Capitalism 2.0: The case for government-funded civic tech

Silicon Valley investments created massively scalable platforms like Uber, Facebook and Airbnb. Here’s how to engage governments and make the platform model work for everyone.

Over the last few decades we’ve seen an acceleration in the myriad ways software has changed how we work, eat, shop, socialize, learn and communicate. Our phones have become inextricably woven into the fabric of our lives, while software and new technology have enabled an incredible amount of wealth creation and accumulation of capital. For many, Silicon Valley represents not only the cradle of technological innovation, it’s the embodiment of capitalism itself.

Yet as anyone who has lived in San Francisco for a few months can tell you, the benefits of capitalism have not reached the least fortunate among us. For all the Bay Area startups claiming to be “making the world a better place” the reality is, on balance, we’ve only widened the digital and economic divide between the haves and have-nots. Software has indeed made the world a better place, but for whom?

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credit: @1followernodad (Sophia Benoit)

To be fair, you can’t blame software or startups or Silicon Valley for these inequities. Software businesses, as it turns out, can be very good at capitalism. Without deliberate intent to do otherwise, entrepreneurial capitalism dictates that profits flow to the owners of a business, while operating costs must be kept as low as possible. The digital platform model has optimized this to the extreme. It costs Facebook or Netflix almost nothing to add a new customer, or for Google to serve paid ads along with every search result. But when operating costs are people, and the gig economy is their primary source of income, systemic vulnerabilities become apparent.

Aggregation Theory provides a good framework for understanding how platforms businesses, with effectively zero transaction, distribution and unit costs, have enjoyed incredible growth and effective oligopolies, arguably the only logical end game for FAANG+ companies. But ever since Amazon (almost accidentally) developed and commercialized cloud services, companies large and small have access to the same massively scalable application infrastructure at a marginal cost. Despite the anti-competitive tactics of Big Tech, the combination of ubiquitous smartphone penetration and cheap cloud infrastructure means the potential for software to have a positive influence on our lives has never been bigger.

As technology is subsumed into the fabric of our daily lives, as eCommerce becomes just commerce, as work-from-home is just work, we should look at practical, meaningful ways to put software and it’s exponential power to work for everyone. Civic tech shouldn’t be a patchwork of experiments in government innovation, it should be an integral component of service delivery. If tech is truly going to make the world a better place, we need to take better advantage of almost-free digital infrastructure and support business models that aren’t designed for centralized control and aggressive profit-taking.

For Canadians, our public healthcare system is probably the clearest example of a public good that is universally seen as sacrosanct. Even the most libertarian of Canadian politicians are wary of suggesting Canada’s healthcare system should be privatized. Yet look to our closest neighbour, where healthcare is a private, massively profitable industry and inequities abound. Put simply, any system where profit is a central purpose will self-optimize to serve those who can provide it with profit.

This is why we created OpenLocal. We are adopting the incredibly efficient, rapidly scalable software platform model for public good, rather than private profit. We are developing systems to enable technical innovation at the local level, empowering municipalities large and small with access to transformative digital services. We are also supporting new models of job creation that prioritize fair wages and give workers a meaningful voice in their terms of employment.

What makes this possible is letting go of the belief that the central purpose of a business is to generate a profit.

If we are going to develop systems for funding the development of software as a public good we need to accept new interpretations of how capitalism works, and for whom.

We are not necessarily talking about huge shifts here. An example relevant to OpenLocal is rethinking the idea that we should look exclusively to the private, for-profit sector for technology innovation.

Historically when we look to government for leadership on public goods, we think of traditional services like infrastructure, healthcare and education. Governments are not thought of as hotbeds of technical innovation. But that is not exactly accurate. In truth, government investment is often directly responsible for funding the magical technologies we’ve credited to big tech. While we credit Apple for ‘inventing’ the iPhone, as Mariana Mazzucato writes in The Entrepreneurial State:

“All the technologies which make the iPhone ‘smart’ are also state-funded … the internet, wireless networks, the global positioning system, microelectronics, touchscreen displays and the latest voice-activated SIRI personal assistant.”

