The NYTimes has just published a piece in which Teresa Tritch recalls an essay Andy Grove published in Bloomberg Businessweek in 2010: "According to Mr. Grove, Silicon Valley was squandering its competitive edge in innovation by failing to propel strong job growth in the United States." That critique reminded me of a piece I'd published here too and a half years ago, but which I wrote back in 1997. I'm bumping that to the top of the queue, along with the short preface I gave it in 2013.
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Over at Crooked Timber they’re having a discussion of the software SNAFU that’s occurred in the rollout of Obamacare. As anyone in the software biz knows, that’s just how it is with large software projects. The thread title suggests something more interesting and far more sinister: Neo-Liberalism as Feudalism.
That title reminded me of the work of Abbe Mowshowitz, whom I met when I was on the faculty at The Renssalaer Polytechnic Institute back in the previous century. He was interested in how the deployment of computer technology was creating virtual organizations that, he believed, would lead to a virtual feudalism:
Absent a sense of loyalty to persons or places, virtual organizations distance themselves—both geographically and psychologically—from the regions and countries in which they operate. This process is undermining the nation-state, which cannot continue indefinitely to control virtual organizations. A new feudal system is in the making, in which power and authority are vested in private hands but which is based on globally distributed resources rather than on possession of land. The evolution of this new political economy will determine how we do business in the future.
Here’s an essay I ghosted in Abbe’s name back in '97 but which, alas, never got published. The ideas are his, the prose mine.
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The New World Order of Virtual Feudalism
One might imagine that, in 2020 a person could be brought to trial on criminal charges in a court convened by a private corporation under provisions granted by the United Nations. What is perhaps more difficult to imagine is a world in which such an institutional arrangement is the solution to a pressing problem, and that a wide range of individual and corporate actors would agree to such an arrangement. At the moment we live in a world where criminal prosecution is primarily a power of nation-state authorities, with the United Nations being an organization created by states and having no direct power in the private sector. This imaginary trial thus violates fundamental distinctions governing our political life.
Yet I believe that such arrangements are not only possible, they are inevitable. New actors -- most noticeably, large multinational corporations -- have come to dominate the world's advanced economies. Increasingly these organizations are operating in a seamless global marketplace. Ironically, as the marketplace becomes global, the great nation states and empires are fragmenting into smaller and smaller units. Large companies have more wealth and power than small states. These developments conjure up visions of the brave old world of medieval feudalism, in which the role of the nobility will be played by corporate executives assisted by employee-vassals who rule over legions of latter day serfs.
Day by day the emerging new world order looks like a virtual feudalism. In thus talking of feudalism I am not, however, asserting that our immediate future holds a regression to the distant past, though there may well be regressive elements. Rather, I think that we are increasingly living in a world which exhibits patterns of social organization and action characteristic of feudal societies, such as fragmented authority, private security arrangements, and a highly permeable boundary between private and public activity. This feudalism is "virtual" because these patterns reflect non-territorial organizational arrangements made possible by information technology rather than being rooted in the customs of land ownership and tenancy which existed in medieval Europe.
To get a feel for this future let us consider the life of three different individuals who are born in the current world and move into middle-age as virtual feudalism unfolds.
Molly McKenna, AD 2020
Molly McKenna turned forty in 2020. She and her family were living tolerably well and her career held prospects for the future. But she had lost any sense that she would ever feel the level of security she had felt as a child or as a young adult. State-provided support systems were meager and her private means were currently strained from having to help pay medical expenses for her parents. It would take years to rebuild a financial reserve. This is not how life was supposed to be.
Molly had been born in 1980 in Pittsburgh, Pennsylvania. Her father was a purchasing manager with USX and her mother sold real estate part-time. The combined income and benefits from her parents' employment had sustained a comfortable life style for the family. After graduating from Rensselaer Polytechnic Institute in 2001 Molly took a job in Boston with the Children's Television Workshop. After three years there she moved to Orlando where she worked on virtual reality systems for Disney World at twice the salary.
Life was good. A few years later, 2008, she married and, a year later, was pregnant. Her husband Gregory had a good salary as a marketing manager for Disney, so she decided to quit her job and become a full-time mother. By the time Daniel, her son, was three he was spending half the day at a pre-kindergarten program and Molly decided to free-lance. She fixed up her Internet site, contacted some agents, and within two months was working on a data-visualization project with the Beijing Stock Exchange and a telesurgury project with a medical school in Buenos Aires. The work was exciting, well-paid, Danny was happy, Greg was advancing steadily in the Disney organization.
