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The Central Paradox of the 21st Century

The Central Paradox of the 21st Century

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“Stop whining young people, you’ve never had it so good”. That’s the debate topic sponsored by The Spectator last week at the British Museum. On the one hand, the statement is insane and insulting.  60% of the unemployed are under 35, recent university graduates on average owe £45,000 for their education and more than a quarter live with their parents because they can’t afford the rent. Entry-level jobs are evaporating, and even internships require impressive resumes.   Most young university graduates with paying work are in jobs that could have been filled by high school graduates.

It’s not just Millennials.  Older workers have it tough too.  A friend of mine, over 50, a graduate from a top university, head of PR at a Wall Street firm took a voluntary redundancy a few years ago, confident his skills and talent would soon land him an equivalent job.  When no one hired him, he set himself up as a consultant but unfortunately, his phone didn’t ring.  Today, he is slicing bologna at his local deli. This is not an atypical tale.  In the modern world job security is a joke.

My father and grandfather had jobs for life.  They gave their youth to the corporation and in return the corporation took care of them until retirement.  Today, no one has a lifetime contract. Lean and mean firms hire freelancers and even staff have few guarantees.  You can be on top this year, unemployed the next.  No matter your age, no matter your skills, our work lives are evermore precarious.  It seems the typical career path is interning in your 20s, finally getting a paying job and rising up the ladder in your 30s, over the hill by 45.  Unless you are a premiership football player, the person who had your job ten years ago got paid more, worked less and had more fun than you do. Each generation of workers seems worse off than its predecessor.

But from another perspective, the optimists at The Spectator do have a point. As employees we may be suffering but   as consumers, we live like kings. We can fly to Dubrovnik for £22, £500 will buy us more computing power than NASA had when they put a man on the moon, Tinder makes hooking up a breeze. Our life expectancy is higher, we eat better, dress better, have more entertainment options than any humans in history. Within living memory, an orange was an acceptable Christmas present. Today even people in council estates buy each other electronic toys that would have amazed James Bond fifteen years ago.

If you are creative, you can publish your short stories on Tumblr, make a movie on your mobile phone, post it on YouTube where millions might see it.  Swedish design that not that long ago was the height of modernist sophistication is now available to the hoi polloi at IKEA. Peasants in Mexico wear fashionable clothes made in China.  Peasants in Iraq have satellite dishes and watch the World Cup live. It is schizophrenic: as workers we have few rights and less power.  As consumers, we live like gods.

Our unheard of affluence as consumers, our precarious existence as workers both stem from the same source: inexorable productivity increases.  Every year, as technology advances we can make more goods and services with fewer inputs of labour and capital.  It used to take dozens of men to unload a ship. Today one man on a computer and another on a crane are faster than 100 longshoremen could ever be. When I started in television, producing a broadcast quality news story required a cameraman, soundman, editor, reporter, producer, and transmission engineer.  Today, one person can fulfil all of those functions and generally will get paid less than any one of us used to.

Productivity increases boost our societal wealth and so make us all collectively richer but they also make more of us redundant.  This is an old story and the traditional answer is that we Luddites should stop complaining and happily give up our handloom weaving gigs because technology will soon find us something even better.  Perhaps that is true, in the long run, but try telling it to the children of  autoworkers in Detroit or the grandchildren of ship builders in Newcastle.  Technological progress today is a job killer and this process is likely to accelerate. Even China is not immune. Today it has fewer manufacturing jobs than it had in 1996 even though it is producing almost twice as many goods.

The rise of robots is no longer science fiction.  More and more jobs are being automated.  The computer is doing to the office worker what the internal combustion engine did to the horse 100 years ago, making him obsolete.  ATM’s killed bank tellers, automated check out will soon eliminate supermarket clerks. Kodak, which recently went bust, at its peak employed 145,000 workers. Instagram had only 14 employees when it was sold for  $750 million.

This paradox between our affluence as consumers and our precariousness as workers poses economic, political, and moral conundrums.  If we can produce more with less, and workers become redundant, who will buy the goods? A robot can make a mobile phone but it cannot purchase one.  Workers are also consumers. Fire your workers, your profits will rise until the day no one can afford to buy your product.  Henry Ford was a visionary for paying his workers enough so they could buy his cars.

Ultimately, our production possibilities frontier and so our societal wealth is determined by our level of technology.  That keeps expanding. Thus every year we should be richer. Each generation should be better off than its parents.  That we are not is a problem of distribution.  When Harold Macmillan told Britons in 1957, “most of our people have never had it so good”, post war prosperity was due to the introduction of labour saving technology but also because societal wealth was shared.  The rich got richer during the post war golden age (1945-1973) but so did everybody else.  Productivity gains were almost instantaneously transmitted into wage gains.  Today the benefits of productivity gains adhere to the CEOs of companies and their shareholders, not workers.

