From Adam Smith to Karl Marx: How would digitalisation ‘age’?

By Mandeep K. Mahendru and Anirudh Agrawal

The world is increasingly becoming digital, where our life-long earnings, relationships, secrets, property and personal rights are stored digitally in some cloud-based server. Current political, economic and social narratives on the depth and breadth of digitalisation are significantly positive, and public funds are diverted in re-organising education, markets and governance along with digital industrial requirement. The fact demonstrates that digitalisation helps humankind by making the world flatter, in making information access easy and democratized, has created multiple jobs and creating the governments more accountable. Internet and digitalisation have made governance easier and minimised information asymmetry. The associated opportunities have created a new generation of entrepreneurs and a new class of rich. The social rights activists advocate making the web and digital space more open, accessible, democratic, with minimal regulations. The markets, public sector and social sector (schools and universities) are encouraging utilisation of digital technologies, digital information and the internet. Our social and political contexts are moderated by how our social network responds or shares via social media.

While the advantages seem to outweight the potential risks, we must critically reflect on the risks and threats posed to vulnerable individuals, social orders and nations through increased digitalisation[i]. AI driven digitalization have the potential to further deepen the vulnerability of the marginalised people, negatively influence labour markets, job security and wages. It has the potential to increase the risks of misappropriation of digitally assets like bank accounts and personal data[ii] . This opinion piece describes the current state of “informed bewilderment”[iii], by contextualizing how the world changed from the times of Adam Smith’s free markets (1770s)[iv] to Karl Marx’s collective production system (1870s)[v].

The markets, public sector and social sector (schools and universities) are encouraging utilisation of digital technologies, digital information and the internet.

Adam Smith wrote the Wealth of the Nations and the invisible hand theory during the late 18th century when international trade of Great Britain was booming, and the United Kingdom’s colonial powers were expanding. He theorized that markets work in perfect harmony when government intervention is least. The book was written at the beginning of the industrial revolution when average English citizen wanted to design, innovate and produce. It was also the time when the per capita income of average English citizen was increasing at a rate never seen in its history. It was the time when the concentration of wealth was shifting from the then land-owning classes and gave birth to the new entrepreneurs (neuveou riche) of that time. For the moment, one must empathise with an average English citizen who had any land or job or proper education, where her future would be subservient to the landlords of the time. One should reflect how during the economic boom driven by the Industrial revolution must have made working-class aspire to become entrepreneurial, free-spirited and rich if only they could get funding and open their factory that produces goods from baby diapers to biscuits to cloths to locomotives. Now, imagine the ruling class must be uncomfortable to see their powers over landless individuals diminished by the newly emerging class post-industrial revolution. The state must have been coerced to act and regulate industries and international trade to maintain the socio-political status quo. It is in this context that the wealth of the nation’s hold our greatest respect as it gave us a philosophical and rhetorical weapon to argue against the role of regulations by the state. The first movers (entrepreneurs) of 18th century Great Britain did accumulate wealth and prestige.

Similar to the IR of the 18th century, today’s’ digital age started in the early 1970s and continues to create an aspirational middle class and neuveu riche. Like the first IR, this digital age has opened new opportunities and kept challenging the ‘old money establishment’ through innovation in the field of technology, where working-class individuals with idea and skills have the potential to challenge capitalist establishment from old established industries by finding new digital worm-holes of doing business. The status quo of older generation institutions, rules and routines are challenged. For example, the traditional prints and tv media are challenged by the social media, SEO based algorithms challenge traditional brick and mortar marketing, public policy work is reflected by the likes, dislikes, comments on web 2.0 and web 3.0 platforms like twitter and youtube. Today’s top five most prosperous individuals and most innovative companies were all started by first-generation entrepreneurs in the digital space.

Almost 100 years after the publication of Wealth of the Nations, Karl Marx published Das Capital. The ideas of Karl Marx were antithetical to the political economy discussed in the writings of Adam Smith. While, Adami Smith advocated free choice, free will and lack of government intervention, Karl Marx advocated collective production and collective shared interests. What must have been the context? His was the time of post industrial revolution. The cities had gained tremendous influence. The large scale migration to cities had again created two classes: those who owned means of production and those who worked to survive. In such a context one may ask questions, such as, how could means and organisation of production change, such that class difference are minimum? Probably, Karl Marx evolved around the Hegelian counterfactuals, re-imagined the ‘power centre’ as the producer, owner, regulator in his works and ideas. Marx writings represent an era which marked the rise of capitalism gave rise to social injustice and the unrest led to revolutions in Europe, particularly in 1848 and 1870-1871, de-legitimating monarchies and governments which showed lack of empathy for the marginalised. His works and ideas provided the philosophical basis to challenge the then system of production, regulation and governance, where vox populi advocated for greater leverage income distribution and decision making both at the production side and the governance side.

Writings of Karl Marx legitimated the idea of classless society. His writings were detailed, which included discussions on organisational design and the role of nation state public sector development. The idea of class less society gained prominence over a while. Growing tensions among those with capital, with power against those who had none eventually, led to multiple social and political protests and in some case resulted in regime changes and bloody revolutions. Among them, 1917 Russian Revolution is the most prominent example where writings of Karl Marx were institutionalised into the creation post revolution soviet republic.

As observed during the times of Karl Marx, we might see the divide between the state and digital companies decrease such that they may occupy the same politico-economic space.

As Digitalization is gaining prominence and there is a greater social, market, and state support. Nevertheless, we are already facing severe challenges. “The concentration  of globalisation of wealth, the permanence of unemployment, the lowering of wages have become real and troubling once again” [vi]. The recent accusations on social media’s role in influencing governance, politics, and choices are seriously undermining the state’s institutions and functioning [vii]. The markets are undermined by how well one spends on social media algorithms and social media influencers. The space for new and emerging brands is decreasing. The big click-based retail firms are promoting their brands and undermining the brands of small upcoming entrepreneurs. As observed during the times of Karl Marx, we might see the divide between the state and digital companies decrease such that they may occupy the same politico-economic space. The inherent fears of the majority are catapult using digital technologies and played against minorities and vulnerable. Just like the writings of Karl Marx and following political changes, we may see similar events unfolding as digitalization reduces the space for conversation and increases the class and capital divide.

Mark Twain along with several other philosophers have said “History repeats itself”. We believe that we are probably close to a similar intersection, where the events that led to the rise of totalitarianism and hyper nationalism may again find its space. Hyper often preludes bloody struggles and profound institutional changes. It is, therefore, essential to be critical of digitalisation, the centralisation of data storage in the hands of few companies, ownership of personal and financial data in the hands of few.

About the Authors

 Dr Mandeep K. Mahendru is a Post Doctoral Research Fellow at the State Bank of India. Her research interests include public finance, welfare economics, and well-being. Her work has been cited in multiple Indian government reports related to public finance and well-being. She has published widely in journals with high impact in the field of economics and finance.

Dr Anirudh Agrawal is a professor at FLAME University India and a researcher at Copenhagen Business School. His research interest lies at the intersection of Finance, Technology and Social well-being. He has published multiple peer-reviewed articles and edited volumes on impact investing, digitalisation and entrepreneurship. Previously, he worked as a development consultant at Frankfurt School of Finance and Management.

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