Book Review: Chokepoint Capitalism: How Big Tech and Big Content Captured Creative Labor Markets and How We’ll Win Them Back, by Rebecca Giblin and Cory Doctorow. Boston: Beason Press, 2022. 303 pp. $26.95.
Rebecca Giblin holds a Bachelor of Laws degree and a PhD, both from Monash University in Melbourne, Australia. She is currently a Professor at the University of Melbourne Law School, as well as Director of the Intellectual Property Research Institute of Australia.
Cory Doctorow, who is Canadian by birth, holds an honorary doctorate from the Open University in the UK. He is a blogger, journalist, author, and activist who works for open-source sharing and freedom of media. Doctorow has held visiting professorships at the Open University and the University of North Carolina, as well as a research affiliate position with MIT’s Media Lab.
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Chokepoint Capitalism is about the reasons for the deep and growing economic inequality in today’s world.
It could not be more timely.
Of course, by now (July 2023), economic inequality is old news. So, what is Giblin and Doctorow’s distinctive contribution to the problem of the “one percent”?
Celebrated books like Thomas Piketty’s Capital in the Twenty-First Century (2014) have painted the economic history of the past several centuries with a broad brush, arguing that the rate of return on capital invested in the industrialized countries has consistently outpaced economic growth since the eighteenth century.
Piketty describes this as a fundamental and ineradicable flaw in free-market capitalism itself.
Chokepoint Capitalism, in contrast, focuses on the past several decades, primarily in the US, and examines with a fine-tipped sumi brush the specific mechanisms that giant corporations have employed to secure their full- or near-monopolistic positions within their industries.
The book is an eye-opening read that will be of interest to a wide range of individuals across the political spectrum.
Giblin and Doctorow make no bones about their own political commitments. They are socialists at heart (pp. 13, 252–255), who would like nothing better than to see capitalism abolished altogether.
Moreover, their economic lodestars, cited repeatedly throughout the book, are the socialist-leaning thinkers Joan Robinson and Thomas Piketty (already mentioned).
However, the authors are also realists. They acknowledge that for now we are stuck—as they see it—with the capitalist system. Therefore, they want to reform it to make it work better, which they define as working in the interest of the common good, and not just the one percent.
And that is a sentiment many of us who reject socialism may nevertheless find congenial—which is why I say that readers from across the political spectrum will find much of value in Chokepoint Capitalism.
However, the most interesting thing about the book—and its real raison d’être—is the way Giblin and Doctorow illustrate the abstract concept of a “chokepoint” with a tremendous wealth of technical detail across a spectrum of culture, arts, and entertainment industries.
For a reader who comes across this text with little in the way of detailed knowledge of the industries covered, the book will be nothing short of revelatory.
First, then, what is a “chokepoint”? It is simply a more-colorful term for “intermediation”—any business whose purpose is to facilitate the cultivation of creative artists and/or the distribution of their works to a paying audience.
In short, intermediaries provide the means by which creative artists are able to commercialize their labor.
Put this way, intermediation sounds like an innocuous, indeed indispensable, adjunct to the creative enterprise in any cultural sphere.
And, indeed, it is. Why, then, call it by the pejorative term “chokepoint”?
I think the real reason the authors settled on this term is for its subliminal connotations. Their fundamental thesis is, after all, that in the culture industry today, intermediaries are exploiting the creative artists they ostensibly serve by using underhanded methods that cannot be justified.
Giblin and Doctorow also illustrate the concept of a chokepoint by means of what they call the “hourglass” model. Like an hourglass, the money that “ought”—by their lights—to be flowing freely from the top of the glass (the customers) to the bottom (the creators) gets choked off to a small stream.
The authors’ socialistic mentality is clearly the unacknowledged force driving this chokepoint/hourglass perspective. It is as though they believe that creators bring the value of their works into being all by themselves, and that intermediaries add little or nothing.
Theirs is a perspective from which only the Beatles of the world are visible, and not the George Martins. However, from a free-market perspective, this is nonsense.
