Capital holders would still have income, and if machines replaced labor on a vast scale, profits, dividends, and asset values could rise sharply, leaving owners with even more spending power.
The marginal value of more stuff declines pretty quickly. Someone like Elon Musk or Mark Zuckerberg can only enjoy so many houses, so many cars, so many new clothes, so many vacations, etc., because there are only 24 hours in a day. The empirical evidence we see from the behavior of actual billionaires is that they make money practically automatically, because the interest on their existing assets accumulates faster (often hundreds of times faster) than they can actually spend it. The only way these fortunes actually decline is if they commit to massive (sometimes wasteful) investments or pledge to give their wealth away. Even then, as was the case with Bill Gates and Warren Buffett for a while, their wealth may still accumulate faster than it can be dissipated.
Ironically, this does more to justify colonialism than it does to defeat it. By your logic, if a modern military force were somehow transported back to the 1600s, they would have no moral basis to prevent European settlers from colonizing North America. For these settlers, the act of settlement was as much driven by morality, by a religious need to go forth and multiply and spread the light of God, as it was by rational calculation of material needs.
So I ask you, by what right would you stop these settlers from going forth and bringing the light of the Lord to the heathen darkness?