Will digitization cause the next financial crisis?
Digitization and militarization may aggravate the underlying structural conditions behind the Great Depression of 2008 and trigger a similarly dire crisis, says study
PremiumThere are warning signs that the global financial system is heading for another disaster.
In a new paper, William I. Robinson of the University of California adds to these warning bells by highlighting how the rapid rise of digitalisation and new technologies could potentially hurt the global economy.
In a new paper, William I. Robinson of the University of California adds to these warning bells by highlighting how the rapid rise of digitization and new technologies could potentially hurt the global economy.
Investors have turned to two intertwined outlets to invest surplus funds, in the face of a sluggish production sector and debt-driven consumption reaching breaking-point, Robinson argues. One is the digital and data-driven economy.
A handful of US-based tech firms that generate, extract and process data have absorbed enormous amounts of cash from financiers desperate for new investment opportunities, he argues. Robinson cites the examples of Apple, Microsoft and Alphabet holding hundreds of billions of dollars in reserves and the highest market capitalizations in 2017.
The enormous cash reserves and profits accumulated in the tech sector do not represent the production of new value so much as the surplus profits of the ‘digital capitalists’, writes Robinson. The gap between the productive economy and ‘fictitious capital’ grows ever wider as financial speculation spirals out of control, he warns. The second channel for the investment of surplus funds is in the police state. The bogus wars on drugs and terrorism, the construction of border walls, the expansion of prison-industrial complexes, deportation regimes, other security apparatuses have become major sources of state-organized profit-making, writes Robinson.Taken together, he suggests this has led to the creation of a global police state that is controlling and repressing societies. Finally, he warns digitization and militarization are also likely to aggravate the underlying structural conditions behind the Great Depression of 2008 and trigger a similarly dire crisis.
Also Read: The next economic crisis: digital capitalism and global police state
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