Digital Capitalism

$\mathsf { v } _ { \mathsf { h } } ( \mathsf { t } )$ is necessary labour-time in year t;

$\mathsf { p } _ { \mathsf { h } } ( \mathsf { t } )$ is surplus labour-time in year t.

Living value per hour: lvph(t) $\mathsf { \Omega } = \left( \mathsf { V } _ { \mathsf { p } } ( \mathsf { t } ) + \mathsf { p } _ { \mathsf { p } } ( \mathsf { t } ) \right)$ / h(t) [€/hour]

where $\mathsf { V } _ { \mathsf { p } } ( \mathsf { t } )$ is total wages in year t;

$\rho _ { \mathsf { p } } ( \mathsf { t } )$ is total profits in year t;

h(t) is total hours worked in year t.

The value of constant capital has already been created at this point of time. It is transferred to commodities and represents specific amounts of value:

$$
\mathsf { c } _ { \mathsf { h } } ( \mathsf { t } ) = \mathsf { c } _ { \mathsf { p } } ( \mathsf { t } ) / \mathsf { | v p h ( t ) }
$$

where $\complement _ { \mathrm { h } } ( \mathrm { t } )$ is constant capital in year t, measured in hours;

$\mathtt { C } _ { \mathfrak { p } } ( \mathfrak { t } )$ is constant capital in year t, measured in monetary units (€);

lvph(t) is living value per hour in year t, measured in €/hour.

Given all these assumptions, MELT (t) can be calculated for t = 0 and then iteratively for all other points of time t = 1…n.

• I selected the following information industries and industry aggregates for analysis:

D58T63 Information and communication;

D58T60 Publishing, audiovisual, and broadcasting activities;

D58 Publishing;

D59T60 Audiovisual and broadcasting activities;

D61 Telecommunications;

D62T63 IT and other information services;

D73 Advertising and marketing research;

D90T93 Arts, entertainment, and recreation.

286

Themes

• In the next step of analysis, I calculated several measures for all time periods and for all of these industries:

Sum of commodity prices $\mathsf { p r } _ { \mathsf { p } } ( \mathrm { t } ) = \mathsf { c } _ { \mathsf { p } } ( \mathrm { t } ) + \mathsf { v } _ { \mathsf { p } } ( \mathrm { t } ) + \mathsf { p } _ { \mathsf { p } } ( \mathrm { t } )$ [€]

c_h(t) = c_p(t) / MELT (t) [hours]

v_h(t) = v_p(t) / MELT (t) [hours]

Surplus-value: $\mathsf { S } _ { \mathsf { h } } ( \mathrm { t } ) = \mathsf { h } ( \mathrm { t } ) - \mathsf { v } _ { \mathsf { h } } ( \mathrm { t } )$ [hours]

Surplus-labour: $\mathsf { S } _ { \mathsf { p } } ( \mathrm { t } ) = \mathsf { S } _ { \mathsf { h } } ( \mathrm { t } ) \times \mathsf { M E L } \top$ (t) [€]

$$
\mathsf { p r } _ { \mathsf { h } } ( \mathsf { t } ) = \mathsf { p r } _ { \mathsf { p } } ( \mathsf { t } ) / \mathsf { M E L T } \left( \mathsf { t } \right) [ \mathsf { h o u r s } ]
$$

$$
\mathsf { p } _ { \mathsf { h } } ( \mathsf { t } ) = \mathsf { p } ( \mathsf { t } ) / \mathsf { M E L T } \left( \mathsf { t } \right) \left[ \mathsf { h o u r s } \right]
$$

Value of output: $\mathsf { w } _ { \mathsf { p } } ( \mathrm { t } ) = \mathsf { c } _ { \mathsf { p } } ( \mathrm { t } ) + \mathsf { v } _ { \mathsf { p } } ( \mathrm { t } ) + \mathsf { s } _ { \mathsf { p } } ( \mathrm { t } )$ [€]

Value of output: $\mathsf { w } _ { \mathsf { h } } ( \mathrm { t } ) = \mathsf { c } _ { \mathsf { h } } ( \mathrm { t } ) + \mathsf { v } _ { \mathsf { h } } ( \mathrm { t } ) + \mathsf { s } _ { \mathsf { h } } ( \mathrm { t } )$ [hours]