The modern science of economics, which arose gradually during the course of the nineteenth century, was composed of many different elements. At its very foundation lay the subjective theory of value, as articulated independently by Carl Menger, Léon Walras, and William Stanley Jevons.
According to the subjective theory, there is no intrinsic value in anything. All market value derives from the preferences of customers. And it is tolerably clear that intermediaries play a major role in shaping such preferences.
Giblin and Doctorow appear to subscribe to Marx’s long-debunked labor theory of value—the idea that the value of a commodity is determined by the amount of labor that went into creating it, whether or not anyone actually wants to buy it.
According to Marx’s theory, the fellow who labored for a decade over a turgid, tendentious, and unreadable thousand-page tome of a novel has created far more “value” than the author of a slim novella knocked off over a weekend that flies off the bookstore shelves.
And in the socialist workers’ paradise that Giblin and Doctorow appear to envision, the former “creator” deserves to be compensated at a much higher rate than the latter author.
On the other hand, it does seem intuitively plausible that, at some point, an author’s share of the income stream that he or she generates—if determined in the normal way by market forces—may dwindle to the point of being “unfair.”
Although there is no way to justify this powerful intuition economically, still common sense seems to indicate that there really is something to it. Perhaps it just goes to show that economics is not the be-all and the end-all of our social arrangements.
While all of this would be an interesting dilemma for further philosophical analysis, for the purposes of their book Giblin and Doctorow simply take it for granted that the current situation is manifestly unfair to creators. And upon reading the unedifying details that the authors document, I think that many readers will be inclined to agree.
The precise reasons for this unfairness is in fact the main subject of Chokepoint Capitalism and occupies the bulk of the book.
In the last chapter, the authors propose a series of remedies. Most conservative populists will bridle at their big-government solutions—but I will save that debate for the end of this review.
First, then, let us look at some of the particular methods that corporations use to create chokepoints.
According to the authors’ convincing analysis, chokepoints arise from two main factors:
- widespread consolidation, both vertical and horizontal, leading to giant corporations capable of achieving full- or near-market dominance (monopoly/monopsony); and
- specific mechanisms designed to protect a giant corporation’s dominant position.
In addition to these two major factors, Giblin and Doctorow bring up two ancillary factors to help explain the current situation as it has evolved over time in the US. One of these is general, the second specific to the entertainment industry, the main focus of the book.
The general factor is this. In 1978, then–Yale Law School Professor Robert H. Bork published a book entitled The Antitrust Paradox. In this book, Bork advanced the heterodox thesis that corporate mergers ought to be evaluated, not in light of their overall impact on society (the common good), but in a more-focused way—primarily, with regard to their impact on consumer prices.
By this criterion, many or even most corporate consolidations can be economically justified—with economies of scale being translated into lower consumer prices—thus disarming the case for antitrust action.
Bork’s proposition proved to be hugely influential, both economically and politically, beginning in the 1980s and continuing until today.
Right out of the starting gate (pp. 3–4), Giblin and Doctorow cite Bork’s thesis as one of the major causes of the trend towards corporate consolidation we have witnessed across a broad swath of industries over the past three decades.
The more-specific factor cited by the authors for the current situation in the entertainment industry is psychological. They point out (p. 24) that creative artists are driven to do what they do by non-economic motives, and that many feel inwardly compelled to continue working at their art, no matter how badly they are treated by the intermediaries who see to its commercialization.
The authors believe that this psychological fact makes creative workers more susceptible to financial exploitation than others. Naturally, the mega-corporations that have come to dominate the commercial culture space have not been shy about taking advantage of this quirk of human psychology.
However, the foregoing considerations, while of considerable interest in their own right, are not the main focus of Chokepoint Capitalism.
Rather, the bulk of the book is taken up with an industry-by-industry investigation of the specific mechanisms that giant entertainment corporations use to preserve their full- or near-monopolistic positions.
To be fair, the authors acknowledge that some of these mechanisms are the result of impersonal market forces and technological innovation, as opposed to human volition and action. In this category, we have such things as network effects, whereby the larger a network becomes, the more attractive it becomes to new users (Facebook would be a prime example).
