The Great Disruption: From Cyber-politics to Cyberwar
This Book Series (2013 Draft Version)
It began with the big box under the Christmas tree. Beginning with a “toy” crystal radio set my parents gave me for Christmas when I was 9 years old, I have been fascinated by information and communication technologies (ICTs) and how they affect human society. After throwing a wire over the driveway and hooking up the extremely primitive crystal radio set, I was amazed to hear AM superstation KFI through the headphones. This led to salvaging an ancient shortwave radio my grandparents once owned which allowed me to listen into “Radio Havana Cuba” and to request a reception confirmation from the embargoed island’s governmental broadcaster, which probably landed me with an FBI file as each month for years thereafter an envelope would arrive from the country of the Cuban missile crisis. I was hooked. This led to learning the Morse Code and electronic theory required to earn an amateur radio license by the time I turned 15. A window to the world and outer space opened up as I was able to monitor teams of amateur astronomers who used amateur radio as the social networking “Facebook” of the 1960s as they observed potential areas of interest on the moon for the Apollo lunar missions. The U.S. Federal Communications Commission (FCC) and the United Nation’s International Telecommunication Union (ITU) also become an important governmental presence as they determined which frequencies my ham radio could use as I sought to bounce my transmitter’s signals off the ionosphere in order to talk to other hams thousands on faraway continents. Even though the signals were often scratchy, the message was coming in loud and clear – the world was changing as ICTs erased the barriers of time and distance between human societies.
1969 was a remarkable year. Not only did it mark the coming of age of the Aquarius generation in the masses of young people spontaneously forming a new community at the Woodstock music festival, but just weeks before, Armstrong and Aldrin had made the first landing and television program from the moon, which was broadcast globally on the just-completed worldwide communication satellite network. Declared by some as one of the most important pictures ever taken, “Earthrise” recorded the Apollo astronauts’ view of the entirety of human civilization in the image of a brilliant blue and while earth rising above the alien horizon of the moon.
A few years later, as I was searching for a doctoral dissertation topic to complete my Ph.D. in political science, I drew upon these experiences and images as inspiration to identify what was going to truly shape international relations for the next decades. In 1980, massive demonstrations against nuclear power in the U.S., Europe, and elsewhere seemed to point to a research endeavor examining how OPEC would fuel policy shifts to the seemingly unlimited atom alternative. But after a frustrating set of initial forays into the German anti-nuclear movement, topic-less I boarded my KLM flight back to California when I picked up the airline magazine in the seat pocket and read about cable TV pirates in the Netherlands and how they were a thorn in the side of the European TV monopolists. Eureka!
From that moment, it was a short conceptual jump from the politics of international telecommunications to the topic of communications satellites and how the international community of nations was grappling with the policy dilemmas associated with regulating an intrinsically global ICT that governments could not control. ICTs not only in the form of satellites, but also video-cassette recorders, personal computers, cell phones, and of course the Internet, are part of a larger tectonic shift that is altering the topography of human civilization for the 21st Century and beyond. This is truly a “great disruption,” on the scale of previous disruptions that profoundly changed the way human beings organized themselves on this planet. While we know a lot about previous “great disruptions,” such as the shift from hunter-gatherer bands to great agriculturally-based urban civilizations, or from agricultural societies into the industrial revolution, our view today is especially nuanced by both the speed of the transformation and the fact that the disruption is itself a revolution in the way in which a disruption would be noticed and measured – the way we gather, process and use information. A recent article talked about the unique role those of us born before 1985 now play. We are the last generation to know the world before the Internet, but also the first to fully enter into our professional careers incorporating the online technologies. In sum, we are the last generation to speak both languages – the pre-Internet discourse and the post-Internet tweets. This has happened before.
The last great disruption caused by a fundamental change in the way people dealt with information occurred about 500 years ago. Gutenberg’s development of movable type in 1451 tore down the cost barriers to printed information on a scale similar to today’s Internet revolution. Now that printed works were much more affordable, millions of new readers flooded the burgeoning publishing market. Incentivized literacy created mass audiences that were already seeking access to heretofore restricted knowledge by the time of Martin Luther’s posting of the 95 Theses in 1517 and his translation of the complete Latin-Greek Bible into colloquial German in 1534. While this earlier great disruption encompassed a time period considerably longer than our current great disruption now barely two decades since the deployment of the World Wide Web, many would point out that the transformations during these past two decades are just as profound and perhaps of even greater disruptive power than those culminating in the Protestant Reformation and the Westphalian System of that earlier era. My quest as a scholar and teacher is to bring these disparate disciplines of the social and technological sciences together into an accessible new worldview that explains so much of what is currently considered so “unexplainable” in U.S. politics or in international relations.
This series brings to the reader a new way of looking at human civilization through the lens of how ICTs are changing our view not only of society and politics, but perhaps even more importantly, our view of ourselves and our role as empowered citizens to realize our goals to make our planet sustainable and our later generations better off. Welcome and please fasten your seatbelts as we explore “new worlds, new civilizations” in the vast online realm.
Book 1: The End of Government
Larry F. Martinez
Professor, Department of Political Science, California State University, Long Beach
Prologue to Book 1: The End of Government
In 1969, the academic field of political science pivoted around one of those paradigm shifts that occur periodically when someone comes up with a new way of looking at the world that makes a lot more sense. In that year, the political scientist at Cornell University was Theodore Lowi and the book he wrote was, The End of Liberalism. What Lowi argued was that Congress by the 1960s had become significantly less engaged in governance, i.e., directly addressing the nation’s problems through legislative solutions Congress itself initiated. According to Lowi, Congress had abdicated its role in governance, leaving it now instead up to the interest groups that had come in Lowi’s view to dominate the governmental process. As the quote from the book’s 1979 edition’s dust jacket points out:
"The main argument which Lowi develops through both editions is that the liberal state grew to its immense size and presence without self-examination and without recognizing that its pattern of growth had problematic consequences. Its engine of growth was delegation. The government expanded by responding to the demands of all major organized interests, by assuming responsibility for programs sought by those interests, and by assigning that responsibility to administrative agencies. Through the process of accommodation, the agencies became captives of the interest groups, a tendency Lowi describes as clientelism. This in turn led to the formulation of new policies which tightened the grip of interest groups on the machinery of government."
In short, Lowi’s argument was that interest groups, which in conventional “pluralist” views of democracy served as the transmission belts for passing on the demands by citizens into the machinery of government, had now become that very machinery. The means had become the end. Lowi’s explanation for why that was taking place placed most of the responsibility on the Congress’s decisions to delegate government’s tasks demanded by the interest groups to administrative agencies that were in turn easily “captured” by the groups they were supposedly designed to regulate. The “End of Government” bemoaned by Lowi was the dilution of its agency, or prerogative to act, through a hyperactive delegation of governmental authority into myriads of Great Society-created governmental entities and their joined-at-the-hip clientele interest groups. Of course, Lowi’s title is a pun, as it were on the word “end” as it pertains to the goal or “teleology” of government, and the actual termination of governmental authority. This book also enthusiastically picks up Lowi’s pun again and runs with it even further than Lowi could at his relatively early stage of the information revolution. What I am arguing throughout this book, is that the teleological interpretation of “End of Government” has now merged with its more or less literal meaning – government was there to fulfill the desires of its client groups; it has lost its distinctive form and function as an instrument for governance apart from its society. Government has begun to fuse with society.
Of course, in 1969 or even 1979, Ted Lowi could not have even guessed at what lie in store for the United States and the for the rest of the world as computer technology and data networks explosively deployed in response to the public’s unquenchable demand for information services instigated by now affordable personal computer in the early 1980s. While Lowi’s book stands as a classic in the pantheon of paradigm-shifting academic works, its analysis falls short. A deeper, more pervasive, factor was beginning to drive these expansions of governmental clientelism than a mere desire to appease interest groups. The advent of electronic mass media reached a crescendo during the period of time Lowi was investigating, with the result that government was now exposed 24/7 to glare of television lights, reducing the costs of time delay and geographical distance nearly to zero for millions of citizens. As the costs for individual citizens to access information about their government fell with the ubiquity of electronic media in every home, school and office, so rose the scrutiny to which government was exposed. As I will argue in the following book, Lowi’s analysis falls short because it did not yet recognize nor appreciate the effect information and communication technologies were already exerting to lower the costs of access to government. But in a larger sense, this is only part of the story in the second decade of the 21st Century, some five decades since the invention of the Internet in 1969. I call this our “Jerry McGuire” moment. There is an iconic scene in the 1996 film where the sport agent played by Tom Cruise is trying to keep his sports star client played by Cuba Gooding, Jr. During this negotiation over a phone call, the Cuba Gooding character presses his negotiation point with his agent by getting the Tom Cruise character to acknowledge verbally, loudly, and repeatedly, what this process is all about by them shouting in unison, “show me the money!” Increasingly, the process of democratic governance in the United States is experiencing its own Jerry McGuire moment as money floods into every nook and cranny of the electoral horserace drowning the institutions – political parties, nominating conventions, and campaigns – that used to represent the idea of governance in a climate changing flood of money. We, as the supremely communicative and information-craving species of homo sapiens, are now writing a new story about how we intend to govern ourselves in an information abundant future where everyone, everywhere, has near complete access to all the information in the world. This book is that story.
As confirmed by the 2012 presidential electoral cycle, information and communication technologies (ICTs) are transforming not only the politics of the United States economy, but perhaps, even more crucially, the economy of its political culture. In a systemic perspective, agricultural or industrial-era paradigms about government – societal relationships are Ptolemaic attempts to explain evolving orbital paths between government and society that today have more to do with “government as a business” than the conventional “business of government.” To explain the unprecedented amounts of money awash in democratic governance requires a new logic for analyzing government’s relationship to an information society. Mancur Olson’s The Logic of Collective Action argued that a new paradigm to explain emerging 20th Century post-industrial pluralist systems of democratic governance was needed to refract otherwise opaque phenomena of interest group behavior and representation. I argue that Economics Nobel Laureate Oliver Williamson’s transaction cost model provides a logic that can transform our understanding of the hidden dynamics driving democratic governance of an information society in the 21st Century. Using the logic of transaction costs, Williamson’s analysis is uniquely suited for detecting and assessing the utility of information-based transaction costs in defining government’s institutions, roles and power in a societal system of information abundance.
