Declaring the end of capitalism has long been it’s own mini intellectual industry. And with the economic adversity brought on by the Great Recession of 2008, it’s an industry that has seen exponential growth. One of the recent, and more thoughtful, entries into this genre is Jeremy Rifkin’s The Zero Marginal Cost Society: the Internet of Things, the Collaborative Commons and the Eclipse of Capitalism. “The capitalist era is passing” Rifkin writes on the very first page, “not quickly, but inevitably.” The architect of it’s demise, according to Rifkin, is not so much an alternative system or the public outrage over the 2008 financial crisis, but rather a sort of bug in the very system of capitalist enterprise, one that carries with it the seeds of capitalism’s fall from preeminence. And that bug has everything to do with technology.
As technology evolves and the information economy becomes increasingly central to overall economic output, marginal costs begin to fall. Marginal cost simply means the amount it costs to produce every additional unit of a product beyond the fixed costs it cost to produce the original unit. In capitalism, profit is made on those margins. But as information technology works it way through the economy, margins collapse. For example, in a wired world, once an original song is recorded and put online, the production cost to sell each additional unit approaches zero. Copies can be made cheaply and easily and distributed anywhere in the blink of an eye. No need to pay a record company or agents. As new technologies improve production processes and reduce distribution costs, those middlemen are cut out, adoption rates scale laterally, and vertically integrated companies of a bygone age get flattened. “The near zero marginal cost phenomenon has already wreaked havoc on the publishing, communications and entertainment industries as more and more information is being made available nearly free to billions of people.” Rikfin writes.