Editor’s Note: We only argue with the most important books out there on postcapitalism. Paul Mason’s book is critical to society’s awareness of what is happening.
Capitalism is inevitably going to collapse over time. The reason, which is a central theme of Paul Mason’s book Postcapitalism: A Guide to Our Future, is a revolutionary departure from traditional Marxist theory. According to Marx, capitalism will collapse because the workers will revolt. There will be class struggle, and the people will overthrow capitalism. Mason’s idea is altogether different. For Mason, capitalism’s inevitable demise is beginning not because of class struggle or revolt, but because of capitalism’s own internal logic, and the inability to change or alter that logic. The two most important factors in its demise are digitalized abundance and globalized limitations.
How Digitalization Comes From Capitalism and Will Kill It, Too
Digitalization is inevitable under capitalism because capitalist logic seeks to drive down costs to expand margins. What could be better than zero cost of production?
Contemporary business is digitalizing everything—business operations, books, music, movies, work, the Internet of Things, driverless cars, and working robots. Whether the products are completely digital or simply include an increasing digital component, digitalization reduces operating costs and the cost of production, which results in dramatic improvements in overall profitability.
To understand the argument on digitalization, Mason considers the e-book. An author writes a book, and then posts it for sale on the Internet. While there is cost in creating the original text, as a digital product there is no additional cost to selling the book. Whether one person or a million people download the book, the additional cost to that author/publisher is zero per unit.
In a non-digital book, the same cannot be said. Real books have a unit cost of production that incorporates printing and binding. Real production costs are important because they provide a floor on the price of the book—no publisher would sell the book below the cost of production, and because there is such a cost, prices can never go to zero.
So, why does this matter? In order to function, capitalism requires markets. Despite the “free market fundamentalism” of neoliberalism which claims that markets can solve everything, markets actually do only one thing effectively—they establish prices in the short term based on the ratio of supply to demand. With digitalized products, however, supply is essentially infinite. No matter the level of demand, it won’t affect the scarcity of the product, and therefore will not affect the price. The supply/demand ratio, which determines price, is rendered meaningless. Because there is zero marginal cost of production, there is no floor to keep prices above zero either. Both factors will drive prices of digital products to zero. As that happens, the supply and demand ratio breaks down completely, and the pricing mechanism in markets, on which capitalism depends, cannot function.
Just as capitalist logic drives costs down, capitalism is the engine behind globalization—it is robust and inevitable, a veritable juggernaut. Globalization did not derive from a hidden desire for capitalist conquest; rather, globalization is required by the logic of capitalism itself. As Mason explains, economists have always known that as capitalism develops, it periodically comes to a crisis of profitability. Innovations lead to new products, the products are sold at a premium until competition enters the market, and then competition begins to commoditize the products and profits begin to fall. As profits fall, capitalism hits a crisis point which can only be solved by accessing new markets. One response is through innovation to meet new needs, and the other is to physically enter new geographic markets. Starting in the 16th century, capitalism drove exploration and conquest, a process that has essentially continued to this day.
Mason makes an interesting point: In this globalized world we now have, which new markets are still to be conquered? Globalization means that capitalism is everywhere. Untouched indigenous societies no longer exist. So, as profits fall, which they inevitably do in capitalism, the classic response to expand into new markets is no longer available. Capitalism as a system has nowhere to go; it will not be able to expand into new markets to restore profitability. As Mason points out, these geographic limitations bring 400 years of capitalist expansion to an abrupt halt. If profits can’t be resurrected, capitalism is over.
A third dynamic, which Mason misses, is crucial: While non-digital products in traditional capitalism “go global” over time, digital products are instantly global. In traditional capitalism, the companies marketing goods and services build distribution infrastructure and other mechanisms needed to get to market—and to obtain what is needed to create the products. Individual companies create these classic distribution channels and supply chains, and tend to globalize them over time.
Digital products are completely different—they are immediately global in both the supply chain and distribution. In the digital world, there is only one market, and it is a global market. Access to that market will equate with capitalistic development as more people get access to the Internet. Nonetheless, there are no supply chains and no distribution channels to create. Authors, musicians, and movie makers have experienced this first hand—it is a global market, and there is no controlling it.
Digitalization drives prices toward zero, and it accesses all markets all the time. Market expansion as a strategy to support profits and perpetuate capitalism is no longer available because capitalism has made the world into a single, universal market.