This chapter deepens and expands the analysis in a paper presented initially at the 2006 Western Political Science Conference, and which was subsequently adapted for publication as a book chapter entitled, “Commercialization of Democracy: The Rise of the Political Industrial Complex” (Martinez 2006). The author acknowledges the especially insightful and constructive comments made by research colleagues at the Center of Technology Assessment in Stuttgart, Germany, during his Fulbright Research Sabbatical in 1998-99.
This book started off as an argument about how the explosive deployment of information and communication technologies (ICTs) continues to fundamentally change the world in general, and our political and economic systems in particular. Based on years of data collection and observation about the evolution of economic and political systems throughout increasingly information-intensive societies, my argument is that the economic and the political spheres are converging as information costs decline. But let’s strip the jargon and get right to the key question this book intends to answer, “why is there now so much damn money in politics?” While this question is where I started my inquiry, it quite unexpectedly took me down into many different rabbit holes within a veritable Wonderland of logical and conceptual twists and turns. Getting beyond the cable TV talking heads to the core of the question about money in politics involves a whole lot more than just Supreme Court decisions and vaguely written congressional legislation. It has to do with the very stuff of what societies and their governments are made of – basically what we are talking about here is information itself and how it affects human behaviors.
To pose the argument slightly differently, if the Internet and other online information and communication technologies are fundamentally transforming the 21st Century’s economic marketplace, it would stand to reason that those same factors are also reshaping other elements of society, including, most significantly, how we in the advanced industrial democracies, govern ourselves. The examples supporting an affirmative answer for the former are all around us, yet there appears to be a reluctance to recognize the latter, as if we do not want to admit that our system of democratic governance would be just as vulnerable to the forces unleashed by ICTs as the economic system has proven to be. And yet, many of the changes we observe in post-Internet democratic governance elude explanation unless we analyze our political system using a theoretical framework utilizing tools of economic analysis. Otherwise, the massive amounts of money just don’t make political sense.
ICTs are transforming the economic marketplace of information societies. Not so many years ago, we booked airline tickets through travel agents, who thrived, in essence, through an “information monopoly” they possessed about airline schedules and fares, an information monopoly created by, and maintained by high ICT transaction costs. Quite simply, during the 1970s-80s, the cost of computers and network technology required to access the airline data was at a price point out of reach for average travelers. But these costs plummeted in the 1990s with the emergence of mass-produced personal computers and online data services. Today, millions of passengers routinely book flights directly with airlines through their Internet-connected computers and even mobile smartphones, while former travel agents are pursuing other careers. How did this happen? While President Bill Clinton’s 1992 campaign motto “It’s the economy, stupid!” poignantly focused on the economic insecurity high in voters’ awareness, a more accurate phrasing of what was actually transpiring would be the less rollicking, “It’s disintermediation, stupid!”
The tear down of the travel agents’ information monopolies described brief above occurred through a process designated by an overly complicated looking word, “disintermediation.” Let’s quickly deconstruct “disintermediation” so that it loses any appearance of being some kind of snarky economic jargon. Focus on the “intermediation” part of the term. In any economic transaction, there are “intermediate” stages or persons involved in carrying out aspects of the transaction at a particular stage. So, to go back to the travel agent we mentioned above, the transaction to buy airline tickets used to require going to your neighborhood travel agent who would serve as the “inter-mediator” between you and the airline. You needed to know which airlines flew at what times and prices between the geographical points of your planned trip. You also need to know if seats were available, if you could get a window or aisle seat, and whether travel your partner(s) could be seated next to you or in the same row. By the early 1960s, computers had begun to replace the manual reservation systems that were literally on notecards. But computer terminals were extremely expensive, so only travel agents with computer terminals subsidized by the airlines were able to spread those technology costs among the many clients they served as inter-mediators earning fees from both customers and airlines for their services.
With the advent of networked personal computers in the late 1980s, the cost of accessing the airlines’ reservations systems began to fall. Airlines realized that with the right software, any of their customers could find out the same information about flights as any travel agent, and with a credit card, the banking system could facilitate the purchase without involving the cost of paying for the “inter-mediary” travel agent facilitating the transaction between airline and customer. Today, millions of airline tickets are sold directly between the airline and the passengers. The “dis” part of the word is the removal of those travel agent “intermediates” from the economic transaction. So, to put it as succinctly as possible, “disintermediation” is the elimination of the “middleman.”
But let’s not give up on the travel agents quite yet. Obviously, there are many, many successful travel agents who have managed to survive even though they are buying far fewer airline tickets for clients than their predecessors of the pre-Internet era. Why are they still in business? Thus we come to the theory of the firm.
Suffice it to say at this stage in our analysis, to point out that the firm exists when it makes economic sense for it to transact its goods and services. In other words, the travel agent’s expertise developed over many thousands of clients’ itineraries means an acquired efficiency in transacting a complicated vacation itinerary that the client finds to be in their own self-interest to pay the agent for instead of doing it (perhaps for the first and only time) themselves to those destinations. Could the travel handle all the arrangements themselves – of course. But how much would it cost in terms of the traveler’s time? And how much research would the traveler have to conduct to figure out which hotels were the best for the money, which cruise ships offered the most enjoyable ports-of-call, and what kinds of discounts might be available if one could negotiate the entire trip as a package? So while travel agents are not selling many individual airline tickets these days, they are selling a lot of package travel deals involving multiple means of transport (airline, ship, train, transfers, etc.,) lodging, and tours. Could the individual traveler do the same – not as efficiently, and that’s why it makes sense for travelers with complicated itineraries to use an agent.
The theory of why firms exist covers wide swaths of the economy and societal functions. Another example is building a house. Could an individual build their own house? Certainly, but how long would it take and how much would it cost? Instead of DIY (doing it yourself), it makes sense in terms of economic efficiency to hire a general contractor who sub-contracts out to the skilled workers and craftsmen they know to buy the materials and to construct the component parts of a home, and to do it far more efficiently than what an individual could accomplish on their own. Similarly, why does a university exist?
Let’s explore this concept of disintermediation for its power to explain a wide range of economic, social and political phenomena that underlie the revolution in governance we are witnessing today.
The Economics of Disintermediation
Economics and social theorist Jeremy Rifkin’s 2014 book, The Zero Marginal Cost Society: The Internet Of Things, The Collaborative Commons, and The Eclipse Of Capitalism (Palgrave Macmillan, 2014), is really a book about disintermediation. Expanding on his prophetic 1995 book, The End of Work, Rifkin examines how declining information costs, reflected in increasingly capable robots on the assembly line, and now smart “expert” computer systems, are eliminating the “middleman” and millions of jobs. At first it was the assembly line worker whose job fell victim to the inexorable efficiencies of assembly line robots who never have sick children at home; robots that can be almost instantly re-programmed to carry out a new set of repetitive tasks without boredom nor wage demands. In 1995, I toured a “cutting-edge” Toyota car assembly line near Nagoya, Japan, where one could see up close how the human workers were literally “riding the robots” in ergonomically-designed seats and harnesses that allowed them to perform the diminishing list of assembly tasks the robots were not yet capable of carrying out. Okay, this is manufacturing and rationalization of the assembly process has had a long history, beginning with Henry Ford’s revolutionary innovations with the Model T’s production process, culminating in today’s situation where increasingly smart robots now perform the tasks once carried out by millions of manufacturing sector workers. But doesn’t this process of manufacturing disintermediation stop at the factory door?
No, it doesn’t. Manufacturing is a very physical process dealing with very real objects and tools. In the same way, agriculture is also a very physical process that involves soil, water, seeds, sunshine, and harvesting. What is remarkable is that both of these wealth-creating sectors that have been part of human society for thousands of years, are becoming increasingly information intensive. In other words, economic evolution is tightly bound with technological innovation and this inevitably stems from the infusion of information.
How Societies Evolve (with apologies to Jared Diamond)
In the beginning, as bio-anthropologist Jared Diamond’s paradigm-setting book Guns, Germs and Steel (1997) sets out, human beings lived for the most part in small migratory groups that followed their seasonal or mobile food supply, whether bison, bass, or blueberries. Over many thousands of years, some of these groups discovered that selective growing of the grasses (wheat, barley, etc.) or seed pods (fruit) they encountered could bring about replicable genetic modifications with significantly more energy and protein content to the human consumer. As Diamond points out, our ancient ancestors also found ways to store many of these genetically selected grains and fruits for long periods, thereby making it possible for a group of humans to more nutritiously “stay put” and farm rather than traipse after dinner. Thus began the “great disruption” of antiquity between hunter-gatherer groups and the increasingly sedentary and urbanized human agricultural societies. The hunter was, so to speak, “disintermediated,” as it was now possible with farming to feed animals for consumption directly, without having to hire the hunters to hunt them. Agriculture took away the economic basis for the hunter middleman.
Photo 1 - One of the last nomadic peoples, the horsemen of Central Asia. Photo by the author, Kazakhstan, 2010.
As Diamond points out, the storage of grains for later consumption required a means for keeping track of who owned the now sizeable stocks of stored grain, requiring the use of memory-aiding marks on wet clay left over from pot making served to record ownership (cuneiform tablets). Alphabets thusly were born and eventually became the means for establishing comprehensive sets of symbols that could represent the entire range of a language’s spoken words. These symbols were systematically standardized into the disruptive information technology of antiquity – written languages.
Guns, Germs, and Steel argues that written languages developed over long periods of time by Indo-European peoples made it possible for those societies to more efficiently transfer ideas and knowledge about agriculture and societal management of resources from one generation to the next. Greek and Roman expertise became all the more accessible and affordable in the wake of Gutenberg’s development of movable type face printing in 1451, coinciding and accelerating the explosion of new knowledge and investigation during the eras of imperial exploration and colonization along with the Renaissance’s scientific revolution in the 15th and 16th centuries. In sum, as Diamond illustrates in his book, the Incas were numerically superior in their encounter with the brutal conquistador Francisco Pizarro in Peru, but completely overwhelmed by Pizarro’s ability to gather intelligence about the Incas through written accounts and his society’s ability to more quickly innovate with firearms technologies. The Incas communicated through a system of knotted strings relayed by courageous runners transporting their messages over steep Andean slopes.
