Our Economic Black Hole
Or: Capital Must Beget Capital
The inequality r > g implies that wealth accumulated in the past grows more rapidly than output and wages. This inequality expresses a fundamental logical contradiction.
—Thomas Piketty
In 1947, American workers took home seventy cents of every dollar the country produced.
That line has bent the same direction for almost eighty years, and it is curving ever faster now. In the quarter that set the record, productivity grew at its fastest pace in two years, and economists are pinning the jump on AI. Goldman thinks the technology could erase a quarter of all working hours before the adoption curve finally flattens.
What follows is a prophecy that has already half-arrived: When machines have rendered human labor obsolete, capital begets capital, because nothing else is left to.
This is what’s left over after you subtract everything real and solid and true. Subtract the dignity of a job, the wage as the thing that made you a citizen with a stake, and four centuries of telling ourselves that what a man does is what he is. Subtract the assumption that making anything requires a person somewhere in the process.
What remains is a loop. Money makes money, machines make the goods, and people just sit and watch.
There’s a subtle wrinkle in that loop. Growth has always been tied to energy, no matter how loosely. You burn something, build something, sell it to someone who burned something else to afford it. Even the most abstract finance was, at some remove, a bet on that churn. And the churn has a ceiling. Cover the planet in solar panels, wrap the sun in a Dyson sphere, and compounding at two percent a year you still run out of star eventually. It might take centuries. But it’s the arithmetic of real things, and real things end.
Decouple capital from energy and the ceiling disappears. Now you have money chasing money with no factory at the bottom of it. Valuations stop resolving to anything you can point at, because output is no longer the thing in short supply.
This is the financialization of everything, except the everything has quietly gone missing, and what’s left is the financialization feeding on itself. Sixteen points of national income have already moved from workers to owners since the government started counting and we have yet to find the floor.
You’d think the whole arrangement would be fragile. Property is a social arrangement, held up by institutions, and those institutions run on a rough public sense that the people who own things mostly earned them, or descend from people who did.
Cut the cord between work and livelihood and that sense erodes rather quickly. The man who owns the machines is living on timing and inheritance, and historically that is not a safe place to stand. Revolutions tend to be arguments about who owns what, and they often resort to force.
That’s the hopeful reading, anyway. The darker one is that a revolt needs people who can coordinate, coordination needs a shared story, and a shared story is the one thing algorithmic technology—the inevitable feed—is best at dissolving.
You can have plenty of grievance and no movement.
You can have a permanent underclass that never coheres because the feeds keep everyone sorted into private, incompatible versions of being wronged. The quiet hope of the global elite in Davos is that this prophecy holds long enough that it can reach escape velocity.
A dollar is worth something because somewhere a person wants a thing another person made. Cut both ends of that and the dollar is pointing at nothing. An economy where humans neither make nor buy in any real sense leads to valuations that are not only high, but also undefined. Run the loop long enough and it eats the number underneath it.
In this way, the morbid prophecy carries its own ending. Capital begetting capital with no labor underneath it is a perpetual motion machine, and perpetual motion machines do not exist. It is both a tautology and a contradiction: capital must beget capital because nothing else can, right up until the thing being begotten refers to nothing, and then it is a very large figure divided by zero.
What comes next, I genuinely don’t know, and I’d distrust anyone who claims to, because the confident ones usually have money riding on a particular answer.
The world where capital begets capital is not a world its owners would actually want to live in, even if it’s the one for which their portfolios are built. Their wealth would mean less every year because there’d be less and less for it to mean anything against. The end of total financialization is total irrelevance donning a cheap costume of total victory. Monopoly comes to mind: you can win a game so completely that everyone stops playing, and then your score is just a number you remember.
So, to this humble scrivener the prophecy is both true and self-defeating at once. The Gospel of Mark gave us the line Lincoln later made famous: a house divided against itself cannot stand.
What stands is probably what was there before any of this started:
Land you can stand on.
Work done with your hands.
The people you’re related to.
Your own body.
A feast.
The Mass on Sunday.
None of these were ever claims on future earnings. They were just the facts of being alive on a given day. They constitute leisure, what Josef Pieper deemed the basis of culture; those precious things that work was supposed to make room for and instead crowded out. This prophecy is the death notice for total work.
What comes after is either leisure in his sense or a cheap forgery of it, and we are choosing between them right now, while it’s still cheap enough to choose.
Per my about page, White Noise is a work of experimentation. I view it as a sort of thinking aloud, a stress testing of my nascent ideas. Through it, I hope to sharpen my opinions against the whetstone of other people’s feedback, commentary, and input.
If you want to discuss any of the ideas or musings mentioned above or have any books, papers, or links that you think would be interesting to share in a future edition of White Noise, please reach out to me by replying to this email or following me on X.
With sincere gratitude,
Tom
Damit Tom. You did it again. Great stuff.
I love this, Tom. It's something I've known for a while but would not have been able to explain or express it as well as you've done here. Thank you.