Accumulation by dispossession in high-tech industries: Entrepreneurship and the labour issue

Reference HarveyHarvey (2006) argues that modern capitalism is facing an over-accumulation crisis, a situation in which ‘both surplus capital and labour exist but there are [sic] no way to bring them together’ (p. 96). In order to solve the over-accumulation crisis and maintain the process of capital accumulation, capitalists search for new geographical spaces and ways to invest surplus capital, such as appropriating both material (e.g. natural resources in other geographical spaces) and immaterial resources (e.g. knowledge) into the circulation of capital. This is described as accumulation by dispossession.

Reference HarveyHarvey (2011) points out that China has, on the one hand, created more fixed, constant capital than needed, which is overvalued. On the other hand, a large working population is currently unemployed in China. Reference HarveyHarvey (1990) sees this over-accumulation as

Harvey explains that in turn capital tries to overcome its own crisis by spatial fixes, temporal fixes or spatio-temporal fixes. He thereby means that capital tries to create new spheres of accumulation (spatial fix), using time-oriented strategies (such as credit, debt, financial markets, financial derivatives) or the combination of both (e.g. the lending of money from banks in other countries or to companies in other countries).

Generally, Harvey’s concept of accumulation by dispossession explains the problems and risks the Chinese economy is facing, such as overbuilding, overinvesting and the capitalist exploitation of cheap labour. This concept explains some of the findings of research into high-tech industries, as it highlights that capital tries to overcome its crisis caused by the gap between capital and labour, via creating new spheres of accumulation, in which high-tech industries have become participants. Some aspects of this capitalist accumulation by dispossession in high-tech industries have been discussed by scholars (Reference McChesneyMcChesney, 2013; Reference Milberg and WinklerMilberg and Winkler, 2013; Reference RifkinRifkin, 2014; Reference SundararajanSundararajan, 2016). For example, Reference McChesneyMcChesney (2013) points out that Internet monopolists have dominated US and world capitalism, and the Internet ‘has been subjected to the capital-accumulation process, which has a clear logic of its own’, due to issues such as the increased use of patents (p. 97). He reminds us that the monopolies created cause lots of problems, such as Facebook’s ignorance of users’ privacy. He takes Google as an example to remind us that these monopolists create ‘winner-take-all markets’ (Reference McChesneyMcChesney, 2013: 173) and leave others with little space for new products. Reference RifkinRifkin (2014) points out the same problem of monopolisation in the Internet of Things (IoT). By taking an economic approach, he points out that monopolies will block further economic progress ‘in order to protect the value of the capital already invested in outmoded technology’ (Reference RifkinRifkin, 2014), and these monopolies will also ‘restrict entry of new enterprises and innovations’ (p. 6). As a result, the economy will ‘go into a protracted stall’ (Rifkin, 2016), as new and more productive technologies are slowed down or stopped.

Reference RifkinRifkin (2014) optimistically believes, however, that ‘the emergence of the IoT infrastructure of the Third Industrial Revolution, with its open architecture and distributed features’ will break the monopoly and billions of people will be individually empowered as far as they become social entrepreneurs (p. 23). Yet neither Rifkin nor McChesney appreciate the degrees of inequality and insecurity placed on workers in this process of capitalist accumulation. Also, it is valuable to explore the linked question of the ways monopolies stop or restrict new enterprises and innovations, as well as the experiences of start-ups in the process of being restricted in entry the market.

Reference RifkinRifkin (2014) argues that market leaders attempt to dominate the market in order to ‘impose prices higher than the marginal cost of the products they’re selling’, with actions of ‘preventing start-up companies from introducing even newer technologies to reduce marginal cost and the price of goods and services’ (pp. 7, 23). It is therefore worth exploring the dynamics between these monopolies and start-up companies.

Reference SchillerSchiller (2005) emphasises Chinese policymakers’ significant role in determining the linkages between China’s domestic political economy and transnational capitalism. For example, Chinese policymakers encourage bank lending and easy access to credit to meet transnational capital’s demands for accumulation. Reference SchillerSchiller (2005) also argues that China’s rapid development as a new site of accumulation has created overproduction tendencies that exacerbate regional and social inequalities. Reference SchillerSchiller (2014) points out that China plays a significant role in global digital capitalism due to its ‘large and still rapidly growing domestic market, and overseen by a strong and capable state’ (p. 235). He reminds us that despite heavy foreign investment, China’s party-state with state intervention aids Chinese capital in gaining important roles in the domestic information and communications technology (ICT) market.

