasury bonds.
Can these gigantic, intricate, and profitable ties be unwound? Can China and the United States actually “decouple”?
Certainly, efforts to do so are strengthening. However, decoupling is not a mechanical process – and the policy itself is not uniformly agreed on either side. US Treasury Secretary Janet Yellen warned in April that US decoupling from China would be “disastrous.” Li Qiang, China’s new premier, asserted in his first press conference in 2023 that China and the US are economically intertwined – to the benefit of both countries.
There is, in any case, no guarantee that US measures to inhibit and retard China’s innovation of digital technologies will succeed. China has set a goal of becoming self-reliant in high-technology industries, and it continues to pour investment into them. Its track record in moving toward technological independence is impressive.
What began as an expression of US supremacy has transformed, throughout the past two decades, into a conflict over nothing less than the shape of the global order. Amid innumerable pressures and uncertainties, the US-China rivalry over technology has become a more general geopolitical-economic contest.
To this struggle, the US brings diminished ideological and political resources. The US has disengaged from international institutions such as the World Trade Organization, and participates only selectively in the United Nations. Its much-vaunted “rules-based order” thus may look like nothing more than an arrangement in which the US makes the rules. Much of the world views the US-led West with open skepticism: as 21 African countries and other nations throughout Asia and Latin America refused to back the Euro-American war effort in Ukraine, French President Macron stated in February that “we have lost the trust of the global south.” Nor, in any case, is current US foreign policy itself stable – it may not carry over through next year’s US election.
On the other hand, for many states China’s commitment to the UN system, its rhetoric of multilateralism, and its proclaimed policy of non-interference in the sovereign affairs of other countries may offer an appealing alternative. China’s brokering of a renewal of diplomatic relations between Iran and Saudi Arabia boxed the United States out of a region it has long considered its own backyard. China’s assertive strategy is to champion reform of today’s deeply unbalanced international order – to push for adequate representation for the Global South. Backed by its strengthening digital capitalism, this strategy will probably fortify China’s geopolitical standing.
We are living through an epochal and unresolved historical transition. Akin to past transitions of this kind, digital capitalism in the 2020s is likely to be marked by violent contingency, perilous confrontation, and continued geopolitical reconfiguration.
 Thanks to Susan Davis, Danny Nasset, Min Tang, Mandy Troeger and ShinJoung Yeo for comments and criticism.
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 There is debate about the extent to which digital capitalism rests upon capitalism’s traditional basis – accumulation via productive investment – or, in addition or instead, intellectual monopoly rents and other forms of surplus appropriation and re-appropriation.
 Including around AI and intermediate commercial services. Martin Wolf, “Globalisation is not dying, it’s changing,” FT September 13, 2022; Dan Schiller, Digital Depression: Information Technology and Economic Crisis. Urbana: University of Illinois Press, 2014: 240-45; Dan Schiller and Shinjoung Yeo, “Powered By Google: Widening Access and Tightening Corporate Control,” Leonardo Electronic Almanac 20 (1), 2014: 44-57.
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 China’s overall investment just in sub-Saharan infrastructure projects over the past two decades has been $155 billion – including but not limited to BRI. Robert Bociaga, “China’s Africa Belt and Road investment drops as West spends more,” Nikkei Asia March 25, 2023; James Kynge, “China grants billions in bailouts as Belt and Road Initiative falters,” FT March 28, 2023.
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 For example, a Google-backed private cable called Firmina, linking the US with Brazil, Uruguay and Argentina. “Cable Compendium” CommsUpdate 6 January 2023.
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 Council on Foreign Relations, Confronting Reality in Cyberspace: 13-14. The report specified that “the United States should develop a broad effort to erode adversarial capabilities, making them less effective by taking out infrastructure; exposing tools; and creating political, diplomatic, and economic pressure on finances, authorities, and leadership.” Ibid: 58.
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 Dan Wang, “China’s Hidden Tech Revolution,” Foreign Affairs, March/April 2023: 65-77.
 Edward Wong, “China Increasingly Seen as Antagonist in Diplomatic Talks Around the World,” NYT March 3, 2023
 Guy Chazan and John Paul Rathbone, “Germany’s Olaf Schulz airs frustration over allies’ stance on tanks for Ukraine,” FT February 17, 2023; Sylvie Kauffmann, “Emmanuel Macron must reset France’s Africa policy,” FT February 27, 2023
 Relatedly, China has also stepped up its public diplomacy and greatly expanded its foreign service. “China Leads World in Number of Diplomatic Posts, Leaving US in its Wake,” The Guardian, November 27, 2019
 Masahiro Okoshi, “China eyes Global South, not West, to expand influence: expert,” Nikkei Asia, March 20, 2023