Summary: Solutions are proposed as the shockwave of the new industrial revolution becomes visible on the horizon. Naturally, we first get small and comfortable ones — such as a guaranteed minimum income, which guarantee high and growing levels of inequality. We might even implement these, leaving the resulting social turmoil for the next generation. First of 2 posts about the GMI.
Our future if we distribute technology’s gains via welfare.
Well-fed, well-dressed menials bow before the aristocrats.
First, the new industrial revolution was debunked. When it become too obvious to ignore, the coming destruction of jobs was denied. Now that too has become obvious — so attention turns to easy solutions. Most commonly recommended is a guaranteed minimum income — a greatly expanded welfare system. For example…
- “Could a basic income solve the biggest challenge of the digital economy?” by Andrew White in The Guardian — “With growing numbers of jobs threatened by automation, reviving old ideas of an unconditional income may be the best way to protect workers.”
- “What If Everybody Didn’t Have to Work to Get Paid?” by David Wheeler in The Atlantic — “Advocates say that a guaranteed basic income can lead to more creative, fulfilling work. The question is how to fund it.”
Productivity has risen, but the gains went to profits (not workers ), then flowed through to the top few percent of households, leaving little for the rest.
The industrial revolution just beginning will produce fantastic increases in productivity — and destroy millions of jobs. How should we distribute these? All other things being equal, the gains will continue to flow to profits — and hence to those at the top. The previous industrial revolutions show that the resulting social tension can become unpleasant or disastrous (e.g., the revolutions of 1848, the Russian revolution). They can make rich nations into poor ones (no longer does anyone say “rich as an Argentinean).
Higher minimum wages help those with jobs. A guaranteed minimum income helps those without jobs. Is this a solution? Yes, if you believe the Britain of Pride & Prejudice
Where will political power concentrate? With income, at the top. We’ve seen this movie.
What are other solutions?
The earlier industrial revolutions were fore-shocks. This is the big one, with machines able to replace not just manual labor and jobs requiring low levels of intelligence — but even those using sophisticated sensors and thinking (see how robots and algorithms are taking over). This might be more like the invention of agriculture, fire, and the wheel.
After varying amounts of pain and struggle, we harnessed those waves of new technology. We can do so now. But the incremental changes that worked before — even expanded — might not suffice. Bolder and larger innovations might be necessary.
My guess (emphasis on guess) is that only some drastic form of income sharing will work — not a trickle to the bottom from welfare, but an equitable division from the top. Combined with free markets, democracy, and a wide distribution of power — we can build a wonderful future. Many mechanisms might work: heavy taxation, a share of public ownership, or some else. Different nations will experiment; some will find working combinations. They will be the winners of the 21st century.
This is just an introductory sketch of this complex issue. For more detailed analysis see Why a guaranteed minimum income won’t protect us from the coming automation wave.
Other posts in this series
- 50 years of warnings about the new industrial revolution. It’s here. Ignore the naysaysers.
- The coming big inequality. Was Marx just early?
- The coming Great Extinction – of jobs.
- Steps to make the tech revolution boost America, not just the 1%.
- The robots are coming, bringing hope of a better future.
- Our future will be Jupiter Ascending, unless we make it Star Trek.
- Well-meant minimum wage increases will accelerate automation.
- The battle of institutions vs. technology = rising wage inequality.
See all posts describing the 3rd industrial revolution and about inequality and social mobility.
For More Information
If you liked this post, like us on Facebook and follow us on Twitter. See these books to learn about the new industrial revolution now in progress…
- The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies
by Erik Brynjolfsson and Andrew McAfee (2014).
- Rise of the Robots: Technology and the Threat of a Jobless Future
by Martin Ford (2015).
- The Future of the Professions: How Technology Will Transform the Work of Human Experts
by Richard and Daniel Susskind (2016).
I think “but the gains when to profits — not workers” was supposed to be “but the gains went to profits — not workers.”
Other that that, the article is up to your usual impressive standards, FM.
Pluto,
Fixed! Thanks for catching that.
Reblogged this on Utopia – you are standing in it!.
This is a bit confusing, because your final paragraph outlines the methods that would be used to produce a guaranteed basic income, which is otherwise criticized in the article for reasons that are not clear.