The result is a perfect storm in which capitalism creates the conditions for its own demise:
- Capitalism cannot reinvigorate profits through market expansion
- Digital products and services create an abundance that makes it impossible for markets to price those goods and services
- Prices and margins fall toward zero
Under these conditions, capitalism cannot function because it cannot price its constituent activities. What is the value of work to create a product whose price is zero? How does a capitalist business leader justify an investment if the product cannot generate a return? What price would one pay to accumulate capital that cannot generate a profit? Indeed, what does money even mean?
Mason’s view is not the opinion of a moralizing critic, but rather it is a cool-headed analysis of the system itself. It opens many intriguing questions—What if he is right? What will replace capitalism? How will the world look when capitalism cannot function effectively anymore and loses its ideological hegemony? These are questions I explore in detail in my forthcoming book Speculations on Postcapitalism. Mason also makes an attempt, and his approach is instructive, even if ultimately unsatisfactory.
The Supposed Guide to Our Future
While Mason provides an intriguing insight into the driving forces behind an inevitable postcapitalism, his descriptions of the outcome falls into a traditional perspective of the political left. Mason’s analysis draws upon leading capitalist system thinkers like Peter Drucker and Adam Smith, as well as its most prominent critics and analysts, including Nikolai Kondratieff and of course, Karl Marx. While that balanced and bifurcated view enables his insightful historical analysis, it may also have limited his view of the future possibilities. If his analysis is correct, this bifurcation itself will become meaningless and irrelevant because the question is not where we will end up on the left-right spectrum, but rather, what is the new spectrum that will replace the left-right view to give meaning and perspective in this new postcapitalist world?
Mason provides five principles for managing the changes to the postcapitalist future:
- Understand the limitations of human willpower in the face of a complex and fragile system
- Design the transition for ecological sustainability
- The transition will be a human transition—it is not just about economics
- Attack the problem from all angles, especially using networks
- Maximize the power of information
One can already see in these principles a prescribed outcome. These so-called principles are worth investigating, but they presuppose an ability to control and prescribe without giving any reason to believe that they will be any more effective than the capitalists will be at controlling and prescribing their own direction. Mason goes on to be quite explicit in describing that
“the top level aims of a postcapitalist project should be to:
- Rapidly reduce carbon emissions so that the world has warmed by only two degrees Celsius by 2050, prevent an energy crisis and mitigate the chaos caused by climate events.
- Stabilize the finance system between now and 2050 by socializing it, so that ageing populations, climate change and the debt overhang do not combine to detonate a new boom-bust cycle and destroy the world economy.
- Deliver high levels of material prosperity and wellbeing to the majority of people, primarily by prioritizing information-rich technologies toward solving major social challenges, such as ill health, welfare dependency, sexual exploitation and poor education.
- Gear technology towards the reduction of necessary work to promote the rapid transition towards an automated economy. Eventually, work becomes voluntary, basic commodities and public services are free, and economic management becomes primarily an issue of energy and resources, not capital and labor.” (p269-270)
Although these aims may be admirable for a social political program, they are disappointing because there is nothing inevitable about these outcomes. There is nothing in the fact of digitalization, for example, that links directly or inevitably to the global warming target of two degrees Celsius. From the standpoint of his argument on the inevitability of postcapitalism, that target is completely arbitrary. Of course, two degrees Celsius has been the long held standard of the scientific community, and there is likely extensive merit to that target, but it is not endemic to the more poignant and significant economic arguments Mason has made.
In other words, Mason argues that as capitalism meets its own demise, there is an opportunity to create a new system. He argues that we can avoid the mistakes of past attempts at central planning, and should therefore embark on a “postcapitalist project” of planning meant to accomplish laudable goals. Indeed, most postcapitalist thinkers see the emergence of postcapitalism as a golden opportunity for the political left. This opportunistic perspective, however, mirrors what Naomi Klein dubbed “disaster capitalism,” albeit from the other end of the spectrum. Rather than Milton Friedman’s right wing ideologues pouncing on a disaster to remake a society as Klein documented, most postcapitalists seem to see the collapse of capitalism as their turn. They hope to create their own version of a socioeconomic experiment, but from the other end of the spectrum. I believe that this hope is not only misplaced, but also damaging to the rise of a true postcapitalism.