Progressives are stuck with the notion that to cure inequality, to restore demand, we should raise wages and reduce unemployment.  These are worthy goals but as technology eliminates more jobs it becomes a Sisyphean task.  If you are a regular reader of Pieria, you will not be surprised I suggest a basic income guarantee as the long-term solution.  As technology reduces employment opportunities while increasing production, nothing else will allow us to maintain demand sufficient to meet supply. 

Ever since the invention of agriculture ten thousand years ago, we have learned that from the sweat of our brow we will earn our daily bread. This deep-seated truth is now out of date.  Capitalism and technology have in large part solved the problem of supply.  We need to solve the problem of demand. The first step is to realize we live in a post scarcity economy, that austerity is not the answer.  The second stem is to recognize we need to divorce work from consumption.  Otherwise, technological progress will impoverish us rather than enrich us and that would be tragic, ironic, and absurd.


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We need to stop thinking about basic income as a form of subsidy, either to labour (i.e. the intellectual inheritor of the workhouse approach) or to capital (i.e. the socialisation of demand).

The marginal revolution's critique of the mechanism by which labour is transformed into value obscured but did not disprove the fundamental truth: that all wealth is ultimately the product of land (i.e. raw materials) and labour. The maximal exploitation of the former is leading to environmental degradation - we are fouling our collective nest - but this only occurs because we seek to maximise the latter, which essentially only produces value by transforming the former. What we need to do is reduce labour time.

This can be achieved without any drop in living standards because it can be offest by productivity (this has historically increased at 1.5% p.a. due to technology alone, and is likely to increase faster if we make labour scarce). A basic income is the mechanism by which we can "buy off" labour time. In practice, this means redistributing wealth from the rich (i.e. the holders of historic embodied labour in the form of capital) to the rest, so Ciaran is right about the need to shift tax away from labour to capital.

For the right, a basic income (or the even more coercive job guarantee) is simply a form of dole, intended to buy off labour in the sense of keeping a lid on dissent. Yes, they want to maintain aggregate demand, but their chief desire is to maintain the imbalance in the distribution of wealth, which is why austerity is acceptable in the short-run and a parsimonious basic income in the long-run.

Re Justin's point about the international dimension. A national basic income would be problematic if it acted as a labour subsidy, as this would undermine factor price equalisation - i.e. cheaper UK labour would prevent jobs being offshored in many industries (this would obviously be a selling point for some). If it were used to reduce working hours instead, it would help maintain the current dynamic of rising wages in developing nations, which would ultimately bring foreign workers the same benefits, albeit on a later schedule.

How do we balance our need to increase demand, our ever expanding ability to increase supply, and the exhaustion of the earth's natural resources and destruction of the environment? Would increasing income to provide the demand for ever increasing supply not just make us into an even more disposable society than we already are?

If we have the ability to produce enough cars to enable every adult to have a new car every 5 years, and all we have to do is ensure that they have a sufficient income to do so, should that be our goal?

Instead of a basic guaranteed income, I think that the safety nets we have in place, PLUS significantly increasing the earned income tax credit and much higher progressive income tax rates (along with significantly higher estate tax rates, and possibly even a annual wealth tax (which I guess negative real interest rates accomplish in some way) as part of the solution in regards to what the best policies should be as we go forward. This has to be balanced with policies that are economically AND environmentally sustainable.

I am curious if the following is an issue you have considered and whether you feel it to be a reasonable concern with regard to the possible solution of basic income.

I find that basic income is a decent theoretical solution to the problems thus illustrated, and I have vouched for it myself. My largest concern, however, is one of practical implementation with regard to the global economy and the consequences of such.

Basic income would need to be implemented transnationally for it to, in turn, be a viable solution within developed nations themselves; the relation between worker, consumer and productivity is not a closed system with regard to political boundaries.

Let me sketch why this is likely the case: farmers in undeveloped nations are directly impacted by over-productivity of industrialized farming complexes in developed nations, which can generate a greater bulk and thus drive down global market value. Even if demand for the specific product is high globally and locally, farmers in undeveloped nations are reduced to subsistence conditions because their methods of production cannot compete with the surplus of such complexes. They cannot afford to purchase their own product, let alone the equipment, labor and infrastructure required to improve their business and become competitive globally! Furthermore, their few successful neighbors are buying food and clothing in import because it is, quite frankly, cheaper. The same issue of abundance of output with minimal labor requirements

This applies to industries outside of agriculture, as well, in undeveloped nations, whenever technical know-how/education or access to manufacturing equipment is wanting.