Difference between value and price: $\Delta _ { \mathrm { p } } = \mathsf { p r } _ { \mathrm { p } } ( \mathrm { t } ) - \mathsf { w } _ { \mathrm { p } } ( \mathrm { t } )$

Difference between value and price: $\Delta _ { \mathsf { h } } = \mathsf { p } _ { \mathsf { h } } ( \mathsf { t } ) - \mathsf { w } _ { \mathsf { h } } ( \mathsf { t } )$

Value rate of exploitation: $e _ { \mathrm { v } } = \mathsf { S } _ { \mathsf { h } } ( \mathrm { t } ) \ / \mathsf { v } _ { \mathsf { h } } ( \mathrm { t } ) = \mathsf { S } _ { \mathsf { p } } ( \mathrm { t } ) \ / \mathsf { v } _ { \mathsf { p } } ( \mathrm { t } )$ (surplus labour / necessary labour)

Price rate of exploitation: $\boldsymbol { \mathrm { e } } _ { \mathrm { p } } = \boldsymbol { \mathrm { p } } _ { \mathrm { h } } ( \mathrm { t } ) / \mathrm { v } _ { \mathrm { h } } ( \mathrm { t } ) = \boldsymbol { \mathrm { p } } _ { \mathrm { p } } ( \mathrm { t } ) / \mathrm { v } _ { \mathrm { p } } ( \mathrm { t } )$

Organic composition of capital: $0 \mathsf { c } _ { \mathsf { v } } = \mathsf { c } _ { \mathsf { h } } ( \mathrm { t } ) / \mathsf { v } _ { \mathsf { h } } ( \mathrm { t } ) = \mathsf { c } _ { \mathsf { p } } ( \mathrm { t } ) / \mathsf { v } _ { \mathsf { p } } ( \mathrm { t } )$ (constant capital / variable capital)

Value rate of profit: $\mathsf { r p } _ { \mathsf { v } } = \mathsf { s } _ { \mathsf { h } } ( \mathsf { t } ) \ / \ ( \mathsf { c } _ { \mathsf { h } } ( \mathsf { t } ) \ + \mathsf { v } _ { \mathsf { h } } ( \mathsf { t } ) ) = \mathsf { s } _ { \mathsf { p } } ( \mathsf { t } ) \ / \ ( \mathsf { c } _ { \mathsf { p } } ( \mathsf { t } ) \ + \mathsf { v } _ { \mathsf { p } } ( \mathsf { t } ) )$ (surplus / (constant capital + variable capital))

Price rate of profit: $\mathsf { r p } _ { \mathsf { p } } = \mathsf { p } _ { \mathsf { h } } ( \mathsf { t } ) / \left( \mathsf { c } _ { \mathsf { h } } ( \mathsf { t } ) + \mathsf { v } _ { \mathsf { h } } ( \mathsf { t } ) \right) = \mathsf { p } _ { \mathsf { p } } ( \mathsf { t } ) / \left( \mathsf { c } _ { \mathsf { p } } ( \mathsf { t } ) + \mathsf { v } _ { \mathsf { p } } ( \mathsf { t } ) \right)$ (profit / (constant capital + variable capital))

In the presentation of the results that follows, I will use the following conventions for industries:

1. D58T63 Information and communication;

1. D58T60 Publishing, audiovisual, and broadcasting activities;

Chapter Twelve | The Information Economy

287

The Information Industry and Marx’s Labour Theory of Value

1. D58 Publishing activities;

1. D59T60 Audiovisual and broadcasting activities;

1. D61 Telecommunications;

1. D62T63 IT and other information services;

1. D73 Advertising and market research;

1. D90T93 Arts, entertainment, and recreation.

In order to make the results easier to understand, I converted labour hours into fulltime-equivalent labour years, assuming a full-time working week of 35 hours and 48 working weeks per year. In Germany, the minimum statutory leave is four weeks, so 1 working year = 35 × 48 hours = 1680 hours.

