Is Capitalism Hitting Its Limits?

Capitalism has been great for our global society — it has enabled incredible access to resources and encouraged our continued growth. But are we starting to see capitalism hit its limits? I think so.

The Case for Capitalism

Capitalism is a great mechanism for optimizing a large society. The needs of a society are many — for large countries, especially modern, there are the things everyone needs (housing, plumbing, transportation, food, clothing, a job, family) and there is an even greater array of goods and services that are needed only by certain niches (trade tooling, hobby gear, medications and medical devices, specialty clothing, sporting goods, smooth jazz, the New Jersey Turnpike). There is a near-infinite number of needs for any society and no single organization could ever track them all, let alone dictate who should need each and who should produce and serve them (pretty much why communism-oriented strategies never work in practice).

Capitalism resolves this by allowing members of the society to self-organize. People who need a resource need only find someone capable of providing it and have something they can offer in trade (with currency being a proxy to keep markets as open as possible). It also offers additional incentives to that self-organization which ensure that needs are served as efficiently as possible while still allowing niche needs to be served.

We can argue that capitalism is good because it is good for a society as a whole. It allows that society to maximize the availability and appropriateness of its resources.

The Limits of Capitalism

But what happens when what the society needs is knowledge? It is now undeniably evident that our global society is innovating at an exponential rate — which has proportional benefits— and that innovation feeds on knowledge. What we are seeing today is that our society seems split on whether or not to treat knowledge as a traditional resource.

Most of the knowledge we encounter everyday is free — wikipedia and a seemingly endless supply of other helpful websites, blogs, news sources, twitter, Google’s map data. And much of that free information drives innovations which we often benefit from for free or very affordably.

But, the truth is, we see all that information because it’s free. Much of the world’s information — the most useful, in fact — is often locked down. That which isn’t entirely proprietary is costly. The majority of new research, medication recipes, software code, API’s, and books are all behind paywalls or kept confidential. And with good reason — that new information is usually very expensive to produce. In a capitalist society, content creators deserve to be rewarded for the value of their hard work and they can only do so by packaging and selling their information or using it themselves to produce new innovations.

The limits of capitalism come from this withholding of information. It eats away at the very features of capitalism that were originally beneficial to our societies. With most of the world’s raw resources exposed, most easy problems solved, and most simple-to-construct products available at the cheapest price, the only significant constraint on our society’s progression is the rate at which we can innovate. The withholding of information creates artificial monopolies on innovation which, in turn, prevents that innovation from being made efficient. Additionally, this knowledge is proving to be the most valuable resource in our society which, in turn, encourages players to double their efforts in producing, capturing, and locking-down proprietary knowledge.

The Big Question

This brings me to my original question. Is capitalism hitting its limits? I think so but I haven’t got a clue of what to do about it.

Thanks to Joe Kirwin for reading drafts of this article.