Note: This essay is revised and updated with other pieces in the forthcoming 3rd Edition of Speculations on Postcapitalism.
Three Stages of Transition
Historical transitions typically take a very long time to unfold, and the transition from postcapitalism to capitalism is just such a transition. The reason they take so long—and will even in the digital age of lightning fast communication and diffusion of ideas—is that the entrenched powers of the old system require a long time to unwind. This is especially true of capitalism. Large capitalist enterprises and infrastructure, for example, represent enormous investments made over many decades, and even centuries. These cannot be unwound quickly, and the people responsible for them will resist the unwinding as well. Although they will eventually give way to the new digitalized world, these realities always slow the process.
In this essay, we explore three likely stages of transition. These stages are necessarily general, speculative, and lacking in clear delineation. Nonetheless, they are conceptually helpful as a lens to clarify what history shows us. The stages are likely to unfold over the course of 100 years, give or take a few decades, and reflect trends that will arise and tend to dominate in each period. Let’s see what each stage involves.
Early Transition—Capitalist Desperation
First, in the early stages, the elite capitalists will cling to 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. This trend is likely to continue for two to three decades as the capitalist powers consolidate returns and seek to hold on to what they have.
Financialization of the economy will continue in this early period. Financialization (which has also been called rentism) refers to the conversion from producing and selling products and services for cash to creating income through rent, interest, dividend investments, and subscribed automated services. 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 financial arrangements. More and more people will find a way to financialize their lives, thereby creating unearned income streams which are one precursor to the non-work, non-priced digital economy.
While the people at the top will cling to their gains, and people in the upper-middle classes will financialize to experience abundance, the brunt of the negative changes will be felt from the middle to lower classes at varying degrees. 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 easiest to automate. At the same time, they will have to rent nearly everything needed in life—housing, transportation, their own genes, and even ideas.
Today, global competition suppresses wage growth, but as digitalization reduces the pricing power of goods, the market price for labor approaches 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.[1] Capitalists will engage a certain kind of arbitrage between the declining price of labor and the not-yet-declining price of goods and services that low- and middle-income earners need. Those whose labor is their chief value and income will be squeezed, and the already large gap between the wealthy and everyone else will become even wider.
Middle Stage—Meaningless Money and UBI
The middle stage of the transition will be characterized by efforts to preserve the meaning of money and prevent its eventual collapse. Digitalization is often understood as an artifact of technology, but what it really represents is the migration of value into the digital components of products and services. Ebooks and recorded music have their value almost 100% in the digits, and because the marginal cost of reproduction is zero, prices in a market collapse to zero as well.
Today, products like coffee mugs and cars still have substantial value located in their physical being, but as 3D printing, robotics, and similar technologies improve, the value will shift from the thing itself to the plan for the thing. But the plan will be in digits, and that digital component will collapse in price just like digital music does and for the same reason—infinite supply and zero cost of reproduction. In other words, all products are becoming predominantly digital, and those that aren’t are being produced with automated robotic labor.
Let’s think about what this means. In a world where digitalization and robot labor eliminate the cost of human labor, they also eliminate demand. If people don’t have wages, they cannot buy goods and services. As economies have become increasingly driven by consumption, this change will be extremely disruptive, and the capitalists will feel the heat. As the consumption class is decreasingly capable of consuming at the standard economic level, it will become impossible for capitalists to get a return on investment. Hence, the whole paradigm for deploying capital, as well as the financialization of life, will become meaningless, and financial wealth will collapse.
As a defense against this collapse, capitalist elites will advocate the actual emergence of universal basic income (UBI) for everyone. Under UBI, 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 or a sudden urge to end poverty. Instead, it will be capitalists who lead this movement as a way to preserve demand and protect profits. Elon Musk and Mark Zuckerberg are talking seriously about this, and even the prominent bond investor Bill Gross has called for it in his investment outlooks. This outcome is the logical result of digitalization, and it is the only way for capitalists to hold off the total collapse of their wealth and maintain the relevance of money.
Nonetheless, the collapse of wealth will come, and it will be 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. UBI is essentially quantitative easing for the common citizen. Like the bank-targeted quantitative easing of 2008 to 2015, UBI will be created with invented money. It will be an attempt to hold off the inevitable, and just as the bank-based quantitative easing held it off for a while, UBI will, too. In this second phase of the postcapitalist era, we can expect to see a continued, quantitative 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 as the economy becomes more focused on free goods and services.
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 worthless. It will provide them with decreasing levels of power and influence. Buying and investing become meaningless because goods and services cannot be sold at a price. In other words, the capitalist measures of value will no longer work. In a world of free digital products and services, 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.
Final Stage—New Measures of Value
Full transition will be marked by a change in the metrics of value. It’s impossible to predict the new measures for certain, but it is likely 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 retain the same economic meaning.
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, UBI, 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 for wage labor, as if work is inherently a good thing. In a capitalist value system, work most certainly is a good thing, and that judgement was reinforced by religious values honoring the essential place of work in capitalist 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 wage labor will deteriorate and disappear. (If it hasn’t, then we have not yet passed into the final stage of the transition to postcapitalism.) Today, work is so important that it determines our socioeconomic status, our opportunity, the communities we live in and schools our kids go to, and how the intrinsic biases of the law treat us. If no one has to work, this entire capitalist social structure must change, and what it changes to will become evident at this stage.
So what new values might emerge? Here are a few ideas:
- Influence as measured by the ubiquity and diffusion of ideas—the more they spread, the more valuable they are.
- Connectedness as measured by involvement in networks.
- Adoption and usage of free products built by collaborative communities or solopreneurs
- Ease of life
- Quality of experiences
These are just a few brainstorms—the list could be endless, but it will always tie back to the new metaphors of a postcapitalist world. Notice how different these terms are from profit, money, capital, and return on investment, which dominate the capitalist view of value.
The world after capitalism 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, as Immanuel Kant said, “man is free if he needs to obey no person but solely the laws.”[i] When these notions erode, the only option remaining will be to imagine a 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, and the emergence of new measures of value.
Zen Acceptance
As the world changes radically through digitalization, we can respond with fear or with radical acceptance. I recommend the latter. Radical acceptance enables us to see the world for what it is, shape the changes ahead, and not fear it. Already as the changes unfold, we can see some of the most likely structures emerging—collaboration, networks, the free economy, digital abundance, and the 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 hierarchy is marginalized and obedience as a value is destroyed. The mystery, suspense, and joy lie in watching for what emerges in its place.
[1] 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. See Jeff Roberts’ “The E-book Investigations: Are Publishers and Apple Breaking the Law?” (https://gigaom.com/2011/12/07/419-the-e-book-investigations-are-publishers-and-apple-breaking-the-law/).
[i] Hayek, F.A., The Road to Serfdom (New York: Routledge, 1994), 85.