Table 12.2 presents a comparison of the German information industries’ output value in the years 2001–2011. Table 12.3 gives the same data, but not calculated in years, but in monetary units (€). The data show that in all analysed information industries, information tends to be sold at prices higher than values. Table 12.4 shows how much larger prices are than values. Prices tend to be between 1.3% and 47.0% higher than values. There is only one case, where the total value is higher than the total price (industry #6, 2008). The annual average differences vary between a minimum of 8.2% in 2008 and a maximum of 20.6% in 2002. The annual average price-value-difference for all information industries cumulated over the years 2001–2011 is around 13%. The price-value-difference is on average largest in the IT industry (26.3%) and lowest in the telecommunications industry (5.1%).

Table 12.5 shows the organic composition of capital – the relationship of constant to variable capital – in the German information industries in the years from 2001 until 2011. It ranges between 0.2 and 4.9. The annual average for all industries is 1.9, which means that on average constant capital tends to be almost twice as large as variable capital. The organic composition tends to be especially high in broadcasting and telecommunications and rather low in IT and information services as well as advertising and market research. This is an indication that broadcasting and telecommunications are particularly technology-intensive, whereas IT, advertising, and market research are particularly labour-intensive industries.

288

Themes

The rate of profit is the relationship of output-surplus to input, the ratio of profit to investments. There is a difference between the price rate of profit and the value rate of profit (Kliman 2007, 26). The value rate of profit calculates the output-surplus based on total surplus-value, whereas the profit rate of profit uses total monetary profits:

$$
\mathsf { V a l u e } \mathsf { r a t e } \mathsf { o f \ u p r o f i t { \Pi } } \mathsf { r p } _ { \mathsf { v } } = \mathsf { s } _ { \mathsf { h } } ( \mathsf { t } ) / ( \mathsf { c } _ { \mathsf { h } } ( \mathsf { t } ) + \mathsf { v } _ { \mathsf { h } } ( \mathsf { t } ) ) = \mathsf { s } _ { \mathsf { p } } ( \mathsf { t } ) / ( \mathsf { c } _ { \mathsf { p } } ( \mathsf { t } ) + \mathsf { v } _ { \mathsf { p } } ( \mathsf { t } ) )
$$

price rate of profit

$$
\mathsf { r p } _ { \mathsf { p } } = \mathsf { p } _ { \mathsf { h } } ( \mathsf { t } ) / ( \mathsf { c } _ { \mathsf { h } } ( \mathsf { t } ) + \mathsf { v } _ { \mathsf { h } } ( \mathsf { t } ) ) = \mathsf { p } _ { \mathsf { p } } ( \mathsf { t } ) / ( \mathsf { c } _ { \mathsf { p } } ( \mathsf { t } ) + \mathsf { v } _ { \mathsf { p } } ( \mathsf { t } ) )
$$

Chapter Twelve | The Information Economy

289

The Information Industry and Marx’s Labour Theory of Value

Tables 12.6 and 12.7 show the value and price rates of profit for the German information industries in the years 2001–2011.

The average value rate of profit in the German information industries for the years 2001–2011 is 3%, the average price profit rate 30%. This means that in terms of value calculated as average socially necessary labour-time, the surplus tends to be around 3% of investments, whereas in terms of monetary prices it is around 30%. This difference derives from the previously presented result that there is a tendency that information commodities are sold above their values. In the German information industry, particularly high profit rates have continuously been achieved in the first decade of the 21st century in advertising and market research as well as arts, entertainment, and recreation.

290

Themes

Chapter Twelve | The Information Economy

291

The Information Industry and Marx’s Labour Theory of Value

In the case of information, because of a sunk-cost rule the initial copy or prototype tends to be cost-intensive. This means that the value measured as labour-time that is required for information production is high. But once information is created, the value for reproducing it is extremely small or almost zero. There are only costs and labour-time for reproducing and circulating information or for updating it, but not for originally creating it because it is not used up during consumption. A mechanism that is therefore of particular importance for achieving profit by selling information is to secure copyrights and to sell copies and licenced usage of information at prices that stand above labour-values. The difference between the low production price of a copy guaranteed by low labour inputs and in comparison a relatively high sales-price is an important principle of capital accumulation in the information industries.

