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Has Capitalism Become Zero-Sum Game?

Entrepreneurs line the streets in many developing countries, and freelancers are on every corner, ready to make a buck.  Of course, while you can appreciate this dynamism, there’s obviously a flaw.  In many countries, nobody seems to get ahead.

The dynamism on the surface obscures the fact the economy behind it is actually a zero sum game, and in a zero sum game, economic dynamism is about survival, not economic progress. This isn’t new.  The zero-sum game has been the curse of Capitalism since it emerged at the dawn of history.  

In a zero-sum game, the wins are balanced by the losses.  The pie doesn’t grow and all boats don’t rise with the tide.  Often, a zero sum game is the result of cheating.  A situation where all of the gains from the game go to a few players and the rest fight for the same scraps, over and over again. Not surprisingly, a dynamic zero-sum game increasingly describes the situation we are in.

The US workplace is clearly becoming very dynamic.  Entrepreneurs and freelancers are everywhere.  Based on what I can discern, the percentage of the adult population working this way is 40% and rising fast.

However, all of the economic evidence indicates that this dynamism is based more on a need to survive than economic progress.  We are becoming poorer and working harder for less.

It appears that we have, for the first time in our history as a nation, a zero-sum economy.

Why did this happen?  How did we end up in a zero-sum economy?

The major reason is that the formula for economic progress provided by the industrial bureaucracy has failed.  Both government and corporate bureaucracies have failed us.  They aren’t able to deliver results anymore.  Worse, rapid technological advancement is decimating the amount of work available in that system.  Much of the work that was done by human beings is being replaced by automation, just like it did during the decline of the agricultural economy, and much of the work that is left is offered is volatile and short term in nature.

Another reason, and one that I think has been poorly explained, is that bulk of the wealth being produced is flowing an ever smaller number of players, rather than to the people who are in competition to earn it.   This suggests that the economy isn’t only in flux, it’s broken at a fundamental level.

Hey, I’m not against the idea of competition.  Far from it.

Competitive games are one of the better ways to allocate the gains of economic activity we’ve found.  However, I’m surprised nobody is willing to point out the obvious.  Simply, in a good and true economic game, it would be impossible to accumulate winnings millions of times larger than billions of other players.  The differences in mental performance, skill, effort, etc. between the individual human participants aren’t that great.  The only explanation is that competition between the participants doesn’t occur, and the game is either broken at a fundamental level or it has been hacked/fixed in a way that makes it nearly useless.  Either way, the game is broken, and we’re in trouble.

A broken economic game + the loss of the structure provided by employment in the industrial bureaucracy (from the predictability of it to the protections it afforded the participants) is a recipe for a potentially violent disaster.

So, what can we do? I’ve looked at this from a myriad of perspectives and there is only one thing that can work.

In order to prevent this shift from becoming a race to the bottom, we need to replace the structure of the old system with a new structure.  A structure that turns it into a cumulative system.

IN a cumulative system, every gain into a step forward for the entire system.

The last time we saw this happen, when a cumulative structure was pasted onto a dynamic zero sum system, the modern world was born.  I suspect we can do it again.  In fact, we must do it again.

More soon.

JR

PS: For new readers, this is one part of a book I’m writing. A couple of pages of every day. When I’m done, I’ll edit it, streamline it, and package it up for sale on Amazon on April 1. Sign up below to make sure you don’t miss a section in the meantime.

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Discussion — 11 Responses

  • Burgundy January 15, 2014 on 5:53 pm

    But the pie should be growing. Increased global production and productivity plus massive injections into the financial system by the World’s central banks. But somehow it is not. In fact every government, corporation, institution and person on the planet seems to be acquiring ever greater amounts of negative wealth (debt).

    It seems the pie per capita is shrinking due to increasing population, but also possibly shrinking as a whole. Even the rich are mainly rich in financial paper or inflated physical assets such as luxury this or that. They’ve become very accomplished at collecting the Casino’s chips. The entire economy seems to becoming a scam-onomy where everyone attempts to acquire wealth by cheating or dealing in illusions.

    It seems as if real wealth (the pie) is shrinking and we have to work harder for less (the quality of everything is diminishing). Automation being a way of working harder with the same or less human assets to make up for the shrinkage. Those without automation working on their behalf are losing their access to whatever real wealth is still left.

    Reply
  • Kevin Carson January 15, 2014 on 6:07 pm

    Capitalism may not have been a complete zero-sum on net, but like every other class system in history it’s had huge zero-sum elements of artificial scarcity and artificial property rights enforced by the state. There’s a zero-sum relationship between an absentee landlord who encloses vacant and unimproved land, and the tenants who have to pay tribute to occupy it. There’s a zero-sum relationship between the owner of a patent and the people who have to pay tribute to use an idea.

