An Unsettling Question for Digital Capitalism

/****** This Essay was first published in German at „Aus Politik und Zeitgeschehen“ and also as an extended version on this blog. The translation was provided by Lisa Contag. ******/

A spectre is haunting (not only) Europe — the spectre of digital capitalism. And as is fitting for the times we live in, it comes in many shapes and colours: as information capitalism, data capitalism, platform capitalism, surveillance capitalism and cognitive capitalism. A multitude of digital capitalisms have come into existence, however, they essentially indicate the same thing: that we are witnessing fundamental changes. And this exact point leads me to the unsettling question: is this still capitalism?

When using the word “unsettling”, I don’t mean the discomfort the authors of numerous and diverse characterizations of digital capitalism obsess about. My goal is not to demonstrate that capitalism’s new digital variety is worse than all its predecessors. My unease rather concerns capitalism itself. I figuratively place my hand on its shoulder, as it were, and quietly ask: “Everything ok there, capitalism?” While many authors identify capitalism to have further radicalized in its digital version, my impression is the opposite. I believe capitalism isn’t doing well at all in the digital realm. This is why I want to ask more fundamentally whether capitalism in its digital variety in fact still meets the criteria we use to describe this economic system and way of organizing society.

There are various definitions of capitalism which at the core, however, are more or less the same. Accordingly, capitalism is seen to meet the following five criteria: it is characterized by the antagonism of capital and labour (at least for Marx), the fact that economy is controlled by markets (neoclassical definition), by private ownership of means of production, the dominance of ownership order, as well as the principle of accumulation (or growth). Below, I will investigate what happens to these criteria in the digital realm.


Let’s start with the obvious: private ownership of means of production, “capital”. Much has happened here in particular due to digitalization. In Marx’ days, means of production were mostly land, buildings, machines and perhaps vehicles. To illustrate how strongly the essence of capitalism has changed through digitalization, you only need to consider this: Uber, the world’s largest taxi company, doesn’t own a single vehicle. Alibaba, the world’s most valuable retailer, has no inventory. Airbnb, the world’s largest accommodation provider, owns no real estate.

Jonathan Haskel and Stian Westlake have researched this context more systematically in their book “Capitalism without Capital”. Its subtitle “The Rise of the Intangible Economy” already indicates that capital hasn’t simply disappeared1. Rather, it dematerialized. Tangible capital goods as they had already been known to Marx, were at some point complemented by software, data bases, designs, brands, advanced trainings and other intangible, immaterial assets. But these weren’t simply added. In the United States, the UK and Sweden investments in intangible assets have surpassed tangible assets long since. 84 percent of the US S&P 500 companies’ assets are intangible2. The digital industry is at the forefront here and a driver of this development. 

“Tangible, intangible, what difference does it make?”, one might ask. Haskel and Westlake point out four systemic differences: intangible assets are firstly sunk costs, meaning that capital invested in intangible assets is difficult to re-sell. Secondly, there are often spillovers: it’s hard to maintain exclusive ownership of information — which all intangible assets are. Thirdly, intangible assets are scalable: once produced, an intangible asset can be used anywhere with no further limitations or additional costs. Fourthly, intangible assets are synergistic: often they only form new products or result in new cases of application in combination with other intangible assets. 

The spillover effect is the most interesting. We encounter it whenever copyrighted works are shared on the internet. For industrial manufacturers this can also simply mean that competitors copy the manufacturing processes of their products or their software. Legal protection is available for some — but by far not all — intangible investments. This is in fact where we return to our criterion of capitalism. Only intangible investments, protected by copyright, patents or trade mark registrations, can be considered personal property and appear as assets in the balance sheets. However, structurally, even these forms of private ownership, i.e. intellectual property, are highly questionable in their classification as property, their worth being determined almost arbitrarily. Essentially, these are monopoly exploitation rights3, or, put pointedly, pretensions to ownership.


