From a Market Economy to a Human Economy

In today’s increasingly polarized economic and political environment, to question the capitalist narrative is like challenging the Roman Catholic Church at the height of the Spanish Inquisition. These days, no one will burn you at the stake, but you stand a good chance of being labeled by neoliberals as a heretic, an apostate, a communist, an idiot – or all of the above.

Whether you question the economic fundamentals of capitalism or the future of fossil fuel dependency, defenders almost always resort to the convenience of binary opposites: if you’re not a capitalist, you’re a communist; if you care about the environment, you don’t care about jobs; if you don’t believe in God, you’re in league with the Devil.

When it comes to economics, this rigid binary thinking is being challenged by a perfect storm of technological and ecological forces. The emergence of the Internet of Things (IoT), the transition from carbon-based energy to renewable energy, and the continuing proliferation of online communications are converging to disrupt the economic foundations of capitalism as we know it.

Social theorist and futurist Jeremy Rifkin calls it the near-zero marginal cost society. Sharing innovator Rachel Botsman calls it the collaborative economy. Robin Chase, cofounder of Zipcar, calls it Peers Inc. However they label it, these thinkers have all noticed the emergence of a new socioeconomic infrastructure in which competition and scarcity are giving way to collaboration and abundance.

All three perspectives eschew the black-and-white, either/or mindset of conventional economic thinking in favor of a more nuanced, pluralistic model of how we are organizing economic activity. None of these writers speak in terms of overthrowing capitalism; they merely agree that capitalism will not be the dominant economic paradigm in the future, and that the old capitalist vs. socialist dialectic will become irrelevant.

The most high profile apologist for these ideas is Rifkin, whose recent books (The Third Industrial Revolution and The Zero Marginal Cost Society) represent the most thorough exploration of what is happening. His basic thesis is that, “the inherent dynamism of competitive markets is bringing costs so far down that many goods and services are becoming nearly free, abundant, and no longer subject to market forces.” It’s as if we’re “Napster-izing” the entire economy.

Changing the Narrative

As Rifkin reminds us in The Zero Marginal Cost Society, a paradigm’s narrative power rests on its all-encompassing description of reality. Once accepted, “it becomes difficult, if not impossible, to question its central assumptions, which appear to reflect the natural order of things.” At the same time, not to question them leads to a “festering of inconsistencies that pile up until a tipping point is reached where the existing paradigm is torn apart and replaced with a new explanatory paradigm better able to martial the anomalies, insights, and new developments into a comprehensive new narrative.”

Take the narrative of capitalism. Private ownership is as fundamental to the narrative of free market capitalism as water is to fish. We can thank Enlightenment philosopher John Locke for that. His seminal work, Two Treatises of Government, claimed that men have “natural” rights to life, liberty, and property. For Locke, the acquiring of goods was fundamental to democracy, and the political condition of human life was based on the production of private property.

Thus, he established the ideological pillars of the capitalist narrative – freedom, private property, and market exchange – principles we now consider as inevitable and natural as the air we breathe. Since we have, over the last 300 years, built our entire legal and political infra- structure around them, we’ve made these principles sacrosanct, and therefore unimpeachable. The foundations of this narrative are now being challenged in several ways.

Ownership vs. Access

There are plenty of examples in which supply and demand are being matched by the sharing of underused assets (Airbnb), or by the reinvention of traditional market behaviors – renting, lending, swapping, sharing, bartering, and gifting (Zipcar), or by platforms that directly match customer needs with providers to immediately deliver goods and services (Uber). What they all reveal is a shift from private ownership to shared access.

Using the same technology by which we share information and content, we are sharing, swapping, lending, bartering, and renting real world assets. This is the core of the new economic paradigm: rather than acting as consumers of goods being manufactured and distributed by large, centralized, vertically integrated organizations, the collaborative economy is turning us into “prosumers” – producers of goods and services that can be distributed horizontally across decentralized networks and marketplaces.

Robin Chase sums it up thusly: “Enabled by new technology, a revolution is taking place inside capitalism as we reimagine the role of consumers, producers, and even ownership. I call this new paradigm ‘Peers Inc’: a trans- formation of the relationship between companies and people. Peers Inc is leading the transition from industrial capitalism to the collaborative economy.”

