Rethinking Economics. A Blueprint for Engineered Capitalism
In a world where capitalism is failing the falsifiability test, we need to examine the alternatives and move to Engineered Capitalism.
My previous articles in this series argued that capitalism, in its current form, is no longer practical. It now fails the falsifiability test, which is a problem for any good theory, and there is a $43 trillion yearly shortfall between the amount needed to house and feed everyone in the world versus the amount in the hands of the non-elite. Small tweaks won’t balance this, it’s a fundamental issue.
This is not just a rich vs poor country issue, either, and data showed us that even countries such as the US will pass into a shortfall whereby the non-elite can fundamentally no longer afford food, housing and healthcare in the 2030s. This is happening in every country. Capitalism’s biggest economies are now fundamentally failing as a result of resource hoarding, and are on the brink of collapse. Whilst politicians tell us, instead, that the problems we’re seeing is because of immigrants. The equivalent of rearranging deckchairs on a global titanic, where one billionaire takes ten lifeboats each.
An economic system that cannot clear the bar of keeping its participants alive, let alone allow them space to innovate, has forfeited its social license. In this follow-up, I explore potential alternatives to our current economic system, assessing which might best serve us, particularly in a world that may be transformed further by artificial intelligence.
Modified Capitalism
Modified capitalism preserves the core engine of capitalism—market incentives—but seeks to temper its worst outcomes. The basic idea is that private enterprise, competition, and innovation remain, but with robust redistributive/limit-break mechanisms in order to prevent disastrous hoarding of resources. This is not a rejection of capitalism, but a recalibration.
The Nordic Model, widely referenced in discussions of successful alternatives, shows how capitalist principles can coexist with high taxes and a generous welfare state. In Sweden, Denmark, Norway, and Finland, government-provided healthcare, education, childcare, and pensions are funded by taxes on both income and wealth. These countries exhibit high rates of innovation and entrepreneurship, suggesting that taxing the wealthy does not necessarily deter economic dynamism. Yet these nations still have billionaires, and wealth continues to concentrate at the top, albeit more slowly. It might be a step in the right direction, but it still suffers hugely from capitalism’s flaws and will eventually disintegrate.
Inclusive Capitalism pushes further. Instead of just taxing wealth, it redistributes ownership itself. Employees gain stakes in the companies they work for, either through profit-sharing schemes or employee ownership plans. In theory, this creates a more equitable form of capitalism where rewards are more tied to work than capital. The John Lewis Partnership in the UK exemplifies this approach, as do parts of Germany’s stakeholder capitalism, where employees are legally integrated into corporate governance. But while it improves fairness and morale, inclusive capitalism still exists within a competitive market that allows capital consolidation over time. Without structural safeguards, wealth gaps simply reassert themselves.
A third approach, Regulated Monopoly Capitalism, acknowledges that in certain sectors—particularly tech, energy, and media—monopoly is inevitable. Instead of breaking up dominant firms, this model treats them like public utilities. Governments regulate prices, enforce labour standards, and even cap profits. This limits exploitation while retaining the efficiencies of scale. But this model’s success depends heavily on the strength of democratic institutions. In practice, powerful corporations often exert influence over the very regulatory bodies meant to control them.
Modified capitalism, then, is about restraint rather than transformation. It offers a familiar framework adapted to modern realities. Its strength lies in its compatibility with innovation and growth. But its weakness is also clear: it leaves intact the profit motive and private accumulation of wealth, which in the age of AI, may render the majority economically irrelevant unless paired with radical redistribution. Which in itself is impractical.
Structural Alternatives
Structural alternatives represent a deeper rethinking of how economies should function. Rather than trying to tame capitalism, they aim to redesign its very foundations. These models place democratic control, social equality, and universal provision at their core.
Market Socialism offers a hybrid model. It retains markets and competition but removes private ownership of capital. In this system, firms compete for customers, but profits are either returned to the workforce or managed collectively. This can prevent wealth from concentrating in the hands of absentee owners or investors. Yugoslavia experimented with this model during the 20th century, using worker-managed firms that operated in competitive markets. More modern proposals suggest national investment funds or regional co-operatives that can pool returns and distribute them equitably. In theory, this model preserves innovation while erasing inherited privilege. In practice, it risks inefficiencies, especially where political interference distorts competition. And it lacks the ability to incentivize entrepreneurs to drive innovation.
Participatory Economics (Parecon) represents a more radical departure. Here, workplaces and consumer groups form councils that cooperatively plan production and consumption. Jobs are balanced so no one person accumulates disproportionate power, and decisions are made collectively. Remuneration is based not on output, but effort and sacrifice. It is designed to eliminate all class hierarchies. But the challenge is scale. While it might work in smaller collectives, applying such intense democratic participation across an entire economy could slow decision-making, suppress innovation, and disincentivize risk-taking.
Universal Basic Services is a more focused structural proposal: the state ensures free access to life’s essentials—healthcare, housing, education, and transport—freeing people from market dependency. Unlike UBI (Universal Basic Income), which gives people money, UBS gives them security. Countries like the UK already deliver parts of this model in the form of public healthcare and subsidised education. The appeal here is clear: no one should go without basic needs due to unemployment or automation. The concern, however, is that full reliance on the state could lead to inefficiency, lack of consumer choice, and underinvestment in innovation. And it doesn’t actually change the make up of capitalism: the UK is as unequal in it’s economy, and functioning just as impractically, as any other modern capitalist economy.
