"In 20 years, there will be only two companies. Everything will be made by Foxconn and sold by Wal-Mart".
What a telling quote. Let's do a little thought experiment. Let's imagine that world (call it FoxMartWorld, if you like) for a moment - because it lays bare the contradictions of industrial age capitalism.
In it, corporate profits would balloon, because two megacorporations would enjoy the bulk of bargaining power.
Within them, a handful of managers would capture the lion's share of rents. There would be no pressure, for example, to issue dividends, buy back shares, or the like.
Productivity would probably skyrocket upwards, as people were told to either work longer, harder, and faster - or not work at all.
But because workers' earnings wouldn't keep pace with productivity, demand itself would be constrained. People probably wouldn't be able to afford all the stuff, eventually, they were producing. The result would be overcapacity: empty Wal-Marts and shuttered Foxconn dorms.
And because working at either Foxconn or Wal-Mart isn't the most fulfilling thing on Planet Earth, happiness would dwindle.
So in FoxMartWorld, we'd have an economy that went something like this: boom, bubble, pop, crash, stagnate.
That's in financial terms.
We'd have an economy that went something likes: fizzle, stagnate, dwindle. That's in terms of happiness and real wealth creation.
Here's what there wouldn't be in FoxMartWorld, then:
- Working incentives
- Real value
- Asset gains
- Marginal happiness
- Enduring growth
Here's the point of my little fable about FoxMartWorld, in case you haven't guessed it already. That's more than a little bit like the economy we already have.
Why? Because it doesn't matter if there are only Foxconn and Wal-Mart left. We already have the effective equivalent: a global economy that's composed of many Foxconns and Wal-Marts, though they might have different names.
In other words, it's not the companies themselves that matter. It's the institutions: how we manage, measure, motivate, and monitor. These are what are common to Foxconn, Wal-Mart - and nearly every other company under the sun. Rebooting, rethinking, reconceiving capitalism begins there.
And it's until we update those obsolete, rusting institutions - until we master the art and practice of institutional innovation - that the contradictions of industrial age capitalism will, like an iron cage, keep us from discovering a more enduring prosperity.
Like I sometimes say: want fries with that Ponzi zombieconomy?