Reference HongHong (2017) has extended Schiller’s arguments by analysing the state-led model of digital capitalism, the model of a networked China that employs global business power under neoliberal policies. Reference HongHong (2017, Ch. 3) points out that China’s policymakers deploy ICTs as the main strategy of economic restructuring in order to advance economic growth. For this task, the Chinese state encourages cultural consumption, digital media use and supports the roll-out of broadband networks.

Reference Milberg and WinklerMilberg and Winkler (2013) have highlighted the role of outsourcing in global value chains in capitalist development and they pay attention to workers’ conditions in the outsourcing model that also applies to China. Likewise, there is some research on the labour costs of accumulation by dispossession in high-tech industries, with some, on the one hand, exploring the way audiences are being subsumed into the accumulation process as ‘free labour’ (Reference BarbrookBarbrook, 2005 [1998]; Reference HillsHills, 2002; Reference JenkinsJenkins, 2008; Reference NixonNixon, 2016; Reference WittelWittel, 2014). For example, Reference TerranovaTerranova (2004) defines active users in the ‘digital economy’ as ‘free labour’, who build a community without great financial rewards and in return obtain ‘the pleasures of communication and exchange’ (p. 91). She regards these free labourers as a new productive force of capitalist production, as well as believing that capitalism is increasingly relying on free labour with its emergence.

On the other hand, some scholars argue that professional labour in high-tech industries is an important issue to discuss in relation to the capitalist accumulation process (Reference ChanChan, 2013; Reference GillGill, 2002; Reference KennedyKennedy, 2012; Reference Pun, Shen and GuoPun et al., 2016; Reference QiuQiu, 2014; Reference XiaXia, 2014). For example, Reference GillGill (2002) investigates poor working conditions in new media industries, by highlighting the pervasiveness of employment insecurity, low pay and long working hours. She particularly links these poor working conditions to gender inequalities in new media work, by arguing that female workers in new media industries experience inequalities in terms of education, access to work, autonomy, flexibility and pay. Reference XiaXia (2014) has also explored poor working conditions in Chinese Internet industries, to reveal long working hours, unequal pay, frequent job-hopping, lay-offs, and unsecured life after retirement.

There is, however, relatively little current research on worker’s experiences in the current Chinese high-tech context, in particular in the context of capitalist accumulation by dispossession in Chinese Internet industries. It is therefore worth asking, to what extent China’s Internet content industry, which occupies a large number of young workers, relates to phenomenon of accumulation by dispossession, and how young Internet workers are experiencing the accumulation by dispossession process.

Expansion of capital accumulation: Mass entrepreneurship and innovation (quanmin chuangye) and financialisation

Since 2010, there has been a start-up boom in China, for which the Internet content industry is key. In 2014, the Chinese government issued the programme ‘mass entrepreneurship and innovation’ (quanmin chuangye) to encourage the entire population to start their own businesses and unleash their innovation potential (State Council of the People’s of China, 2016). The number of newly registered enterprises increased to 2.62 million until the first half of 2016 (Xinhua, 2016a). It is common to find cities in China that are ambitious about being start-up incubators. For example, Suzhou, a third tier city west of Shanghai, has announced the establishment of three hundred incubators holding 30,000 start-ups by 2020 (Reference SchumanSchuman, 2016). In order to increase the speed of this start-up boom, both the central government and local governments showed their support through developing policies and providing funds. For example, the Hangzhou government initiated a Dream Town (an Internet village) with lavish resources for start-ups, such as giving start-up companies easy access to loans and subsidies (Reference SchumanSchuman, 2016).

Owing to the evidence of substantial support from agencies, policy and funds and from media reports we can deduce that millions of entrepreneurs have entered the start-up market, usually with some years of work experience; a devoted approach to work; a passion for technology and a dream of becoming millionaires. Forbes has revealed that numerous young Chinese-born people from the 1980s and 1990s, from first and second tier cities, or even smaller cities, have entered into the start-up market. Most of these young people are not afraid of failure, as they take the outcome, whether positive or not, as part of their experience and believe that it will open up more opportunities in the future (Reference TseTse, 2016). In summary, the Chinese start-up boom in the Internet content industry is facilitated through governmental support and has been supported by large numbers of young and willing entrepreneurs.

