AI and Fake Capitalism

Imagine you go to a restaurant. You order the steak, a drink, and dessert. You pay $20 and leave happy. But there’s a catch: the restaurant didn't pay for the water to wash the dishes, they dumped the trash in your neighbor’s yard, and they underpaid the waiter so much that you have to pay extra taxes to fund his healthcare.

The steak wasn’t $20. It was $100. You just pushed the other $80 onto someone else.

This is the "Hidden Cost" economy, and we are finally hitting the limit of how much we can ignore.

1. The 1920s: The Warning we Ignored

In the 1920s, a British economist named Arthur Pigou realized that capitalism had a "glitch." He noticed that if a factory produces smoke that makes a whole town sick, the factory owner makes 100% of the profit, but the town pays 100% of the doctor bills.

Pigou called these "Externalities." He argued that if we don't tax these companies to cover the "social cost" of their mess (now called a Pigouvian Tax), the market isn't actually "free", it's a scam. At the same time, Simon Kuznets, the man who gave us GDP, warned us that measuring a country’s success by how much it spends is like measuring a person’s health by how much they bleed.

We ignored them because "unpaid bills" look like "economic growth."

2. The 1970s: Economics for People, Not Profits

By 1973, the world was bigger, dirtier, and faster. E.F. Schumacher published a book that changed everything: Small Is Beautiful: Economics as if People Mattered.

Schumacher pointed out that we treat the Earth’s resources like "income" (money we can spend) instead of "capital" (money we must save). He famously called our system "parasitic." He argued that by chasing giant, centralized factories and global shipping, we were destroying the very communities and environments that keep us alive. He told us to slow down and focus on "human-scale" technology.

We ignored him because "Big" was more profitable than "Beautiful."

3. Today: The Two Women Mapping the Exit

Now, in 2026, the "hidden costs" are so big they can no longer be hidden. Two women are leading the charge to finally fix the accounting.

• Kate Raworth (The Doughnut): She argues that 20th-century economics is broken. Instead of a line that goes up forever, she proposes a Doughnut. The inner ring is the "Social Foundation" (no one should be hungry or sick). The outer ring is the "Ecological Ceiling" (we can’t burn the planet). Success isn't "more"; success is staying inside the Doughnut. Amsterdam and dozens of other cities are already using her map to change how they function.

• Kate Crawford (The AI Reality): She is pulling the curtain back on "The Cloud." In her book Atlas of AI, she proves that AI isn't "magic." It is made of lithium mines, millions of gallons of cooling water, and thousands of low-paid workers labeling data. She is forcing us to see that every "free" AI chat has a physical, social, and environmental cost that someone, somewhere, is paying.

  
  

The Bottom Line

If AI companies had to pay for the water they use, the carbon they emit, and the social disruption they cause, AI would be much more expensive. But it would also be honest.

For 100 years, we’ve enjoyed a "Free Trial" of industrial growth. We are now the generation that has to decide: do we keep pretending the bill isn't coming, or do we finally start charging the "True Price" of our world?

Look, whatever it is we call ´capitalism´ is failing. But if we were to account for all those externalities we might finally have a good system after all.

Thanks for reading. Abrazos.

Diego Rojas