Rise of the Network Society (The Information Age: Economy, Society, and Culture Volume I)

By Manuel Castells

The information technology revolution was instrumental in allowing the implementation of a fundamental process of restructuring of the capitalist system from the 1980s onwards. In the process, this technological revolution was itself shaped, in its development and manifestations, by the logic and interests of advanced capitalism, without being reducible to the expression of such interests.

Soviet statism failed in its attempt, to the point of collapsing the whole system, to a large extent because of the incapacity of statism to assimilate and use the principles of informationalism embodied in new information technologies.

Chinese statism seemed to succeed by shifting from statism to stateled capitalism and integration in global economic networks, actually becoming closer to the developmental state model of East Asian capitalism than to the “socialism with Chinese characteristics” of official ideology.

This book studies the emergence of a new social structure, manifested in various forms, depending on the diversity of cultures and institutions throughout the planet. This new social structure is associated with the emergence of a new mode of development, informationalism, historically shaped by the restructuring of the capitalist mode of production towards the end of the twentieth century.

Capitalism is oriented toward profit-maximizing, that is, toward increasing the amount of surplus appropriated by capital on the basis of the private control over the means of production and circulation. Statism is (was?) oriented toward power-maximizing, that is, toward increasing the military and ideological capacity of the political apparatus for imposing its goals on a greater number of subjects and at deeper levels of their consciousness.

In the new, informational mode of development the source of productivity lies in the technology of knowledge generation, information processing, and symbol communication.

What is specific to the informational mode of development is the action of knowledge upon knowledge itself as the main source of productivity.

Restructuring proceeded on the basis of the political defeat of organized labor in major capitalist countries, and the acceptance of a common economic discipline by countries of the OECD area.

While capitalism’s restructuring and the diffusion of informationalism were inseparable processes on a global scale, societies did act/react differently to such processes, according to the specificity of their history, culture, and institutions. Thus, to some extent it would be improper to refer to an “informational society,” which would imply the homogeneity of social forms everywhere under the new system.

Thus, all societies are affected by capitalism and informationalism, and many societies (certainly all major societies) are already informational,31 although of different kinds, in different settings, and with specific cultural/institutional expressions.

“Gradualism,” wrote paleontologist Stephen J. Gould, “the idea that all change must be smooth, slow, and steady, was never read from the rocks. It represented a common cultural bias, in part a response of nineteenth century liberalism to a world in revolution. But it continues to colour our supposedly objective reading of life’s history… The history of life, as I read it, is a series of stable states, punctuated at rare intervals by major events that occur with great rapidity and help to establish the next stable era.”1 My starting-point, and I am not alone in this assumption, is that, at the end of the twentieth century, we lived through one of these rare intervals in history. An interval characterized by the transformation of our “material culture” by the works of a new technological paradigm organized around information technologies.

The creation and development of the Internet in the last three decades on the twentieth century resulted from a unique blending of military strategy, big science cooperation, technological entrepreneurship, and countercultural innovation.

The networking logic epitomized by the Internet became applicable to every domain of activity, to every context, and to every location that could be electronically connected.

Based on these technologies, computer scientists envisage the possibility of computing environments where billions of microscopic information-processing devices will be spread everywhere “like pigment in the wall paint.” If so, then computer networks will be, materially speaking, the fabric of our lives.

The rise of the network society, which I shall attempt to analyze in the following chapters of this volume, cannot be understood without the interaction between these two relatively autonomous trends: the development of new information technologies and the old society’s attempt to retool itself by using the power of technology to serve the technology of power.

In sum, the information technology paradigm does not evolve toward its closure as a system, but toward its openness as a multi-edged network. It is powerful and imposing in its materiality, but adaptive and open-ended in its historical development. Comprehensiveness, complexity, and networking are its decisive qualities.

It is indeed a force, probably more than ever under the current technological paradigm that penetrates the core of life and mind.105 But its actual deployment in the realm of conscious social action, and the complex matrix of interaction between the technological forces unleashed by our species, and the species itself, are matters of inquiry rather than of fate.

