The ‘Google Model’ of Production - The Entrepreneurial Function, the Immaterial and
the Return to Rent
Professor Gerard Hanlon
School of Business and Management
Queen Mary
University of London
Mile End Road
E1 4NS
[email protected]
Please do not quote without author’s permission.
Paper presented at the CPPE, University of Leicester January 25th 2012
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The ‘Google Model’ of Production - The Entrepreneurial Function, the Immaterial and
the Return to Rent
This paper argues that an understanding of the neo-liberal entrepreneur and his or her
entrepreneurial spirit enables us to explain some of the emerging tendencies within postfordism. Through an analysis of the Austrian School of Economics and in particular
Kirzner, this paper will explain how enclosure and the capturing of value that already
exists have become a key element in capitalism. In contrast to the past wherein capital
sought control of the labour process to extract value today, it increasingly seeks to
capture value that is already there. Furthermore, this capturing of existing value comes in
the form of rent which has re-emerged within post-fordism as a growing component of
surplus value despite Keynes declaring the rentier’s ‘euthanasia’.
Keywords – Rent, Productivity, Innovation, Post-Fordism, Immaterial Labour,
Entrepreneurship
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This paper argues that one of the most salient features of the move to post-fordism is the
capturing of free labour and of the common (Hardt 2010) and that this tendency has
enabled rent to re-emerge as a major category. The re-emergence of rent stands in stark
contrast to fordism wherein it declined as a form of profit. Under fordism management
sought to directly control the production process in order to extract value – indeed the
history of management thought is, to a large extent, a history of struggling to control the
production process (see for example, Taylor 1919, Mayo 1933, 1949). The reappearance
of rent highlights the emerging tendency in post-fordism for capital to take on the
appearance of the ‘entrepreneurial function’ as outlined by the Austrian School of
Economics – most especially the function as described by Kirzner (1973, 1997). For
Kirzner, this function is one of capture rather than creation - it is a model based on ‘an
alertness’ to see already existing opportunities and to seize them. However, the
development of such a tendency leads to a problem. Namely because more and more
products are immaterial capital has to use property rights to capture this value and limit
the reproduction of resources that, once created, are more easily and cheaply reproduced
e.g. this paper (Pasquinelli 2008). In so doing, capital restricts the ability of users to
access resources thereby limiting production and innovation in ways that are seemingly
different to the past. In sum, the paper argues that today capitalism is becoming defined
by entrepreneurial capture, rent seeking and property rights as a fetter on production
(Vercellone 2007, 2008).
Why Kirzner?
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Ricketts (2006) suggests that the concept of the entrepreneurial function is somewhat
fuzzy. Whilst accepting this, what follows will argue that within the post-fordist
economy there is a tendency towards the increasing dominance of Kirzner’s
entrepreneurial model. In the emerging capitalism, firms are deploying this function of
‘alertness’. It is argued that Kirzner’s description of the entrepreneur as non-generating
is useful in helping us to understand why post-fordism is increasingly characterized by a
return to rent, by a barrier to productivity and by an emerging ‘Google Model’ of
production. Within this model capital is less concerned with directly controlling
production to generate profit and more concerned with using its dominant position to
extract rent (Pasquinelli 2008, Vercellone 2007, 2008; Hardt 2010, Marazzi 2011).
Although Kirzner has many critics within his own Austrian tradition and beyond (see
Foss and Klein 2000, Chiles et al 2007, 2010, Matthews 2010), the paper will focus on
him for two reasons. Firstly, there is a consensus that his work is central to our
understanding of the concept (see Shane 2000, 2003; Foss and Klein 2010; Chiles et al
2007, 2009; Metcalfe 2006; Ricketts 2006). Secondly, the paper wants to draw out the
parallels between Kirzner’s entrepreneurial function and the post fordist capitalism with
its accompanying inclination towards rent.
The Austrian School and the Entrepreneurial Function
Neo-liberalism’s most important criticism of mainstream economics is the role it gives to
market equilibrium (see Hayek, 1948; 33-56). In essence, neo-liberals claim that the
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processional nature of the economy is denied in equilibrium, people are made passive and
individual decision making is underplayed (Hayek, 1948, 94-99, Kirzner, 1973; 30-43,
1979; Chiles et al 2007, 2009). The contention is that the market is dynamic, the future
unknowable and people have incomplete knowledge. In this world, people have to
exhibit agency, spontaneity and ingenuity to survive and the entrepreneur represents the
pinnacle of this agency (Hayek 1945, 1948).
The core building blocks of this critique are based on the work of Hayek and Mises (Foss
and Klein 2010, Chiles et al 2007, 2009). Hayek’s spontaneity means knowledge is
incomplete and the future unknowable; as such we can never achieve equilibrium
although through our actions and constant learning we can move towards it (Hayek,
1948; 100). The second strand of this connects to Mises’ (1996) book Human Action.
