How AI will force us to redefine capitalism

How AI will force us to redefine capitalismThe prospects are unsettling; however, if we undertake necessary measures, challenges can be overcomeSukhayl NiyazovBlockedUnblockFollowFollowingJun 29Photo by M.



on UnsplashCapitalism is the world’s most resilient and effective economic ideology ever devised, in spite of its shortcomings, because there is no viable alternative.

Not only did capitalism withstood the Communist challenge and successfully weathered the negative repercussions of the Industrial revolutions, but it has also become an almost universal economic policy for countries that want to evolve in a sustainable and effective way.

But today, many policymakers speak about the need to reform capitalism so that ensure its future vitality and flexibility as well as to address imminent challenges, such as relentlessly growing inequality, inability to tackle environmental degradation and climate change, inherent weaknesses in the financial system, which culminated in the financial crisis of 2008, in addition to an increasingly appealing Chinese mix of free-market capitalism and centralised, government-controlled economy.

Yet current challenges to capitalism pale in comparison to the threat once posed by communism.

However, in spite of ominous predictions about the eventual demise of the capitalist system, it was communism which proved to be unable to adapt to the changing realities and, in the end, collapsed, whilst capitalism reigned supreme in the wake of the Cold War.

This paved the way for the so-called Washington consensus — a universal adoption of capitalist principles around the globe and their support by the United States and European Union, through international institutions like IMF and the World Bank.

The reason why capitalism defeated communism was that the distributed data processing system is much more effective than centralized.

If a mistake in a system with multiple data processors occurs, other participants will be quick to utilize this mistake and return the system to equilibrium (this is how the invisible hand of the market works).

On the other hand, a mistake in the centralized data processing system, where decisions are made by a single processor, will have disastrous consequences, for the will be no one to correct it.

This advantage allowed capitalism defeat communism in the Cold War.

AI, however, might nullify capitalism’s decisive advantage and tip the balance in favor of centralized economic systems.

After all, the Roman empire existed for centuries with centralized data processing, and the Chinese dynasties, which lasted for hundreds of years, also relied on the centralized bureaucratic apparatus.

This means that if the conditions of the 21st-century change again, the capitalist distributed data processing system can become irrelevant in the age of AI.

It is known that in order to ameliorate AI algorithms, the quality and quantity of available data becomes an important factor.

Governments, if they have enough high-quality data, can use advanced AI algorithms to predict market forces and then evaluate potential choices in order to combat lingering crises or more effectively allocate resources.

What is the point of the free-market capitalism then?Previously, self-correcting market forces ensured far better efficiency than centralized economic planning.

However, a country which has enough data on the economic activity — and centralized systems are far better at collecting huge amounts of data than capitalist states, where data is dispersed among a variety of actors — will have a considerable advantage over its competitors.

Imagine a state where vulnerabilities that can potentially trigger an economic crisis are detected and cured even before the first signs of collapse appear.

There will be no such thing as business cycles: only economic expansion without any downturns.

In addition to the issue of the relevance of free-market capitalism, the advent of AI will challenge another pillar of capitalism — free-market competition.

The problem with the AI-powered economy is that industries naturally tend towards monopolization because of the positive feedback loop that is generated as a result of AI’s dependence on data.

If a particular company using AI gains an upper hand over its competitors, it will be very hard to resist a self-perpetuating cycle of monopolization.

Such a company, thanks to the already large set of data, will have advanced algorithms.

Advanced algorithms mean better user experience and more features, thereby attracting more customers.

More customers, in turn, generate more data, which further improves the existing algorithms and makes the company’s products even more appealing, ultimately resulting in an even larger customer base, ad infinitum.

The problem with monopolization is that a fundamental cornerstone of capitalism, the secret of its success and efficiency — free competition — may become a thing of the past.

Without the government’s intervention, capitalism’s engine of development will come to an end.

On the other side, there is a threat to the capitalist system from unprecedented social upheavals occurring as a result of the replacement of jobs by algorithms and robots.

Although studies show that in the short term more jobs will be created thanks to AI than eliminated, in the long run, it will be technically feasible to replace most of the jobs.

Moreover, in spite of the fact that new jobs will appear, they will be mostly white-collar jobs that require a very advanced level of knowledge and years of training at colleges.

The so-called skill bias in the age of AI will create the most unequal societies ever.

A new class of “useless” people will be formed, who will simply become irrelevant and redundant in the economy operated by AI algorithms and robots.