The jump from the agricultural-based society where the vast majority of people are engaged in crops and livestock to the industry-based society where the bulk of wealth and livelihoods is generated in manufacturing was also accomplished by elimination of the agricultural middleman. Innovations in farm technologies such as more efficient plows, cotton gins, and harvesting equipment meant that fewer farmers could raise more crops and make more money that much larger numbers of earlier, less productive generations. Pushed off the farms by technological and chemical fertilizer innovations in the 18th and 19th centuries, these legions of disintermediated farming families trooped into the cities and took up employment manufacturing in factories the implements demanded by the now wealthier famers.
The story of course does not stop here. By the latter half of the 20th Century, the advanced industrial societies were characterized by very small segments of their populations (< 10%) engaged in agriculture, and well over half of the population employed in the industrial sectors of manufacturing, steel, and energy production. The challenge though for the industrial sector firms was how to differentiate their products from those of their many competitors in what were high saturated markets. For example, a potential car buyer in Europe, Japan, or North America in the last decades of the 20th Century would have literally scores of similar vehicle models to choose from. If you are a car manufacturer, how do you differentiate your product so that your four-door family sedan is demanded more than your all-too-similar competitors?
While it’s costly and cumbersome to innovate quickly the actual bending of metal on an assembly line, it’s really quite straightforward to nimbly differentiate an automotive product through advertising or service warranties. Both are information intensive, advertising through the plethora of mass electronic media of the late-20th Century, or extended service warranties now affordable to offer through the much more precise robotic manufacturing process that made cars much more reliable. Now, market battles determining winners and losers in the manufacturing were being fought between innovators in the rapidly growing service sector. Cars are basically commodities, requiring fewer and fewer workers to make one, as Rifkin points out in his 1995 book. Instead, college graduates in the latter-half of the 20th Century migrated like Mad Men into the service sector’s advertising and marketing firms.
Today, over half of the American workforce is engaged in the service sector. Less than 2% are farmers, and the share of the workforce employed in the Rust Belt manufacturing industries is disappearing - like the once mighty “Motown” of Detroit. Now though we see a repeat of the commodification of service sector products that we witnessed earlier with car manufacturing. Mass media advertising on broadcast TV and radio along with automobile service warranties are themselves becoming commodities, while the competition to differentiate services gains momentum but in increasingly information-intensive settings. Thus we witness with the deployment of the Internet’s World Wide Web in the 1990s, the race to differentiate services through the collection of even more information that allows the precise profiling of users and the individualized targeting of advertising into new online settings such as Facebook, Google, and YouTube.
Figure 1 Societal Evolution
So here we are, midway through the second decade of the 21st Century, squarely in the transition stage from a services economy to an information economy. The other stages of course do not disappear, but they diminish as a share of the workforce and the wealth that they create. Today, the winners and losers of the battle for economic survival are fighting it out in the information sector to differentiate their services products that differentiated their industrial manufactures, which also determines the agricultural winners and losers. For example, in 1999, while on a Fulbright research sabbatical in Stuttgart, Germany, I enrolled in a wine tasting course at the city’s community college (Volkshochschule –VHS). It was a real eye-opener, as we spent the first evening’s class learning how to clean glasses and our hands properly so that when we raised a glass in front of our nose, that our ofactory senses would not be compromised by a dishwasher detergent or cheap scented hand soap. We were also let into a little wine industry secret: most people buy a bottle of wine based on whether or not the design and colors of a bottle’s etiquette appealed to their visual aesthetic rather than expected taste or smell. In fact, most wine drinkers reportedly when blindfolded cannot taste the difference between a red or white wine according to our wine instructor. Advertising is a service that designs bottle labels, but anyone perusing the wine aisles even in the most mundane supermarkets these days knows how many bottles are out there – a real challenge for any vintner! So what to do? Use information to differentiate your product. Besides the aesthetic of the bottle’s label, what prompts consumers to choose one wine over another? Word of mouth, and especially from people you know. So where is wine marketing moving – off the crowded supermarket shelves to the social networking platform, such as Facebook or Twitter. Clicking on “like” sends your endorsement to all your Facebook friends, a highly treasured word of mouth endorsement that may be nearly costless to the firm seeking to advertise their product. Oh, and by the way, by clicking on “like” for a wine, your other parameters about your societal status and propensity to buy a certain kind of car, house, clothes, and food, that you voluntarily clicked on for Facebook, are also aggregated by “big data” profilers who sell this information to other firms seeking similar potential customer populations. To summarize, we are an “information society” because whoever is most skillful in manipulating information will economically survive in the services, industrial, and agricultural marketplaces. My argument is that this is also true for political survival.
Disintermediation, then, is a powerful force for change. Fueled by competitive market incentives to differentiate an otherwise commoditized product, disintermediation has brought about increases in quality, reductions in price, and expansions in variety as producers strive to survive. What is striking about this long-range view of societal evolution, is how this effort always moves in the direction of more information as the key factor of change. Whether from hunter-gather to agricultural, or from industrial to services stages of evolution, the next stage embodied a much higher level of information. Today, the battle for domination of the world marketplace is one of information about information. The world’s greatest minds and technological innovators are engaged in a struggle of epic proportions over the tiniest of things – the movements of bits – ones and zeros – represented by the presence or absence of massless electrons. Spurred by declining costs of massive supercomputers, the race is on to see which firms will most effectively use their brains to tackle the challenge of “Big Data,” the development of algorithms that determine whose customer data is going to be commoditized and whose profiling data will differentiate to determine that they will be a winner and not a data loser.
And no, it doesn’t stop here. In fact, one could claim the process is only now gaining momentum as we enter the newest phase of societal evolution – by delving into the human brain itself. In 2013, President Obama announced that the United States, having mapped the human genome less than 13 years before, would now map the human brain itself. In other words, the world of the information society’s “Big Data” determination of economic winners and losers, will in the future evolve into a bio-information stage where information and how the human brain receives, processes, and stores it, will differentiate products and societal processes of the future. This is already a major concern for military establishments, as evidenced in the Aviation Week and Space Technology article, “Brain Trust: Improving human-machine interaction crucial as systems become more complex and automated,” (AWST, August 11/18, 2014, pp. 45-47). While this article focuses on the neurotechnology that will allow electroencephalography (EEG) sensors on a pilot’s head to monitor his or her brain’s ability to fly a highly automated aircraft through combat areas or even to land (witness the Asiana Airlines Boeing 777 crash landing at San Francisco Airport on July 6, 2013) midday at a major international airport, the consumer applications are already making inroads into the commercial world marketplace. Wearable devices will measure heart rate, skin temperature, and blood sugar and merge this data into a person’s smartphone and social networking sites. Imagine what an advertiser could learn if wearer upon viewing an advertisement also provided real-time biometric feedback about his or her bodily reaction? Or to take it another way, imagine being able to incapacitate a foe through the transmission of a particular thought or emotion into the brains of your opponent’s soldiers or civilians? Advertising or propaganda or education are processes for imparting thoughts and thinking processes into the brains of the recipients; imagine being able to do this directly, without the costly and time-consuming middleman of the TV broadcast, person-to-person conversation, or school? This is disintermediation on the molecular level.
Disintermediation in politics as well as economics
We observe disintermediation wherever declining information transaction costs eliminate the economic rationale for the middleman. This is an almost ubiquitous process, resulting in daily transformations of wide swaths of our increasingly information-intensive economic sectors such as music, newspapers, television, and banking, to name a few in addition to the travel industry. What I am asking here is whether ICT disintermediation operates also as a transformative factor for the process of democratic governance as it has been shown to do for these other information-intensive business activities. The answer in short is “yes.” But, as stated above, the implications are far-reaching.
So, how is the political system, i.e., the process of legislating, voting, lobbying, campaigns and elections, or what we commonly call the process of “democratic governance,” evolving in the online 21st Century? I argue that democratic governance is evolving in ways that are increasingly synchronous with the disintermediating evolution of the online economic marketplace. In fact, more than occurring merely synchronously, the political and economic co-evolution is actually co-mingled as the “transaction cost” wall between the democratic governance and the economic system erodes to the declining information cost assault of ICT disintermediation. Just as the travel agent has been “dis-intermediated” out of a job, so too must political parties fear for their future relevance as the “middlemen” between government and voters. Or, are political parties doomed to the scrapheap of history, as the hereditary House of Lords or the Pope’s “infallible” role as God’s middleman? The answer lies in the way in which democratic governance evolves in the new political marketplace of the information age. I am arguing in this book that the best crystal ball is one that peers forward through the same lens that explains why we are less likely to book flights through travel agents, or buy music on CDs, or get our news from a “dead tree” newspaper – the lens of disintermediation – or, to boil it down to its distilled deepest essence - the central role played by information transaction costs. The Internet revolution was chiefly about how advances in computer technology and networking brought down the price of information access to a cost point where one in 12 humans on earth has a Facebook account. To cut to the chase, I argue that democratic governance is not only going to look a lot like the information economy of the 21st Century, it’s also going to be part of, or perhaps even worse, it will be indistinguishable from the market. Once again to paraphrase Lowi’s “End of Liberalism” discussed in the prologue, it’s the “End of Government” as we once knew it.
Defining the Argument
“Democratic governance” is the process of connecting government to society through electoral campaigns, lobbying, polling-profiling, and other public relations and information dissemination means and media. Democratic governance is crucial for the public’s ability to hold government and officials accountable, as well as for the government’s ability to regulate activities and markets and to enforce laws.
Commencing with the information technology revolution of the 1960s, two trends continue to transform the process of democratic governance in the United States and, to a growing extent, other highly industrialized democracies: (1) the accelerating deployment of increasingly pervasive and powerful ICT infrastructures with concomitant declining information distribution costs, and, (2) the expansive market growth of democratic governance as measured in terms of revenues raised and spent for lobbying, electoral campaigns and governance-focused public relations. The 2008 presidential electoral cycle in the United States and, above all, the online fund-raising prowess of the Barack Obama campaign, vividly confirmed how each trend paradoxically reinforces the other, resulting in a highly synergistic relationship marking the emergence of highly commercialized sectors of democratic governance not only in the United States, but also in other highly industrialized (i.e., ICT-intensive) democracies during the coming decades. In short, the paradox of more money chasing declining costs prompts this article’s advocacy for a new logic or paradigm to explain whether governance of an information society “requires” a commercialized democracy.