Things went along fine until 2017 or so. By then Danny was eight and in the third grade at a private elementary school. Greg had been spending half his time on the West Coast. Though the travel was burdensome, he felt that he had no choice, not if he wanted to keep Disney happy with him. Molly's free-lancing was exciting, but exhausting. While she did much of her work at home, communicating via email and video conference, she still had to go to one or two face-to-face meetings a month, often half-way around the world. She was exhausted, her relationship was Greg was strained and Danny was piping his displeasure to all within earshot.
Still, life continued. Molly signed-up for an online MBA program in international marketing offered jointly by Paris Graduate School of Management and Catholic University in Santiago. Things began to pick up, and Molly was optimistic once more. She and Greg had another child, he left Disney, and they moved to Mexico City in 2019 to form a consulting collective specializing in marketing media in the Americas.
Then she learned from her father that USX had gutted the pension-plan in an attempt to buy back enough stock to prevent a take-over. His pension was now worthless as was the company health-insurance. Her mother contracted cancer and was no longer able to work her real-estate business. Medical needs were now pushing the limits of what their HMO would cover and their little dollop of private insurance wouldn't cover much. Her father had some income from investments of his own but that just barely covered basic living. Social Security payments provided some income but not very much. Though the system didn't go broke, the fix depended on scaling back benefits drastically in the near-term while moving toward complete privatization in the long-term. Social Security now provided them just enough to cover phone and utility bills and a night at the opera once a year. Medicare was also scaled-back and, inadequate though their income was, Molly's parents were above the income limits. They would have to sell the house and move into a small apartment in order to pay the medical bills.
But if her father should become ill...
And that is what happened in 2020 when he came down with a mysterious viral infection. The medical problems were eventually resolved, but the out-of-pocket expenses precipitated a severe reduction in her parents' standard of living. Since she had helped them pay the medical bills, Molly's own own savings were severely depleted. She and Greg would not be able to make the down-payment on the condo they wanted, one with a bedroom for each child and a home office space. Nor did she have the resources needed to establish an office in Lima; she would have to make other arrangements if she wanted to become a major contractor to Panpacific Cybernetics. Life was no longer about advancing; it was about making do.
Commentary: The Corporate Lord and the Impoverished State
The two most saleint features of Molly's story are her job mobility and the failure of state-sponsored programs to provide adequate support for her parents' health care and retirement. The net result is that while Molly appears to be one of the well-educated high-tech "haves," that status doesn't necessarily ensure the security it should. The world in which she lives is one of comparatively great wealth, but the state is impoverished, leaving individuals alone to negotiate their relationships with various corporate bodies. That impoverishment is connected to Molly's job mobility through high technology and through the existence of the multinational corporation.
High technology promotes job mobility in ways both geographical and functional. Geographical mobility depends on modern transport methods. The functional variety is more closely linked with information technology. Ordinary telephone communication, video-conferencing, proprietary computer networks, and quasi-public utilities like the Internet make it possible for people to interact with each other over great distances. You don't have to be in the same building with people whose work is intimately intertwined with yours.
Beyond this, as more and more work tasks are taken-over by automated systems, the general skill-requirements rise and the resulting mix of tasks is richer with a variety of short and long-term projects. Project teams are not permanent; people are assigned to them only for the duration of the project. Project teams might consist entirely of people from one organization, or they might include people from two or more organizations. In the extreme you have the kind of organization which exists in the film industry where the products, movies, are created by teams consisting of workers from many different organizations of various sizes. This makes for functional mobility where individual workers move from one project to another and where the projects may well be organized under different corporate umbrellas.
This same technology gives the multinational corporation extraordinary competitive advantages. Corporations are multinational in various ways. Coca Cola and McDonalds serve fast-food and drink around the world, but the formula and the offerings vary from country to country as local circumstances dictate. Major automobile manufacturers such as Ford, Toyota, and Mercedes-Benz not only sell cars but they also buy parts and assemble them on two or more continents. A smaller company, such as Nike, develops its products and handles the marketing from its home base in the United States, but all of its manufacturing is contracted out to foreign, mostly Asian, firms.
