The Real Road to Serfdom

Extraction, Resentment, Trump

Tim Wu, in The Age of Extraction: How Tech Platforms Conquered the Economy and Threaten Our Future Prosperity, has a short section he calls "The Real Road to Serfdom" (pp. 122-124). The phrase "comes from Austrian economist Friedrich Hayek, who believed that a well-meaning government, as it expanded and began to engage in centralized economic planning, was certain to metastasize into a despotic totalitarian state." With his 1944 bestseller, Hayek became an instant hero to the right, helping them distance from fascism (unfashionable in the UK and US since war with Nazi Germany broke out) and group it with dreaded communism. More importantly, by tracing the original sin of both to the idea that any form of popular government could ameliorate the problems of capitalism — as had just been demonstrated with the Keynesian response to the Great Depression (especially in the US — they could argue against any use of democratic power to limit or compensate for the pure freedom of the market.

We needn't go into the many levels on which Hayek's rhetoric veers between the inept and evil. Wu doesn't. He merely points to another path toward the same end, starting with the concentration of economic power in private hands. (Although I suppose state ownership could act as self-interestedly. The real question is less whether a state is involved than who the state belongs to, and for what purpose.) What matters is that both of these paths end in "serfdom" (which we Americans read as "slavery," but with a whiff of feudalism, and not confined to one race).

Like all paths, Wu notes several landmarks along the way:

1. Monopolization: The concentration of economic power in one or a few firms, to such an extent that they are able to limit or simply ignore competition. I should note here that the crude tactics of Standard Oil or AT&T aren't necessary. With the growth of intellectual property and network effects, many companies exercise finer-grained monopolies. For instance, there may be dozens of pharmaceutical companies, but they rarely compete with each other, as each is actually a portfolio of monopolies for individual drug products.

2. Extraction: The higher returns owners can obtain by leveraging their monopoly powers. This tends to divide the economy into winners and losers, transferring wealth from the latter to the former, increasing inequality. The bulk of Wu's book details many ways this is happening, mostly (but not always) with tech companies.

3. The emergence of mass resentment: The losers grow unhappy, and look for someone to blame their misfortune on. At first, the winners try to convince them that the game is fair, the winners were more deserving, and the losers have only themselves to blame. If that doesn't work, the winners can try to redirect anger to scapegoats. You shouldn't have any trouble coming up with examples.

4. Democratic failure: "where an elected government is either unable or unwilling to respond to majority resentment in a meaningful way." Of course, a functioning democracy should have prevented or limited monopolies, and not allowed the extraction and resentment to develop, so this is not exactly a new stage, but a precondition that is becoming increasingly obvious.

5. Democratic failure leads to the rise of the strongman. My instinct here is to say "not necessarily," but if democratic failure is complete, what's the alternative? Revolution? Long ago, that might have been possible, and might have negated the point by producing its own strongman. Wu doesn't make much of a distinction: "The strongman's popularity always lies in a promise to truly serve the interests of the people. Some actually do . . . but over the longer term, the track record of authoritarian dictators leaves much to be desired. They turn the slow road to serfdom into an expressway."

Wu ends the chapter with: "This is the sequence. The question is how to break it." So instead of offering a hypothetical development model, he's talking about us, here and now. With Trump, we already have a fairly complete caricature of a strongman, even if he's not quite as strong as many of the models. He certainly wants to be that strong, and often acts like he is. Moreover, it's pretty clear just how democratic failure led to his election — if it isn't obvious to you, try following the money, then factor in how the mass media decides what to promote and what to expose — so again we're spared having to consider hypotheticals. We don't have to consider whether the push toward greater corporate and financial power in the 1970s inevitably led to Trump. All we have to consider is the fact that it did.

Wu, like Cory Doctorow in his more colorful Enshittification: Why Everything Suddenly Got Worse and What to Do About it, is more interested in policies than in the politics necessary to give them a chance. There are few things I'd rather do than talk tech policies. While I like most of what I've read in these two books, I have much more I'd like to see. But there's a lot of blue sky in these proposals already. And at this stage most are certain to be opposed by some of the richest and most influential people anywhere. And perhaps worse — getting people to recognize those "robber barons" as villains isn't so hard — many depend on arguments that few people understand and appreciate.