A new economy emerged in the last quarter of the twentieth century on a worldwide scale. I call it informational, global, and networked to identify its fundamental distinctive features and to emphasize their intertwining.

This new economy emerged in the last quarter of the twentieth century because the information technology revolution provided the indispensable, material basis for its creation.

Productivity drives economic progress. It is by increasing the yields of output per unit of input over time that humankind eventually mastered the forces of nature and, in the process, shaped itself as culture. No wonder that the debate over the sources of productivity is the cornerstone of classical political economy, from the Physiocrats to Marx, via Ricardo, and remains at the forefront of that dwindling stream of economic theory still concerned with the real economy.

A complex picture emerges regarding the process of historical development of the new informational economy. This complexity explains why highly aggregated statistical data cannot reflect directly the extent and pace of economic transformation under the impact of technological change.

What has changed is not the kind of activities humankind is engaged in, but its technological ability to use as a direct productive force what distinguishes our species as a biological oddity: its superior capacity to process symbols.

A critical development in financial globalization is the staggering volume of currency trading, which conditions the exchange rate between national currencies, decisively undermining governments’ autonomy in monetary and fiscal policies.

International trade was, historically, the main link between national economies. However, its relative importance in the current process of globalization is less than that of financial integration, and that of internationalization of foreign direct investment and production.

In the late 1990s, on the initiative of the United States government, the WTO focused its activity on liberalizing trade in services, and on reaching an agreement on trade-related aspects of intellectual property rights (TRIPS). On both grounds, it signaled the strategic connection between the new stage of globalization and the informational economy.

In sum, the process of regionalization of the global economy has largely dissolved, in favour of a multilayered, multi-networked structure of trade patterns, which cannot be apprehended by using the categories of countries as units of trade and competition. Indeed, markets for goods and services are becoming increasingly globalized. But the actual trading units are not countries, but firms, and networks of firms.

The debate over the regionalization of the global economy denotes, however, a very important matter: the role of governments and international institutions in the process of globalization. Networks of firms, trading in the global market, are only one part of the story.

Yet the complexity of interaction between government strategies and trade competition cannot be understood under the simplistic notions of regionalization and trading blocs.

Global production of goods and services, increasingly, is not performed by multinational corporations, but by transnational production networks, of which multinational corporations are an essential component, yet a component which could not operate without the rest of the network.

There is, increasingly, a process of globalization of specialty labor. That is, not only highly skilled labour, but labour which becomes in exceptionally high demand around the world and, therefore, will not follow the usual rules in terms of immigration laws, wages, or working conditions. This is the case for high-level professional labor: top business managers, financial analysts, advanced services consultants, scientists and engineers, computer programmers, biotechnologists, and the like. But it is also the case for artists, designers, performers, sports stars, spiritual gurus, political consultants, and professional criminals.

While the informational economy shapes the entire planet, and in this sense it is indeed global, most people in the planet do not work for or buy from the informational, global economy. Yet all economic and social processes do relate to the structurally dominant logic of such an economy.

A global economy, in the precise sense defined in this chapter, emerged in the last years of the twentieth century.110 It resulted from the restructuring of firms and financial markets in the wake of the 1970s’ crisis. It expanded by using new information and communication technologies. It was made possible, and by and large induced, by deliberate government policies. The global economy was not created by markets, but by the interaction between markets and governments and international financial institutions acting on behalf of markets – or of their notion of what markets ought to be.

The decisive agents in setting up a new, global economy were governments, and, particularly, the governments of the wealthiest countries, the G-7, and their ancillary international institutions, the International Monetary Fund, the World Bank, and the World Trade Organization. Three interrelated policies created the foundations for globalization: deregulation of domestic economic activity (starting with financial markets); liberalization of international trade and investment; and privatization of publicly controlled companies (often sold to foreign investors). These policies began in the United States in the mid-1970s, and in Britain in the early 1980s, spread throughout the European Union in the 1980s, and became the dominant policy in most countries in the world, and the common standard in the international economic system, in the 1990s.