Here Mises (1996; 252) argues we are all, to a greater or lesser degree, entrepreneurs.
We are all entrepreneurs because we all have to anticipate the future – entrepreneurship
can only be avoided in death. Temporal issues and anticipating the future hold for all
and, as a result, so does entrepreneurship - the fact that there is no risk involved nor
capital required ensures an entrepreneurial persona is open to everyone1. Theoretically
such a proposition implies that the conflict between capital and labour is obliterated
because this key function requires no capital nor risk and is available to all - indeed
required and necessary of all.
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Mises (1996; 255) allows for a subset of entrepreneurs in the Schumpeterian mode whom he refers to as
‘promoters’ – this subset for Mises is essentially what entrepreneurship is for Schumpeter (see Schumpeter,
1983; 137)
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Unlike Schumpeter (1983) Mises thus extends entrepreneurship to the whole population to managers, to labourers, to capitalists, to promoters, etc. – all perform entrepreneurially
in different settings. This is important for two reasons. One it breaks the grip of
expertise by enshrining entrepreneurial knowledge at the heart of social relations. Two, it
enables the entrepreneurial function to drive development both in the marketplace and the
organization by making this social relation the primary relation in life (e.g. the family, the
firm, the market place see Becker, 1962, 1962a, Schultz 1962).
Because of these attributes the entrepreneurial function is both central to capitalist
progress and different to the management function. Management primarily entails
‘subordinated entrepreneurial duties’ (Mises, 1996; 304) although in a living economy
the two roles, cannot be separated (Mises, 1996; 306; Metcalfe 2006; 83-6). The
entrepreneurial function allocates resource by anticipating the future needs of consumers
and, depending on the success of this anticipation, profits or losses ensue which ‘thereby
shifts the ownership of the means of production from the hands of the less efficient into
those of the more efficient’ (Mises 1996; 299). Hence the future of the capitalist is
located in the strategic actions of this function whether or not they are carried out by him
or her – as such senior management becomes entrepreneurial through strategic
anticipation (Metcalfe 2006). In this sense, the entrepreneurial function is the dominant
function within capitalism.
So how is entrepreneurship enacted? Kirzner believes the entrepreneurial function is
essentially that of a price taker who takes an ‘arbitrage theory of profit’ (Kirzner 1973; 85
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– for a critique of his position within the Austrian tradition see Chiles et al 2009, Foss
and Klein 2010). Kirzner’s function sees the entrepreneur scanning the market and
allocating resource in search of price differentials to exploit. He or she is a market maker
who co-ordinates transactions and looks for under-valued resources (Ricketts, 2006; 48;
Metcalfe 2006). By so doing, entrepreneurs guide capitalism because they add to
everyone’s market knowledge thereby pushing us towards equilibrium rather than away
from it as suggested by Schumpeter (1983). Central to this arbitrage is the temporal
dimension because the entrepreneurial function anticipates the future market and future
consumer needs. This anticipation then leads to the allocation of resource and to profit or
loss.
Kirzner, Entrepreneurial Knowledge and Capture
For the Austrians, Hayek’s (1945, 1948) theory of knowledge implies that different
independent people act in a huge variety of ways and have variable abilities to access
knowledge. Hence equilibrium can never be achieved but there may be a tendency
towards it i.e. when the knowledge and the plans of individuals come more and more into
line with each other. Central in this tendency towards equilibrium are entrepreneurs
because through their spotting and exploiting of variability in the market they spread
knowledge (Hayek, 1948; 45). As Shane (2000, 2003) argues, this approach makes
position and prior experience fundamental because both enable some people in some
situations to see an opportunity that they may not see in a different situation or, indeed, in
the same situation if they have a different set of prior experiences. Thus people’s
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variable knowledge necessarily and helpfully enables more spotting of new and different
opportunities.
This function is not based on knowledge data or information or science. What is required
by neo-liberals is entrepreneurial knowledge (Drucker, 1994; 140). That is, it is about
vision, spirit, affect, ‘alertness to information rather than its possession’ (Kirzner, 1973;
68). Kirzner (1973, 38 emphasis in original) puts it thus
‘Entrepreneurial knowledge, may be described as the “highest order of knowledge”, the
ultimate knowledge needed to harness available information already possessed or capable
of being discovered’.
However, this also means entrepreneurship does not create anything. Kirzner (1973; 74
emphasis added) explicitly comments
‘I view the entrepreneur not as a source of innovative ideas ex nihilo but as being alert to
the opportunities that exist already and are waiting to be noticed. In economic
development, too, the entrepreneur is to be seen as responding to opportunities rather
than creating them; as capturing profit opportunities rather than generating them.’
So within the economy, profit is not generated by the entrepreneur rather it is discovered
and captured2 – making Kirzner’s model one of unproductiveness or destructiveness (on
For a critique of Kirzner’s view of the entrepreneurial function based on the argument that the
entrepreneur creates opportunity see Chiles et al (2009) and Foss and Klein (2010).
