I.
To understand the future, one must recognize patterns of the past. How did new paradigms rise and fall? What pushes one economic system up and the other down? According to Douglass North (1991), institutional change is the result “pushed forward by self-seeking individuals.” But what self-seeking behaviors lead to seismic changes like the shift from feudalism to capitalism or the establishment of feudalism from primordial society? If we rely solely on the teachings of North, these historical changes are the results of a series of small shifts through the push and pull of micro agents. This framework is unsatisfactory because it does not present a way to aggregate these micro behaviors into a coherent narrative explaining the forces behind the economic development of humanity as a whole.
Beyond the scope of international comparisons that North’s theory allows, I seek explanations of humanity’s economic development as a species. Rather than predicting the fate of a single country, I long for a theory capable of uniting humanity’s development in economic sense. More specifically, I want to foresee the next economic system that will take over from capitalism as the primary paradigm for resource distribution on Earth. What will become of capitalism?
II.
In Marxism’s line of analysis, such shifts result from class struggles that turned into revolutions. Scarcity is the driver of such struggles. As do all species on Earth, we evolve out of the brutal force of scarcity. Natural selection, in the language of economists, is simply scarcity at play.
Therefore, an evolution in human productivity and ingenuity is at the heart of any economic paradigm shift. Conflicts arise when the old system could not produce or distribute enough for everyone to subsist. They are only settled when another system guarantees enough for everyone. Revolutionary shifts in the economic system happen due to insurmountable scarcity that forced society to evolve.
III.
This essay is born out of a world reckoning with a new reality. We are no longer in a big world with unlimited resources waiting for our ingenuity to exploit. Those are the days when the current teachings of mainstream economics proliferate. Now, we are living in a small world fast approaching its limits. At this rate, in the long run, we are not only dead but our species extinct.
Conditions for capitalism to operate are being called into question. First and foremost, assuming perfect substitutability between human-made and natural capital is flawed with grave consequences. All investment decisions – especially public investment – rest on this assumption that natural capital can be replaced with technological innovations. Increasingly, we understand that human innovations may not matter at all on an inhabitable planet. Second, even if our ingenuity is so great that we outrun the wrath of nature, capitalism is ripping the fabric of society apart as it fuels rampant inequality by design.
The frantic search for a new system has returned nothing but wishful models far removed from reality. To understand the future, one must recognize patterns of the past. Never before has economic history been so important.
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