tl;dr: Data will succeed money as the lifeblood of the economy thus making money irrelevant.
What is going to be the lubricant of the Next Economy? The go-to answer most likely is “data”. My interest here is not so much on the more technical aspects of data gathering, mining, artificial intelligence and what other buzzwords might be up in the air. I am more curious about larger scale transformations in the fabric of the economy, especially when it comes to the role of data and money. As it is often the case in turbulent and transformative economic times, turning towards Karl Marx can help us see certain things clearer.
In chapter four of “Das Kapital”, Marx outlines a general formula for capital. The starting point, in his view, is the circulation of commodities within an economy. In a modern economy, this is accompanied by flows of money. In order to distinguish two different types of circulations, Marx uses ‘M’ to denote ‘money’ and ‘C’ to denote ‘commodities’. The first type of circulation he classifies as ‘direct’ and can be depicted as C-M-C i.e. commodities are sold on markets for money that can, in turn be used to buy different commodities. In effect, the focus of this direct circulation is on the use value of the commodities traded. Money is here just a convenient intermediary enabling more and smoother economic transactions. The second type of circulation is M-C-M i.e. money buys commodities in order to sell them at a higher price. The focus in this money circulation is on the exchange value. Commodities are becoming something akin to investment vehicles and the goal of economic transaction is the creation of surplus i.e. M-C-M is actually M-C-M’ where M’ is the originally monetary value plus excess or surplus value. It is obvious that today’s economy is much more of the M-C-M’ type than C-M-C. In fact, as Marx himself noted, an economy focused on money circulation might as well appear as M-M’ alone, without any need for actual commodities. The rise of financial markets and the financialization of products over the last four decades speak testament to an economy in which the only capital that matters is money, or in the words of Marx: fictitious capital, producing endless boom-and-bust cycles.
From a Luhmannian system-theoretical perspective, the shift from C-M-C to M-M’ can be understood as an evolutionary process of the economy, bringing forth its own generalized medium of communication. Economic transactions in this perspective are nothing more than money communication, every supposed factual reality of goods and services is expressed solely in monetary terms. The real economy can be confused with the money economy and vice versa. Luhmann speaks of autological closure of the economy and by that he means that money, as the dominant communication medium for all things economic, is not referencing anything outside itself anymore. If you want to know the value of something, you have to give a monetary account. ‘Holding something dear’ is not understood by the economy unless you put a price on it. This may sound cruel and reductive but it enabled the economy to build ever increasing complexity and, with a little help from politics, a global economic system.
Enter data. When data became more important, interestingly as a byproduct of financialization and the necessity to gather enough data to make profitable investment decisions, it appeared to be just another commodity: M-D-M’ where ‘D’ stands for ‘data’. But when you look at data-driven companies like Google or Amazon, data appears to have more value than money in the economic exchange. Data on customers’ behaviors and preferences, their profiles when it comes to buying decisions, where they live and how they move around during the day are just like money to these companies. Their products and services become tailored to the data their customers provide and, by using these products and services, more data is generated to create new products and services. Money seems to be just the awkward intermediary here, giving rise to a form of circulation that looks more like D-M-D’ where D’ is more or better (connected, mined etc.) data. The obvious question is, when will the middleman be cut out? In other words: when will money cease to be of importance for the economy?
D-D’ might as well be the new form of circulation in the data economy without the need of money as an intermediary. If you look at Google, it is always fascinating to see that the vast amount of money they make, does not originate from their more advanced data products like their translator, Google maps, the Pixel smartphone, the Chromebook, but by ads. Google is an ads company, first and foremost, if you only follow the money. If you follow the data, things look very different. And the use value of all the other products, just of think of their map service or the translator, is increasingly high for millions of customers. In order to use them, we pay with data. We give data to Google by using the products. And Google gives products back to us and thus the autological closure of data as a new generalized communication media for the economy might become apparent.
What is interesting about an economy running on D-D’ instead of M-M’ is that data, unlike money, is a real thing. You can use data to build products and services that contain the data. If you invest money in making smartphones, the smartphones do not contain money. Data is an original wealth creator whereas money is just a derivate, or in Marx’ words: fictitious. Another difference is interesting: everyone can create data by themselves. Money, on the other hand, can only be created by banks unless governments allow other forms of money like in local exchange trading systems. Of course, there will also be a difference in the kind of data created and its use value but this will be up to those who can combine and mine the data better. But as ‘raw material’ for the data economy, real data by real people is needed. There will be imbalances in the data economy just as there are imbalances in the money economy. So a new form of data politics and data regulation will be necessary. But this does not change the general trajectory: there is a significant chance that money will become less important, probably an oddity or a collectors’ item, while data emerges as the new lubricant of the next economy.