Friday 30 May 2014

The Robot Economy and the Crisis of Capitalism: Why We Need Universal Basic Income

The success of capitalism depends on technology as well as markets (and social norms and state institutions). Markets enhance the efficiency of a society's allocation of resources, such as labour, between competing projects so that we spend them where they will create the most total value. In factories for example rather than in tiny subsistence farms. But there is a limit to the gains from better logistics. If that were all there was to capitalism then economic growth would have ended long ago - as the classical economists feared.

What saves us from a dead-end economy in which anyone's gain is someone else's loss (the kind of economy that some benighted environmentalists dream of) is technology. Technological innovations, from electricity to computing don't merely rearrange the resources we have, they multiply the value we can get out of them, the productivity of our economy. Thus, for example, from a black goop of compressed zooplankton we created a fuel source that transformed the cost-structure of transportation and made the horse redundant. And it doesn't end there. Recent developments in lithium battery technology and artificial intelligence are once again transforming the price of moving from A to B, making the human driver redundant.

In 1930 the famous economist JM Keynes made a prophecy about the Economic Possibilities for our Grandchildren: Within 100 years the relentless trend of rising productivity would solve the ‘economic problem', the struggle to overcome scarcity that has characterised the human condition since our beginning. Finally, we would be able to turn as a society to considering what our enormous wealth can do for us, rather than what we must do to get it.

With the birth of the robot economy, Keynes' prophecy is coming true. Yet this is not a time for complacency. Unless we intervene, the same economic system that has produced this astonishing prosperity will return us to the Dickensian world of winners and losers that characterised the beginning of capitalism. Or worse. The problem is this, how will ordinary people earn a claim on the material prosperity of the capitalist economy if that economy doesn't need our labour anymore? 

The Crisis

The original industrial revolution was basically an energy revolution that replaced puny human brawn with fossil fuel powered machines that were orders of magnitude faster and stronger. Human workers were displaced into the new jobs created by this prosperity, some managing and servicing the machines that made actual things, but most into ‘services', producing intangible goods such as education by cognitive efforts that the technological revolution in productivity couldn't reach.

We are now living through a second industrial revolution that is replacing puny human brains with machine intelligence. Any kind of work that can be routinised can be translated into instructions for computers to do, generally more cheaply and reliably than human employees can. That includes increasingly sophisticated cognitive labour like driving, law, medicine, and document translation. Even university lecturers are at risk of being replaced by technology, in the form of Massive Open Online Courses, while the digital cloning of actors promises to allow film-makers to cheaply manufacture whatever cast they please.

Just like the original industrial revolution this is creating large numbers of losers whose skills are no longer valued by the market. But this time it is not clear that new jobs will appear for these people to move into, for this time the machines can follow us nearly anywhere we try to go. This time technological unemployment may become a permanent fact that we have to deal with by changing how capitalism works. Our birthright as humans - the ability to produce things by our labour that others find valuable – may become economically worthless.

According to some economists, automation is already erasing white collar jobs from the economy, a process that accelerates in recessions like this one leading to jobless recoveries and an ever-widening hole in the middle of the labour market. At the bottom, increasing numbers of people will compete for low status low paid jobs like cleaning and fast-food preparation - things that machines are not yet able to do, or not able to do cheaply enough. At the top will be a new creative class of knowledge workers who develop and service the machines on behalf of the capitalists who own them. In between, the jobs will be most cost-effectively done by robots.

Thus, on the output side of our new robot economy, we could have material abundance undreamed of by earlier generations. But on the input side we would have an economy increasingly independent of human labour and so unwilling to pay for it. Hence the crisis. For under capitalism as we know it the labour market is the central mechanism for distributing claims on the economy's productivity. The welfare systems we have developed are mainly designed to complement it, for example by providing education to improve children's employability as adults; or social insurance ‘safety nets' for the disabled and temporarily unemployed. Employment is also highly moralised – people are understood to have a moral duty to seek paid work and are held responsible for their failure to get it. (Indeed, cultivating this norm was essential to the global institutionalisation of capitalism, along with legal innovations like limited liability corporations. The 19th century colonialists deliberately set out to convert subsistence economies into profitable ones by coercing peasants into waged labour.)

None of this is sustainable in a robot economy. Capitalism as we know it is going to have to change.

Universal Basic Income

Universal basic income is the idea that governments should guarantee all their citizens an income sufficient for a decent standard of living. It is not a new idea - versions of it can be found in Thomas More's Utopia and Thomas Paine's pamphlet on Agrarian Justice. In the idealistic 1960s and '70s the idea enjoyed some political support and experiments were even carried out to see how it might work in practise.

Yet the grip of the moral ideology of work on the public's imagination made basic income politically unfeasible. What government could win votes with a policy of raising taxes to pay people to sit around doing nothing? Even hard nosed economists worried that it would undermine the work ethic on which the economy depends, including the taxes needed to pay for the basic income itself. Not that anyone really knew what the effects would be. The data from the largest experiment, Canada's Mincome, were judged politically inconvenient and filed away without even being analysed.

However, the idea of basic income has recently been enjoying a revival. It has appeal across the traditional political divide between those who want the state to fix more things and those who want the state to fix less. Some on the left see it not only as a just return of excess profits from capitalists to workers, but as a means of returning dignity to work – giving people the freedom not to have to take demeaning and low paid jobs merely to survive. Some on the right focus on the efficiency and liberty gains of abolishing the intrusive and paternalistic bureaucracy of the present welfare system. New experiments in Finland and the Netherlands have generated a wealth of journalistic and op-ed coverage, much of it positive.

