Big Tech in turmoil: ​​Why capitalism’s main engine of growth is stuttering

By Keishia Taylor and Eddie McCabe 

The tech sector is in turmoil – facing its worst crisis since the dot-com bubble burst in the late 1990s. Stock prices are fluctuating wildly, profits are being squeezed, and hundreds of thousands of workers have been laid off. Tech companies in the US increased layoffs by 649% in 2022, with 161,411 job losses globally. 2023 looks to be even worse, with 155,462 layoffs in just the first three months.

The plight of Twitter workers following Elon Musk’s $44 billion takeover in October 2022 generated the most headlines in the maelstrom, with Musk’s decision to make up for his terrible financial deal by cutting the workforce by half – 3,700 workers – while demanding that remaining staff commit to a ‘hardcore’ work environment. Many more rejected this proposal and left of their own volition, leaving just 30% of the workforce in place. But other major, household-name companies have taken a similar cost-cutting tack: since November, Amazon has cut 27,000 jobs; Meta has cut 21,000; Google’s parent company Alphabet has cut 12,000; and Microsoft has cut 10,000. Thousands of smaller tech firms have also been downsizing, with many startups going bust. 

The Big Tech crisis is symptomatic of the deepening crisis of the capitalist economy as a whole, which is now also being sharply exposed in the series of recent bank collapses, most notably of Silicon Valley Bank, which “had become the go-to bank for nearly half of all venture-backed tech startups”, according to The Guardian. Both the crises in tech and in finance are being driven by the policies of central banks around the world increasing interest rates in response to the inflation spiral, which itself is a product of multiple other problems in the capitalist economy – from the effects of the Covid pandemic, including supply-chain disruption; to the intensification of imperialist tensions, particularly with the war in Ukraine; to climate change; to anaemic growth and falling profitability over years.

The truth is that the boom in the tech sector, particularly in the last decade and a half, was artificially inflated by low interest rates and the speculation it encouraged. The growth and even the existence of many tech companies has relied on this access to cheap credit, in the absence of real profitability. Without this these companies will struggle to maintain their positions or in some cases to survive, and the downsizing we see today is the first recognition of this.

The rapid rise of Big Tech

Without doubt this crisis is significant, not just for the tech sector but for the capitalist system as a whole. The market value of the tech industry is roughly $5.2 trillion, or 5% of global GDP. Tech companies made up seven of the ten biggest companies in the world by market capitalisation in 2022: namely Apple, Microsoft, Alphabet, Amazon, NVIDIA, Taiwan Semiconductor Manufacturing Co, and Meta – or eight if you include Tesla, which resembles tech companies in many ways including its history of exponential valuation increases despite reporting losses (which it did every year until 2020, and even then it made more money by selling carbon credits to other car manufacturers than by selling its own electric cars). Twenty years earlier, that list contained just two tech companies, Microsoft and IBM. 

Hence, not only are these some of the biggest companies in the world but their rise, and the growth of the industry as a whole, has been dramatic. Consider that Amazon was founded in 1995 and Google in 1998, while Facebook was founded in 2004, Uber in 2009 and Zoom in 2011. These companies now dominate their various markets almost as monopolies.

Consider also that some of their founders and CEOs have become household names, joining and then topping global rich lists over the last decade. Their accumulation of personal wealth has been both obscene and staggering. In 2010, for instance, Mark Zuckerberg’s (Meta) and Jeff Bezos’s (Amazon) fortunes amounted to $6.9 billion and $12.6 billion respectively; by 2021 – at their peak – they had surpassed $140 billion and $200 billion. Elon Musk became a billionaire in 2012, and by 2021 his wealth was valued at $340 billion! Since that ridiculous peak, which coincided with the height of the global pandemic, their personal wealth has declined again significantly, with Musk’s net worth estimated to be $187 billion in February 2023 – making him still the richest person on the planet. 

These sums are incredible, almost unimaginable just a few years ago, but their wild fluctuations (the wealth Musk lost in 2022 was equivalent to the GPD of Hungary, a country with a population of nearly 10 million people) reflect a volatility at the heart of their businesses. 

Underlying fragility

The tech sector has been the most dynamic sector of the capitalist economy in recent decades, since the age of the internet transformed communication, and increasingly, so many other aspects of our daily lives. Innovation and technological breakthroughs are certainly part of this, but a significant factor in the growth of the tech sector is financial speculation, leading to a continuous inflow of cash which inflates share prices and leads to more investment – far beyond what any real innovation would warrant. The rapid rise and fall of cryptocurrencies is a particularly stark example of this phenomena. 

In the context of falling profitability generally, investors have gambled heavily on tech as an arena that’s likely to continue to experience growth. In the period following the financial crash of 2008, in which central banks pursued a policy of quantitative easing (increasing the supply of money) and low interest rates (making cheap credit widely available), investors and companies went on a spree. This included shifting investment from innovation and production to dodgy get-rich-quick schemes. For example, Cisco, once the leading digital communications company in the world, has over the last two decades spent $152.3 billion – 95% of its income over the period – on stock buybacks (literally buying its own stock) to prop up its stock price. Unsurprisingly, as a result, it has fallen behind its competitors, particularly Chinese 5G companies, who’ve actually invested in R&D. 