The function of labour, or rather the juxtaposition of labour and capital as elements of the production process, plays an essential part in any definition of capitalism. According to Marx’ theory, human labour, or more precisely socially necessary labour time, is the factor that creates a commodity’s economic value in the first place. Because the labourer is not fully compensated for the value he produces, but only to the extent necessary to reproduce his labour-power (reproduction), the capitalist pockets the difference (surplus value) as profit. 

Let’s take a closer look at the use of labour and generated value in the digital economy with the particularly impressive example of the US video-rental chain Blockbuster in comparison to online streaming service Netflix: Netflix, counting 5400 employees, generated 15.7 billion dollars in revenue in 2018, whereas the video-rental chain, which went broke, generated 3.24 billion dollars with 25,000 employees in its last year (2010). This means that while employing five times the amount of people Netflix does, Blockbuster only generated one fifth of Netflix’ revenue — despite their similar lines of business4. Digital economy thus appears to generate much more value added per employee than the former analogue economy.

In economic science, this correlation is measured as workforce productivity. If you look at the overall economy (e.g. of the G20 states), you will indeed notice enormous growth of workforce productivity, but only low growth of wages, with the margin consequently ending up in the capitalists’ pockets, a fact that has been described by economist Thomas Piketty who illustrated how the growth of fixed assets has been decoupled from the growth of wages5. Numerous IT firms are among the companies with the highest workforce productivity in the world. Apple generates nearly 2 Million dollars in revenue per employee. Facebook and Google follow in second and third place, with well over 1 Million dollars per employee6. None of these companies are known for paying bad wages — to the contrary. In relation to the market prices, particularly developers and IT specialists earn far above average. In relation to the generated revenues, however, their wages are no more than “peanuts”. And considered from the perspective of Marx’ logic of exploitation they could even be counted among the most badly exploited people in the world, given the enormous amount of extracted surplus value. 

On the other hand, however, it is difficult if not impossible to measure how the perceived social surplus value relates to the economic surplus value, especially since surplus value is generated so differently today to what Marx observed in his time. In his book “Das Kapital sind wir”, writer and researcher Timo Daum not only provided an interesting description of the digital economy but also his own hypothesis about value creation in the digital realm7. According to Daum, value isn’t created through the production of goods but through innovation. And we are all contributing to it: because we are constantly monitored when we use digital tools. The data collected in this way is used for the development of new innovations and for improving existing products. Harvard economist Shoshana Zuboff has taken the same line, however, she makes value creation sound a lot more insidious. She too sees the surveillance of users at the centre, but rather than innovation she identifies manipulation (behaviorial surplus) as key for the internet companies’ creation of value.8 Nick Srnicek, a lecturer in digital economy, on the other hand, describes data as a kind of resource which only gains value when being processed. He thus identifies the work of programmers, analytical algorithms and most of all data scientists as responsible for value creation9. In his book “Post Capitalism”, journalist Paul Mason even came to the conclusion that capitalistic economies will not be able to continue if information rather than labour becomes the central resource for value creation.10

When asking about the role of labour in the digital realm, we are thus confronted with a variety of differing, contradictory theories and observations. The only common denominator seems to be that labour in the classical understanding is no longer where the creation of surplus value essentially happens. 


Much has happened in economic science since Karl Marx authored “The Capital”. Many economists no longer consider the production process as central, but the market. Accordingly, there’s hardly any contemporary definition of capitalism that will not refer back to the market, identifying it as capitalism’s essential control mechanism. By keeping the equilibrium between production and consumption via the price mechanism, the market ensures that goods are only produced roughly in the amounts they are demanded and that they remain within an affordable range — at least in theory, which is often and readily criticized because it builds on presumptions that can hardly be put into practice: complete transparency of the market, people as rational economic subjects, the non-existence of transaction costs, not taking into account influences and costs (externalities) not represented in the market, and so on.