Canada’s investments in AI research through CIFAR in the early 1980’s directly led to the pioneering work of Geoffrey Hinton, Yoshua Bengio and Yann LeCun, and has made Canada a world leader in the field of AI. Governments have a long history of funding the development of many core technologies, from their role in funding foundational medical research, to GPS, even the internet itself, which grew out of ARPANET, a communication research project funded by the U.S. government.

Considering my earlier criticism of capitalism it might be surprising to suggest that governments should be acting more like venture capitalists. If Silicon Valley VCs have been so effective in leveraging startups for wealth creation, why shouldn’t governments emulate the VC model to directly fund software that delivers on policy objectives? What if software platforms that provide ‘public good’ services like public transit, local delivery or in-home care are funded to deliver government mandates of accessibility and quality of life, not extracting profits to provide a 10x return to investors?

There is physical infrastructure, like a national broadband network that the current government has committed to, but we believe there are big, cost-effective gains that can be made in ‘soft’ infrastructure. Software platforms to serve local residents and support community businesses, to create tech job opportunities in rural communities and enable them to build their own digital services, and create network effects between these communities by making the digital services developed by one municipality available to all.

This isn’t a particularly radical idea. It simply asks us to expand the definition of ‘government services’ to include new initiatives like software platforms and digital public goods, particularly ones that are citizen-led and community stewarded. Organizations like the Civic Digital Network are helping establish frameworks and relationships with government to guide the development of a civic digital infrastructure. Code For Canada has a successful, well-established model for hands-on, project-focused engagement to improve the digital capacity of all levels of government. Most of the “how do we get there?” questions have ready answers.

Opportunities for community-oriented software platforms extend well beyond the initiatives of public transit and local delivery that OpenLocal has proposed. Consider the needs of our retiring baby boomers, and the desire to keep them living comfortably and safely in their own homes for a long as possible. Personal support workers, meals, cleaning services — there are myriad local support services that could be better provided through well-build user-centred software platforms. Subsidies to private sector long term care providers shouldn’t be the only model our parents and grandparents rely on.

The brilliant @ArmineYalnizyan explains how our current economic policies are geared towards making the economic pie bigger. The problem is the economy is more like a cake.

One last, important caveat. As we enter into the pandemic recovery period where the Canadian government is injecting billions into the economy, we need to provide frameworks that keep those funds circulating here at home.

The economic benefits of CERB and other recovery support funding diminishes significantly if that money is spent on the products and services of multinationals and immediately leaves the country.

This is why open-source digital platforms are particularly effective in this context — they can be operated for the sole economic benefit of local users. With an open-source platform there is no requirement for an extractive business model to pay back thirsty investors.

The pandemic has thrust change upon us whether we want it or not. The measure of how well individual countries emerge from this current challenge will rely on having the wisdom and courage to let go of old ideas and embrace new ones. GDP is being challenged (most notably by the OECD) as the key measure of a ‘healthy’ economy. Modern Monetary Theory (MMT) is challenging concepts of fiscal policy that have guided Western economies for nearly half a century. Full employment, not keeping inflation in check, is becoming the new North Star for government macroeconomists.

From this new perspective we can look at investments in digital infrastructure — a broad range of digital services supported by the government — as an essential public good, in the same way that we see good roads, schools and garbage collection services as essential to the well-being of our communities.

Let’s look for civic problems that can be improved by results-oriented investments in inexpensive commodity hardware and open-source software. Let’s fund digital platforms designed to support tech workers in rural markets and create networks between them. Let’s create community-run digital services that provide meaningful value to residents while improving resiliency, technical self-sufficiency and economic diversity.

The skills to accomplish these tasks are not unique to Silicon Valley insiders, and the infrastructure is available to anyone with a fast internet connection. This is an opportunity to align with governments at all levels, building relationships that empower them with new ways to make meaningful, transformative contributions to the public good. And let’s build models to deliver these public goods that start with a deep understanding of the needs of the users: citizens, neighbours and you.

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— Richard Switzer, September 2020

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OpenTransit is a Canadian not-for-profit company developing open-source software for ‘public good’ digital services

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