Available in Spanish. Kindly translated by Daniel Urbina
Early in October, Europe’s highest court invalidated the 15-year-old “safe harbor” – an international agreement that the European Union had negotiated with the United States to loosen the EU’s Data Protection Directive of 1995 so that it would allow companies to transfer personal information in digital form from the European Union to the United States. Is the European Court’s judgment a fundamental change in networking policy – a full stop – or merely a comma?
This is actually a longstanding structural conflict that has reignited. Its beginnings go back nearly half a century – when transborder flows of computer data [TDF] threatened to become a point of sharp conflict between the US, Europe, and often newly independent countries of the then-Third World.
By the mid-1970s, TDF was simultaneously controversial and – for U.S. big business and military agencies – irreplaceable. In 1981, Herbert I. Schiller showed, a few thousand large corporations possessing foreign direct investments outside the United States and (two-thirds of them, anyway) headquartered within the U.S. – relied on “a continuously swelling volume of data flows circulating inside [their] corporate business structures across national boundaries.” Based in all economic sectors, these companies used early computer communications networks to transmit data concerning such things as “raw material stocks, production schedules, quality control, personnel records, tax and legal information, currency transactions, profit repatriation, and investment decisions.” As Schiller underlined, TDF helped to enable the largest corporations both “to transact their global business and further integrate the internationalization of capital.”
A second source of TDF was the U.S. military and its allies. “The ability of American companies to operate on a global scale and enjoy the benefits of worldwide resource and market exploitation,” Schiller explained, “would be unimaginable without the full backup of a concentrated military power, ready for instantaneous deployment and intervention.” Military and intelligence agencies depended on networked TDF to operate bases around the world; to implement attacks; and to conduct increasingly widespread surveillance.
There existed no definitive inventory of TDF; even partial views were highly inexact, for the data that streamed across jurisdictions remained shielded. How much data was being sent over the private telecommunications circuits that carried most of it? What portion of TDF was made up of operational and administrative business data? What part of the total was comprised of personally identifiable information? What were the companies doing with all of “their” data? States did not deign to find out. The absence of meaningful public documentation bespoke an underlying power imbalance. Big companies successfully insisted that policymakers should not peer too closely at TDF, out of concern that such investigation might lead to calls for greater accountability – which in turn might constrain the operations of their profit-projects.
TDF not only conferred power on corporate capital but also, paradoxically, established a new point of vulnerability for it. Interruptions and oversight requirements both endangered the political economy that was being reconstructed around computer-communications. Physical threats emerged when an earthquake or even the drag of a ship’s anchor engendered a break in the submarine cables over which data coursed; however, far more menacing for big business were political threats, emerging in initiatives that aimed to restrict the content of TDF, or charge according to the volume of data sent, or oversee TDF in the interests of self-government. Read more
Cubans repeatedly rebelled against the mono-culture of sugar that an empire of capital forced on both land and people; only the Cuban Revolution of 1959 finally succeeded in overcoming this bondage. However, even before attending to a new agrarian law, needed to put an end to the plantation system and to redistribute foreign landholdings, Cuba gave an immediate demonstration of its newly won sovereignty. Just two months after Fidel Castro marched into Havana, in March 1959, telephone workers tore down a telephone advertising billboard, placed it in a coffin, and marched it down a boulevard before tossing it into the sea. The ad was an icon of foreign domination. The Cuban Telephone Company, owned by the International Telephone and Telegraph Corporation, controlled and profited from the country’s thoroughly inadequate telecommunications. Cuba’s revolutionary government now took over management of this company; to the cheers of the Cuban people, formal expropriation followed. In the ensuing years, what had been an unbalanced, Havana-centric telecommunications system was extended substantially into Cuba’s countryside. Meanwhile, other companies, based not only in the US but also in Western European countries, were also nationalized. Every government apart from that of the United States duly accepted the legality of nationalization under existing international law, and negotiated financial settlements with the Cuban state.