A major consequence of multinational organization is that corporate interests no-longer coincide with the interests of a particular nation-state. The alignment invoked in the infamous assertion from the 1950s that "what's good for General Motors is good for the nation" no longer obtains. General Motors' good needs to be counted up in many nations and, for example, what's good for a General Motors plant in Mexico may not be good for a General Motors workers living in the United States, who may in fact lose their jobs to that Mexican plant.
In the world of virtual feudalism more and more economic activity falls outside the jurisdiction of nation states. Consequently, even in the wealthy industrialized countries of the developed world governments can no longer collect adequate revenue. Citizens are unwilling to pay higher taxes and multinational corporations are free to lower their tax bills by playing countries off against one another. Hence we face the irony of a chronic shortage of funds for health, education, and welfare programs in the context of increasing collective wealth.
One measure being taken by governments to compensate for the impoverishment of the state is the privatization of public services. Already, for example, many local, state and federal prisons in the United States are run by private companies such as Correctional Services Corporation; and inmates in various prisons are currently employed in private enterprises. Corporations use private security forces to maintain order, and to prevent theft, vandalism, and sabotage in their factories and offices. The provision of personal and training programs for private security forces is thus becoming big business.
Education is another arena of privatization. Many public primary and secondary schools now depend on corporate sponsorship for educational materials, equipment, and some funds. Beyond this, there is considerable interest in having such schools completely privatized. The most highly publicized ventures, such as Chris Whittle's Edison Project and Baltimore's trial program with nine schools, have not been the successes their sponsors have hoped for, but the interest remains. Certainly various voucher proposals are advanced with private sector opportunities in mind.
As a final example, consider current proposals for coping with the projected insolvency of Social Security and Medicare -- systems which so deeply failed in our first scenario. A government-mandated requirement that part of one's paycheck go into a privately-operated retirement fund may or may not be a sensible way to deal with social security. But it crosses the boundary between public and private in a serious way.
Whatever the merit of any of these, or similar, practices and proposals, the point is that they are proliferating. For better or worse, there will be more of them in the future. The boundary between public and private organizations and institutions is dissolving. We are moving into a world of institutions of various sizes having overlapping and even conflicting jurisdictions and mandates, a world reminiscent of the feudal world where individuals negotiated their way through duties and powers emanating from a diffuse network of duchies, kingdoms, churches, guilds, towns, manors, and empires.
In such a world the individual acts like a knight errant negotiating arrangements with various lords, whether individual or corporate, with loyalties diffused through a shifting network of contracts and contacts. Those without negotiable skills will become impoverished serfs, or worse. Just how we will find security and community in such a world is an open question.
Robert Wong, AD 2020
On January 31, 2020 C.E., Panpacific Cybernetics, Inc. became one of 15 multinational corporations admitted to membership in the United Nations. It was a marriage of convenience, albeit a rather strange one. As always, the UN was strapped for cash and officials couldn't help but notice that more than a few multinational corporations had revenues exceeding the gross domestic product of the UN's smaller member nations. As for the multinationals, they were concerned about security. Widespread terrorism -- including the holding executives for ransom and a variety of unauthorized electronic break-ins -- was bad for business and there were a host of regulatory and treaty issues they wanted to influence in whatever way they could. They were willing to pay stiff UN dues in return for the ability to operate directly in this political arena.
This deal was guided by Robert Wong, who had been born in Hong Kong in 1980. His father was a senior member of the family trading business and his mother was just that, a mother and wife. Prompted by the up-coming transfer of government to mainland China, the family decided to establish legal headquarters in Singapore in 1994. Wong's father moved there for that purpose and a year later moved to Silicon Valley to establish a beachhead in North America. He took his family with him and they became U.S. citizens.
Robert finished high school in San Jose and went on to undergraduate work in economics at Berkeley, spending summers working in the family business, brokering motherboards and hard drives for small and medium-sized PC clone manufacturers, a business which built on family connections in Southeast Asia. Robert went on to get a law degree at Stanford and, upon graduation, he decided that, rather than going to work in the family business, he wanted to strike out on his own. So he took a job as an economic development official for the City of Los Angeles, a job that would allow him to use his knowledge of business while establishing a professional identity outside his family.