For instance, let's go back through the five stages and consider the most obvious, and in some cases traditional, solutions:

1. Monopoly: We've had antitrust laws since the 1880s, but they've been loosely and inconsistently enforced, in large part because monopolists spend lavishly both on lawyers and on lobbyists. There have also been shifts in thinking about what constitutes a monopoly, and when and why it presents problems. (The original emphasis was on unfair competition, but since the 1970s the focus has been more on consumer protection.) Much more can be said here, but one big problem is that antitrust measures are reactive, waiting until monopoly conditions exist, and not proactive, preventing monopolies from forming.

2. Extraction: Sometimes monopolies are "natural" or otherwise desirable for reasons of efficiency. In those cases, we the standard way to keep monopoly power from being abused is with regulation. While there are many examples of bad regulations, the vogue for deregulation has allowed monopolies, and for that matter nominally competitive businesses, to further abuse their powers. Again, lawyers and lobbyists are an obstacle to recovery.

3. Resentment: The political system used to respond to resentment with reforms. Unsanitary food processing led to the FDA. Stock manipulations led to the SEC. Pollution led to the EPA. Even as late as 2009, widespread financial fraud was addressed with the CFPB. But that sort of response is becoming harder, partly because lobbyists have more power, partly because journalists (or their corporate publishers) have less desire to report problems, partly because politicians prefer to treat problems as emotional disorders. Money in politics has become so pervasive that Republicans don't even bother recognizing inconvenient problems. Meanwhile, Democrats are reluctant to blame their donors, and the only "solutions" they are eager to support are ones that subsidize favored businesses. The whole notion of public interest has been dragged through the mud since the 1980s, making public service seem like a foolish career choice.

4. Democratic failure: Well, this is primarily about money. The traditional solution is to level the playing field, including limits on campaign spending and public financing for everyone. Democrats may complain about this system, but they have done little if anything to change it, perhaps because the specific Democrats who get elected are the ones who have learned to play the system. By now, failure goes deeper, including a largely rigged system of partisan courts, efforts to restrict voting, and to render voting powerless through gerrymanders. Given the "checks and balances" Republicans have exploited, it will take landslide voting wings for Democrats to change the system (assuming they even want to).

5. Strongman: Trump, Q.E.D. No matter how unpopular he becomes, we're stuck with him until 2029. Impeachment is impossible. Decades of ceding power to the executive branch paved the way for his abuses, but he's operated way beyond previous norms. In particular, he's launched massive purges against the civil service, and moved to build personal loyalty in the armed forces. Even assuming his party can still be voted out of power, it will take a long time to repair the damage and address the problems he has neglected or aggravated (climate change is the big one he seems proudest of).

Democratic failure has allowed the government to be captured by ideologues and profiteers, whose prime concern is to lock themselves and their supporters into permanent power, regardless of how much damage their schemes cause, and how unpopular they become. I'm not sure that the strongman move was necessary, but the folksy Bush burned all of his credibility between his terror wars and the financial meltdown, and media darlings McCain and Romney didn't inspire much enthusiasm. Trump gave rank-and-file Republicans a new lease on life, a chance to be bigots and braggarts once again, to turn their resentment into a club for beating their enemies. He promised to fix their problems, and to be their redemption. Meanwhile, Harris and Clinton painted themselves as stalwart devotees of the liberal-globalist status quo. So while on any nerdy policy survey they should have fared much better than Trump, at least Trump acknowledged problems needing fixing, and their intense hatred of the man, even more than anything he himself said, made them think of him as their champion.

Sure, that was the dumbest thing possible, but for some reason Democrats couldn't be bothered to point that out. In the end, Trump recapitulated the classic fascist formula: rabble rousing + oligarchy = power-mad dictatorship. Having failed to stop it, with few options to effectively resist, we're largely resigned to riding this out, until Trump and his cult and fellow-travelers flame out. The test then will be whether we'll just try to restore the ancien régime that generated such resentment in the first place, or break with the old thinking that got us in such a predicament, and come up with better ideas and methods.

While I still feel pretty isolated, I should note that there is a lot of quality thinking that points to ways out of this disaster. Wu and Doctorow have good ideas on tech, but also realize that extraction and enshittification aren't just tech issues: those are problems that occur all across the political and economic spheres. Tech particularly matters, because tech (especially AI) is providing the tools (especially for surveillance and split-second decision making) that are being applied elsewhere.

But to get some traction, I think we have to dig deeper beyond the attention-grubbing surface of tech with its dark underbelly of surveillance and scheming and admit to the real problem, which is that in a world where everything depends on making money, no one can be trusted not to screw you over. That's ultimately what the resentment is about: fear and loathing for the society we live in and cannot live without.