ThePythonicCow
4th February 2015, 06:55
Thanks in good part to a brilliant lecture by Yanis Varoufakis, who is now the new Minister of Finance for Greece, with the victory of the Syriza party in their elections last week, I would like to forecast the demise of capitalism, in the coming decades.
The lecture was from May of 2013 - it can be found on Youtube at Confessions of an Erratic Marxist (https://www.youtube.com/watch?v=A3uNIgDmqwI).
Do keep in mind that essentially 100% of my economic forecasts have failed so far :). Fortunately, this particular forecast is projected far enough into the future that I likely won't be here, among the living, to be proven wrong once again.
===
Capitalism is the merger of two essential elements:
Debt based money creation.
Mass production that gains increased efficiency with greater investment.
Historically, the great evolutions in human economics have come as a result of the major changes in material and energy technology.
Our best available materials for tools over the last few millenia have evolved up the following chain:
wood
bronze
iron
steel
silicon
Our best available energy sources have evolved up the following chain:
human and draft animal muscle
wind, water, and firewood
coal burning
gas and oil burning
(perhaps nuclear should be included here)
"free" energy (not generally publicized yet)
The economics of capitalism depend on borrowing large sums of money, to fund large mining, factory, farming, transportation, distribution and sales infrastructure.
Perhaps the most essential assumption of capitalism is that "size matters":
Production costs determine the lowest profitable sales price.
Sales price determines sales volume.
Higher volume production drives down production costs.
Combining this with the debt based creation of money puts the lenders in the powerful position of determining who will be lent the largest amount of money, to create the largest production facilities, whether of plows or tanks or iPhones, whether of aircraft carriers or oil supertankers.
The primary beneficiaries so far, on a major economic scale, of the recent advances in silicon, have been the existing steel and oil based businesses. Wal*Mart and Amazon can use computers to more efficiently distribute factory made goods. Computer aided design can make finer automobiles, iPhones and jet engines. Computers can better analyze seismographic data to find petroleum reserves underground.
The world's economy is still dominated by the economics of debt based money creation, used to fund massive energy, manufacturing, mining, farming, shipping, and distribution projects.
We live in a world of oil and steel, on silicon steroids.
However, this is changing, in a way that will undermine the fundamental assumption of capitalism that "size matters".
With the Internet, 3D printing, and "free" energy, the material and energy costs of such massive production and transportation infrastructure, which depended on the massive lending of banks creating money as debt, will fade into the background.
The critical element to distribute will be information, not the material products of massive investment and infrastructure. The incremental cost of a new widget will become essentially free.
We will come to rely on three basic and universally available infrastructures:
Information, via the Internet.
Energy, via (not yet visible) "free" energy.
A modest range of raw materials: food, water, fibers, woods, metals, plastics, chemicals, computer chips, ...
From this we will locally construct whatever we require or desire, limited primarily not by the blessing of a banker to lend us the money, but by the genius of the information creators, who provide the blueprints or recipes over the Internet, because they can.
Sharing information is "free" ... whether one person or one billion people read this present post of mine makes absolutely no difference to my wallet. I have no production costs that are proportional to the number of "units" produced.
This destroys the primary means by which bankers used lending to control production, as building a different model of something doesn't require an expensive new factory, with attendant rail or road connections and a new electrical substation.
Rather the means of production will become once again more distributed, as it was prior to the Industrial Age.
As has long been noted (see as just one example Capitalism and the Industrial Revolution, by Joe Kaminski (http://josephkaminski.net/2013/10/30/capitalism-and-industrial-revolution/)) capitalism (the funding of large production and infrastructure projects) arose with the industrial revolution (which depended on increased scale of production, to drive down unit costs and drive up sales volume.)
Instead of just being used to design finer phones and cars, sold by fancier marketing campaigns, through more finely tuned distribution networks, silicon will become the basis for replacing these industrial age constructs with a new paradigm, once again more distributed, and far less dependent on large scale lending from the bankers for finance. Thus .. the death of Capitalism.
Currently, all the major powers contending for power, be they NATO, the EU, Russia, China, or other nations or corporations, are fundamentally driven by the economics of the Industrial Age, and its associated debt money paradigm.
So I doubt that we will see this new, information based, paradigm become dominate anytime soon. Rather we are seeing an increasingly massive strain on the existing system, which doubtlessly will not give up without a fight.
But, in my view, the inherent orneriness of humans (we make lousy robots), and the inevitable rise of a silicon based civilization (so long as we don't destroy this fine planet first) makes the transition from the age of Industrialism and Capitalism, to a new information age, inevitable, most likely in the coming decades.
===
I have some familiarity with this transition, in one small arena -- computer operating systems. During the three decades that I was an active computer programmer, computer operating systems evolved from being primarily an adjunct to main frame computer company operations, providing proprietary support for running their custom hardware, to being predominantly based on a core foundation of open source development, including Linux, Mac OS X and Android.
This shift is not complete, and will likely always involve a "blend" ... Windows and the iPhone core software are I presume almost entirely proprietary. This "tug of war" between the large manufacturers operating in the capitalism/industrial paradigm and the individual and smaller operators operating in the "information" paradigm will continue for many decades, on many fronts.
===
As with computer operating systems, similarly in numerous other ways, the shift will not be sudden or on a massive scale, but rather incremental, on many fronts, as the local scale of the information age based on the free exchange of data prevails over the industrial scale of capitalism based on reducing manufacturing costs through large scale production facilities financed by immense debt.
