Prophecies of Doom

How the Seeds of Self-Destruction Are Baked into Capitalism

This essay is part of a series comparing the twilights of (1) Rome's slave-based economic system and (2) the Middle Ages' feudal system to (3) today's capitalist economic system. In addition to the broad life cycles of these economic systems, we'll note similarities between infectious diseases and changes in communication technologies common to all three eras. Finally, we'll see how belief systems rise and fall in tandem with these broad economic systems. When these systems seize up and stop functioning, people begin questioning authority. And that, in turn, leads to collapses of bedrock conceptions of reality itself.

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Introduction

On the 2020 campaign trail, dark-horse presidential candidate Andrew Yang was fond of saying, “We never knew that capitalism was going to get eaten by its son, technology.” But that’s the very idea that Karl Marx painstakingly laid out over 150 years ago. His prophecy of doom was simply that once tech replaces enough employees, the capitalist system—comprised of employers and employees—will come crashing down. At that point, Marx supposed, we’d invent new production roles to replace the familiar employers and employees of capitalism. Just as those roles, once upon a time, replaced the lords and peasants of the Middle Ages.

The Advent of Capitalism

Capitalism was born in the aftermath of the Black Death, which killed a third of all Europeans. The resulting labor shortage gave the survivors an idea. Rather than swearing fealty to any particular feudal lord, the peasantry started selling their labor to the highest bidder instead. After that, a dynamic economy populated by employers and employees slowly began displacing the old feudal system of lords and peasants.

The horror of the plague also prompted Europeans to begin questioning the political authority of their day, the Roman Catholic Church. Wealthy banking families, notably the Medici of Florence, were the first to challenge its intellectual monopoly.

This challenge eventually culminated in the Protestant Reformation, a continent-wide conflagration that Europe resolved by drawing international borders the Pope was not allowed to cross. After that, each country chose between Catholicism and Protestantism, free from the influence of the Vatican. The modern nation-state was born.

The Treaty of Westphalia formalized international borders in 1648. With the political power of the Pope severely curtailed, banking houses rushed to fill that power vacuum. Just 46 years later, the world’s first surviving central bank popped up in London. And we’ve lived in a political order dominated by banks ever since.

Just as the Pope once crowned the noble heads of Europe, international bankers still hold political influence over our nominal heads of state. Banks rule our capitalist system of employers and employees the way the Pope used to rule over the feudal system of lords and peasants.

The Prophecy of Doom

The basic plumbing of the capitalist system is that employers (1) borrow money from banks and then (2) pay off their loans by hiring employees to bring goods and services to market.

This arrangement heavily incentivizes employers to minimize the number of paid employee hours they must deduct from their profits. That’s where technology comes in. Labor-saving tech is prized by business owners for its ability to fatten profit margins and undercut competition. That dynamic makes capitalism into a technological arms race.

However, this race to innovate and apply new technology also creates a countdown clock to disaster. With the recent arrival of ChatGPT, it’s easier than ever to imagine a future in which production is carried out by robot armies and managed by AI software. Under such a scenario, a handful of employers would control this vast, automated production apparatus.

However, without workers earning wages, no one would have the money to buy the resulting products. Collectively, customers and employees are the same people. That’s why capitalism’s relentless incentivization of technological improvement gives it a logical expiration date.

All the way back in 1867, this was the simple observation of Karl Marx. No system that divides people into employers and employees can survive past the point where technology renders the employees obsolete. At that point—Marx prophecied—new production roles would arise to replace employers and employees. Just as those roles once replaced the lords and serfs of the Middle Ages.

The Tipping Point

All the way back in the 1970s, we reached a crucial tipping point in America. It came unheralded and unrecognized.

During that decade, the supply of labor doubled as women arrived at the workplace for the first time in US history. Meanwhile, technology cut deeply into the demand for that labor. Long-distance communications and international jet travel facilitated the mass offshoring of American jobs. Computers radically enhanced the productivity of the remaining domestic workforce, such that many fewer workers were suddenly needed to perform the same tasks. This collapse in the demand for labor—in concert with a burgeoning supply—had a predictable impact on the price of labor: wages stagnated relative to worker productivity.

50 years of stagnant wages for employees has resulted in escalating political strife. But it has not yet resulted in the dramatic collapse of capitalism foreseen by Herr Marx. That’s because we slapped a temporary blowout patch over the problem.

The Patch

This temporary patch was the mass extension of credit to the working and middle classes. The 1980s are known for the rise of shopping malls and credit cards. In previous eras, credit cards were primarily used by business travelers. But in the 80s, they became ubiquitous. Debt was the only way the working and middle class families could afford to continue consumption apace.

And that brings us back to the banks that dominate politics in our modern era. We’ve papered over the fundamental problem of technology depressing wages by augmenting employees’ income with interest-bearing debt. But over the long haul, of course, the interest owed on that debt exacerbates the problem.

Debt was also a key factor in the Fall of Rome. For the Romans, slavery caused dangerous debt levels by undercutting the incomes of free laborers. Wealth inequality exploded to the point that there was almost no one left with an incentive to defend Rome from barbarians at her gates. The Fall of Rome gave interest-bearing debt such a bad name that the Roman Catholic Church considered moneylending to be a sin all the way up until the time of the Protestant Reformation.

Today, household debt sits at record levels. Meanwhile, ChatGPT is poised to make large swatches of employees redundant, from teachers to writers to paralegals. Our current situation is not unlike the one faced by the passengers on the Titanic. No one is unaware that we have a problem at this point. But, for most of us, the true scale of the looming disaster has yet to sink in…

Conclusion

The interplay between capitalism and technology means that there is a countdown clock built right into the capitalist system. It’s a ticking time bomb, scheduled to blow up in our faces when enough employees are made obsolete by technology. In the last half of the nineteenth century, Karl Marx articulated the nature of that problem definitively. But a final reckoning with his prophecy has been delayed by the kick-the-can-down-the-road tactics of international finance, the political power-brokers of the capitalist era.