Why Unregulated Capitalism Always Leads to Enshittification

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Lots of ideas work well in theory, but many of them don’t work out so well in practice, especially when the idea becomes an ideology, pursued dogmatically without oversight to correct for malfunctions and abuses.

The idea of investment capital was one such idea, allowing, for the first time, a group of people to pool their money to enable major projects like factories or resource development or large-scale trade that no individual (other than rich monarchs) could finance.

While pooling of capital was a good idea, some people decided to turn the idea into an ideology, called capitalism, and this ideology, in its most extreme, unregulated form, now underlies many of the problems we face today. It has, in short, become utterly dysfunctional, leading to obscene disparities in wealth and income, catastrophic destruction of our environment and many people’s lives, monstrous amounts of waste of all kinds, and a globalized economy teetering on the edge of complete collapse.

Cory Doctorow has dubbed the process by which initial good ideas, without constant attention and oversight, can devolve into dysfunction, as enshittification. (His article is well worth reading in its entirety.) He explains how this has inevitably happened with Amazon, with Facebook, with Twitter, and other “platforms”, and most recently with TikTok and Google Search:

Here is how platforms die: First, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves [ie the managers and shareholders]. Then, they die.

I call this enshittification, and it is a seemingly inevitable consequence arising from the combination of the ease of changing how a platform allocates value, combined with the nature of a “two-sided market,” where a platform sits between buyers and sellers, hold each hostage to the other, raking off an ever-larger share of the value that passes between them.

I’ve explained this process before in different words: In any unregulated capitalistic enterprise, there are incentives for eliminating competitors, then eliminating restrictive regulations, then defeating and exploiting foreign rivals and laws, then confusing (ie lying to) and squeezing your customers and employees, and finally dismantling and privatizing government activities that might compete with you.

This is all done in the pursuit of endlessly higher profits. Ideological capitalists are completely unapologetic about doing this, claiming their “responsibility” is to maximize profits for their shareholders, and the massive damage that pursuit does to humans, economies, and the environment — so-called “externalities” — is not their problem.

Stupidly, we have allowed this situation to go on for centuries, constantly reducing restrictions and encouraging more of this destructive behaviour. The threadbare argument, of course, is that we are all “shareholders” in capitalist enterprises (as employees, investors, pensioners etc) so this is all in “our” collective benefit. It’s absurd, but that’s where ideology takes you.

There are many opportunities to intervene and prevent this destructiveness in such a way that capitalist enterprises could be beneficial instead of ruinous — anti-combines (anti-oligopoly) laws, usury laws, strong labour and employee benefits laws, fees and taxes to charge corporations for external costs they are responsible for, reckless lending laws, independent public rate-setting organizations, duties to discourage both offshoring and undue protectionism, laws against deceptive hiring and unethical firing processes, prohibition of non-disclosure and non-compete agreements, laws against deceptive advertising and corporate disinformation, laws against lobbying and influence-peddling, laws against domestic and foreign bribery and similar corrupt practices, and so on, and, when all else fails, wage and price controls.

We used to have a lot of these, before the onset of the Reagan/Thatcher era when unregulated capitalism became the prevailing economic ideology in the west. Now, we have almost none of these curbs on corporate excesses. The armies of lawyers hired by corporatists have had almost all such restrictions dismantled. And with regulatory agencies politicized, mismanaged, starved, and disemboweled, it’s unlikely we could get the derailed train of western capitalism back on the rails even if those in power wanted to. Like everything else that gets too big and becomes dysfunctional, it will simply collapse, and we’ll have to pick up the pieces and create new, functional (probably hyperlocal) economies from scratch.

It is ironic that one of the reasons we were so fascinated by the internet when it first emerged, was the possibility of disintermediation. If you wanted to buy something online, you could research and go right to the source, skipping the expensive wholesalers, retailers, advertising/PR media, and other “middlemen”. You could get exactly what you wanted custom made for you.

It was a nice dream. But what has emerged is a whole new suite of intermediaries, such as the “platform” social media, who maximize their profits by bullying both their suppliers and their customers (ie the corporations selling the product, not you — you and your data are merely the product they are selling to their real customers, the corporations).

As Cory explains, the supplier of the real product you want to buy gets squeezed more and more for charges and markups by the social media company. And you, the supposed customer (silly you!) gets shown not what you’re looking for, but what the suppliers willing to pay the social media company for ads want you to see.

And now, as enshittification gets worse, you’re also being (mis-)directed to floods of fake sites, many of them entirely run by AI to push certain products, telling you what product you should actually buy, and they too are taking an intermediary rake-off for pushing you to that product’s website, or pushing you to the social media site that features that product who will take a rake-off from them, too.

So you get to see, and buy, what they want you to see, and buy, not the marvellous little small-business product perfect for what you are looking for, because that innovative small business is not wealthy enough to pay the social media gatekeepers to get your attention. And guess who has to pay for all the rake-offs added to the cost of the suboptimal product up and down the line, that you do buy?

Similar forms of enshittification have now dysfunctionally entangled almost every industry, from junk fees to price-fixing to shoddy, wildly overpriced products, to non-existent, opaque, and even hostile “customer service”. Rampant unregulated capitalism may be OK for “shareholders”, until the opportunities to maximize profits are maxed out (at which time the numbered parent company will just close it down, stiff the suppliers, employees and customers, and open up with some new enterprise).

The same thing will happen, Cory predicts, with the social media platforms — as they get more and more dysfunctional, and provide less and less value to us, the actual users, we will abandon them, and find (with difficulty) some other way to get what we need and want online, that they originally promised.

We will find ways, he says, to remain connected with, and renew connections with, the people and organizations and information we want. There are a variety of strategies, such as “end-to-end” processes and loyal user agents, that could allow us to at least “take back the internet” from its brainless capitalistic ideologues. There are some clues in economist Elinor Ostrom’s nobel-winning work explaining how the “Tragedy of the Commons” (often used as an argument for privatization of everything) is not inevitably a tragedy, with the right interventions. Governance by principles, not ideologies.

I’m not optimistic, but it’s worth keeping an eye on.

It’s so bad that Lyz Lenz laments that even dating service platforms are becoming enshittified. Her argument is that one of the ways unregulated capitalism deflects attention from its utter dysfunctionality is by asserting that individuals can and should take responsibility for solutions themselves, rather than holding capitalist excesses responsible. It’s nonsense, she says:

[With all these “solutions”,] people are still selling something. A dating coach, a match maker, a viral meme account about Hinge profiles, an empowering new mindset, they’re all flesh flies, feeding off the enshittification of the apps.

We can learn to “step outside the algorithm”, she suggests. Stop using dysfunctional enshittified apps. Deal with the world in ways based on personal relationships and real-life activities, not commoditized, ‘capital-ized’ processes, systems, products and tools.

Well, maybe. When most of the world is still preoccupied with trying to use processes, systems, products and tools that are falling apart all around us, it’s hard to see one’s way straight to invent, explore, or rediscover better ways of doing things.

But soon we’re going to have to get good at it, so we might as well start now.

Cory also had some interesting things to say recently about workplace power and precarity; more about this in a post later this month.