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How basic income can solve one of the digital economy’s biggest problems

At a time of global economic insecurity, an insightful commentator identified the existential threat that technology poses to work:

We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come – namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.

These words by John Maynard Keynes in 1930 remind us that contemporary anxiety over jobs being taken from us by robots is not so far removed from fears of a greater vintage.

Indeed, the more these fears are periodically recycled and perennially assuaged, the less potent they appear to those who are sensitive to the long arc of human history. Nonetheless, this has been one of the major themes of discussion by world leaders at Davos.

John Maynard Keynes.

The exponential growth of digital technology since the 1990s has brought us to the “fourth industrial revolution”. Advancements have reached the point where highly skilled jobs are as susceptible to replacement by automation as ones which do not require much education or training. This is vividly exemplified by Silicon Valley entrepreneur Martin Ford’s contrasting of the radiologist’s vulnerability to automation with that of a housekeeper, whose decision-making processes are less easily replicated.

This is compounded by the concern that this new type of economy does not provide enough compensating positions for the jobs automated out of existence. As an illustration of how the most innovative digital companies can generate huge wealth on the back of the toil of relatively small numbers of people, look at how Google’s market value of US$377 billion is supported by just 53,600 global employees. Contrast this with General Motors’ market value of US$60 billion and 216,000 employees.

This divergence would not be significant in an economy where the business of each company was completely separate. Now, though, the tech giants’ operations have seeped into other spheres of business, such that Google’s driverless cars makes the company a direct competitor of General Motors.

Martin Wolf, the Financial Times’ chief economics commentator, argues that these tectonic shifts should open up a space for a rethinking of our attitudes towards work and leisure. Rather than lamenting what automation robs us of, why not use it to generate greater opportunities for leisure and education, as well as liberate us from our constant anxiety that we will not be able to support our families in this unstable environment?

Technology has come a long way. Alexander Svensson, CC BY

An age-old idea

An obvious way to do this is by way of a basic income – redistribute wealth and give all citizens a flat, unconditional income. The idea is grounded in decades-old ideas and experiments. The Democratic candidate in the 1972 US election, George McGovern, for example, proposed a “Demogrant” of US$1,000 a year for every American.

Robert Reich, the labour secretary in Bill Clinton’s first presidential term has also advocated a combination of minimum income, earnings insurance and a US$60,000 nest egg for each citizen to cushion against the violent vicissitudes of the modern global networked economy. And, as Wolf advocated, Swiss campaigners for a basic income framed their arguments around the notion of improving citizens’ work-life balance.

Libertarian economist Milton Friedman. The Friedman Foundation for Educational Choice

It might surprise the reader to discover that ideas for a basic income come from figures on the right too, including the libertarian economist Friedrich Hayek. They were manifest in proposals for a negative income tax, first advocated by Milton Friedman in 1962, and which almost came to fruition during the Richard Nixon presidency in the form of the Family Assistance Plan.

The failure of this plan to get off the ground was accompanied by a series of negative income tax pilot schemes in a number of US cities with less than stellar results. Despite this, Conservative thinkers like David Frum argue that introducing a basic income would cut bureaucracy by eradicating the thicket of anti-poverty programmes currently in place. A number of new schemes – most recently in the Dutch city of Utrecht – might give us a better indication than their 1970s forebears of how these experiments might work in our highly automated economies.

Something that the head of the World Economic Forum, Klaus Schwab, has been keen to emphasise is the increasing tendency for benefits of the digital revolution to accrue to the many not the few. “As automation substitutes for labour across the entire economy, the net displacement of workers by machines might exacerbate the gap between returns to capital and returns to labour,” he said.

Keynes prediction in 1930 that within a hundred years people in the richest nations would be working only 15 hours a week might not come to pass. But given the potential of automation to confound economists’ employment projections, those gathering at Davos would be remiss to not consider a basic income as a credible policy response to contemporary anxieties about our role in the modern workplace.

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