A cursory examination of the two trends is instructive. It is hard to exaggerate the speed and effect of the information revolution upon American society and political culture. A short digression to an historically-based film illustrates the startling contrast between the perceptions of information access formed during the childhoods of the Baby Boomer generation and those of today’s “Millennials,” the texting-tweeting online generation whose only experience is that of a world of “information abundance” (Bimber 2003). Set in a small Appalachian mining town of the late 1950s, the 1999 film October Sky painted this contrast in bold strokes as it tells a heartwarming story of working class high school students, who, supported and encouraged by their terminally-ill physics teacher, surmount many challenges in their science project quest to build and test a rocket. One of the biggest was the lack of books about rocket physics and engineering in their rural town’s school or public library (IMDB 2012). Today’s high school students watching the film would scoff at such problems, and wonder, “why didn’t they just “Google” the needed information?” Rockets today are launching from a world fundamentally alien from that of the pre-Internet generation. In 2010, according to the International Telecommunication Union (ITU), over five billion cell phones were in use across all habitable areas of this planet (International Telecommunication Union 2010). In terms of cell phone ubiquity and ability to communicate with any of five billion cell phone users and businesses, perhaps at no other time in history is the truism from the swashbuckling science fiction movie figure Buckaroo Banzai more relevant: “No matter where you go, there you are.” Of course, in the information age Mr. Banzai’s aphorism translates to, “no matter where you go, there’s the market” (IMDB 2012).
The second trend notes parallel expansions in speed and effect as measured by the explosive overall market growth of the democratic governance sector with revenues raised and spent for lobbying, electoral campaigns and governance-focused public relations. The emergence of the broadband Internet economy in the early 2000s demonstrates the trend. Lobbying as a market sector did far better than the overall US economy following 9/11. Between 2000 and 2004, while the post-9/11 federal budget grew from $1.79 to $2.29 trillion, an increase of some 21%, the number of registered lobbyists more than doubled in that same time period from 16,342 to 34,785, with revenues increasing from $1.6 to $2.1 billion, a 25% growth rate. The US economy as a whole from 2000 to 2004 grew from $9.8 to $11.6 trillion (constant 2000 dollars), a 4.5% growth rate (Measuring Worth.org) The 2008 presidential electoral campaigns raised and spent more than $1.8 billion, one billion more than 2004, and $1.2 billion more than in 2000 (Measuring worth.org 2012). The 2012 electoral campaigns are slated to exceed even those prodigious growth figures, with so-called “super PACs” slated to raise and spend over one billion dollars (Gold 2012). Governance-focused public relations, conducted chiefly by corporations and non-profits, but also increasingly by transportation and pharmaceutical sector corporations, spent more billions. Again we are faced with the question, why the massive revenue expansion of democratic governance?
The high information costs that historically isolated many cultures, markets, institutions, and organizations are falling in cadence with the growing global deployment of ICTs. The multi-billion dollar music industry organized since the 1980s around the profitable compact disc is rapidly disappearing, in effect mirroring parallel changes in the travel industry, financial services, real estate, and political organizations and institutions. Political parties, once a prime source of candidate and issue information, are suffering declining memberships, just as labor unions, and network nightly news shows reach shrinking memberships and audiences. But there’s the rub; declining voter turnout, declining competitiveness in congressional and legislative elections is occurring against a backdrop of massive influxes of money. As confirmed by the 2008 electoral cycle, if one were evaluating the numbers about the revenues generated by the American democratic process of elections and governance as a business report, the economic bottomline looks rosy indeed. At the same time, voter turnout in the 2008 general election did not exceed turnout in the early 1960s, and actually declined in some regions. Such is the conceptual disconnect between conventional thinking about American democracy and its evolution in an information-saturated environment. To paraphrase Albert Einstein’s observation about nuclear weapons and human civilization, information abundance is changing everything, save our thinking; and the “peril” posed by the concomitant commercialization of democratic governance requires fundamental re-thinking of the governmental – societal relationship.
Application of transaction costs’ core logic underlying the governmental - societal relationships reveals power configurations manifesting themselves as “information monopolies.” Using analytical lenses focusing on transaction costs, the boundaries and sizes of such information monopolies become visible, creating a topographic map of societal, economic and political power. The higher the information transaction costs, the more protected and powerful the entity. In an information society, control over access (i.e., ability to determine transaction costs) to information and its dissemination is a key factor shaping configurations of societal and governmental power. Topographies of these power configurations increasingly coincide with cost contours of information access and dissemination allowing the possessor to control prices of one or both. For example, the revenue declines in the recorded music and newspaper industries stand as stark examples of eroding transaction costs and resulting dispersion of revenues. Learning from those examples, cable TV and telephone network providers of Internet access are attempting to re-establish their information monopolies through legislation thwarting “net neutrality.” Such “information monopolies” may rise, fall or shift with advances in technology or with policy shifts in regulatory regimes (i.e., copyright or security classifications). As deployment of more efficient and powerful information and communication technologies (ICTs) fundamentally shifts costs of accessing and disseminating information downward, transaction costs defining information monopolies will increasingly define the far-reaching effects of “information abundance” upon the viability of democratic governance of the information society.
A “New” Focus on “Old” ICTs as Historical Factors of Transformative Societal Change
The transformative effect of information upon societal and governmental systems has long fascinated, perplexed and surprised both participants and scholars of human governance. While it is axiomatic to declare “information is power,” it is quite another mental leap to critically analyze or predict how changes in the cost and accessibility of information will affect the structuration and/or functioning of highly complex political systems. Indeed, according to historian Elizabeth Eisenstein, the role of information as a factor of societal and political change has been largely neglected (Eisenstein 1979). However, over the past four decades the steady infusion of ICTs so-called “post-industrial” societies has also compelled a re-examination of societal transformations. The emergence of the “information society” of the late 20th Century has (somewhat paradoxically) prompted scholars in a variety of social science disciplines to go back to re-examine previous eras of transformative systemic change for lurking factors of information causality. They have not come back empty-handed.
Within the highly lucrative mainstream “academic” media, Jared Diamond’s bestseller, Guns, Germs, and Steel, postulates about the role of information for the emergence of institutionalized governance. Diamond argues that an information technology, in this case, an institutionalized writing system (cuneiform clay tablets), used to record the ownership of grain stocks in the ancient city-states located along Tigris and Euphrates rivers, was the precursor to establishment of the first governmental institutions which were primarily used to inventory and police granaries (Diamond 1998). In a similar fashion, Time Magazine’s December 31, 1999 special millennial edition highlighting the 10 most notable persons of the second millennium, picked the German goldsmith Johann Gutenberg as “Person of the [15th] Century” (Time Magazine 1999). Gutenberg was the first European to develop and commercialize the information technology of movable typeface printing in order to lower the costs and increase the Roman Catholic Church’s profits from sales of indulgences. The ramifications of this ICT is hard to overestimate, as historian Kai-Wing Chow writes:
The invention of the movable type printing press in Europe in the mid-fifteenth century has been hailed as the key agent in bringing about or facilitating all major intellectual, political, and religious movements - the Renaissance, the scientific revolution, the Reformation, the Enlightenment, the French Revolution, and the diffusion of the modern nation-state. For historians of European printing, the triumph of modern Europe driven by these powerful forces of intellectual and cultural change was evidence for the superiority of the Gutenberg movable-type printing press as a technology of communication and an agent of progress (Chow 2004).
Irving Fang’s book, Communications Revolutions, outlines the process of how Gutenberg’s innovation reduced publishing prices through massive economies of scale, resulting in rising literacy and readership in the populations. Growing demand prompted more authors to write in the vernacular on an increasingly diverse range of topics effectively ending the information monopoly of the Church in Rome, and setting in motion a communications and political revolution (Fang 1997) that transformed feudal Catholic Europe into a system of increasingly secular nation-states codified in the Westphalian System treaties in 1648 (Gray 1999). Conversely, factors inhibiting the full deployment of the printing press and the subsequent reduction in information costs are seen as roadblocks to societal, scientific and economic development (Man 2002). The failure of printing press technology to similarly revolutionize the Chinese or Arab societies is viewed by some scholars as a factor partially explaining the scientific stagnation and isolation of those formerly leading societies as compared to the scientific and industrial revolutions in Europe that propelled that region to world dominance (Lewis 2002).
Information Abundance and Societal-Economic-Political Transformations
Falling information costs re-configure societal power. In the Mesopotamian and European examples cited above, an information technology (clay tablets or movable type, respectively) drastically reduced the costs of information access and dissemination resulting in transformative shifts in societal and governmental power. Diamond argues that the shift from hunter-gatherer nomadic forms of human organization to sedentary agricultural city-states was facilitated by an information system (alphabets, clay tablets, accounting techniques) that promoted more efficient management and policing of surplus grain stocks. The possessor of that information became the entity we designate as “government” today (Diamond 1998). Historian Irving Fang underlines the role of information costs in the explosion of publishing and literacy following Gutenberg’s development of movable typeface printing in 1451. As printing costs fell, literacy rose, producing a synergistic explosion in the range of topics and languages published, fundamentally eroding the information monopoly long held by the Roman Church and setting the stage for mass distribution of Martin Luther’s vernacular translation of the Bible (Fang 1997).
Common among the various historical and systemic analyses of ICT involvement in societal and political transformations are the factors intrinsic to the ICT medium itself, and the economic effects of the ICT(s) on the marketability of the new medium to potential users. I will similarly use these two factors in this analysis of on-going transformation of American democratic governance. In contrast, though, to these historical examples of information-propelled governance transformations, today’s ICT revolution has also unlocked long-standing information monopolies, producing a transformative change even more far-reaching and fast-paced than Gutenberg’s half a millennium ago. Whereas Gutenberg’s printing presses mobilized masses and their demands for governmental legitimacy based upon a popular sovereignty (“consent of the governed”) separate and distinct from the political and commercial interests of the Roman Church, my analysis argues that today’s information revolution is also creating a new pivotal point of power between society and government.
Our investigation will proceed in the following steps. First, it will lay out the problem: What is the relationship between media and markets as they operate within the process of democratic governance? The hypothesis being tested here is the concept of an information monopoly. Secondly, it will examine transaction cost economics as an analytical approach for detecting and evaluating information monopolies. Finally, the utility of the information monopoly concept as detected and defined by transaction cost economics will be examined as it pertains to its explanatory power for the disintermediational transformations we see taking place in the American democratic governance.