In the context of the robot economy, the case for a universal basic income becomes still more compelling. For now it also has appeal across the other central political divide of modern societies, between those who are optimistic about the future and want to seize its possibilities and those who fear what is coming and seek protection against its dangers. The optimists see the robot economy and dream of escaping history, the miraculous transformation of the capitalist economy into some Star Trek style fantasy of abundance and personal fulfilment. The pessimists fear that history will run backwards, that the brutal economic logic of robots will return us to a Dickensian or even feudal nightmare.

Basic income is a radical change to our social institutions, but radical change is coming anyway thanks to the robots. Even the risk averse and the hard nosed realists are now coming around to the idea as they note the shifting ground beneath their feet and recalculate the balance of their fears. Whether one seeks to transcend capitalism or merely to save it, the path lies through something like basic income.

First, the material abundance being wrought by ever increasing automation makes the affordability and sustainability of a universal basic income more credible. The scourge of technological unemployment means that even if being paid a living wage to do nothing does dissuade lots of us from taking jobs and turns most of us into surfer bums, that won't matter.  An outbreak of mass laziness won't affect the tax base because there will be so few jobs left for humans to do anyway.

Second, because the labour market mechanism for transferring claims on economic output from capital to labour has broken down, we will need a new way of providing people with the ability to consume goods, or else we will end up in an economic crisis of under-consumption amidst potential plenty. As J.A. Hobson put it in Imperialism:

Whatever is, or can be, produced, can be consumed, for a claim upon it, as rent, profit, or wages, forms part of the real income of some member of the community, and he can consume it, or else exchange it for some other consumable with some one else who will consume it. With everything that is produced a consuming power is born. If then there are goods which cannot get consumed, or which cannot even get produced because it is evident they cannot get consumed, and if there is a quantity of capital and labour which cannot get full employment because its products cannot get consumed, the only possible explanation of this paradox is the refusal of owners of consuming power to apply that power in effective demand for commodities. 

As in a debt crisis, an economy will stop spinning and crash to the ground if the distribution of assets becomes too skewed. Most modern economists view the economy not as a moral drama in which it makes sense to talk of good and evil or right and wrong, but rather as a complex machine that can produce more or less of what we value depending on how it is set up and maintained. Thus, the capitalist way of solving a debt crisis is for the government to compulsorily transfer some assets back from creditors to debtors so that the economy can keep spinning. The traditional 'moralistic' way of solving a debt crisis is for creditors to take ownership of their debtors' last assets, themselves, which is why so many of the agrarian economies preceding capitalism were slave societies.

By this same utilitarian reasoning some version of a basic income - whether funded by corporate taxation, income taxes on the rich, or universal share ownership - seems necessary to transfer purchasing power back to ordinary consumers and prevent capitalism from collapsing into neo-feudalism.

Third, the welfare system as we have known it will have to be replaced. If we do not wish our material utopia to become a Dickensian dystopia or worse, with most of the population politically, socially and economically disenfranchised, we will have to build a new welfare system that isn't dependent on the labour market. The central issue here is human dignity. Most rich countries have already ended the scourge of old-age poverty with free healthcare and cost of living linked pensions entrenched as entitlement rights rather than charity. We long ago decided that old people should not be subjected to the horrors of penury, begging for alms and living on the streets. We should extend the same consideration to people in general.

Finally, and more positively, a basic income would allow us to take advantage of the liberation offered by material abundance. As the anthropologist David Graeber noted in a recent essay, On the Phenomenon of Bullshit Jobs, when you look at the content of most of the work people do these days, "It's as if someone were out there making up pointless jobs just for the sake of keeping us all working."

The cult of work has persisted long after it stopped really making sense and the material prosperity prophesied by Keynes came to pass. A great many people are trapped in jobs that are wholly or mostly pointless – Graeber has a particular go at corporate lawyers and university administrators – simply because they need to earn a claim on the productivity of the economy somehow, and automation has reduced the number of jobs in industries that make or do things that are actually useful, like growing food or building things.

Artificial intelligence would undermine most of these pseudo-jobs, to the extent that they are worth doing at all, while a basic income would provide us with the freedom as a society not to set out to create a whole new set of pointless jobs, as Downton Abbey flunkies to the new upper-classes, say. Finally we would be able to stop wasting half our waking lives on activities that really don't matter whether we do them or not. Finally we would all have the right to the dignified leisure of the gentleman, not the hopeless and morally stigmatised inactivity of the unemployed. We would be able to live our lives for ourselves, though whether we would use that freedom to embark on noble projects and philosophical contemplation, or merely to watch more TV and play golf is another matter (and one I have tried to address elsewhere).


For eating the forbidden fruit, the Abrahamic god cursed Adam to a life of endless labour: "By the sweat of your brow you will eat your food" (Genesis 3:19). The rise of the machines has given humanity a wonderful opportunity to finally be free of that curse. Yet the end of labour also presents a crisis for capitalism.

The widely shared material prosperity that has been capitalism's greatest achievement depended upon a specific harmonious configuration of technology, markets, social norms, and government that is now coming unstuck. We have a decision to make between two futures. In one, we cleave to the institutions we have become accustomed to – the market for labour, the ideology of work, and a welfare system focused on supporting and enforcing those. In that case we are likely to end up back in a world divided between rich and poor, or, worse, between lords and serfs. In the other future we take control of our prosperity and make it work for us rather than we for it.

This essay was originally published on 3 Quarks Daily. Heavily revised July 2017.

An excellent short video on why work is doomed: