In the nineteenth and twentieth centuries, engines and electricity cut pathways for the extension of the information nexus and capitalism across the United States, Western Europe, and Japan. After World War II, with the dawning of the digital age, capitalism spread and intensified as new technologies and new means of data processing reconfigured, sped up, and deepened the transmission of information globally. Although the birthplace of the new information technologies (IT) was the United States, seminal contributions came from the United Kingdom, and major Japanese innovations also molded the era and helped to globalize it. The military and economic advantages these technologies bestowed on capitalist nations was one motivation for the Russian Communist Party's push for reform from above that unintentionally led to the dismantling of the Soviet Union. With their economic model in ruins, former socialist states had no choice but to adopt market (or quasi-market) economies, first among them being China, whose meteoric rise our notion of the information nexus can contextualize. Digital technologies have provided elements of the capitalist information nexus to India and underdeveloped nations in Africa, where pioneering developments are taking place. But is the “IT revolution” truly revolutionary? And can we apply the term capitalism to digital-age states that interfere with the functioning of the information nexus? The current chapter addresses those issues after providing an overview of the technologies responsible for this third phase in the history of capitalism.

Computing and telecommunications: The “digitization of just about everything”

The computer as we know it has its direct origins in a mechanical tabulator designed by the American engineer and statistician Herman Hollerith for the US Census Bureau in 1890. Crunching data registered on punch cards, his machine shaved years off the time it had previously taken the government to complete the census. Hollerith's Tabulating Machine Company merged with other firms and in 1924 was renamed International Business Machines. Under the decades-long presidency of Thomas J. Watson, Sr., IBM led the global production of computing equipment. As the company fattened due to sales in the 1930s to the American Social Security Administration, it opened branch offices around the world.

Throughout nineteenth-century Europe, industrialization and urbanization occurred rapidly and in tandem with wrenching socio-political transformation. Within several generations the continent experienced the disappearance of cottage craft industries and explosive demographic growth. Peasants fled their overcrowded farming villages for the shanty towns and tenements of big cities that were bursting at the seams but offered employment in factories, workshops, and retail stores. In the nineteenth century, that could seem a mixed blessing because of the lack of sanitation, the ubiquity of vermin, and the pollution: the inhabitants of Hamburg, Germany, saw “everything as if through a veil, for the smoke from a thousand chimneys spread over everything like a drifting mist.” To go from being a mainly farming society to a mainly industrial and urban one was a jarring shift in the extreme. Polarities of wealth were severe in the new metropolises, and, for many societies undergoing industrialization for the first time, for at least a generation the wages and living standard of workers were as likely to decline as improve. This is the general context in which the word “capitalism” emerged.

Unlike the word “capital,” which dates to ancient Rome, and “capitalist,” which was coined in mid-seventeenth-century Holland and Germany, “capitalism” is of relatively recent vintage. Before the mid-nineteenth century it appeared scattershot in the European and American press. Its consistent usage commenced in 1850, beginning with this passage by French socialist Louis Blanc in the ninth edition of his book The Organization of Labor: “What I would call capitalism … [is] the appropriation of capital by the few, to the exclusion of the many.” “Capitalism,” he continues, is “the mortal enemy” of those who would make capital – “the hen that lays the golden egg” – accessible to the masses. Later that same year, the anarchist-socialist Pierre-Joseph Proudhon mentioned the word in his personal correspondence, and in 1857 it made its appearance in one of his pamphlets. It makes sense that the word would have arisen in France in that time period: “socialism,” “communism,” and “liberalism” were coined there earlier in the century; adding “ism” to French words had become a natural linguistic reflex in the highly politicized atmosphere of class tensions and ideological conflict following the revolutions of 1789, 1830, and now 1848.

In early modern Europe, the rapid circulation of commercial and financial information signified the rise of capitalism. It took place in a swath of territory that straddled the Alps from northern Italy to Lyons, Geneva, and Basel. It forked out to Paris on the one side and Frankfurt am Main on the other. But capitalism cut the deepest channels down the Rhine River basin to the Low Countries, from there arcing out across England and southern Scotland, and flowing east along the Baltic Sea coast to Stockholm.

In this territory, relatively small and politically open societies with strong but not oppressive central governments and good access to maritime, riverine, or overland communications routes held the advantage that they had accrued from abundant trade and a sense of widening economic horizons. Great Britain and the Dutch Republic were the most advanced of these information societies, as news and commerce traveled most voluminously in, around, and between Amsterdam and London.

The capitalist firmament expanded suddenly in the nineteenth century, when the railroad and the telegraph turned the United States into an immense, steam-powered, and electrified version of Holland or England. A compact coastal territory was no longer the requirement for rapid communications and intensive exchange of goods and information. Capitalism could now exist on a continental scale – wherever political conditions tolerated the freest and fullest transmission of information.

The size of the American economy – whose productive capacity was supercharged by industrialization after the Civil War – brought the first full-fledged mass market into existence. The mass market entailed new ways of doing business as new transportation and communications systems accelerated both supply and demand. Information technologies thus shaped the salient contours of capitalism in our time: internationally linked commodity markets; factory-based mass production; mass distribution in new types of retail stores; mass marketing; large corporations; and the meteoric rise of the stock market.

These are all the subjects of the current chapter, the first to interpret American capitalism from the perspective of the information nexus. But the story begins with the technological advances that generated the modern information nexus and undergirded capitalism in the nineteenth and twentieth centuries.

