Atoms and bits

Theorists of the fourth industrial revolution are fond of making dubious comparisons with the first industrial revolution. They also like to claim that new technologies (such as the sharing economy, artificial intelligence, deep learning, 3D printing and so on) operate primarily in the informational sphere, rather than the material. Characterizing this technological revolution as geographically neutral minimizes any implications of violence — in stark contrast to the industrial revolution, which provoked fierce competition over raw materials, energy sources and global trade routes.

Certainly the prospect of the sharing economy giving rise to a world war is unlikely, but that’s not to say that it doesn’t involve any violence or repression, for the notion of a clear separation between information and matter is a myth. Uber, for example, could never have gained a foothold in the market were smartphones not already widely available. Smartphones are manufactured on a vast scale and at relatively low costs, preserving a substantial profit margin for companies like Apple. This model relies on enormous Chinese assembly plants where sweatshop-like conditions are tantamount to waged slavery, in some cases with laborers imprisoned at their workstations. Apple has faced repeated scandals over working conditions, most memorably following a spate of suicides at a factory assembling iPhones in 2010. Smartphone manufacture also requires precious metals, which are extracted in primitive mines in Central Africa where child labor is rife, health and environmental conditions are dire, and profits fuel vicious conflicts between militias and armed gangs.

Even in the United States, violence is not absent from the equation; it is simply better concealed. With the advancement of its economy, primary manufacture has largely given way to a focus on the production and consumption of software, design and services. Although unemployment rates have fallen, many attribute the rise of the far right in the US, as embodied by Donald Trump, Ted Cruz and their like, to the vulnerable position of the working class in the new “flexible” labor market. Political, economic and media elites have closed ranks while labor rights and protections have been systematically dismantled, setting the stage for mass mobilizations around an aggressive discourse calling for a return to an idealized past.

More pernicious than flawed comparisons between the first industrial revolution and the technological revolution, however, is the misconception that the benefits provided by new technologies are somehow divorced from the question of resource distribution. The accumulation of capital has never been a spontaneous outcome of the workings of technical innovation and the market; it is determined first and foremost by state-level policymaking. Brazil, for example, has channeled the profits of exporting raw materials into social institutions and services such as education and health, and the Democratic Republic of the Congo has invested in militias and weapons. China has created infrastructure and scientific and engineering expertise from the profits of manufacture for export, while Bangladesh has only amassed the worn-out corpses of impoverished factory workers.

In fact, by comparison with the first industrial revolution, the intangible nature of the technological revolution most likely means that less wealth is created overall, but that accumulation is more concentrated. The industrial revolution transformed the process of production itself, and the nature of the goods produced and changes in the labor market came as a result of that. But the sharing economy offers no new means of producing goods or services. The scope of its transformative potential is the labor market itself — not what the labor does.

Uber, for example, has not altered the technical process of transportation. Uber’s answer to the question of, say, “How will I get from home to work?” is the same as that offered by a taxi, i.e. hiring a car and a driver for a single journey at a price appropriate to the time and distance involved. What has changed is the mechanism by which a contract is struck between driver and passenger, the distribution of profit and the ownership structure of the service.

The sharing economy model depends fundamentally on the fact that the cost to consumers of accessing the service is minute (i.e., the cost of downloading an app and creating an account), and the cost to companies of entering new markets is similarly minimal. Ultimately, then, it is highly unlikely that any accumulation of capital, assets, infrastructure, expertise, knowledge or services will ever take place.

I presume Uber’s Egypt office is small, employing a small administrative team whose jobs entail no skill acquisition. The company neither possesses nor develops any assets or equipment, of course, and will not invest in infrastructure. The driver provides the car, while the state provides the roads and subsidized fuel. And when the company makes profits in Egyptian pounds, it will extract them in dollars. In short, the only accumulation is that taking place in California. The profits are there; the investments and high-level employment opportunities (management, design, programming, planning, etc) are there. And given that Uber calls itself a software company, rather than a transportation service, it is not required to pay significant taxes in either place. Most major Silicon Valley companies register their headquarters in tax havens, and claim that they make most of their profits in those headquarters so as to benefit from international double taxation agreements. The US has such difficulty recovering taxes from its richest corporations, like Google, Apple and Facebook, that former President Barack Obama became personally involved in negotiations with these companies and still came away with little more than crumbs.

Egypt’s own relationship with the industrial revolution is a sorry tale, despite the country’s early integration into global markets, the dollar crisis being a case in point. Egypt’s track record in collecting taxes is no better, as the state’s repeated failure to collect income tax from its own employees — even judges — goes to show.

There is no reason to presume we shall fare any better as we confront the technological revolution. It’s certainly clear that Uber offers a better service to consumers, but to believe the hype of the sharing economy and its apps is sheer fantasy. It also assumes a huge measure of good intentions, and as our inspired president once said, it takes more than good intentions to build a state.

Alaa Abd El Fattah