From GSP 2-2016
A big step forward in the net and the competition over who owns it
Under the title “Industry 4.0,” a turning point has been announced which will not only affect industry, as its name says, but is supposed to substantially change the entire way that production and consumption is carried out in the future. The news consumer learns about this new world mainly in the form of a colorful collection of keywords ranging from “smart factory” to “Internet of Things” to “Big Data,” with the broad term “digitization of all areas of life” standing out among them.
On the one hand, the new digital era is full of promise. This is especially true of work, which in the future will take place in “intelligent factories” where the “physical and virtual worlds” will be linked to form “cyber-physical systems.” Automation will take over more and more activities – especially those that are “physically difficult or boring”; machines will be released from their safeguards and do their work side by side with their human co-workers, increasingly hand in hand. But this is only one side of the “new world” of digitization. These are, after all, “opportunities,” and a modern person knows all too well that these are always accompanied by worrisome “risks.” This applies above all to the world of work. Because if robots take over more and more jobs in largely “humanless factories,” then more and more employees may find themselves out of work. And because the market economy is based on the insanity that work is not the necessary effort that people are happy to see reduced, but the source of income on which the majority of humanity depends, the vision of “deserted factories” is not simply a promise but also a “nightmare” (Labor Minister Nahles). And so the great digital leap forward becomes another case of a “curse vs. blessing” for humanity.
But it’s dumb to discuss this potential loss of jobs and the progressive impoverishment that comes with it as an unintended byproduct or “dark side” of the oncoming wave of automation. After all, the whole point is for entrepreneurs to digitally upgrade their production processes in such a way that they can be handled largely autonomously and automatically. The progress achieved in this way is not so that there will be less and less burdens on workers, but so that the necessary outlay of money for labor power is reduced for the entrepreneurs. In this way, they save on the wage costs that go for the livelihoods of workers who are no longer needed. This is indeed a great advance for the owners of capital who produce all sorts of use-values, but only as a medium for their real product: the surplus of money over their advance. In keeping with the rationality that governs the market economy, this streamlining of labor is called “rationalization” – and it provides companies with the most important means of lowering their prices and thus proving themselves in the competition for market share. The keyword “humanless factory” makes clear how far the entrepreneurs now plan to push this ratio: not only is work to be performed almost entirely by robots, but decisions about the production process and its control can also be taken over more and more by – appropriately programmed – automats. In addition to the savings on paid personnel, the progressive reduction in the proportion of human labor also ensures a considerable shortening of production time. This too is progress for the capitalist employers for whom, as is well known, time is also money and for whom therefore every superfluous minute that passes during production is one too many. As long as their invested capital remains tied up instead of being made available again for the continuation and expansion of business – this clearly contradicts the purpose for which the whole enterprise is set in motion in the first place. What this speed-up imperative means for the workers who are still needed is obvious: they have to keep up, i.e. carry on at the new pace.
Job destruction, job creation
But as with every technological advance and every round of “rationalization,” industrial capital not only makes a lot of labor superfluous with this leap. It also makes use of its power over labor in a new form. With digital technology, capital creates new jobs, such as jobs for which computers are either still too clumsy or simply too expensive. A beautiful harmony between humans and machines: robots can take over the particularly unpleasant tasks and at the same time ensure that their human colleagues perform their work as efficiently as possible in terms of the valid operational calculation: as quickly as possible, i.e. as cheaply as possible for the paying company. The machines direct the hand movements on the assembly line, determine the walking routes in the warehouse, and clock the flow of goods; they measure the performance of the employees and thus in practice teach them how much work really fits into an hour; they keep the people on their toes and at the same time provide the company management with a useful guidance for the personnel decisions that still have to be made by people as long as robots can neither issue warnings nor dismissals. None of this is “revolutionary.” The fact that a job is nothing more than an ensemble of objectified performance requirements for the worker only becomes particularly vivid in this “industrial revolution.” With the enormous rationalization of production made possible by the technology of “Industry 4.0,” the “revered” employee is of course required to fit into the system as a cog even more optimally. But that is merely the smaller part of the working world in the new age. Increasingly, companies are using freelance IT specialists who are themselves de jure “entrepreneurs” working on their own account, and who transact contracts for labor, services or consulting with them. In this way, the company frees itself from the costs and barriers of a normal employment relationship: from regulations of any kind on working time, from salaries that have to be paid continuously, from contributions to health, retirement and unemployment insurance. These are all expenses that are always necessary to maintain a workforce but which companies are not contractually responsible for when they hire freelancers. With the help of the internet, a global labor market can be opened up for such activities in a very real way. On “people clouds” – globally accessible internet platforms that function as transparent “job exchanges” – freelancers compete against each other and certainly also against permanent employees in IT departments. There they compete for contracts by outbidding each other in terms of performance, while undercutting each other in terms of pay. Some effort is also spent on breaking down larger and more complex IT projects into the smallest subtasks so that the external subcontractors only produce individual “building blocks.” On this basis, the global labor market is tapped in an even more comprehensive manner for the completion of such tasks. After all, not much more is needed than internet access, some user knowledge, and a sufficient command of English to participate. In this way, a worldwide “crowd” can be assembled that competes to be “sourced” by clients. This allows companies to take the wage levels of Asian, Latin American, and Eastern European countries into account when negotiating with programmers from first world countries.
