Archives for posts with tag: Universal Basic Income

Autumn of 2008.
The Bucharest Stock Exchange assembled a conference for the investors where some relatively junior guys working for the ‘Global Banking Establishment’ tried to uplift our mood by outlining their bosses’ envisioned reaction to the crises. Something which would later be known as  ‘quantitative easing’.
I asked one of them:
‘The current crises is the straight consequence of money having been used improperly. Are you sure that throwing a fresh amount of it on the market would make things any better?’.
‘Well, nobody has come yet with a better idea…’

Almost ten years later, it seems that ‘throwing fresh money at it’ did revive the market.
Dow Jones has climbed through the clouds, unemployment is low, inflation is low, interest rates are also low…

Some 120 economies, accounting for three quarters of world GDP, have seen a pickup in growth in year-on-year terms in 2017, the broadest synchronized global growth upsurge since 2010.“, according to the IMF.

Only the very same words could have been used to describe the 1990’s…

But there is something that at least some of us have noticed.

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©Elliot Wave International (www.elliotwave.com)

Both major economic crises which have scarred us in less than a century have been closely predated by spikes in ‘income inequality’.

To make things worse, we are confronted by yet another fast moving development which pushes us towards uncharted waters.
Large scale replacement of ‘human capital’ by industrial robots, some of them driven by ‘artificial intelligence’.

Reaction has been mixed.

Some of the very rich have pledged to make available to charity important chunks of their estates while other ‘concerned parties’ promote  heavier involvement of the government – ‘guaranteed universal income’, etc., etc…
All these in the name of an illusive ‘equality’.

‘On the other side of the isle’, where inequality is seen as being not only natural but also harmless, people are happy with what’s going on and see no problem in everything continuing to march to the same beat.

I argued earlier that ‘heavy involvement of the government’ has already been experimented. And failed. Check the fate of every communist dictatorship.
Actually, check the fate of all dictatorships.
You’ll find that whenever a society becomes too centralized, that thing alone considerably diminishes its survival chances.
Same outcome whenever people in a group/community evaluate things using a single yardstick/from a single perspective.
To make things worse, the speed of the degenerative process becomes catastrophic when decision making becomes centralized while the reduced number of decision makers are partially blinded by too many of them using a single yardstick to do their job.

We are fast approaching that situation.

Extreme wealth polarization means that economic resources become concentrated in very few hands. Hence economic decision making.
And since policies cannot be put in place without resources…

The funny thing is that this concentration of power/decision making take place regardless of property remaining private or communism taking over.
As long as those who control the whole system are too few, ‘who owns it’ makes no difference.
Absolute monarchies faltered in the very same way as their communist successors.

It doesn’t matter whether an universal basic income would be supported by a tax exacting government or by a small coterie of ‘concerned investors’, sooner or later any such arrangement would become sour.

One other thing.
Claims for equality might become so deafening as to impede clear thinking.

Just as money is a very good tool/servant but a lousy goal/master, equality is a commendable goal but a lousy tool.
Human beings ‘work best’ as autonomous individuals who cooperate freely inside what has been described as ‘free market’.
Whenever that market was cornered, either from outside – by the government, or from inside – too many of the players acting in ‘concert’/sync because they had been ‘mesmerized’, remember the ‘Tulip mania” of yore? – it had faltered. Sometimes abysmally.
Attempting to fit everybody in a ‘one size fits all’ mould would be catastrophic.
Just as catastrophic as when less and less people can develop and express their true potential. Remember that we haven’t changed, biologically, during the last 50 000 years or so. But, generation after generation, we’ve been able to do more and more things simply because each generation made it easier for the next one. Most of the times, anyway.
Let’s not change this.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I keep hearing about this issue and I can’t stop wondering about how parallel to each other are those defending this idea with those denying its merits.

Pro:

-Robots are eating more and more jobs so more and more people will end up hungry.
-AI will make robots so productive that it will be far more efficient to use robots than human workers.
-A decent income is a human right.

Con:

-This is a socialist move, hence it will end up in failure – no other reason offered.

As it is obvious to all, both sides score big.

Yes, including ‘a decent income is a human right’ and ‘all socialist ideas end up in failure’.

Then what are they fighting each-other about?!?

Let me rephrase that.
WHY are they fighting, in the first place?

Because neither listen to what the other has to say… as simple as that…

Let me discuss some of the practicalities involved.

Robots eating up jobs and AI being able to continually increase financial efficiency are so evident that they do not deserve much consideration.

‘All socialist moves ended up in failure’.
We need to define socialism in order to make sense of this sentence.
Mainly because ‘socialism’ is one of the most abused words nowadays, on a par with liberalism. Sometimes they are even considered synonyms…
Well, ‘liberalism’ comes from liberty and  bona fide liberalism is concerned with individual freedom.
Socialism, on the other hand, comes from social. And is concerned with the the workings of the entire society.
The point being that there are two types of socialism. One which is ‘somewhat’ synonym with liberalism – the ‘reverse’ side of liberalism, actually, while the latter is the exact opposite.

I’m not making any sense?

Let me start from the other side.
All forms of socialism which have failed have been excessively centralized forms of government. And it was because of that excessive centralism that they had failed, not because of being ‘socialist’. The evident proof being that the same thing has happened with all right-wing dictatorships, which had used the very same excessively centralized decision making mechanism – the totalitarian government …

Which brings us back to the problem at hand.

