The biggest threat to capitalism is capitalists. After all, capitalists are monopolists. And monopolists are antithetical to broader prosperity because they give the monopolist an unfair pricing power over their consumers which often leads to social unrest. We need look no further than the recent case of Martin Shkreli to see how this plays out in real-life.
Anyhow, I was reading through this very good report from Bank of America (which came from this very good article in the Guardian) on the impacts of technology. It got me thinking about the oft-discussed debate surrounding the “rise of the robots”. BofA says the insurgence of technology is being driven by the creative disruption of three ecosystems:
- The Internet-of-Things
- the Sharing Economy
- On-Line Services
This is all a win for consumers because these new ecosystems are helping improve living standards like never before. But it is also highly disruptive and destructive to incumbent businesses who don’t evolve. But there’s a broader and more disconcerting potential impact here. What is happening is that technology is advancing so rapidly that it is outpacing the rate at which new jobs are created to replace the technolification (this word does not exist) of everything. This is a rather new economic phenomenon and quite a paradox because technology is making our lives betters, but it is also directly leading to income inequality and economic imbalances. More broadly, this is leading to three substantial multi-temporal problems:
- The economy can’t create new jobs fast enough to keep up with the pace at which the technolification of everything is destroying jobs. In the long-run there would be an equilibrium here, but in the short-term, this technolification is creating a labor market imbalance.
- The financial markets can’t digest this pace of creative destruction efficiently enough which is why we seem to be seeing an exaggerated boom/bust cycle in the stock market even though the economy is actually operating more smoothly (which is partially explained by the fact that researchers don’t know how to properly measure much of this productivity).
- Governments are scrambling in their typically inefficient ways to catch up with the rapid pace at which capitalists are lapping them. This explains why governments appear more involved in everything than ever.
The shorter version of this is: the capitalists are winning. Technolification leads to monopolization which is a big part of why the economy looks so strange today. The problem, of course, is that the economy is not a board game in which someone walks away the “winner”. It is a living system that operates best when democratized. And democracies and monopolies are a bit like oil and water. That explains why it looks like the government is more involved in everything than ever. And as this technolification of everything continues I suspect these three multi-temporal problems will not only persist, but could become much more exaggerated.