Also, the larger the network, the greater the sacrifice for customers to defect to a competing network, as well as the higher the cost of market entry for potential competitors.
Nevertheless, a great many of the mechanisms the authors analyze are perfectly intentional. Not infrequently, they involve private companies persuading the government to change the law in their favor—and nothing could be more intentional than that.
Some other examples of intentional mechanisms include laws against circumventing digital locks on media, deliberately opaque accounting practices, the industrial aggregation of copyrights, antitrust laws that make it a crime for individual creators to coordinate their demands, and much more.
It is convenient to have a term to refer to all such devices collectively. To this end, Giblin and Doctorow borrow the term “moat” from Warren Buffett (p. 6).
The term is marvelously apt, evocative, and intuitively clear. Just as moats protected medieval castles, so too, the authors are saying, modern mega-corporations are surrounded by an entire panoply of legal, financial, and technological devices designed to repulse any and all threats to their monopolistic position (whether full- or near-).
The first industry Giblin and Doctorow examine—and one of the most revealing—is book publishing (Chapter 2).
Even before the advent of the Internet and Amazon, the book publishing industry was already undergoing tremendous consolidation. Today, the business is dominated by a handful of mega-corporations, such as Hachette Book Group, Penguin Random House, HarperCollins, and Simon & Schuster.
However, even these mega-companies have become highly dependent upon the intermediation of Amazon.com, and Amazon makes demands upon the publishers commensurate with that asymmetrical relationship.
These demands take various forms, but one of the most troubling is Amazon’s practice of requiring steep discounts and even outright payments from publishers to accept and showcase their book titles. There would appear to be a thin line between such payments and what we might with justice term “bribes” or “payola.”
The publishers, in turn, have responded to this development by passing the costs along to their authors. Indeed, authors’ advances have fallen by about 50% over the past 15 years or so (p. 23).
As for moats, certain provisions of the international Digital Millennium Copyright Act (DMCA), passed in 1998, have played into the hands of Amazon and other online sales platforms by providing legal sanctions for circumventing “locks,” which vendors put into place to constrain the behavior of customers in ways favorable to the seller.
Some of the downstream effects of the DMCA were certainly never foreseen by the treaty’s drafters. Thus, the law of unintended consequences has gifted Amazon with one of its most effective moats: its near-monopolistic control over electronic book publishing (or “self-publishing”).
This control works in two ways:
- Amazon made their books unplayable on other platforms (p. 28); and
- Amazon offered far more attractive contracts to authors willing to self-publish e-books on their platform than did the traditional book publishers (70% vs. 25% royalties!) (p. 30).
When publishers attempted to fight back by banding together to improve their negotiating position, Amazon responded by “disintermediating” those companies—that is, by offering to double authors’ royalties if they would publish directly on Amazon.
Moreover, it turns out that all of this predatory activity is protected by law. Amazon actually sued the publishers on antitrust grounds and won, being awarded $166 million in damages (p. 31). In the eyes of the law, it was the publishers, not Amazon, who were engaging in forbidden monopolistic activity!
Finally, Amazon has tended its moat by going after small competitors in its myriad niche markets extremely aggressively, buying up new successful new companies, sometimes at great expense.
A prime example is Amazon’s purchase of a small competing company called diapers.com for the extraordinary price of $200 million (p. 37).
Why would Amazon spend so much money to acquire such a seemingly minor competitor?
Because the benefit of the purchase to Amazon lay not just in the acquisition of the company itself, but even more in the message it sent to other potential competitors—and even to the financial markets.
As the authors point out (p. 37):
That was an expensive way of capturing the diaper market but a cheap way of teaching everyone else to stay out of Amazon’s path. Nobody has forgotten the lesson. Venture capitalists routinely refuse to fund companies that might impinge on the giants’ territory, resulting in provably less innovation in those spaces.
Towards the end of the chapter, Giblin and Doctorow turn their attention to the broader social implications of the type of market control exercised by Amazon and other contemporary corporate titans.
