No country is governed by a Capitalist party, although there is no shortage of capitalism on the planet. There have been Socialist parties for socialism, Liberal parties for liberalism and Communist parties for communism. Yet acolytes of the most powerful model of all are reluctant to brand themselves with its name. One reason is that the word “capitalism” was popularised by its critics. The most common usage is pejorative, denoting a system characterised by exploitation of workers by bosses. Another reason is that there are too many kinds of capitalism in practice for any single party to claim ownership of the idea. In the west the pendulum swung between more liberal and dirigiste modes, while the underlying structure stayed remarkably stable. But that doesn’t make it permanent. Already a digital revolution has transformed the way business is done. What if it is changing the nature of capitalism itself?

The rise of a handful of vast corporate powerhouses whose business models have no instructive precedent from the analogue-era forces a reappraisal of the way capitalist economies work. The top seven highest valued companies in the world are all in the technology sector. Titans such as Alphabet (which owns Google) and Facebook specialise in products that do not exist in three-dimensional space. Apple and Amazon sell real-world objects as well as concepts, but their fortunes and market dominance have been built on nebulous concepts – models, brands and algorithms.

The big winners

Wealth is no longer in factories, pipelines or retail outlets. Their capital is not anchored to specific jurisdictions. That makes them hard to regulate and hard to tax. These are patterns of economic globalisation that pre-date the digital revolution. While some intangibles like software and data strongly rely on computers, others do not: brands, for example. The rise of the intangible economy can be traced to the US, when businessman Henry P Crowell invented Quaker Oats in 1879. His insight was that he needed a strenuous advertising campaign to convince American consumers that his cereal was not horse fodder.

What makes the new era different is the extent to which value has become detached from the tangible, and the corresponding social and economic consequences. This is the dynamic described by Jonathan Haskell of Imperial College and Stian Westlake of Nesta as “capitalism without capital”. In their book of that title, the authors illuminate ways in which the scale of intangibility deforms the familiar mechanisms of a market economy.

An intangible digital product or process can be replicated and shared a near-infinite number of times at no additional cost. This makes very rapid commercial expansion possible. It can also make it harder to protect intellectual property rights. This is partly why the big winners are companies that control the platforms on which content is shared, rather than the producers of that content. Another feature of this model is that it thrives on cross-fertilisation of ideas. The potential for unforeseen, lucrative synergies leads tech innovators to cluster in city hubs, of which Silicon Valley is the template. The pioneers of an intangible economy benefit from geographic intimacy, even if their work then flies weightlessly around a global network. This pattern in turn accelerates social polarisation. Those with the skills to navigate the new economy gather in high-income hotspots where housing costs soar. These citadels then become unaffordable and culturally alien to those who lack the qualifications to join the higher caste.

This is a recipe for entrenched inequality and profound frustration among the excluded. It is not hard to see how that can destabilise democratic politics. The anger of communities that felt left behind on the march to globalisation was a significant factor in the election of Donald Trump in the US and the vote for Brexit in the UK. Those votes exposed many social fault lines but one of the most consistent is disparities in education: graduates have been found to be less likely to support populist and nationalist movements than non-graduates.

The two tribes

Intangible capitalism generates what Haskell and Westlake call “inequality of esteem” – a chasm between haves and have-nots that goes beyond affluence and opportunity. It is a disparity in ownership of the political process. Neither side trusts the other with the power to make decisions about the collective future. The two tribes grow suspicious of elections in case the process ends up expressing the will of the “wrong” people. This is a dysfunction in the once flourishing marriage of democracy to capitalism. The two ideas are connected to the extent that the rule of law and civil rights are essential to both, but one does not automatically sustain the other.

These problems are not easily addressed by politics on the traditional left-right axis. For conservatives, it gets harder to deny the need for a more interventionist state. The laissez-faire doctrine that sees government as an impediment to progress is obsolete. The threat of capricious, unaccountable power in the intangible economy is corporate and financial. The new digital empires tend towards monopolisation and, since much of their trade is information, that means monopolising the channels by which citizens communicate with each other; an awesome power. The tech giants will continue to leech control away from the analogue democratic structures unless politicians redress the balance.

Grounds for optimism

It is not obvious what effective intervention looks like. The traditional left response to inequality is redistribution by taxes and labour protection. There is a case for both remedies in a UK economy plagued by low wages and job insecurity. But those are symptoms of deeper issues to which orthodox socialist and social democratic experience might not be a relevant guide. Government can take control of failing railways or banks, but it is hard to see how the public sector could be expanded to offer a service that rivals Google or Facebook. Regulation and enforcement of anti-monopoly rules can help, but imaginative new methods of imposing civic, social responsibility on the transnational corporates must be devised.

These are vast challenges for politics in the coming years as artificially intelligent devices and invisible algorithms intrude ever deeper into our lives. It is unlikely that any one party will have all of the answers. But there are grounds also for optimism. Over time, the progressive benefits of new technology have always outweighed the costs in social and economic disruption. There is no reason to believe that the era of intangible capitalism will be different. It does not have to entrench inequality. Nor must it necessarily undermine democracy, which is a resilient idea. But it is also an idea whose survival requires adaptation and vigilance in volatile periods of political climate change. Now looks like such a time.