Virtually every other major company in the world, but particularly in tech, has engaged in similar practices. One result of this is the prevalence of ‘Zombie Companies’, whose profits or even revenues can’t cover their debts over an extended period of time, which should mean they go bust. However the supply of cheap loans has kept these companies afloat. To illustrate the point: in 1990, 1.5% of publicly listed companies in the world’s largest economies were considered to be zombies, by 2020 that had risen to 7%. 

Given the shift in monetary policy by the various central banks which are now increasing interest rates, these companies are clearly in grave danger, but so too is the tech sector as whole which has been massively boosted by the injections of cash due to the availability of cheap money – now no longer available. Of course the effects are already being seen, but how bad it will get when a global recession hits (and it will — part of the motivation behind interest rate rises is an attempt to provoke a recession to cut across demands from workers for better pay and conditions to counteract inflation) remains to be seen.

Workers, not bosses, take the hit

As with any capitalist crisis, regardless of its causes, workers will be the ones who suffer – if not with job losses then with worsened pay and conditions to facilitate a return to profitability. It doesn’t matter that these companies collectively make hundreds of billions each year from the labour of their workers, without which all the cash injections and cheap credit wouldn’t go far. However, when things go wrong the ruthlessness that these companies display externally to their competitors is turned inward.  

An article in the New York Times by Nadia Rawlinson, a former chief people officer at Slack, put it bluntly, stating: “The layoffs are part of a new age of bossism, the notion that management has given up too much control and must wrest it back from employees. After two decades of fighting for talent, chief executives are using this period to adjust for years of management indulgence that left them with a generation of entitled workers.”

While tech jobs such as software engineering and design are generally well paid and sought after, they are nevertheless exploited like all other workers (contributing more value to their employers than they receive in wages or benefits). Even before this crisis a major trend within tech companies was the replacing of direct employees with contract workers with far fewer rights and worse conditions. For example, since 2018 contract workers have outnumbered direct employees at Google. 

Moreover, their jobs are often highly pressurised and demanding, with many reports of burnout and becoming jaded, including by the realisation that their work is not as meaningful as they might have been led to believe. Rather than using technology for the benefit of society, tech workers are generally working to facilitate intensified exploitation of other workers, or finding ways to help advertisers bombard even more people, including with practices of collecting data that borders on mass surveillance. 

Take tech out of profiteering hands 

While these tech companies take great pains to curate a friendly image, nothing could be further than the truth. In 2018, Google quietly removed its famous motto “Don’t Be Evil” from its code of conduct as thousands of its employees publicly condemned Google’s development of technology for US military projects. Big Tech companies claim to be leaders in the transition to green energy, cutting emissions and developing new technologies. In fact, Amazon, Google, and Microsoft are providing services to the likes of Shell, BP, Chevron, and ExxonMobil to actually help them discover and extract fossil fuels faster, more efficiently and more profitably – to the tune of billions of dollars. Microsoft, with just one contract with ExxonMobil, is facilitating the emission of an additional 3.4 million metric tons of CO2 per year – blowing its ‘carbon negative’ target out of the water. 

One of the most insidious examples of the impact of Big Tech can be found in social media. These platforms have provided almost limitless opportunities for connection, communication, and expression. But they have been developed in order to maximise profit regardless of the human cost, particularly through advertising. Based on every search, click and even pause in scrolling, we are bombarded with targeted advertising that uncannily exploits our insecurities, manufacturing demands to sell unnecessary products. To maximise ad sales, these apps are designed to keep people scrolling and thus viewing ads for as long as possible by exploiting our dopamine reward response. 

The mental health harms of social media, especially on young people, are increasingly well-documented, as are the algorithms that deliberately encourage eating disorders in young people. Similarly, social media algorithms have been shown to provide greater reach to right-wing and far-right content.

All of this advertising and monitoring data has exponentially increased the need for storage and processing facilities leading to the expansion of data centres, of which there are millions around the world – with each facility containing thousands or tens of thousands of servers, consuming more environmental resources than entire countries. Data centres now account for almost 1% of energy-related greenhouse gas emissions globally. By comparison, the aviation industry accounts for 2%. Even after significant improvements in efficiency, data centres alone are responsible for around 1% of electricity use globally (excluding cryptocurrency mining) and could use up to 30% of Ireland’s energy demand by 2030, jeopardising domestic supply. 

New technologies provide a huge amount of potential for humanity in terms of communication, organisation, education and creativity, but in a capitalist system, run for profit, it is utterly destructive. The whole industry could be transformed if it was wrestled from the grip of private profit, brought into public ownership and run democratically by workers and users, taking full account of its social and environmental effects. In this way the tech industry could be purged of advertising, the wastefulness of data centres, the devastating impact on mental health, and collusion with the ruinous fossil fuel industry. Secure jobs and working conditions would be safeguarded. The internet and social media could be genuinely free and open source resources for all, democratically managed for the purposes of elevating humanity and saving not endlessly damaging the planet.

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