He proved adept at getting businesses to invest in poverty-stricken economic development zones, but the poverty nonetheless outstripped the investment. He became interested in the intersection of immigration issues and high-tech employment and decided to pursue that interest at the national level. In 2010 he was elected to the United States Congress.
There had been steady pressure over two decades to impose strict immigration quotas. At the same time high-tech business lobbied hard against such restrictions, for they had many foreign-born workers who came to the United States for their undergraduate and, often enough, graduate education, and remained to work. They lost the battle in 2001 and immigration was tightened. By the end of the decade US high-tech businesses were feeling the pinch and were lobbying hard to have the immigration restrictions lifted. Wong was influential in working out legislation in which workers to be hired in certain capacities were exempt from restrictions provided the hiring company paid an annual "head-tax" equal to .9% of the employee's gross compensation. This tax went into a fund which was distributed to the states and was intended to train US workers for high-tech jobs.
Meanwhile Wong devoted more time to business and began working his family connections in Asia. He created a holding company whose assets consisted of companies in mainland China, Indonesia, and in India which provided programming and data processing services for clients in the European Community and in the United States. The businesses went well and Robert Wong began moving up in the Forbes lists.
However, this put him, and others as well, at odds with rank-and-file programmers in the US, who were distressed at seeing much of their work out-sourced to overseas programmers. These programmers began organizing against such outsourcing and focused much of their energy on Wong, whose visibility as a politician made him an obvious and vulnerable target. Much of this activity was mediated by the Internet, which many groups had been using to advance their concerns against corporations and governments. In consequence Wong was voted out of office in 2014.
He threw himself into his business, which flourished. It depended on the fact that Asian schools were producing more computer programmers than could be absorbed by Asian businesses. Actually it was a little more complicated than that, since Asian businesses were certainly expanding rapidly and employing computers to do so. But European and North American businesses and governments could pay more for their services than the locals could. Consequently programming shops in mainland China, India, and, increasingly Indonesia, were taking on the bulk of the industrialized world's routine programming and data-processing tasks. Wong's holding company emerged as the largest single player in this market.
As 2020 approached, it became clear to Wong that, just as nationalist sentiment among job-threatened programmers in the United States cost him his seat in Congress, so similar sentiments among services-starved businesses and governments in Asia were now beginning to threaten his business. Asian businesses needed the talents of Asian programmers and engineers. Business leaders and politicians were variously calling either for an outright ban on selling informatic services to the former colonial powers, strict rationing of person-hours allotted to such clients, or protective tariffs on their wages. And, of course, they used the same Internet-based organizing tactics which had cost him his Congressional seat.
Beyond that, terrorists were becoming a global meance, breaking into networks and interfering with cash transfers, stealing proprietary information, faking transactions and information, and crashing systems. Because the network made physical location irrelevant -- a terrorist could easily operate with a small computer while moving from country to country -- the terrorists were difficult to track down and, when caught, prosecution often became enmeshed in a daunting maze of jurisdictional disputes.
Wong decided that membership in the United Nations would be a plausible starting point for dealing with these issues. To that end he began meeting with colleagues and acquaintances from various public and private arenas. In 2020 those meeting bore fruit. Now the real work could begin.
Commentary: New Loyalties and Citizen Action
While Molly McKenna is highly skilled, Robert Wong is that and (so the story goes) wealthy and powerful as well. As he faces the world of 2020 he doesn't have the financial concerns that McKenna does. To be sure, his business is under considerable pressure but he is a man of foresight and commands considerable wealth. His chances of making suitable business decisions are good. His story is not so much about his ability to negotiate the terms of his own life and the lives of those he cares for, but about the forces channeling the uses of power.
Immigration is a critical issue. On the one hand, people want to move from areas of poor living and diminished prospects to areas with better jobs and a higher standard of living, from Mexico and Central America to the United States, from Eastern Europe and the former republics of the Soviet Union to Germany and Western Europe, and from Africa to the Iberian Peninsula and France. On the other hand, while citizens of the richer nations may oppose such immigration because it threatens their jobs and standard of living, the corporations for which they work often see things differently, as is currently the case with high tech corporations in the United States, which have lobbied against immigration quotas.
