the digital economy

my notes.

Setting the scene

Move fast and break things enriches the already wealthy. The Schumpeterian idea is our future for better or worse. Children born now will be the most tracked in history. In some novels only the wealthy can eradicate their digital footprint. Paradoxically, not to be known, is to be somebody. The security risk of tracking devices in our home was touched on here. It’s not just phones, but our fridges, washing machines, kettles, cups. The danger of these being hacked increases exponentially. My guess is the future will be better for many, but us poor people, the largely disenfranchised, will be more easily monitored and controlled How ironic that an old blog post from a Tory MP calling for sterilization of the poor should crop up now.

Key trends in online activity

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John Pilger, The Coming War with China.

coming war with china.jpg

http://www.itv.com/hub/the-coming-war-on-china/2a4249a0001

The title is deliberately provocative. Does John Pilger mean trade war between the number one and two trading blocks in the world? Because we know that is already happening. President-elect Donald J Trump in his campaign –among other accusations – accused China of raping America and stealing job and the American economy was ‘hurt very badly by China with devaluation.’ The United States and Canada are vital to the Chinese economy. The former dependent on the cheap money China provides to service its debts. Equally, America and the rest of the world are depended on the cheap imports that Chinese labours provide. Think Apple here. Australia’s economy is premised on exporting the raw materials necessary to keep the Chinese economy growing. Britain and America’s  metaphoric economy report cards, for example, are marked as successful if GDP growth has been reaching one-percent, or if it hits the dizzy heights of two-percent GDP growth. China, in contrast, recently hit growth rates exceeding ten-percent of GDP, but this has slowed in recent years to around five-percent and falling to levels associated with more mature economies.

It’s worth quoting Lijia Zhang, a Beijing journalist. Her best-selling book (although obviously not in America) is called Socialism Is Great! She was a child of the Cultural Revolution, when millions of Chinese died of hunger and has lived in the US and Europe. ‘Many Americans imagine that Chinese people live a miserable, repressed life with no freedom whatsoever. The [idea of] the yellow peril has never left them… They have no idea there are some 500 million people being lifted out of poverty, and some would say it’s 600 million.’

China stands now where America stood before the start of the First World War. The world’s axis is shifting East, not only to China, but to countries like India, which between them account for over half the population of the planet. It’s the end of empire for America. And like the British before them if it comes to deploying gunboats as the British did during the opium wars and the Boxer Rebellion, then Pilger notes the American’s are doing the same with over 400 naval bases world-wide, including one a few miles from me in Faslane, but most of them pointing East and costing trillions of dollars. The irony here James Bradley notes:  ‘Warren Delano, the grandfather of Franklin Delano Roosevelt, was the American opium king of China; he was the biggest American opium dealer, second only to the British. Much of the east coast [establishment] of the United States – Columbia, Harvard, Yale, Princeton – was born of drug money.’

America wants to be allowed to be more protectionists that China and China to be more free market than America. The irony here is the Hurun Reports conclusions there are more dollar billionaires in China than anywhere else in the world, including America. But as Eric Li concludes you can be a billionaire in China, but still not be able to buy the Chinese politburo. Pilger’s programme was made before the election of billionaire president Donald J Trump and whose senior positions have been filled so far with a number of billionaires, three Goldman Sachs bankers, and the chief executive of the largest oil company in the world, who has close ties with Russia. It makes George W Bush’s first cabinet of millionaires pauperish.    ‘I believe in American exceptionalism with every fibre of my being,’ said President Barack Obama.  President-elect Trump has already made that exceptionalism clear with his appointment of retired marine general James ‘Mad Dog’ Mattis as defense secretary. Accused China of interfering with a missing US drone and angering China’s leaders by taking a call from Taiwan’s president – an island that China regards as its sovereign territory.

The difference now is it’s nuclear. Pilger takes us through the stages of and testing of America’s nuclear capability. The Bikini Atoll was repeatedly blown up with the cost estimated in millions of dollars a day. But the real cost was to the islanders used as human guniea pigs in experiments into radioactivity that would have shamed Dr Mengele because the latter only tortured subjects in front of him and not the children’s children of their children as US scientists repeatedly did and continue to do. Poor nations dependence on the US dollar was highlighted by a tale of rich and poor. The Ronald Reagan Ballistic  Missle Defense Site (of course it’s defense) on the Marshall Islands spends billions of tax dollars and year, and millions of dollars a day. The island nearest this paradise ( a swimming pool away) cannot afford to fix the town’s only bus. But perhaps the most chilling moment in Pilger’s documentary was when a former soldier admitted that during the Cuban Missile Crisis a rogue officer ordered those under his command to fire the missiles, and opening the silo doors, which would have wiped out China and the world. For twenty seconds in 1961 the world stood on Armageddon, before the order to stand down was made and the officer quietly escorted away to La-La land.