The U.S. Government neither forgave nor forgot. It imposed a punishing economic embargo, which has lasted for more than half a century. Successive U.S. Administrations made repeated attempts, overt and covert, to overthrow the Cuban Government; since the 1980s, the US government has doled out more than $1 billion (under the pretense of “democracy” and the “free flow of information”) to stir unrest against Cuba’s government. The 1992 Torricelli Act and the 1996 Helms-Burton Act turned the embargo into an even more devastating blockade, by adding further extraterritorial sanctions. Helms-Burton enabled the original owners of nationalized Cuban assets who afterward became U.S. citizens to use US courts to prosecute foreign companies that took over these properties. Such provisions violated international law; but they were still deployed against a Mexican telecommunications corporation for making use of IT&T’s onetime Cuban telephone property. Year after year, for twenty years, the United Nations General Assembly has resolved by overwhelming majorities that the U.S. embargo should be ended. The blockage continues; but real changes are afoot.
If Cuba’s entanglement in the circuits of capitalism had long revolved around sugar, information and communication have now become pivots of the country’s reintegration into a newly digital capitalism. In the run-up to President Obama’s 2014 announcement that the US was negotiating with Cuba to restore diplomatic relations, the U.S. Agency for International Development (USAID) was funding a Cuban version of Twitter – “ZuneZuneo” – through the Cuban-American youth group called Roots of Hope, and was infiltrating the underground Hip Hop scene by sending a Serbian music producer to recruit Cuban rappers to provoke fans to spark a youth movement against the Cuban state. As the U.S. shifted its foreign policy strategy – the two countries re-established formal diplomatic relations in July 2015 – it also moved networks systems and applications into the foreground.
The previous June, Google Chairman and former CEO Eric Schmidt had visited Cuba, with a team of Google executives including former State Department advisor Jared Cohen, and accompanied by the usual noise about a “free and open internet.” Expressly criticizing the embargo, Schmidt geared his visit to scoping out future business opportunities. Soon after, Google released its Chrome browser and free versions of Google Play and Analytics in Cuba. This was possible because, while the US trade embargo still remains intact to this day and can only be lifted by an act of the US Congress, Google tactfully offered free services – which fell between the cracks of the embargo – to test the waters in Cuba. As Google anticipated, the Obama Administration eased regulations in a few strategic fields including telecommunications. To “initiate new efforts to increase Cubans’ access to communications and their ability to communicate freely,” the U.S. relaxed its controls to allow U.S. companies to sell telecommunications equipment and services, software, and Internet services in Cuba.
Over the last few years, the idea has taken hold that “big data” is driving far-reaching, and typically positive, change. “How Big Data Changes the Banking Industry,” “Big Data Is Transforming Medicine,” and “How Big Data Can Improve Manufacturing,” are characteristic headlines. “Big data” has become ubiquitous, powering everything from models of climate change to the advertisements sent to Web searchers.
Even in a society in which acronyms and sound-bites pass for knowledge, this familiar formulation stands out as vacuous. It offers us a reified name rather than an explanation of what the name means. What is the phenomenon denoted by “big data”? Why and when did it emerge? How is “it” changing things? Which things, in particular, are being changed – as opposed to merely being hyped? And last, but hardly least, are these changes desirable and, if so, for whom?
Big data is usually defined as data sets that are so large and complex – both structured and unstructured – that they challenge existing forms of statistical analysis. For instance, Google alone processes more than 40 thousand search queries every second, which equates to 3.5 billion in a day and 1.2 trillion searches per year; every minute, Facebook users post 31.25 million message and views 2.77 milion video, 347,222 tweets are generated; by the year 2020, 1.8 megabytes of new information is expected to be created every second for every person on the planet.
The compounding production of data – “datafication,” in one account  – is tied to proliferating arrays of digital sensors and probes, embedded in diverse arcs of practice. New means of storing, processing, and analyzing these data are the needed complement.
A quick etymological search finds that the term “big data” began to circulate during the years just before and after 2000. Its deployments than quickened; but this seemingly sharp-edged transition into what Andrejevic and Burdon call a “sensor society” actually possesses a deeper-rooted history.
The uses of statistics in prediction and control have long been entrenched, and have increased rapidly throughout the last century – as is pointed out by a working group on “Historicizing Big Data” established at the Max Planck Institute for the History of Science. The group emphasizes that big data must not be stripped out of “a Cold War political economy,” in that “many of the precursors to 21st century data sciences began as national security or military projects in the Big Science era of the 1950s and 1960s.”
