The End of Capitalism – Postcapitalism by Paul Mason

End of Capitalism
The end of capitalism

Paul Mason, the economics editor of Channel 4 News, says that capitalism is over. And he’s written a book – Postcapitalism – to prove it.

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Based on evidence from America, Moldova and Greece, Mason argues that ‘neoliberalism’ – a political system he would say is designed to undermine the welfare state and the working class – has reached the end of the road.

I’m no historian, and no great critic of capitalism, but this sort of thing seems to have been going on for a long time. At least as far back as Marx. ((And yet whenever people are given the choice, they choose capitalism. Why should the artisans of Etsy be any different? It’s almost as though those on the left don’t understand human nature))


What is Paul saying?

Paul’s basic argument has three strands:

  1. information technology is blurring the definition of work, and its link to wages
    • in the near future, automation will reduce the amount of work needed to provide a decent standard of living for all; on that much we agree
  2. abundant information is “corroding the market’s ability to form prices correctly”
    • I can see no evidence of this, and would probably argue the opposite – more information makes pricing easier, even if it changes some existing “bad” prices, like music CDs
    • Paul’s point seems to be that tech businesses are built on selling “socially produced information”; I have some sympathy for this, but the information is traded for free services (Google search, Gmail, YouTube and Facebook) just as New York was traded for beads
    • the idea that corporations act to protect their intellectual property – even if in this case the property is anti-intellectual – is not connected to the information revolution; it may be inefficient, but it’s not new
  3. collaborative production of goods and services is appearing
    • Wikipedia is Paul’s poster child for this, destroying the encyclopedia business and eschewing online advertising
    • I agree that open source is a successful and useful movement in the software and information arenas, ((You’re reading some open-source journalism right now)) but how does it break out of these ghettos?
    • Food co-ops, creches, carpools and local currencies are all fine things, but where is the open-source hardware, whether smartphone, self-driving car or reciprocating saw?
    • Micro-payments – whether Bitcoin or some as yet undevised system – are an interesting area, and could help extend collaboration, but it’s micro-capitalism rather than post-capitalism
    • Similarly, 3D-printing and similar technologies will extend open source into the work-shop, but will they replace the R&D divisions of existing giant corporations?

Paul makes a good point that information – the true currency of our age – is difficult to value under traditional accounting rules. I have argued previously that we need to replace GDP with something more useful.

Paul envisages a world with “information as a social good, free at the point of use, incapable of being owned or
exploited or priced”. Not surprisingly, the “framework to understand the dynamics of an economy based on abundant, socially held information” comes from Marx. ((While we’re on the subject of historical figures, Nikolai Kondratieff and his wave theory of capitalism also loom large))

Paul thinks that “austerity” – I would substitute globalisation – “means driving the wages, social wages and living standards in the west down for decades until they meet those of the middle class in China and India on the
way up”.

I would argue that this was Plan A, but that technology – the internet and smartphones, robotics and software and the internet of things – have derailed this. As yet we have no Plan B.

too much

Is capitalism so bad?

We live in the best of times, in the safest and most free societies in human history. Along with science, capitalism has to take a lot of the credit.

Capitalism also has a decent track record of lifting people out of poverty. The evidence for this in Britain is overwhelming, even in the last 50 years after the introduction of the welfare state.

Hundreds of millions to the east of the former Iron Curtain have been enriched since the fall of the Berlin Wall in 1989. And even more recently, the developing world has begun to benefit.

The basic problem with capitalism for the left appears to be that it doesn’t make everybody equal. If all the villagers have 20 (of what ever unit of currency we’re using) but the nob on the hill has 100, this is worse than if all the villagers have 10, but the nob has 10 as well (assuming he hasn’t been lynched by the mob).

A secondary issue is that labour – actually doing work than brings you out in a lather – is seen as a more suitable way of providing for yourself than investing capital.

Doing the latter now makes you a ‘rentier’. The term has been redefined from “gaining profit by monopolizing access to property” to just gaining profit from property.

Take the current hatred for buy-to-let landlords, second only to bankers on the most wanted list. It’s true that there’s a lot more private rental property in the UK than there used to be (there’s also less social housing).

See also:  The End of Alchemy - Mervyn King

But the thousands of small-scale landlords aren’t acting as a cartel. They don’t work together to buy the properties, or to set the rents. The properties are bought at market price, and rented out at market rent.