This mechanism can be observed in the data presented in this section: I showed for the German information industries that on average during a period of ten years, the difference between commodity values and commodity prices was about 13%. The price/ value difference reached an average maximum of 26.3% in telecommunications, where the peak difference was 47.0% in 2002. In publishing, audiovisuals, and broadcasting the average price/value difference was 11.1%, in IT/information services 5.1%, and in arts, entertainment, and recreation 10.7%. We can in comparison calculate the price/value difference for the entire German economy (excluding finance and renting that we consider as unproductive sectors) and the manufacturing sector (table 12.8). We can see that on average manufacturing goods tended to be sold 4.8% above their values. In the total economy, values on average roughly equalled prices. This is not a proof, but a potential indication that the information industries tend to be especially characterised by selling commodities above their average values and to accumulate surplus-profits. To substantiate this assumption, further research will be needed in the future with data from different countries. The assumption that the information industries use a special form of capital accumulation is further substantiated by the fact that the price profit rate in manufacturing was on average around 7% and in the total German economy (excluding finance and real estate) around 13% (table 12.9), whereas the average in the information industries was around 30% (table 12.7). In these data, profits tend to be quite higher in relation to investment costs in the information industries than both in the total German economy and the manufacturing industry.

292

Themes

The average organic composition of capital $\complement / \nu$ was around 2 in the German information industries (table 12.5) and according to my calculations in the same time period (2001–2011) 1.8 in the entire economy (excluding finance and real estate). The average monetary profit generated per working hour was 9.0€ in manufacturing, 8.6€ in the total economy, and 10.7€ in the information industries. The average labour costs per hour were 30.9€ in manufacturing, 24.7€ in the total German economy, and 30.7€ in the information industries. So both labour costs and profit per hour were in the information industries somewhat higher than in the total economy. These differences are not striking, the German information industry overall is an average industry in terms of the average organic composition, monetary profit per hour, and wages per hour.

Tables 12.10 and 12.11 show the average differences between total prices and total investment costs in the information industries, manufacturing, and the total German economy:

Chapter Twelve | The Information Economy

293

The Information Industry and Marx’s Labour Theory of Value

$$
\mathsf { d } = \mathsf { ( p r i c e s / ( c + v ) ) } - 1
$$

d measures to which percentage degree prices are on average higher than investment costs.

The data show significant differences in that in all except one industry (IT), d is on average quite higher than in manufacturing and the total economy. Whereas, prices are on average 12.5% higher than investments in the total economy and 6.7% in manufacturing, the price/investment ratio is on average 20.3% in the German information industries.

294

Themes

Selling information has high initial development and investment costs (sunk cost rule). It is also highly uncertain if audiences and users will have interest in a specific book, film, record, software, television series, advertisement, mobile phone because human tastes and cultural preferences are complex and cannot be calculated in advance (hit rule, nobody knows anything rule, see also Caves 2002). Initial labour costs and requirements are high, whereas the costs and hours for reproducing information goods (except live performances and unique pieces of art) are fairly low. The data presented in this section are empirical indications for the tendency that information companies try to set off the risks involved in their form of production by selling their commodities at prices above their output values (on average around 13% higher), at prices that are significantly higher than investment costs (on average around 20% higher) than in the total economy, which – given successful commodity sales – results in higher profit rates. The price rate of profit in the German information industries was in the observed data therefore on average around 30%, whereas it was on average only around 7% in the manufacturing industry and 12.5% in the total economy.

12.3 Labour Productivity in the Information Sector

The question arises whether it is possible or rather difficult to increase productivity in the information sector. From a theoretical perspective, the assumption of limited productivity increases seems to be only partly true for information, art, and culture: journalists can be made to work faster, that is to write more articles, cut and paste them online or from press releases, etc. Art and culture can be digitally reproduced and thereby become commodities that can be reproduced faster. Advertising is content that can be made more efficient by targeted advertising that allows presenting different advertisements at once to many people. Designers and architects can be made to work on more projects simultaneously. Freeman (2008, 3) argues in this context that “reproduction, transmission and recording” have “eroded handicrafts limits beyond the point at which the handicraft concept remain viable”. The Internet is a medium enabling the creation, production, transmission, and consumption of information in one space as well as the convergence of these processes (prosumption). Freeman argues that in the Internet age service productivity “is free to expand without natural impediment” (Freeman 2008, 3).

The labour productivity index is an OECD statistical indicator that uses the following definition of labour productivity:

Chapter Twelve | The Information Economy

295

Labour Productivity in the Information Sector