2
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unproductive entrepreneurship see Baumol, 1990). This entrepreneurial ‘alertness’ does
however provide an indirect benefit by teaching the less alert about price differentials.
The spreading of this knowledge helpfully squeezes profit margins making
entrepreneurial profits short-lived (Mises, 1996; 296). By so doing, successful
entrepreneurs provide for customers most urgent needs (Mises 1996; 290). It is through
this indirect sharing of knowledge and the meeting of urgent need, that successful
entrepreneurs drive the economy and allocate resource. Importantly though, if they can,
entrepreneurs will avoid this indirect sharing of knowledge and seek to monopolize –
because in ways mapped out by Polanyi (1957) - ‘entrepreneurial capitalism is clearly an
uncomfortable place’ (Metcalfe, 2006; 77) and therefore to be avoided.
Given the entrepreneurial function does not generate profit, innovate, nor create
opportunity, why do the neo-liberals accord it such a key role in society? Fundamentally,
they see the entrepreneur and entrepreneurial activity (which sits in all of us alongside
other roles – consumer, producer, manager, etc.) as the ethical inheritor of all wealth.
This wealth is then used to pay others their market price via transaction co-ordination e.g.
capitalists, landowners, workers, etc. Building on Locke and Mises, Kirzner (1973a)
argues entrepreneurs display initiative and it is this human will and not what flows
afterwards through labour, capitalist risk, etc., that is the key to wealth generation.
‘In this view the product has come into being only because some human being has
decided to bring together the necessary productive factors. In deciding to initiate the
process of production, this human being has created the product. In his creation of this
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product this entrepreneur-producer has used the factors of production which his vision
has brought together. He has not cooperated jointly with these factors (so that this view
does not see the entrepreneur’s contribution as consisting of a portion of the value of a
product with the remaining portions being the contributions of “other” productive
agents). He has produced the whole product entirely on his own, being able to do so by
his initiative, daring and drive in identifying and taking advantage of the available
productive factors’ (Kirzner 1973a; 10 emphasis in original).
For this vision of creation, the Earl of Southampton produced Hamlet, the Pope the
Sistine Chapel and Facebook the sociality of its users because, somewhat contradictorily,
these entrepreneurs had the vision to see the value or potential value of what was already
there and hence allocated resource to it. They saw the real existing opportunity before
others and with this vision the entrepreneur created these ‘whole products entirely on
(his) own’ and is entitled not to a portion of the value but to the whole of it, from which
he or she pays the market rate to others (including the capitalist).
Although written less trenchantly, Mises (1996; 297) also deposits the entrepreneurial
function of resource allocation based on anticipated consumer need as representing the
universal interest of society.
‘Capital does not “beget” profit. Profit and loss are entirely determined by the success or
failure of the entrepreneur to adjust production to the demand of consumers. There is
nothing “normal” in profits and there can never be an “equilibrium” with regard to them.’
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Crucially, anticipated consumer needs and entrepreneurial knowledge structure both
production and the distribution of wealth. However, this entrepreneurial role does not
exist in a special class of people. It can, and increasingly needs to be, percolated
throughout the enterprise society and the firm via entre and intrapreneurship (see Macrae
1982, Metcalfe 2006).
Kirzner (1973; 52-62) hypothetically outlines what entrepreneurship might look like.
The example used by Kirzner is one of hunting. To summarise, an entrepreneur thinks
that hunting will prove to be a lucrative area wherein price differentials could be
exploited. As such, the entrepreneur provides no capital and seeks no risk, but hires a
gun to exploit the high price of meat. If their view is correct others will see the
entrepreneurial profits, enter the market and thereby lower profitability because the
entrepreneur provides information for those alert enough to recognize it. Equally, and
more interesting for Kirzner, the entrepreneur may not be alert to hunting in their own
right but hire an employee to hunt for them. If the employee is an average hunter with
average talent, the entrepreneur will get surplus simply from their entrepreneurial
alertness to be early and over time this will be whittled down via competition. One
assumes at this point the entrepreneur moves on to claim arbitrage elsewhere?
If, on the other hand, the employee is an average hunter but finds better hunting grounds
and passes on all this extra value to the entrepreneur, then the employee is more
productive but not entrepreneurially alert. Simply because this employee sees him or
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herself as expending the same energy as other hunters, they get the wage of other hunters
and the entrepreneur gets the excess entrepreneurial profit because the employee lacks
entrepreneurial alertness. Finally, if the employee finds better hunting grounds but keeps
the excess value for themselves then they have exercised their entrepreneurial alertness
by getting the ‘entrepreneur’ to hire their equipment and provide them with a wage and
allow them to keep (some of) the entrepreneurial profit (Kirzner 1973; 61-2).