So there’s no way the technology of “Industry 4.0” is going to make work superfluous – a whole smorgasbord of new jobs is opening up in the course of the abolition of the old ones! And they consistently testify to the extent to which capital, with its technical progress, also increases its power to adapt the required activity to the criteria of its profitability calculation.
The business with “Big Data”
So this well-known calculation is what the new "industrial revolution" is all about; with all the technology of “Industry 4.0,” entrepreneurs are given a range of new tools to pursue their familiar purpose. They are “networking” their production processes across company boundaries, not only exchanging all kinds of data, but also automating the ordering and payment of materials in order to make buying and selling more efficient. The digitization and automation of their business processes also provides a completely different level of flexibility: the changeover time for production lines is radically reduced due to the nature of the new machines and their software control; information relevant to buying and selling flows into the production process in “real time” and automatically adjusts it to market conditions. Thanks to the services of IT companies such as Google, Amazon and Facebook, a global virtual trading platform can be accessed. In the end, the vast amounts of data generated by the networking of production and consumption can be turned into a business of its own – so much so that information of this kind is now being traded as the “oil of the 21st century” or the “capital of the future.” Although some of the evangelists of this new business sphere called “Big Data,” which is supposed to break down all industry boundaries, do not themselves know how they are going to make profits from it, this only spurs them on all the more to seek and develop corresponding future business ideas.
In light of all the possibilities opened up by “Industry 4.0,” it is clear to industrial capital that if you want to secure and expand your success as an industrial enterprise, you must not be late to the great leap forward that is taking place in the digital field. This is where the suitability of its production as a means of capitalist enrichment will ultimately be decided. So this is the truth of the “curse and blessing” of the digital revolution: First, it is a huge business tool for capitalists in their competition for markets, therefore, second, it is a necessity to pursue exactly this benefit by all means. The respective workforces are a dependent variable within this competition – which in this respect means anything but a “new era.”
The fact that the progress of industry is based on its fusion with IT gives rise to a very principled concern, especially in Germany: the more extensively the services of IT capital are used, the greater becomes the fear of industrial capital that it will fall into a harmful dependence on the competitors to whom it owes the means of its own industrial progress. A real beauty of the division of labor under capitalism: to the extent that a technology proves its usefulness, it becomes a means of power for the suppliers over those who derive their business benefit from it.
Competition between capital groups
The first form in which industrial capital is already partly feeling the power of its IT partners, partly worrying about it in the future, is in the price to be paid for the various services of IT capital. But the contradiction that arises from the growing importance of IT capital now goes far beyond the question of price. Because in the new digitized world – so we hear – cars are becoming “apps on wheels” and virtually all industrial products are becoming “hybrid,” i.e. a combination of industrially manufactured goods and digital technology built into them. But that’s not all. IT companies such as Google and Amazon are already brokering commerce all over the planet and will become all the more attractive in this function the more they manage to seamlessly process the world market, i.e. to dominate their domain so comprehensively that no company or customer will be able to bypass them. In the new, digital world, German industrial capitalists in particular are concerned that they will degenerate into the “extended workbench” of the IT companies, into interchangeable suppliers of the bits and pieces that the IT top dogs also need for their big business. German global market leaders do not envision their industrial revolution being done in such a way that the really big business will not be done by them with their products, but by the suppliers of the IT parts to “Industry 4.0.” They take up the fight with the self-confidence that they have derived from their record of success. This battle now revolves around the question of who in the first place determines the increasing intermesh between IT, industry and commerce, i.e. the digitized production process. To put it in the language of the experts: Who is the “lead firm” here and who is merely a supplier? Who can take the business benefits from the merging of IT and industry away from the competitor or degrade it into an assistant to its own business?