Generously ignoring these inaccuracies, the market could be seen as an “information system”11 which coordinates the signals of providers and consumers as input. From this point of view, one should think that the market would be compatible with the digital realm. And as it turns out, market mechanisms are indeed easily recreated in algorithms. This is exactly what for example Uber did with “surge pricing”. The number of Uber drivers on the road varies, depending on the time of day or night, likewise demands for drivers vary. Uber users are thus presented with a surge price next to the standard price. In case of uncertainty, this is higher than the standard price, on the other hand it ensures that people immediately get a car. In a way, this is a market price — except that it is calculated by an algorithm. 

A lot more insights can be gained from the millions of user decisions for and against surge prices. People whose smart phone battery is about to run out, for example, are more willing to pay a higher price for an immediate Uber ride. This also allows for the calculation of the consumer surplus, as a team around economist Steven Levitt demonstrated with the example of Uber12. Consumer surplus, in short, is the difference between the price I factually pay for a product and the price I would be prepared to pay if it were higher. The difference that I did not pay is the bonus I as a consumer end up with in the end. Because the readiness to pay certain prices varies from person to person, every consumer “receives” an individual consumer surplus. The general consumer surplus is then calculated by adding up individual differences. Levit et. al.’s research showed that Uber generated roughly 2.9 billion dollars in consumer surplus 2015. This is not the kind of money reflected in statistics. It’s money that wasn’t spent but possibly would have been if every customer had been shown a personalized price. However, if you know that a customer would pay more, why then not indicate that price instead?

Let’s look at what is happening here: if the market price is an information system and computers, the internet and shop systems are also information systems, then the former was in a way hacked by the latter. The providers’ IT systems are simply more intelligent than the market.


A both simple and elegant definition of capitalism, which distinguishes itself both from the Marxist and the neoclassical definition without being incompatible with either, was developed by economists Gunnar Heinsohn and Otto Steiger.13 They define capitalism as an ownership order,i.e. a society which is structured by the concept of property. What may sound banal, obvious and hardly productive at first becomes interesting when you take a closer look at the implications of the term “ownership.” 

While Marx locates capitalism’s original setting in production, and the neo-classical economists in the market exchange, Heinsohn and Steiger locate it in the difference between “ownership” and “possession”. This distinction itself is not economical, but mainly legal. “Possession” is anything I have power of control over; which distinguishes it from “ownership”: ownership is a legal title, an abstract claim. This means that I can give objects that I own into the possession of others while they remain my property. However, this is only possible if an external power ensures that this legal title is enforceable and the object is returned to me in cases of doubt. Ownership thus requires a state monopoly on the use of force. 

When applying this definition to the digital realm, the online music platform Napster comes to mind. Launched in 1999, this service made all the music files on a user’s computer available to other Napster users. The program featured a search mask which allowed searches for any kind of music, producing a list of users who had the titles in question and were prepared to share them. One mouse click sufficed to start the download. For collectors, this was a true El Dorado. For the music industry, however, this El Dorado was a major spillover, the total loss of control and the sudden end of their business model. Following Heinsohn / Steiger’s definition of capitalism, one could say that the music industry fell back from ownership order to a download ‘possession order’. The music industry (and a number of rights distributors) lobbied extensively for more restrictive copyright laws, nonetheless it wasn’t able to get rid of thepeer-to-peerfile sharing platforms.

And this is where it gets interesting: The fact that the music industry does have a business model again today is not due to the state enforced ownership order but because a totally new, unique order formed on the internet: the order of platforms. When Apple approached music labels in 2002 and presented them with iTunes, the company’s own commercial online platform for music, the music industry had its back to the wall. Not even the major labels had succeeded in introducing legal online platforms that could compete with the file sharing platforms. Apple’s Steve Jobs was able to dictate the terms to the labels in the end14because his company had something they didn’t have: I call it “marketable power of control”. Apple was not only able to commercially and legally offer music, but also to withhold it via iTunes’ technological infrastructure, without requiring any additional entity to enforce this (the state). Many companies which today shape the “platform economy” would soon follow Apple’s example. First and foremost, their platforms are control infrastructures to artificially shorten potentially boundless goods.

