What happens when a capitalist economy begins to malfunction and society moves to the next stage—what many people now call postcapitalism? How will the people act? What forces will move through the economy? What should we be prepared for?
These questions can only be addressed through reasoned speculation. No one knows the future, but because we are already moving through the transition from capitalism to postcapitalism, we can glimpse how key players will react, and then reason our way into a vision of the transition.
The term “postcapitalism” implies that this new way of ordering the socioeconomic world will de-emphasize capital, and all the structures—political, economic, and even religious—which support it. Power will no longer identify with capital. Digital abundance will drive prices to zero and make markets dysfunctional. The current financial world order will collapse. These are drastic predictions, but they are derived from the way capitalism operates today.[1] The question is, as these things occur, what can we expect to experience as a society? Here are a few ideas.
Early Transition
First, in the early stages, the capitalists will cling to their power. Perceiving a threat to their wealth, they will look for every possible way to control the outputs of the digital economy. They will use and develop intellectual property law, continue to assert market-based models as solutions to intransigent problems, and continue to accumulate and concentrate wealth at the very top, especially in those areas where they are successful controlling the digital capital, as they see it. Economists routinely document and comment on the increasing wealth gap between the rich and the poor, and the increasing ability of the rich to control capital. This trend is likely to continue for two to three decades as the capitalistic powers consolidate returns and seek to hold on to what they have.
Financialization of the economy will continue in the early period. Financialization refers to the conversion from producing and selling products and services for cash to creating income through rent, interest, and dividend investments. This conversion will continue for most middle and upper middle class people as the value of their work deteriorates, and they seek income through non-work activities. More and more people will find a way to financialize their lives, thereby creating unearned income streams which are one precursor to the non-cash, non-priced digital economy.
Financialization is a precursor because it leads people to engage their lives differently—in such a way that they do not need to price their labor and can engage activities the way they want, be they recreational, vocational, creative, inventive, or playful.
The financialized group will splinter. For some, it will be a ticket to sloth and the indulgement of wealth. We already have many people in that place. For others, it will be a way to contribute—an opening to participate in some greater good, whether it is engagement with one’s own creativity or contribution to a larger social good in the non-profit or digitalized world. Who goes into which group is likely to depend largely on the level at which full financialization is achieved and experienced as abundance. For those who can fully financialize economic life at $5,000 per month of income, life may be easy, generous and creative. While I am not aware of any study to this effect, I believe it is a safe bet that the contributors to Wikipedia and Linux are not, for the most part, in the super wealthy group. Nor are most artists and social activists, nor deep spiritual practitioners. On the other hand, others will have a lifestyle that requires $25,000 per month, $250,000 per month, or more, and I suspect the general trend of this group will be toward hedonism—the mere fact of “needing” that much money to financialize suggests an already active, hedonistic, self-indulgent force within.
While the people at the top will cling to their gains, and people in the upper middle will financialize to experience abundance, the brunt of the negative changes will be felt from the middle on down and at varying degrees depending on many factors. Most of these people will lose income producing work to the early robots and other digital changes to the economy because this work is the first and easiest to automate.
This trend is already evident in the stagnant wages in the United States. Global labor competition has suppressed wage growth as even intellectual workers are competing with workers in India, Philippines, and Colombia. With these suppressed wages, they have to buy the basics of living which, despite official claims of low inflation, are getting more and more expensive to most middle and low income earners.
Today, global competition suppresses wage growth, but as digitalization reduces the pricing power of goods, the market price for labor tends toward to zero, as well. Capitalists will try to ensure the prices for goods at market do not go to zero, but no one will stop the accompanying reduction in wages.[2] Capitalists will engage a certain kind of arbitrage between the declining price of labor and the not-yet-declining price of goods and services which low and middle income earners need. Those whose labor is their chief value and income will be squeezed, and the already sharp divide between the wealthy and the rest will become even worse. This is a first stage that will generally make the capitalists happy, for it will appear that they are gaining wealth and power.
Middle Stage
I expect a second stage to unfold as a basic fact manifest itself—as the price of labor goes to zero, so does the ability to purchase. Henry Ford understood this when he said that he wanted his cars priced and workers paid so that every worker could afford to buy a car. In a world where digitalization and robot labor eliminate the cost of labor, they also eliminate wages and the ability of people to buy goods and services. You don’t have to pay robots, but neither can they buy. As economies have become increasingly driven by consumption, this change will be extremely disruptive. In this stage, the capitalists will feel the heat. As the consumption class is increasingly incapable of consuming at the standard economic level, it will become impossible to get a return on investment, so the whole paradigm for deploying capital, as well as the financialization of life, will become meaningless, and wealth will collapse.
This collapse of wealth is a defining moment. While the havoc on our economic institutions can hardly be overestimated, we are actually facing a collapse that is both qualitative and quantitative. The 2008 collapse was quantitative—a fact easily understood by considering its signature solution, so-called “quantitative easing.” Central bankers created trillions of dollars, and in so doing, saved capitalism. In this second phase of postcapitalism, we can expect to see a continued widening of the income and wealth gap in the short term, but in the longer term we are likely to see a decrease in the meaning of that gap. I would expect this transition to take a hundred years or more, but it is entirely possible that particular shocks could drive it much sooner.
