Inequality driving towards After Capitalism

The third in our series of seven key drivers influencing the move to After Capitalism is technology acceleration.

Growing economic inequality is threatening the social order.

Inequality has long been an issue, but awareness of it has been growing and it is becoming increasingly intolerable. I previously shared how Piketty’s popular Capital in 2014 makes a strong case that since the 1970s, income inequality has increased significantly in the rich countries and that it is a structural feature of capitalism. A few years later in 2016 the leader of the World Economic Forum, Klaus Schwab, while promoting his Fourth Industrial Revolution concept, acknowledged that inequality represents his greatest societal concern. Many other researchers and world leaders have been publicly acknowledging that inequality is approaching crisis mode. Even celebrity CEOs have joined the chorus — Salesforce’s billionaire CEO Marc Benioff has criticized the “horrifying inequality” of America’s economic system.

The behavior of a system is a function of its structure.

UH Foresight alums will recognize this quote from Systems Thinking class. The key implication here is that inequality is a feature of capitalism, not a side effect. It’s not something broken that can be fixed. The capitalist system produces inequality. We might be able to reduce it a bit, but it won’t go away. Historically, we have more or less accepted inequality because capitalism also produces growth. What’s different is that inequality is worsening and because of values shifts, people are no longer as willing to accept this bargain.  

Piketty’s extensive research basically found that return on capital investments beats economic growth, which essentially translates into an advantage for previously accumulated wealth. Put bluntly, capitalism has a systemic, built-in advantage that favors those who already have wealth. In systems thinking terms, it’s the “success to the successful” archetype.

It’s getting worse. A simple but enlightening breakdown from Stewart in 2018 about the US class structure is shown in the figure. It suggests the “middle class” is already gone. The big winners since the 1970s have been the super-rich 0.1% at the top. The 9.9 percenters (think knowledge workers), doing well, have been hanging on. The big losers over this period of time have been the 90%. Think about that for a second — 90% have not been served well. Hmm.

It’s corroding societies. The challenges of inequality go beyond economics. Wilkinson and Pickett (2009) cite effects, such as undermining citizenship by eroding trust, solidarity, mutuality, and breeding cynicism. It’s also creating a new hereditary aristocracy — America now has less social mobility than some poorer countries. Guy Standing takes it a step further and identifies a new class structure emerging from the inequality, which he calls the precariat. The precariat consists of people whose work lives are characterized by insecure jobs interspersed with periods of unemployment, and dealing with related issues such as trouble finding insurance or affordable housing.

Can tech abundance come to the rescue? There are some suggestions that a great wealth bounty deriving from technology acceleration will solve inequality. But so far, technology has tended to exacerbate inequality. One need look no further than Musk, Bezos, and Branson, the entrepreneurial tech heroes, who have accumulated massive wealth and are mostly celebrated as heroes. But as futurists we must consider that this could change — 0ur Technology Acceleration driver covered last week explores this possibility.

Inequality is arguably the single biggest and most direct driver leading to the questioning of capitalism. It has grown to such an extreme that it is getting more and more difficult for supporters of capitalism to explain away. The historic case of a rising tide lifting all boats is becoming less clear as well; some boats are rising fantastically high, but most are now stagnant and taking on water, and many are sinking.  – Andy Hines