A number of features emerge from this description of entrepreneurship. Firstly, the
entrepreneur is interested in arbitrage and the scanning of the horizon for undervalued
resource not the organization of production in the manner of the traditional capitalist
searching for efficiency gains. Secondly, entrepreneurial profits are short-lived and
lessen over time because the act of gaining entrepreneurial profit spreads knowledge of
this existing opportunity and hence others enter the market place. This second point
creates a tendency to encourage protection via property rights or else a move in search for
higher arbitrage elsewhere (Metcalfe 2006). Historically, one outcome of this search for
property right protection seems to have been the stifling of innovation, the tendency
towards unproductive or destructive processes and the taking of rents (Baumol, 1990).
In the post-fordist economy that is emerging, the entrepreneurial function outlined by
Kirzner is increasing in importance as capital captures value and opportunities that have
already been created and claims the legitimate right to that value. Some examples of this
might be the raiding of the value of ‘identity’ through the work of human resource
management or human capital (Becker 1962, Fleming 2009, Costea et al 2007); the
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increased use of ‘free’ labour through social media sites (Soar 2011), internships (Ross
2011) or what Marazzi (2011) calls financialisation; the use of ‘free’ academic labour to
produce profit for academic publishers (Monbiot 2011), the dependence of internet news
media on the editorial expertise of ‘old media’ such as print and TV (Pariser 2011), etc.
In short, through its exploitation of free labour and/or skills derived outside the
workspace, capital is increasingly ‘capturing opportunities rather than generating them’.
This post-fordist tendency begets rent and stands in contrast to the Fordist pursuit of
efficiency within the factory. This expansion of the entrepreneurial function of capture is
the emerging ‘Google Model of Production’.
Postfordism and the Immaterial
As mentioned, rent is a category that was eclipsed in the Fordist era of production. Hardt
(2010) points out that Keynes famously talked of the ‘euthanasia of the rentier’ because
they no longer had a worthwhile function. Capitalists eschewed rent as a form of profit
because they sought the value derived from the direct control of the production process
(Braverman 1974, Marglin 1980, Edwards 1979). Profit, production processes and
labour control were umbilici tied. The rentier was the antithesis of this and was
characterized by a lack of interest in the production process or in how his or her rent was
generated. In the pre-fordist era the epitome of the rentier was the aristocratic absentee
landlord who waited in London for his rents from vast estates in the colonies without any
knowledge of, or interest in, how those rents were generated or by whom. Rent, as Marx
(1988) highlighted, was associated with immovable property – land, rivers, forest, mines
– and when capitalism developed movable property, its days were numbered. One of the
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reasons for this was that when labour was turned into a commodity the pretence that it
was a fundamental element of the social order and the community was laid bare. This
shift forced the rentier to become a capitalist (Marx, 1988: 88).
In this transition, aristocratic society and its claim that the landowner (and rent)
represented the universal interest gave way to capitalism and the claim that capital (and
profit) represented that interest. Movable property trumps immovable property, money
becomes the ideal form of private property and the rentier is rendered functionless. In
order to increase profit a direct interest in the production process becomes increasingly
necessary. Despite being numerically small, the capitalist’s imprint shapes society, the
accumulation regime moves from rent to profit and industry refashions society in a
qualitative sense (see Hardt 2010). Today new forms of property are also at the heart of a
qualitative shift (Hardt and Negri 2000, Virno 2004). This change entails a transition
from a fordist to a post-fordist regime of accumulation (Aglietta 2000). This alteration is
generating new modes of production based on the entrepreneurial capture of free labour
and the common to extract rent. In its wake, this change is bringing a new capitalist
problem wherein private property, productivity and innovation are seemingly in conflict.
First Qualitative Shift – Towards Immaterial Labour and the ‘Google Model’ of
Production of Post-fordism
The first important qualitative shift in capitalism concerns where value is created and it is
fundamentally linked to entrepreneurial capture. Increasingly value and opportunity are
generated outside the firm. This has occurred because of the rise of mass intellectuality
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and the development of what Marx called the ‘general intellect’ (Marx, 1973; 706-08).
This development came about because of capital’s desire to reduce labour time as it
searched for efficiencies and profit in the factory. Obviously such a reduction led to the
growth of free time. Free time enabled labour to transform itself into a different
subjectivity by enabling it to develop in new ways. This renewed (and renewing)
subjectivity then returns to production as an enhanced value generating form.
Increasingly labour becomes fixed capital because knowledge, science, technology, etc.
are embedded in labour’s being i.e. in the social individual (Marx 1973). Whilst Marx
located this shift in technology (although Vercellone 2007 qualifies this criticism), recent
theorists have argued that the general intellect should also include, communication,
desire, affect, language, emotion, etc. (Virno 2004, Marazzi 2008). These sources of
value are developed outside of what we traditionally think of as the workplace. They are
developed at school, at play, at work, at home, etc. and they are put to work, generate
value and give rise to explosive productivity increases – for example, every minute
labourers/consumers/users of YouTube upload 48 hours of material (Soar, 2011; 6).