Our bankers will come under increasing stress as this trend accelerates. Sounds good to me, even if it will make for some "exciting" times.
The lecture was from May of 2013 - it can be found on Youtube at Confessions of an Erratic Marxist (https://www.youtube.com/watch?v=A3uNIgDmqwI).
Do keep in mind that essentially 100% of my economic forecasts have failed so far :). Fortunately, this particular forecast is projected far enough into the future that I likely won't be here, among the living, to be proven wrong once again.
===
Capitalism is the merger of two essential elements:
Debt based money creation.
Mass production that gains increased efficiency with greater investment.
Historically, the great evolutions in human economics have come as a result of the major changes in material and energy technology.
Our best available materials for tools over the last few millenia have evolved up the following chain:
wood
bronze
iron
steel
silicon
Our best available energy sources have evolved up the following chain:
human and draft animal muscle
wind, water, and firewood
coal burning
gas and oil burning
(perhaps nuclear should be included here)
"free" energy (not generally publicized yet)
The economics of capitalism depend on borrowing large sums of money, to fund large mining, factory, farming, transportation, distribution and sales infrastructure.
Perhaps the most essential assumption of capitalism is that "size matters":
Production costs determine the lowest profitable sales price.
Sales price determines sales volume.
Higher volume production drives down production costs.
Combining this with the debt based creation of money puts the lenders in the powerful position of determining who will be lent the largest amount of money, to create the largest production facilities, whether of plows or tanks or iPhones, whether of aircraft carriers or oil supertankers.
The primary beneficiaries so far, on a major economic scale, of the recent advances in silicon, have been the existing steel and oil based businesses. Wal*Mart and Amazon can use computers to more efficiently distribute factory made goods. Computer aided design can make finer automobiles, iPhones and jet engines. Computers can better analyze seismographic data to find petroleum reserves underground.
The world's economy is still dominated by the economics of debt based money creation, used to fund massive energy, manufacturing, mining, farming, shipping, and distribution projects.
We live in a world of oil and steel, on silicon steroids.
However, this is changing, in a way that will undermine the fundamental assumption of capitalism that "size matters".
With the Internet, 3D printing, and "free" energy, the material and energy costs of such massive production and transportation infrastructure, which depended on the massive lending of banks creating money as debt, will fade into the background.
The critical element to distribute will be information, not the material products of massive investment and infrastructure. The incremental cost of a new widget will become essentially free.
We will come to rely on three basic and universally available infrastructures:
Information, via the Internet.
Energy, via (not yet visible) "free" energy.
A modest range of raw materials: food, water, fibers, woods, metals, plastics, chemicals, computer chips, ...
From this we will locally construct whatever we require or desire, limited primarily not by the blessing of a banker to lend us the money, but by the genius of the information creators, who provide the blueprints or recipes over the Internet, because they can.
Sharing information is "free" ... whether one person or one billion people read this present post of mine makes absolutely no difference to my wallet. I have no production costs that are proportional to the number of "units" produced.
This destroys the primary means by which bankers used lending to control production, as building a different model of something doesn't require an expensive new factory, with attendant rail or road connections and a new electrical substation.
Rather the means of production will become once again more distributed, as it was prior to the Industrial Age.
As has long been noted (see as just one example Capitalism and the Industrial Revolution, by Joe Kaminski (http://josephkaminski.net/2013/10/30/capitalism-and-industrial-revolution/)) capitalism (the funding of large production and infrastructure projects) arose with the industrial revolution (which depended on increased scale of production, to drive down unit costs and drive up sales volume.)
Instead of just being used to design finer phones and cars, sold by fancier marketing campaigns, through more finely tuned distribution networks, silicon will become the basis for replacing these industrial age constructs with a new paradigm, once again more distributed, and far less dependent on large scale lending from the bankers for finance. Thus .. the death of Capitalism.
Currently, all the major powers contending for power, be they NATO, the EU, Russia, China, or other nations or corporations, are fundamentally driven by the economics of the Industrial Age, and its associated debt money paradigm.
So I doubt that we will see this new, information based, paradigm become dominate anytime soon. Rather we are seeing an increasingly massive strain on the existing system, which doubtlessly will not give up without a fight.
But, in my view, the inherent orneriness of humans (we make lousy robots), and the inevitable rise of a silicon based civilization (so long as we don't destroy this fine planet first) makes the transition from the age of Industrialism and Capitalism, to a new information age, inevitable, most likely in the coming decades.
===
I have some familiarity with this transition, in one small arena -- computer operating systems. During the three decades that I was an active computer programmer, computer operating systems evolved from being primarily an adjunct to main frame computer company operations, providing proprietary support for running their custom hardware, to being predominantly based on a core foundation of open source development, including Linux, Mac OS X and Android.
This shift is not complete, and will likely always involve a "blend" ... Windows and the iPhone core software are I presume almost entirely proprietary. This "tug of war" between the large manufacturers operating in the capitalism/industrial paradigm and the individual and smaller operators operating in the "information" paradigm will continue for many decades, on many fronts.
===
As with computer operating systems, similarly in numerous other ways, the shift will not be sudden or on a massive scale, but rather incremental, on many fronts, as the local scale of the information age based on the free exchange of data prevails over the industrial scale of capitalism based on reducing manufacturing costs through large scale production facilities financed by immense debt.
Our bankers will come under increasing stress as this trend accelerates. Sounds good to me, even if it will make for some "exciting" times.