Two Factors: Information Media and Information Markets
Since the 1950s-1960s, the social sciences have investigated and focused on two information-related factors that have permeated change throughout the U.S. political process. The first factor focuses on the way information or content reaches the end user. This we denote as the informational medium, or media, manifested today in American politics as mediated political information - primarily television, but also a plethora of online media from Internet websites, blogs, to podcasts - all feeding from print and online information sources, a medium that dominates political dialogue, campaigns and governance (McChesney 2001). Since the 1950s, television has become not only a political medium, but as communication scholar George Gerbner described it, “a culture” in itself (Gerbner 1994). TV is not only dominant in a content but also temporal dimension: According to the Literacy Project, today’s Baby Boomers, the first television generation will by the time they reach 70 years of age have spent fully 10 years of their lives watching TV, including increasingly, Internet-based media (Center for Media Literacy).
The second factor stems from interactions or transactions with information; what political scientist Cass Sunstein calls “information markets,” i.e., the expanding range of marketable information-intensive products and services generated by the political process (Sunstein 2002). Otherwise known under the rubric of “lobbying,” or “public relations,” or “political campaigning,” the second factor encompasses a growing range of information-intensive products and services that derive their value-added profitability from their relationship to democratic governance. For example, court trials now employ an expanding army of not only attorneys, but also political scientists, jury consultants, and public relations experts, costing many millions of dollars for a major trial. On the electoral front, one now speaks of the “Initiative Industrial Complex,” a term somewhat derisively describing the line up of public relations firms and campaign consultants who market ballot initiatives to labor unions, major corporate and other private sector industrial groups. They hire signature collectors, professional media campaigners, and a myriad of other professionals to conducts ballot initiative campaigns that occur far more often than the traditional cycle of elections for elected officials for the various levels of government. The special election held in California in November 2005 generated some $250 million in revenues for the Initiative Industrial Complex; California’s November 2012 ballot initiatives were far more profitable that those in 2005 (Onishi 2012). Despite efforts to control political spending, California continues to grapple with this bypass of the state legislature that gives rise to “a cottage industry for some political consultants to make money…” as former Speaker of the California State Assembly and San Francisco Mayor Willie Brown observed in 2013 (Skelton 2013).
The two factors (media and markets) are linked as agents of systemic change, but exactly how are they linked? And how are they transforming the very nature of the American political process?
Media and Markets Analyzed
While there is a vast literature about media or about information markets in the governance process, the vast majority of published mainstream and academic works are anecdotal and/or descriptive, focusing on how media content or media bias affects reporting and thereby, purportedly, individual or voting behaviors. The more promising approaches are evident in the information market literature, which focuses on management and strategies for conducting political campaigns, lobbying, and evolving forms of citizenship in a media-saturated society. Bruce Bimber’s Information and American Democracy: Technology in the Evolution of Political Power points out:
Contemporary analysis occasionally echoes Truman and Tocqueville on communication. One subtext in the recent literature is that modern organized interests play a game of information at least as much as they play a game of money or organization. A few scholars have even suggested that interest group influence rests primarily on the flow of information, rather than money, organization, or other features of organizational infrastructure. Unfortunately, given that democracies are now in the grip of an informational revolution, this theory has not significantly influenced larger models of contemporary political structure or change in the United States. (Bimber 2003)
And indeed, from Joe Trippi’s account of how Vermont Governor Howard Dean’s 2004 presidential campaign raised over $40 million dollars using email and online contributions, to the case studies of Moveon.org and other web-based organizational platforms, Bimber’s observations are prescient in the current post-Citizens United era of “Super PAC” fund raising and expenditures that are demanding increased scrutiny of what are increasingly anonymous mainstream media and online campaigns (Trippi 2004).
Nonetheless, these works have still to discover and elucidate the systemic change taking place. A tantalizing clue about this conundrum is found in one of the standard textbooks for university-level courses about the media and media effects by media scholars Joseph Straubhaar and Robert LaRose, entitled, Media Now: Communications Media in the Information Age, 5th Ed. (Belmont, CA: Wadsworth, 2005). After a very thorough review of the various print and electronic media, their organization and regulation, the book then devotes its later chapters to the “Media Issues.” Remarkably, the book argues in a section entitled, “What are the effects of advertising and political campaigns?”
...Despite the huge sums of money spent on commercial and political advertisements, their effects are relatively modest; they directly affect perhaps only a small percentage of the audience. Those who are affected by advertisements are likely to be those who are relatively uninformed about or uninterested in the product or candidate to begin with. Interpersonal influence and selective perception act to reduce the impact of advertisements on most audiences... (Straubhaar and LaRose 2004)
This finding is echoed by an article by Michael Schudson published by the Center for Media Literacy in 1986:
Advertising: Hit or Myth?
Advertising is much less powerful than advertisers and critics of advertising claim, and advertising agencies are stabbing in the dark much more than they are practicing precision microsurgery on the public Consciousness. (Emphasis added)
… One of the more striking examples concerns television advertising for the 1984 Olympics and the 1985 Superbowl. The naïve observer must assume that businesses reap extraordinary rewards for their elaborate and expensive sponsorship of these events. But, it turns out, no one really knows if they do (Center for Media Literarcy 1986).
These paragraphs illustrate much of what constitutes a methodological (and very frustrating) impasse for mainstream and academic media effects theories and studies. In short, there is a big disconnect between the money spent and the effects observed. Despite all the resources devoted to studying media effects, there remains a paucity of documented observable effect, whether one is attempting to detect and measure a sustained or systematic increase in societal violence following increased viewing (Gerbner), decline or increase in civic participation (Putnam 1995), or even improved or reduced learning in pre-school, K-12, or in higher education (Center for Media Literacy). In sum, the primary change we observe is the greatly increased amount of funding on commercial and political advertisement.
In fact, if one thinks about media effects in a systemic way, it would be surprising to find broad changes across wide swaths of society or the economy. The plethora of media ensure that there are probably as many media programs that subdue violence as those that promote it; similarly for civic participation where television viewing caused significant political mobilizations as much as it has depressed participatory behaviors, and as for the schools, there is no significant evidence that computers in the classroom have led to higher test scores or any other assessment criteria evidencing improved learning. Nor do they necessarily depress learning. But the one aspect that links all of these areas is the fact that money is pouring into all of them. And this is the point that the Straubhaar-LaRose mainstream textbook and many of the other observers and scholars of the communication field miss: the media effect is not seen in society per se, rather, it is seen in the media. The media effect is, in reality, to increase revenues, market access and network deployment for the media. The rest, as Straubhaar and LaRose point out, is mainly statistical noise, which, in certain cases, such as very close electoral races, these minimal effects can make a difference, but not in any sustainable systematic way. In short, media are about maximizing media.
Perhaps the most recursive example of this effect is seen in the current market mania for social networking services such as Facebook, Google+, Twitter, Yelp, among others. With hundreds of millions of users enthusiastically providing details about their likes and dislikes, the names and contact lists of their friends and family members, the wall between private and public has fallen, perhaps forever. Data aggregators can now profile hundreds of millions of customers and voters, allowing unprecedented degrees of intimate analysis of our deepest desires and fears, all geared toward a more effective advertising pitch for detergents or democrats, red wine or republicans. With online shopping it’s now possible to even more directly link a sponsored tweet with a purchase, will it be possible soon to identify a Facebook “like” with an online vote for a candidate or proposition? The jury still appears to be out on this question. In the 2012 elections, hundreds of millions were spent on highly focused directed emails, snail mail, and robocalls, with the Koch brothers able to show very little for what they invested in Karl Rove’s P-R machine. Again it supports the point though that I am making here – the outcomes don’t matter nearly as much as the belief pushed by the media, or today the online media, that they matter so that the money keeps flowing in. We are truly in Jerry McGuire politics: Just “Show Me the Money!”
The second, or market part of the relationship (lobbying - campaigning), functions to create demand for the media side; in other words, a political campaign consulting firm generates demand for its services by proposing to an industry group that a ballot initiative would have direct benefits to their bottom line (Onishi 2012). Of course, the major part of the revenues generated for the campaign are spent not only by the campaign consulting firm for its work itself, but more lucratively, as commissions for the media buys it makes for television and radio air time. The actual policy outcomes of the political ad campaign are secondary to the revenue benefit such ballot initiatives generate, for both the market and media sides of the relationship. But this is not the way conventional media or interest group theories explain and predict the motivations for either “inside-” or “outside game” lobbying (Greenberg and Page 2011). So, to answer the question, “if there is a negligible effect on outcomes, what explains the massive increase in campaign spending?” we can now begin to formulate an answer: the disintermediation of conventional political processes and institutions (political parties, labor unions, nominating conventions, etc.) increasingly leaves only the media itself to fulfill the role of democratic governance.
Need for a New Logic of Collective Action within the Information Society
In the 1960s, conventional interest group theory was stuck. Truman’s classic works on pluralism were no longer adequate for explaining observed interest group behavior in an era of expanding governmental regulation of business and, especially the emerging realm of environmental impacts (Truman 1951). Mancur Olson’s seminal work, The Logic of Collective Action, adapted paradigms from microeconomics to illuminate the underlying rationality that allowed interest groups to recruit members in a way that mitigated the collective goods/free rider problem through the attractive pull of selective (i.e., private) benefits (Olson 1965). Combined with public choice models and theories, Olson’s logic promoted powerful theoretical insights that could analyze wider ranges of organizational structures and behaviors (Shafritz, et. al. 1996).
Today, democratic governance is operating also in a fundamentally different environment, one marked by radically lowered information costs that obviate some of the collective-private goods characteristics analyzed by Olson (for example, information as a selective benefit). Once again, however, (micro)economics theory at this point comes to the aid of the political scientist attempting to explain and map the topography of information age political processes. While Olson’s logic pivoted on rational choices undertaken by interest group leadership and members, the logic I am proposing is premised upon the cost contours of information access and dissemination. In essence, an interest group, a firm, or a governmental institution, will become a distinct and significant landmark in the political topography when it commands an information monopoly. In an information society, it is less the logic of collective action, but rather the logic of information that serves as the organizing concept for determining when, in the rational choices taken by participants, to enter into information transactions or not to. The organization is defined, therefore, by the perceived value of the information it possesses, a value it seeks to support by maintaining the cost of access and controlling dissemination (i.e., “transaction costs”). Let’s explore this concept of “information monopolies.”
