New Metropoles 2

Doyle Saylor djsaylor at
Tue Nov 9 21:27:56 MST 1999

Greetings Comrades,
    So Jose responds at length to my musings.  And then Xxxzx Xyyxyz says
with respect to my remarks:

 These are aesthic/opinion critiques of modern production. That's ok, but it
supports the statement of digitization being inferior only in regards to
your asthetic likes/dislikes. If you judge these two things by most
standards besides (for instance usable life span, storage space, etc),
modern production is superior.

I just didn't go into the technological details of the issues I referenced.
These discussions in a broad sense on lists like this can't go on in endless
detail.  It takes a lot of effort to clearly state differences concisely
without losing one's head in detail.  I would not be living up to the
requirements of this medium.

Having said that what I had in mind Brian, was a when I listen to digital
CD's and I am slightly hard of hearing I find speech is much harder for me
to distinguish on CD's than on analog records.  Anecdotally many of my
friends complain of similar problems with radio transmissions, theatre
sound, and CD's.  There is a limited dynamic range possible for CD's  which
audiophiles debate about endlessly in the aesthetic sense you imply, but the
reality is that CD sound is inferior in characteristics which make speech
intelligible.  I was reading today in the news that a new format is coming
out which addresses the relative inability of CD's to audibly compare to
analog recordings.  Maybe that will be a suitable format, but the point is
that records were supplanted despite their auditory advantages.

You refer to storage advantages of CD's, meaning size, and perhaps other
random access advantages of digital addressing of the information.  But I
have to remind you that the main storage media of CD's, which is an aluminum
substrate is not permanent.  CD's deteriorate much faster than vinyl
records.  The medium has been hyped as essentially permanent and durable
when the opposite is the case with respect to vinyl records.  One can coat a
CD with a gold layer and get a more stable medium, but for the average CD it
will oxidize into oblivion long before the vinyl record will.  This is true
of virtually all the computing mediums.  They are not durable and the
culture recorded on this materials is likely to rot in a hurry.  That is
simply not the same standard as vinyl records even though vinyl is not as
permanent as paper for storing culture.  Vinyl records scratch of course.
Analog re-recording deteriorates with each generation, but permanence of our
cultural heritage is not what CD's produced.

That is not just an aesthetic judgement by any means.   When one looks at
the computing industry and calling it digitization seems to me a miss naming
of the important aspects of the phenomenon, there are many sorts of the
above comparisons which make computing not perform up to the standard which
Jose is trying to prove.  While I doubt it is possible to technically
resolve these things here on the list, the point is not I think to get
technical, but to put across the meaning that is being debated.  Computing
is not the substance that the U.S. media would make of it.  In the midst of
a major Stock Market bubble where a mania exists to justify the current
system, computing becomes the world of dreams come true.  And only by
looking at actual products and ignoring hype about production increases etc.
that make such and such so important, the underlying reality is sadly less
than the dream we are fed.   I realize of course we can't return to vinyl
records or other nostalgic forms, and there are advantages to computing
which I relish, I am just making the point that the thrust of Jose's remarks
seem to me way off the economic reality of the U.S. economy.

And then Jose Perez responded at length,

To my mind the kind of up-and-down
fluctuations you see in the market are "a tale told by an idiot, full of
sound and fury, signifying nothing." To a large extent, these fluctuations
are caused by changes in market "sentiment."  There's a whole industry
dedicated to manufacturing this sentiment and changing it like clockwork
three times a week. All of this talk and activity is entirely in the realm
of speculation. And I think experience shows that a 5-20% drop (the most
recent one was 20%, I believe, as measured by the S&P though not the Dow)
has little or no effect whatsoever on consumers and the economy.

    I'm not sure what point you are trying to make by comparing market cap
to GDP. A lot of this "market cap"  right now consists of illiquid dot-com
shares in the hands of insiders. Their putative value cannot be realized
today and I don't believe it will ever be realized. It is pure fiction, a
complete bubble, and there's not even an expectation that this fictitious
"capital" should provide a return. These shares are not at all comparable to
those of IBM or any other established, profit-producing company.

Well you claim that besides business, or internet business the rest
of the market is based upon real value.  But your error of value in the
internet business, or something based upon pure speculation is about two
trillion dollars.  My point was that this enormous amount of fluctuation in
the markets without an affect upon the real economy simply points out the
real value must be somewhere out side that 20% fluctuation otherwise like
the Japanese economy which had a significant market drop we would have
gotten a business contraction due to the market losses.  It also tells me
that your analysis has to be pretty vapor like if you can assert one area of
the market is real value because of the computing influence upon the U.S.
economy, and two trillion dollars is none existent in another segment.  I
can't see how you can assert so clearly that one area is real value like IBM
and other areas are just speculation.  IBM lost ten percent of its value in
one day this autumn.  These sorts of rapid losses and gains in all areas of
the market are not normal signs of real value.