The platforms’ marketable power of control has overcome its limitations to actual legal titles long since. Facebook has no ownership rights of our personal data and yet their business model is based on executing marketable power of control over them. The platforms are already executing a form of control that operates without the ownership order and merely reflects it in parts. This, however, means that in the digital realm, the legal concept of ownership is at stake, at least to some degree.


One criterion keeps reappearing both in the Marxist and the neoclassical type definitions of capitalism, namely growth. What part does it play in digital economy?

In “The Rise and Fall of American Growth”15, economist Robert J. Gordon argued that despite all the future promises digitalization may offer, economic growth is no longer driven by factual innovation today. He substantiated his findings with reference to the so-called total factor productivity (TFP) — a measure of economic efficiency which is calculated by subtracting growth rates of labour and capital inputs from growth in output, and thus determining the portion of growth in output not explained by growth in these factors. The TFP to Gordon represents a way to measure growth effects of innovation. The fact that the US TFP averaged somewhat more than one percent annually from the 1930s to the 1970s, but was much lower before and after, leads Gordon to the conclusion that digitalization has resulted in hardly any innovation. He thus picks up on an observation by economist Robert Solow back in 1978: “You can see the computer age everywhere but in the productivity statistics.16

I would like to object. In my opinion, digital innovations are as real as technological innovations once were, the difference being that they can’t really be measured by conventional standards. Both the gross domestic product and all values derived from it, such as growth, productivity or the TFP, are based on how much revenue is generated in different industries, meaning: anything not leading to a transaction is not considered. However, there are many reasons why especially digital innovations often appear transaction-neutral or even reductive.

Firstly, market transparency has increased through the internet. Our consumer decisions today are much more knowledgeable than they were before the internet, which also means less misinvestments (and thus less transactions). Secondly the mentioned spillover effect has also led to the situation that we have a much larger variety of cultural offerings at our disposal without having to spend substantially more money. We don’t have to illegally stream movies but the mere fact that we could forces companies to create attractive commercial options that are legal. This also leads to a minus in growth performance. Thirdly we shouldn’t forget how much free knowledge we have access to today. Apart from collecting donations, Wikipedia is completely free. On the other hand, it creates a big red minus in the overall economic balance sheets, given the losses of numerous encyclopaedia publishers. Though many attempts have been made, there is no sensible way of determining Wikipedia’s enterprise value17. Similar effects for the economy can be observed in the case of open source software.

In general, many economic processes are becoming more efficient thanks to technology. The introduction of Artificial Intelligence and Big Data is advertised time and again as enabling substantial savings. Savings, however are transactions that didn’t take place. They streamline the balance sheets without necessarily being complemented by additional investments. This means that digital innovations save more transactions than they add. Why is there still economic growth then? My hypothesis: similar to 2007, we are in a bubble, this time, it’s the intangible assets bubble. I think intangible assets are massively overrated — simply because they are artificially prevented from spillovers, the “natural state” of any information in the digital realm. Platform control, draconic copyright laws and the enforcement thereof, have led to an artificial shortage of ideas, thoughts and creative achievements, which make our lives poorer on the one hand, in order to sell them to us at an even higher price on the other.

Growth used to mean that more people could do more things, that products became cheaper, that more people had access to running water, electricity, consumer goods. In the digital economy, growth merely means that the consumer surplus is exploited more efficiently, i.e. that more people are needlessly paying more than they would have to under normal market conditions. Growth means that immaterial goods are made scarce more successfully.


All five criteria I identified at the beginning of this text are rendered absurd by digital economy. The unsettling question more precisely then is:

Is capitalism still capitalism when capital is merely purported, labour is superfluous, it is not controlled by the market, it has abandoned the ownership order and the little growth that remains is the result of the artificially fabricated scarcity of intangible goods?