My two interviewees in Hangzhou mentioned that some of their colleagues quit their jobs at Alibaba and started their own businesses in the Dream Town, as the Hangzhou government supports the Internet village with subsidised rent, cash hand-outs and special training. According to the New York Times, USD49 billion of venture capital was invested in China in 2015 and in August 2016, the Vice Chairman of the National Development and Reform Commission (NDRC) announced that a national venture capital fund for emerging industries of about a further USD6 billion would be issued (Xinhua, 2016b).

That being the case, is the market ready for this start-up boom? To what extent does the market have space for start-ups? As mentioned earlier, the Chinese Internet economy is increasingly dominated by the BAT. Table 1 lists Baidu’s acquisitions in recent years showing it has entered various areas in the content industry, such as website security software, literature, and entertainment. Previously, in 2010, Baidu invested USD50 million of private equity in iQiyi, an online video company and obtained the controlling interest in iQiyi in November 2012. In May 2013, it further acquired PPS, another online video business, and merged it with iQiyi (see Baidu, 2016). Baidu states the aim of these acquisitions was to become the leader of the online video business in China. Baidu (2016) has also declared its aim of acquiring 91 Wireless, a leading mobile application and mobile games operator stating,

Table 1. Baidu’s acquisitions.

Data source: https://www.crunchbase.com/organization/baidu/acquisitions/acquisitions_list#section-acquisitions (accessed 10 October 2018).

As the above quote mentions, Baidu’s ambition is to ‘further foster an ecosystem that enhance[s] the company’s monetization ability on the emerging mobile markets’, and thus dominate the mobile market via such acquisitions and investments. This domination via acquisitions and investments indeed is a common strategy shared also by Alibaba and Tencent. For example, Table 2 shows Alibaba’s acquisitions, which covers areas like newspaper, video sharing, mobile applications, advertising, and so on. Table 3 shows Tencent’s acquisitions, which includes services like music, digital gaming, literature, and so on. Both companies state a similar aim of enhancing the company’s leading position on certain area. In other words, the three giants are dominating emerging areas via acquisition and investments.

Table 2. Alibaba’s acquisitions.

Data source: https://www.crunchbase.com/search/acquisitions/field/organisations/num_acquisitions/alibaba (accessed: 9 October 2018).

Table 3. Tencent’s acquisitions.

Data source: https://www.crunchbase.com/search/acquisitions/field/organisations/num_acquisitions/tencent (accessed 9 Ocober 2018).

It is valuable to see how Baidu defines its main competitors for its three segments. In terms of Internet search, its main service, it defines Google and Tencent’s search engine ‘SoSo’, merging with Sohu’s search engine ‘Sogou’ as part of its investment in Sogou in 2013 (Crunchbase, 2018),^{Footnote 1} as its main competitors. For transaction services, Baidu identifies its primary competitors as being Meituan-Dianping, which was funded USD3.3 billion by Tencent in January 2016, and Koubei, in which Alibaba’s investment arm Alibaba Capital Partners invested USD1 billion in October 2016 (Crunchbase, 2018).^{Footnote 2} For iQiyi, Baidu recognises Youku-Tudou, acquired by Alibaba in November 2015, and Tencent Video as its main competitors. In other words, Baidu, Alibaba and Tencent share most of the Internet content markets, as all Baidu’s competitors are part of Tencent or Alibaba’s services.

Moreover, the BAT’s subsidiaries and investees are continuously acquiring and investing in new start-up companies. For example, Tencent’s investee Meituan-Dianping, China’s largest group deals site, acquired a third-party payment start-up, Qiandai, in 2016, in order to reduce its reliance on the existing mobile payment solutions owned by Alibaba and Tencent, and also to eliminate a possible competitor for Tencent (Reference YapYap, 2016). Therefore, it is not surprising to see that BAT is developing a monopoly capitalist accumulation via investing and acquiring companies in various areas, including by subsuming start-ups.

