Computers and Capitalism; J. J. Davis

594 and which leave the consumer at the mercy of a few powerful producers. A corollary of this criticism is that capitalism leads to social inequality as well: not only is production con centrated in fewer and fewer hands, but wealth itself, the fruit of produc tion, is concentrated in fewer and fewer hands as well. "The rich get richer, and the poor get children." An increasingly stratified .society, with the poor at the mercy of the wealthy ruling classes, with little hope of upward social mobility-such is the popular image of the results of the free market. It should be noted, of course, that the criticism of excessive concentra tion of the means of production boomerangs against the socialist critic. In a socialist system the state has a monopoly of the means of pro duction, and society in effect be comes one large company store, with all the potential for abuse and inef ficiency which that entails. A tho roughgoing socialistic system is in fact the prime example of monopo listic concentration in economic life.

The Communist Party of the Soviet Union exerts far more power in eco nomic life than Exxon or Gulf Oil could ever exert in the petroleum and energy industries. Exxon can not send its competition to prison; the Communist Party can. The facts of recent American ex perience do not support the "exces sive market concentration" criticism.

COMPUTERS AND CAPITALISM 595 Especially in the rapidly growing fields of computers, data processing, and electronics, new firms are chal lenging the dominance of older firms such as IBM. New fortunes are being made almost on a daily basis, and a whole new generation of bright and energetic young entrepreneurs has appeared on the international scene to vindicate the wisdom and produc tivity of the classical free market. The Computer-BasedEconomy In the new "Information Age" economy created by the computer, creativity can be richly rewarded, age is no barrier to success, and entry into the marketplace has never been easier. In the new world of the com puter-based economy, "breaking in" does not necessarily require vast amounts of steel and concrete and capital, but rather new ideas, a will ingness to take risks, and imagina tive insights into new applications of the burgeoning computer technol ogy. A new insight, a knowledge of programming, and access to a com puter terminal are all that is needed to launch a new software enterprise.

James Nitchals is now 21 years of age, runs his own computer software company, and expects to make his first million dollars before he is 25. Rob Fulop is only 25, but is already making more than $100,000 a year, drives an expensive BMW and owns his own town house near San Fran cisco. Nitchals and Fulop are exampIes of a successful new breed of young video and computer game de signers that are leading the way in a new industry that already gener ates more than $1.2 billion in reve nues annually. 1 Steven Jobs, a college dropout, and his friend Stephen Wozniak started Apple Computer Incorporated in a garage with an initial investment of $1,300. Sales surged from $2.7 mil lion in 1977 to $200 million in 1980. In 1981, Apple controlled 23 percent of the $2.2 billion world market in personal computers. 2 The wealthiest man in New En gland is not a "Boston Brahmin," but 62-year-old An Wang, who emi grated to the United States after World War II from Shanghai with personal assets on the order of $100.

Wang went on to found Wang Labo ratories, producing computers and other high-tech devices, and today Wang's holdings are valued at $200 million. His wife Lorraine's hold ings are on the order of $120 mil lion, and his children hold $300 mil lion in stock. 3 As journalist Alexander Taylor has noted, "Up to now, it seemed as if opportunities for making great for tunes like those of the Rockefellers and Carnegies had been cut off. It is heartening that people are taking chances and sometimes succeeding beyond their wildest dreams."4 The success stories of Jobs, Woz niak, Wang and many others dem596 THE FREEMAN October onstrate that the doors of the free market are wide open today for those who have the energy, the initiative, and the imagination to walk through them. The new world being brought into existence by the computer chip is dispelling the myth of the closed economic society and the "monopo listic market concentrations" which shut out all competition.

The same principles of ready ac cess to rapidly changing markets and the need for constant creativity and innovation hold true in the interna tional arena. American computer firms can not assume that today's successes and today's profits assure an easy time in the economic battles of tomorrow. The Japanese now ex port more that $1 billion worth of semiconductor devices. In the stra tegic market for 64K Random Ac cess Memory chips, the heart of the modern microcomputer, the Japa nese have captured the lead even in the United States. 5 "Excessive mar ket concentrations" are neither in evitable nor permanent in the dy namic and rapidly changing world of computer technology. Enemy of the Environment? A second frequently raised criti cism is that "capitalism destroys the environment." Images of greedy cor porate moguls turning the wilder ness into vast strip mines, asphalt parking lots, shopping centers, and fast food chains come to mind. While there are certainly legitimate con cerns for the safe disposal of toxic wastes and other environmental hazards, the general environmental picture presented in the mass media has tended to be one-sided.

