Erich Honecker & the Internet of Things. A Comment on Jeremy Rifkin’s “The Zero Marginal Cost Society”


“The capitalist era is passing… not quickly but inevitably.” Thus reads the opening sentence of Jeremy Rifkin’s new book The Zero Marginal Cost Society. It’s not, indeed, a blockbuster title but that doesn’t mean that this would be one of Rifkin’s minor books. In fact, what the American Business School Academic and head of the Foundation on Economic Trends attempts here is a synthesis of the rather enormous body of work that stands to his name. From his almost prophetic book on the technology-induced decline of the global workforce (The End of Work 1995), his take on the experience economy (The Age of Access 2000) to the more recent thesis about capitalism as an operational accident in the history of mankind (The Emphatic Civilization 2009) and the proclamation of a Third Industrial Revolution (2011) based on the convergence of smart grid energy and distributed communication networks, Rifkin has emerged as one of the most influential commentators on social and economic change who is in great demand as policy and business consultant in Europe and particularly with the German government.

In The Zero Marginal Cost Society, many, if not all these themes return, organized this time around a new conceptual backbone called “The Internet of Things” (IoT). While in the popular use of the notion of IoT, what is usually meant is the spillover of digital networking into the world of physical objects based on the proliferation and interconnection of microprocessors and analytic software apps, Rifkin argues for an even more inclusive, all-encompassing understanding of the Internet of Things. His IoT features three dimensions: energy, communication and logistics. First, there is what he calls the “energy-internet,” representing the trend toward smart grid technology, i.e., the distributed generation of renewable energy (every house as a micro-power plant feeding into the grid etc.). Second, we have the distributed communication network, the internet. Together, those two form what Rifkin calls the energy/communication matrix. In fact, in the first chapters of the book, he attempts a rewrite of the history of capitalism (against Marx and Smith) as one driven by the co-evolution of energy and communication technologies rather than (the organization of) labour power. The third dimension, then, is provided by a smart and distributed logistics system that is not really here yet but according to Rifkin, trends such as ubiquitous sensors in retail automation, smart cities, big data technologies etc. clearly point in this direction and anyway, this simply is the way things will (have to) go.

Together, these three dimensions make up “the first general purpose technology platform in history that can potentially take large parts of the economy to near zero marginal cost.” Now, what does “near zero marginal cost” actually mean? In economics, marginal costs signify the investment necessary to produce one more unit of a particular good. As costs tend to decrease with increasing numbers of goods produced, over the long run, the cost of such investment becomes marginal. According to Rifkin, near zero magical cost is the result of what he refers to as the “ultimate contradiction at the heart of capitalism,” i.e., the race for technological innovations lowering production costs and prices for the sake of competitive advantage. In other words, capitalists compete for customers, ergo goods and services get cheaper, ergo profits fall over time (Marx famously expounded this argument as “tendency of the rate of profit to fall”). Today, Rifkin argues, the convergence of the energy, communications and logistics internets on one all-encompassing IoT will, eventually, lead to the evaporation of profit for significant parts of the economy. We see this already happening in industries dealing in digitized or digitizable goods (publishing, entertainment, etc.) but in the eyes of the futurologist, this is only the prelude to a new “great transformation.” With profits gone, capitalism will be eclipsed, i.e., if it won’t disappear entirely, it will at least move to the margins of the economy.

A tiny little caveat is in order at this point. There is a difference between capitalism (a specific mode of production that comes with its specific mode of ownership of the means of production) and the market (a mechanism for the distribution of goods and services). Taking this difference into account, which Rifkin doesn’t, would mean to understand that the collapse of certain markets does by no means logically lead to a collapse of capitalism at all. As readers of the French historian Fernand Braudel might remember, historically, capitalism hasn’t really been all too keen on markets anyway.

