The internet doesn’t have a flag, but if it did the black-and-gold flag of anarcho-capitalism would seem appropriate. The internet isn’t an entirely unregulated space, of course. The long arm of the law can reach into the furthest recesses of the dark web (if it can be bothered). But if anywhere comes close to the borderless, buccaneering, voluntarist ideals of pure libertarianism, it is cyberspace.
Except that the origins of the internet are deeply statist. Indeed, the Defense Advanced Research Projects Agency (DARPA) – which created the internet in its original form – can be described as an arm of America’s ‘deep state’.
ARPANET on the one hand, Minitel on the other
On UnHerd this week, Nigel Cameron provides an account of how DARPA developed ARPANET, which evolved into the internet we know today. He goes on to describe how it also serves as Exhibit A in Mariana Mazzucato’s1 case for an entrepreneurial state. And no wonder, the internet’s story provides powerful support for all three parts of her argument: firstly, that the state plays a vital role in scientific progress and innovation; secondly, that the state has a special role to play in creating the shared infrastructure that supports private enterprise; and, thirdly, the state should itself be much more entrepreneurial – not least in capturing (and reinvesting) a fair share of the private sector profits enabled by its inventions.
The government agency that made Silicon Valley
There’s a great deal in Mazzucatoism that I support. However, it’s vital that we go into this with our eyes open. The entrepreneurial state doesn’t always get it right – and when it gets it wrong it can do so on a scale and with a degree of bloody-mindedness that the private sector would be hard-pressed to match.
So while the example of ARPANET should inform public policy – and a shift to a more entrepreneurial state – it needs to be considered alongside the great counter-example: Minitel.
But before I get on to that bittersweet tale, some historical context.
When did you first encounter the internet? If you’re old enough to recall the information Stone Age, there must have been some point at which you realised that a new age was dawning. For me it was the early 1990s, when, on a visit to Goldsmiths college, a member of faculty showed me a system that allowed academics to exchange knowledge online. This was my first glimpse of the internet. Ironically, the chap was a communist – a nice one as it happened, but seemingly oblivious to the hyper-commercialised behemoth the internet would become.
Videotex – just like the internet, only much worse
I had somewhat more of an inkling, however – because I saw something like the internet back in the 1980s. It was called Prestel, which was a UK-based videotex service – and at the time it struck me as being entirely commercial in purpose. In someways it was even more commercial than today’s internet because there was a price tag attached to every page of information.
Videotex is similar to teletext, the system that was used to provide TV subtitles for the hard of hearing. Videotex, however, allows for the two-way exchange of information. Therefore, it can perform many of the functions provided by the internet – including text messaging, online shopping and other interactive services. Unlike teletext, which you only needed a (analogue) TV to access, videotex services typically required a phone line, a modem and a terminal. They were usually operated by phone companies (rather than broadcasters) – who saw videotex as a way of generating extra revenue.
Like ARPANET, Prestel was developed by the state – specifically the Post Office (the state-owned monopoly that used to run the UK’s telephone network as well as the postal service). When, in 1984, the telecoms side was privatised as British Telecom, Prestel was privatised with it. BT continued to develop and market the videotex service, but it never achieved more than 90,000 subscribers – and in 1994 it was sold off. The new owners tried to make a go of it, but by the mid-nineties it was becoming clear that that the internet was the future. And that was pretty much the end of Prestel. Indeed, it is all but lost to history – just a few pages of content (of which there were tens of thousands) saved to users’ floppy disks.2
Vive la différence
In France, however, it was a very different story. Like the British Post Office, the French state telecoms company, PTT (later France Télécom), decided to develop a videotex service – which was named Minitel. France Telecom wasn’t privatised until 1998 and the French government decided to back Minitel in a big way. Millions of Minitel terminals were given away free during the 1980s and 90s – thus overcoming the cost hurdle that prevented the widespread adoption of Prestel in the UK. As a result, the French were communicating, shopping and banking online long before it became the norm in other countries. I can remember French relatives of my parents’ generation ’emailing’ one another at a time when the only Brits doing the same were academics and socially-awkward young men with neck-beards (overlapping categories, I know).
That part of the service known as Minitel rose (‘pink Minitel’)3 enabled the French to pioneer another digital activity: the mass consumption of online pornography – even if it was mainly text-based. Like today’s internet companies, the government passed the buck of child protection to parents – but, being French, they did slap a tax on the offending sites.
The inability of Minitel to display more than rudimentary graphics (of whatever nature) was a key reason for the decline of the system. Despite a user-base of 25 million at its mid-90s peak, the reality was that the technical limitations of videotex could not compete with the internet. Once broadband was rolled out, Minitel’s fate was sealed. In 2012, the system was shut down (though with hundreds of thousands of terminals still in use).4
Various post-rationalisations can be made for the great Minitel experiment – not least that France became the first country to develop a mainstream online culture. But where is the entrepreneurial legacy of all that investment? If you look at rankings of the world’s top internet, IT and software companies, you will see that most of them are American or (increasingly) Chinese. There are some Japanese and other Asian companies, but very few European companies and none to speak of from France.
Of course, the private sector is also capable of backing the wrong technology (remember Betamax?). Alternatively, they might miss the boat when a new technology disrupts a once thriving business model (the impact of digital cameras on Kodak being the classic example). But when private companies make the wrong call, they either find a way of moving on or they go under. Either way the mistake is terminated.
However, the entrepreneurial state does not face the same constraints: it can’t easily go bust; it can easily raise capital from its ‘investors’ by taxing them; and it’s under little pressure to show a short-term return. This has the great advantage of allowing it to become a patient investor in technologies that might take decades to achieve their full potential (as was the case with ARPANET). But it also has the great disadvantage of allowing politicians to take an entire nation up a technological dead end – and to persist in that folly long after a private company would have given up.
C’est la folie
Commenting on the Charge of the Light Brigade, Field Marshal Pierre Bosquet said “C’est magnifique, mais c’est pas la guerre” (it’s magnificent, but it’s not war). Replace war with entrepreneurship and you could say the same about Minitel. You could go even further and see the whole episode as a metaphor for the French way of doing things – gloriously dirigiste, but doomed to be superseded by les Anglo-Saxons.
And yet this is not an exclusively French vice. Later this week I’ll be presenting a list of the British state’s worst investment decisions. Brace yourselves!