Their resentment towards the wealthy will likely lead to significant turmoil in society and destabilizing consequences.

In the aftermath of the Industrial revolution, profits of industrialists soared, whilst the life quality of the oppressed working class remained low.

Ideologies of socialism and communism emerged as a consequence, which sought to appeal to the sentiments of the working class, thereby posing the greatest threat ever to capitalism by directly challenging its foundations.

How will the democratic governments around the world respond to such challenges?.As for now, governments in the West failed to mitigate far less serious consequences of the ICT Revolution, such as relentlessly increasing inequality.

Will they able to withstand dramatic social upheavals and solve domestic challenges or will “the right of people to … institute new Government” prevail when “Government becomes destructive of these ends”, that is, when it will be unable to provide its people with “Life, Liberty, and the pursuit of Happiness”?Nonetheless, I do not think that an ineluctable collapse awaits the capitalist West and that Communist China will inevitably achieve absolute economic supremacy thanks to its centralized data processing.

After all, it is flexibility, adaptability and resilience that define democracies and help them endure for a long time, unlike dictatorships, which often stagnate and fail to evolve due to the inability and unwillingness to accommodate changes and implement urgent reforms.

The unique characteristic of the process of human development is that it is affected by the predictions made about it.

As G.

Soros has put it,… reality is a moving target because it is affected by our understanding.

 We are accustomed to think of events as a sequence of facts: one set of facts follows another the never-ending chain.

When a situation has thinking participants, the chain does not lead directly from fact to fact.

It links a fact to the participants’ thinking and then connects the participants’ thinking to the next set of facts.

Photo by Markus Spiske on UnsplashTherefore, the gloomy predictions about the demise of capitalism and the inevitable victory of the proletariat outlined in Das Kapital by K.

Marx didn’t come true.

As R.

Reagan has put it,How do you tell a communist?.Well, it’s someone who reads Marx and Lenin.

And how do you tell an anti-Communist?.It’s someone who understands Marx and Lenin.

There is a deeper meaning in this phrase: Reagan does not only say that Communists have misunderstood K.

Marx; he also makes a point that because anti-Communists understood Marx and Lenin and changed their behavior accordingly by undertaking measures that would improve the conditions of the working class so that quell the potential rebellion in its infancy.

As a result, revolutions didn’t occur and capitalism still existsBy the same token, ominous forecasts made today about the collapse of the capitalist system as a result of the AI-induced upheavals will likely force policymakers to reform the system so that it conforms to the expectations of the majority and reflects its needs.

Moreover, even though free markets might become obsolete due to the implementation of AI algorithms in economic decision-making, this doesn’t mean that capitalist United States will inevitably lose ground to Communist China.

The advantage that the US has is its huge amount of high-quality data about the economy, thanks to the long tradition of the responsible approach to collecting information.

For the United States and other capitalist countries, the best approach would be to combine and preserve such advantages of capitalism that cannot be replaced by AI — such as free competition and private sector’s inherent efficiency when dealing with investable resources — with the new technologies.

They can be used to identify potential weaknesses in the system and make the invisible hand of the market work not for the best of the market, but for the best of people.

We can accomplish this through measures that would mitigate the negative repercussions of an unregulated, laissez-faire capitalism — inequality, formation of monopolies, fraud and corruption.

This, however, will require the governments of the West to reign in Big Tech in order to prevent monopolization and preserve free competition, as well as to devise a more effective kind of taxing system and implement a set of measures that would reduce the level of inequality and buttress social stability.

To that end, we need interaction and cooperation between the government, civil society, NGOs and corporations.

Only through the mutual effort can we save capitalism and facilitate a peaceful transition to the new kind of societal order that would be relevant in the new era.

Just as the ideologies of communism and socialism emerged in the wake of the Industrial Revolution due to the poor conditions of the working class, if we fail to overcome the challenges to capitalism posed by the emergence of robotics, AI and Big Data, current order might come to an end because of the advent of completely new movements, beliefs and ideals.

Further:AI-powered monopolies and the new world orderHow AI’s reliance on data will empower tech giants and reshape sociopolitical ordertowardsdatascience.

comCapitalism vs communism from data science’s perspectiveHere is the comparison of communism and capitalism as competing data-processing systems.


comWhy white-collar jobs will be most adversely affected by the advent of AIMoravec’s paradox explains why white-collars, not blue-collars, will be hit first by AImedium.


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