A tiger has many stripes, and we seem to have given them all different names: global, financial, immaterial, extractive, parasitical, monopolistic —so many adjectives that we use to try to understand what is happening to good old industrial capitalism. Instead of describing new stripes, it might be more beneficial to step a little back and realize that it is not a tiger anymore. Instead of explaining how the past is being deformed, we should look at what is being formed.

We are in the midst of a digital revolution as impactful as the industrial revolution was as we emerged from slavery and feudalism. It's changing the way we live, socialize, work, live our lives, the way social surplus is extracted, and the way it is used. In Germany, it's been called Industry 4.0, but it reaches far beyond industry and robotics. Lester Brown stresses the environmental dimension and calls for a Plan B 4.0. Jeremy Rifkin calls it a new Age, as in The Age of Access and The Zero Marginal Cost Society. Hazel Henderson stresses the opportunities for a Win-Win World. Shoshana Zuboff calls it information civilization. How far do the changes go? How long can we keep calling it capitalism?

At the centre of what we call capitalism is the concept of capital and what the classics called reproduction and accumulation of capital. Capitalism clearly worked for the elite, but also for the large masses, even if geographically circumscribed. And the logic is simple enough: money was invested in production – factories, machinery, salaries —which generated the goods we needed, or else they would not sell, and it generated profits which could be reinvested in more production and accumulation of capital. Surplus value was extracted through low salaries, but at least jobs would be created. The system was unequal but productive. It was capital in its dynamic cycle of reproduction and expansion.

The surplus allowed for private fortunes but also for sufficient taxes to support some form of welfare state. This allows governments to fund infrastructure, enhancing productivity —and social policies, such as health, education, and similar collective consumption services, essential for social well-being and productivity. As more capitalists gradually understood Henry Ford's message that better salaries generate demand and thus stimulate the system, a certain feeling spread that we had reached a balance. Keynes presented the theoretical framework.

But it didn't last. On the one hand, progress in richer countries was based on solid exploitation of the poorer part of the world, basically for the prosperous 15% of the global population. On the other hand, with Margaret Thatcher and Ronald Reagan, the system started to change in the more prosperous parts. The 1980s became known as "the lost decade", but what followed was not glorious. Taking the US as an example, we see that from 1990 to 2020, the wealthiest 10% gained speed impressively, the following 40% somewhat modestly, and the bottom 50% —the brown, barely visible line at the bottom of the graph— stalled. It wasn't only because salaries at the bottom stagnated but also because privatization drastically reduced public investment in social policies and infrastructure. A new mix, we could call it a metamorphosis, was underway. Exploitation continues, one might say, private ownership too, so the system would be basically the same, but with more technology.

Marjorie Kelly was among the first to point out, in 2003, that the very logic of capital accumulation was being displaced. In her book The Divine Right of Capital, she showed that the so-called investors, shareholders of a great and growing number of companies, extracted much more than they contributed. The financial system was building a financial drain on productive activities. In the emerging logic of absolute shareholder priority, productive reinvestment, wages, social or environmental concerns lost weight in the overall decision process. Milton Friedman had given a profound displacement of the logic of the accumulation of capital academic lustre: The business of business is business. It earned him a Nobel prize from the Bank of Sweden and massive popularity with the emerging corporate financial interests.

Thomas Piketty gave a structure to what was changing in capitalism. World GDP, the production of goods and services, grows around 2.0 to 2.5% in the long run. But financial earnings, by bankers and institutional investors, pay between 7 and 9% for more significant amounts. This means that a caste of more affluent financial groups got richer by a far greater amount than the growth of real wealth. He called it capital in the 21st Century. David Harvey correctly stated that this is not capital but wealth. Because money —just paper or a magnetic sign in a computer— becomes capital when productively invested, generating more product, capacity, jobs, salaries, and so taxes for the government to provide social policies and infrastructure. What was a productive investment was gradually surpassed by extractive finance.

Money extracted from the reproduction process to become personal wealth is not capital. It is not generated through profit on efficient production but through dividends for absent owners. Joseph Stiglitz and others call it unearned income. The free-riders of the economy are rentiers, and the money they extract from the productive sector is rent. Mazzucato states it clearly: "The financial sector now accounts for a significant and growing share of the economy's value-added and profits. But only 15% of the funds generated go to businesses in non-financial industries. The rest is traded between financial institutions, making money simply from money changing hands, giving rise to the phenomenon Hyman Minsky called "money manager capitalism". To put it another way: when finance makes money by serving not the real economy but itself (p.136).1

In his excellent Killing the Host, Michael Hudson goes a little deeper:

Today, the Finance, Insurance and Real Estate (FIRE) sector has regained control of the government, creating neo-rentier economies. This post-industrial finance capitalism aims to be the opposite of that of industrial capitalism as known to 19th-century economists: It seeks wealth primarily through the extraction of economic rent, not industrial capital formation. Tax favouritism for real estate, privatization of oil and mineral extraction, banking and infrastructure monopolies add to the cost of living and doing business. Labour is being exploited increasingly by bank debt, student debt, credit card debt. At the same time, housing and other prices are inflated on credit, leaving less income to spend on goods and services as economies suffer debt deflation (p.1).2

A key issue in increasing profits through salaries is the creation of jobs. But productive investment or job creation are not required to raise rent generated by debt, dividends, real estate speculation and the like. This breaks down the essence of what we knew as capitalism, where profits came from production, wages were raised to provide demand, and taxes paid for infrastructure, social policies, and overall governance. It changes the nature of capital accumulation, which is the essence of capitalism. Can the fact that BlackRock manages assets worth 8.7 trillion dollars, five times the GDP of Brazil, be overlooked? The different kinds of intermediaries, banks for money, platforms for communication, and traders for commodities, are means, not ends. In economic terms: they are necessary, but only insofar as they stimulate the production of goods and services. These costs are unjustified if they are greater than the economic stimulus they generate. And the costs presently are far greater: the tail is wagging the dog.3

Brazil provides a clear illustration of this transformation. According to Carlos Lessa, former president of BNDES (Banco Nacional de Desenvolvimento Econômico e Social), bank profits in Brazil grew by 11% during the Cardoso administration in the 1990s, and by 14% a year during the Lula/Dilma 2003-2013 decade. These profits rose as the country was de-industrialized. No economy can survive this level of unproductive rent extraction. President Dilma did try to reverse the trend by drastically reducing interest rates in 2013, using public banks. She did not last: a war was started against her presidency, resulting in her impeachment. 2013 was the last year the Brazilian economy grew by 3%. As of 2021, Brazilian per capita income is below that of 2011 (IMF, April 2021).4 Financialization hit Brazil with exceptional strength. But the system is taking over in the capitalist world we knew.5

The key question is: when the core of the capital accumulation logic is displaced, how long should we call it capitalism? The digital revolution goes much deeper than Industry 4.0. Another animal is being born.


1 Mazzucato, M. (20188). The Value of Everything: making and taking in the global economy. Public Affairs, New York.
2 Hudson, M. (2021). The Rentier Resurgence and Takeover: finance capitalism vs industrial capitalism, January.
3 The Age of Unproductive Capital: new architectutres of power. Cambridge Scholars, 2019.
4 in Valor Econômico, 10-12 April 2021, p.1, e p. A3.
5 Dowbor, L. (2021). Beyond Capitalsim: new social architectures. Cambridge Scholars.