Capitalism vs. Privacy





Informational capitalism has turned the Internet into a means of social control.

By Samuel Earle

In the popular discourse, authoritarianism typically stands as liberal capitalism’s dramatic antithesis. And nowhere are their purported differences more stark than in their attitudes toward individual privacy. While in the liberal capitalist world every person’s home is said to be their castle, in authoritarian regimes, it is just one more state-monitored cage.

Today, however, privacy is disappearing within the walls of advanced capitalist democracies. And multinational corporations, holding aloft the banner of total transparency, are the ones leading the charge.


In 1999, Scott McNealy, then-CEO of Sun Microsystems, famously declared, “You have zero privacy now anyway. Get over it.” Google CEO Eric Schmidt warned that “if you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” Mark Zuckerberg, the world’s sixth richest man, decided that privacy was no longer a social norm, “and so we just went for it,” while Alexander Nix, of the data firm Cambridge Analytica — famously employed by both the Brexit and Trump campaigns — brags that his company “profiled the personality of every single adult in the United States of America.”


These days, the rhetoric of private capitalists seems indistinguishable from the rhetoric of state tyrants. Their scripts are all mixed up. Their differences have always been exaggerated, if not imagined, but we could once rely on them to at least speak differently. What’s changed?

The Evaporating Bond

s an economic system founded on the idea of a private sphere — consisting of private individuals who own private property and make private profit in private markets — capitalism is assumed to protect individual privacy. The sanctity of the private realm allegedly ensures maximum freedom for the individual, as producers and consumers are liberated from unwanted interference from the state and nosy neighbors.


Capitalism’s detractors have long decried its tendency to hollow out the commons and push everyone into their private bubbles, but its supporters celebrate this atomization. “Civilization,” wrote Ayn Rand in 1943, “is the progress toward a society of privacy. The savage’s whole existence is public, ruled by the laws of his tribe. Civilization is the process of setting man free from men.” From this perspective, capitalism’s emphasis on the private sphere and the resultant privacy made it the world’s great civilizer.


As early as the 1970s, however, the bond between capitalism and individual privacy was becoming unstuck. In 1977, the right-wing legal jurist Richard Posner put forward his “economic theory of privacy,” eventually publishing it in a paper in, aptly, 1984. There, he argued that individual privacy hindered capitalism by interrupting the free flow of information that markets need to be efficient. Posner concluded that “people should not — on economic grounds in any event — have a right to conceal material facts about themselves.”


Posner was writing for Chicago Unbound, the law journal at the University of Chicago, the epicenter of the neoliberal storm that was spreading across the world. Milton Friedman was one of Posner’s closest colleagues, and Posner himself is often included under the Chicago School umbrella. Posner’s capitalist roots — with their endless exaltation of the private individual — made his arguments against individual privacy all the more surprising. The love affair between privacy and capitalism, long taken for granted by dove-eyed liberals, was revealed to be the shallowest of relationships: a marriage of convenience that was no longer convenient.


In the digital age, this relationship has become all the more fractious. A new form of capitalism has emerged on the Internet, variously referred to as informational capitalism, digital capitalism, or surveillance capitalism. Personal information is the lifeblood of the new economy: companies collect their users’ data to sell it to advertisers and generate revenue. The more companies know about individuals, the better they can target their advertisements, boost their “conversion rates,” and rake in profits.


And make no mistake, there’s a lot of money to be made. In the third quarter of 2016, a total of $17.6 billion was spent on digital advertising, a 20 percent rise from the previous year.


Facebook and Google have become a duopoly in this new context, accounting for about half of the total; of the $2.9 billion in growth over the last year, the pair was responsible for a remarkable 99 percent of it. In the process, they have become the two fastest growing corporations in the history of capitalism, with an ability to collect, monitor, and sell data on users in ways other companies can only imagine. Their collective net worth is $800 billion, more than the total GDP of the Netherlands.


Both their business models show that, in informational capitalism, privacy no longer impedes profit: privacy prevents profit. The belief that individuals should be allowed to control their personal information now contradicts capitalism’s profit-making process. Far from sheltering private individuals from external interference, as Ayn Rand imagined, companies now want to know individuals as well as they know themselves. Corporations strive for perfect transparency, so that, in the words of Google’s chief economist, Hal Varian, the search engine will “know what you want and tell it to you before you ask the question.”


We might take solace in the fact that these companies don’t carry the force of the state — that if their intention is to target advertisements more effectively and sell data more profitably, it also might redound to the benefit of the user.


Many people enjoy using a service that knows them well and recognizes their personal habits, preferences, and interests. The quality of their experience increases with the amount of personal information they turn over — and who doesn’t want better services?


But dangers do exist. Although much of the data that tech firms collect is frivolous, we should be wary of the aggregation effect: taken individually, each piece seems innocuous; taken together, an intimate picture of our person is revealed.


Yet even this does not get at the heart of the problem. The greatest threat lies not so much in what corporations know as in how they use that knowledge. The services they offer are entrancing, replete with conveniences and new possibilities, tailored to our every need. But when we cede so much personal information to corporations, we grant them incredible power and responsibility. Knowledge may mean power, but information often means domination.

And since the first large-scale data collection efforts in the nineteenth century, companies have been using technology to exert massive social control.

The Hollerith Machine

In 1880, with a rising population, an expanding territory, and a deepening desire for statistics — combined with a complete lack of technological strategy — the data collected by the United States Census took most of a decade to process. By the time the next census rolled around, in 1890, the processing time had been reduced to three months.


A young American engineer, Herman Hollerith, invented the system that enabled this incredible speed-up. Inspired by train conductors, he used punch cards to automatically tabulate information on a set of standardized traits, from race and gender to literacy levels and religion, across the entire population. The Hollerith Machine, as it came to be known, is now recognized as the first information system that successfully replaced pen and paper. Countries all over the world used it to collect data on their citizens.


In 1911, Hollerith sold his company and the rights to his machine in a merger, forming what is now known as the International Business Machines Corporation (IBM). Under the leadership of Thomas J. Watson, a man revered as the “world’s greatest salesman,” IBM would own 90 percent of all tabulating machines in the United States. They sent them wherever the money called.

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