Leaping Forward, Sliding Back: The Intangible Revolution Reshaping Economic Formations

This is a guest post by Theo Reks, author of Controlled Economic Evolution

At the beginning of summer, a great many things tend to happen. Before people settle into a proper holiday mood, there is usually one last surge of business activity. Yet amid the storm of loud news before the seasonal lull, one fact almost always remains in the shadows: this is precisely the time when national statistical offices publish data on how their economies performed in the previous year. The paradox is that this modest, easily overlooked information –  not wars, political scandals or even artificial intelligence –  may matter most for all of us. Still, every now and then, something of it does break through into the press.

In India, citing the World Intellectual Property Organisation, officials have stated that the country recorded the fastest growth in intangible assets among the world’s major economies –  6.6% (https://www.business-standard.com/economy/news/india-must-formalise-measure-creative-economy-to-spur-growth-saurabh-garg-126051100950_1.html)..China, too, is reporting success. Its economy, we are told, no longer relies simply on ‘steel and concrete’, but is beginning to treat software, databases and the results of R&D as core assets. The ‘Red Dragon’ is stockpiling a new kind of fuel: the share of investment in intellectual property products has reached 12% of total investment (https://finance.eastmoney.com/a/202604183709781229.html).

But this is not merely a matter of numbers. China is also speaking openly about unprecedented qualitative change: the rise of new economic sectors and the remarkable ‘resonance’ produced by the use of ideas inside old sectors. At first glance, one might ask: what is so extraordinary about injecting a new asset into an old economy? Is this not simply the logical next stage of gradual evolution? Chinese economists do not see it that way. They speak instead of a new ‘depth in the spatial reach of a large economy’.

The authors of the theory of Pole Kinetics would agree with them, though in their book, Controlled Economic Evolution: Pole Kinetics and the Non-Random Transformation of Modern Formations, they call it something else. It is not depth, but a higher economic orbital –  that is, another economic formation. The term, familiar since Marx, is redefined in the book with considerable rigour, based on an analysis of the structure of economic assets over the past century.

Spending money to expand intangible assets is not a sign of incremental evolution. It is a sign of a revolutionary shift between formations. Achieving the necessary and sufficient share of such assets in an economy is far from easy. But once this threshold is crossed, the opportunities are considerable: the entire social system of the country acquires a new resilience. Economic development is nonlinear, and history contains points that physicists call ‘bifurcation points’ –  moments at which small changes can produce large consequences and give rise to a qualitatively different system.

India and China are remaking themselves by injecting a new type of intangible asset into the bloodstream of their economies. India even speaks explicitly of building the institutions required for this task. And it will do so: the global experience and the algorithm of such system-building are systematised by the theory of Pole Kinetics.

Yet while some countries are thinking about a better future, others –  having already reached it –  are, for some reason, reopening the gates to a past long since exhausted. They fight over acres of land or barrels of oil that have lost their former meaning. Assets belonging to the economic formations of the nineteenth and twentieth centuries still seem attractive to them, even though, in their present condition, they no longer need them at all.