Robert Skidelsky, the British biographer of Keynes, put up a post yesterday wondering about life after capitalism. His concern is that capitalism, having done the job of bringing wealth to large numbers of people in the developed countries, was running out of productive goals:
This is not to denigrate capitalism. It was, and is, a superb system for overcoming scarcity. By organising production efficiently, and directing it to the pursuit of welfare rather than power, it has lifted a large part of the world out of poverty.
Yet what happens to such a system when scarcity has been turned to plenty? Does it just go on producing more of the same, stimulating jaded appetites with new gadgets, thrills, and excitements? How much longer can this continue? Do we spend the next century wallowing in triviality?
Skidelsky quickly transitions into a moral argument about the uses of wealth. But there’s another, perhaps more important question to explore here. What if capital itself is running out of places to generate returns.
After all, we’re told that one of the prime causes of the worldwide housing bubble was an excess of capital sloshing around the world. In the US, the financialization of the economy is direct product of over-capitalization.
Finally, the latest driver of the economy, the technology business is rapidly de-materializing uses for capital. Facebook, Apple, Google even Goldman Sachs don’t have their capital invested in things. The money that makes up their capital is mostly invested in human beings.
We don’t know where Facebook plans to spend the billions it is raising. There’s talk of moving to a new corporate campus, of keeping talented engineers on staff and surely they need some server space. Groupon doesn’t seem to need the money they’re raising so much as they’re raising money because this is their time.
Maybe these are just anomalies around specific businesses. But it is troubling that these are the success stories of our time and it’s hard to see where the capital is beyond digits on a screen.