Leaving this not so minor misunderstanding aside for the moment, the question is: where does the path beyond capitalism lead according to Jeremy Rifkin? The answers is, as one might have guessed, the “social economy” or “collaborative commons,” i.e., the laterally structured social system that co-evolves alongside the IoT. Of course, as with the IoT, the collaborative commons are still emerging but the signs, according to the author, are all over the wall: trends such as the sharing economy, free and open software initiatives or social innovation make clear which way we are going. And while “emerging” is in fact a diplomatic way of saying that something isn’t really here (yet), the prospects for the social economy are outstanding thanks to its “soul mate,” the IoT:

“The new infrastructure is configured to be distributed in nature in order to facilitate collaboration and the search for new synergies, making it an ideal technological framework for advancing the social economy. The operating logic of the IoT is to optimize lateral peer production, universal access, and inclusion, the same sensibilities that are critical to the nurturing and and creation of social capital in the civil society. The very purpose of the new technology platform is to encourage a sharing culture, which is what the commons is all about. It is these design features of the IoT that bring the social commons out of the shadows, giving it a high tech platform to become the dominant economic paradigm of the twenty-first century.”

What The Zero Marginal Cost Society presents is thus a dialectic where the technological advances synthesized in the notion of IoT drive a transformation of the economy to the effect that the benevolent human tendencies toward sharing and collaboration become the operating principles of a new economic order. The teleology that Rifkin developed at length in The Emphatic Civilization is here put on the rails of the IoT in order to reach its final destination: socio-economic “commonism.” Whereas in the past, people believed they needed to struggle for revolution as a way of overcoming capitalism, we now know that it was simply a matter of waiting for technology lending a hand to the course of history in bringing out the internal contradictions of a social system that in the not too distant future will lead to its more or less gentle self-destruction.

On of the great problems with Rifkin’s analysis lies in his ‘method’ of lumping together a wide variety of often contradictory ‘trends’ and extrapolating them into seismic shifts toward a radically democratic, post-capitalist economy. To give an example: Richard Stallman and Free Software, Eric S. Raymond and Open Source, Laurence Lessig and Creative Commons are all called into the witness stand to testify for the “democratizing culture” of the internet. Yet, these are very different initiatives with very different motivations. Turning them all into democratizers makes one wonder why Rifkin didn’t include Google’s Art Project in his list as well. Besides, for a book published about a year after Snowden, a more nuanced view on the relationship between internet an democracy would be apposite.

This is no minor quibble as the internet emphatically provides the author with the model for the other two dimensions of the IoT, i.e., the energy and logistics internet. Of course, Rifkin is not an idiot. He also sees the the obvious counter forces to his argument and he discusses them in the book as well. He talks, at some lengths, about “the new corporate giants that are colonizing large swaths of virtual space.” Yet, ostensibly discussing these empirical challenges to his argument and taking them seriously are two different things. While Rifkin brushes aside the highly problematic proprietary structure of the internet with a remark as to “some kind of regulatory restriction” that is likely to appear (really?), he simply ignores the trend toward hyper-exploitation in his logistics internet as well as the rather undemocratic trends in the sharing economy.

At times, Rifkin’s book reads like the work of someone who spent a whole year traveling from one innovation conference to the next and taking all the presented arguments at face value. 3D-printing, crowdfunding, MOOCS, driverless cars, DIY, big data, Moore’s Law, singularity – you name it, it’s in the book. And he mixes it all into a dialectic where the transformation of human society into a network of collaboration, sharing and so on is a function of a human-machine interaction that is fully determined by the logic of technological progress. Rifkin’s socio-anthropological argument sees us as human beings cross the threshold toward our supposedly proper, i.e., fully social existence, yet, by doing so, human being is completely thingified in the internet of things. While the author presents himself as a fervently political thinker (the eclipse of capitalism, etc.), there is no space for political judgement at all in his vision of our interconnected future. Although he shares with most of today’s trend watchers and futurologists a taste for techno-teleology, the stubbornness with which Rifkin massages his favorite trends into the big transformation toward the post-capitalist society is truly reminiscent of the late Erich Honecker who famously remarked (I paraphrase): “Neither ox nor donkey is able to stop the progress of the social economy.”