We have a lot of people who would like to live in nicer properties than they can afford, as we always have done. ((I too would like to live in a much nicer property than the one I own, but I can’t afford to)) If you want to live / own somewhere nicer, you need to prioritise saving and earning money over spending and not earning.

capitalism RIP

Greece, Gaza and the banking crisis

The recent problems in Greece, and the less recent problems of the 2008 credit crunch, are instructive of the selective analysis by the left:

  • yes, the banks behaved badly, mostly by lending money to people who wouldn’t pay it back
  • but, there was too much personal and national debt
  • yes, Greece is going through some terrible times
  • but, the construction of the Euro – monetary union without fiscal union – and Greek corruption and bent accounting are the underlying causes, not a neoliberal conspiracy

Paul even sees the shelling of Gaza as the actions of a ruthless elite defending capitalism, rather than a cycle of abuse played out at national level.

At its heart, the difference between the left and the right is all about accountability.

The right believes that people are accountable for their actions and their lives, and the left does not. Instead, society / the system / the Man / capitalism is responsible.

Those who have borrowed money they can’t repay were forced to borrow by wicked lenders.


Sharing or renting?

For Paul, post-capitalism is a system in which we all become rentiers, as it happens.

Paul believes that the “sharing economy” – as currently evidenced by Airbnb and Uber allowing you to rent out your spare room or work a few shifts as a cabbie – will take over.

The first problem is that it’s not a sharing economy, it’s a rental economy. I can’t stay in a flat for free, or ride in a cab for free.

The Economist defines capitalism as the interaction of individuals with a market economy, and on those terms the system is advancing, not retreating.

Airbnb and Etsy allow people to earn money in new ways. The internet has been in wide use for around 20 years and US corporate profits are close to a postwar high as a proportion of GDP.

The “sharing economy” – like its underlying infrastructure, the internet – is a marketing and distribution revolution, not a production revolution. It’s just Amazon for things that Amazon can’t shove in a cardboard box and drive down the M1.

Behind all the things we need (want?) and use are people with skills to provide them, and people who own the machines that make or provide them. And the people with skills and / or assets still want paying.

And unless the revolution involves full socialism, and the abolition of private property, that’s the way things will stay. ((From some of the things Paul says –  “an economy based on the full utilisation of information cannot tolerate the free market or absolute intellectual property rights” – this may indeed be the case))

Which means that as a consumer I need money to start with. We’ve looked before at the possibility of a universal Basic Income, but on the scale we’re talking about here it would cost significantly more than then existing welfare state which is already leading to a budget deficit.

On the other side of the equation, as a provider I need some assets or skills that people want to share.

And it’s not just renting, it’s actually under-cutting existing providers, and their assets and skills. There are probably not many people who are against lower hotel rates, but look at London cabbies.

They studied for years to learn how to get around London, then sat-nav arrives. And now Uber. It’s not surprising they are cross, but that won’t stop people catching cheaper cabs. ((It’s hard to feel the same sympathy for cabbies in, say, Paris)) What does a 50-year-old cabbie do in 5 years time?

The Lotus Eaters

A new renaissance

The left, and particularly the young and liberal arts left, believe that the end of capitalism will usher in a new renaissance. A land of lotus eaters from which a new Leonardo or Michelangelo for our age will emerge.

Really? Or will we get an endless conveyor belt of people like Zoella, Charlie XCX and “the Fat Jew.” ((Not meant to be controversial – that’s his name, he’s an “Instagram celebrity” who the FT took to lunch recently))

Work has functions beyond putting food on the table – dignity, community and the creation of meaning spring to mind. Unemployment has historically been degrading and humiliating, but no doubt the left have plans to “reclaim” this.

It’s true that this brave new world will allow a lot more people to indulge their “creative side”. Which will be very nice for them, but it won’t replace working a 9 to 5 job. We can’t all be selling knick-knacks on Etsy. ((Not to mention the fact that the people on Etsy can’t make a smart phone on their dining room table))

Look at photography as an example. I’m old enough to remember when taking a good photo was difficult (and expensive) and making a decent print was like alchemy. Computers changed all that, and then smartphones, the internet and Instagram changed it all again.