Once such a network is constituted, any node that disconnects itself is simply bypassed, and resources (capital, information, technology, goods, services, skilled labour) continue to flow in the rest of the network.

Thus, within the value system of productivism/consumerism, there is no individual alternative for countries, firms, or people. Barring a catastrophic meltdown of the financial market, or opting out by people following completely different values, the process of globalization is set, and it accelerates over time.

***

My hypothesis is that, as the process of globalization progresses, organizational forms evolve from multinational enterprises to international networks, actually bypassing the so-called “transnationals” that belong more to the world of mythical representation (or self-serving image-making by management consultants) than to the institutionally bounded realities of the world economy.

Thus, when societies massively destroy manufacturing jobs in a short period of time, instead of gradually phasing the industrial transformation, it is not necessarily because they are more advanced, but because they follow specific policies and strategies that are based in their cultural, social, and political backdrop. And the options taken to conduct the transformation of the national economy and of the labour force have profound consequences for the evolution of the occupational structure that provides the foundations for the new class system of the informational society.

If Japanese manufacturers produce many of the cars consumed by the American market and many of the chips consumed in Europe, we are not just witnessing the demise of American or British manufacturing, but the impact on the employment structure of each country of the division of labour among different types of informational societies.

The implications of such an observation for the theory of informationalism are far-reaching: the unit of analysis to comprehend the new society will necessarily have to change. The focus of the theory must shift to a comparative paradigm able to explain at the same time the sharing of technology, the interdependence of the economy, and the variations of history in the determination of an employment structure spread across national boundaries.

The labour force located in different countries depends on the division of labour between distinct functions and strategies of these multinational networks. Thus, most of the labour force does not circulate in the network, but becomes dependent on the function, evolution, and behaviour of other segments in the network.

The pressures toward greater flexibility of the labour market and toward the reversal of the welfare state in Western Europe come less from the pressures derived from East Asia than from the comparison with the United States.

Lean production, downsizing, restructuring, consolidation, and flexible management practices are induced and made possible by the intertwined impact of economic globalization and diffusion of information technologies.

The prevailing model for labour in the new, information-based economy is that of a core labour force, formed by information-based managers and by those whom Reich calls “symbolic analysts,” and a disposable labour force that can be automated and/or hired/fired/offshored, depending upon market demand and labour costs.

This transformation has shaken our institutions, inducing a crisis in the relationship between work and society.

While America is an extreme case of income inequality and declining real wages among the industrialized nations, its evolution is significant because it does represent the flexible labour market model at which most European nations, and certainly European firms, are aiming.

Labour unions, the main obstacle to one-sided restructuring strategy, were weakened by their inability to adapt to representing new kinds of workers (women, youth, immigrants), to acting in new workplaces (private sector offices, high-technology industries), and to functioning in the new forms of organization (the network enterprise on a global scale).

Thus, on the surface, societies were/are becoming dualised, with a substantial top and a substantial bottom growing at both ends of the occupational structure, so shrinking the middle, at a pace and in a proportion that depend upon each country’s position in the international division of labour and on its political climate. But down in the deep of the nascent social structure, a more fundamental process has been triggered by informational work: the disaggregation of labour, ushering in the network society.

Internet-mediated communication is too recent a social phenomenon to have provided the opportunity for scholarly research to reach firm conclusions on its social meaning.

In the international arena, new trans-border social movements, rising to defend women’s causes, human rights, environmental preservation, and political democracy, are making the Internet an essential tool for disseminating information, organizing, and mobilizing.

Every cultural expression, from the worst to the best, from the most elitist to the most popular, comes together in this digital universe that links up in a giant, non-historical hypertext, past, present, and future manifestations of the communicative mind. By so doing, they construct a new symbolic environment. They make virtuality our reality.

The new global economy and the emerging informational society have indeed a new spatial form, which develops in a variety of social and geographical contexts: mega-cities.

They are the nodes of the global economy, concentrating the directional, productive, and managerial upper functions all over the planet: the control of the media; the real politics of power; and the symbolic capacity to create and diffuse messages.

