Bear with me while I stick my toes into somewhat unfamiliar waters. I haven't studied economics since college and that was... a while ago. Nonetheless, I will wade in to take on some people who are probably a bit more versed in the topic. I am responding to this post from Glenn Reynolds in which he cites a passage from The Angloshpere Challenge, an article in The Economist and a bit of his own writing, to highlight his agreement with the statement that capitalism ended in the 1990's. Here is the excerpt from the Angloshpere Challenge he cites:

The first indication came when the falling price of computers crossed the point where the average programmer could afford to own a computer capable of producing the code from which he typically earned his living. This meant that, for the first time since the beginning of the Industrial Revolution, the ownership of the most critical tool of production in the most critical industry of the world's leading economy was readily affordable by the individual worker. Throughout the first three decades of the Information Age, the individual worker was still dependent on his employer for his means of production, just as any textile worker in Manchester or Lawrence was in 1840.

Suddenly, this changed. Now it is as if a steelworker could afford his own blast furnace or rolling mill, an automobile worker his own assembly line. By strict Marxist definitions, capitalism ended sometime in the early 1990s. This is a development that has not received adequate attention.(emphasis added)

The cost of a facility for Webcasting is far less than the cost of a facility for television broadcasting. At some point in the relatively near future the quality of the webcast will be as good as, if not better than, that of broadcast television, and the cost of a webcasting facility for high-quality production will be within the range of many individuals. Just as the personal computer capable of producing first-rate software is revolutionizing the work relations of software, the personal webcasting facility will change the nature of the broadcasting media. It also changes the dynamics of production.

Here's where I dive in: I think they are all wrong.

Since all three example put forward are in support of the same idea, I am going to deal with the first example specifically with the thought that my arguments would then necessarily apply to the other two.

It is certainly true that the decline in cost of personal computers coupled with the growth in their capabilities has indeed put the tools for developing commercial software within the reach of individual developers. The days of the "traditional" manufacturing center for software development of a large company able to provide the necessary hardware are surely on the decline. You don't need access to a sophisticated mainframe to write software any more. This does not mean the end of large software manufacturers. Companies like Apple, Microsoft, Adobe, Oracle etc. will continue to employ their own programmers. Likewise, not all programmers, even though they can afford the hardware to do so, will want to attempt to make their living as freelancers or starting their own companies in their garages.

There will be some who will. The result of that will be that the person hired as a freelancer to code a new feature for company A, would then move on to write code for company B. The better freelance software engineers would be able to demand a higher price, and companies wanting the best, would be willing to pay it. A new market emerges.

Then there will be those programmers who decide to go into business for themselves. They will set up shop in their basements, garages and spare bedrooms. They create targeted software. Filling in the gaps that the big names leave uncovered. Their product will be distributed over the web for little cost to them.

For example, this post and every word on this site for the last several months, was written using a nifty little program called Ecto. Ecto exists to serve as a front end for blogging to a number of systems including Blogger, Moveable Type, Typepad, Wordpress and more. It is a clean efficient interface available for both Mac and Windows. The cost $18.

The first response to this is, "Yeah shareware. It's been around forever." Exactly my point. But look at it from another perspective. The authors have written a program targeted at a vibrant and rapidly expanding community. One of the reasons for that part of nature of the blogosphere is the extremely low cost of entry. If the people at Kula Co., Ltd. tried to sell Ecto for $150, they would have priced themselves out of their market. I don't think that at $18 they are charging what the market will bear, I would have paid a bit more, but the point is the market is there.

Another illustrative example of how the democratization of the means of production results in the emergence and growth of new markets is the field of design in general, and graphic design in particular. It is particularly relevant because it is be further along the process than programming, video production, and certainly blogging. With the advent of desktop publishing and the postscript laser printer in the early 80's, pundits of the design industry were predicting the death of graphic design. I will grant that in the hands of amateurs and professionals alike, new technologies have produced some truly awful design but there has also been an explosion of great design.

The cost of entry is a bit higher than that of blogging, but probably considerably less than Mr. Reynolds do it yourself web video studio. You don't need top of the line equipment. (Don't tell my boss I said that) For $1,300 you can get an iMac with a 17 inch flat panel screen and a 1.6GHz G5 processor. You would probably need to spend a couple of hundred more to boost the memory from the off-the shelf 256MB but many of the catalogs typically offer a free memory upgrade. You'll need to invest about $3,000 for the industry standard software, Illustrator, PhotoShop, Acrobat and Quark Xpress. Maybe another grand for a half decent printer. For about $5,000 you are in business as a design studio. If you have talent and the ability to generate contacts, you will have work.

If you have the talent and don't have the $5,000 (or you don't want to put that much an a credit card) freelance work is available. There is an entire "industry" of companies that exist to provide freelance design talent to companies and agencies. You provide the talent, they provide the contacts. They of course get a cut of the bill.

The point is that barriers to entry into the field of graphic design have been eliminated, but graphic design is not dead. The market for design evolved and grew.

Capitalism is not dead and it will not be killed because caffeine saturated programmers can afford to own the means of production. New markets may emerge which in most cases will exist along side the old markets. Cable TV did not kill the networks, and web video will not kill either. The markets for programming, video and information will expand, and we will all be better for it.

Posted by: Stephen Macklin at 08:09 AM | Comments (1) | Add Comment