The last Merchant (In the age of ice)
Why did the economy stop growing around the year 2000? Here is the simplest answer to the most complex question of our time.
The original (Spanish) version of this article can be found here.
It must have been around 1930 when the last Norwegian ice cargo ship set sail for the British coast. Until very recently, that had been a thriving business. At its peak, in the late nineteenth century, the international ice trade employed around 90,000 people in the United States, and Norway exported a million tons a year.
The ice merchants of the twentieth century had inherited a trade with 4,000 years of history. The oldest known reference to the organized production of ice dates from 2,083 BC: a clay tablet records that Shulgi, king of the Sumerians, named the thirteenth year of his reign “the year of the ice house,” in honor of the first one built under his command.
From then until industrialization, ice was a scarce and highly valuable good: a luxury product. To obtain it, wherever winter allowed, it was collected from frozen lakes and rivers and stored in icehouses for the rest of the year. Where that wasn’t possible, it was cultivated. In warm places like India, it was made during cold winter nights by pouring water into shallow trays; at dawn, thin sheets were removed and accumulated, stored in enormous pits at great depth.
Even in the early twentieth century, the ice that arrived by ship from Norway to the great cities was still stored much as it had been in antiquity: in large iceboxes, cold cellars dug into the earth and packed with other old, dirty ice that was only there to maintain the temperature. But when the last ice cargo ship departed from the Norwegian coast, the international trade was dying — strangled by competition from industrial ice. This new product, manufactured in factories and mechanical refrigeration facilities, was unreliable and expensive at first, but began to compete successfully from the mid-nineteenth century onward. So successfully, in fact, that by the outbreak of the First World War more industrial ice was being produced every year in the United States than was being collected naturally.
The ability to produce on demand triggered many revolutions. Ice reached homes, hospitals, restaurants, and factories. It made it possible to transport fish and meat thousands of kilometers, to preserve milk and beer, to keep corpses intact long enough to perform an autopsy, and to keep vaccines alive. An entire infrastructure of warehouses, transporters, merchants, and delivery workers grew up around these new uses, dedicated to getting ice to consumers — a system indistinguishable from the one that supplies our cities with food and drink today. According to census data compiled by historian Elli Morris, in 1920 some 160,000 people worked in the ice industry in the United States.
Until, in the mid-twentieth century, a new innovation produced one final transformation of that industry. The spread of running water, electricity, and above all, domestic refrigeration, completely changed the way ice was produced. Suddenly, homes, bars, and shops had a machine capable of making as much as they wanted. They no longer needed an industry. The mechanism that had made it possible to distribute this product for 150 years lost its purpose and began to disappear. By 1950, almost nothing was left.
The Miracle of the Gin and Tonic, and the Age of Ice
The story of ice is fascinating for two reasons. One is that it reveals the extent to which it is a miracle of civilization that on any ordinary Sunday, in the middle of a long lunch, one can push back from the table and ask who wants a gin and tonic.
The other is that it reveals a law we still don’t fully understand, but which is transforming the economy and the entire world in recent years. Because when production spread across the whole of society, ice became abundant and ceased to cost money — it ceased to have economic value.
An entire sector then evaporated from the economy. Only a few uses remained for which trading in ice made sense, and its production had become so widespread that the price at which it was sold was the minimum possible, as close to cost as it could get. Even though the capacity to produce ice had multiplied — or rather, precisely because of that — the entire industry disappeared from economic measurement. Hundreds of thousands of people were put out of work, and a sector of activity vanished.
As if it had literally evaporated, the activity that had once supported a large industry dispersed into millions of small domestic factories, like droplets of water suspended in steam.
This phenomenon — which I’ll call “industrial evaporation” — is a process distinct from what economists used to call “creative destruction.” In creative destruction, some industries die because more efficient and innovative ones are born. The economy advances because the new companies are ever more cutting-edge and require more capital and better labor.
Evaporation is a different phenomenon, which occurs when a technology becomes universal, and it is the former consumers who satisfy their own needs without requiring an industry.
Industries, for their part, cannot compete — because when the consumer is producing what they need themselves, they are far more efficient. Entire cost categories that the industry would have been obliged to absorb simply disappear: storage, transportation, or marketing. And the ice is made inside the house, at the exact moment it’s needed, and in precisely the right amount.
In economic evaporation, industries are not replaced by better ones, but by a more efficient system and a different form of activity. But none of this is counted, or compensated — because it happens outside the perimeter of the economy, in a sphere of human activity that I call “Plutonomy.”