Specifically, this is what they have to say about the issue of data-mining (p. 36):
This is the true heart of “surveillance capitalism”—not the idea that Big Tech uses data-mining and machine learning to create mind-control systems that bypass our critical faculties and trick us into buying whatever they want to sell us. Rather, Big Tech abuses monopoly power to deprive us of choice by limiting what we can buy, redirecting our searches to hide rivals’ products, and locking us into its ecosystem with technologies we can’t alter without risking a lengthy prison sentence.
Finally, the authors neatly sum up the moral of the chapter on publishing, as follows (p. 38):
This is not the way it is supposed to work. The supracompetitive profits created by monopolies and monopsonies are supposed to attract new entrants who will compete them away. But that doesn’t work when we gift powerful companies with ways of converting their temporary market advantages into enduring law-backed defenses.
I should add that the chapter contains a wealth of additional, highly technical, commercial and legal details that I have not touched on here. Much of this material will be of most interest to professionals, but the patient general reader will be rewarded with an in-depth education in the workings of the modern world of Big Business.
The many other entertainment industry sectors (and illustrative examples) covered by the book include online classified ad platforms (Craigslist), the music industry (Prince), music streaming platforms (Spotify), terrestrial radio broadcasting (Clear Channel), live act booking agencies (Live Nation), Hollywood agents, Apps (Fortnite Battle Royale), and podcasts (YouTube).
Each of these chapters is quite similar in its structure to the chapter on book publishing we have already examined. For this reason, it is unnecessary, and would be tedious, to review each of them in detail.
However, there are several new kinds of “moats” discussed along the way that are worth mentioning.
For example, in their discussion of the music industry (Chapter 4), the authors explain the ins and outs of copyright law and the contracts that composers and performers have typically been required to sign. They then put paid to the idea that all that needs to be done is to tinker with copyright law—a notion that they claim is both widespread and completely wrong-headed.
They explain the reason why in a colorful simile (p. 63). Just as giving more money to a weak child who has his lunch money stolen from him by a gang of bullies every day would do no good—the bullies would simply get richer and the child would still have no money for his lunch—so, too, amending the copyright law such that creators received a larger share of the income stream generated by their work would be to little avail.
The reason, according to Giblin and Doctorow, is that the same contracts would still be in effect. So, copyright reform would make the intermediaries (labels and agents) richer, not the composers and performers.
In the chapter on “Big Radio” (Chapter 7), the authors discuss the concept of “regulatory capture” as that industry’s principal moat. More specifically, according to the authors, station owners have greased regulators’ and lawmakers’ palms so thoroughly that the industry has been effectively deregulated, resulting in repeated mergers leading to the market dominance of a handful of mega-stations like Clear Channel (now rechristened HeartMedia).
The authors lament this history, not only for economic reasons, but also for political ones. They maintain (p. 94) that the consolidation of the land-based radio broadcasting system has led to the “seeding of hate and division” by means of an “unfiltered stream of aggressive conservative invective,” all with the aim of the “countrywide indoctrination” of the simpletons who live in flyover country with such cherished right-wing concepts as low taxes and deregulation.
The intemperate closing pages of Chapter 7 are the low point of Chokepoint Capitalism.
Beginning in Chapter 12 (out of a total of 19), the authors switch gears and begin to advance various ideas regarding what can be done about the situation analyzed in the first half of the book.
First, Giblin and Doctorow argue passionately that the problems they have reviewed are largely systemic (p. 145). For this reason, any adequate solution to the problems must be systemic, as well.
They then dive in, beginning with a recent movement in legal studies called the “New Brandeisians” (p. 147), who have named themselves after Supreme Court Justice Louis Brandeis, a stout-hearted antitrust crusader during the early decades of the twentieth century.
The point at issue is whether the narrow Bork interpretation (discussed above) of the relevant antitrust statutes shall continue to prevail, or whether the broader earlier interpretation as defended by Justice Brandeis, in which the common good ought to be the prime consideration, might roll back the past 40 years of judicial favoritism to mega-companies.