As I mentioned separately to you, how else do you compensate for the domestic labour of the parent who stays home to raise children and support the household? Doesn’t a guaranteed basic income diminish the need for both parents to enter the labour market? And if it did, wouldn’t that free up space in the labour market?
Also, wouldn’t a guaranteed income allow groups of individuals to pool their resources and form cooperatives perhaps?
I am not sure comparisons with the past are plausible, especially since we never had such measures before. If industry becomes more and more automated, without a guaranteed income, none of the much vaunted promises of modernity will ever be realized–less work, more time for leisure, etc.
Maximilian,
(1) “without a guaranteed income, none of the much vaunted promises of modernity will ever be realized”
My critique of the guaranteed minimum income is that it by far insufficiently radical. It would be a step forward (i.e. reduce poverty), but the new industrial revolution will require much bolder measures. The difference between what’s needed and the GMI is two-fold.
First, the GMI is too small — and would create a two-tiered society (with a small middle class of professionals and craftsmen). The vast fruits from the new industrial revolution would flow to those who “own the machines”. We are already seeing this, as automation creates a surplus of labor even in highly skilled jobs. Giving crumbs to the people is better than letting them starve, but inequitable. My guess (emphasis on *guess* is that the resulting social instability would force change).
Second, the GMI has the wrong framing. It looks like welfare — charity for the poor — instead of an equitable sharing of society’s wealth. I suspect the spiritual damage to recipients would be substantial.
The combination of the these factors would imo produce a fearsome concentration of political power. Which would have it’s own ill consequences.
(2) “I am not sure comparisons with the past are plausible”
My point exactly.
Maximilian,
“how else do you compensate for the domestic labour of the parent who stays home to raise children and support the household? Doesn’t a guaranteed basic income diminish the need for both parents to enter the labour market? And if it did, wouldn’t that free up space in the labour market? ”
I neglected to reply to this. I agree, that would happen. But how large an effect would this have? Like most aspects of the GMI, it depends on the size of the GMI.
If low — then has a small aggregate effect, encouraging parents with wages in the bottom quintile or two to not work while raising children.
If high — then this could have a large effect. But a high GMI has so many problems of funding and gaining political support. This would add to the cost.
On the other hand, increasingly women prefer to stay in the paid labor market rather than stay at home with the kids. I wonder how large an effect this would have.
So, I understand that your proposed alternative is extremely ambiguous because you really don’t understand how it would flesh out, yourself. But it stretches way too thin to be worth any level of substantial consideration.
Frankly, at best, I see it as the stage we would move into AFTER moving into guaranteed income.
Guaranteed minimum income is superior to any existing systems we have currently for providing welfare to the jobless. Basic income is undeniably imperfect for the reasons which you stated. There exist some poorly conceptualized hypothetical systems which might be better than basic income. I believe we can agree on these priors, but I don’t believe I see the argument to the same conclusion as you.
We should still strive towards the best we can see beneath the horizon,while knowing there likely is better beyond what we can see. Hasn’t every advancement in society been implemented in this manner?
If a guaranteed minimum income buys us an extra decade or two to ponder what the next step is, then mission successful, I say.
Salvia,
We’re talking about the future, so all we can do is speculate. However you appear to be missing the point of this critique.
“If a guaranteed minimum income buys us an extra decade or two to ponder what the next step is”
I totally disagree. A guaranteed basic income does little to change the distribution of income, unless it is set quite high. It reduces poverty, but would allow the further concentration of income and wealth. In another decade or two the system might have solidified so that more radical reforms are not possible.
Furthermore, doing income redistribution as “welfare” rather than an equitable share of profits categorizes the recipients as supplicants of the owners — in effect, freeloaders. This abandons the moral high ground and generating spiritual dependency.
We see all of these factors at work during the past 2 decades, as the existing welfare system was rolled back. I suggest looking for another path forward, rather than trying to re-roll the stone back up the hill.
“A guaranteed basic income does little to change the distribution of income, unless it is set quite high. It reduces poverty, but would allow the further concentration of income and wealth. In another decade or two the system might have solidified so that more radical reforms are not possible.”
I much favor the risk of that possibility than the risk of walking into a revolution without a well defined economic endpoint. Are communist dictatorships not a probable result when the ranks of the impoverished masses grow strongly enough? While I don’t argue that is the precise model that will be defaulted to, I am highly pessimistic that the end result will be better than what we have currently. I do not at all mean to sound anti-populist when I state that populist revolutions almost always end badly. Populism works best when it is able to successfully deliver a correction to the ruling elite without outright destroying it.