Also in its annual report, Baidu (2016) highlights the importance of innovation by stating ‘this (the high competition) may force us to expand significant resources in research and development and strategic investments and acquisitions in order to remain competitive’ (p. 7). Baidu seems to rely heavily on ‘strategic investments and acquisitions’ (Baidu, 2016), and does not give details of how to ‘expand significant resources in research and development’ (Baidu, 2016). Table 4 shows Baidu’s research expenses and investing expenses. In 2015, in terms of research expenses, Baidu spent nearly 10.2 billion RMB, 15.3% of its annual revenue; in terms of investing expenses, Baidu spent nearly 55.73 billion RMB, including 31.3 billion RMB cash investments and 24.43 billion RMB non-cash acquisitions of investments, amounting to around 83.96% of its annual revenue (66.38 billion RMB). Apparently, Baidu spent much of its revenue on acquisition and investments, rather than research and innovation, as it claimed to do.

Table 4. Baidu’s research and investment expenses 2015.

Data source: Baidu (2015), accessed 29 January 2017.

Therefore, as Reference FosterFoster (2007) argues, if the BAT group continues expanding their empire via acquiring start-ups that provide new projects and services, rather than inventing new ones, they will occupy the entire market and leave limited space for new productive capacity. An example is that of, as already referred to in the introduction, Didi dache, a car hailing company that was funded by Tencent and subsequently merged with Kuaidi dache, which was subsequently funded by Alibaba in 2015 and in the process became dominant in China’s car hailing market. In a short period of time, it bought Uber’s China unit in 2016 and became an oligopolist in the industry. The new giant Didi Chuxing nowadays occupies almost 90% of the ride-hailing market (Beijing Review, 2016). This certainly leaves hardly any space for new start-ups to enter the market via initiating new services or projects. As Foster argues above, the result is a limited space for new productive capacity.

However, this article’s main concern is to explore how individuals such as start-up entrepreneurs experience this process of financialisation. To them, the first issue they face is piracy – sometimes, piracy becoming a chance, rather than a problem:

In 2014, almost 2.5 billion pirated digital games were downloaded, representing a loss in revenue of USD74 billion revenue lost (Reference GrahamGraham, 2016). It seems that the piracy culture damages the digital game industry. However, it is a different story in the Chinese context: in some entrepreneurs’ understanding, piracy has become such a common phenomenon in the industry that it has even become an aspect of business rules:

As Tom suggested above, the phenomenon of absorption emerges via piracy: as the CY case shows, start-ups invest in small companies that pirate their products, first, to avoid the negative impact caused by piracy, and second to avoid the complicated process of applying for a trademark and copyright. Meanwhile, as pointed out above, the BAT tends to dominate the industry via absorbing these start-ups. Reference McChesneyMcChesney (2013: 173–174) argues that technical standards, such as patents, encourage monopolies, as the firm that holds the patent usually sets up barriers for new competitors to enter. Here, the Chinese case suggests further ways in which to understand means of setting up entry barriers: monopolies extract low purchase prices for patents and copyright via absorbing start-ups, while leaving the risks and costs of setting up these technical standards to start-ups. It is easy to imagine that a large number of small start-ups may disappear, owing to the negative impacts caused by piracy and the benefits taken by piratic companies. Only a small number of start-ups survive in this cruel game and are successfully absorbed by the monopolies, and they do so after paying a high price in the process. Therefore, thousands of start-up companies are innovating with only few of them succeeding in creating new projects attracting large numbers of users and many of them are shortly after this taken over by the BAT, via investment or acquisition.

The process of accumulation by dispossession is enabled by the close relationships between the BAT and the government. The interviewees in this study gave more detailed information on the game between Internet companies and the government. For example, most Internet companies, start-ups as well as the BAT, are aiding the government in deepening current economic reform via improving traditional industries:

In return, the government protects companies standing close to it, such as the BAT, by cordoning off the market:

This suggests close relationships between the government and Internet industries: the BAT helps the government deepen current economic reform with certain products improving traditional industries, rather than creating an online space for alternative voices to speak out (Reference Xia, Kennedy, Herold and MaroltXia and Kennedy, 2014: 177). In return, the government closes the market to enable BAT to benefit from offline business.