See also:  The Simple Path to Wealth

So now its easy and cheap to get a decent photo, and pretty easy and pretty cheap to get what would have been an excellent one about 20 years ago.

This is all great for me as a hobbyist – I get better results is less time, with smaller and lighter equipment than before – but what about pro photographers?

Has this increased supply meant that people want more photos? Have rates increased because so many people can now take a decent picture?

The skills and assets that people want are the ones that are in short supply. Tweaking capitalism won’t change that.


How will this happen?

This is where things all get a bit hazy. Paul thinks that “info-capitalism has created a new agent of change in history: the educated and connected human being”.

I think the internet has created an uneducated generation unable to think for itself, and consumed by circle-jerk preaching to the converted.

Paul imagines a “Project Zero” to “dissolve market forces, socialise knowledge, eradicate the need for work and push the economy towards abundance”, with three main aims:

  • zero-carbon-energy system;
  • the production of machines, products and services with zero marginal costs; and
  • the reduction of necessary work time as close as possible to zero.

“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 labour.”

And it turns out that Paul does want to socialise everything.  ((In the old sense, not the Facebook sense)). He’s in favour of public ownership of monopolies including finance, and the provision of water, energy, housing, transport, healthcare, telecoms, infrastructure and education “at cost price”.

And he does want Basic Income – £6K pa, plus a minimum wage of £18K pa. This will cost £306 bn pa, or twice the cost of current welfare state. Answers on a postcard as to how we save the £150bn.

It all sounds a bit Fight Club to me.

The move to post-capitalism is very popular with those who don’t do well out of the current system – those with only the prospect of a “bullshit job” – just as the welfare state is popular with those who benefit from it, and less popular with those who pay for it.

Basic income is popular with students and people in minimum wage jobs, in the same way that Jeremy Corbyn is currently the darling of undergraduates and union leaders. But he’s not in a position to form a government.

As George Bernard Shaw said: “A government that robs Peter to pay Paul can always depend on the support of Paul”.

But to implement the necessary reforms will require convincing Peter, and there seems to be no plan to do this.

end capitalism

Is there a real problem?

There certainly is a problem with capitalism as we have recently understood it. The equation used to be capital + labour = growth. But with the dawn of a global network and the recent advances in software and robotics, it’s far from clear that labour has a significant role to play.

With each year, it will become economically viable to replace more and more low-end skills with automation. The recent trend towards higher minimum wages in developed countries will only exacerbate this.

Even as far back as supermarkets, experience has shown that if you can eliminate the human touch and reward the consumer with lower prices, you will prosper.

From here, it looks as though “high-touch” jobs like waiting in (expensive) restaurants and bars, hairdressing and nail-bars will survive. Personal care for the elderly and cleaning also look to be good bets.

But cultural values change, and it’s entirely possible that people will prefer to interact with robots rather than other people. The evidence from on-line shopping, smartphones and tablets would certainly seem to suggest this.

So the real question is what to do with the increasing proportion of society whose skills are too low to command a living wage. Not the old who have already worked, or the young who need to be trained, but the working age people who are not qualified to work.

How does a consumer society function when only 50% (or 25%, or 1%) of the population are consumers? And how do you keep the peace when the majority of people have nothing to do?

These aren’t the questions that Paul’s book is trying to answer, but I’m glad that he’s got a debate going.

Until next time.

  1. The end of capitalism has begun – Paul Mason, Guardian
  2. Postcapitalism: A Guide to Our Future by Paul Mason – review by Chris Mullin, Guardian
  3. The non-virtual elephant in Paul Mason’s postcapitalist sharing-economy room – Nigel Pollitt, Guardian letters
  4. Is Capitalism Ending? – Steve Denning, Forbes
  5. Advancing, not retreating – Economist
  6. Paul Mason’s Postcapitalism is proof that the left is out of ideas – Douglas Murray, Spectator
  7. PostCapitalism: A Guide to our Future – review by Gillian Tett, FT
  8. Postcapitalism by Paul Mason – review by Liam Halligan, Telegraph
  9. Postcapitalism – Will the system die a natural death? – Dave Sewell, Socialist Worker

Mike is the owner of 7 Circles, and a private investor living in London. He has been managing his own money for 40 years, with some success.

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The End of Capitalism – Postcapitalism by Paul Mason

by Mike Rawson time to read: 9 min