As Professor Julian Simon of the University of Illinois has pointed out in a detailed article in Science, be tween the years 1920 and 1974 the total acreage in the United States devoted to wildlife preserves and to state and national parks increased from 8 to 73 million acres. It is still the case that all the land in the United States used for urban areas and roads amounts to less than three percent of the total surface area of the country. Lake Erie, which was pronounced ecologically dead some years ago by Barry Commoner, has improved significantly, and the fish catch is actually increasing. 6 More fundamentally, the thesis that "capitalism destroys the envi ronment" overlooks the fact that the computer is leading the way from an economy based on heavy industry and manufacturing to one increas ingly based on the creation, process ing and distribution of information. We are now in fact already living in the "Information Age." Today more than 60 percent of the American la bor force works with information as programmers, teachers, clerks, sec retaries, accountants, managers, brokers, insurance people, attor neys, bankers, and technicians. Only 1983 COMPUTERS AND CAPITALISM 597 about 13 percent of the labor force is actually engaged in manufacturing operations. Almost 90 percent of the 20 million new jobs created during the 1970s were in the areas of infor mation, knowledge, and service jobs.7 In the new Information Age cre ated by the computer, the creation of new wealth is not exclusively or even primarily dependent on dig ging physical resources from the ground-with the environmental problems which may be entailed but rather, depends on intangibles: new ideas, new processes, and new ways of organizing people and pro viding services. A new computer software program for businesses or a new video game can create an enormous amount of new wealth and human employment without de stroying the environment. Human creativity has taken ordinary sand, a physical resource for which there is virtually an inexhaustible supply, and by turning it into a silicon chip, has created an almost .boundless cornucopia of income, employment, and opportunities for human devel opment.

Videotex and Fiber Optics The relatively new videotex mar ket, which provides online informa tion to computer terminals in busi nesses, government, and private homes, already represents a $250 million a year business. Industry analysts expect that the videotex industry, together with its associated hardware and software components, will be approaching a $7 billion dol lar market by 1987-a projected an nual compound growth rate in ex cess of 93 percent. 8 The transmission of data between computer-controlled systems is being revolutionized by new developments in fiber optics technology . New glass fibers now being developed in the laboratory are only one-tenth the di ameter of a human hair, and yet are so efficient in the transmission of in formation in bursts of light that the full contents of 16 Bibles could be transmitted across the country in a single second. Already some 37,000 miles of the new fibers have re placed copper wires in the telephone system, and by the end of the decade, the U.S. market in fiber optics tech nology is expected to reach $1.2 bil lion. 9 Videotex and fiber optics technol ogy-powerful new generators of wealth that hardly existed a decade ago-are only two examples among many in the new computer age which make the older environmentalist criticisms of the free market system largely obsolete. No longer must so ciety face the apparent dilemma of new jobs versus clean air: with care ful planning and creativity, society can enjoy both.

During the age of industrial capi talism, the forces of the market tended to concentrate resources and 598 THE FREEMAN October manpower in the large urban areas. The need for such concentration no longer exists in the new computer based economy. In the small town of Peterbor ough, New Hampshire there are no traffic jams and many of the town's 5,000 residents are on a first-name basis. This tiny town in the south western part of the state, some 80 miles from Boston, is the hub of some rapidly growing publishing and mail order businesses. More than 20 pe riodicals and countless books, cata logs, and newsletters are being pub lished within a ten-mile radius of this small New Hampshire town. Titles such as Byte, Microcomputing, and Robotics Age herald the new infor mation-based economy which has come to town. 10 When ideas rather than physical resources have become the coin of the realm, there is no need to crowd all successful enterprises into al ready overcrowded urban areas, and the environmental advantages can be considerable. When the "com modity" being produced is informa tion, deliveries can be made easily and rapidly over a telephone line, and the producer can be located al most anywhere.

Third World Oppression? Yet another charge levelled against the free market system is that capitalism inevitably oppresses the poor peoples of Third WorId nations. According to Third World rev olutionary Frantz Fanon, "The question which is looming on the ho rizon is the need for a redistribution of wealth. Humanity must reply to this question, or be shaken to pieces by it."ll Criticisms such as Fanon's are not really new, but derive from the the sis of Lenin that capitalistic econo mies are inherently oppressive and imperialistic, ever seeking to ex pand markets, seeking cheap raw materials from the poor nations and then selling finished goods to those same poor countries at exorbitant prices. As has been the case with the great social mythologies of history, there has been just enough of an ele ment of truth in the Lenin thesis to make it persuasive in the minds of countless millions of people in the twentieth century. Recent experi ence, however, indicates that Lenin , was never entirely correct, and that his analysis is rapidly becoming out of touch with reality in today's in ternational high-tech economy.