Reference FosterFoster (2007) warns that the monopoly capitalist production process will result in limited space for productive capacity and investment in new capacity, stating:

Reference FosterFoster (2007) has also argued that oligopolistic firms under monopoly capitalism will generate a strong tendency towards economic stagnation, as they rely heavily on ‘cutbacks in output, capacity utilization and new investment’ (p. 7). Therefore, this financialisation certainly will lead to a decrease in innovation and production. Furthermore, it is ‘an ongoing process transcending particular financial bubbles’ (Reference Foster and MagdoffFoster and Magdoff, 2009: 84). As a result, some start-up entrepreneurs become capitalists-in-waiting via financing and cashing out:

Here, as these start-up entrepreneurs suggest above, the aim of their Initial Public Offering (IPO) is merely to extract wealth from the rest of population, such as investors, by cashing out. Therefore, this research suggests that capital concentration and centralisation in the industry, resulting in BAT’s monopolisation based on their alliance with the government, indeed stimulate a process of financialisation. Therefore, BAT subsumes start-ups, a process which rationalises the illegal phenomenon of piracy by investing in or acquiring piratic companies. The BAT then builds up an alliance with the government via benefit exchanging. This alliance enables the BAT members to monopolise the industry, as part of the financialisation process. Consequently, some start-up entrepreneurs become capitalists-in-waiting: they pay attention to an IPO for financing and cashing out, rather than for improving products. Likewise, ordinary workers focus on sharing stocks and cashing out after an IPO.

In other words, individuals’ experiences in this research enrich the process of financialisation going on in Chinese Internet content industry, by exploring piracy issue. Moreover, there is another factor relating this financialisation process to Chinese education system and contemporary Chinese social context: training institutes in the Internet content industry.

Changing social relations: Training institutes

This accumulation by dispossession process also subsumes thousands of labourers from traditional industries as one interviewee states,

In other words, this capital accumulation manifests ‘the expansion of wage-earning class, a way for capital accumulation expansion via enlarging the scope of social relation’ (Reference HarveyHarvey, 2006: 95–96). There are two tendencies revealed in the existing research exploring this expansion process. First, some scholars (Reference FuchsFuchs, 2016; Reference NixonNixon, 2016; Reference WittelWittel, 2014) argue that capital accumulation occurs from exploiting a number of non-waged labourers’ surplus value, such as Internet users’ time spending on Internet and contents they created online. Reference NixonNixon (2016) in turn has argued that digital media companies, such as Google, are generating revenue via controlling over numerous activities of digital audience labourers. He conceptualises this capital accumulation process as ‘the Googlization of everything’.

Other scholars (Reference ChanChan, 2013; Reference Pun, Shen and GuoPun et al., 2016; Reference QiuQiu, 2014) pay attention to labourers in digital electronics manufacture industry, and explore how Chinese cheap labour is subsumed into global capitalism. For example, Reference Pun, Shen and GuoPun et al. (2016) focus on the Foxconn issue by exploring how Foxconn is building up its empire based on exploiting Chinese labour. All these scholars also indicate the emergence of worker resistance – from an alliance of workers, students and scholars.

Both tendencies show that media giants in capitalist countries expand outwards via subsuming waged and non-waged labourers in Asian countries like China. They usefully reveal the forming of a media empire based on the expansion of a wage-earning class: both non-waged Internet users and waged workers are exploited in the digital electronics manufacture industry.

Likewise, the expansion of a wage-earning class in the Internet content industry enlarges the scope of social relations. For example, as shown above, this industry has subsumed a number of workers from traditional industries but also involves the use of new university graduates from the problematic Chinese education system. This is an unexplored factor in the capital accumulation process as training institutes in the Internet content industry become an incubator for laymen, both workers in traditional industries and fresh university graduates, to join the industry:

The following interviewees also suggest, an overload of university students also has undermined the quality of education, making it difficult to teach students skills necessary for joining the industry:

As Reference WuWu (2017: 4–5) indicates, China started its market-oriented education reform in the 1990s and since then, many private colleges with high tuition fees have been established, and public universities and colleges have been restructured to generate profits. For example, the number of college students grew from 2.28 million in 1978 to 37.79 million in 2017, accounting for 45.7% of the age cohort (Ministry of Education of the People’s Republic of China, 2018). This dramatic increase in the number of college students and graduates led to a devaluation of their bargaining power in the job market. According to Reference WangWang (2015), more than 7 million college graduates entered the job market in 2015, and many of them live as an ‘ant tribe’, a term coined by Reference LianLian (2009) to describe group of low-income graduates, suffering from rising health care and education costs, surging housing prices, rising crime rates, and environmental degradation, clustered together in cheaply rented subdivided rooms on the outskirts of large cities, undertaking low-paid temporary work while they search for jobs.