For this reason, far from being a phenomenon specific to ice, evaporation is affecting or will affect ALL industries. It is a universal process. And we can identify it clearly by distinguishing three or four phases of productive history — even with a very broad brush:
For thousands of years, human knowledge only extended to the minimum needed to collect what nature provided. The economy was one of subsistence, because the costs of those processes were too high to produce surpluses. People could barely cover their basic needs with their knowledge and labor, and famines and times of scarcity were frequent. These were the years when ice merchants collected blocks from the mountains and brought them down to the cities in carts as a luxury product for consumption by a few nobles and kings. (Pre-industrial phase)
Then, in the first part of the industrial era, under British leadership, ice became a raw material and began to form part of the growing international trade. It was the era in which Norway and the United States dominated the market. (First industrial phase)
In the second part of the industrial era, under American leadership, ice became an industrial product — manufactured and distributed like cans of Coca-Cola. (Second industrial phase)
In the final phase — what I’ve called evaporation — the distributed production of ice in homes multiplied supply until it became abundant, collapsing prices through efficiency (lower transport costs, labor costs, etc.) until it smothered industrial production and put the companies in the sector out of business. (Evaporation phase)
The Evaporated Society
All of this happened seventy-five years ago, and at the time it was an anomaly: back then, most industries were still being replaced by other industries. But today it’s the norm. Ice traveled the road that almost all technologies now follow before anyone else, and that’s why it’s so useful for understanding what’s coming: the evaporation of the economy through technological diffusion has become the defining characteristic of our time.
For example, in the field of energy: wood was the harvested energy source (pre-industrial). The international coal trade was the equivalent of Norwegian ice — a raw material (British-industrial). Oil is the industrial phase of energy (Fordist or American-industrial). And photovoltaic solar is, like refrigerators, a technology you can install at home (diffuse or distributed). That’s why energy prices, like ice prices before them, are falling. It sounds like an outrageous claim — but we should expect that within a very short time, there will no longer be an economic sector dedicated to energy, just as there is no longer one dedicated to ice.
Another example: the media. Oral transmission was the equivalent of harvested ice — the most basic and elementary way of collecting information from your environment (pre-industrial phase). Newspapers first, then television and radio, were the industrial version of information (industrial phase). The internet — including social media, Substack, Reddit, and all the user-generated content — is to the information economy what home freezers were to the ice industry (evaporation).
And one final example from a sector now beginning to follow the same path: for thousands of years, humanity obtained food from nature, farming minimally and hunting when possible (pre-industrial). Industrial agriculture and livestock farming were the equivalent of ice factories — an organized form of producing food (industrial). But in recent years, a technology called “precision fermentation” has been developing, and it too is the equivalent of the domestic refrigerator (evaporation). This technology makes it possible to manufacture proteins using microorganisms programmed for that purpose. When it becomes universal, it will be possible to make food at home the way one can already make beer or yogurt.
Although it’s somewhat less obvious and requires a little more abstraction, this same process of evaporation is what has affected retail commerce, banking, travel agencies, fabric shops, and stationery stores. These businesses, more than distributing the goods they sold, were really sustaining the sector’s knowledge and transferring it from manufacturer to buyer along the entire distribution chain. To buy a washing machine, or take out a mortgage, an ordinary person needed the advice and administration of a specialist. In the industrial phase, that expert was the shop assistant or the bank advisor. But with evaporation, those roles are replaced by universal access to information on the internet, which allows people to make informed decisions without needing the industry, in the same way that a fridge lets you make ice.
We can even extend this analogy to explain the revolution AI would produce, if it succeeds. Knowledge itself didn’t exist as a commodity until the industrial era. A person could only collect whatever was available in their environment. With the industrial era, an entire apparatus emerged dedicated to turning knowledge into a sellable product: books, magazines, and manuals. AI proposes to destroy all those industries by applying the same mechanism: evaporation — extending to every individual the possibility of having all stored knowledge at their fingertips.
Evaporation — more or less accelerated — is today affecting all technologies and all sectors of industrial activity. And with every step it advances, a piece of the economy retreats. This is how we have spent most of the last twenty-five years under powerful deflationary pressures, with productivity stagnating and financial bubbles following one after another.
This is also the cause of what economists call “the productivity puzzle.” When a technology withdraws the satisfaction of a need from the market, the aggregate productivity of the economy suffers. And this phenomenon — combined with our inability to understand it — is the reason wages are stagnant in the West, the reason wealth and power concentrate in Silicon Valley, and the reason we face a major political crisis everywhere.
