coalpot

Reflections of Chap. 1: “The Neoliberal Networking Drive Originates in the United States” from Digital Capitalism by Dan Schiller

In this chapter, Schiller (2008) argues that the quest to develop networks, infiltrating all spheres of the economy, primarily serving intracorporate and intercorporate business processes, marks the major ethos of proponents and designers of the digital capitalism model. Schiller traces the historical development of the Internet to show how a neoliberal paradigm directed and engineered the growth, regulation, and adaptation of Internet technologies. He defines neoliberalism as “paring unwanted state oversight and regulation of the economy to gain more unfettered freedom of action for private firms resuscitates the liberal economic policy of Victorian Britain” (p.1)

He argues that computers, which were initially used as instruments for asserting US military supremacy, took on an added dimension in the 1960s, that of advancing research and development and advancing scientific innovations. NSFNET became the most common method for scientists and researchers across universities and laboratories, and government bureaucrats to share information. “Although it was developed within the U.S. military-industrial complex, this foundational technology lies in the public domain. The rights to use it were made freely available,” Schiller recounts (p.9).

When the utility of the computer began to attract greater popularity, the corporate sector hijacked it for commerce. Schiller notes, “By the mid-1960s, manufacturers, banks, insurance companies, utilities, and retailers were operating two-thirds of a greatly enlarged base—some 35,000 installations—of computing facilities” (p.2).

The corporate battles to dominate this new communication technology and maximize its profit potential ignited a series of government regulation. Government oversight also ensured that it barred foreign ownership of this strategic business, and protected US dominance of the technology. State bodies and the Federal Communications Commission cooperated to adjudicate on pricing and infrastructure mechanisms. Businesses with vested interest in expanding the applications of information technology soon protested the smothering effect of these regulatory and legislative frameworks (p.4).

Schiller notes, “Between the mid-1950s and 1970, business users elaborated a policy agenda around a general objective: freedom to develop corporate network systems and services as they preferred” (p.4). They argued effectively against the continuation of the general-purpose public system utilized by telephone, advocating instead pro market policies that advance their individual business interests. “Regulators embraced the fiction that computer network, which in fact made increasing use of the existing telecommunications infrastructure could be treated as if they existed independent of that infrastructure,” Schiller writes (p.5).

The attitude to regulation reflected the differentiation of computing and telecommunications as connected but separate industries. “The Internet’s direct ancestor was the Arpanet, which in 1969 inaugurated a radical new system for routing digitized messages between interconnecting computers. Conventional telecommunications systems used a technology, perfectly appropriate for voice communication, called circuit switching,” Schiller writes (p.8).

The FCC appeared to abandon this model in 1980, when it allowed regulated telecommunications companies to set up subsidiaries that would participate in developing the business of computing (p.6). Schiller reflects on these regulatory trends, noting, “With the benefit of hindsight, what should have been plain at the time is now painfully clear: even if it should entail the sacrifice of the bluest of blue-chip companies, the U.S. policymaking establishment was deter-mined to grant business users maximum freedom to exploit information technology networks as a private matter” (p.7)

According to Schiller, business executives’ and government bureaucrats’ neoliberal framing of these new information platforms were motivated as much by their promise of offering lucrative international business prospects as by their potential for expanding domestic markets. He writes, “At about that point, corporate executives and government bureaucrats recognized that the stakes in this arcane area of policy were huge that continued U.S. corporate stewardship of the exploding information technology industry might renew waning U.S. global political-economic power. Thus the impact of liberalization quickly began to extend beyond the theater of U.S. domestic telecommunications (p.7).

These competitive forces operated within a liberalized environment to advance the development of a multi-platform network technology that gave birth to the Internet. Schiller states, “The Transmission Control Protocol (TCP) and the Internet Protocol (IP) constituted the requisite suite of software instructions that, as the 1970s drew to an end, used satellites, mobile radio circuits, and fixed terrestrial lines to tie together with increasing effectiveness an expanding set of military networks” (p.9)

The Internet’s capacity to incorporate existing technologies and build on them in a variety of ways highlighted its business potential and drove its popularity. Schiller notes, “Internet, a term that came into use during the mid-1980s, denoted the decentralized set of networks, some 3,500 by late 1991, that connected to the NSFNET backbone. These individual networks, each run and funded on its own, developed informal organizational means of co- operating with one another to direct traffic and set policy” (p.10-11).

The late 1980s and the early 1990s produced saw the transformation of Internet as an intra-organizational and inter-industrial platform to a public utility with the development of the hyperlink technology and the simple graphic interface. As vendors and suppliers rushed grab market share, the Internet became a fixture of the radically changing telecommunications infrastructure. Schiller writes, “More portentous still was the hothouse growth, beginning in the early 1980s, of local-area data communications systems. The dominant technology for local-area networking was called Ethernet, a combination of hardware and software for linking workstations into office networks that was built around an ‘‘open,’’ or nonproprietary, standard and offered publicly available documentation” (p.11).

Although the financial services sector was among the first to fully incorporate the technology into its operations, no particular industry had an advantage in terms of the use of the internet, because the technology was fast becoming ubiquitous. However, there were certain companies that used the Internet to gain a competitive advantage in their particular sector. “Between 1984 and 1993, the percentage of U.S. workers using computers doubled, from one-fourth to nearly one-half. In 1996, 7.4 mil-lion people worked in the U.S. information technology industry, while industries that were major users of information technology employed about half the workforce,” Schiller notes (p.14-15). Information technology developed within a transnational framework of corporate capitalism expanded rapidly around the world; however, they were primarily US owned and operated (p.15).

Both  Us Corporate and governmental actions and policies focused on establishing the Internet as a new decentralized global information; however, only countries with modernized telecommunication systems could exploit this widespread application of electronic commerce. This coupled with deliberate regulatory and corporate strategies made the United States dominance of the sector beyond reach. Schiller notes, “The open Internet remained largely a U.S. system. Some 60 percent of the Internet’s host computers in early 1997 were located in the United States;¹⁵⁷ the Net relied on English as its lingua franca; and its very architecture still forced intra-Asian traffic to transit to network exchange points located in the United States before being routed back to Asian destinations” (p.35).

_______________________________________________________________

Schiller, D (2000) Digital Capitalism: Networking the Global Market System. Cambridge, MA: MIT Press.