Current economic system is headed for collapse says Jeremy Rifkin. Photograph: Linda Nylind/Linda Nylind
At the very moment of its ultimate triumph, capitalism will experience the most exquisite of deaths.
This is the belief of political adviser and author Jeremy Rifkin, who argues the current economic system has become so successful at lowering the costs of production that it has created the very conditions for the destruction of the traditional vertically integrated corporation.
Rifkin, who has advised the European Commission, the European Parliament and heads of state, including German chancellor Angela Merkel, says:
No one in their wildest imagination, including economists and business people, ever imagined the possibility of a technology revolution so extreme in its productivity that it could actually reduce marginal costs to near zero, making products nearly free, abundant and absolutely no longer subject to market forces.
With many manufacturing companies surviving only on razor thin margins, they will buckle under competition from small operators with virtually no fixed costs.
“We are seeing the final triumph of capitalism followed by its exit off the world stage and the entrance of the collaborative commons,” Rifkin predicts.
The creation of the collaborative commons
From the ashes of the current economic system, he believes, will emerge a radical new model powered by the extraordinary pace of innovation in energy, communication and transport.
“This is the first new economic system since the advent of capitalism and socialism in the early 19th century so it’s a remarkable historical event and it’s going to transform our way of life fundamentally over the coming years,” Rifkin says. “It already is; we just haven’t framed it.”
Some sectors, such as music and media, have already been disrupted as a result of the internet’s ability to let individuals and small groups compete with the major established players. Meanwhile, the mainstreaming of 3D printing and tech advances in logistics – such as the installation of billions of intelligent sensors across supply chains – means this phenomenon is now spreading from the virtual to the physical world, Rifkin says.
Climate change
The creation of a new economic system, Rifkin argues, will help alleviate key sustainability challenges, such as climate change and resource scarcity, and take pressure off the natural world. That’s because it will need only a minimum amount of energy, materials, labour and capital.
He says few people are aware of the scale of danger the human race is facing, particularly the growing levels of precipitation in the atmosphere, which is leading to extreme weather.
“Ecosystems can’t catch up with the shift in the planet’s water cycle and we’re in the sixth extinction pattern,” he warns. “We could lose 70% of our species by the end of this century and may be imperilling our ability to survive on this planet.”
Convergence of communication, energy and transport
Every economy in history has relied for its success on the three pillars of communication, energy, and transportation, but what Rifkin says makes this age unique is that we are seeing them converge to create a super internet.
While the radical changes in communication are already well known, he claims a revolution in transport is just around the corner. “You’ll have near zero marginal cost electricity with the probability of printed out cars within 10 or 15 years,” he says. “Add to this GPS guidance and driverless vehicles and you will see the marginal costs of transport on this automated logistics internet falling pretty sharply.”
Rifkin is particularly interested in the upheaval currently rippling through the energy sector and points to the millions of small and medium sized enterprises, homeowners and neighbourhoods already producing their own green electricity.
The momentum will only gather pace as the price of renewable technology plummets. Rifkin predicts the cost of harvesting energy will one day be as cheap as buying a phone:
You can create your own green electricity and then go up on the emerging energy internet and programme your apps to share your surpluses across that energy internet. You can also use all the big data across that value chain to see how the energy is flowing. That’s not theoretical. It’s just starting.
He says the German energy company E.ON has already recognised that the traditional centralised energy company model is going to disappear and is following his advice to move towards becoming a service provider, finding value by helping others manage their energy flows.
He urges large companies across all sectors to follow suit and, rather than resist change, use their impressive scale and organisational capabilities to help aggregate emerging networks.
Network neutrality: key to success
While Rifkin believes the economic revolution is likely to be unstoppable, he warns that it could be distorted if individual countries and corporations succeed in their intensifying battle for control of the internet:
If the old industries can monopolise the pipes, the structure, and destroy network neutrality, then you have global monopolies and Big Brother for sure.
But if we are able to maintain network neutrality, it would mean that any consumer who turns prosumer, with their mobile and their apps, already can begin to feed into this expanded internet of things that’s developing.
People think this is off on the horizon but if I had said in 1989, before the web came, that 25 years later we’d have democratised communication and 40% of the human race would be sending information goods of all kinds to each other, they’d have said that couldn’t happen.
The paradox of over-consumption
Isn’t Rifkin concerned that the ability to produce goods so cheaply will just lead to more strain on the planet’s limited resources as a growing global population go on a buying frenzy?
He believes there is a paradox operating here, which is that over consumption results from our fear of scarcity, so will go away when we know we can have what we want.
Millennials are already seeing through the false notion that the more we accumulate, the more we are autonomous and free. It seems they are more interested in developing networks and joining the sharing economy than in consumption for consumption’s sake.
Nonprofit sector to become preeminent
What about the concern that the end of capitalism would lead to chaos? Rifkin believes the gap left by the disappearance of major corporations will be filled by the nonprofit sector.
For anyone who doubts this, Rifkin points to the hundreds of millions of people who are already involved in a vast network of co-operatives around the world:
There’s an institution in our life that we all rely on every day that provides all sorts of goods and services that have nothing to do with profit or government entitlement and without it we couldn’t live and that’s the social commons. There’s millions of organisations that provide healthcare, education, ministering to the poor, culture, arts, sports, recreation, and it goes on and on.
This isn’t considered by economists because it creates social capital which is essential to all three of the internets, but doesn’t create market capital. But as a revenue producer, it’s huge and what’s interesting is it’s growing faster than the GDP in the private market system.
At the age of 69, Rifkin admits he may not live long enough to see his hope for a better future materialise, but says the collaborative commons offers the only viable way forward to deal with the sustainability challenges faced by humanity.
“We’ve got a new potential platform to get us to where we need to go”, he says. “I don’t know if it’s in time, but if there’s an alternative plan I have no idea what it could be. What I do know is that staying with a vertically integrated system – based on large corporations with fossil fuels, nuclear power and centralised telecommunications, alongside growing unemployment, a narrowing of GDP and technologies that are moribund – is not the answer.”