More and more work takes place within and without the traditional workspace.
‘In other words production neither starts nor ends in the factory. We can therefore affirm
that productivity, as a measure of increase in economic value, begins even before the
worker arrives at the office.’ (Marazzi 2007, 29 emphasis in the original)
The new fixed capital is in labour’s head and we have entered a social factory where all
of life is increasingly put to work in ways that are different to the assembly line (Ryan;
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1991, 208, Fleming 2009). Today many industries operate on the basis of this creation of
value outside the traditional workspace – e.g. social media sites, IKEA, TV, etc
(Pasquinelli 2008). But older industries are also part of this transformation. For
example, the UK government has a category for ‘personal research’ in its survey of how
academics spend their working time. This survey is used to allocate resource between
teaching and research – once an academic has reached 37.5 hours of labour per week
their research becomes ‘personal’ research i.e. it might generate value but the University
will not be allocated any direct resource (although it will gain reputationally). It is free
labour and the state and University are being entrepreneurially alert by capturing
something for nothing. Furthermore, this labour is increasingly formed in the ‘general
intellect’ not within the firm e.g. YouTube is simply a platform made valuable through
the array of material posted by people who do not work for YouTube nor post products
made by YouTube. Here individuals have posted something of their subjectivity onto
YouTube which then seeks to commoditize it and extract value via advertsing. Echoing
Mises (1996), the market comes to shape social relations. Indeed, as Marazzi (2011, 56)
has argued we are in a world of co-production between the consumer and the producer
and this ‘Google Model’ of production is generating a new regime of accumulation
‘In the gap (between accumulation and profit) the extraction of surplus value, of unpaid
labour, is done by capturing devices outside of the direct productive processes by using a
business model that draws from the productive, creative and innovative qualities of the
workforce developed in extra-professional environments’ (Marazzi 2011, 114).
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As suggested, this ‘Google Model’ of production is based in the entrepreneurial alterness
to capture unpaid labour taking place outside the traditional workplace which creates
value. This value generation is located in the general intellect (Pasquinelli 2008).
YouTube (and a host of others – Google, Facebook, Linkedin,) gets it value from the
uploading of material provided for free by labourers/customers/users and it is this value
which makes the firm attractive to other users and hence to advertisers (Pariser 2011,
Lanier 2011). The labourers/consumers/users are akin to Kirzner’s (173, 62) employee –
more productive but not entrepreneurially alert. Like the UK state, YouTube acts like the
entrepreneur whose alertness ‘captures the opportunities he perceives’ (Kirzner 1973; 612). Thus central to the new economy are unpaid labour and the skills, value, knowledge
etc. derived outside the workspace in the ‘general intellect’.
Second Qualitative Shift – Towards the Immaterial Product in Post-fordism
The second change we are witnessing concerns the growth of two contrasting forms of
property – the material and the immaterial – this is something of a methodogical
makeshift as obviously this paper is both material and immaterial. The material is
characterized by scarcity and is not reproducible i.e. if I am using a car you cannot use it.
In contrast, the immaterial is characterized by being easily reproducible and virtually
limitless – it is possible (but infinitely unlikely) that this paper will be read
simultaneously by 100 individuals, so scarcity is not an issue (or at least not in the way it
traditionally was – obviously resources are still used and our attention capabilities are
limited, see Pasquinelli 2008). This is important because it means that a variety of
readers could contemporaneously make use of this work in different and innovative ways
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and thereby increase its productive potential. However, we still have the issue of
ownership. Ownership of the rights to the paper limit access to it and hence lessen its
productive and innovative capacity. This is a real tension in the emerging economy as it
becomes more immaterial e.g. publishing, music, social media, film, television, academia
and education, scientific and medical knowledge, design, telecommunications, art and
literature, etc – all of which have a strong footing in the immaterial. Much of what these
industries produce is reproducible at little cost and thus open to multiple uses at the same
time thereby increasing the opportunity for productivity and innovation. That they are
not open to this, will limit this productivity. As Hardt (2010, 349) comments
‘Property is becoming a fetter on the capitalist mode of production. Here is an emerging
contradiction internal to capital: the more the common is corralled as property, the more
its productivity is reduced; and yet expansion of the common undermines the relations of
property in a fundamental and general way.’
One obvious example of this tension is the growth of, and conflict around, intellectual
property rights, patents, trademarks, etc. For example, witness the various sides of the
debate over ownership of the UK World War Two poster ‘Keep Calm and Carry On’
where at least two different organizations dispute the phrase being trademarked by the
Keep Calm and Carry On Company. But one could think of the more crucial dispute
about medicine and HIV which has emerged in India. The pharmaceutical company
Novartis has challenged Indian generic medicine manufacturers and is seeking to extend
its patent of the drug Gilvec and to sell it to Indian citizens with HIV at Western costs.