I suggest we keep that stone a reasonable distance away from somewhere where it will come crashing down triggering a populist revolution, while we hopefully find out a way to work the kinks out of a system of public ownership of the means of production (that is what you’re suggesting, yes?).
I am fully aware of the flaws you have indicated regarding a basic income and do not disagree with them, so I’m not sure I am missing the point of your critique. This clash seems entirely due to the disagreement of its validity as an intermediate step. Sometimes you just gotta slap a bandaid on the problem if it aint gonna be easy to fix in a timely manner.
salvia,
“the risk of walking into a revolution without a well defined economic endpoint.”
Humanity’s history is of evolution without plans. The US was one of the first planned nations, in the sense that many of the settlers — and later, the Founders — had specific dreams of what they were building. Since then there have been other attempts at planning — notably the French, Russian, Chinese, and Cambodian revolutions. I agree with you about the need for planning, but humility about the project is needed.
“Are communist dictatorships not a probable result when the ranks of the impoverished masses grow strongly enough?”
Probably not. Communism was a hot meme in the 20th century, but enthusiasm for the project appears to have burnt out — for obvious reasons. But the idea, the core concepts, probably will appear in a new — and perhaps more feasible — form, eventually.
“you have indicated regarding a basic income”
A small but important point: a guaranteed minimum income provides supplementary funds to bring income up to a minimum. A basic income gives a fixed sum to everyone, as a reward for existing.
“This clash seems entirely due to the disagreement of its validity as an intermediate step.”
Yes, that’s always the debate when at a fork in the road. Making the right choice is important. For more details see the follow-up post, which discusses some of the objections raised here.
A guaranteed income is not charity — I do not know that it would be viewed that way, and so far I have not seen anyone use that argument. It represents citizenship taking on real meaning, where major natural resources (for example) should theoretically belong to all citizens and therefore the proceeds from their exploitation should also be distributed.
As for it not being radical enough — well this is a matter of perspective. Some things can be very radical, and absolutely disastrous. Personally, I think the idea that I am no longer *forced* into the job market, to work for some tyrannical tight-fisted a-hole, and allows me the freedom to possibly pursue other exciting, rewarding, and productive ventures … is actually extremely radical. We simply have not had that option before.
I think you focus heavily on the amount of the income, and assume that it must be and will be pitifully low. I have not seen anything to suggest that there is anything inherent to the concept that demands that be the case. I am not seeing any numbers or percentages here either. In actual cases, such as the one debated in Norway, it means living below the poverty line. In other cases, where the same policy was proposed but without using any of the terminology, it would have meant enormous wealth redistribution (Libya’s case, with oil). In other words, what is redistributed and how much, to produce that guaranteed income, is up for debate. We need not assume we will fail in advance and that the amount will be meaningless.
Maximilian,
We’re talking about the speculative future, and I agree that your perspective might prove more accurate than mine. This is a cautionary note, not a quadratic proof.
“A guaranteed income is not charity – I do not know that it would be viewed that way,”
I’d like to buy some beers in a blue collar bar and ask them. My guess is that they’d agree with me. To a large fraction of Americans taxes are theft and welfare for free-loaders. Trying to sell a minimum income as other than welfare is imo hopeless. The 1% will find a large willing audience for their opposition.
“Personally, I think the idea that I am no longer *forced* into the job market”
I agree that a GMI would have many positive effects. I fear that the negatives would outweigh them. Most importantly, wealth would continue to accumulate at the top — and prove difficult to change. Especially with a population of dependents.
“I think you focus heavily on the amount of the income, and assume that it must be and will be pitifully low.”
Yes, a consequence of my guess that a GMI would be framed as welfare. The current welfare system is unpopular, hence the long slow rollback since 1980.
“I have not seen anything to suggest that there is anything inherent to the concept that demands that be the case.”
No inherent. Just the likely framing of it in US society. In the Nordics, for example, the result might differ.
“In actual cases, such as the one debated in Norway, it means living below the poverty line.”
OK, even in Norway it is welfare. Perhaps there is something inherent in the concept that makes it so.
