Are we navigating the end of the market era?

by Thiemo Fetzer*

Have you noticed that we are living through the slow unmaking of the market economy as we know it?

Up to now, markets coordinated societies — not because they were perfect, but because they efficiently aggregated dispersed information through price signals.

Moving from price signals to direct information

That architecture is now being hollowed out by exponential advances in data collection, predictive Artificial Intelligence (AI), platform monopolization as well as, crucially, the weaponization of economic dependencies by states.

The traditional economic architecture was predicated on scarcity — information being hidden and prices revealing it through decentralized competition. In today’s world of ubiquitous sensors, real-time data platforms and predictive AI, supply, demand and preference have become directly observable.

The role of prices as a signaling mechanism is thus being diminished — and often strategically distorted.

The political consequences

The implication is profound. At the core, governance struggles to catch up with the hybridization of power among states, platforms and private data monopolies.

After all, if markets are no longer the default mechanisms for efficient resource allocation, then platforms, data brokers and algorithmic systems are becoming de facto central planners — but without democratic legitimacy or transparent accountability.

This shift erodes the very political compact that once made market economies tolerable — the belief that decentralized competition would prevent concentrations of power.

We are thus moving toward a world where power is centralized not in state institutions, but in private data monopolies which operate without the counterbalancing constraints of democratic oversight.

In such a world, trust — rather than efficiency — is becoming the core scarce resource.

Debasing skills

One big real-life consequence of this shift is that the traditional foundation of work as a vector for social integration and skills transmission is unraveling.

In addition, economic activity is becoming increasingly detached from physical scarcity. And skills that were once transmitted across generations are harder to accumulate and preserve.

No way to restore old market equilibria

The future will not be defined by a restoration of old market equilibria. Rather, it will be shaped by how societies choose to rebuild the infrastructures — human, technological and institutional.

These infrastructures are the ones to enable coordination and trust in a world of direct, unmediated information flows.

The productivity shock to the service economy

AI is delivering a productivity shock to the service sector that few have fully digested.

Historically, services expanded precisely because human labor was needed to navigate informational asymmetries — such as those between patients and doctors, consumers and retailers or clients and legal advisors.

Today, algorithmic systems can increasingly automate these tasks, diagnosing conditions, matching supply and demand and optimizing legal and financial transactions.

Brave new world?

The technological leap brought about by AI does not simply replace jobs. It undermines intermediation itself as a core economic function.

The consequences are already becoming visible. There is a shrinking pool of meaningful, dignity-conferring work.

In its place, we see the expansion of “bullshit jobs” — roles that exist largely to preserve the appearance of economic participation.

Simultaneously, a deepening divide is emerging between those who design, own and control the new algorithmic systems and those whose work and status are determined by them.

The collapse of skills transmission

Under the pressure of this economic fragmentation, the collapse of skills transmission is accelerating.

Once naturally embedded in apprenticeship structures, manufacturing firms and broad-based public education systems, the mechanisms of knowledge transfer are breaking down.

What drives the decay?

This decay is driven by several forces. First, the “casualization” of the service sector means that workers are no longer tied to firms through firm-specific capital or long-term investment in skills.

Second, global labor arbitrage — the ability to easily import skilled labor — removes any systemic incentive for firms to train domestic workers.

Third, education has increasingly become a positional good. That means that access to high-quality education is being restricted more and more by privilege — rather than education being treated as a public good.

Beware of the profound systemic consequences

In this overall process, societies not only lose their ability to maintain physical infrastructure. Innovation is harder to come by beyond a small class of privileged enclaves. And the ability to sustain resilient, knowledge-based middle classes shrinks accordingly.

Without a robust mechanism for transmitting hard skills across generations, economic dynamism gradually collapses into rent-seeking. And societies will experience a worrisome, fragile dependence on increasingly narrow sources of human capital.

*Professor of Economics at Warwick University and at the University of Bonn.

**first published in TheGlobalist.com