I must admit that the authors make for a compelling case for returning to Brandeis’s view. Let us listen to them presenting this the case for this change in their best spirited and thought-provoking tone.
Speaking of the Borkian interpretation of antitrust law, they say (p. 147):
And we see how it’s actually driving corporate concentration: when you act in concert with rivals it makes you an illegal cartel, but if you buy your rivals, you can do what you like. (original emphasis)
Among the many other recommendations that the authors make for systemic change, I should mention their call (Chapter 13) for enacting legislation requiring greater transparency in commercial contracts of all sorts, so that the parties will know precisely what to expect when they sign on the dotted line.
Again, it is hard to find fault with this commonsense suggestion.
Another pet idea of the authors (Chapter 14) is changing the legal structure—both of the antitrust regime and wherever else it might be necessary—in order to facilitate collective action by creators, as well as workers and small suppliers of all sorts.
Yet another idea (Chapter 16) is something Giblin and Doctorow call “radical interoperability.” What does this mean?
The authors point out (p. 197) that, from a theoretical point of view, all computers are alike in that they are all Turing machines. This means that they are all capable of running any program (given sufficient memory capacity).
But if that is so, then how are “locks” possible? How can Amazon force you to pay if you wish to download an ebook or stream a movie?
It turns out that the answer is that you allow them to. If you do not wish to go along with Amazon—and if you have the requisite technical skills—you can easily defeat the lock that is preventing you from downloading the ebook or streaming the movie by creating a “virtual machine”—that is, a program that mimics another program, in this case, software that legitimately possesses a key to the lock.
As the authors put it (p. 197):
You’re not dealing with a computer that can’t do what you’ve asked of it. You’re dealing with a computer that won’t do it. (original emphasis)
They predict that this is an untenable situation over the long run (p. 199):
It turns out that if a computer owner does not acknowledge the legitimacy of a digital control, then the digital control will fail. It’s simply too easy to make tools to bypass and defeat it.
At present, we live in a world in which a company like Apple reverse-engineers the file formats of Microsoft’s highly lucrative Office software package that used to run only on IBM “clone” equipment.
The authors call this “adversarial interoperability”: forcing interoperability on someone who doesn’t want it (p. 202).
What they are proposing is something different. They call it “competitive compatibility,” meaning universal interoperability in which all systems are capable of running the same software—and may the best man win!
In Chapter 17, Giblin and Doctorow make what is perhaps their most radical recommendation: minimum wage for creative work.
I do fear, though, that the idea of paying a minimum wage to young people living in their parents’ basement and pursuing their “art” will not meet with universal approval.
On the other hand, the idea of a “universal minimum income” is catching on, so why not a minimum wage for artists? But would the latter wage be higher than the former, on the grounds that creative artists are of greater value to society?
If so, then, we will need an army of bureaucrats to make surprise inspections of all those basements to determine whether all those twenty-somethings are on the sofa watching TV sitcoms or composing a novel on their smartphones.
Chapter 18 introduces the idea of collective ownership, which in the US today, alas, must be restricted to the development of more co-ops (the collectivization of the entire society being unrealistic at present).
The last chapter, Chapter 19, introduces some new material before summing up. A novel type of moat that Giblin and Doctorow discuss here will likely catch most readers by surprise
Traditionally, many highly placed employees in large organizations who leave for greener pastures have been required to sign “non-compete agreements,” which restrict the employee’s ability to take a similar job from a competing organization.
The innovative business practice that the authors expose to the light of day (p. 247) is the use of the non-compete agreement by the fast-food industry.
Incredibly, it appears that entry-level employees are being required to sign non-competes as a condition of employment—thus ensuring that a teenager cannot leave, say, McDonald’s to go to work for Burger King or Wendy’s or any competing fast-food company.
Talk about an effective moat! This practice really is reminiscent of a medieval castle with its drawbridge raised. Entry-level fast-food employees who sign non-competes will indeed be little better than feudal serfs.