According to Webster’s Collegiate Dictionary, a “monopoly” is
... 1 : exclusive ownership through legal privilege, command of supply, or concerted action 2 : exclusive possession 3 : a commodity controlled by one party ... (Woolf 1974)
The Oxford English Dictionary stipulates that an “organization” may have a monopoly over a “service:”
1 the exclusive possession or control of the supply of a commodity or service. 2 an organization having a monopoly, or a commodity or service controlled by one. 3 exclusive possession or control of something.
“Information” is a multi-dimensional entity, manifesting itself in both physical and ethereal forms. According to the Oxford English Dictionary, “information” is defined as:
1 facts or knowledge provided or learned. 2 what is conveyed or represented by a particular sequence of symbols, impulses, etc. (Oxford English Dictionary 2012)
However contrary to purely physical objects, information is not “used up” in the conventional sense of consumption; and while it may be very expensive to generate the first piece of information, it may cost almost nothing to duplicate it millions or billions of times. For example, a piece of software may cost millions or billions of dollars to develop at the cost of millions of labor hours, but practically zero to copy in almost zero time. Whether or not an information monopoly exists, depends upon the particular cost contours determining access and dissemination prices. What I am arguing here is that the relationships between media, markets and governance are usefully defined and described by the mechanisms of information monopolies.
Similar to conventional monopolies, the possessor of information with the capability to set high access and dissemination prices, in essence exerts significant control over the market’s prices for such information, a situation analogous to the economic definition of a conventional monopoly. The relationship between information-intensive media and markets is defined by the cost contours of information access and dissemination. Information, in its most traditional manifestation, existed as physical objects (i.e., books, papers, files, etc.) or in the human form as materials stored by a human brain’s memory or thought processes. Access and dissemination, then, corresponded closely to the informational medium - physically stored information required physical access and dissemination, creating the economic dimensions of access scarcity and monopolistic price controls.
An “information” monopoly in real life
The “political entrepreneur” perspective of pluralist politics combines political and economic cost-benefit decision-making for policy actors, thereby illuminating the insights afforded by the information monopoly concept to explain actual behaviors, as in this case, on Capitol Hill. The information monopoly that is central to the power of Congress as an institution and for each of its members is the information they choose to use for the casting of their votes, for which they possess a rather exclusive monopoly. The schedule and attention span of a member of Congress is extremely limited in terms of the personal access afforded to members of the public and insider knowledge about the member’s voting intentions on upcoming bills. The information costs to a member of the public to gain access to that member’s schedule to express their views or to find out the voting intentions of the member are extremely high, involving usually at a minimum, transportation to the member’s Capitol Hill office, lodging, etc.. The member of Congress has, in this respect, an information monopoly, where they determine the “price” of information access and dissemination. A member “sells” this information in a way they believe promotes their own cost-benefit calculus, usually in terms of promoting campaign funding or other goals, such as re-election, policy, or institutional leadership. (Mayhew 1974, 2004).
The lobbying firm exists and justifies its economic relationship based upon its ability to harness economies of scope and scale for its client association’s members as determined by the Capitol Hill information monopolies. In terms of economies of scale, the lobbying firm consolidates contributions from members so that each pays an amount shared among the other association subscribers, and, with regard to scope, the lobbying firms offers an enlarged range of services, ranging from public or private access to the Congress member’s calendar or activities (a constituent meeting in the office compared with a round of golf), to insider’s access to the Hill staff, committee staff, and to various “insider” journals, etc. As the economies of scope and scale pare down the inordinately high costs of member information access and dissemination by parsing it out among many dues payers, and consolidating the transaction to a single individual (the lobbyist). This is what the lobbying firm is selling to its clients, namely, lowered information access and dissemination costs through economies of scope and scale. The lobbying firm capitalizes on the preferred relationship it has to the member of Congress, garnered through campaign funding donations, and information access it “sells” in turn to the member of Congress along with preferred information dissemination channels back to the membership.
Supply v. Demand Side Pluralist Politics
Conventional pluralist theory, (Truman 1951), emphasized the role of constituent demands for representation. The disturbance theory of pluralism holds that problems inspire members to associate and to petition their demands through lobbyists (Greenberg and Page 2011). In contrast, the “supply side” school argues that legislative and lobbying actors actively seek out ways to generate market demand for their services. Morris Fiorina argued that the decline in the marginal district was linked to the “monopoly of bureaucratic unsticking power” consolidated and maintained by members of Congress as a means for translating constituent services to winning electoral coalitions (Fiorina 1977). What Fiorina is, in our perspective pointing out, is the existence, and indeed, dominance, of information monopolies between congressional members and the bureaucracies, which are marketed to constituents through mailings, speeches, and other media products. Fiorina is arguing that the cost contours of bureaucratic “unsticking power” create an information monopoly that is actively marketed (i.e., “supplied”) by congressional incumbents and lobbying groups to constituents. The cost contours are themselves the costs of transacting the sale of information; if we understand the transaction costs, we will be able to determine the topography of information monopolies, and thereby political power configurations between government and society.
Transaction Cost Economics
Oliver Williamson’s, The Mechanisms of Governance, “propose[s] a logic of organization in which the discriminating alignment of transactions with governance structures is the source of refutable implications” (Williamson 1996). It forms the core of the following application of transaction cost economics to the problem of determining the cost contours of information monopolies as configurations of societal and political power. Transaction cost economics is an analytical framework for understanding the origin and functioning of organizations, firms, and institutions, utilizing the transaction as the unit of analysis. As Williamson states:
As I shall show ... the analytical action resides in the details of transactions and governance. I propose a logic of organization in which the discriminating alignment of transactions with governance structures is the source of refutable implications.... [T]here is growing agreement that the institutional environment (laws, polity, etc.) and the institutions of governance (markets, hierarchies, etc.) matter a lot and in ways that are pertinent to industrial organization and much else, such as economic history, comparative economic systems, labor economics, economic development and reform, health care, business strategy, multinational business and even aspects of corporate finance. Applications outside of economics to law and the other social sciences are numerous and growing (Williamson 1996).
Williamson’s logic is extracted from the rich vein of theoretical mother lode ore underlying micro-economics. In the 1930s, economist Ronald Coase asks the famous question, “why the firm?” If all transactions could take place in the market, Coase asks, why would sellers and buyers pay the additional costs inherent in the institutional costs of the firm? In the view of transaction cost economics,
[G]overnance is ... an exercise in assessing the efficacy of alternative modes (means) of organization. The object is to effect good order through the mechanisms of governance. A governance structure is thus usefully thought of as an institutional framework in which the integrity of a transaction or related set of transactions, is decided (Williamson 1996).
In other words, Coase argued that the firm is able to justify itself because it lowers transactional uncertainty costs to users. Multiplied by many transactions, the firm exists due to the very high information costs (also defined as “bounded rationality”) imposed by “the identification, explication, and mitigation of all forms of contractual hazards” [Emphasis in original] (Williamson 1996).
The firm, is, according to transaction cost economics, a type of “institution.” Institutions, “as sets of ordered relationships among people which define their rights, exposures to the rights of others, privileges, and responsibilities,” therefore, are another type of firm, whose existence is premised upon its function in lowering the information costs of transactional certainty and integrity. Examples abound.
The revolutionary aspect of Ebay in the 1990s that solidified its dominance as an online marketplace institution is the compilation and dissemination of the buyer’s or seller’s feedback score. The inclusion of the feedback score about each participant in an Ebay auction is the piece of information that lowers the transaction costs for both buyers and sellers by identifying, explicating, and mitigating contractual hazards imposed by the anonymity of the Ebay online auction transactional environment, i.e., as a governance institution within its realm of online commerce. The Ebay, or Facebook, examples point out, however, an alternative argument that downplays the defining power of the Coase-Williamson transaction cost model.
Milton Mueller’s analysis of network governance looks specifically at how governance is likely to take root in the vast online spaces created by rapidly expanding ICT service and network deployments. Mueller contends that the Coase-Williamson model of the rational actor to be overly confining, as it is, in his view, unable to adequately explain the on-going expansion of governance especially in collaborative and social networking milieus (Mueller 2010).
Mueller cites the work published by Walter Powell in 1990 that downplays the role of hierarchically organized firms or institutions (Powell 1990). As Powell points out,
… firms are blurring their established boundaries and engaging in forms of collaboration that resemble neither the familiar alternative of arms’ length market contracting nor the former ideal of vertical integration (Powell 1990).
Powell is clearly arguing for an analytical framework that takes into account the network effects of blurring boundaries and relational incentives. “Networks, then are especially useful for the exchange of commodities whose value is not easily measured,” such as a “style of production, a spirit of innovation … or a philosophy of zero defects” (Powell 1990). In other words, networks are blurring the walls separating transactions dealing with concrete commodities and those transacting decisional commodities.
The “open platform” concept for organizations formed and structured around network incentives and rationales has gained greater currency with success stories such as those from Wikipedia and Linux.
The Logic of Transaction Cost Economics in more detail
Williamson’s argues that transaction cost economics effectively illuminates the interplay of economics, law and organization with regard to the mechanisms of governance. To sketch out his argument in more detail:
The transaction of the unit of analysis; the firm is focused on reducing transaction costs to buyers and sellers, and when used for this purpose it becomes a governance structure. When buyers and/or sellers do not realize transaction cost reductions while utilizing a firm, they will revert to pure market transactions (as in the Ebay example above) which is an alternative governance structure.
The contract forms a central pivotal point for transaction cost economics. The contract structures the transaction as a framework, allowing buyers and sellers to use the contract “as an occasional guide ... and as a norm of ultimate appeal when the relations cease in fact to work.” Rather than the parties seeking outside adjudication by judges with limited knowledge applying general rules, they instead resolve disputes through “avoidance, self-help and the like.”
As Williamson states:
...[T]ransaction cost economics owes its behavioral assumptions to organization theory. These are truly important, in that all interesting problems of complex economic organization would vanish were it not for the twin conditions of bounded rationality and opportunism. Herbert Simon’s remarks are apposite: ‘Nothing is more fundamental in setting our research agenda and informing our research methods than our view of the nature of the human beings whose behavior we are studying (Williamson 1996).