They also function as magnets for their hinterlands; that is, the whole country or regional area where they are located. Mega-cities cannot be seen only in terms of their size, but as a function of their gravitational power toward major regions of the world.

Mega-cities articulate the global economy, link up the informational networks, and concentrate the world’s power.

Yet what is most significant about mega-cities is that they are connected externally to global networks and to segments of their own countries, while internally disconnecting local populations that are either functionally unnecessary or socially disruptive.

The more a society is democratic in its institutions, the more the elites have to become clearly distinct from the populace, so avoiding the excessive penetration of political representatives into the inner world of strategic decision- making.

For the first time in history, a unified global capital market, working in real time, has emerged. The explanation, and the real issue, of the phenomenal volume of trans-border financial flows, lies in the speed of the transactions. The same capital is shuttled back and forth between economies in a matter of hours, minutes, and sometimes seconds. Favoured by deregulation, disintermediation, and the opening of domestic financial markets, powerful computer programs and skilful financial analysts/computer wizards, sitting at the global nodes of a selective telecommunications network, play games, literally, with billions of dollars. The main card room in this electronic casino is the currency market, which has exploded in the past decade, taking advantage of floating exchange rates. [Trading in foreign exchange markets averaged $5.3 trillion per day in April 2013. *] These global gamblers are not obscure speculators, but major investment banks, pension funds, multinational corporations (of course including manufacturing corporations), and mutual funds organized precisely for the sake of financial manipulation. François Chesnais identified about 50 major players in the global financial markets. Yet, as argued above, once turbulences are generated in the market, flows take over, as central banks have repeatedly learned to their heavy cost. Time is critical to the profit making of the whole system. It is the speed of the transaction, sometimes automatically pre-programmed in the computer to make quasi-instantaneous decisions, that generates the gain – or the loss. But it is also the time circularity of the process, a relentless sequence of buying and selling that characterizes the system. The architecture of global finance is indeed constructed around time zones, with London, New York, and Tokyo anchoring the three shifts of capital, and a number of financial maverick centres working on the slight discrepancies between market values at their opening and closing times. Furthermore, a significant and growing number of financial transactions are based on making value out of the capture of future time in present transactions, as in the futures, options, and other derivative capital markets. Together these new financial products dramatically increase the mass of nominal capital vis-à-vis bank deposits and assets, so that it can be said properly that time creates money, as everybody bets on and with future money anticipated in computer projections. The very process of marketing future development affects these developments, so that the time frame of capital is constantly dissolved into its present manipulation after being given a fictitious value for the purpose of monetizing it. Thus capital not only compresses time: it absorbs it, and lives out of (that is, generates rent) its digested seconds and years.

The material consequences of this apparently abstract digression on time and capital are increasingly felt in economies and daily lives around the world: recurrent monetary crises, ushering in an era of structural economic instability and actually jeopardizing European integration; the inability of capital investment to anticipate the future, thus undermining incentives for productive investment; the wrecking of companies, and of their jobs, regardless of performance because of sudden, unforeseen changes in the financial environment in which they operate; the increasing gap between profits in the production of goods and services and rents generated in the sphere of circulation, thus shifting an increasing share of world savings to financial gambling; the growing risks for pension funds and private insurance liabilities, thus introducing a question mark over the hard-bought security of working people around the world; the dependence of entire economies, and particularly those of developing countries, on movements of capital largely determined by subjective perception and speculative turbulence; the destruction in the collective experience of societies of the deferred-gratification pattern of behaviour, in favour of the “quick buck” common ideology, emphasizing individual gambling with life and the economy; and the fundamental damage to the social perception of the correspondence between production and reward, work and meaning, ethics and wealth.

The annihilation and manipulation of time by electronically managed global capital markets are at the source of new forms of devastating economic crises, looming into the twenty-first century.

***

Time is managed as a resource, not under the linear, chronological manner of mass production, but as a differential factor with reference to the temporality of other firms, networks, processes, or products. Only the networked form of organization and increasingly powerful and mobile information-processing machines are able to ensure the flexible management of time as the new frontier of high-performance firms.32 Under such conditions time is not only compressed: it is processed.