Pilger does not touch on American’s forgotten war, the Korean war, when Chinese forces near Yalu in early 1950s caught General Douglas MacArthur and his soldiers by surprise (see David Halberstam, The Coldest Winter. America and the Korean War).  America was sick of war, as was the world. The answer was to go nuclear. But even then scientist recognised that would mean the end of the world. The Coldest Winter is, of course, nuclear winter.  Now with ‘smaller’ nuclear weapons and hawks in the cabinet, every war looks winnable, but only by striking first. We’ve given Dr Strangelove Trump the codes to our planet’s future.

Here it’s worth quoting an exchange with Pilger and Professor Ted Postol was scientific adviser to the head of US naval operations. An authority on nuclear weapons. Remember this is pre-Trump and pre the term ‘posttruth’ gaining entry to the Oxford English dictionary: “Everybody here wants to look like they’re tough. See I got to be tough… I’m not afraid of doing anything military, I’m not afraid of threatening; I’m a hairy-chested gorilla. And we have gotten into a state, the United States has gotten into a situation where there’s a lot of sabre-rattling, and it’s really being orchestrated from the top.”

 

I said, “This seems incredibly dangerous.”

 

“That is an understatement,” he replied.

Taking a bite out of Apple, what did the EEC ever do for us?

rich v poor

Imagine someone handed you thirteen billion Euros, approximately £11 000 000 000, as the European Commission tried to do, claiming that Apple had acted illegally in Ireland and paid an effective Corporate tax rate of 50 Euros for every 1 000 000 Euros they took out of the country. In a deal known as the Double Irish, Apple claimed they did not take any money out of the country, but simply moved it between different offices with no staff and an online address of undertherainbow.com. This was perfectly legal they claimed as little people had been doing it for years. And with sleight of hand they pointed to the thousands of jobs they created, mainly in Cork, but not made of cork, but making things that people think they need, but really don’t.  You think that would be the end of it. Picking on the richest company in the world, just because you can isn’t really fair. Then there’s the Apple threat. The blight of those 6 000 jobs. They want to protect the little people too.

Well, some simple arithmetic here. Take the thirteen billion Euros and give it to the imaginary 6000 worker and then ask them what they’d rather have, their share in the Apple jackpot or a job, sometimes for the lucky punter, paying above the minimum wage?

In the real world of, course, that’s not the way it works. The Irish Government spokesman, finance minister, Michael Noonan, said he would appeal against the EEC’s ruling, because they were protecting the real interests of the little people, and begorrah, if multinationals wanted to create fake jobs with real money then Ireland was just the place to do it. Sure, didn’t they invent Guinness, which nobody likes but everybody drinks and claims is the greatest thing since Jesus walked on water.

Tim Cook, Apple’s chief executive, threatened Applexit from the EEC and has courted Boris Johnson, our Home Secretary, for campaign advice. That’s Irish.

Paul Mason (2015) Postcapitalism: A Guide To Our Future.

Paul Mason is an optimist. I’m a pessimist.  He outlines the problems mankind faces in the future and suggests as a utopian solution of free money and us all working together in a non-working world. I tend more towards the four horseman of the apocalypse scenario.

Mason suggests there are a number of negative feedback loops that will work together to make the world a much poorer place for 99% of humanity, but if we reverse engineer this process we can all become richer and make a fairer and more prosperous world for all. ‘Neoliberalism is Broken’ is the title of his first chapter. We all know how this works. We’ve being doing it for the last thirty years and the process has accelerated since the financial meltdown of 2008. Work longer hours for less pay, or no pay. Sing hallelujah, and thanks boss, as money flows from the poor to the rich at an increasing rate.  Thomas Piketty, Capital, did the maths. Algorithms rule the world.  But Mason sees a chink of light in the information age. Technology that puts at least fifty percent of the workforce out of work, (timescale by 2050, or at cinema near you soon) will, as work itself become redundant, give us more leisure time. When the distinction between work and leisure becomes blurred creativity will flourish. Examples, oh dear, ‘people will blog, make movies, self-publish books’. Shit. I’m already doing all these things. I must be living in the future. It’s Martin Ford’s The Rise of the Robots, but with a happy ending. The robots won’t gain an awareness of themselves as a singular being, in the singularity, and mankind as being a species that has reduced the planet to a giant hamburger, and instead of keeping mankind as a pet, they’ll not do the logical thing and mine us for the energy in our hair and skin and meat and reduce the world to something like a boxset of hell played on an endless loop, but instead of that, our android friends will free us from work.

