The End of Capitalism

Forbes, the US magazine, has just produced its annual list of the wealthiest people in the world, and the top position goes to Mr Bill Gates. This whizz-kid’s computer software company, Microsoft, started as a subcontractor to IBM and soon afterwards thrashed IBM and every other rival.

The most remarkable thing about Mr Gates is that he owns no factories. Nor does he own oilfields, banks, or other traditional forms of wealth. All he owns is a company which produces no goods, just systems of knowledge called software. The value of this knowledge is so enormous that Mr Gates’ equity stake in Microsoft is now worth $ 12.9 billion.

This demonstrates vividly what social scientists now describe as the arrival of the knowledge society. Companies no longer produce only tangible goods (like soap or cars), they now produce intangibles like knowledge systems, and these are best sellers.

General Motors (GM) has long been the biggest company in the world in terms of assets like factories. But there have been times when the stock market value of all Microsoft shares has exceeded that of all GM shares. In other words, hardheaded marketmen have regarded a company with no factories, only brainpower, as more valuable than the company with the biggest factories in the world.

This a revolutionary development. For the first time in history, the richest man in the world is an owner of human capital rather than financial or physical capital. Brains now matter in a way they! never did earlier. Classical thinkers, from Karl Marx to Adam Smith, believed that a country’s economic resources consisted of land, labour and capital. But now the world is moving into a post-capitalist society, where the most important resource will be neither land, labour nor capital, but knowledge.

The full transition to a knowledge society will take maybe a century. However, some of its contours are already clear, and they are startling. Classical thought divided society into the owners of capital and suppliers of labour, and the struggle between them was viewed as the stuff of history. But in the knowledge society, both capitalists and proletariat will be superseded by a major new category, ideas-people. The world will still have workers and owners of physical capital, but the fate of nations will be decided mainly by the productivity of its ideas-people.

This will spell the death-knell capitalism as we have known it. Till now, inherited money been the principal source wealth, and even incompetent inheritors have done very well by hiring talented brains. But what happens if top brains become the principal wealth of a country worth more than inherited wealthy At that stage the capitalist loses control, since his company. wealth now consists principally of the brainpower of his ideas-people and if they walk out he loses most of his capital. This is already eve dent in some businesses like advertising and computer software. where it is well recognised that wealth consists of people. This will increasingly become the case in the coming decades.

Where will this lead to ultimately? As far as I can see, it will no longer be possible for moneyed! mediocrities to hire brainy). people—they will not be able to afford it. Instead, moneyed medico rities will queue up to invest then”‘ money with the best ideas-people who constitute the chief resource of the country. Any mediocrites who attempts to compete with the ideas-people will speedily go bankrupt. So instead of today’s situation, where capitalists make use of employees’ ideas, we will have the reverse phenomenon of ideas-people making use of the money “of those who have inherited cash rather than brains.

This will be a rather egalitarian society. Wealth will depend on ability, not position or inheritance. Unlike money, brains are not heritable. Today a capitalist can pass on his wealth to his son. But in the knowledge society, an ideas-person will not be able to bequeath his high intelligence to his son. So wealth will not remain concentrated as it does under inheritance systems, and will be more widely dispersed than ever.

True, brains are not equally distributed, so in-equalities will persist. But brains are distributed more equally than inherited wealth.

We are still too far from the ultimate knowledge society to see more than its barest outline. But it seems clear that the rise of Mr Gates signifies a social change as revolutionary as the earlier one from feudalism to capitalism. Those who are still celebrating the victory of capitalism over Marxism need to moderate their exuberance. The end of capitalism is already in sight, and its conqueror will be not Marxism, but the coming knowledge society.

What do you think?