“We need not assume we will fail in advance and that the amount will be meaningless.”
No. But that doesn’t mean we should pick something difficult to sell, and perhaps disastrous if implemented.
Incidentally, I think we should add some level of land redistribution too. I think every citizen should own a piece of land, as a birthright. I realize that if I had land, I probably never would have become an academic…so just imagine how many people would be happy as a result of that alone! Seriously though, citizenship needs to stop being a mere abstraction, a piece of paper, a passport, with some hollow appeals to vague doctrines. It needs to be practical and material too.
Maximillian,
Now that’s a radical thought. It seemed that I had drifted into a more radical and original mindspace than you — which was obviously absurd.
The Federal government owns uncounted acres. Much of the land that cowboys fought range wars over is considered wasteland today. The Midwest — almost everything inland from the coasts — is emptying of people. A new Homestead Act might revitalize much of America.
That’s brilliant. I hope you write that up.
Thank you, Mr Maximus, for always staying ahead of the game. The idea of Guaranteed Minimum Income as a solution to the problem of structural unemployment is just now starting to enter the public consciousness, but you are already looking beyond. Great work.
I want to bring up one thing that I think might become an important consideration in any national system of profit-sharing or basic income, is regional difference in cost of living. How would such systems affect the locations where people choose to live, the sort of living situations they are able to afford, and their physical access to the urban centers of commerce? In other words, if a large section of the population has only a fixed and very specific amount of money to throw at housing, then where will all those people live?
I’m thinking about the history of public housing in the United States and elsewhere. Although altruistic in its intent, by the end of the 20th century public housing was seen by many as creating a sort of poverty trap, precisely because it isolates a specific economic group, physically and socially, from permeability into higher economic strata.
This new ‘idle class’, as some have started calling the hypothetical future economic group, will they end up occupying neighborhoods of cheap apartment blocks, 20 miles out from the city center? That doesn’t sound so good, but maybe it’s still better than the alternative. In either case, it’s something to consider.
Todd,
“How would such systems affect the locations where people choose to live”
That’s a powerful question. As Maximillian says, much depends on the amount of redistributed income. We might get the equivalent of the great rings around the cites of Europe, where the poor live.
The bottom line is that these answers depend on us. If we’re passive, we’ll get what we’re given (as Americans, however, we will have the right to whine about it).
“…the great rings around the cites of Europe, where the poor live.”
That’s exactly what I was thinking of. Many cities in East Asia also have the same thing.
Again, I’m not saying it’s necessarily a “bad” geographical distribution of the population, and it could be the best of all possible options, given economic and demographic realities.
Your point is well-made, that we are in fact talking about assigning a discretionary gap between the rich and the poor, and political will could make it a smaller one, whether measured in dollars or miles.
Todd,
This is all speculative, but I believe the GMI is a dead-end road, setting our sights to low. A GMI is unlikely to be high — its inherently a basic income, as its often called — and locks us into a 2 tier society. It is a poor first step since we’re likely to be weaker as time passes and the class differentials grow.
I can see value in the arguments presented here for a GMI, however I also see huge risks. We already have many clamoring for the dismantling of capitalism due to climate change and with dire emergency seemingly around every corner, there is no shortage of intellectuals on the Left craving power. I don’t often get worked up over issues in the theoretical stage, but political rhetoric in recent years is truly disturbing. Is America looking at another Russian Revolution in the 21st century ushered in by our benevolent intellectual superiors? I think maybe.
A GMI worth anything would probably cost trillions per year in the US alone. That sort of income redistribution is not something to take lightly. I’m not libertarian by any stretch, but giving the government that much more money/power should cause most people to pause. As a society, we would need to come to a new understanding between the government and the citizen, if the robots take over. Government will become the ultimate parent with the power that parents wield over children. Are you all ready for that? Been to the California DMV lately? All we need is a much larger federal DMV that instead of providing drivers licenses provides food for everyone. That is what we are talking about ultimately. What do we become as a society then? If we have a government that confiscates wealth on such a scale, what will become of us?
We need solutions to this new “industrial revolution” and to things like climate change, but there is no common ground anymore. Everyone is retiring to their corners waiting for their political party to seize total control. We live in a political fantasy land these days. We need solutions equal to the huge tasks in front of us, but I don’t see any light in the tunnel from here.
