“Capitalism,” as we know it, which really is shorthand for the existing political economic system in the West, is on a collision course. Left to itself, the system drives more and more wealth and income to the top. Already, over 50% of global wealth is held by the top one percent, and about 50% of that by the top one-tenth of one percent. Of course, as wealth and income continue to concentrate, the system itself becomes less stable. We see that in recent elections. Across the West, right-wing populists are gaining traction, while political parties that supposedly advocate for the working class openly cavort with their wealthy benefactors. If this doesn’t frighten you, you’re not paying sufficient attention.
Driving this development is a perversion over recent decades in the impact of technological advances on our society. Technology’s role should be to make all our lives better. For centuries, it worked that way. In the first 60 years of the 20th century, for example, technology drove the American work week down from 60 hours to 40 and took children out of the workplace.
Technological advances, however, don’t necessarily benefit us.
After all, the labor savings from technological advance brings with it a combination of three possible outcomes: (1) an increase in the hourly wage for the work that remains to be performed; (2) a reduction in the cost of goods and services to consumers; and (3) increased profits to the owners of capital. When the first two of those outcomes dominate, society advances. When the third outcome dominates, not so much.
Guess which outcome has dominated over the past three decades?
Does that mean the system we know as capitalism is doomed?
Not necessarily. The system has been on a collision course before, but has been saved by policy choices. Consider what would have happened had policy makers in the West not acted to strengthen unions, and impose a minimum wage, overtime restrictions, and child labor and workplace safety laws.
Could those mechanisms be strengthened to save “capitalism” again? Maybe, but there could be a problem of diminishing returns. Show me a higher minimum wage and I might show you a machine that makes hamburgers from start to finish. Show me a 28 hour work week and I might show you a worker who takes on two full-time jobs.
Which doesn’t mean the current system is doomed, but does mean policy makers must think outside the box. That may spell doom for America’s Democratic Party (See Different Worlds: Inside and Outside the Team Democrat Thought Box), but not for all of us.
Enter Finland. Finland now is experimenting with a basic income guarantee, something policy wonks on both the right and left have advocated for some time. As reported by the NY Times in Free Cash in Finland. Must Be Jobless, Finland will be handing out cash to jobless people, free from bureaucracy and limits on side earnings. What Finland is doing is a bastardized version of the basic income guarantee. And Finland, as the article points out, is not alone.
Is this a step in the right direction? In my mind, it represents the right direction. Combine this with changes to the overtime laws and a more progressive system of taxation and we could regulate extreme inequality out of existence without destroying the incentive for people to innovate and work hard in order to get ahead.
For those interested in this stuff, the entire article is a must read, but here are a few of the more interesting snippets:
The government is eager to see what happens next. Will more people pursue jobs or start businesses? How many will stop working and squander their money on vodka? Will those liberated from the time-sucking entanglements of the unemployment system use their freedom to gain education, setting themselves up for promising new careers? These areas of inquiry extend beyond economic policy, into the realm of human nature.
The answers — to be determined over a two-year trial — could shape social welfare policy far beyond Nordic terrain. In communities around the world, officials are exploring basic income as a way to lessen the vulnerabilities of working people exposed to the vagaries of global trade and automation. While basic income is still an emerging idea, one far from being deployed on a large scale, the growing experimentation underscores the deep need to find effective means to alleviate the perils of globalization.
The search has gained an extraordinary sense of urgency as a wave of reactionary populism sweeps the globe, casting the elite establishment as the main beneficiary of economic forces that have hurt the working masses. Americans’ election of Donald J. Trump, who has vowed to radically constrain trade, and the stunning vote in Britain to abandon the European Union, have resounded as emergency sirens for global leaders. They must either update capitalism to share the spoils more equitably, or risk watching angry mobs dismantle the institutions that have underpinned economic policy since the end of World War II.
The bold underlining of that last sentence is mine, but only because it’s the best I can do here. Ideally, that sentence would be shouted into the home of every sane American on a daily basis.
“The last two years, there’s been an explosion of interest in basic income,” says Guy Standing, a research associate with the School of Oriental and African Studies at the University of London, and a co-founder of the Basic Income Earth Network, an institution created to promote the idea. “The elites realize that the inequalities are becoming politically dangerous.”
I’ve started to see this in my own work, but not as visibly. I know millionaires who are genuinely concerned about economic injustice. They’re not advocating the basic income guarantee yet, but I think they’ll get there.
Universal basic income is gaining consideration in part as an acknowledgment that the labor market has changed so fundamentally that full employment may amount to a fantasy. Factories have been refashioned into urban-chic office spaces. Robots are replacing workers, while the gig economy turns full-time jobs into contract positions.
Basic income is intended to be permanent, built for an age in which demand for labor may be perpetually slack. Whatever happens — say everyone becomes a part-time Uber driver, or Uber drivers are replaced by self-driving cars — everyone can count on sustenance.
Strikingly, basic income is being championed across the ideological spectrum.
Utopian dreamers envision it as an emancipation from the meaninglessness of low-wage work. People stuck in dead-end jobs at fast-food restaurants could abandon laboring over the fryolator in favor of growing organic vegetables and reading to their children.
Labor advocates embrace basic income as a means of increasing bargaining power, enabling workers to eschew poverty-level wages while holding out for better.
Libertarians see it as a means of shrinking government by consolidating social service programs. Liberals envision it as a way to remove the stigma of public assistance: Instead of standing in line at the grocery store bearing food stamps while suffering the judgment of other shoppers — Shouldn’t she be buying spinach instead of frozen pizza? — poor people would get the same check as everyone else.
All of which makes sense. But here’s the purported stumbling block:
Yet the expensive price tag attached to anything that is truly universal makes it a political nonstarter in many countries — especially in the United States, where Mr. Trump just appointed a labor secretary who is critical of simply raising the minimum wage.
If every American were to receive just $10,000 a year, the tab would be roughly $3 trillion a year, roughly eight times what the United States now spends on social service programs. The government might just as well commit to handing out unicorns.
At some point, that thinking will break down, or so I hope. That $3 trillion per year price tag? We have a $17 trillion per year economy, 20% of which is flowing to the top one percent. And the $3 trillion is grossly overstated. For those above the poverty line, the basic income guarantee would increase taxable income, driving tax revenue back to the Treasury. Ultimately, the impact of the basic income guarantee would be to lift all Americans out of poverty. Can the richest nation in the history of the planet afford to do that? Of course we can.
Would the basic income guarantee result in a society of lazy loafers who refuse to work? We won’t know that until we try, but I have trouble believing that many people would be content to live at the poverty line when they could live better by working a bit. That’s not the real fear of those who will be the last to stand in the way of guaranteed income. The real concern is that the Walmarts of the world will lose their unfair bargaining advantage. Potential workers with a guaranteed basic income still would get off the couch to work in crummy jobs. They just wouldn’t do so for the pittance they’re currently being paid. Which could put a healthy dent in the fortune of the Walton family. Oh well. The price of progress.