The merit in that argument is it is logical. William Shakespeare’s Brave New World  before Brave New World has Ariel working for the man, Prospero, in  The Tempest.  All utopias are a bit like that. Prospero might have stolen an island home, but it was from an evil witch, and give him his due, he did give gainful employment to the witch’s son, and became master of the monster, Caliban, who he used as another source of free labour. Prospero was free to do what he willed, as we will be in a prosperous new age based on exciting new technologies. Fritz Laing, Metropolis. As above, so below. Aldous Huxley and George Orwell both envisaged a time when work would be something that would be optional – for the elite. As it always has been, but Mason argues that the problems facing us are global problems and unless we face them together they will defeat us and the capitalist system will fall apart.

Global warming is an example of this. Mason doesn’t think the market can work well enough to allocate resource so everyone can meet their energy needs and keep enough fossil fuels out of the air and keep the temperature of the earth below an increase of around two-degree centigrade level. After that runaway global warning will take place. Being born in a particular location will be the equivalent of a life in poverty and death with millions of refugees on the move. I called this melodramatically, The Third World War, and suggested it’s already begun. I think it’s a war already lost. Human casualties, I’d guess, somewhere in the range of the Black Death, one in four. I can be bland about it because I’ll be dead by the time this is fully realised. But if you’ve children of grandchildren, be very afraid. Mason suggests that we leave all fossil fuels in the ground, turn to solar, wind, and sea, as Germany has done, with up to 50% of its needs being met in this way. So it is possible, but is it probable?

China and India playing catch up and building or having recently built hundreds of coal-fired stations.  But as Mason states ‘Between 2003 and 2010, climate change lobby groups received $558 million in the US. Exxon Mobil and the ultra-conservative Koch industries were major donors…’ What’s in it for them? Simple. Leave fossil fuels in the ground, or as Mason suggests in his chapter ‘Project Zero’ and Exxon Mobil will be worth zero on the stock market of any market. Far simpler to go out and buy a politician, or president.

One of interrelated problems Mason identified was workers in the Western world are getting older. Gee whiz, you may be saying, my hips killing me, I sure know about that. ‘Futureproofing’ on Radio 4 that around 50% of children born today will live until they’re 104. Great news for them. Around 4% of those born at the start of the last century lived long enough to collect their pension. So work hard and don’t collect your pension was the order of the day. Think about this. One in two hospital beds are filled by our fossil fools. Piketty suggests that rich countries growth will fall to around 1% to zero or negative growth. That’s where we are now. More must be done with less. That’s where we are now. Piketty also shows that the equation that you put into the system early and take it out in your later years, in health deficits, no longer works, or can be taken seriously. Mason shows that six of eight nations with populations under 30 are in Africa. Throw in India and US and the equation that one worker will be supporting one pensioner (around four workers fill those positions now) and you’ll be able to determine it doesn’t add up. Mason also shows that all that money invested in government bonds and shares and other financial assets are, in the longer term, worthless as the International Monetary Fund recognises. The bearer will not pay on demand.  When it unravels, as it will, then the provider of last resort is the government.

Here’s another of my favourites. The problem of supply is one of demand. Rosa Luxemburg, and all that. As Apple who make those nice phones and tablets and were the richest company in the world find to their cost, unless poor people have money in their pockets they can’t afford to buy those shiny new toys. One in eight workers in the US have at one time worked for McDonalds. Tens of millions wait for food stamps and flood into Walmart, who tell their staff to claim for food stamps. In our country we’re looking at the same solution: the race to the bottom. The solution, increased liquidity, give more money to the rich in the hope that it trickles –eventually- down to the poor, doesn’t work. It’s never worked, but is  neoliberal ideology in action.

