Capitalism and Technology

(originally published October 11 2019)

There have been many arguments offered in favor of unregulated capitalism. Some, following John Locke, argue that individuals can gain ‘natural rights’ to property, and respecting those rights requires that we do not interfere with economic exchanges of consenting adults. Others point to the efficiency that capitalism brings about. Adam Smith famously argued that the ‘invisible hand’ of the market would lead to an optimal distribution of resources. Finally, some link capitalism with personal identity, claiming that property rights are an important precondition of individuals’ self-respect.
In the Twentieth Century, in light of the often-disastrous attempts at central planning carried out in the Soviet Union, a number of authors turned to a new argument. Drawing heavily of the liberal tradition of the West, and the central place it affords individual freedom in its scheme of values, they argued that capitalism and liberty go hand in hand. If one supports the cause of individual liberty, one must also support largely unfettered capitalism.
A classic argument along these lines appears in the first chapter of the economist Milton Friedman’s work Capitalism and Freedom (1962). Friedman highlights two ways in which capitalist economic arrangements can contribute toward individual freedom. First, and most straightforwardly, the freedom that capitalism involves – namely, the freedom to buy and sell in an open market – is itself a component of the overall freedom of an individual. Regulating markets invariably involves restricting the number of options open to people about what they do with their own property, and thus reduces their freedom.
Second, this economic freedom can also play a role in promoting political freedom. Only when the concentration of political power in central government is offset by economic power in the hands of ordinary citizens can we be sure that our government will not degrade into tyranny. Without the ability to amass resources and use them to hold the government to account (by donating it to campaigns, and so on), state power may go unchecked in a dangerous way.
While Friedman’s arguments about the connection between unregulated capitalism and freedom might have had some plausibility 60 years ago, more recent technological developments, and the way in which they have interacted with free markets, have started to undermine his assumptions. For one thing, a free market in which high-tech products have a central place may not be so friendly to the component of individual freedom that he pointed to in his first argument. This might be, for example, because of technological monopolies: when only one firm possess the technology necessary for a given product to be produced, consumers lack much of a say about what terms they will buy it on. At the same time, complementary products might further limit economic freedom; if one has to use a specific operating system when using a given computer, our capacity for choice is limited. Finally, compatibility issues may mean that our choice over products is further reduced. If everyone is using a specific program for word processing, I may not be able to work with them if I am using something else.
Friedman’s ideological ally, Friedrich Hayek, once argued that ‘[o]ur freedom of choice in a capitalist economy rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another’. Although this may make sense with products like umbrellas – if one seller cannot give me a good-quality umbrella, I can find another one further down the street – it cannot be said to apply to many technological products. If a popular social media site refuses to satisfy my privacy preferences, I cannot simply switch to another (unless I want to be on a social media site which nobody else uses).
Friedman’s second argument, that economic freedom supports political freedom, has also begun to look suspect. New technologies have undoubtedly increased the possibilities for political action: campaign groups can now organize more effectively with the aid of the internet, for instance. But it has also created new opportunities for oppression by powerful interests. Cambridge Analytica have been able to directly target susceptible individuals with messages supporting given political positions. Given that rival positions are not given an opportunity to respond to these messages (since these “dark ads” are not publicly accessible), democratic debate has been stifled and, we might think, the autonomy of electorates has been undermined.
Furthermore, as we spend more and more of our lives in virtual spaces (interacting with people on social media rather than in person, for example) the capacity of authoritarian regimes to track the actions of their populations has been increased. A few decades ago, to fully know what its people were up to, a government would have needed to place security cameras and voice recorders on every street corner and in every house. Now, all they need to do is to collect the online data of those people and use algorithms to identify undesirable elements. Entrepreneurs financial efforts to support various causes may be exactly the sort of thing that Friedman was thinking about when he talked of the capacity of economic power to offset political power, but the technology that these billionaires made their money from may at the same time set back the cause of political equality.
New technologies can be used to harness greater freedom of individuals. But if they are to live up to this promise, the economic environment that was once deemed appropriate for simpler products to be bought and sold may need to be replaced.