However, that is beside the point.  You argue that the economy will continue
to grow another five years or more because computing digitization will
support this growth.

    On computers and productivity. I'm familiar with the book you cite as
well as the review in Doug Henwood's newsletter. That is precisely the view
I'm polemicizing against. My contention is that the service sector
productivity figures in particular are meaningless junk that could not
possibly be true. It seems that that has now also become the official
position of the major government statistical agencies. The BLS -- in charge
of getting together many of these stats -- goes over in great detail in the
February issue of Monthly Labor Review what is wrong with the figures they
have and how they put them together. Fed Chairman Alan Greenspan has also
criticized the unreal nature of these figures in congressional testimony.
I've reviewed and quoted that material in posts last summer, and won't
repeat it here.

Well if those statistics are junk what is reliable statistics?  Greenspan in
my understanding is trying to say that software ought to be shifted out of
the current accounting categories into other categories which reflect true
value of the contribution of software.  Perhaps this is so, but so what?
What seems to me more on Greenspan's mind is the inflation of the equity
markets or the wealth effect of increasing stock value in measuring the real
economy.  Software doesn't contribute to that inflation, market speculation

What is missing in your focus upon "digitization" and you mean the
combination of television, telephones and computers by this term, is that
last year the Asian currency crisis was big news.  What is it about the U.S.
digitization "boom" that caused that currency crisis?  I would suggest the
reality is that financial markets (big banks in New York, and Europe and
Japan) caused the crisis by first flooding those countries with easy loans,
and other juicy riches then withdrew their money over night when the
investments soured.  The exact same thing could be said about the U.S. Stock
Market mania about computers and the internet.

    What has happened is that computerization has collapsed the cost of
doing all sorts of paperwork. This is what government statistics showing
"less" productivity were capturing, that the cost of clearing bank
transactions or preparing a statistical analysis of sales kept getting lower
and lower. But, unlike in manufacturing, where real goods are produced which
have a value independent of the costs of production incurred by a particular
enterprise, things like clearing checks or credit card purchases, producing
company reports and memos, etc., have no value. Thus the government tries to
impute a value to them from their costs. In sector after sector of the
"service" side of the economy, you see the same problem, figuring out just
what the "output" is and how to value it.

Well you are arguing against yourself.  You can't have a value increase from
computing if all that office work is not worth a darn.  Since it is hard to
measure the contribution of this sort of stuff how do you feel so confident
that computing is measurably what you heartily believe?  it either has to
produce real economic gains, or it is just pushing out reams more useless
information which nobody uses and is worthless.  Sort of like Tulips and
Tulips and Tulips.  But no potatoes.

    To a Marxist, all these sorts of costs are paid, so to speak, out of
surplus value. Retailing, banking and all sorts of other "services" are not
value-adding operations, they are value "sinks," they drain part of the
surplus value generated by the economy as a whole. Hence the meaning of a
decline in the "output" of such sectors is precisely the opposite of what it
is for the bourgeois economists. For the bourgeois economist, it is a
decrease in society's wealth. For us it is recovered surplus value, value
which is no longer wasted on, for example, keeping banking records by hand.

    For society as a whole, these sorts of activities represent the same
thing as "overhead" for an individual enterprise. A company that reduces its
overhead costs isn't poorer as a result, it is richer.

    So, where and how do we see the "savings"? Well, consider this: where do
new cable channels come from? Where do the resources for the thousands of
web sites that have sprung up over the past few years come from? Overall,
these things are possible because society has been able to free up the
resources necessary to put them together, including the necessary labor.

So we have thousands of web sites.  We can produce lots more of this
information than before.  This is a far cry from those things which really
produce value such as inventory control like 'just in time deliveries'.
Again if tons and tons of Tulips are your bag, but potatoes eaten are not
increasing in production then there is something wrong with value in the
sense you imply about the current economy.  Like Greenspan you feel
compelled to find the paradigm that explains the wonder of a Stock Market
bubble which encompasses the whole U.S. economy simply because it is so

I will stop here.  Computing has many things about it I appreciate and I do
not feel Jose's remarks about broadcasting are too far off the mark.
Perhaps at some point it would be worthwhile to look at making videos and
what that means with respect of computational control of images.  But the
point of this exchange is to clarify that I do not think 'digitization' is
significant for this economy compared to the the growth of financial
markets.  If anything computing is the tulips of our time.
Doyle Saylor

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