Swatter,
(1) “A GMI worth anything would probably cost trillions per year in the US alone.”
Let’s run the math. The Federal government spends $2.2 trillion on social security, Medicare, and welfare benefits. Guessing, the States
probably spend very roughly another $0.8 trillionand locals spend $0.688 trillion ($489B on Medicaid and $199B on welfare). Totaling$3$2.9 trillion. That’s paid for by taxes on the low end of the post-WWII range (lower than most of our peers), with a small deficit (~3-5%) — along with a monsterous military budget ($800 – $1T, depending on definition — almost half of total world spending).Assume the GMI replaces the existing welfare and social security system. Assuming an average cost (pulled from the air) of $40 thousand/year (many would get only partial income support from a GMI) — each trillion dollars brings another 25 million households on the GMI system. If an average HH of 3, that’s 75 million people. Equivalent to almost half the current working population.
I doubt another trillion dollars is unaffordable if military spending is reduced and taxes are increased. Automation on that scale would probably require massive changes in our social and political systems. Certainly that would be true for any larger changes.
(2) “but there is no common ground anymore. … I don’t see any light in the tunnel from here.”
It’s early days yet. Social systems take time for problem recognition, discussion of solutions, and building consensus. The process accelerates as the problems become visible, and then more pressing. It’s certainly too early for despair.
Before thinking about providing some form of GMI, one has to think where to get it from. As long as the profits from productivity gains are privatized the State system does not have the resources for GMI.
Facing a future structure roughly like:
— 1% Aristocrats: hold and control vast resources and powers;
— 15% Middle Class: hold or have access to some resources and limited powers, need to work (mostly as lackeys or thugs of the 1%-er), but has reasonably pleasant life from it;
— 85% Daytaller: neither hold nor have access to resources, one pay-check away from destitution or already on the dole;
there are no peaceful solutions compatible with the Western post-French Revolution understanding of society.
We are knee-deep in the Marxist question of control of productive resources, and how to maintain some form of (to some degree) free, individualized society vs the obvious “solution” of some collectivistic, autoritarian system with centralized resource management. Which would just replace the aristocracy with a clique of apparatchiks.
Reinhold,
(1) The population of the US is 323 million, with aprox 159 million employed at least part time– 49%. That’s compatible with a large (if weakening) middle class — upper and lower tiers, and a large working poor — supported by a small welfare system and a large social retirement system. A large fraction of working households have savings sufficient to last less than 30 days without work. So let’s examine your concerns.
(“As long as the profits from productivity gains are privatized the State system does not have the resources for GMI.”
With profits at near-record highs and taxes (aggregate of all kinds) at the low end of the post-WWII range, there is clearly the ability to increase spending on welfare systems. Much depends on the numbers of people on the dole — on the amount of the GMI.
(2) “1% – 15% – 85%”
Such a radical change is, of course, possible. But presumes a very different economic system than ours. Where is the spending that sustains the economy, with 85% poor or on the dole? That’s worse than poor and unemployed levels during the Great Depression, and that was … the Great Depression. You cannot assume that level of change without describing the other changes that make that scenario work.
(3) “We are knee-deep in the Marxist question”
That’s one possibility, but hardly the only one. The “third way” used in western europe works OK, by most measures as well as our (and better by some measures). Perhaps that is the line of evolution leading to the future.
85 pct might sound too high, but: statistics show that only 8 pct of the U.S. population can afford a college eduction for their offspring, or a new standard-size car without taking a credit. One case of extended medical leave, and these families are defaulting on all their credit obligations. These are daytallers, just proped up to Middle Class spending levels by unjustified and de-facto unsecured credit (I’m aware how our monetary system works and the reasons for these credits). But not what I call Middle Class. So I already give them the reason of the doubt (aware of various sources of income not transparent to and not being fathomed by .gov amongst the immigrant community – at least in Europe) that there are actually more than just those 8 pct. Middle Class a few decades ago was living in his own house with garden, fully paid and owned, a wife that might play around with some half-day job once the kids are out, two or three kids, a decent car, maybe a small country house, two vacations a year. At least where I spend my time there are very few people able to afford that. And re your 45 pct: That’s incl the so-called lower middle class and middle middle-class that were invented not to have too many ” working poor” on the statistcs.