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This is a direct challenge to India’s patent regime with some scientists and activitists
protesting that Norvartis is engaged in the monopoly capitalist process of ‘ever-greening’
– that is, making minor modifications to a drug in order to extend its patent and capture
rents (Reid-Henry, 2011). Such disputes are increasing as the number of patents and
other forms of intellectual property applications rise – since the 1980s the number of
patents granted by the US state has doubled (Marazzi 2008, 123). These immaterial
knowledge based patents are increasingly for products that are cheap to reproduce and,
assuming Hardt (2010) is correct, they will limit rather than enhance overall productivity
and innovation because some of the individuals who could potentially make use of these
products and the knowledge located within them are denied access.
This returns us to the entrepreneurial function and the short-lived nature of
entrepreneurial profit. This short term nature comes about because of the function’s role
in spreading knowledge – something a patent does although it also restricts use. This
spreading of knowledge was one of the entrepreneur’s beneficial roles for the Austrians.
Today, however, property rights are used to extend the shelf life of entrepreneurial
profits. This does two things: it enables a ‘super’ profit because entrepreneurial profit is
higher than ‘normal’ profit due to the fact that it is based in ’alertness’ and two, this
redistributes wealth and production in particular ways and to particular groups (presently
in very unequal ways). As suggested earlier, one of the potential outcomes of the short
termism of entrepreneurial profit is a tendency towards limiting access to knowledge –
that is being ‘willing to sabotage the innovative effects of others’ (Metcalfe, 2006; 77).
This is the creation of an artificial scarcity by restricting the spread of knowledge and
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hence productivity and innovation. Today through entrepreneurial alertness capital seeks
monopoly and seeks to avoid spreading knowledge of what might be valuable. This
tendency towards monopoly via scarcity is an emerging tension in post-fordist capitalism.
Kirzner distinguishes between two sources of monopoly (scarcity) – one where the
monopoly is a result of resource ownership and one brought about due to the producer’s
uniqueness (Kirzner 1973; 21).
Essentially, Kirzner distinguishes between for example, a water monopoly wherein if you
need water you must go to company X because they control the scarce resource. The
second monopoly allows other competitors to emerge through knowledge dissemination
provided competitors feel profits can be taken. This second monopoly is legitimate
because it does not interfere with the market process and competition. Herein lies a
contradiction for the emerging immaterial economy. Theoretically, an academic can
publish his or her work as open access or go to a variety of privatized journals and
publishers or a person can use Facebook with almost a billion users compared to
MySpace with 30 million - so Kirzner would argue that the process is competitive and
hence there is no necessary monopoly.
However, for immaterial products, property rights create an artificial scarcity and hence
limit the use and potential productiveness of these resources. Here property rights act as
an enforcing of artificial scarcity – they turn potentially limitless immaterial products into
quasi-immovable resources thereby creating a quasi-monopoly on use which, in turn,
limits productivity and innovation. This is different to the past where in practice only one
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person could use a product such as a car or a hammer at any one time regardless of
property rights. But there is no equivalent reason why this paper is not available to
anyone with a modem (Pariser 2011, Lanier 2011). Today, Kirzner’s entrepreneurship
and monopoly conflict with productivity because they restrict access. Combine this with
Metcalfe’s observation that entrepreneurial capitalism is an ‘uncomfortable place’ and
one can see how property rights and entrepreneurial capture come to act as fetters on
productivity (Hardt 2010). In short, it is an example of how capitalist groups seek to
avoid the market by restricting its impact upon them (Polanyi 1957).
These twin changes in products and production are important if we are to understand
post-fordism because they explicitly relate to the issue of capture at the heart of Kirzner’s
entrepreneur and of current capitalism. Increasingly this entrepreneurial capture is
performed via financialization - that is, by the search for ‘profitability outside
immediately productive processes’ (Marazzi 2011; 31 emphasis in original). This
financialization operates through ‘hyper-productive logics centered around the primacy
of shareholder value’ (Marazzi, 2011; 63). At the heart of entrepreneurial society is the
immaterial in terms of both property and labour and this has led to a tendency for a return
to rent and a decreasing interest in direct control of the production process – the ‘Google
Model’.
The ‘Google Model’ of Production, the Immaterial and the Tendency Towards Rent
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Immaterial labour and immaterial products are, of course, intimately linked. If
immaterial labour is increasingly communicative and located in language and symbols
then its product will be the same. Immaterial labour is also important because it stems
from the general intellect - from the outside of traditional production. One can see this in
something like Facebook wherein the product is created by labourers/consumers/users in
their free time and based on their subjectivities. This is the social factory where all we
know and are and potentially are and know are put into production. To quote Marx
(1973, 706) ‘general social knowledge has become a direct force in production’.