And yet, while Rifkin clearly prefers the reckless ideological construction of the dawn of commonism to intellectual rigor, he certainly is not a socialist revolutionary. At the climax of a chapter entitled “The Collaborationists Prepare for Battle,” he reveals his vision on the conflicts he sees lying ahead. After stating that it would be a “mistake to believe that a Commons model will invariably govern the next chapter of human journey,” (which, I am sorry to say, is exactly what he had argued in the previous 190 pages) Rifkin sketches the ‘political’ front lines:

“While the collaborationists are ascendant, the capitalists are split. The global energy companies, the telecommunication giants, and the entertainment industry – with a few notable exceptions – are entrenched in the Second Industrial Revolution and have the gravitas of the existing paradigm and political narrative to back them up. However, the electricity transmission companies, the construction industry, the IT, electronics, Internet, and transport sectors are all quickly creating new products and services and changing their business model to gain market share in the emerging Third Industrial Revolution hybrid of market and Commons arrangements, aided in various ways by the government.”

Let us ignore, for now, the highly problematic notion of the “collaborationist ascent” (and what that would actually mean) and focus instead on the “capitalist split.” Rifkin’s statement sounds much less like the initially promised “eclipse of capitalism” and more like the adaptation of economic policy to a new regime of production. And of course, his own TIP consulting group can help to achieve this by way of “Third Industrial Revolution Master Plans for cities, regions, and countries.” The revolution Rifkin has in mind will thus be government-sponsored and preferably led by his consulting operation. This is much less hilarious a proposition than it might initially seem. The interesting fact about The Zero Marginal Cost Society is that underneath the infantile rhetoric of the futurologist trend-watcher, there lies a vision of an economic future that is indeed driven by a great sense of (geo-)political realism. Rifkin’s unconvincing regurgitation of the Californian techno-utopian nonsense can safely be filed under a great entrepreneur’s lip service to the zeitgeist. What is much more important is that he moves beyond the digital cliché by embedding it in a notion of the IoT that emphatically includes the so-called ‘real economy’, i.e., the industrial infrastructure as well. As I said above, Rifkin is an advisor to European governments, particularly to the Germans and, more recently, counts the Chinese premier among his admirers as well. There is an emergent geopolitical project on the European horizon (well, it’s actually a bit closer than the horizon although the current conflict in Ukraine could cause serious disruption) driven by the idea that a new economic order can be built on the back of recent technological developments that is very much in line with the more realistic core of Rifkin’s argument. This vision is explicitly continental, manifested in the extension of railway lines and development corridors across the Eurasian landmass. China has just revealed its aspirations in this respect under the programmatic heading of The New Silk Road, a giant free-trade and logistics project that

“runs south west from Central Asia to northern Iran before swinging west through Iraq, Syria, and Turkey. From Istanbul, the Silk Road crosses the Bosporus Strait and heads northwest through Europe, including Bulgaria, Romania, the Czech Republic, and Germany. Reaching Duisburg in Germany, it swings north to Rotterdam in the Netherlands. From Rotterdam, the path runs south to Venice, Italy — where it meets up with the equally ambitious Maritime Silk Road.”

This project, if it is to be realized, is going to combine German high technology and Asian manufacturing in a more sustainable, “green” productive order catering to the enormous demand of European consumption. As Brian Holmes recently remarked in a contribution to Nettime, this new economic system “would cover massive Chinese infrastructure investments, with Germany replacing the US as the key banker and technological and scientific partner. […] The aim is to use capitalist modernization to guide the largest part of the world’s population through the devastating first half of the twenty-first century, as inequalities grow worse and climate change takes hold.”

This is, indeed, the geopolitical context in which Rifkin’s intervention has to be placed. And he, of course, is more than aware of it. His book, I think, should be seen as a clever entrepreneurial pitch to European and Asian governments and administrative elites translating the Californian ideology into the more industrially orientated, Eurasian situation. The question is if this would have been possible with a slightly more honest effort that doesn’t shamelessly substitute ideological hyperbole for intellectual integrity. How Rifkin’s latest work goes down with its potential addressees remains to be seen. Do they really feel they need a self-styled Erich Honecker of the IoT as their guru or are they going to be rather discouraged by the sheer vulgarity of his techno-historical teleology?