Keynes Society

Talk review: Capitalism without capital

The western society is being increasingly dominated by the intangible economy. What does this mean for capitalism?

Professor Jonathan Haskel began by putting forward the notion that capitalism was not ‘bad’, as many observers of the world’s problems in recent years would have you believe, but that capitalism was instead changing. This was because the nature of investment and capital assets were changing: from investment in tangible assets, such as capital machinery, towards investment in intangible assets, such as training, software and R&D.

This change, he stated, was mostly hidden from view due to how GDP figures and company accounts were constructed, but that intangibles were starting to appear everywhere, with profound consequences. Currently, for every £1 of investment in tangibles, £1.10 is going toward intangibles, with this ration only set to increase. As shown below, the more recently a firm went public, the much lower the percentage of its value that could be explained by its tangible assets would be – demonstrative of the economy-wide changes that are taking place.

Source: Lev and Gu (2016)

The four economic properties of intangibles were set to dictate how our economy would function in the future: scalability, the sunken nature of costs, spillovers and synergies were already responsible for the structural changes we are seeing, such as the dominance of a few tech firms.

Some life advice followed, with Professor Haskel predicting that those who would benefit would be frontier firms tearing away from the rest due to scalability and synergies; as well as that the contested nature of intangibles would put a premium on people able to make sense of such contestability and combine all the intangibles together. Questions followed on everything from changes to the GDP metric to the future of the worker-firm relationship in an intangible economy, concluding this fascinating talk on the nature of our current capitalist system.

Jonathan Haskel & Stian Westlake’s book, ‘Capitalism Without Capital: The rise of the intangible economy’, is available online and in bookstores.

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