We are — or rather, those who managed to participate in that industrial and manufacturing system, which I myself arrived too late for, are — the last ice merchants. The last iteration of society that will live by exchanging products. We are sitting on a geological fault line, in the collision between two tectonic plates that are blowing apart the economy we knew, with enormous consequences.
The Reasons for Evaporation
The political and economic establishment, which refuses to look this process in the face, insists that the productivity revolution is just around the corner — it just needs time to materialize. It’s a “lag,” they say, because every transformative technology takes decades to translate into growth. Others point to this being a phenomenon tied to digital technology or to the internet. And in general, everyone wants to trust that at some point, a technology “of the old kind” will come along and put us back on the path of growth. That’s why the establishment has entrusted itself to the god of AI to deliver a fourth industrial revolution that will pull us out of this civilizational impasse.
But this isn’t going to happen. Because what has changed the tide of history isn’t any particular technology — or even many technologies. It is society itself that has transformed, and it no longer produces the conditions necessary for technology to translate into economic growth.
This is counterintuitive, because our vision of the economy is deeply productivist — it assumes that producing is what drives growth. But here’s the thing: the economy is exchanges. And what human beings exchange is knowledge. If, throughout the thousands of years we have existed as a species, there was practically no commerce until the Industrial Revolution, it’s because in that pre-industrial phase, the knowledge was universal and couldn’t be exchanged — it was abundant.
The sustained and extraordinary productivity growth of the industrial era, along with that “creative destruction” of the economy, emanated from a historical anomaly. For two hundred years, there was a unique moment in which knowledge could be monopolized. Only some companies and some countries possessed the knowledge needed to produce certain goods, and they could trade in them exclusively. The industrial economy was an enormous mechanism for buying and selling restricted knowledge.
But if that knowledge was scarce during those two centuries, it wasn’t because of any administrative lock, nor because of its nature, but for a very deep social reason: there were not enough people in the world capable of transmitting and administering it. The Industrial Revolution happened because, in just a few years, in a handful of very specific Western countries, all the knowledge accumulated through the Scientific Revolution crystallized rapidly into a series of applications. And it remained restricted to the elites of those countries for the following centuries — the only ones with sufficient numbers of engineers and administrators to put it to use.
But at the end of the twentieth century, when the entire world set out to create the first generation of university graduates in the history of humanity — the people I call the “hijos del optimismo” (children of optimism) — that two-century-old monopoly broke apart, and with it, the industrial economy.
This Is NOT an Advertisement
I have written a book about all of this. And I’m aware that when I keep urging you to buy it, it can sound like a commercial break. But it isn’t. I have been an entrepreneur for thirteen years. In that time I’ve done many things to make money, and I can assure you that writing books is not one of them.
Books are a terrible business. They require an enormous amount of work — this one in particular, which has taken me years — and the author receives a pittance in return. They don’t pay off for almost any author; but for me, with the high opportunity cost of writing meaning I have to stop doing things that actually are profitable, a book is a straightforward financial loss. I lose money giving it even minimal attention.
The reason I insist so much that you read Hijos del optimismo (children of optimism) is not what I earn from it. It’s because it contains the most ordered, most complete, and most useful explanation I’ve been able to create of everything I write about here. And because I genuinely believe it is an indispensable map for understanding the present — one that can change the life of whoever reads it.
So if what I write here interests you, and you trust my judgment: take my word for it and buy it.
Since then, all technologies are born already evaporated — diffuse, distributed, in many hands at once. Since the children of optimism arrived, technology no longer passes through those two industrial phases that created many factories and many jobs, because it cannot be monopolized.
The evaporation of the economy is the great economic transformation of our time:
If OpenAI had been founded in 1995 — the year Google was founded — it would be another Google today. Because it would have enjoyed a monopoly over its technology that it cannot have now. And it cannot have it now because today there are hundreds of millions of software engineers capable of building a chatbot, whereas in 1996 there were very few.
Conversely, if Google’s search technology were invented today, Google would never have existed: because there would have been millions of different search engines within just a few months, and Google would never have been able to consolidate the search monopoly that built its dominant position and customer base.
The same is true of Facebook, Twitter, and Airbnb. None of these companies possesses a technology that everyone else doesn’t also have. What they had, at a specific moment in time, was the opportunity to achieve a monopolistic position — because there weren’t enough engineers capable of competing with them, or financiers willing to embark on that kind of venture. And so, by the time potential competition could react, the so-called network effects had already turned them into monopolies. And that was an insurmountable barrier.
All of this applies to physical goods too. If drones had been invented in 1900, like cars, there would have been a “Ford” of drones that would have monopolized the technology and produced the illusion of productivity for whatever country it called home.