The problem is that Mason’s view is steeped in the status quo. Postcapitalism, if it is to be real, will also bring about new principles and social alignments yet to be imagined. Contrary to the postcapitalist rhetoric, usurpation by Marxist or leftist ideologies will hail not a victory of postcapitalism, but rather its failure. Marxist and leftist ideologies can only exist where capitalism exists because they need it to oppose. Hence, leftist ideological victory would demonstrate that capitalism is still defining the playing field. When capitalism dissipates, there will be no left and no Marxism, and from an ideational standpoint, only the elimination of all of them will signal a truly new era.
Postcapitalism will not be a shift to the left; it will be a new system based on a different logic. The move from feudalism to capitalism was a qualitative change in systemic logic reflected in new principles, legal structures, and new political alignments, not merely a swing to the other end of a pre-existing spectrum.
The development of that logic is crucial. Capitalism functions because of an inherent logic reflected in the rules, regulations, and policies of corporate and government offices. When a person gets a job, he or she fulfills a role—the function of the office—and that role is part of and defined by the capitalist logic. It is so strong that it causes people to act in ways contrary to their own political beliefs, economic interests, and even moral values. In other words, we all become creatures of the logic of the system. True postcapitalism will change that logic, not just advocate the leftist political agenda.
Postcapitalists should be looking to define that new, intrinsic logic and the relevant societal institutions and principles needed to guide the postcapitalist future, not establishing planned outcomes. Hence, a more compelling argument than Mason’s would focus on how to change that underlying logic—after all, the original argument is that the logic of capitalism is leading to this postcapitalist world in what could be a very dramatic, possibly catastrophic collapse. Rather than a leftist political project meant to bend the economic system to its will, a truly radical approach imagines the new principles of a new economic system.
It might be useful to propose some slightly different questions:
- If in the past capitalism survived based on a logic that creates, invades and dominates new markets, what new logic will arise so that such creation, invasion, and domination is not required for the economic system to work?
- Because is it unlikely to happen all at once, what are the opportunities for adding value within the capitalist system and for setting up alternatives to that system as capitalism wanes? Where should we be ready to act?
- As postcapitalism emerges, what are the likely impacts on the international monetary system—what would happen to central banks and global financial markets?
- What economic opportunities should be engaged to help establish beachheads and alternatives to meeting the very real economic needs of people in a world where capitalism begins to fail, climate is changing rapidly, and all the old rules are falling apart?
- How will capitalism and business respond in the short and intermediate term? What will be the role of business?
For example, Mason raises the notion of universal basic income (UBI) in which everyone is given enough monthly income to live on. He, like many other advocates of UBI, poses this as an idea to free labor and overthrow capitalism. Certainly, it would require major changes in the system.
Less obvious, however, is that UBI may become the response to capitalism’s most basic need in a globalized market—UBI creates a new market into which capitalism can expand. Businesses need new markets, and the suddenly empowered consumers receiving UBI become that new market. Just as digitalization, which is driven by capitalist business logic, will make markets nonfunctional due to pricing problems, UBI, which capitalism will require to survive, will undercut capitalism’s exploitation of labor. However, UBI is unlikely to evolve based on ideological argument—there are far too many forces arrayed against the ideology. Rather, it will come into being in the service of a capitalism desperate for new markets. In other words, it will evolve out of capitalism’s intrinsic logic, not result from a Marxist revolution—a realization that should provide far more hope to many more people about the possibility of UBI occurring.
While I appreciate the arguments made by advocates of full automation, universal basic income, and the end of work, I find the political arguments, which have been around for a long time, far less compelling. Where there is economic and business analysis that ties these potential outcomes to real interests in the business world and capitalist system, we can see the more likely direction the future might actually take. In this book, I was hoping that Mason’s keen analytical approach would make that connection. In my reading, he gets close, but ultimately leaves that link for others to make.
As for Mason’s brilliant book, I cannot thank him enough for his cogent economic history and analysis. Moving forward, we need imagination, but not about policies and outcomes. We need to imagine new economic logic because the world we have was created not by greedy people, but by people employed to live out a capitalistic logic that was given to them. This new logic is where I, others, and hopefully Mason himself will turn next, with the hope of giving new generations a different experience of their time on this earth.
Anthony Signorelli is a sales effectiveness consultant and author of the book, Speculations on Postcapitalism.