Here’s the qualitative problem: What good is it to have all the money in the world if everything is free and nothing can be purchased anyway? It isn’t that the capitalists will lose their money; their problem will be that the capital they accumulated will become increasingly meaningless. It will provide for them decreasing levels of power and influence. Buying and investing become meaningless. In other words, the capitalist measures of value will no longer work—and neither will anyone else’s measures. A world of free digital products and services means there is no point to earning money—not by labor nor by deployment of capital. You wouldn’t be able to use the money anyway. This will be a crisis point because, almost inevitably, the new postcapitalist value system will have yet to emerge.
In this second stage, we will see the actual emergence of universal basic income for everyone. The idea is that all citizens receive an income from the government, whether they work or not. You could think of it as social security for everyone. If this comes about, it won’t be because of a rising leftist political power. Instead, it will be capitalists who lead this movement as a way to preserve purchasing power to protect profits. Indeed, even the prominent bond investor Bill Gross has called for it in his investment outlooks. Despite vehement denials from capitalist surrogates and apologists, this outcome is a possibility primarily because it is the logical result of digitalization, and it is the only way for capitalists to hold off total collapse of their wealth and keep money relevant.
Universal basic income is essentially quantitative easing for the common citizen. Like the bank-targeted quantitative easing of 2008-2015, it will be done with invented money. It will be an attempt to hold off the inevitable. Just as the bank-based quantitative easing held it off for a while, UBI will, too. But the inevitable remains inevitable, and we will eventually move to the final stage.
Final Stage
Full transition will be marked by a change in the metrics of value. It’s impossible to predict the new measures, but it will be certain that the familiar measures of dollars, wages, and profit, for example, will no longer dominate. In an economic system where markets cannot function, what does profit mean? Who would pay wages for labor to build something that can’t be sold? If everything is automated, what does labor mean? No doubt, these terms could receive a revised meaning in popular usage, but if so, they certainly won’t mean the same thing economically anymore.
More to the point, a whole new system of economic measures, religious values, and socio-political structures is likely to emerge. Many people are speculating (and hoping) that the postcapitalist economy will be one of full automation, universal basic income, and digital abundance of nearly everything. In essence, the dream is that all basic needs are taken care of by an automatic economy, and people will be freed to live their creativity. Optimists celebrate this dream, while capitalist critics decry the lost incentive to work. To me, both look rather idealistic, and the reality is likely to be something far different than nearly anyone can imagine.
For example, the capitalist criticism of basic income is that it removes the incentive to work, as if work is inherently a good thing. In a capitalist value system, it most certainly is a good thing, and that judgement was reinforced by religious values honoring the essential place of work in capitalistic life. But in a postcapitalist world, work loses its value. Perhaps creativity emerges, perhaps love emerges, perhaps social balkanization emerges—but the central value of work will deteriorate and disappear. If it hasn’t, then we have not yet passed into the final stage of the transition to postcapitalism.
Capitalism and democracy grew up together, and if capitalism wanes, democracy will erode as well. What will replace it? No one really knows, but we can predict at least that strong social structures supporting collaboration will ascend, as will values around sharing and contributing to the betterment of society. Egalitarianism will probably strengthen as well. The new political, legal, and social structures that emerge will need to reflect and hold these popular values.
It is important to try to imagine this final stage for what it could be. After all, a postcapitalist world will no longer recognize the most basic principles of capitalism—the value of work, capital, private property, rule of law, and perhaps even the sovereignty of the individual. Indeed, new visions of freedom may move past the Enlightenment view that “man is only free if he is ruled not by man but by the law.” When these notions erode, the only option remaining will be to imagine the new world. Some will fight to retain some of the old values, while others work to create the new ones. This battle will feel to many like the world is coming apart. That’s because the principles at stake stand as the very bedrock of modern capitalist society—so much so that we cannot imagine the world any other way. People will worry about and decry these eventualities in many books, essays, speeches and sermons. But in the end, the transition to postcapitalism will be recognized by the dissolution of capitalism’s core principles.
Historians and social commentators will recognize the change when the last vestiges of these capitalist principles are replaced. Today, we can see some of the most likely structures emerging—collaboration, networks, the free economy, digital abundance, automation of work. We will not go back to the servitude of feudalism, nor to the subservience of capitalism. Indeed, perhaps the most radical reform of all in the postcapitalist society will be the inability to support the top-down hierarchy of capitalistic structure. In feudalism we had lords and serfs; in capitalism we have bosses and workers. Although qualitatively different, the social structure of hierarchical power is little changed. Religion still celebrates obedience because capitalism requires an obedient population. Postcapitalism will not be complete until this hierarchical approach is marginalized and obedience as a value is destroyed. The mystery, suspense, and joy lay in watching for what emerges in its place.
Conclusion
The transition to postcapitalism will likely require at least a hundred years. There will be phases, and there are nuances and creative opportunities we cannot even yet imagine. The speed with which we reach the postcapitalist outcome, as well as the exact structure of it, can be effected with thought and advocacy and proper policy. They can also be thwarted and manipulated by the same means. Capitalism will not be replaced by a postcapitalist world without a fight, and the nature of that struggle will determine both how long it takes and the shape our new postcapitalist world. Indeed, the century ahead—one way or another—will dramatically change the world.
[1] See my other essays.[2] This actually happened when Amazon, Apple, and other ebook publishers collaborated to create a pricing floor for ebooks at the very vanguard of the postcapitalist trend.
