Vladimir Mau about the new book "Restarting the Future" published by Gaidar Institute Press

The book by Jonathan Haskel and Stian Westlake "Restarting the future: How to Fix the Intangible Economy" is a follow up of the previous book by the same authors, published in 2017 "Capitalism without Capital: The Rise of the Intangible Economy" (Princeton, NJ: Princeton University Press), and the Russian translation published in 2024 («Капитализм без капитала: подъем нематериальной экономики» (М.: HSE).

The world is currently going through a rapid and radical renewal. No matter how trite or journalistic this phrase may sound, it is indeed true. This renewal is multifaceted and complex; it concerns economy and social life, politics and international relations, ideas and culture. В настоящее время мир проходит через быстрое и радикальное обновление. These changes are based on the most recent technological trends. Moreover, the most developed part of the world, which certainly includes modern Russia, is the first to go through the renewal process.

Therefore, books are being published, many books, whose authors are trying to comprehend the new developments in our life as a whole and in economic development in particular. It is important to highlight what is really new, that will shape socio-economic life for any foreseeable future. For this, it is critical to identify the latest trends, as well as to find adequate tools and terms to analyze and describe the present and even more evolving changes. From the economist’s point of view, there is a need to substantially update economic theory and create a new political economy adequate to modern realities.

Authors of this book make exactly such an attempt, and this is what makes their study interesting and useful. The title "Restarting the Future" is intriguing and aims at trying to predict the challenges that will be faced for at least in the next decade. However, there is also, obviously, a risk: the most important feature of the modern world is a sharp acceleration of changes, both technological and institutional. This means that priority socio-economic tasks and challenges can change and are changing significantly very rapidly.

The book was written shortly after pandemic, and in some points, it seems already out of date by the time of publication: for example, authors, following the theorists of "long-term stagnation", include in their analysis the issues of persistently low inflation and ultra-low interest rates, while stagflation risks are more likely to come to the fore.

However, such constraints are quite natural and do not make the book irrelevant in any way. The book is interesting precisely because it identifies long-term trends that may not reflect short-term problems and solutions.

Authors consider the most important long-term economic trend (and challenge) in emergence and rapid development of "intangible economy" or "economy based on intangible capital," which they refer to as ideas, knowledge, connections, brands. Accepting this thesis requires a significant revision of the economic analysis models and, accordingly, of the economic policy models.

Haskel and Westlake attribute significant decline in the growth rate of intangible investment to underestimation of this new phenomenon and persistence of traditional economic models based on the dominance of tangible (physical, traditional) capital, which makes the world poorer and increases global risks. They also recognize this as the main socio-economic problems of the first quarter of the 21st century, i.e. growing inequality, unhealthy competition and a slowdown in economic growth after the 2008–2009 global financial crisis. This concerns both economic policy instruments and approaches to doing business, which authors describe as out of date.

Authors try to be not only critical but also constructive, and therefore, this book is of particular interest. They offer their ideas on financial and business organization, intellectual property rights, monetary and fiscal policy, support for science and urban development.

Analysis of modern investment specifics and especially reasons for limited private investment observed in the post-crisis decade is very important (pp. 221–222). This is an extremely important phenomenon of the recent 15 years, which authors explain by structural and institutional reasons, and above all by reluctance of the debt finance market to accumulate resources for sectors that do not require a significant material base. Indeed, innovative businesses tend to have limited physical capital compared to traditional companies, and therefore become trapped, what the book elegantly calls "collateral tyranny," which in turn becomes an unacceptable brake on innovation, and thus a brake on real economic growth (p.p. 217–247). "Financial instruments we need are not those suitable to the material economy. Rather, we need more equity finance and less debt finance, as well as more study and understanding of economies and companies than before" (p. 267).

Modernization of institutional environment is particularly important, but it is its conservatism that becomes an obstacle to sustainable technological progress and thus welfare progress. Therefore, authors come to entirely Marxist conclusion that there is currently a conflict between the state of technology (production forces) and institutional environment (production relations): "Important new technologies that often cause discomfort to well-established interests require new institutions for their operation. Society possessing institutions required to thrive in the technological scenario of one time period may well be unprepared to prosper in the next technological era. Indeed, previous success may make its institutions immune to change" (p. 354). Developing this idea, authors emphasize that a new situation is evolving, when those institutions that helped to support fair and sustainable growth with obsolete techniques may not work as well today. Out-of-date institutions often continue existing after losing their useful qualities, while attempts to shape institutions to deal with new technologies may fail to achieve their goal, especially during the initial period of these new technologies. Moreover, small groups having their vested interests are often very successful in advocating for those institutions that are eventually harmful to society. (p. 163).

Among the proposed institutional changes are liberalizing intellectual property regulation and avoiding fetishization of quantitative targets. For someone with experience of the Soviet era, incentivizing the achievement of quantitative targets (formerly called "rating for the plan") is definitely ineffective.

However, the further we move away from the XX century, the more there are those who want to repeat the Soviet experiment, which in economic terms means rating for the plan. Therefore, another thesis of the book under review seems important: "incentive systems based on quantitative indicators always produce perverse outcomes" (p. 185).

Catching-up development in the world of intangible assets described in the book may be of particular interest for the Russian reader. (p.p. 155–156). This is where risks of institutional inertia are particularly high, as well as risks of non-critical borrowing of institutions of the most developed countries. However, the problem is that these institutional patterns may also prove outdated but persisting due to the same institutional inertia.

Obviously, many estimates and conclusions of the book are controversial and sometimes only indicate problems and contradictions, leaving room for further reflection and individual conclusions. However, this can also be attributed to the merits of the book.