These structural alternatives challenge the market’s centrality. They aim to eliminate systemic poverty and reduce competition over essentials. They score highly on equity, but each faces questions about scalability, adaptability, and the capacity to maintain and drive innovation.
Worker-Led Economies
Worker-led economies seek to socialise ownership at the firm level without abolishing markets. In these models, businesses are owned and operated by their employees, who vote on decisions and share profits. Spain’s Mondragón Corporation is often cited as a leading example—employing tens of thousands and operating a network of cooperative firms that compete globally.
The moral and practical appeal is strong: no distant shareholders siphoning off value; no executives earning hundreds of times more than front-line staff. Worker-led models can build solidarity, reduce inequality, and foster greater accountability within companies. They also empower communities, often reinvesting locally rather than extracting profits to distant investors.
However, the scalability of this model is limited. Transitioning to a cooperative economy requires a complete cultural and financial reorientation. Access to startup capital, inter-firm competition, and international trade create persistent challenges. Furthermore, there's a risk that democratic firms may resist automation—not out of conservatism, but out of genuine fear that it will make some members redundant. These systems are drivers against innovation and efficiency, in this regard, and would attempt to fend off societal and technological change in favour of the status quo.
Still, hybrid models offer promise. For example, policies could support the formation of co-ops through favourable financing, procurement rules, and tax incentives, allowing cooperative enterprise to flourish within a broader capitalist system.
Post-Capitalist or Non-Market Systems
Post-capitalist systems discard the market altogether or drastically reduce its role. They argue that tying human wellbeing to market performance is both unjust and unsustainable, particularly in a world where AI could provide abundance.
Resource-Based Economies propose a fully planned society where resources are allocated scientifically based on need, rather than profitability. Advocates, like those behind The Venus Project, envision a post-scarcity world managed by AI and automation, where human labour is largely unnecessary. This techno-utopian vision suggests eliminating money altogether. But such a system would require flawless coordination, universal trust in institutions, and an extraordinary leap from current infrastructures. It also completely ignores the benefits of incentivising innovation and growth – both of which drag society forwards.
Commons-Based Peer Production, already evident in the open-source software movement, is a decentralized model where individuals contribute to shared projects for intrinsic or reputational rewards rather than profit. Wikipedia, Linux, and other digital collaborations suggest that people will create even without financial incentives—especially when motivated by purpose, recognition, or social benefit. While powerful in knowledge industries, this model struggles to scale into food, housing, and other material goods where resource coordination is complex. It’s not clear how it accounts for jobs or roles in society which are unrewarding or undesirable, which higher forms of remuneration help to fill. Likewise, whilst people will always drive innovation in areas of passion, given their needs are being met, the drive for innovation is also needed in areas that don’t hold high numbers of passionate hobbyists.
Post-capitalist systems offer compelling visions of an economy beyond exploitation. But they remain largely aspirational, facing deep structural, psychological, and logistical barriers to implementation.
Conclusion: Which Model Works in an Automated World?
We know the challenges that capitalism is failing to address at the moment. But we must also plan for the future. In an AI-driven future where traditional employment declines and productivity decouples from labour, the core question becomes: which system continues to reward innovation and progress, while ensuring resources are shared fairly?
Modified capitalism, particularly when paired with Universal Basic Income and Universal Basic Services, appears to be the most pragmatic option. It allows us to keep markets and innovation alive while cushioning the social impact of automation. But there also needs to be strict limits on earnings, particularly for the owners of capital. There will always be human employees needed, and it seems fanciful to suggest otherwise. Linking manager/owner income or profits to lowest level employee wages through ratios (e.g., a 10:1 maximum) is essential to avoid runaway inequality.
Likewise, in a world where there are far fewer jobs overall and a far greater chance of capital hoarding, personal income should be subject to annual caps beyond a rational threshold—say £10 million—after which only a limited yearly increase (e.g., no more than inflation plus 10%) is permitted. This would allow for comfort, reward, and personal ambition well above that of the average population, without permitting a return to billionaire extraction from an economy largely funded by public automation.
To this skeleton system, we can add functional elements from other systems: universal access to the latest AI models (coupled with hugely limiting the ability to copyright AI models, which should become as public in ownership as water or healthcare), thus allowing hobbyists and the necessary unemployed class the ability to contribute, create and innovate. Adopt the environmental consciousness of degrowth movements, thus allowing genuine humanity interests to play roles alongside growth.
The future may not belong to one model alone, but to a blended system that combines efficiency with equity, purpose with prosperity.
The most rational system would seem to be a foundation of regulated, modified capitalism that preserves incentives and innovation, layered with redistributive mechanisms to curb inequality, and enriched with selective elements from alternative models that protect the environment and ensure human purpose beyond traditional employment. In short, a system built not to serve capital, but to allow capital to serve humanity. It is not the capitalism that has evolved naturally, but one designed for the modern world. It is Engineered Capitalism.