Adam Smith never mentioned the word “capitalism.” Karl Marx used it arguably five times. The first American president to invoke it was Harry Truman. One of the most resonant terms of our modern vocabulary is thus a relative neologism. Awareness that the advent of the word occurred so recently compels us to alter our assumptions about the concept.

What Henry George wrote in 1879 about the word “capital” is also true of capitalism: “Most people understand well enough what capital is until they begin to define it.” The term is ubiquitous, but unlike similar grand historical concepts, such as feudalism or totalitarianism, whose validity historians have disputed, capitalism is assumed, by proponents and opponents alike, to be a given, like the air we breathe.

The purpose of this book is to subject capitalism to a new critical inquiry. In doing so, I will question the myths pertaining to capitalism on all sides of the political spectrum and propose an alternative to traditional definitions of the concept. The Information Nexus demonstrates that the money-based economy is not unique to capitalism – and the same holds true for many of its other supposed attributes, from commodification to wage labor. Capital is essential for capitalism, but so was it for all pre-capitalist and non-capitalist societies. In short, I do not associate capitalism with the “cash nexus,” as the Victorians first did. Rather, I locate its distinctiveness in business’ quest for information and usable knowledge. What is unique about capitalism is not that it is capital-intensive, but that it is information-intensive.

The information nexus is synonymous with capitalism. A nexus is a series of connections linking things. What this book explores is the dense web of information seeking and generating that resulted from having ready access to a complex of ever-changing information, communications, and transportation technologies. The information nexus links people in capitalist economies and expedites all investment and spending decisions by firms and individuals. It has historically thrived under political systems that value freedom of expression – not because democratic political systems have refrained from economic intervention as the mythology of laissez-faire suggests, but because these governments have tolerated the free flow of information in their societies and permitted unfettered access to commercial and other forms of socially useful knowledge.

Chapter 1, for the most part, conveyed the views of scholars and politically active opponents of capitalism. But the word “capitalism” has had a deeper resonance due to its popular usage worldwide. It emerged as a mainstream term because of the geopolitics of the twentieth century, in reaction both to the specter of Russian communism and the rise of America as a military, commercial, and cultural superpower.

“Into the Russian looking glass”

With the victory of Bolshevism in Russia, anti-capitalist rhetoric posed a shiver-inducing threat that compelled a reexamination of American economic life. Russia became America's “dark double,” and Americans came to understand their nation as its diametrical opposite, as the positive to its negative force. In 1949, the writer and Librarian of Congress Archibald MacLeish lamented this pattern of thought for allowing the mental “conquest of the United States by the Russians.” American political debate, he wrote, “was sung to the Russian tune; left-wing movements attacked right-wing movements not on American issues but on Russian issues, and right-wing movements replied with the same arguments turned round about.” With respect to policy, “whatever the Russians did, we did in reverse.” As America “wandered into the Russian looking glass,” its perceptions of capitalism also took shape in the reflection.

Nearly every one of the thousands of articles in the American press that mentioned the word “capitalism” from the 1880s to the 2000s defined it with reference to Russia or the Soviet Union, which in American opinion came to represent the polar opposite of the US political and economic system. This evidence leads to the conclusion that American views of capitalism, whether conservative or liberal, developed out of America's preoccupation with Russia in the twentieth century. In existential rivalry with the USSR, Americans were forced to adopt the socialist term “capitalism” precisely because it was the object of communist abuse.

As the press conveyed the earth-shattering events occurring in Russia, they adopted the word “capitalism” en route. Nearly every New York Times article that mentioned it in the 1920s was connected with the Soviet Union and its rulers Lenin, Trotsky, or Stalin. Simple reporting on the USSR required adoption of the term, and editorializing necessitated defining it.

Everything I have written so far establishes that capitalism is a socially and historically constructed concept, an emotionally loaded term whose proponents or antagonists invest it with assumptions based on their political or ideological orientations. Harsh or defensively self-righteous moral judgments have framed many of the assessments of this “contested truth,” which is fundamental to discussion of modern history, politics, and the contemporary economy. Of course, there have been plenty of reasonable moral objections to the particular ills of the existing economic order. That notwithstanding, polemicist critiques of capitalism have reflected and contributed to failures to understand what is truly distinctive about it.

The concept of capitalism appeared at a time when Europe had decisively pulled ahead of the rest of the world militarily and economically by making the sudden transition to an urbanized industrial existence. The concept was central to the critique (and later defense) of what historian William H. McNeill termed the “Victorian edifice,” an architectural metaphor for the self-congratulatory nineteenth-century European worldview. Capitalism's detractors wanted either to open the doors of the building wider or to pull it down altogether, but they, too, held the same presuppositions as everyone else about the bedrock foundations on which capitalism stood. Whether for it or against it, commentators “emphasized ‘capitalism’ as a new mode of production in Europe,” ignoring the many identical patterns of economic life and behavior that existed elsewhere in the world. The opponents of capitalism were just as “supremacist” as the supporters of capitalism because they, too, automatically accepted the notion that while capitalist Europe was commercially dynamic, non-capitalist Asia had long been in a state of civilizational decay.

This manner of thinking went back to the early Enlightenment. For many of the cosmopolitan philosophes of the eighteenth century, the high point in the evolution of civilization had been reached in Europe's “commercial society,” specifically the Dutch Republic and England, both wealthy nations governed by law and reason where, in the words of Adam Smith, “every man … lives by exchanging, or becomes in some measure a merchant.” For the next century or more the once-flourishing but now stagnant continent of Asia acted as a foil highlighting the exalted position Europeans saw themselves as occupying.