Oops, our business model is being done to us

Thinking about Apple’s travails running its iCloud service in China. As a condition of operating in China the Chinese government insists on physical control over the iCloud servers, meaning users have little protection against state intrusion and Apple are reduced to being a remote manager of the service.

One of the  themes of digital capitalism has been that customers no longer control the product they own. Software and network lock in means your ability to repair, retask or otherwise mess around with the product is limited. In some cases the product may stop working entirely unless it continues to be supported by the company that produced it. The business model is that the hardware is a vehicle for the customer to be sold services: books (which you effectively license), music, video streaming and the like.

In the case of China we’ve seen how this puts the company in the same position in relation to the state that its customers have in relation to it. Apple does not own or control its iCloud service in China. It is effectively a licensee, given permission to operate the service on conditions set by the government.

The case and many others like it show how the theory of neoliberalism is parochial and now dated. Critics have argued for a long time that neoliberalism is the general shift in global capitalism towards market dominance through society. Politics emphasises deregulation and a reduction in social welfare, reducing the state to the role of ring holder. The rise of the BRIC countries has shown that neoliberalism is a largely Western phenomenon and is being superseded by an integrated, state led capitalism in China and Russia. This form of capitalism can quite easily adapt and make use of the tools and models developed by Silicon Valley to move fast and break them.

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