In his 2009 book The Cultural Logic of Computation, David Golumbia argues against the still-common notion that internet access and rampant computerization will be inherently democratizing forces. Rather, he says, it’s just as likely that the undeniable empowering effects of computerization will serve to exacerbate imbalances of wealth and power. Or, as he summarizes the argument in a new essay on High-Frequency Trading: “it is probably correct that the rising tide of computerization does in fact lift all boats, and there is no reason to think that computerization comes along with some kind of built-in circuit breaker that prevents it from empowering the most powerful.”
Golumbia uses the rise of automated High-Frequency Trading (HFT)—drawing on real examples as well as its dramatization in the film Margin Call—to demonstrate the fallacy of assumptions about “internet democracy.” Web-based tools for automated financial trading are said to have leveled the playing field, allowing individual investors the same access to the markets that the high-powered brokerages and banks have long enjoyed. Just as critical as the ability to trade has been access to requisite information like real-time prices, trading volume, etc. And yet, these same seemingly-democratizing developments (automated trading, freely available information) are also what have allowed the market to become dominated by the algorithmic designs of the world’s top engineers, in the employ of its most highly-capitalized banks.
So, just as computerization lowers the barriers to entry in market trading, it underwrites a transformation of financial mechanisms on a scale such that the newly-welcome individuals haven’t a chance of keeping up. Just because all boats are higher doesn’t mean the smallest won’t still drown in the wake of the large.
The abstract of Golumbia’s article, forthcoming in Social Semiotics:
The development of High-Frequency Trading (HFT)—automated trading of stocks, as well as bonds, options, and other investment instruments—provides a signal example of the political effects of computerization on a discrete social sphere. Despite the widespread rhetoric that computerization inherently democratizes, the consequences of the introduction of HFT are widely acknowledged to be new concentrations of wealth and power, opacity rather than transparency of information flows, and structural resistance to democratic oversight and control. Even as computerized tools undoubtedly provide individual investors with more power relative to what they had before, they also provide powerful actors with relatively more power as well, in some cases effectively excluding the majority of individuals from insight or meaningful participation whatsoever, especially with regard to the political impacts of market activities. Reports on recent financial crises, and the 2011 film Margin Call provide narrow windows into the operations of HFT and the challenges it poses to democracy; these in turn raise significant problems for the view that computerization inherently democratizes.
At Golumbia’s website you can also read a pre-press version of the full paper.
