What did William Gibson get wrong in his otherwise superb short story "New Rose Hotel," which was published in 1984 (the same year as his groundbreaking novel Neuromancer) and made into an equally superb but grossly underappreciated film in 1998? That in the future, corporations would not only dominate the world in the near absence of state power but have a monopoly on high-tech innovations. In Gibson's story, the scale of the investments that corporations have made in R&D and human capital is such that new products flow from their labs at a dizzying pace. But what we find today (which is the future) are corporations spending more and more money on stock buybacks rather than on developing new products, new technologies. In fact, a recent paper (PDF) by the economist J.W. Mason shows that corporations are even borrowing loads of money to pay shareholders. You are supposed to borrow money to make more money—that is actually capitalism. What on earth should we call this strange business of borrowing money to increase the returns of unproductive shareholders?
In his paper, Mason compares corporate inflows — earnings and borrowed money — with outflows in the form of productive investments and shareholder rewards. In 1960, a dollar borrowed would generate an average 40 cents in additional investment. Since the mid-1980s, the investment per dollar borrowed has shrunk to 10 cents. Taking the place of investment, he finds, is a correlation between borrowing and shareholder payouts...
The consequence? “Finance is no longer an instrument for getting money into productive businesses, but getting money out of them.” We can say that the future Gibson missed, and the one we actually find ourselves in, is quickly moving in the direction of a completely new state of affairs, a new kind of official economy that can only be described as a no-economy economy.
Below this growing no-economy, we find a frothing, feverish, and unregulated Système D, the globally connected underground economy that Gibson's short story (and fiction as a whole) correctly predicted. Also, the no-economy economy of the financial capital sector is converging with the no-service economy of the documented labor sector. And whereas stock buybacks represent the essence of the former economy, the self-service checkout machines in retail stores represent the essence of the latter.
In fact, the idea of a no-service economy came to me from an employee at the Safeway in University Village. I will not name this employee, nor specify his/her sex. What you need to know is that s/he is about to retire, has been in the business longer than s/he cares to remember, and, on the winter night that I met him/her, seemed to have largish feet that had been forced into tight work-like shoes. One other thing that’s important to know is: The Safeway s/he works at is huge but has no self-checkout machines. None! The same is not true for the QFC right next door (its main area has 11 machines and nine live service stations). Though the employee I spoke with believes his/her managers will eventually surrender to the machines, he/she also believes that Safeway has not been as aggressive about self-service as other corporate retailers, such as QFC. Support for this claim can be seen at the Safeways on Rainier, on Othello, or even the one on Capitol Hill, which is not that far from the epicenter of the self-service revolution in Seattle, the Broadway Market (more on this in another post).
“What all of this is about,” said the Safeway employee, “is our kind of economy and the way it is deteriorating... I watched America become a service economy. I saw people leaving the factories, which were closing down, and entering things like retail. For a moment, it was all about service and customer satisfaction. But we have now entered a new world. We are now becoming a service economy with no services.” This is the kind of deep insight that only long experience in this industry could provide. The US economy is trying to become a no-service economy. After shipping factory jobs to poorer countries in the '70s and '80s, the managers of our times want to relocate the remaining jobs in the service sector. (Groceries hire one out of every 10 Americans.) One way to relocate such jobs is the old way: send them to poor countries (call centers for American companies are contracted to businesses in the Philippines and India). The other way: transfer service work from employees to customers.
The true horror of the self-checkout machines and stock buybacks is that they point to the exhaustion of meaningful human innovation in the post-Space Age. This exhaustion is related to secular stagnation, and the arguments made by the economist Robert Gordon ("The death of innovation, the end of growth..."). In the past, we made things or dreamed of things that actually helped us—that warmed the house, brought light to our bedsides, washed our dishes, kept food cold, baked our cakes, blended our fruits, removed dust from our carpets, alarmed us if there was a fire or an intruder, powered screws into walls, connected us directly with people who lived across the street or in another part of the world, recorded the messages of those we had missed, and so on and so on. By the '70s, we had practically everything—the beginning of stagnation (which was sold as stagflation to the public). Our homes were simply stuffed. There was not much more we needed. At this point, you saw a shift from appliances that helped consumers to machines that made consumers do the work—self-service. We crossed that line in the '80s, at around the time the economy departed real production, financialized, and began its journey to a no-economy economy. Money became virtual, and factories became virtually empty. This is what happens when a country can no longer grow along normal lines. It has to flee reality, which is growing too slow, and enter the labor-free orbit of speculation.