Establishing basic income only in developed nations would increase demand only in developed nations without providing such means to international producers, in turn closing developed nations’ marketplaces off to other countries that cannot compete. Factoring in ethical motivations which are not entirely utility-maximizing ('hipsters' and counterculturalists purchasing coffee from farmers in other nations out of principle or for aesthetic reasons, creating a demand to be filled initially by small business and later by corporations to source these farmers) is not enough to account for the chasm of wealth and well-being between developed and undeveloped nations. Worse yet, the fissure would only widen. We would outsource our poverty even further to other countries through increasing average well-being in our countries. This is ethically abhorrent in itself.

Not to be alarmist, but this might create instability in the global economy resulting in fluctuations of wealth distribution and increasing sporadic violence and civil unrest. Crises of poverty, environmental degradation and societal instability whose effects know no political boundaries would, in turn, impact the economy and well-being of developed nations, as they attempt to mitigate damage to keep their own structures afloat. Take in to consideration illegal foresting operations in Indonesia that crop up in an attempt to compete globally by providing a limited, non-renewable resource, which, in turn, destabilize regional governments unable to cope with enforcement scale.

The suggestion that our over-productivity can be harnessed to improve quality of life and sustained is couched in the assumption that the technological and scientific innovation will always progress. What happens to the the health industry, for instance, when rain forests, which are fundamentally vital to research into biology and medicine, are destroyed? This is even a small concern compared to how environmental degradation and overpopulation in other countries impacts global well-being. You cannot significantly change a local environment without cascading external transformations.

I am more interested in how we would contend with the global economic consequences of catalyzing our own current transformation of the relation between consumer and work. One cannot simply provide the means to consume to individuals in other nations who cannot afford to compete with our marketplace without severe cultural and political ramification. And, mind you, we have unfortunately tried it...

We would need to change our own domestic economic and welfare policies while redesigning our foreign policy such that it indirectly promotes growth in countries we should not directly tamper with for moral, cultural, political and social reasons. The question is how to do this.

the answer lies in taxation reform and a new frame of ideological thought.

Tax has for the past century been viewed as a charge on labour for services provided by the state to and for labour but that has never been true just convenient for the owners of capital and land. Taxation funds the overhead cost of the entire function of society and should be levied across all productive factors (land labour capital and energy and knowledge). For much of the past century it has fallen mostly upon labour and less upon capital and even less upon new productive capacities. Energy in particular has been severely under taxed and as a result this finite resource has been squandered most wastefully - with some ugly consequences in the offing for the entirety of modern society because this social construct is little more than embodied energy. Each generation has the responsibility to the future to leave it with the same productive capacity that it inherited - farmers and nomadic pastoralists have understood this for millennia but capitalists don't.

Our governments know nothing of government as they are beholden to the status quo which in its present form is an awful mutant of capitalism. The present problems of society are problems of governance and leadership. Governments primarily exist to keep the populace busy and society stable. Capitalism needs a stable society and a busy society to exist but for the past thirty years capitalism in its current diseased form has been cashing up the cost of maintaining stability and employment and pocketing the savings.

The pyramids weren't built to bury Pharaoh's they were built to occupy surplus labour and create demand for the product of efficient irrigated agriculture - they were make work schemes but also they drove the advancement of knowledge and technology - just as the space program of the 1970's did in the US. Every king of old knew that idle labour was a recipe for revolution but was also lost productive potential. Governments need to develop a tax system that can fund full and meaningful employment for the great majority in stable communities. It needs to tax all aspects of production to do this and also control flow of trade at the border to achieve this.

We are suffering from the consequences of the narrow and selfish views of the Thatcherite dogmatists who are of the type who want hoard the Pharaoh's gold to themselves rather than keep the populace occupied and fed. This selfish short-sightedness has several consequences - first the economy withers then the under employed masses revolt then the thatcherites are put to the sword - all with much waste and destruction.

The old model is dying and there is no new model being debated. We confront a new and very different world in the coming decades where much of humanity will seem to have no economic value and where energy is rapidly becoming scarce and expensive and our leaders response is to do more of the same but harder - which is like rowing towards the waterfall. We see the harbingers of this future in Iraq and Syria and Sudan. They are not different to the UK or the US or Europe - they are just at the leading edge of change because they have less of everything not because they are fundamentally different.

Tom,

All well and good, and true and insightful, but you pull your punches in the final paragraph. We need to solve the problem of distribution, not demand. A basic income is sensible, but this can be implemented in radically different ways, which is why you'll find as many supporters of the idea on the political right as the left.

We (in the developed world) are moving towards a post-scarcity economy, but this simply means we have the capability to meet the material needs of everyone. Meanwhile, power becomes ever more scarce, which means that as societies we repeatedly fail to take the steps to actually ensure that the benefits of post-scarcity are equally enjoyed by all.

If at Pieria "this house agrees the time is ripe for a basic income", perhaps you should start explaining the specifics. I suggest that this would lead to a more fruitful debate than the sort of blowhard nonsense sponsored by The Spectator.

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