Probably not. But what is it then? At the moment, we still have one foot in good old analogue capitalism. And with respect to the digital foot: we only ever learned to perceive capitalism in contrast to communism or socialism — in the best case anarchism and feudalism. What the digital economy is doing, is none of those. We have to understand the novelty of the situation at this point. For all of us, digitalization is something new, hence we should consider the possibility that this could also be a totally new form of economy, one we don’t have a name for yet and one of which we don’t really know how it works. Something still in progress that’s not automatically better or worse than capitalism, but sufficiently different. “The old world is dying, and the new world struggles to be born: now is the time of monsters”, Marxist philosopher Antonio Gramsci is said to have noted once.18We too are dealing with a monster, here, a creature that doesn’t have a name yet. Monsters aren’t necessarily evil but they frighten us because we don’t understand them. 


  1. Cf. Jonathan Haskel/Stian Westlake, Capitalism Witho ut Capital. The Rise of the Intangible Economy, Oxfordshire 2017.
  2. Cf. The Value of Intangible Assets, April 10, 2019,«.
  3. Cf. Marcel Weiß, Kann es ein Eigentum an Geistigem geben? Nein., February 23, 2012,«.
  4. Cf. the Wikipedia articles about Netflix and Blockbuster LLC (last accessed on April 23, 2019).
  5. Cf. Thomas Piketty, Das Kapital im 21. Jahrhundert, Munich 2014.
  6. Cf. Anaele Pelisson/Dave Smith, These Tech Companies Make the Most Revenue per Employee, September 6, 2017,«.
  7. Cf. Timo Daum, Das Kapital sind wir: Zur Kritik der digitalen Ökonomie, Hamburg 2017.
  8. Cf. Shoshana Zuboff, The Age of Surveillance Capitalism. The Fight for the Future at the New Frontier of Power, New York 2019.
  9. Cf. Nick Srnicek, Platform Capitalism, London 2016.
  10. Cf. Paul Mason, PostCapitalism. A Guide to Our Future, London 2015.
  11. As for example Friedrich August von Hayek does in Der Wettbewerb als Entdeckungsverfahren, in: idem., Freiburger Studien, Tübingen 1969, pp. 249–265, here p. 249.
  12. Cf. Peter Cohen et al., Using Big Data to Estimate Consumer Surplus: The Case of Uber, National Bureau of Economic Research, NBER Working Paper 22627/2016,«.
  13. Cf. Gunnar Heinsohn/Otto Steiger, Eigentum, Zins und Geld. Ungelöste Rätsel der Wirtschaftswissenschaft, Marburg 2002.
  14. Cf.. Steve Knopper, iTunes’ 10th Anniversary. How Steve Jobs Turned the Industry Upside Down, April 26, 2013,«.
  15. Cf. Robert J. Gordon, The Rise and Fall of American Growth. The U.S. Standard of Living Since the Civil War, Princeton 2016.
  16. Cf. Simon Dudley, The Internet Just Isn’t That Big a Deal Yet: A Hard Look at Solow’s Paradox, November 12, 2014,«.
  17. Cf. e.g. Leonhard Dobusch, Wert der Wikipedia. Zwischen 3,6 und 80 Milliarden Dollar?, October 5, 2013,«.
  18. Quoted from Slavoj Žižek, A Permanent Economic Emergency, in: New Left Review 64/2010,«. The quote’s authenticity is subject to controversy, however. Presumably, Žižek freely paraphrased the following lines: “The crisis consists precisely in the fact that the old is dying and the new cannot be born, in this interregnum a great variety of morbid symptoms appear.” Antonio Gramsci, “Wave of Materialism” and “Crisis of Authority”, The Prison Notebooks, New York 1971 (1949 / 51), p. 275 et seq.
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