China has launched its China International Payment System (CIPS), which is intended eventually to provide cross-border transactions denominated in its own currency, the Yuan or Renmimbi. Why couldn’t China, and international Renmimbi users, simply rely on the already existing and well-established telecommunication system — the Society for Worldwide Interbank Financial Telecommunications (SWIFT) — which has functioned as a global network for bank transactions for over forty years?
To understand China’s CIPS initiative requires a closer look at how specialized financial telecommunications are embedded in global power structures.
Corporate trade and investment generate enormous volumes of financial data to accompany transactions of many kinds. As U.S. businesses moved into transnational markets throughout the postwar decades, they turned to big banks to help them exchange payment data across national jurisdictions. Some leading U.S. banks addressed this opportunity by developing proprietary computer systems and linking to their corporate customers. A more encompassing option was established in the early 1970s through SWIFT, a global system for sending and receiving instructions about payments and other financial transactions. No actual money transits the network: the money itself is sent via separate electronic funds transfer networks. By standardizing the format for such messages and winning over a growing fraction of international financial institutions, however, SWIFT surpassed individual banks’ proprietary systems.  Today, nearly 11,000 financial institutions and corporations located in over 200 countries use SWIFT to exchange millions of messages each day. SWIFT has grown into an essential infrastructure, not only of international finance but also world trade and investment.
One might think that such a mechanism would be above controversy, in that it provides only a technical means for conducting cross-border financial exchanges; but one would be mistaken. Politics has impinged continually on the network. This reflects its unbalanced control. Read more
An earlier version of this article was presented to the Technology and Democracy project at CRASSH, Cambridge University, 29 September 2015. A version without full footnotes was published at openDemocracy.
The International Monetary Fund warned last week that, nearly eight years after the global financial crisis, still-sluggish economic growth might combine with a new financial shock to tip the world back into recession. Meanwhile, however, investment in information and communications technologies – long venerated as a growth dynamo – remains high. How may we clarify this apparent contradiction?
The concept of “digital capitalism”  may help. Great changes are ramifying around digital networks; at the same time, abiding political economic processes carry forward. I developed the idea of digital capitalism for this reason: a phase-change is occurring within capitalism.
Before turning to consider the problems that confront digital capitalism today, I will trace four features of its industrial profile and give an account of its political development.
The Structural Profile of Digital Capitalism
Unevenly, across many decades, the industrial revolution gripped not only manufacturing but also agriculture, trade and, indeed, information. Aileen Fyfe captures this change in characterizing 19th-century British publishing as “steam-powered knowledge.” Similarly, the applications of digital networks today stretch beyond a discrete information sector. Digital systems and services have been bolted to all parts of the political economy.
This carries ramifications. One is that it is shortsighted to equate the digital merely with familiar consumer markets, as for search engines, smart phones and social networks. Consumer expenditures on digital goods and services account for an estimated 30 percent of the worldwide total. Nor is it sufficient to try to grasp the digital merely by focusing only on vendors – whether IBM and AT&T in the 1970s; or Microsoft and Intel a decade or two later; or Google, Amazon, Facebook and Apple today. Digital capitalism has been constructed, and reconstructed, not only by suppliers but also by corporate users on the demand side: the likes of Wal-Mart and GM and Exxon-Mobil and Monsanto and JP Morgan Chase. Later, we’ll see that these business users’ importance has been political as well as economic.
A second point pertains to the chronology and character of capital investment in what the Census Bureau now enumerates under the category of “Information Processing Equipment and Software.” U.S. capital investment in networks of course began to escalate long ago – well before the postwar period favored by most conceptions of the information society, and well before the arrival of microelectronics. Private line telegraphs – lines entirely dedicated to traffic sent and received by a single business user, which leased them from a carrier on a monthly basis – saw widening use, especially by large banks, meat packers, and by the Standard Oil Company, between the 1880s and the 1910s. So-called “industrial radio services” thereupon proceeded to apply new wireless technology to the operations of railroads, power transmission systems, department store chains, airplane operating companies and newspapers. By 1947, for example, U.S. oil companies, had built 500 radio stations and obtained licenses to 49 radio frequencies in their search for oil deposits; they began to use microwave radio in order to send data produced by their new offshore drilling rigs to geologists and engineers located at their headquarters by the 1950s. The political scientist Murray Edelman and the economist Dallas Smythe sought to place these neglected network services on the academic agenda during the 1950s.