It is no longer the case that devel oping nations are condemned for ever to be merely the suppliers of raw materials for the factories and heavy industries of the West. Hard work, initiative, and technical know how are enabling many of these once impoverished nations to leapfrog ahead in the world economy. Singapore, with hardly any natu ral resources, and a land area hardly 1983 COMPUTERS AND CAPITALISM 599 larger than Memphis, Tennessee, has won 25 percent of the global backlog of orders for oil rigs, second only to the United States. South Korea is now the world's largest producer of black and white television sets. These new high-tech giants of Asia are now offering stiff competition to Japan in the international market. 12 Atari has decided to move a sig nificant portion of its computer as sembly operations offshore to Tai wan, in order to take advantage of favorable tax structures and the en ergetic and more economical Tai wanese labor force. Rather than being "oppressed," the Taiwanese have found themselves to be the beneficiaries of economic dynamics in the computer age where societies that are labor and knowledge inten sive can compete very effectively with the older industrial societies.

Enemy of the Family? Perhaps one of the most serious charges to be laid at the feet of the free market system is that the capi talistic system is inherently de structive of such critical human val ues as marriage, strong family ties, and community stability. Is it really the case that capitalism has sacri ficed some of civilization's most treasured values at the altar of greed and economic gain? The relentless search for profits, the promotion of a mercenary frame of mind, the weak ening of ties with the soil, the family and the town, the constant corporate moves and the transient style of life: such is the litany of accusations made against the free market system. These charges are to be taken se riously, and historical honesty re quires that they not be dismissed out of hand. It is indeed the case that fathers under the age of 40 in Amer ica move on an average of every three years. 13 The American family is ex periencing tremendous stress, and it is undeniable that economic factors have contributed to the crisis.

Any economic syste:rn or theory which neglects the role of the family runs the risk of killing the goose which is helping to lay the golden eggs. As George Gilder has pointed out, the creation of wealth arises out of a matrix of values and character traits which are learned in healthy families. "If work effort is the first principle of overcoming poverty, marriage is the prime source of up wardly mobile work ... work, fam ily, and faith ... are the pillars of a free economy and a prosperous soci ety."14 One of the most encouraging di mensions of the computer revolution is that it has great potential for re ducing this tension between home and work. In his best-selling book, The Third Wave, Alvin Toffier has even ventured to predict the advent of the "home centered society" in which an increasing number of Americans will be operating out of 600 THE FREEMAN their homes as the centers of their business, educational, and personal lives. Instead of being forced to move to a different town in order to change jobs, many .will be able to simply "plug into a different computer." The "Home Centered Society" of the In formation Age will mean less forced mobility, fewer transient relation ships, and greater participation in community life. 15 William H. Bowman of Belmont, Massachusetts is a good example of the new breed of cottage-industry entrepreneurs. ·Bowman and his friend David Seuss formed Spinna ker Software Corporation in May of 1982. Bowman, whose firm markets learning games written for micro computers by freelancing program mers, expects to earn $3 million in revenues in 1983, and as much as $50 million within five years. The "testing laboratory" for the com puter games has been Bowman's Belmont home, where his six chil dren and their friends play the new games for hours on end. 16 The computer revolution has brought earning and play and fam ily and work together in an entirely new way virtually unparalleled in the experience of mankind. This is not to say, of course, that the Infor mation Age is without its own haz ards, but the new economic realities of the computer revolution make some of the most common criticisms of the free market obsolete and open up exciting new vistas for human creativity and the well-being of mankind as a whole. ® -FOOTNOTESIThm Nicholson, et al., "The Hottest Game in Town," Newsweek, August 16, 1982, p.55.

2Alexander Taylor, "The Seeds of Success," Time, February 15, 1982, pp. 40,41. 3Stephen Bailey, "Plenty of Green in New England," Boston Globe, August 28,1982, p.12. 4Alexander Taylor, in ''A Letter From the Publisher," Time, February 15, 1982, p. 1. 5Douglas Ramsey, et al., "Japan's High-Tech Challenge," Newsweek, August 9, 1982, p.5l. 6Julian Simon, Science, June 27, 1980, pp. 1431-37. 7The foregoing figures are from John Nais bitt, Megatrends (New York: Warner Books, 1982), pp. 14,2l. 8"Videotex Market Predicted to Hit $7 Bil lion by 1987," Communications News, March, 1983, p.25. 9Richard A. Shaffer, ''A Faster Kind of Opti cal Fiber May Capture Much of Market," Wall Street Journal, July 23, 1982, p.19. lOWendy L. Wall, ''A Small, Remote New Hampshire Thwn turns Into Sophisticated Pub lishing Hub," Wall Street Journal, September 2, 1982, p.19. llCited by Jim Wallis, "Of Rich and Poor,"

Post American, February/March 1974, p.l. 12Louis Kraar, "Make Way for the New Ja pans," Fortune, August 10, 1981, p. 176. 13Jay Kesler, "Family Portrait-1982," speech at National Association of Evangelicals Con vention, March 2-4,1982. 14George Gilder, Wealth and Poverty (New York: Basic Books, 1981), pp. 70, 74. 15Alvin TofRer, The Third Wave (New York: Morrow, 1980), p. 220. 16Ronald Rosenberg, "New Home Videos Pro vide an Educational Adventure," Boston Globe, August 17, 1982, pp. 41, 54.