Ongoing education reform in China is characterised by an industrialisation of education – an increasingly market-oriented education system restricted for sustained profits, based on a problematic university education system, producing too many university graduates with low-quality vocational preparation, competing for limited positions in high-tech industries, such as the Internet content industry examined in this research. In the process, it is facilitating the growth of private training institutes to supplement the education system in training university graduates hoping to access the Internet content industry (Figure 1).

Figure 1. Individual subsumption in the Chinese Internet industry.

The training institutes also pose significant issues for their graduates and their future employment in the Internet content industry. First, the teaching quality is not guaranteed:

Even with this unguaranteed teaching quality, the tuition fee is still too high for fresh graduates to afford:

According to a Peking University study, the average monthly salary for fresh graduates in Shanghai, a city with one of world’s top 10 most expensive property markets, is only 3241 RMB (Reference SweeneySweeney, 2015). It is obvious that a tuition fee of more than 10,000 RMB is too high for most fresh university graduates, even if they may be able to enter the institutes after 2 years of working.

In order to attract these students who are eager to join the Internet content industry while unable to afford the fees, some training institutes even advertise ‘free courses without tuition’, which means that students can pay back the fees after finding jobs in the industry:

However, ‘free’ obviously has its price. Indeed, training institutes offer loans to students by cooperating with loan companies, and students need to pay interests:

Some institutes even advertised a ‘job guarantee’ to attract these laypeople, although this again cannot be realised in many students’ cases:

In some ‘successful’ cases, such jobs are still not stable:

It is suggested that such ‘guaranteed jobs’ are created by the training institutes to attract potential students. Students are forced to pay for training when finding jobs and are forced to leave with half pay for their hard work in the first 3 months in these companies. For students who cannot find ‘guaranteed’ jobs do institutes keep their promises by returning fees? The answer is clearly no as one interviewee reports:

This process of fee recovery appears to involve deception and coercion. Students are deceived into thinking there is no other way to claim back their fees. And they are coerced to forgo claiming back their money in such a humiliating way. It therefore undermines these students’ legal rights.

To students who are neither deceived to get a ‘guaranteed job’ nor coerced to claim back tuition fees and then finally access the Internet content industry, they may need to eliminate their experiences in training institutes from their CVs in order to receive a fair pay:

As the interviewee suggested, workers from these training institutes either can only find positions in small companies, such as start-ups and outsourcing companies, with heavy workloads and low pay, or find low-level positions in big companies, such as those in the BAT, with lower pay than their colleagues. As stated above, there is an emerging body of evidence about poor working conditions in high-tech industries (Reference ChanChan, 2013; Reference Pun, Shen and GuoPun et al., 2016; Reference QiuQiu, 2014; Reference RossRoss, 2007) revealing the problems associated with excessive overtime work, poor pay, limited social networks, insecurity, and high competition, and the presence of high levels of exploitation and slavery. Workers from training institutes in this research also suffer such poor working conditions, and their stressful working life drives them to become the silent cogwheels of the BAT’s enlarged Internet content empire.

In summary, the graduates training for work in the Internet content industry often become victims of a problematic Chinese education system and training institutes. After graduating from poor-quality universities, they are forced to pay for training institutes to join an Internet content industry that is often tagged ‘high salary’ in some media reports but in practice the evidence above suggests this is not the case. Some graduates may not be able to afford the high tuition that they choose to attend so-called free courses, for which they indeed need to pay more to loan companies. Some graduates may choose so-called ‘job-guarantee’ institutes, while they finally realise this is only a business strategy, and claiming back tuition is humiliating. In many cases, owing to the poor quality of these courses, most graduates finally only find jobs in start-ups and outsourcing companies or low-level positions in members of the BAT with low pay.

In turn, in the Internet content production process, it is fresh graduates’ labour power as well as immaterial assets, such as knowledge and social networks, that are being transformed into priced commodities, such as professionally produced Internet content and products. These graduates are therefore subsumed into the capitalist accumulation by dispossession based on the social programme ‘mass entrepreneurship and innovation’, as social relations of subjects.