Thus, the real challenge of the new relationship between work and technology does not concern mass unemployment, as I tried to discuss in chapter 4, but the overall shortening of life working time for a substantial proportion of the population. Unless the basis of calculation for social benefits is modified through a new social contract, the shrinkage of valuable working time and the accelerated obsolescence of labour will bring to an end the institutions of social solidarity, ushering in the age wars.

Our exploration of emergent social structures across domains of human activity and experience leads to an over-arching conclusion: as an historical trend, dominant functions and processes in the Information Age are increasingly organized around networks. Networks constitute the new social morphology of our societies, and the diffusion of networking logic substantially modifies the operation and outcomes in processes of production, experience, power, and culture.

The inclusion/exclusion in networks, and the architecture of relationships between networks, enacted by light-speed-operating information technologies, configure dominant processes and functions in our societies.

A network-based social structure is a highly dynamic, open system, susceptible to innovating without threatening its balance.

Switches connecting the networks (for example, financial flows taking control of media empires that influence political processes) are the privileged instruments of power.

So observations and analyses presented in this volume seem to indicate that the new economy is organized around global networks of capital, management, and information, whose access to technological know-how is at the roots of productivity and competitiveness.

The network society, in its various institutional expressions, is, for the time being, a capitalist society. Furthermore, for the first time in history, the capitalist mode of production shapes social relationships over the entire planet. But this brand of capitalism is profoundly different from its historical predecessors.

In this electronically operated global casino specific capitals boom or bust, settling the fate of corporations, household savings, national currencies, and regional economies. The net result sums to zero: the losers pay for the winners. But who are the winners and the losers changes by the year, the month, the day, the second, and permeates down to the world of firms, jobs, salaries, taxes, and public services – to the world of what is sometimes called “the real economy,” and of what I would be tempted to call the “unreal economy,” since in the age of networked capitalism the fundamental reality, where money is made and lost, invested or saved, is in the financial sphere.

Thus, capital is either global or becomes global to enter the accumulation process in the electronically networked economy.

There is not, sociologically and economically, such a thing as a global capitalist class. But there is an integrated, global capital network, whose movements and variable logic ultimately determines economies and influence societies.

They play their competing, or converging, strategies by and through the circuits of this global network, and so they are ultimately dependent upon the non-human capitalist logic of an electronically operated, random processing of information. *

But, if work, workers, and working classes exist, and even expand, around the world, the social relationships between capital and labour are profoundly transformed.

Labour is disaggregated in its performance, fragmented in its organization, diversified in its existence, divided in its collective action.

Labour loses its collective identity, becomes increasingly individualized in its capacities, in its working conditions, and in its interests and projects. Who are the owners, who the producers, who the managers, and who the servants becomes increasingly blurred in a production system of variable geometry, of teamwork, of networking, outsourcing, and subcontracting.

Capital tends to escape in its hyperspace of pure circulation, while labour dissolves its collective entity into an infinite variation of individual existences.

Because information and communication circulate primarily through the diversified, yet comprehensive media system, politics becomes increasingly played out in the space of media.

The fact that politics has to be framed in the language of electronically based media has profound consequences for the characteristics, organization, and goals of political processes, political actors, and political institutions.

The social construction of new dominant forms of space and time develops a meta-network that switches off non-essential functions, subordinate social groups, and devalued territories. By so doing, infinite social distance is created between this meta-network and most individuals, activities, and locales around the world.

In a broader historical perspective, the network society represents a qualitative change in the human experience.

We are just entering a new stage in which culture refers to culture, having superseded nature to the point that nature is artificially revived (“preserved”) as a cultural form: this is in fact the meaning of the environmental movement, to reconstruct nature as an ideal cultural form.

It is the beginning of a new existence, and indeed the beginning of a new age, the Information Age, marked * by the autonomy of culture vis-à-vis the material bases of our existence. But this is not necessarily an exhilarating moment. Because, alone at last in our human world, we shall have to look at ourselves in the mirror of historical reality. And we may not like the vision.

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