Capital investment in information processing equipment and software, however, accelerated sharply after the recession of the early 1970s. Expenditures on computing and accounting equipment, office machines, communication equipment, and instruments soon became the largest single category of capital investment in equipment – and a key driver of economic growth in their own right. Data carriage took several forms: by adding specialized equipment the national voice telecommunications infrastructure could be adapted to enable limited data transfer; and big organizational users also could lease dedicated private circuits and contract for commercial packet switched service. Data networking was fractured, however, as companies and even individual corporate departments became locked in by competing vendors’ proprietary products. With the growth of the Internet after the mid-1980s, this fragmentation diminished somewhat, and businesses again increased their outlays. James Cortada cites an internal IBM estimate that ICT investment escalated from 38 to 55 percent of all equipment spending between 1990 and 2001.
Sectoral variation was, and remains, considerable. Forestry, fishing and agricultural services account for a small portion of the 2013 U.S. total ($153 million in 2013). Manufacturing claims a much larger share ($37 billion). Professional, scientific and technical services also are very considerable ($30 billion in 2013). The second-top category is finance and insurance ($60 billion). The largest spender is the information industry itself, inclusive of everything from publishing to computer services: its collective outlay has spiraled to $86 billion.
Digital networks did not free capitalism from its crisis tendencies, but became embedded in them: this is my third point.
By the early 2000s, financial intermediaries had been spearheading the development of digital systems and services for decades. The largest U.S. financial companies – such as JP Morgan Chase – spent billions of dollars each year on ICTs, and boasted IT and software staffs numbering in the thousands. This titanic build-up of networked finance occurred as banks pushed debt on every institution and packaged it in a staggering variety of instruments. Banks institutionalized fee-based products, own-account trades, and off-the-books investment vehicles, even as they also continually increased their own leverage – and, with it, risk. This opaque, complex, and rickety system crashed, when some U.S. residential mortgage holders ceased to make payments. Leverage – debt – was the fuel that stoked this fire, and networked finance had spread debt literally everywhere. In the aftermath of the crisis, menacingly, networked finance and the volatility that accompanies it have carried forward.
That networks were bearers of crisis again became apparent as the crisis cascaded into the wider economy. Manufacturers had deployed digital networks to automate and to outsource production tasks; and to disperse their operations in order to improve market access and/or to cheapen the cost of labor. This great buildup of manufacturing networks provided no guarantee of corporate profitability. GM spent tens of billions of dollars on ICTs between 1970 and 2007, but after the crisis erupted the biggest U.S. automaker still had to be rescued by the U.S. Government. The underlying problem was that manufacturers’ networks had been folded into another sweeping crisis tendency as international competition engendered overcapacity – that is, more plants and factories than were needed to supply the global market.
This reorganization of manufacturing production contributed to what David Harvey calls “wage repression” throughout working-class communities in the wealthy countries, as automakers responded by cutting high-wage union jobs. Reciprocal hits to demand were predictable. The average age of vehicles on the road in the United States hit an all-time high this year: 11.5 years. This has been attributed to quality improvements; but for many consumers, it seems certain that hard times were the decisive factor: by 2015 both new and used car owners were holding onto their vehicles for more than two full years beyond what had been the average in 2006.
And again, the underlying problem of overcapacity has not abated. The big carmakers stampeded into China, and have come to depend on Chinese buyers for around one-third of their global sales. As China’s economy has slowed during the year just past, however, they have now also turned to reduce capacity at their dozens of joint-venture Chinese plants.
A fourth and final point: For decades – again, beginning well before the Internet’s take-up – political leaders recognized that the U.S. information industry was a spectacular pole of growth within the capitalist world economy. Heads of state made a point of paying homage to leading U.S. tech executives. Notably, China’s Deng Xiaoping in 1979, Jiang Zemin in 1993, and Hu Jintao in 2006 each made high-profile visits to U.S. tech companies. France’s Jacques Chirac led a presidential entourage to Silicon Valley in 1996 and, nearly twenty years on, Brazil’s Dilma Rousseff and India’s Narendra Modi followed suit. How has the U.S. worked its digital magic? Can it be replicated? Failing that, as the McKinsey consultancy puts it, “How should you tap into Silicon Valley?” Because it is patent that these questions command the attention of governments, I turn next to consider digital capitalism’s political dimension.