Immigration will remain a volatile issue and, to the extent that it continues in a substantial way, will continue to put pressure on nationalist dreams of cultural homogeneity. While the culturally diverse state is hardly a novelty -- consider the various cultures which lived under the aegis of the Roman Empire -- it does put pressure on that very same nation-state which is suffering from waning revenues. It seems likely that, as the state's power wanes, more and more people will, like Robert Wong, find other institutions in which to invest their loyalty.
Beyond the pressures of identity politics, the state's power is also under pressure from a variety of citizen's groups, such as the ones which voted Wong out of office. Such groups may also be the major source of countervailing force against the multinational corporations. Thus, in the wake of his successful effort to pressure Texaco into settling a racial-discrimination suit, Jesse Jackson has established an office on Wall Street to continue his work with corporate America. Similarly, the threat of boycotts by consumer groups in the United States and Europe have pressured PepsiCo, Heineken Brewery, and several other companies to cease operations in Burma because of that country's repressive regime.
The Internet will surely play an expanding role in such activity, for it provides a cheap way of disseminating information and of communicating with the powers-that-be. Even before the explosive growth in the Internet, citizen protest forced the Lotus Development Corporation to abandon plans to market a CD-ROM database containing information on 120 million households; much of this pressure was exerted by people sending email directly to Lotus. Much to the consternation of many corporate attorneys, Stanford University has recently announced the Stanford University Securities Class Action Clearinghouse, a web site which will track litigation and make court documents available to anyone with a web-browser. One doesn't have to work the web very industriously to find hundreds, if not thousands, of groups concerned about the use and abuse of corporate power.
Thus the technology which makes multinationals so powerful and elusive affords the same potential power to the citizenry. Corporations and governments care about their images and are vulnerable to public pressure. Whether or not people will be able effectively to exploit this vulnerability remains to be seen. Yet, to the extent the citizens organize, that organization only increases the diffusion of power and authority in the emerging virtual feudalism. Perhaps the major long-term question is whether we'll see an international and cosmopolitan network of highly-educated haves pitted against impoverished and poorly-educated populations of have-nots. Will anyone work the network on their behalf effectively enough so that they can work their way into the twenty-first century?
Jarvis Roosevelt, AD 2020
Jarvis Roosevelt was born in 1990 to Marlene Kryjak and Fitzhugh Roosevelt, distant cousin umpteen times removed from Franklin Delano himself. Jarvis had little interest in science and technology and just barely more than a little interest in business, politics and the law. What really interested him was rhythm, dancing and playing percussion. As far as he was concerned, computers were to be measured by their capacity for doing virtual reality simulations of dance patterns and their capacity for generating patterns of percussive sound.
His parents, who were enthusiastic vessels of those traditional values which placed rhythm way down the scale from reading, writing, 'rithmatic and (self) reliance, were not at all pleased with this. They were just barely able to maintain a middle-class life style on Fitzhugh's income as a distressingly peripatetic retail manager and Marlene's income from various part-time jobs. They feared that if Jarvis insisted on being a musician/choreographer he would be lost to the middle-class forever.
There was, alas, little they could do. When he graduated from an El Paso high school in 2007, Jarvis set out to become a full-time musician. He did free-lance computer-music work with multi-media developers and played in several bands working the local live performance circuit. As he devoted more and more time to live performance, his multi-media computer music skills became weaker and in five years they were obsolete. Early in the 2010's he slipped from the middle-class and took his wife and children with him. They entered a chaotic limbo, their lives stitched together with income obtained through truncated welfare/workfare plans, petty crime, black-market organ-donor and DNA reengineering "farms," a baby broker, and domestic service to those living in gated communities. Needless to say, the family did not survive the stress.
By 2115 Jarvis had hit bottom—his family and one kidney were gone—but somehow managed to hook-up with a loosely-organized network of cybernetic agitators. They were initially attracted to his music performance skills and asked him to lead them in communal music-making, which he was happy to do. In return they helped him restore his computer skills and gave him a reason to develop and use them, educating him about social protest in the nineteenth and twentieth centuries. He became a virtuoso at manipulating the new media and worked hard and well at infecting the "infosphere" with stories about life in limbo.