However, Facebook, for example, is also hampered by its ownership – to make use of
Facebook one has to join (albeit for free) which means that only members can access
your profile which in turn limits the use of the service i.e. people from MySpace cannot
access your profile. Here we see the twin aspects of post-fordism namely the rise of the
immaterial, often based on free labour, and property rights hindering use, productivity
and innovation.
However, there is a further element to these products and of the emerging tendency in
post-fordism. Namely, the production process appears not to be of interest to the owner.
Facebook does not create the product people seek – that product is created in dispersed
locations, outside of the workplace, inside the workplace, it uses skills developed in the
social factory not in work, and so on. Lest we think, however, that only the social media
operate in this fashion – land and gentrification (see Harvey 2002), journalism (Pariser
2011) or academic publishing are, for example, similar. Academics write, edit, review
and consume the product they hand over to publishers only to purchase their own product
22
back via personal spending and University libraries. Where the product is created, what
is created, or how, is of little interest to the publisher. The publishers are unconcerned
about the production process because, from their perspective, it is characterized by free
labour. Comparing academic publishers to landlords, Monbiot (2011) argues that this
free labour and the ownership of property rights enable academic publishers to achieve
profit margins of 35-40% - super entrepreneurial profits. These property rights then limit
access and hence the use of the product thereby imposing an artificial scarcity. Other
examples abound – we just need to think of the controversies around the pirating of film
and music industries, the pharmaceutical industry, bio-piracy and indigenous/traditional
medicine, etc. If under fordism profit, production processes and labour control were
umbilici tied then today it seems property, productivity and innovation collide.
Monbiot is right to use the example of the landlord because he or she is closely associated
with rent. Whilst speaking of rent in The Wealth of Nations, Smith (1981; 160) observed
‘The rent of land, it may be thought, is frequently no more than a reasonable profit or
interest for the stock laid out by the landlord upon its improvement. This no doubt may
be partly the case upon some occasions; ….. the landlord demands 1) rent even for
unimproved land, and the supposed interest or profit upon the expense of improvement is
generally an addition to this original rent. 2) These improvements, besides, are not always
made by the stock of the landlord, but sometimes by that of the tenant. When the lease
comes to be renewed, however, the landlord commonly demands the same augmentation
of rent as if they had all been made on his own’
23
Smith highlights two aspects to rent: firstly, the neglect of the item put out for rent and
secondly the rentier’s desire to capture the value of any improvements made by the
tenant. That is, the landlord is uninterested in controlling production but is
entrepreneurially alert to the opportunities for value capture provided by improvements
carried out by someone else. These traits shape the ‘Google Model’ of accumulation. If
one examines immaterial products such as Facebook or academic publishing what is
valuable is not the control of production. What is valuable for Facebook is both market
dominance and the control of use so that more and more free labour and content are
provided thereby enabling it to sell more and more personal preferences and data to
advertisers and, because it has market dominance, more people will join it because they
have friends there already – Facebook has achieved lock-in (Pariser 2011, Lanier 2011,
Soar 2011). After all, there is not much point in joining a social media site that is a
market minnow.
Academic publishers are also uninterested in the direct control of production but again
seek control of use and market dominance in order to extract free labour and content from
academics seeking the status of the publisher’s journals or imprint. When, as Marx
states, ‘general social knowledge has become a direct force in production’ market
dominance becomes an important feature of production in new ways. For example,
Google used its market position to capture a large percentage of the world’s phoneme
pronunciation to then develop a new set of search by voice services which are now used
in Android phones (Soar, 2011; 5). Thus Google entrepreneurially captured value from
24
the general intellect – our speaking abilities and traditions – to develop new services on
the free labour we provided for them via talking to their directory services. This is the
exploitative new economy.
As with immovable property yesteryear, scarcity is central. On the basis of such scarcity
entrepreneurial profits will remain both high and long-term thereby demanding the
continued allocation of resource despite its unproductive nature (Baumol, 1990).
Immovable property was naturally scarce and property rights were used to extract from
this. In contrast, immaterial property is made artificially scarce so that market dominance
can be achieved and capital can capture value in ways akin to the (rentier) entrepreneur
(Kirzner 1973, Baumol 1990) - that is value which is already there and waiting to be
captured. This allows capital to extract via the ‘becoming rent of profit’. As Christian
Marazzi (2011; 61) puts it
‘the increase in profits over the past thirty years is thus due to a production of surplusvalue with accumulation, although an entirely new accumulation because it is external to
classic productive processes. It is in this sense that the idea of a “becoming rent of
profit” (and, in part, wages themselves) is justified as a result of the capture of a value
produced outside directly productive spaces. Today’s system of production curiously
resembles the eighteenth century economic circuit centred around farming and theorized
by the physiocrats’
25
Although from the other end of the political spectrum, Marazzi’s description of the new
regime of capture, which he condemns, is oddly reminiscent of the entrepreneurial
function in Kirzner (1973; 74)
Both refer to opportunities or value created elsewhere and then captured by those who do
not generate or produce them and both highlight a disinterest in the direct production
process and/or its control. The entrepreneurial society is a rentier society and this is a
growing tendency within post-fordist capitalism.