But in the 2010s, drones were born already commoditized — the technology is universal — and today they are manufactured anywhere, sold for next to nothing, and even a country devastated by war like Ukraine can build its own drone industry from scratch.
And the reverse is equally true. If the car and all the other innovations of the Industrial Revolution had been invented in 2020, Ford and Bell Labs would never have existed. The same thing would have happened as with drones: hundreds of companies would have rushed to copy each other and would have collapsed prices within months. This, precisely, is what is happening with electric cars today.
The Earthquake
I have the unfortunate habit of saying very momentous things without giving them sufficient weight. I’ll try not to make that mistake this time. What I am saying here — and what I believe I am demonstrating with solid arguments — is that the industrial economy we knew, which was not merely the way we satisfied our needs but the way we organized the distribution of status, participation, and power in society, is dying. It is ceasing to exist. It is evaporating. It is degrowning.
And we have nothing to replace it with. So its structures — increasingly fragile, but still propped up by iron cultural agreements — are producing monsters: grotesque figures like Donald Trump, Elon Musk, or Sam Altman.
In the coming years, alongside the explosion of the AI bubble, we can expect structural deflation as evaporation pushes one sector after another toward minimum cost. We are already seeing this in many countries in the impact of falling electricity prices.
Until we do something about it, we will continue to observe an extreme concentration of wealth — because the Plutonomy, that vaporous sphere of activity in which people satisfy their needs today, cannot be invested in. Capital that was supposed to be “productive” has nowhere to go and has launched itself into rent extraction in real estate, in large supply contracts, and anywhere it can obtain a guaranteed return. The returns devoted to satisfying that capital, despite nominally contributing to GDP growth, produce no new value: they invent no new products, no new services. They only contribute to a spiral of accumulation very similar to the one that existed before capitalism.
As if that weren’t enough, we are also facing a measurement crisis — and with it, a crisis of economic policy. The instruments that measure economic reality, like GDP, do not capture the value produced outside the market. They fail to notice that the most important human activity of the twenty-first century no longer takes place in the economy. So governments are navigating with instruments that measure a shrinking world — making decisions about an economy that is ever smaller on paper, while the real activity shifts to a place their numbers cannot see.
In people’s lives, this manifests most painfully in the hollowing out of the meaning of paid work. We had convinced ourselves that we would go into the world of work to find identity, status, and meaning — but when needs are satisfied in the private, uncompensated sphere of Plutonomy, and industries die, jobs evaporate too, without replacement. This produces the wage stagnation we have observed over the past thirty years — but not only that. Something more. There are fewer and fewer jobs in which one can contribute to society the way one can contribute in Plutonomy. So many people find themselves trapped between working and contributing. Between continuing to play a role in the productive system, knowing it is a fiction, or doing something of genuine value in Plutonomy, but in deeply precarious conditions.
What underlies all of this is a profound crisis around the value of human beings. In this era of abundance — in which we are capable of producing more of everything — the question we don’t know how to answer is: if work is no longer needed, what will make us worthy of others’ recognition? How do we organize society in a time of abundance? How do you structure a world made of water vapor?
And yet, what an exciting time. What an opportunity! As I never tire of repeating: this is not a crisis of society. On the contrary — we are capable of producing more and more, communicating better and better; we are wiser than ever and have more tools than ever to move forward. What we are navigating is a crisis of the form in which we organize ourselves in this new time. But everything remains to be built, and fewer and fewer things bind us to death or pain.
John Maynard Keynes — who was a giant — saw it coming with a clairvoyance that is almost frightening. It was a hundred years ago, at a conference in Madrid, in the aftermath of the 1929 crash:
I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not — if we look into the future — the permanent problem of the human race.
Why, you may ask, is this so startling? It is startling because — if, instead of looking into the future, we look into the past — we find that the economic problem, the struggle for subsistence, has always hitherto been the primary, most pressing problem of the human race — not only of the human race, but of the whole of the biological kingdom from the beginnings of life in its most primitive forms. Thus we have been expressly evolved by nature — with all our impulses and deepest instincts — for the purpose of solving the economic problem. If the economic problem is solved, mankind will be deprived of its traditional purpose.
Will this be a benefit? If one believes at all in the real values of life, the prospect at least opens up the possibility of benefit. And yet I think with dread of the readjustment of the habits and instincts of the ordinary man, bred into him for countless generations, which he may be asked to discard within a few decades.
Perhaps the strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples who can keep alive, and cultivate into a fuller perfection, the art of life itself, and who will not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.
And that is what the twenty-first century is about. Enjoying the abundance that has arrived.
