This longish item is from a draft of a report that I worked on, on the current state of the economy. The "final" report is available at http://www.gocatgo.com/texts/econ.back.030819.html. - jd

The technology revolution continues, like background noise that sooner or later one stops hearing. Chip by chip, robot by robot, router by router, the revolution marches on. It advances in stages, as new and cheaper devices allow not just new ways of replacing human beings, but also new ways of organizing production.

The technology revolution provides the foundation for the leap from electro-mechanical, industrial production to electronic-based, laborless production. Describing it as such barely hints at the profoundness of this change.

The technology revolution isn't just about robots that can assemble a car, or computers that can add numbers and print invoices. Although the ability to do what people can do, and to do it faster, cheaper and more accurately is a big part of the revolution, it is really just one side of it. The revolution in the communication and transportation system is at least as important. The communication and transportation systems are the connective tissue of the economy, and society.

As computer chips become cheaper and more powerful, the cost of communicating falls. As the chips become smaller and more energy efficient, they become more mobile. Advances in material science and physics open up new communication channels. As the cost of interaction falls, processes tend to separate into more and more discrete pieces. As the cost of connections -- coordinating the computers in the modern factory, communicating market information, loaning money, buying and selling, transporting digitalized goods, tracking containers, profiling the data shadow of consumers -- plummets, new patterns -- and new possibilities -- of economic flow emerge. The process is like taking a block of iron and breaking it into millions of pellets -- it now behaves like a liquid. The nature of the connections between the parts of the economy and society are transformed.

This is the environment within which speculative capital flourishes. Modern speculation grew out of the money markets which emerged at the intersection of multinational production, the breakup of the monolithic gold standard, and computerized digital communication in the early 1970s. Modern speculation is the management of risk in the face of uncertainty that grows out of more and more discrete interactions in the economy. The end of the gold standard means that the relative value of each currency in money terms changes in relation to each other currency. The end of the colonial system means a burst in the number of possible trade connections and market players; the resulting apparent turbulence requires hedging and futures contracts and put and call options and various combinations thereof in more and more exotic financial derivatives to manage some degree of stability so production can proceed. The end to the welfare system and the 30-years-and-out social contract and the social pension system means each individual is left to cast about for security.

Lenin used the metaphor of imperialism-as-chain -- it would be broken at its weakest link. Globalization is a re-working of the old relationships of imperialism. The multiplication of nation states (the U.N. had 51 members when it founded, today it has 191 members) means a multiplication of nodes of economic-decision making. The neo-liberal agenda of breaking down the barriers of the colonial system and closed economies results in more connections. The proper metaphor for globalization is the web, or the network. The properties of modern capitalism that emerge with electronics, the strengths and weaknesses of capitalism in the 21st century can only be understood by understanding the principles of how networks function.

Volatility naturally accompanies electronic-based capitalism. It is one of the emergent behaviors of any system with many actors following the same set of rules and responding to the same information or stimulus. This pattern has been observed in software-based factory-floor trading systems and in stock market swings driven by thousands of day-traders. Networks allow for a degree of stability in an otherwise volatile environment, because risk is distributed across more nodes; multiple interconnections provide redundancy in case of local failure. The local may be sacrificed for the good of global capital. The network allows Russia or Argentina to suffer financial collapse, and not collapse the entire world economy. The effects may ricochet through the financial system, and create disturbances, but not prove fatal.