The New Merchant Class: A primer on next century’s politics

1492–1789

If you were unfortunate enough to be British before the 16th century, chances are you were a serf. You farmed land owned by your local lord, lived a short, mucky life and were taxed heavily for the privilege.

Serfs were the engine of the feudal system. One step up from slaves, they had very few rights, no political representation, and in many cases were prohibited from travel. Don’t like the thought of subsistence farming? Tough, it’s all you’ve got.

Over the course of the Early Modern period, events conspired to break the feudal system down. The 16th century saw growing urban populations, ownership of land by common people and the revolutionary idea of being paid a wage for your work.

At the same time, New World colonies and innovation in ocean travel meant that transatlantic trade was taking off. An enterprising Brit could find a ship, set sail for the Caribbean with commodity goods and bring back hoards of valuables. Those too sensible to make the trip themselves could throw in some coin, investing in trading missions for potentially huge returns.

For the first time, you could make serious money without owning a vast estate. Wealth has always meant power, and the proceeds from trading allowed merchants to make some waves. Unhappy with the system, which remained stacked against those without blue-tinted blood, the newly minted “merchant class” fought for rights beyond their station.

The demands of the merchant class helped destabilize English politics. By the mid 17th century, the genie was out of the bottle — three civil wars set the stage for the Glorious Revolution, which saw England’s democratic Parliament steal ascendancy from the King. The modern state was born.

The merchant class was destined to cause trouble. Their means of making money was new and unusual; no longer subject to the old rules, they were harder to control. With this new way to make a living came a set of motivations entirely at odds with the establishment. The end of absolutism was written in their ledgers.

2008+

After a few years in the Bay Area, I find the tech industry faintly embarrassing. New arrivals — myself once included — wash up on these shores with a pure-hearted belief in the power of disruption. Technology, they tweet, will heal the sick, uplift the poor and make the world a fairer place. The world will be bathed in the light of science and everything will be O.K.

As reality sinks in, this wave of migrant energy collapses into one of two states. The first is a techno-libertarian zealotry; the puritanical belief that we exist only to better ourselves through science and market forces — where bettering oneself means increasing one’s email throughput while avoiding household chores.

The second is a quiet disengagement, accompanied by the suspicion that perhaps “disruptive” success comes more often from design savvy and lightweight management than from the miracle of startup innovation.

While the potential of the Valley to fix the world is somewhat overstated, the Bay Area undeniably incubates something that will one day cause huge political change. As Early Modern England held the seeds of its liberal democratic future, today’s Bay Area — and similar world regions — host a new demographic destined to mould political discourse for centuries to come.

That 17th century merchant class: young, savvy and unexpectedly rich, they stamped their feet and the world shook. Born from the ashes of the feudal era, they were the prototype for the modern era of civilization. Their new way of life broke continuity with the past, and the power it brought them shaped the course of history.

Our 26-year-old-white-boy saviours of the Bay, gripping MacBook Airs in their caffeinated fingers, seem an unlikely parallel. But equivalent they are, and powerfully so.

Seven years deep, our economic crisis has hollowed out the middle class and consolidated wealth at the top. As technology and globalization opens new frontiers in trade, media and services, much of that money is pouring into the creative industries. Content and software are the spice of modern life, and those fortunate enough to build them receive outsized reward. They’re part of what’s been called the “creative class”.

Unlike traditional industry, the delivery of software services is not a capital intensive business. Start-up costs are low, and launching a business requires few specialized skills that aren’t already in the hands of creatives. In industries where the barrier to entry is low and where workers are paid relatively well, the line between capital and labour is increasingly blurred.

Like our old-world merchant class, the entrepreneurs of this new age are tapping into new sources of money that remain inaccessible to both ordinary people and traditional industries. With competition constrained by skill shortages and the importance of personal connections, they can rapidly bootstrap wealth at astonishing rates.

The effect this has on local economies is clear. In distorted markets like San Francisco, New York and London, cost of living has shot through the roof as the young and wealthy try to live out their dreams. Expensive apartments, high-end coffee shops and the rise of $4 toast make it difficult for those in traditional industries — already squeezed by economic change — to keep a foothold in trendy cities.

Much of what the tech world takes as “disruption” — the success of Uber, Airbnb and other “new economy” startups — can be ascribed to the rapid growth of a new demographic, not a change in traditional consumption. This new class is both affluent and conscious: willing to spend extra on a polished experience but happy to share an apartment, content to pay a premium for their fancy neighbourhood but not geographically constrained by their job.

While we’ve seen major demographic changes in the past hundred years — most significantly, the rise of the middle classes — our young creatives represent something not seen since the 17th century. A young, educated, wealthy elite is migrating to global cities. They have radically different consumption patterns, and they deliberately reject the business models of the past.

Like the merchant class of old, they wield outsized power to shape the world around them. Technological change grants them increasing control of communications, media and investment capital. In the same way the merchants financed ever more ambitious expeditions with past proceeds, the benefits of creative success are self-amplifying.

We see some of this in the success of this demographic’s upper echelon. Entrepreneurs like Elon Musk, rich from smart but unexciting ventures like PayPal, plough the proceeds into vision projects like SpaceX and Tesla. They use their primary resource — cash — to actualize their dreams of the future.

In the Early Modern period, the values and priorities of the merchant class conflicted with those of the absolutist establishment. To protect themselves, the aristocracy attempted to constrain their growth, but the merchants fought — and won. The focal point of macroeconomic forces, it was inevitable that the merchant class’ growing size and power would bring about political change.

Our creative class today are barely aware of their political power. They experiment with engagement through novel channels, but buoyed by success and as yet unopposed, they have no great motivation to fight.

There will not be peace forever. Once the previous establishment feels threatened by change, legislative pressure will attempt to hold the “new economy” back. Shifts in the fabric of Western demographics will require the young to support their parents. And as they move towards having kids, our unlikely crusaders will find it hard to live the lifestyles they want without compromise they find unacceptable.

Forced to engage with politics to clear the path for their growth, how will our protagonists act? On the one hand, the sudden popularity of candidates like Bernie Sanders and Jeremy Corbyn could be signs of a tilt towards the left. This is a generation unscarred by the ideological battles of the 20th century; socialism is no longer a dirty word.

On the other hand, as the political establishment fights to protect the status quo, economic regulation could be seen as a weapon for disenfranchisement. Attempts to tackle inequality could be seen as a threat. Amongst the creative elite, right-leaning or libertarian views could gain a hold.

The motivations of this new demographic are largely unaligned with those of today’s middle classes. Doing business across borders, and personally unaffected by the loss of jobs to automation and cheap foreign labour, our creative class will have less reason to dislike immigration and globalization than their parents.

With the creative class wielding greater power but fewer numbers, what political discourse will result? Will we see the rise of a creative class lobby, or might they see campaign finance as a tool of oppression? Will the establishment maintain their love for economic liberalization, or could deregulation be seen as playing into the hands of the burgeoning nontraditional elite?

We’re just at the beginning of understanding how this new elite will engage with politics, which life events will drive them to do so, and the response this will elicit from the rest of the world. Answering these questions is key to understanding the trajectory of our civilization through the next few hundred years.

Thanks to Sam Altman, Jena Brentano, Andrew Brentano and Xianhang Zhang for reading drafts of this post.

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