For Universal Basic Income to work – or Guaranteed Basic Income, as some insist on calling it, it has to be financed.
Through taxes, right? Which means that those owning the robots would have to be somehow convinced to give up a huge proportion of their profits… Then why bother in the first place…? Why start any businesses, at all?
We’ll have the government run the whole show? Remember what history teaches us about centralized decision making?

So?!?

Well, not all is lost while there’s still hope!

Let me rearrange the arguments.

We not only live in an inherently limited space, with inherently limited resources, but we’ve also finally started to understand our predicament. Which calls for as much efficiency as possible.
Only for a different kind of efficiency than that we’ve accustomed ourselves to.

Until recently, we’ve been trying to get as much money under our belts as possible. Without much regard for anything else.
That’s why we’ve been cutting down secular forests, feeding almost all the fish we’ve been pulling from the oceans to the domestic animals we were raising for their meat, polluting our breathing air, selling our fellow humans which happened to had a different skin color than ours into slavery… As if there was no tomorrow…

Slowly, we’ve started to realize that this won’t work for very much longer.

That no matter whether we’re responsible for the global warming – or if it’s real at all, sooner or later we’ll exhaust the planet.
OK, it is highly plausible that we’ll discover/learn to use new classes of resources.
But this eventuality doesn’t constitute, in any way, a valid reason for us to continue squandering the meager resources we have at our disposal.

Hence the need for increased efficiency.

Only this has to be a different kind of efficiency. The kind that focuses on minimizing waste instead of maximizing profits. The kind that recycles because it makes obvious sense, not because it is cheaper.

Along the same path we’ll discover that it would make a lot of sense to help the less developed nations to catch up with the most advanced ones.
For starters, because the ‘advanced economies’ no longer need cheap workers. They use robots instead.
Secondly, because better living people tend to have less children than those struggling to survive. And we’ve already agreed about the planet being rather limited…

Nothing too fancy… until now, right?

Well, the next item will be trickier..

Remember that Ford had raised dramatically the wages he paid to his workers?
With tremendous results?

OK, his reasons were not the ones, generally but erroneously, attributed to him.
He didn’t do it to ‘encourage’ his workers to buy cars from him… or because of philanthropy…

Actually, it was the turnover of his staff.

At the time, workers could count on about $2.25 per day, for which they worked nine-hour shifts. It was pretty good money in those days, but the toll was too much for many to bear. Ford’s turnover rate was very high. In 1913, Ford hired more than 52,000 men to keep a workforce of only 14,000. New workers required a costly break-in period, making matters worse for the company. Also, some men simply walked away from the line to quit and look for a job elsewhere. Then the line stopped and production of cars halted. The increased cost and delayed production kept Ford from selling his cars at the low price he wanted. Drastic measures were necessary if he was to keep up this production.”

But, whatever Ford’s reasons were, the long term results have been abundantly clear.
Nowadays people who build cars are being paid well enough to afford buying the same kind of cars they are building. At least in the advanced economies…

What happened was that Ford, in order to keep the assembly line going, paid his workers as much as he afforded to. With spectacular results.
While nowadays most employers tend to ‘compensate’ their employees with as little as possible. Which makes perfect economic sense… doesn’t it?

The same economic sense which used to drive us into “cutting down secular forests, feeding almost all the fish we’ve been able to pull from the oceans to the domestic animals we were raising for their meat, polluting our breathing air, selling our fellow humans which happened to had a different skin color than ours into slavery… As if there was no tomorrow…”

See what I mean?
Instead of attempting to mandate a ‘Guaranteed Basic Income’, calculated by the central government and financed through forcefully levied taxes, how about hiring as many people as it would make sense, let them work as little days per week as they want and pay them as much as we can afford to instead of programmatically replacing as many of them with robots and paying the remaining ones as little as we possibly can?

OK, some of us won’t get as rich, as fast, as our grand-fathers did… So what? None of us can eat even close to what our grand-fathers used to… and food is a lot cheaper, anyway…

This is would be a considerably shorter way to get more people out of poverty than any scheme concocted by any government and it would have the same snow-ball effect as Ford’s wage increase had.

Economists describe this as Rostow’s ‘take off effect’.

 

For attaining adequate finance for take off it is necessary that:

(a) The community’s surplus over consumption does not flow into the hands of those who will utilize it by hoarding, luxury consumption or low productivity investment out-lays;

(b) Institution for providing cheap and adequate working capital be developed;

(c) One or more sectors of the economy must grow rapidly and the entrepreneurs in these sectors must plough back a substantial portion of their profits to productive investment; and

(d) Foreign capital can profitably be utilized for building up social and economic overheads.”

 

Obviously, any attempt to instate a guaranteed basic income, (except for those too young, too old or otherwise un-able to pull their weight, of course) would grind any ‘take-off’ to a stand-still.

And no, getting people out of poverty is not a valid goal, per se.
Poverty is a relative thing, which relies more  on feelings than on hard reality.
The real problem with poverty is that it reduces the ability of poor individuals to lead meaningful lives. Poor people are a lot less autonomous than self sufficient ones, meaning that decision making ability is impaired by the fact that they need to focus their attention on the short term time span.

This whole thing has long term consequences on societal level.

Remember what I said about centrally planned socialist countries constantly failing.
About all dictatorships eventually crumbling under their own weight, because of too much decision power being concentrated in too few hands?

Excessive wealth polarization produces the same results. Economic decision becomes too concentrated, political decision follows through and…

What next?
The world has already experimented with communism. Didn’t work.
It also experienced two economic meltdowns, exactly when wealth polarization was at relative peaks.

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When are we going to learn anything from what happens to us?
Why do we continue to waste the accumulated lessons collectively known as ‘history‘?

 

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