On the one hand, IT companies are engaged in this battle by purchasing hardware, such as Apple, which has the physical parts of its products manufactured in low-wage China, or Google, which is entering the automotive manufacturing sector and thus competing with established industrial companies in their very own field. With the impressive size of the capital they have now achieved, they are supplementing their empire with production plants of all kinds in order to deprive the established corporations of any future prospects, especially in the field of future products. By then at the latest, German industrial capitalists on the other side are realizing that they must be able to do all this themselves. They must free up the IT capabilities needed to master networked production. So they are setting out to turn the tables, acquiring the IT expertise they need. This is no longer just a matter of avoiding dependency. That would be far too defensive. The fear of being downgraded to a workbench is being turned into a claim by Germany’s ambitious industrial capital to be or to become the capitalists who themselves have the largest share of the “value chain,” i.e. who make the most profit in a business that begins with the product idea and does not end with the recycling of the product, but continues with the exploitation of the data that accumulates on such a massive scale in all this. They dedicate themselves to “data sovereignty,” procure the necessary information and analysis capacities, and become serious competitors in the Big Data business themselves. The ambitious boss of a German car company expresses in his casual way what the competition of the capitalists will revolve around in the future: “‘Value creation is shifting from hardware to software and services,’ says the BMW boss (Harald Krüger). A sentence that could also be translated as follows: Up to now, we have only earned our money with cars. Soon we will also earn our money with digital and other services” (SZ, 3.17.16).
The battle for control of the business which merges IT and industry into a single entity is being waged by both factions of capital. However, this does not mean that there is no room for cooperation in this competition. For even in the new digital industrial world, the simple free market principle remains in force that victory in competition depends on the size of the capital that one competes with. When established market leaders in industry join forces with those from IT and dissolve conventional industry boundaries in this way, they aim for sheer overwhelming market power. Siemens and SAP, Google and Fiat/Chrysler, Apple and IBM are prominent examples of a cooperation which takes account of the “hybrid” character of production processes and products that have become “ecosystems” in the way that befits competitors for the capitalist business with them: Their claim to monopolization is to be pursued against others by merging with them and made incontestable through the economic power they put together.
A state priority
The question of who will win this battle for industry and the global business of the future is important not only for German companies, but also and especially for the German state – it’s far too important to simply be left to “free competition.” With this in mind, the Chancellor takes the floor:
“We are now at a decisive point in the question: How does digitization penetrate industrial production? This is for us economically of the utmost importance because it has not been decided whether traditional industrial production will one day become the back end of the extended workbench or whether we will manage to achieve an equal balance of digital technology and traditional industrial production with which we can then continue to succeed worldwide ...” (Merkel at the conference “Economy 4.0 – Opportunities for Germany,” 4/11/15).
On the international level in particular, the digital revolution is not about a convenient division of labor; all the knowledge behind information technology and all the engineering skill that goes into combining IT and production technology have their higher purpose in overwhelming the relevant knowledge and applied science of other countries. Merkel also sees that what matters in production is dominance over the “value chain.” The extremely unworthy role of a nation that merely produces stuff as a “workbench” that others make their profit with is out of the question for Germany; this role is of course reserved for other nations. The “balance” that Merkel actually has in mind will hold precisely when there is no “balance” between Germany and other nations, but rather when the superiority of German industry is ensured. To defend its status as a leading industrial location, the government is imposing a comprehensive “digital transformation” on its nation – but not just on its nation. Because Germany wants to defend its global industrial leadership, all of Europe needs a digital revolution under German leadership. And this much is certain: offense is the best defense.
The question about the opportunities and risks of digitization “for our society” has therefore long since been answered: “Industry 4.0” is a challenge for the decisive subjects of market competition. It is a means and a necessity for capital and the state in their respective competition. What this means for the absolutely inconsequential people who fear for the future of their current and future jobs will be felt in time – here too as usual.