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?