Returning to their main theme of the plight of creative workers, Giblin and Doctorow emphasize that their principal concern is with the middle class, as evidenced by this perceptive quote (p. 246):
We need to recognize that the strip-mining of creative workers is part of a broader project in service of an oligarchy—that it’s not just creators and independent producers who are being screwed over, but almost everyone, as wealth keeps being inexorably funneled toward the rich. The death of the middle-class creator is part of the death of the middle class.
Let us stand back a bit and reflect upon Giblin and Doctorow’s recommendation. I believe they are quite correct to insist upon the systemic nature of the problem we are faced with today—and as a populist conservative, as opposed to a libertarian, I do indeed believe we are facing a grave problem in the trend towards monopoly.
Moreover, I am even prepared to go along with the authors’ characterization of our current political regime as an “oligarchy” (a constant theme of their last chapter).
Where I part company with the authors is over the causes of the present situation and therefore the nature of the remedy for it.
Giblin and Doctorow are avowed socialists. Therefore, they see the government as the solution to all problems.
Basically, they maintain that everything will be alright if we just:
- reinterpret existing antitrust laws in the way they were traditionally understood, as being for the common good;
- pass new legislation requiring a minimum wage for creative workers, greater transparency in contracts, and so on;
- ramp up public spending in the arts sector (this is a new proposal in Chapter 19—p. 254), providing a guaranteed job for all creative workers and greatly increased direct funding of local arts initiatives across the country; and
- impose new regulations favoring collective action, radical interoperability, the abolition of non-compete agreements, etc.
They invoke the Depression-era Works Progress Administration (WPA) as an example and an inspiration for what can be achieved, given the political will.
True, the WPA’s favored artists tended to churn out predictably left-wing murals meant to inspire the oppressed masses to rise up against their capitalist exploiters, but the authors no doubt view that detail as a feature, not a bug, in their proposal.
In the last chapter, Giblin and Doctorow also briefly discuss ways of paying for all this government largesse. Their favorite ideas are a hefty new wealth tax on individuals and corporations (p. 254) and printing money (p. 255).
But raising taxes substantially on the wealthy and running the printing presses faster than we already are would likely play havoc with our already-far-overextended economy.
Moreover, many of these ideas (e.g., the minimum wage for creative artists) are obvious non-starters.
It is revealing, I think, that the one moat the authors do not propose to tear down in the last chapter is regulatory capture. The reason, I think, is that they realize, if only subliminally, that regulatory capture is an inevitable consequence of inflated government power and that the more power the government has, the greater the problem will become.
In my view, the root of our entire difficulty is precisely what one might call the “political capture” of the whole government apparatus by mega-corporations. No amount of tinkering with laws or administrative rules is going to help, so long as torrents of cash pass from the coffers of the private sector into the pockets of legislators and regulators.
It follows that there are two obvious reforms that ought to be implemented, if we are truly serious about doing something to change this disgraceful situation (which, let there be no mistake about it, is convenient to both political parties).
The first would be campaign finance reform. We need to make the current system of all-but-outright bribery illegal. And the only way to do that is to publicly finance political campaigns. And the only way to make public financing of campaigns practicable is to reduce campaign seasons by statute to a small fraction of their current enormously bloated size.
Other advanced countries get along quite well with political campaigns that last only a relatively short time. In France, for example, the official campaign period for presidential elections is about two weeks, and there are strict rules about free public access of candidates to the mass media.
There is no reason why we should not adopt such a system in this country. If we did, the primary motivation for politicians to accept bribes from Big Business would be removed in one fell swoop.
The second reform would be to force the government to live within its means, which in turn would mean drastically shrinking its size.
Only a small government that keeps its nose mainly out of the economy might stand a chance of resisting political capture and effective “oligarchy” (or “corporatism” or “crony capitalism”).
If Giblin and Doctorow really want democracy, they ought to try to rein in their big-government instincts, because socialism and democracy are mutually exclusive states of affairs.
That said, the authors have written a book that is required reading for anyone, on the left or the right, who is deeply concerned about income inequality in this country and what, if anything, can be done about it.