he outbreak of the COVID-19 pandemic suddenly made every society fearful of face-to-face contact. Restaurants, cafes, concert halls, and other cultural amenities essential for a flourishing urban civilization were closed, in some countries for over a year, to protect people against the risk of infection and prevent health systems from being overwhelmed. Life retreated to the family cell, and the burden of stress and frustration grew.
During the lockdowns that many governments imposed, firms took steps to allow people to work online easily, purchase goods without having to enter a brick-and-mortar store, and entertain themselves without venturing outside. The big winners were companies like Amazon, Apple, and Netflix, whose market value has soared during the crisis.
As it happens, such so-called digital capitalism hinges precisely on reducing physical interactions and dispensing with the need for face-to-face meetings. COVID-19 has rendered many activities virtual; for example, health-care consultations are now often conducted remotely. The pandemic has thus allowed the dominant players in digital industries to conduct a full-scale experiment regarding the virtual world’s assimilation of the physical one.
To understand why the digital economy goes hand in hand with the need to protect oneself from face-to-face interaction, it helps to read (or re-read) the French economist Jean Fourastié’s seminal 1948 book The Great Hope of the Twentieth Century. Fourastié offered an optimistic vision of the world to come: after agrarian society, which cultivated the soil, and industrial society, which worked with matter, human beings in the service society would finally cultivate themselves. Education, health, and leisure would be central to the new world.
“The civilization of the tertiary sector will be brilliant; half or three-quarters of the population will enjoy the advantages of higher education,” Fourastié wrote. “Within a few generations, initiative even in low-skill work, and the diversity of the means of transportation and of leisure activities, will favor the individualist tendencies of human beings.” Therefore, he concluded,
“[T]he time is coming when history will have advanced far enough that human beings can legitimately endeavor to elaborate the philosophy of the new age, and work in a less oppressive darkness toward a dramatic birth. In liberating humanity from the labor that inanimate matter can execute on its behalf, the machine must lead us to jobs that, of all created beings, only human beings can perform: those of intellectual culture and moral improvement.”
The idea of a transition to a “humanized” society prompted many commentaries – Léon Blum, who in the 1930s served as France’s first socialist prime minister, wrote an enthusiastic review of the book when it was published – but all identified a central problem: it anticipated a world without economic growth. Fourastié himself had no doubt that the service society, by no longer being subject to the invasion of machines, would make growth disappear. If the commodity a person sells is the time they spend with others, then growth is by definition limited by the time available.
This gives rise to what economists call “Baumol’s cost disease,” a term coined by William J. Baumol and William G. Bowen in the 1960s. Growth is necessarily kept in check when one has to meet in person, whether to examine patients, teach a class, or perform a play. It is possible, of course, to “work more to earn more,” as former French President Nicolas Sarkozy once urged his fellow citizens to do, but it would never be possible thereby to double one’s earnings every 15 years, as happened in the industrial world of the 1950s and 1960s.
Without digital technology, all service-industry workers lack economies of scale that would allow a single provider to reach an ever-greater number of clients. The concept of economies of scale – whereby a business can increase production while keeping its costs the same or increasing them only a little – is fundamental in economic analysis. It allows a firm to set in motion a virtuous cycle: the larger its customer base grows, the more its business thrives. Otherwise, beyond a certain size, the company is condemned to stagnate.
Achieving the maximum benefit from economies of scale in the service sector requires new technologies that can increase the producers’ impact. Film and television, for example, have allowed actors to perform before ever-larger audiences.
It took a long time, and a great deal of trial and error, to find a solution to the cost-disease problem. But the answer appears to lie in today’s emerging digital society: one has only to convert human beings of flesh and spirit into data sets – bits of information about our health or our desires – so that we may become part of the digital world, where we can be managed by algorithms. To achieve “efficiency,” everyone must become data bits that can be processed by other data bits.
Artificial-intelligence software will be able to treat, advise, and entertain an unlimited number of clients, provided they have been digitized beforehand. When a watch on my wrist analyzes my vital signs, an algorithm can develop a customized solution to my health problems. The prophetic 2013 film Her depicts an AI with the capacity for emotion – and the bewitching voice of the actress Scarlett Johansson – that is in love with several million people at once. Such is the promise announced by Homo digitalis: that of a world emancipated from the limits of the human body.
As Fourastié predicted, human beings are central to the service society, but they must first be digitized in order to satisfy today’s inexhaustible thirst for growth. The great COVID-19 lockdown has made clear that growth once again becomes possible online once people are freed from the imperative of face-to-face encounters.
Obviously, the big question is whether the digital cure will be worse than the disease. Are robots going to replace humans and increase poverty? Will industrial assembly-line work give way to a Taylorism of the mind, via Facebook and Netflix?
Through an extraordinary curvature of historical time, the old questions of the industrial world are resurfacing at the heart of the digital one that is replacing it. Do we therefore have to reprise every stage of the old world – including its episodes of moral bankruptcy, financial crises, and economic insecurity – or can we do better? In 2022, we may start to find out.
Copyright: Project Syndicate, 2021.
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COVID-19 and the Rise of Digital Capitalism
Illustration via Adobe Stock.