Mason takes a hint from that well-known libertine, Friedrich Hayek, and suggests that citizens should be issued with an income to do with it what they liked by the government. Imagine if universal credit really was universal credit and how work would become an optional choice. But it’s another of Hayek’s truisms Mason challenges. Only the market can allocate resources. Computing power, argues Mason, can now do that just as effectively, or more effectively than any free market. Facebook and Google, for example, can anticipate our every need before we can even voice it. Their algorithms are getting better. What we think of choice is just a bit of camouflage as the servant serves us more of the same, but in a different colour. But imagine Mason suggests harnessing this power. Imagine the government building more houses. Imagine the government taking control of the money supply and instead of trying to sell banks we already own, lending money to rich people, lending it to fund social projects. Imagine the government running the energy industry for our benefit. I know, I know, it’s a bit much to take. Especially, the bit about taking money from the 1% who are rolling in it. There’s a loss of liberty there. Liberalism. Liberty. More equality.  Mason thinks that the threats that we face will allied with the technologies that we have developed will make it brave new world with everyone sharing in the fruits of non-labour. I’m more cynical. We’re at the Wright brother stages with the first aircraft. New technologies will enrich us, but not us all. The world is a more stratified place and will become even more stratified and uneven. Four horsemen on the horizon. Not even that far. I think I can hear the thunder of hoofs. But I hope Mason is right and I’m wrong, as I usually am.

Apple – the number 1 hit.

apple

Apple’s quarterly returns $18 billion (around £12 billion) in three months from October to December 2014, selling 34 000 iPhones an hour, is pretty impressive especially when factoring in I don’t even have one. Nor do I have an iPad, AppleMac or neither will I purchase the much hyped Apple watch. So what took Apple to the top of the tree without me?

Quite simply they make beautiful toys, but that is not enough. They market them as the must-have gadget. And they blur the distinction between work and leisure. iPhones are not phones they are sophisticated computers with a growing number of appliance all of which can be bought and sold via Apple stores online or in an increasing number of towns.

With almost half the world’s population having access to a mobile phone it makes sense to target the place with more than half of the world’s population. iPhone sales to China – up 70% on last year. Apple plan to double the number of stores.

China also makes Apple what it is. It manufactures these toys, puts them in containers and ships them around the world. The typical factory worker is male, aged 27, a migrant from the provinces. He makes around £180 a month and works around 56 to 61 hours a week, but perhaps longer, when required. I like that idea of when required. It always makes things so reasonable. When required means when we tell you. In the same way 15-minute breaks every two hours sounds good when factory inspectors visit, or the working week is fourteen days on and one day off. The worker can return to rest in the luxury of hostel accommodation – money automatically taken from his wages. The strain does drive some workers to suicide, but that does not appear in balance sheets.

Apple employs a massive 170 000 workers in these plants. These are the hands that assemble and test and polish and seal and send you your toys. The brains, of course, is a different matter. To sell the next generation watches Apple have recruited Angela Ahrendets from Burberry as head of retail on a $73 million pay package.  Let’s make some simplifying assumptions. Multiply $73 million by around 1.6 to convert dollars to sterling. Divide that sum by 365 to determine what she makes in one day. Divide that by the pay of the average migrant worker in a year (£130 x 52). This will give you some idea of the order of magnitude and difference between head and hands.

Apple also employ around 4000 people in the Republic of Ireland. Like Communist China the Irish government is quite happy to subsidise building costs in return for much needed jobs. Steve Jobs greatest innovation arguably might have been technological, but Apple’s continued success rests on the double Irish. Quite simply when other US companies were paying corporation tax of around 26%, Apple as a Cork registered company was paying less than 2%. The European commission found the tax deal that ran 1991 to 2007 to be (illegal) state aid. More recently Apple paid 3.7% in tax of non-US profits of $31 billion in 2013. Apple is a global player.

Apples 2014 revenues of $200 billion and a cash pile build-up of $178 billion ($23 billion in the last quarter) banked overseas gives it high liquidity and more money that it knows what to do with. A standard ploy is to buy back shares and increase the dividend to their shareholders. But they found it cheaper to borrow money to do that than dip into their surplus. Their main competitors Google, whose revenue derives from the most lucrative algorithm in history, use many of the same methods. Somehow I don’t feel any richer for knowing that.  The old certainties of what was good for corporate America was good for the world are unravelling. We’re all second-class citizens in the same world, but the many hands are increasing.

http://unbound.co.uk/books/lily-poole