    Reply
    • John Robb Kevin Carson January 16, 2014 on 10:06 am

      Kevin, I suspect my mistake with this article is assuming that people actually believe they are living better today than they did 200 years ago, and that the economic system we have played a big role in that. JR

      Reply
      • Chris John Robb January 16, 2014 on 12:20 pm

        I can’t believe what I’m reading. Does anybody seriously believe we aren’t living better than we did 200 years ago? We are living a lot longer, in better health, with many more possessions – even the poor. In fact, the poor in the US might well qualify as rich in most of the world. Many of those unemployed due to the economic factors being discussed in this series (or even by choice), living on food stamps, unemployment and other welfare programs, have flat screen TVs, smart phones, and enough calorie intake that obesity is a major health problem.

        Reply
  • frankr January 16, 2014 on 2:39 am

    The economy has ever grown much faster than 2% per capita per year after inflation. Any growth in income you personally experienced faster than that 2% after inflation (promotion at work, success of a business you started, etc) was thus due to someone else getting less than 2%. In other words, in the short-run, capitalism, like every other system, has always been zero-sum. It’s only over the long-run that the system was not zero-sum for a while. I’m not as pessimistic as you about the long-run future. There’s going to be a big die-off at some point due to climate change, but after that, we’ll probably see a golden age of communism when most people get a guaranteed income for doing whatever they want. Maybe 100 years from now. The tricky part is making it past the die-off bottleneck between now and then. That’s what interest me. When the die-off happens, and how to survive it if it happens in the next 50 years (after that, I’m outta here).

    Reply
    • Burgundy frankr January 16, 2014 on 6:45 am

      Yes, we’re heading into the bottleneck, but unlike John’s assertion that we’re all in this together, we’re not. Those that can hitch a ride with technological evolution stand a greater chance of surviving the journey.

      Life on a planet with finite resources is always going to be a zero sum game. Last time I looked nature was losing badly with mass extinctions and runaway habitat destruction. That’s the difference between having technology working on your behalf and not. But of course we are a product of nature and depend upon those natural habitats for our own survival. The big downer is that technological evolution (aka the System) isn’t going to stop the unbridled destruction of our habitat for our sake, nor is it going to commit suicide for our sake and halt its breakneck progress. No, we humans have to change and adapt to stay on the technological bandwagon or perish with our natural habitat.

      That’s where our problem lies; life in a space suit 24/365 eating synthetic food isn’t really an option for the continuance of the human race; neither is building a controlled environment for 7+ billion humans, their crops and animals. So system-wise the chosen option will probably be to modify humans to cope with extreme environments (albeit the scope is as yet limited) as well as provide controlled environments to sustain a workable population to advance and maintain the thrust of technological evolution.

      Ever wondered what the sudden interest in going to Mars is about. A bit of a long shot to set up technological outpost on Mars (the Moon is out of the question due to the nature of its dust). More likely it is about advancing the techniques required to build controlled and self-sustaining environments for humans in hostile conditions. May just be required to live on planet Earth in 50 years from now.

      Reply
  • Jeremy January 16, 2014 on 8:35 am

    When was the last time a cumulative structure was pasted onto a zero-sum system? Hopefully you’ll elaborate in a future installment.

    Reply
    • John Robb Jeremy January 16, 2014 on 9:59 am

      Will do.

      Reply
  • Tony Noerpel January 17, 2014 on 12:50 pm

    Hi John

    three suggestions:

    consider energy flow. If it is not increasing then we are at zero-sum and when energy flow contracts, the economy has to contract. I would think we cannot beat thermodynamics. :+)

    Pareto’s yard sale model of the economy suggests that wealth always aggregates to a single agent even ignoring individual advantages if one assumes that every trade is only ever so slightly uneven. In fact ever since agricuture created some surplus humans have been plagued by inequitable wealth distribution: Pharoahs, kings, emperors, warloads, dictators, CEOs… nothing new here.

    Supporting Burgandy: The National Academy of Sciences recently advised that without global warming we will have accomplished the sixth mass extinction event in a few centuries time. With global warming it will likely happen by 2100. I would suggest that humans are not clever enough to survive a major mass extinction event but we may be weedy enough.

    http://www.nap.edu/catalog.php?record_id=18373 :

    great blog, enjoy the conversation.

    Reply
  • nickels January 23, 2014 on 11:20 am

    Even if economics is not a zero sum game, power is a zero sum game. Those with more $ have more power than those without.
    And worse there is a positive feedback with wealth. The more you have, the easier it is to keep and increase.
    So zero sum or not we have all become the slaves of the Oligarchy.

    Reply
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