January 3, 2022
The pandemic accelerated a shift to digital capitalism, reducing physical interactions and dispensing with the need for face-to-face meetings. The shift puts humans at the center of economic growth as more aspects of our life are digitized, but this comes with its own problems, writes Daniel Cohen.
T
he outbreak of the COVID-19 pandemic suddenly made every society fearful of face-to-face contact. Restaurants, cafes, concert halls, and other cultural amenities essential for a flourishing urban civilization were closed, in some countries for over a year, to protect people against the risk of infection and prevent health systems from being overwhelmed. Life retreated to the family cell, and the burden of stress and frustration grew.
During the lockdowns that many governments imposed, firms took steps to allow people to work online easily, purchase goods without having to enter a brick-and-mortar store, and entertain themselves without venturing outside. The big winners were companies like Amazon, Apple, and Netflix, whose market value has soared during the crisis.
As it happens, such so-called digital capitalism hinges precisely on reducing physical interactions and dispensing with the need for face-to-face meetings. COVID-19 has rendered many activities virtual; for example, health-care consultations are now often conducted remotely. The pandemic has thus allowed the dominant players in digital industries to conduct a full-scale experiment regarding the virtual world’s assimilation of the physical one.
To understand why the digital economy goes hand in hand with the need to protect oneself from face-to-face interaction, it helps to read (or re-read) the French economist Jean Fourastié’s seminal 1948 book The Great Hope of the Twentieth Century. Fourastié offered an optimistic vision of the world to come: after agrarian society, which cultivated the soil, and industrial society, which worked with matter, human beings in the service society would finally cultivate themselves. Education, health, and leisure would be central to the new world.
“The civilization of the tertiary sector will be brilliant; half or three-quarters of the population will enjoy the advantages of higher education,” Fourastié wrote. “Within a few generations, initiative even in low-skill work, and the diversity of the means of transportation and of leisure activities, will favor the individualist tendencies of human beings.” Therefore, he concluded,
“[T]he time is coming when history will have advanced far enough that human beings can legitimately endeavor to elaborate the philosophy of the new age, and work in a less oppressive darkness toward a dramatic birth. In liberating humanity from the labor that inanimate matter can execute on its behalf, the machine must lead us to jobs that, of all created beings, only human beings can perform: those of intellectual culture and moral improvement.”
The idea of a transition to a “humanized” society prompted many commentaries – Léon Blum, who in the 1930s served as France’s first socialist prime minister, wrote an enthusiastic review of the book when it was published – but all identified a central problem: it anticipated a world without economic growth. Fourastié himself had no doubt that the service society, by no longer being subject to the invasion of machines, would make growth disappear. If the commodity a person sells is the time they spend with others, then growth is by definition limited by the time available.
This gives rise to what economists call “Baumol’s cost disease,” a term coined by William J. Baumol and William G. Bowen in the 1960s. Growth is necessarily kept in check when one has to meet in person, whether to examine patients, teach a class, or perform a play. It is possible, of course, to “work more to earn more,” as former French President Nicolas Sarkozy once urged his fellow citizens to do, but it would never be possible thereby to double one’s earnings every 15 years, as happened in the industrial world of the 1950s and 1960s.
Without digital technology, all service-industry workers lack economies of scale that would allow a single provider to reach an ever-greater number of clients. The concept of economies of scale – whereby a business can increase production while keeping its costs the same or increasing them only a little – is fundamental in economic analysis. It allows a firm to set in motion a virtuous cycle: the larger its customer base grows, the more its business thrives. Otherwise, beyond a certain size, the company is condemned to stagnate.
Achieving the maximum benefit from economies of scale in the service sector requires new technologies that can increase the producers’ impact. Film and television, for example, have allowed actors to perform before ever-larger audiences.
It took a long time, and a great deal of trial and error, to find a solution to the cost-disease problem. But the answer appears to lie in today’s emerging digital society: one has only to convert human beings of flesh and spirit into data sets – bits of information about our health or our desires – so that we may become part of the digital world, where we can be managed by algorithms. To achieve “efficiency,” everyone must become data bits that can be processed by other data bits.
Artificial-intelligence software will be able to treat, advise, and entertain an unlimited number of clients, provided they have been digitized beforehand. When a watch on my wrist analyzes my vital signs, an algorithm can develop a customized solution to my health problems. The prophetic 2013 film Her depicts an AI with the capacity for emotion – and the bewitching voice of the actress Scarlett Johansson – that is in love with several million people at once. Such is the promise announced by Homo digitalis: that of a world emancipated from the limits of the human body.
As Fourastié predicted, human beings are central to the service society, but they must first be digitized in order to satisfy today’s inexhaustible thirst for growth. The great COVID-19 lockdown has made clear that growth once again becomes possible online once people are freed from the imperative of face-to-face encounters.
Obviously, the big question is whether the digital cure will be worse than the disease. Are robots going to replace humans and increase poverty? Will industrial assembly-line work give way to a Taylorism of the mind, via Facebook and Netflix?
Through an extraordinary curvature of historical time, the old questions of the industrial world are resurfacing at the heart of the digital one that is replacing it. Do we therefore have to reprise every stage of the old world – including its episodes of moral bankruptcy, financial crises, and economic insecurity – or can we do better? In 2022, we may start to find out.
Copyright: Project Syndicate, 2021.
