Life After Capitalism
For the past three years I’ve been writing and speaking on the subject of Life After Google: the potential move of the world economy beyond the dual crises of internet hacking of private data and central bank hacking of global money.
I said online commerce is moving into the Cryptocosm, a new blockchain based architecture for networks and finance.
By supplying a new and unimpeachable security model for personal data and identity, the Cryptocosm remedies both the global debauch of money and the porous pyramid of the internet, where all money, data and power rises to the top — to a few online leviathans in the US and China. Concentrated in a few salient companies and datacenters, both the wealth and the data of the world stands ready to be raided by politicians, central banks, and government regulators.
In the US, we imagine that the data hacks come chiefly from China. Certainly China with its millions of engineers, Communist party intelligence aparatchiks, and computerized culture represents a threat to the currently centralized architecture of the American internet and economy.
But the assaults on Google, Facebook, and Amazon by the bureaucrats of the European Community and the US Administrative state, with repeated fines of billions of dollars and impossible liabilities for “privacy,” “fake news,” and “hate speech” are far more menacing than the Chinese depredations.
Moreover, China amazingly has become the world’s first country to launch a national blockchain platform and a new digital currency affiliated with it. While US Congressmen and EU officials express fear and trembling over Facebook’s proposed new Libra, the Chinese Communist party has made blockchain into a “core technology.” It has already launched an affiliated digital yuan to fund online food purchases through our long-recommended investment vehicle Tencent.
Whether the particular blockchain architecture adopted in China will end up as a bastion of individual identity and data remains to be seen. Launched in China is a frenetic entrepreneurial struggle to define the specifications of their new National Blockchain network and new currencies.
But as I have written, the Chinese system embodies many contradictions…
The Most Menacing Threat
As the Chinese renew the reach of their political authoritarianism, they are launching new stock exchanges, new venture capital projects competitive with Silicon Valley — fostering three times more initial public offerings than the US — and enlarging the commitment of their educational system to the technical STEM domains that are the foundation of the new information economy.
While the US educational system sinks into a morass of climate cults, gender fantasies, and diluted scientific disciplines, the Chinese are doubling down on rigorous STEM pursuits from the high school level on.
Today, however, I have to acknowledge that the world faces a deeper and more devastating crisis than Life After Google. The suppression of the US economy under the mindlessly destructive lockdown regime is incomparably more menacing than any threat from China or the virus.
We are moving into a new order that might better be termed Life After Capitalism.
Heather Macdonald of the Manhattan Institute expressed our predicament in this month’s Imprimis from Hillsdale College:
The public officials who ceded their authority to the so-called experts were deaf to the pleas of law-abiding business owners who saw their life’s efforts snuffed out. They engineered the destruction of trillions of dollars of wealth, through thoroughly arbitrary decision making. And then they stood by as billions more dollars of work burned down. Public order and safety, equal treatment under the law, stability of expectations — all the prerequisites for robust investment have been decimated. The failure to quell the riots means that more are inevitable. Any future business faces possible destruction by another lockdown or by looting — which it will be is anyone’s guess.
The coronavirus lockdowns demonstrated our leaders’ ignorance of economic interdependence. After the riots, that ignorance has been shown to run far deeper. It is an ignorance about government’s most fundamental obligation: to safeguard life, liberty, and property. It is an ignorance about human nature and human striving.
Property and capital are not soulless abstractions, easily replaced by an insurance payout, as the rioters and their apologists maintain. (The Massachusetts Attorney General noted that burning is “how forests grow.”) Capital is accumulated effort and innovation, the sum of human achievement and imagination. Its creation is the aim of civilization. But civilization is everywhere and at all times vulnerable to the darkest human impulses. Government exists to rein in those impulses so that individual initiative can flourish. America’s Founders, schooled in a profound philosophical and literary tradition dating back to classical antiquity, understood the fragility of civil peace and the danger of the lustful, vengeful mob.
Our present leaders, the products of a politicized and failing education system, seem to know nothing of those truths. Pulling the country back from the abyss will require a recalling of our civilizational inheritance.
That, not China, is the challenge faced by investors today. But the way out is illuminated by a new information theory of economics where we understand that wealth is knowledge not power, growth is learning not governmental engineering, and money is a measuring stick not a magic wand for central banks.
True money reflects the inexorable influence of time on all economic decisions. What remains scarce when all else becomes abundant, true money is the measure of value. It is registered by the time-prices of all commodities, how many hours and minutes you have to spend to buy goods and services. This measuring stick applies across all political and economic systems, all regions of the world, and all epochs of human achievement.
When these principles are understood, it becomes clear that the system currently prevailing in the world, which we call capitalism following Karl Marx’s coinage, is not aligned with the realities of economic life. It has been seized in a coup by authoritarians in the universities and cities of the West and governments of the world.
Even while the global economy founders amid a vast and totally reckless assertion of power, entrepreneurs everywhere continue their processes of learning, accumulating new knowledge to face the future. In our newsletters and Moonshots, we are finding companies and technologies that can make Life After Capitalism a time of creativity and accomplishment.
Editor, Gilder’s Daily Prophecy