Everyone vs. Everything

Aiding this transition is the emergence of the IoT, which Rifkin hails as a game changing platform that enables an emerging “collaborative commons” to flourish alongside the capitalist market. IoT will connect everybody to everything, enabled by the rapid proliferation of sensors (50 billion by 2020) attached to natural resources, production lines, the electricity grid, logistics networks, homes, offices, stores, vehicles, and appliances.

How much of a game changer is this likely to be? In a 2013 paper entitled The Internet of Everything for Cities, Cisco predicted that by 2022, IoT will generate $14.4 billion in savings and revenue. In doing so, it will continue the process of driving products and services to near-zero marginal cost. The platform for economic exchange is moving from a closed, competitive, corporate system built on proprietary information and intellectual property, to an open, collaborative, connected community built on shared access to everything.

Mean vs. Green

Another tipping point is the transition to renewable energy. Business and industry have always operated in an ecological vacuum, regarding the biosphere as external to economic activity. The reality is that all economic activity harnesses matter and energy from the biosphere and transforms it into goods and services. The process of creating such economic value has lead to a massive release of carbon dioxide emissions that is destroying the very biosphere from which we have drawn resources in the first place.

The resulting climate change is driving investments in renewable energy sources such as solar, wind, geothermal, biomass, and hydro. At the same time, according to Rifkin, the harvesting techno- logy for solar and wind power is predicted to be as cheap as mobile phones and laptops within 15 years. If the efficiency of solar cells continues at its current pace, solar energy will be as cheap as today’s retail energy price by 2020, and half the price of coal by 2030. All this points to a future in which “hundreds of millions of people will produce their own renewable energy in homes, offices, and factories, and share green electricity with each other on an Energy Internet just as we now generate and share information online.”

Money vs. Trust

Perhaps the biggest disruption unleashed by the emerging collaborative economy is its prioritization of the community over the individual. In capitalism, as set forth by Enlightenment philosopher Adam Smith in his landmark tome The Wealth of Nations, economic prosperity is driven by self-interest and competition. This principle has animated the rise of free market neoliberalism over the last 30 years, having inspired both the Chicago School of Milton Friedman and the market deregulation launched by Ronald Reagan and Margaret Thatcher. Indeed, it is said that Thatcher carried a copy of Wealth of Nations in her handbag wherever she went.

The collaborative economy, enabled by exponential techno- logical change, upends Thatcher’s claim that “there is no such thing as society; there are only individuals and families.” It is enabling small companies and individuals to make and share goods and services in ways that bypass the classic twentieth century industrial value chain. And since they will be doing that at little or no marginal cost, money is no longer the only motivator of economic activity. In a recent Fast Company article, Rachel Botsman writes: “The sharing economy is uniquely placed to reflect our desire as human beings to connect directly and to feel a part of community larger than our individual selves, which serves a purpose far higher than simply the trading of stuff, space, and talents.”

By taking back the economic power currently enjoyed by highly centralized, competitive enterprises and distributing it across decentralized, collabo- rative platforms of exchange, we are moving from the monopol- ization to the democratization of economic activity. Democra- tization and collaboration are built on trust, and as such, says Chase: “What distinguishes and transforms these activities is that platforms connect, organize, aggregate, and empower the participating peers.” In this scenario, the most important currency is social, not financial.

Toward a Human Economy

Capitalism has had a good run. But in its relentless drive for operational efficiency and productivity, it has in fact sown the seeds of its own transformation. The profit motive that funded everything from steam power to the internet and made a handful of individuals unimaginably wealthy is inadvertently giving agency to a far broader community of digitally savvy “prosumers.” A group that has little interest in competing for scarcity, and would rather collaborate in the creation of abundance.

That is not to say that capitalism is over. As Rifkin wisely reminds us, large enterprise will still be around to aggregate the network solutions and services upon which the collaborative economy will operate. There will still be a market for premium and luxury goods and services, albeit a small one. But instead of a small collaborative economy operating on the fringes of capitalism, it will be capitalism that operates on the fringes of the collaborative economy. The market economy will give way to the human economy, with economics no longer operating in a fictitious vacuum called the marketplace, but consciously and sustainably integrated with the warp and woof of the biosphere.

the author

Will Novosedlik

Will Novosedlik is AVP, head of growth partnerships at Idea Couture. See his full bio here.