Property rights enforce scarcity, limit productivity and enable the emergence of rent
because capital does not organize production but, having watched others do so via free
labour, it extracts the rent. Marx (1981; 779-88) argued rents were either differential
rents based in exclusion or reaping the rewards of large scale capital investment or were
based on absolute surplus labour. For example, through the ownership of the natural
water power for a mill, a capitalist needed less labour to produce the same amount of X
hence they generated surplus profits and the excess came in the form of rent. Today
capitalism increasingly extracts surplus value via free labour or through the extraction of
value from large scale capital investment by a third party e.g. the state and IT
infrastructure or through the general intellect via quasi-monopolies e.g. Routledge or
Facebook, thereby claiming more profit in the form of rent. If the entrepreneurial
function is to commoditize and capture under-valued resource then free labour and the
common are this par excellence.
26
All of this suggests there is a growing distance between capital and production. The
‘Google Model’ of production with its emphasis on free labour and the harvesting of the
social factory means that the function of controlling the production process is
increasingly to the side of actual production because Kirzner’s entrepreneurial capture
supercedes it. With this emerges ‘the becoming rent of profit’. Somewhat surprisingly,
because we often see ourselves as increasingly managed, capital appears to be taking less
direct interest in control of the production process and where value is created. This lack
of interest in directly controlling the production process opens up a limited autonomy for
labour which capital seeks to expropriate and control through rent (Hardt 2010).
However, this might also allow the potential to usher in an empancipatory moment
wherein we realize that self-organized production is already taking place. After all,
Polaroid retreated from self-organized production when it realized management might be
made redundant (Edwards 1979).
Conclusion – What is to be done?
These issues return us to Kizner. His entrepreneur creates nothing, takes no risk, does not
innovate but is entitled to the full product because he or she saw the opportunity or had
the vision to capture value that was already there. This seems to describe the tendency
towards rent within post-fordism. Firms increasingly rely on free labour, capture value in
the common, stay alert to opportunity and seek to limit the spread of knowledge (in
contrast to the Austrian School view). What we are witnessing here is a return to rent and
an imposition of artificial scarcity to enable market dominance to ‘recreate’ the rent
27
capabilities of immovable property. As capital becomes more disinterested in control of
the production process, is increasingly surviving via an extraction of free labour, and is
attempting to use property rights to take rent and arbitrage, it embraces Kirzner’s
entrepreneurial vision. To somewhat reverse the autonomist Marxist proposition –
capital has refused wage labour via its interest in what is free and in the general intellect.
This potentially opens a space for labour to continue to self-organise and reject capital,
management and the entrepreneurial function - however remote that may look.
The entrepreneurial society appears to have entrepreneurial capture, enforced scarcity and
property rights at its heart. It also appears to be in conflict with productivity and
innovation. It further seems to eschew an interest in direct control (of elements) of
production. Capital takes on the entrepreneurial function outlined by Kirzner – namely,
one wherein it captures existing value, uses property rights to create scarcity and, by
limiting the spread of knowledge, ensures entrepreneurial profits are long term whilst
claiming the market process is unhindered. Furthermore, because it is ‘visionary’, capital
is claiming more and more of the social product whilst limiting society’s potential
productiveness through restricting the spread of knowledge.
Today capital faces a new problem because it needs to present its extraction of the
‘becoming rent of profit’ as the universal interest when increasingly the labour necessary
for this is free, capital is more and more removed from production, the entrepreneurial
claim to decide the distribution of wealth leads to increasing inequality, and these
changes limit innovation and production. This shift implies a reversal of almost 300
28
years of capitalist legitimation wherein capital and profit (and management’s role in
garnering it) were praised as being in everyone’s interest unlike the older regimes based
in rent (Hirschman 1977, Marx 1988, Smith 1981). Such a transition is fraught with
potential outcomes. As Gramsci famously highlighted, the birth pangs of fordism were a
defeat for the revolutionary left because, with this historical shifting of gear, came a
moment of economic, political and ideological reconstruction (Gramsci 1971; Hall,
1988). Capital is shifting gear again and with this comes another moment of
reconstruction. So far this has been an example of the ‘Great Moving Right Show’ (Hall,
1983), but as capital seeks to reestablish unproductive rent as a legitimate form of
expropriation it takes a risk. Capital’s refusal of wage labour in favour of entrepreneurial
capture may lead to a political moment wherein labour refuses capital and embraces what
it is already doing – self-organizing.
29
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