One day in the not too distant future, they’re going to use Facebook as a case study. In how to do everything badly. From management to leadership to innovation to social responsibility. At business schools, executive courses, in economics degrees, in journalism schools. So let’s stay ahead of the curve, and do a tiny, quick case study of how Facebook shows us just how badly broken the economy is — and how deeply we need to rethink it.

On the one side lies the obvious. Facebook makes billions — 41 billion dollars in 2017 to be precise. As a result, its market cap is astronomical — about 450 billion dollars. Now, those are just financials — and one of the great lessons of this age is that by themselves, financial numbers mean precisely nothing, until we do the harder work of understanding whether they actually translate into real human benefits — or only burden people, societies, and the planet with hidden, shifted, and uncounted costs.

Does Facebook do that? Of course it does. First there are the human costs. It makes us lonelier, dumber, meaner, more jealous, and unhappier. That’s a finding that’s been replicated in reams of research. (Now, I am sure you’re going to say “but not me!!”, but quite probably, you are — forgive me — either perhaps not examining your emotions fully, or you are a statistical outlier.) So I don’t want to overstate this, but I can’t state it any other way than reality, either: on a very basic economic level, what is happening is that Facebook grows by making people (quite literally) miserable.

Can you think of another institution like that in history? I can. A workhouse. Facebook is something like a digital workhouse. You check in, perform free emotional labour— and it profits as a result. We’ll come back to that analogy. First. Is a society really any better off this way?

How could it be? One person wins — but another loses. No progress is made. So what’s important to understand is that no real economic value has been created whatsoever in this exchange. In fact, real value has been destroyed. It has gone up in smoke. Real value is created — and only created — when people are made better off in some way. An education might make you frustrated, annoyed, and sleepless at times — but it elevates your intelligence, courage, empathy, and wisdom. The same is true of watching a great film, or going for a run every day. But Facebook does no such thing. It appears to have no human benefits whatsoever, for the average person, that can be discerned. Not a single one.

But this all only the tip of the iceberg of Facebook’s “negative externalities” — economic parlance for hidden costs. (I don’t like that phrase, because “externalities” imply that there is some kind of “real” or “main” benefit that the uncounted cost is “external” to — but what about in Facebook’s case, when an institution appears to be mainly have only “externalities”? Then orthodox economics fails. But I digress a little.)

Let’s return to the topic of those “externalities”, or hidden, shifted, and uncounted costs. So far, we’ve covered the human ones. But there’s another kind, which we’ve become more than familiar with lately — social costs.

The news broke recently that Facebook had “shared” the profile data of billions of users. It will take years to unpack this weird, sad story. What’s clear is that using Facebook en masse leaves societies prone to being hacked, manipulated, and cheated — the kind of finely-engineered mass-scale military-grade propaganda efforts that we’ve now seen can rip societies apart in mere years simply wouldn’t be possible without its consent, if not downright encouragement. Hence, the social costs of a Facebook appear to be democracy, a working social contract, and quite probably national sovereignty itself. And those are only the ones we know about so far.

So. Let’s tally up all those costs. Human costs: Facebook makes us dumber, sadder, lonelier, meaner — worse human beings. Social costs: it corrodes and corrupts democracy, sovereignty, and society with misinformation, disinformation, and propaganda, that cause distrust, rage, and despair. What’s all that worth? Is all that worth 41 billion dollars a year? 450 billion in market cap? Well, what do you think democracy is worth? What’s a nation’s intelligence, wisdom, and trust worth? There aren’t precise answers to those questions — though we could try to quantify it — because there shouldn’t be. Our job isn’t to be something like financial analysts at an investment bank, picking numbers out of the sky — but thinking, reasoning human beings.

So let’s think about it a different way. There are two kinds of “costs”. Short-term costs (like paying a bill), and long-term costs, often called liabilities (like owing a debt). Short-term cost: paying your gas bill. Long-term liability: cleaning up an oil spill. Which kind does Facebook have?

Well, your daily satisfaction snaps back if you don’t use Facebook for a few days — but your loneliness, mistrust, and general happiness doesn’t. In the same way, democracy, once corroded, doesn’t magically fix itself — it stays broken, until the hard work of cleaning it up is done. So Facebook resembles something like a gigantic, globe-spanning oil spill — one made of toxic bits leaching into the groundwater of society, and the waters of your mind.

Hence, it isn’t a case that the human and social costs it incurs merely “offset” today’s “productivity” — which is how journalists and pundits often approach naive economic analysis (“Bob, web surfing is costing us a billion dollars a year!!”). It’s not that simple, or easy, and is in fact much more dire. The human and social costs that Facebook has are forms of illth, or negative wealth, which require difficult, exacting work to be done over longer periods of time just to come back to yesterday’s levels of prosperity — just like paying off a debt, or cleaning up an oil spill.

So. Let’s put all that together. On the one hand, Facebook earns billions, and its market cap reflects that. But on the other, Facebook appear to have no positive impacts whatsoever. Not a single one that is discernible to analysis, empirical fact, or reason. Not on people. Not on society. Not on democracy. The only function it plays is to target ads slightly better. But that creates no real value for anyone, unless you’re spending hours a day cruising around for the perfect ad, and in that case, you probably need to get your head checked. There is simply not a single benefit to be had that is apparent in any way.

So the equation is this. 450 billion dollars of market cap — at the price of functioning democracy, working minds, and healthy societies going down the tubes. Facebook imposes significant and steep costs, not just short-term ones, but long-term liabilities, that linger, just like air pollution or lead in the water (after all, misinformation and distrust are forms of mental and social pollution about). Just like any other kind of pollution, it’s going to take cleaning up after it long after the groundwater has been poisoned to balance the books gone. In that way, it is a predatory institution, whose growth comes at the cost of genuine prosperity, which is made of all the things Facebooks costs us, whether trust, intelligence, closeness, reason, truth, or democracy itself — but while these things are easily destroyed, they are not so easily forged again.

Let’s sum that all up. The point isn’t just that “democracy is worth more than 450 billion dollars”, although it is. It’s that those 450 billion dollars reflect not a single iota, speck, or mote of benefit to anyone outside Facebook that the naked eye can see — in fact, only long-run, enduring costs, just like pouring hazardous waste straight into the river you drink from. And that is a very, very curious thing, isn’t it? Remember the workhouses? Exactly. Institutions that create no real value are less than useless to societies, engines of self-destruction, which is why they are considered follies of history.

I’ve chosen Facebook because it’s an extreme example of how extreme the economy has become (and that’s why it’ll be a case study in the near future, too). Extremely divorced from reality, extremely devoid of meaning, chock full of financial mumbo-jumbo — but utterly empty of economic reality, which is about real human prosperity, or its absence, deficit, negation.

All of that reflects just how broken the economy is. One of the economy’s biggest and most celebrated corporations can skyrocket up the stock market. It can rake in billions. It can earn the plaudits of pundits and thinkers alike. But it can do all that not just without contributing to, but at the expense of, genuine, meaningful, and enduring prosperity for real people and society.

That is a very grim and dangerous place to be. It tells us that the way we think about what “an economy” is, how it functions, and even why it exists, is badly and profoundly out of touch with reality. And our real job isn’t even just wagging fingers at Facebook — but rethinking all the above. Because the truth is that Facebook is just one example of an economy that’s as broken as a teenager’s heart.

Umair

April 2018