Re Western Europe, the third way: An illusion, and falling apart. Fees are rising, benefits are cut, waiting lines explode. I’m living in Western Europe, plus part of the year in Russia, plus a few weeks in UAE, travel a lot incl the States. You drive the two hours from Vienna to Budapest and the average monthly income drops from EUR 1800 to EUR 600. Drive two hours further East and it’s down to EUR 450. In those few countries of the EU where things still function a bit, the elites are hard at work to de-industrialize with green laws and forced immigration acceptance which cost in Germany alone EUR 45.000 per head per anno (there are about 2 million fresh immigrants in Germany). That is the equivalent of all the German unemployment benefits, or the salary of all public servants. And that is without the statistically predictable family-reunification which will add 3 to 5 heads to each existing immigrant. There is no sustainable European third way.
Reinhold,
I have lost the thread of what you are attempting to say. The first part has no obvious relevance to this post. The second is a rant not worth replying to — every nation has strengths and weakness; such rants can be composed against almost anybody.
“A guaranteed income is not charity – I do not know that it would be viewed that way…”
“I’d like to buy some beers in a blue collar bar and ask them. My guess is that they’d agree with me. To a large fraction of Americans taxes are theft and welfare for free-loaders. Trying to sell a minimum income as other than welfare is imo hopeless. The 1% will find a large willing audience for their opposition.”
This was exactly my first thought when considering the political viability of GMI in America. To most Americans, and *especially* the Right, poverty is always a moral weakness, not a condition one is forced into and/or kept in.
ch1kpee,
“poverty is always a moral weakness, not a condition one is forced into and/or kept in.”
I think that’s a bit too strongly stated. Rather, there is support for welfare — charity via government — for the less fortunate, especially old, disabled, and children. I can imagine getting sufficient support for a low guaranteed income (as welfare, charity) — but not a large one.
But there is little support for redistribution cash, just passing money out to those who are not working. My guess is that paying anything but sustenance level income to able-bodied people not working would be greeted with “WTF” by the guys in a blue collar bar.
How likely is a high guaranteed minimum income? This is one step beyond communism (as a system, not defined as a “bad thing”). Under communism workers had ownership and shared profits. Under a high GMI people get cash without working, irrespective of need, for vague reasons (breathing?).
Since communism has been pretty much a non-starter (and a disaster where tried), rebranding and expanding the concept seems even less likely to fly. Leftists get testy when cold water thrown on them while they’re dreaming.
Finding solutions for the new industrial revolution will require some creative thought.
The whole “poverty as moral weakness” (with your caveat: except for children, the elderly, and the infirm) is one of the big reasons there is so little support for any meaningful redistribution in this country. But what do you expect from a nation raised on Horatio Alger fairy tales? And a 1% dangling such a worm of social advancement in front of the proles to keep them working hard, maximizing productivity, and quietly accepting the growing gulf in power and wealth between them?
ch1kpee,
I’d be interested in seeing analysis of American’s opposition to wefare. Is is distinct from American’s frequent opposition to redistibution and esteem for property? Or is it, as you note, linked to the ancient belief that world goods are God’s reward to the good (see the book of Job)?
The Horatio Alger rags-to-riches myth has a deep hold on our imagination, although I wonder if many people have read them since the 1920s. And inmany (most?) of the stories Horatio achieved middle class success (seldom riches) by a chance friendship with a rich old guy or relative — not pure meritocracy.
When I said “moral weakness,” I meant more in the Socratic sense…like you’re poor because you’re doing/did something “wrong,” like you don’t work hard enough, you’re too lazy, you’re on drugs, etc. etc.
But you do raise an interesting point. Though I think few would admit it, I wonder how many religious conservatives now believe something similar. If you believe in the televangelist “prosperity gospel” (pray hard and God will make you rich) crap, it can’t be too hard to believe in its obverse, that your poverty is a punishment from God. Such cognitive dissonance might make the current forced alignment of religious conservatives with economic libertarians more bearable for them.
This person has a theory that only young societies are egalitarian:
https://colonyofcommodus.wordpress.com/2015/04/11/only-young-societies-are-egalitarian/
What do you think of his argument?
infowarrior,
Technology changes everything, both in society’s class and gender structures. We have too little experience to draw such broad conclusions. I doubt “young” is even a useful metric for a society.