In other words, Simon’s “bounded rationality” refers directly to the information costs incurred when more immediate action is required. Here is where the organization takes form as users resort to “satisficing” in recognition that “all complex contracts are unavoidably incomplete.” The logic of the organization or institution, then, is the attempt to mitigate that contractual incompleteness and complexity. Ipso facto, whenever we see an institution, the logic tells us to look for high transaction costs. Most notably, in this view, if transaction costs are not sufficiently high, the justification for an institution disappears into the simpler alternative form of preference determination (i.e., “governance”) - the market.
To emphasize again, the logic of transaction cost economics can explain and predict that a firm/institution will come into existence when sellers and/or buyers perceive a “satisficing” lowering of transaction costs, many of which arise under very complex contractual conditions. Jared Diamond’s argument about the origins of government is supported by the logic of transaction cost economics, as it is consistent with the impetus to establish an institution in order to significantly reduce the transaction costs, i.e., information costs of accounting grain stocks and policing their security involved with agricultural urban society (Diamond 1998). It also follows, that the higher the transactional costs, i.e., information costs, the more complex the contract and the more restricted the range of buyers (fewer can afford to buy). This is the basis for monopoly.
What happens, though, when the dominant form of commodity being transacted is information itself? As discussed above, the properties of information as a commodity are unique and different from physical commodities. Information is not “used up” in the sense of a physical good (the ideas in a book, for example), nor is it diminished by others using it (your TV reception is not affected by millions of other viewers). This non-rivalrous characteristic of information transactions acts to further facilitate the seamless web of transactions between even highly dissimilar suppliers and users.
The Logic of Transaction Costs and Information Monopolies
High transaction costs, i.e., significant costs incurred in accessing and/or disseminating information are the necessary condition for an information monopoly, and in fact are the method for detecting them. Pushing the Coase/Williamson logic further arrives at the epistemological point where boundaries of information monopolies increasingly define institutional jurisdictions and organizational reach.
For example, Terry Moe’s “political entrepreneur” would now find that in a political environment of information abundance that “turn[ing] the medium of communication into a selective incentive” no longer works. Moe continues:
He can do this by providing members with specialized information related in various ways to their economic well-being- information about their industry, government relations, recent economic developments, new production techniques, labor or management relations, etc. Moreover, because such information is likely to appeal only to a select clientele, it probably cannot easily be obtained elsewhere; the general communications media must appeal to a more heterogeneous population and cannot regularly supply the kind of narrow, detailed information that is needed. Given the nature of the market, therefore, the entrepreneur may find himself sitting on a gold mine - in a position to establish a virtual monopoly over a commodity of value to a set of consumers.... Moreover, ... effectiveness is enhanced to the extent that the entrepreneur can establish a virtual monopoly over certain kinds of information.... This does not mean that nay given entrepreneur can actually attain this level of control, for there are organizational competitors, alternative channels of communication, and costs of communication that stand in his way. Because of such factors, some entrepreneurs may not find it worthwhile to establish regular communications links with members at all. What direct contact represents, rather, is a strategic option available for use to the degree that the situation permits.
The change wrought by the Internet from Moe’s 1980 analysis to 2012 is that the information is obtainable elsewhere, posing the challenge to the political entrepreneur that his or her virtual information monopoly gold mine has to be built and maintained with new strategies and techniques. A group or institution will only exist where the transaction costs create an information monopoly and the “trick” is how one does that.
Strategies for Information Monopolists
Monopolies exist in de facto or de jure forms. The possessor of a de facto monopoly enjoys the benefits of either owning or controlling such a dominating amount of a good’s supply, that he or she may dictate the price. The other form of monopoly, de jure, usually takes form following governmental policies recognizing the existence of a “natural” monopoly (typically a networked good, such as natural gas, electricity, or telecommunications, where high entry costs prohibit a second provider) thereby granting de jure monopoly price-setting privileges with governmental oversight. De jure monopolies are also found in cases where governmental policies establishing patent, royalty or copyright protections provide the possessor monopoly powers.
Transaction costs to maintain both de facto and de jure information monopolies during eras where information existed almost exclusively in physical (i.e., written or printed) form were directly linked to the costs of information access and dissemination. To gain access to information one had to physically go to where the information was stored, e.g., a library, archive, or institution, and the dissemination of the information likewise required a physical transference, whether from paper to paper, or from human to human. Governments and universities, for example, functioned as possessors of information, and were able, as Moe’s political entrepreneur, to enhance their power and legitimacy by controlling access to that information.
As sociologist Saskia Sassen advocates, in order to investigate the true nature of an entity or system, it is necessary to observe its behavior under stress (Sassen 2006, 2012). In our investigation, we can ask, “what happens, though, when those factors erode that created the high transaction costs maintaining the information monopoly(ies)?” Employing Williamson’s logic of transaction cost economics, we can postulate that the political entrepreneur will attempt the following:
Convert an eroding de facto information monopoly to de jure.
If normal information access and dissemination costs do not maintain the power value of the information, the possessor will attempt to maintain the transaction costs through copyright or patent protections, or in the case of government, to classify growing swaths of information. There is a direct correlation between the ease of gaining access to information and the propensity of the United States government to classify it. In the commercial realm, as music CDs were ripped and distributed online, the Recording Industry Association of America began to file lawsuits against their customers as a strategy for discouraging downloads of copyrighted works.
Increase demand by converting information
Increase demand for your information by converting it, (a) either to an entertainment product (Postman 1986, and Gabler 1999), or, (b) marketing it to narrower customer niche groups, the “Daily Me” (Sunstein 2002). Neil Postman’s seminal pre-Internet work, Amusing Ourselves to Death: public discourse in the age of show business, and Gabler’s Internet-era book, Life the Movie: how entertainment conquered reality, thirteen years later both emphasize the commercial strategies of possessors of eroding information monopolies. Declining viewership of the major television networks blurred the line between news and entertainment, as myriads of new cable TV channels fragmented audiences. The strategy of focusing on an audience fragment is precisely what Cass Sunstein identified in his book, Republic.com, as an option created by advanced webpage profiling metrics and algorithms allowed political entrepreneurs to narrowcast political information geared for specific individual preferences.
Convert the information monopoly to a service monopoly.
Examples abound, such as the Automobile Club marketing insurance or tow services, or more recently, the American Association of Retired Persons (AARP) advocating Medicare prescription drug reform and then becoming a drug wholesaler.
Re-capping the argument thus far...
So, to briefly summarize our analysis to this point: Williamson’s transaction cost economics uses logic frameworks posed by Coase and Olson to detect the cost contours incenting users to contribute or collaborate within the firm; Powell points out that networked entities exhibit relational incentives for collaboration that are specifically designed to mitigate the transaction costs of the informational monopolies that prompted their creation. Universities are particularly apt examples of this phenomenon captured by the disintermediation model. Created to reduce information transaction costs of authorized users (i.e., professors and students), the university’s once impregnable information monopoly is now falling victim to the ubiquitous availability of online information (witness the emergence of MOOCs – Massive Online Courses – that enroll sometimes tens of thousands of students simultaneously). As this model predicts, universities are re-thinking how they can justify their “value-added” to client groups. The sprouting of recreational facilities, plus initiatives to exercise greater control over massive online courses such as the collaboration between Harvard University and the Massachusetts Institute of Technology illustrate strategies 1, 2 and 3 above. These structures emerge as information costs all around them subside, leaving institutional “islands” dominating the societal and political topography. Terry Moe’s elaboration of Olson’s logic posits that these information monopolies are maintained however by the political entrepreneurs within these institutional islands, but whose work, tragically, is more akin to building sand castles against the onrushing tide of ICT-reduced information costs than a seawall. Users vote with their mouse clicks, requiring the political entrepreneurs to adapt new strategies beyond those conceptualized by Moe in 1980 in order to maintain the selective benefits that enhance subscribers’ loyalties.
Applying the Information Monopoly Framework to the Question of Money in Politics
…. The medium has not only become the message, but has created it as well.
- Michael Kergin, outgoing Canadian Ambassador to the U.S. (Kergin 2005)
Breaching the Wall
If we apply an economics perspective to the functions of government, it quickly becomes clear that its chief function has long been to procure, process and apply information to decision-making. Government, like the university, has been, and remains, essentially an information society, whose dominant mode of production uses information as a raw material for its finished [policy] products. Going back to Diamond’s anthropological narrative, society, in contrast to government, has progressed through stages of economic evolution characterized by different dominant modes of production, i.e., agriculture, manufacturing, and services, as the means for producing wealth.
Central to our transaction cost analysis, is the fact that government, during earlier information-as-physical entity eras, enjoyed an information monopoly as transaction costs for accessing information within the hierarchical governmental institutions were extremely high. During this time of “information as a physical entity”, there existed an impenetrable transaction cost wall (i.e., information monopoly) between government and agricultural or industrial society. The transaction cost wall not only made government’s information-intensive transactions functionally distinct from the agricultural or manufacturing transactions characterizing societal markets, it also shielded government’s claim to legitimacy based on the governmental sector’s functional separation from the supply and demand forces of the free market economy. Government was accountable to the citizenry for governance and not profitability.
This began to change as information evolved into ethereal bits of ones and zeroes, while society’s dominant modes of production themselves became more information-intensive (i.e., the “services-based economy”).
As a result, the government’s information monopoly became increasingly penetrated as transaction costs fell between itself and a society whose dominant mode of production required ever greater densities of information transactions. Evolving from its agricultural and manufacturing origins, today’s information-intensive economy creates networked firms with transaction cost contours closely congruent with those of the institutions of governance and government. To borrow from the techno-bionic vision of futurist Raymond Kurzweil, the “singularity” is achieved between the previously dissimilar realms of society and government (Kurzweil 2005).
Societal – Governmental Informational Convergence
Society and government have now converged for the first time in terms of their prime economic activity and organizational structure – informational transactions among networked firms. Society and government both see each other in terms of potential market expansion as information transaction costs decline overall due to ICT innovations, and, as the compatibility of societal - governmental information products and services converge. In sum, we are witnessing an industrialization of the governmental process, where both society and government see each other as potential markets for revenue growth.
