28.08.2025
Intangibles rely on tangibles
Do we live in a capitalist world without capital, where intellectual property is more important than steel, cement and copper cables? Michael Roberts is not convinced
A recent article in the Financial Times got very excited about the rise of intangibles.1 The author, Tej Parikh, said: “Fifty years ago, the assets held by the top 500 US companies were predominantly ‘tangible’ - factories, equipment, inventory, etc. But today it is estimated that most of their assets are ‘intangible’: ie, intellectual property (knowledge and software), branding value and marketing networks.”2 In the US, spending on intangible assets surpassed tangible investments as a share of gross domestic product in the late 1990s and the gap has widened ever since.
Actually this news is not new. Way back in 2017, Jonathan Haskel of Imperial College and Stian Westlake of Nesta wrote a book entitled Capitalism without capital: the rise of the intangible economy. They showed then that investment in intangibles had started to exceed tangible investment by the mid-1990s, at least in the US.
Haskel and Westlake argued that the main impact of intangible investment like intellectual property rights (IPR) had led to increased inequality between capitalists.3 Through IPR, the leading companies were monopolising the development of ideas, research and design and blocking any ‘spillover’ to others. This explains the rise of the ‘magnificent seven’ tech giants and big pharma, which gain super-profits and protect them by monopoly (intellectual property) rights at the expense of the profitability of others.
Parikh presents the latest evidence for this. The World Intellectual Property Organisation (WIPO) finds that intangible assets make up 90% of the total enterprise value of the 15 largest American companies - considerably higher than that of the broader US corporate sector.
In his FT piece, Parikh excitedly argues: “… this transformation helps to explain four prevailing themes in the US stock market: high concentration, exceptionalism, volatility and bubble-like valuations.” He suggests that the US stock market may not be overvalued, compared to productive investment, if intangibles were properly accounted for. Kai Wu, chief investment officer of Sparkline Capital, is quoted in the FT article as estimating that accounting for intangible assets would cut any perceived overvaluation by about 25%-50%: “While the market is by no means cheap, once firms are given credit for their intangible assets, valuations look far less frothy than the headlines imply,” he says.
Also - most importantly - not accounting for intangibles means that US productivity growth is probably underestimated. The WIPO calculates that “unmeasured intangibles” amounted to around $2.7 trillion in current terms last year in the US, and would have added over 0.2 percentage points to America’s average labour productivity growth rate between 2010 and 2024 if included in GDP.
But the conclusion that intangible investment will alter the mode of accumulation in capitalist production (Haskell and Westlake), reduce stock market overvaluation (Parikh) and raise productivity (WIPO) seems highly exaggerated to me.
The key point is that investment in intangibles requires investment in tangibles to deliver more profit. As Ed Conway put it in his recent book,
For all that we are told [that] we live in an increasingly dematerialised world, where ever more value lies in intangible items - apps and networks and online services - the physical world continues to underpin everything else … Pretty much everything, from social networks to retail to financial services, is wholly reliant upon the physical infrastructure that facilitates it and the energy that powers it. Without concrete, copper and fibre optics there would be no data centres, no electricity, no internet. The world, dare I say, would not end if Twitter or Instagram suddenly ceased to exist; if we suddenly ran out of steel or natural gas, however, that would be a very different story.4
The vast bulk of the world economy is still built on the production of things - ‘stuff’ that can be commodified from the labour of billions.
Conway goes on:
It is a rather lovely place, a world of ideas. In the ethereal world we sell services and management and administration; we build apps and websites; we transfer money from one column to another; we trade mostly in thoughts and advice, in haircuts and food delivery. If mountains are being torn down on the other side of the planet, it hardly seems especially relevant here in the ethereal world.
Conway points out that in 2019 the world mined, dug and blasted more materials from the earth’s surface than the sum total of everything we extracted from the dawn of humanity all the way through to 1950: “Consider that for a moment. In a single year we extracted more resources than humankind did in the vast majority of its history - from the earliest days of mining to the industrial revolution, world wars and all.” While materials consumption is certainly falling in post-industrial nations like the US and UK, on the other side of the world, in the countries from whence Americans and Britons import most of their goods, it is rising at a breakneck rate.
Moreover, much of the value of intangibles is not productive at all. Branding and marketing are merely means of shifting profits from the small to the large, not creating new value. So the claim that intangible investment will replace tangible investment, reduce costs and raise profit margins to justify stock market valuations and boost productivity growth is not proven. Indeed, if it is true that intangible has overtaken tangible investment in the major economies, then the data show that this is not altering the nature of capital accumulation and profitability. The rate of profit in the major economies is generally lower now than in the late 1990s.
US net investment (after depreciation) is lower and productivity growth is also lower. Intangible investments may have increased the concentration and centralisation of capital towards the mega-companies, but the overall decline in profitability, investment and productivity growth has continued.
Michael Roberts blogs at thenextrecession.wordpress.com
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See legal60.com/intellectual-property-vs-real-property-a-comparative-analysis.↩︎
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See thenextrecession.wordpress.com/2017/12/10/capitalism-without-capital-or-capital-without-capitalism.↩︎
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E Conway Material world: a substantial story of our past and future London 2024.↩︎