The Social System of Production of Digital Capitalism and Industry 4.0

Saturday, June 25, 2016: 9:00 AM-10:30 AM
107 South Hall (South Hall)
Philipp Staab, Hamburg Institute for Social Research, Hamburg, Germany
Oliver Nachtwey, Goethe University Frankfurt, Frankfurt am Main, Germany
In our paper we want to assess some foundations of digital capitalism. For this purpose, we discuss how the material and technical characteristics of digital goods and enterprises shape the structuration of markets, property relations, organizations, and employment regimes. Following a theoretical discussion of the changes induced by the digitalization of the economy we consider – based on our own empirical research – how digitalization affects a highly-coordinated form of capitalism like the German political economy. We argue that digitalization promotes a specific social system of production (Hollingsworth/ Mueller/ Hollingsworth) previously unknown to the German political economy but now challenged by coordinated state-business policy making.

In classic socio-economic theories of capitalism, the categories of property and coordination (state–market) occupy key theoretical positions. Furthermore, most authors assume a specific model of production (technology, organization) as the basis for the development of the particular type of capitalism that they analyze. These core categories of political economy, when applied to the analysis of digital capitalism in comparison to the pre-digitalized world, reveal fundamental changes. In digital capitalism, a new social system of production emerges, in which the technological basis of creating value systematically transforms markets and companies. We analyze the path of transformation towards this new social system of production by focusing on changes in (1) markets, (2) property relations, (3) organizations, and (4) employment regimes

(1)   In our understanding, digital capitalism is a process in which digital technologies, and the economic and ideological shifts in the world of work associated with them, spread and diffuse. The logic of digitalization can best be observed by looking at leading digital companies, such as Google/Alphabet, Amazon, Apple, or Microsoft. The centerpieces of these companies are socio-technical ecosystems that connect goods, services, consumers, and producers in a system of permanent connectivity (the “Internet of Things“, platforms, rating systems, etc.). These socio-technical ecosystems form, on the one hand, the basis for ruptures in established business models and are decisive vehicles for the emergence of new digital markets. On the other hand, they also represent a logic of stabilization in the digital economy, which has replaced its volatility in the 1990s.

(2)   The hype of the so-called “Sharing Economy” must be critically examined. The social system of sharing, which is systematically embedded in many digital business models, is based on changes in the role of property relations. The digitalization of products transforms the role of property as a category with respect to its significance for the production and distribution of products and services: Companies like Uber, Airbnb, or Skype, for example, do not own the means of production that are at the core of their economic models. Classic forms of ownership of the physical means of production are “democratized” in such business models, in the sense that they are now in the hands of employees, clients, and prosumers (e.g. laptops, tablets etc.). Furthermore, the patterns of consumption have become more and more post-ownership: Access to goods and services becomes more important than their ownership. Therefore, music and video-streaming platforms, for example, have become strong innovators and central players in traditional sectors. However, power and control do not disappear with the changing role of property. A functional equivalent of owning the means of production emerges, which ensures that power resources remain for the most part with the companies: The control over communication, rules, ratings, and networks constitutes the specific form of power relations in digital capitalism.

(3)   The main pillars of the debate about the nature of capitalist firms as organizations are the categories markets, hierarchies, and networks. In our view, these categories are crucial for the classification of the digital enterprise. However, there is a significant transformation in the form of the capitalist enterprise. The transformation of property relations facilitates changes in the way companies are organized. Typical digital capitalism companies resemble less and less the vertically integrated corporations of organized modernity. In particular, the kind of enterprise which is sometimes described as a “platform” is the vanguard of digital capitalism. It’s organizational principles resemble those of brokers, in which both clients and employees are linked to the company through loose network couplings, creating a kind of liquid membership.

(4)   Because digital goods are independent of space and time constraints, they tend to facilitate and generate the globalization of processes of both production and consumption. Of particular interest for the analysis of digital capitalism in this context is the expansion of the access to labor through digital tools such as crowdsourcing. The integration of labor forces from all over the world into highly integrated labor processes opens a new chapter in the history of economic globalization.

Throughout history, all known social systems of production have been grounded in the social embeddedness of market processes—especially within the framework of state infrastructure and regulation. The global information space, which emerges through the digitalization of the economy, transcends state regulatory spheres for work, generates new globally competitive markets for products and labor and promotes winner-takes-all constellations, which threaten established business models. In Germany this process has created a vital debate about the future of the highly industrial and export-orientated centerpiece of the national economy. Furthermore, new coordinated state-market co-interventions have emerged to create an “Industry 4.0” as a blueprint for the global digital economy. While Google is building its own car, the German automobile industry, with strong government-support, is starting to create its own socio-technical ecosystems that integrate more and more digital tools into production models. The German model of Industry 4.0 builds on the tradition of incremental innovation, thus challenging the disruptive ideology of Silicon-Valley-style digital capitalism.