While the informatic haves certainly owned and controlled the infosphere, they did not dominate society so thoroughly that they could keep all the high-quality genes in their sphere. The have-nots kept producing people of talent and somehow at least some of them managed to learn the technology well enough to use it against the haves. Some folks were purely disruptive, disturbing commerce and communications for spite and, where possible, power and profit. Jarvis and his comrades were a bit more principled, concentrating on showing the haves just what life was like on the bottom, making it more difficult for them to believe their myths of prosperity and equity for all and spinning endless stores of folks falling from high-tech prosperity into destitution through no discernible fault of their own. The haves, of course, did not appreciate this public-spirited service.
By 2020 Jarvis had a price on his head, not as a result of the stealing or drug dealing he had done, but as a result of his effectiveness in penetrating Virtual Reality Dream Zones, a network-based entertainment offering from Panpacific Cybernetics -- the company's first, and a smash hit around the world. He used brilliant color and infectious rhythms to convey unpleasant truths deep into the minds of people who just wanted respite from work. His work had the political potency which 1990's leftists tried to read into hip-hop. In June Jarvis was apprehended in the Cape Verde Islands and turned over to Panpacific for trial in the company's internal court, a procedure which had just been sanctioned by the United Nations.
Commentary: Whither Liberty and Justice for All?
While the story of Jarvis Roosevelt is not a pleasant one, at least Jarvis has managed to fight his way to a meaningful mode of life, struggling to redress the gap between the have-nots and the haves. If that gap continues to widen, people will certainly continue to work against it and the oppositional activity which takes place outside legally-approved channels may well increase -- one thinks of the violence which labor organizations felt forced to employ in the nineteenth and twnetieth centuries -- even as the splintering of authority blurs the sphere of legality. However much I believe there is a positive long-term prospect, I do not think it will be realized without first visiting a very nasty world. And I do not think the nastiness will be able thoroughly to expunge opposition.
Perhaps the deepest problem for generations to come will be to work out a system for sharing wealth that is not based on participation in production. It seems likely that the world's collective wealth will, with possible interruptions, continue to increase, but opportunities to work will decline. For computer-communications and related technologies will surely continue to progress and to absorb more and more work tasks, extending even more deeply into both white-collar and blue-collar worlds than they do today. Emerging virtual organizations may well plunder the world's wealth until their power is checked, perhaps by networks of organized consumers with or without the more subversive activities of folks like our imaginary Jarvis Roosevelt.
In the long run it is possible that wealth will be distributed so as to guarantee that all will have food, shelter, health care, and education. But getting there from here will require a moral revolution, a reassessment of human life and purpose. That revolution seems far less certain than the technological revolution which is has become a staple of the evening TV news.
Still, there are reasons to think that such a revolution is possible. For one thing, the technologies of automation demand a depth of rationalization beyond anything which nineteenth century apologists of bureaucracy could imagine. The reengineering which is downsizing corporations and thus eliminating jobs depends on analyzing corporate processes and decision-making much more deeply than has been done in the past. Some of the knowledge thus gained is embodied in computer systems while other knowledge is used to redesign processes and the jobs which implement them. The resulting organization is one in which more and more decisions are governed by explicit and public criteria.
The deeper you wish to drive computer technology into the white collar realm the more you must explicate and rationalize job tasks. As this process advances it will become increasingly difficult to shade decisions in the various irrational ways which humans do so well. In particular, it will become more and more difficult to distribute preferences among, for example, suppliers according to habit and prejudice. This may well work against the tribalism which is still so evident in even the most sophisticated of circles in the industrial world -- remember Texaco. Beyond that, the increase of communication and interaction across cultural borders may well foster a long-term reduction of ethnic enmity. And the proliferation of new kinds of organization and government may afford new ways of structuring and directing that enmity, perhaps means effective enough to transform enmity into mere difference.
Beyond this we need to consider the possibility that the style of thinking necessary to function within the well-remunerated sector of the world may make it more difficult casually to ignore the plight of the less-fortunate. Such thinking may be loosely termed "systems thinking" and it fosters the ability to identify, analyze, and modify patterns of interaction in complex arrangements of "atomic" processes. Now, one may well develop systems thinking in order to analyze manufacturing processes, but once the skill has been developed in that arena, it may be awfully tempting to apply the skill in thinking about political and economic issues, even if one thinks about those issues, not as an expert, but as a mere citizen. Is it too much to hope that, as such thinking becomes more and more distributed throughout the educated population, the haves will experience continuous "conceptual pressure" against the division between themselves and the have-nots?
* * * * *Abbe's blog.