The “Political Industrial Complex” operates analogously to the roles of multi-national corporations that operate across national boundaries in a globalizing marketplace. Today, a rapidly growing array of firms and individuals operate seamlessly from within both governmental and societal marketing environments. Each sells to the other, attempting to maximize the revenue and market share their information monopoly may control.
For example, society “sells” data profiling directly to government’s Department of Homeland Security, which is, ironically, fueled by data outsourced by governmental data collections (drivers’ licenses, tax returns, police investigations). Or, TV and radio stations coverage of political campaigns as “news” shrinks, compelling political incumbents and challenges to buy more airtime.
Government “sells” to society “subscriptions” to the regulatory soap opera of the Kabuki Theater of the shakedown of big corporate donors. Politicians “rattle their cages” to create new market demand sectors by threatening regulation, or de-regulation. Professor James Thurber stated that during that during 2006, over $56 billion in earmarks were added to appropriation bills (Thurber 2006). The courts have done their part as well, declaring that campaigns for judgeships are open to almost unlimited political fund raising. The 2008 and 2012 election cycles confirm and reinforce the explanatory power of these perspectives.
Assessing Transaction Cost Economics and the Political Industrial Complex Model
As we have seen, the logic of transaction cost economics posits that institutions arise when sustainable information monopolies create the basis for political power and legitimacy. Government, as an entity, has always been an “information society,” whose raison d’etre was the gathering, processing, and dissemination of information required for decision-making. Information in a physical form typically on paper maintained the high transactions costs of anyone seeking access (information media) into the governmental process, ensuring a ready stream of income for the lobbying organizations (information markets). While the rest of society was economically focused on agricultural, and later, industrial and service-based activities for the generation of surplus value, government alone functioned as an information-dependent entity.
Each expansion of the information economy creates further commercialization in the governmental sector. Conversely, each expansion of the democratic process is accompanied by an even larger expansion of the marketing and commercialization of the process. For example, the Google and Facebook are but two of the most visible data aggregators whose multi-billion dollar stock valuation is based on their ability to directly sell profiles of their users to advertisers. Those same techniques of market research for purposes of national security, and are in fact sold to the Department of Homeland Security in synergistic societal-governmental marketing relationships argued by O’Harrow, as the “Security Industrial Complex” (O’Harrow 2009). Freed from constraints of physicality, geography and time, the societal-governmental information economy enjoys declining transaction costs that act to further accelerate the commercialization impulse to expand markets.
Conclusion: Towards a Disintermediation Theory of Democratic Governance
In short, the ICT revolution has made democratic governance a saleable commodity in itself, irrespective of red or blue ideological divisions, age, gender, or other traditional categorizations of the body politic. This pivotal shift opened the floodgates to the billions of dollars now flowing into not only the traditional presidential, congressional, or state and local legislative campaigns, but also to the opening of whole new market sectors such as judicial races, “vanity” ballot initiatives, and a plethora of inter-mingled private-public information industries focusing on monetizing voter-consumer profiling through data aggregation services, to name a few. To understand how the ICT revolution has merged politics into economics, I argue that a new logic is required that transcends the conceptual limitations of conventional pluralist paradigms interest group politics. Applying Williamson’s logic of (transaction cost) disintermediation explains the erosion of the information monopoly wall that once defined (and protected) government as an entity separate and distinct from society’s marketplace economy.
To understand the dynamic forces shaping the contours of democratic governance in the post-Internet era, you now have to look at politics as a marketable commodity. I argue that the creation and deployment of disruptive ICTs within a liberalizing market regulatory environment has created both vast new revenue-producing products as well as new industrial sector to create and exploit expanding markets for the democracy product. This new core of democracy market creators is the political industrial complex.
Something fundamental has changed the way Americans play the political game. Someone or something has rewritten the rules because the players aren’t running the bases or carrying the ball the way they used to. All the worse for the game, since a lot of the spectators have left the stands, leaving even the most diehard fans who used to lead the “waves” and cheer the team even during boring or losing contests, also looking around for alternative spectacles more deserving of their attention and devotion. All the more mysterious, because if the political process were looked upon as a business, one would have to say that, on the basis of revenues, the business of politics was booming. Every year, more and more money was being raised and spent not only for political campaigns, but also on the spectacular growth sector of lobbying the governmental sector (Kaiser 2009). Paradoxically, while money is up, attendance is down as voters opt to sit out the elections and increasingly choose just to sit (usually in front of a screen) and not leave the house to engage in other forms of involvement in civic life. What’s going on in the world’s superpower and pre-eminent democracy?
American politics has become professionalized - similar to the way purely amateur sports have disappeared from the Olympics and from the university football stadiums and basketball courts across America. The political game is no longer something Americans consider to be fundamentally very different from the many other components of our culture that have also become increasingly commercialized - from college football and baseball, religion, police protection, parks, education and your DNA, to name just a few. During an earlier era, in order to understand politics and the process of governance, one researched and studied first of all, philosophy, then law, and then the disciplines subsumed within the field of “political science,” which included elements of philosophy and law combined with sociology, psychology, and even anthropology. Today, these can’t make sense out of the political spectacles that saturate the airwaves. U.S. tax policy is over 10,000 pages of regulatory gibberish with no perceivable connection to a public interest or function. However, the tax code and a lot of other mysterious political phenomena do make a lot more sense if we switch channels, or paradigms, as it were. This analysis has peered into the new game of politics and government, which today is now much more about a highly commercialized spectacle of governance, than the de Tocqueville perspectives taught in high school and university American government textbooks.
Big changes in science and technology require concomitant shifts in our world view and the way the government governs in both domestic and foreign policy arenas. Development of the atomic bomb was one such change ushering in a nuclear rivalry between the United States and the Soviet Union known as the Cold War. On January 17, 1961, President Dwight D. Eisenhower addressed the nation on television and radio for the final time during his eight year tenure in office. In his farewell address, Eisenhower, a career Army officer and former Supreme Allied Commander during World War II, emphasized that Americans should be cognizant of the special status gained by the military establishment during the Cold War. The “military-industrial complex” was a direct outgrowth of the Cold War, a confrontation between continental superpowers that far outstripped the conventional means for weapons armaments research, development and production:
… Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions (Eisenhower 1960).
President Eisenhower’s farewell address pinpointed the “permanency” of the arms build-out as the organizing principle of the Cold War constellation of power. Contrary to historical experience where wars were followed by build-downs of arms and their procurement and production, the Cold War was different. This was a superpower standoff that required constant innovations in missile accuracy, payload capacity, and the development of smaller and smaller nuclear warheads, each the result of billions invested in research, manufacture and deployment (Bacevich 2010).
Today, we are experiencing another big change in science and technology. Over the past five decades, an accelerating series of technological innovations in telecommunications, computing, and broadcasting have permanently transformed the way people create, store, process and disseminate information. Similar to Eisenhower’s identification of the military industrial complex as a central fulcrum of power in the Cold War’s constellation of governmental-economic spheres, the center of gravity and energy driving 21st Century post-Internet society is the “political industrial complex,” with the media, both traditional and online, as the planets orbiting this massive black hole of commercialized governance. Precipitating out from the confluence of the communications revolution and the information economy, governance in the 21st Century is already emerging as a vastly different political game as the system responds to these fundamental economic cost signals that have disintermediated long-standing governance institutions. The implications are evident in the increasing ideological polarization of political parties seeking revenues from the most highly motivated donors usually at the extremes of the political spectrum. This is not confined to the United States, as democratic governance in a growing number of highly industrialized countries (and hence networked economies) also becomes a commodity for media marketing (Wieczorek 2012). Perhaps Silvio Berlusconi, former Prime Minister of Italy and billionaire media magnate, stands as a seminal figure in the evolutionary process toward outright media commercialization of democratic governance.
Solutions and Recommendations: Disentangling the Political Industrial Complex
To a very grateful extent, this article builds upon an impressive array of works by authors who have astutely observed that ICT are transforming the way people perceive and participate in politics. From the communications field, Neil Postman, Noam Chomsky, Herbert Schiller, Robert McChesney, among others, point out how the rapidly expanding media market sectors are changing political discourse. On the political science side, Cass Sunstein, Theda Skocpol, Bruce Bimber and Robert Putnam, among others are examining the factors “professionalizing” the political process, excluding the rank and file amateurs from campaigns and governance. But while these scholars have identified the factors, they have not been as successful in deciphering the consequences.
This requires some “out of the box” thinking for the factors and their consequences spillover traditional academic or theoretical boundaries. Just as President Eisenhower conceptually linked economics, politics and nuclear weapons in his famous “military industrial complex” speech, this analysis must likewise conceptually link the causes and consequences of the ICT revolution for American democracy. Cyberspace legal theorist and activist Lawrence Lessig has shown how the political industrial complex is benefitting from and using ICTs to capture the democratic process for the furtherance of its market goals (Lessig 2012). As political entrepreneur Arianna Huffington at the April 2002 Los Angeles Times Festival of Books observed, “the political establishment is interested in itself, not in any political program” (Huffington 2002).
Indeed, the political industrial complex is not about policy, but profits. Therefore, to understand American politics during the first part of the 21st Century, the empowered citizen is well advised seek ways to understand democratic governance as a business first, and as a political force second. I hope my analysis and arguments in this piece move the discussion along. I have attempted to show how the powerful logic inherent in Williamson’s transaction cost economics can illuminate how the information society promotes a commercialized system of democratic governance, whose integrity as a separate accountable entity succumbs to the disintermediation imposed by an all-encompassing media market that respects no boundaries other than those defined by costs. Only an engaged and empowered citizenry can re-impose the transaction costs that can protect their democratic system from becoming just another entertainment commodity competing for attention amid the media din endemic to an increasingly commercialized information society.
FUTURE RESEARCH DIRECTIONS
The “disintermediation school” of political-economic theorizing is gaining visibility as increasingly wide swaths of our information society experience fundamental transformations that defy conventional explanations. The health care sector is undergoing a revolution, not only from the side of technology and service delivery, but perhaps even more disruptive is the re-structuring of the economic platform of health care finance, as evidenced by the Affordable Care Act (“Obamacare”). A recent article pointed out how the opening of online health insurance exchanges portends that private health care insurance companies “will be the next to undergo disintermediation.”
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