by Noriyuki Morimoto
Karl Marx argued that the self-propagation of capital is the growth engine of the capitalist economy. He predicted that as capital accumulates, the ratio of profit on capital would keep declining and ultimately disappear, which would trigger a depression, the end of capital’s self-propagation, death of capitalism, and the rise of a revolution. Fortunately, this prediction did not come true.
The capitalist system has survived to the present day, partly because of the intervention of politics in the autonomous development of the economy, including the skillful course correction to a welfare state, but the more important factor is probably technological innovation.
What Marx could not have imagined is endless technological innovation. This takes place in all areas, such as energy, telecommunications, data processing, transportation, medicine, space, and ocean development. Huge investment in innovation has always been an important factor in the capitalist system, as it has always activated capital.
Innovation is not only about science and technology but also covers various fields, including social engineering of organizations, updating legal systems with the reorganization of ownership and use rights, and innovative forms of expression such as in formative design. For example, in the case of the relationship between deregulation and agriculture, the idea is to drive agricultural growth through innovation in social institutions rather than scientific or technological breakthroughs.
With continued innovation, capital will continue to work vigorously and keep retaining profits regardless of capital accumulation. However, in seeking even higher capital profits, capital must turn to monopoly. Monopoly control over production and prices will ensure unjustified profits.
In the past, monopoly meant monopolizing the means of production. Today, however, a monopoly is to monopolize technology. Once allowed to monopolize, monopoly capital, secure in its vested interests, will not only fail to innovate itself, but will be eager to nip innovation in the bud, lest it be threatened by outside innovation. If this happens, innovation will end, and the capitalist system will ultimately collapse.
Hence, the activities of mega corporations with monopolistic control over advanced technologies are considered problematic. On the other hand, however, the publicization of technology will diminish the profit incentives for innovation, the benefits that technological innovation brings. Without technological innovation, there is no growth, and even with technological innovation, there is no growth because of monopoly: capitalism is ultimately facing a major turning point.
[Category /Growth Strategy]
Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.