back to article Basic income after automation? That’s not how capitalism works

Philosophers, economists and other academics have long discussed the idea of “basic income” – an unconditional monthly check from the government to every citizen, in an amount at least high enough to cover all basic necessities. Recently, this idea has gained more political traction: Even conservative parties consider it, and …

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  1. John Robson Silver badge

    It would put a lot of lawyers and accountants out of a job

    After all, if we only need benefits for disabilities which incur additional costs then it's a lot easier to organise.

    And there would be no good reason to have a zero rated tax bracket - probably paying for most of the system to start with...

  2. ecofeco Silver badge

    No basic income but no jobs?

    Let them eat cake! That always works, right? Because no one ever got mad, overthrew governments and burned everything down and killed rich people (who thought they were untouchable) by the thousands because they and family and friends were dying and starving to death, right?

    Several billion people will just accept being left die.

    Right? RIGHT?!

    Yeah, that will end well. History says so! Oh wait...

  3. Suricou Raven

    There's one huge flaw in the whole thing.

    It assumes demand for goods in general is really elastic.

    The people of old who predicted automation would bring about a three-day work week were wrong because they assumed demand would be inelastic: That the people would want only so much 'stuff' and so with increasing per-person productivity there would come a point where that demand would be satisfied with only a small number of people in employment. This didn't happen, because with falling cost of production consumption increased accordingly: Even the low-income today live a lifestyle that would have been the envy of a preindustrial king. Clothing so cheap that people will throw away a piece rather than spend time stitching a hole? Items imported from half-way around the world just to decorate our homes? Holidays to exotic locations?

    If we all lived like an 1800's peasant, we really would need only a fraction of the population in work.

    An important question is how far this can be taken. If further automation leads to even greater per-person efficiency gains, what happens? Do we reach the point where clothes are so cheap people will throw them away each day rather than wash them and just buy anew? There has to be a limit to how much useless tat people want in their lives - and there are only so many hours in the day to watch television. Even if consumption continues to increase, there are other costs to this solution: Massive resource usage and environmental impact.

  4. John H Woods Silver badge

    The alternative ...

    a) slow capital punishment by starvation or exposure for being too lazy to work

    b) an army of people and machinery trying (and failing) to make sure no-one cheats the system.

    To me, a basic income is a *highly capitalist* idea (and I like it). It enables the removal of vast amounts of red tape. You could ditch minimum wage, tax allowances, and probably a good deal of protectionism. We could also get rid of hundreds of thousands of public sector jobs which don't really contribute anything positive to the economy. The situation we have at the moment tho, where people who could do a few hours work per week just cannot do that in any legal fashion seems to me to be ridiculous. For the employees, every hour you worked would make you richer, and for the employers, the workforce would be much more flexible and mobile.

  5. Christian Berger Silver badge

    Extrapolating medium term trends

    Yes, we still have a surprising amount of work. One reason for this is of course that we can burn through more and more resources. However resources are typically finite. There's only so much oil you can turn into cheap plastic toys.

    For areas where the limiting factor is the workforce, we have found other ways to keep more people employed. In engineering we purposefully stop giving students good education so they will get worse and worse. This results in engineers needing exponentially more time to solve problems. Essentially since they have never learned how to actually solve problems, or how other people have solved problems in the past, their solutions often involve creating more problems than they were trying to solve. This causes a chain reaction which can even become critical.

    In other areas like management, we are seeing the creation of "bullshit jobs". Jobs which serve no purpose but to create things for people to do. There are companies producing household appliances which have whole departments thinking about how to create an overarching theme of management so they can justify, more or less logically, why they have production plants.

    We are currently still doing rather well at wasting work, however I believe it is very naive to think that this can go on for ever.

  6. CaseyAPayne

    What About 50% Unemployment?

    Where I'm from in the US (Milwaukee, WI) the unemployment rate among African American males is over 50%. Not only is it because manufacturing jobs leaving, which will never be replaced, there is systematic racism and the effects from the history of their (our) community. Problems like this exist throughout major cities in the US.

    The economics of that situation creates a really strong argument for a reparations of some kind. A reparations of some kind may be the only answer to the problems which arise from that situation. There is no way reparations, for African Americans, will ever happen but basic income can.

    It could also be argued that basic income could reduce many of the costs of some social programs and the social impact of having so many people out if work. There is a basic income of a kind that's being utilized in cities across the country. Free housing, with no strings attached, for the homeless.

    There is also an emerging class of citizen, and I find myself as one of them, which will have no interest in the "lavish" lifestyle of the full time working class. Technology has greatly reduced the cost of living a comfortable lifestyle . With a shift in one's economic frame of mind early retirement is something which is available for everyone who can make, and live on a low percentage of, a decent wage.

    Anyhow every place around the globe will have to figure out how basic income plays, or doesn't play, a role in their social well being. The answer won't be on the extreme side of for, or against, basic income.

  7. SeanC4S

    The US has food stamps and free or reduced price school meals for lower income groups.

    That is a good model to follow.

    1. Charles 9 Silver badge

      People started hawking their food stamps for beer money or cigarettes. Even with the transition to EBT cards, there's still a black market for trading in EBT benefits for those particularly exempt items people would prefer to food.

      Here's the hint: people will CHEAT. It's in the human condition.

  8. Chromatix

    I have seen the effects of mass unemployment for myself.

    For centuries, Liverpool was a major port, and built an extensive dock system to serve all its traffic. Whole sections of the city were built as housing for dockworkers, within reasonable walking distance of the docks. These were not wealthy people, but they made an honest living through hard work.

    Then containerisation happened, and ships were unloaded by huge cranes instead of armies of men. New, enormous docks were built to accommodate this new method of working and the larger ships it engendered. The old docks, unable to compete on equal terms, closed - putting thousands upon thousands of dockworkers out of work, all at once.

    They couldn't just move to another dock or port - all the other ports were containerising too, and the containerised docks required far fewer men to handle a much larger volume of goods. In happier times, they might have gone to work for the railway instead, but British railways were in the middle of a full-scale retreat from goods traffic. Likewise, mines were closing all over the place.

    There was thus no other industry that could take on a large influx of unskilled physical labourers, which is what they were if you discounted their docker experience. And besides, who would they sell their houses to in order to move - if they owned them in the first place, that is. If they didn't, they were still stuck paying rent *and* council tax (which wasn't income-linked) without a steady job to pay for them. The only viable way out was the welfare system.

    The result was the Toxteth Riots of circa 1980 - Toxteth being one of the more centrally-placed docker districts. If you look in the right places, you can *still* find burned-out buildings from that event. And, even though I didn't live there, for some reason my parents sent me to school there. Several of the other children in my class regularly came in hand-made uniforms, because their families couldn't afford the official ones.

    Containerisation was, of course, an overall benefit to the economy, since it greatly reduced the cost of shipping over long distances. But it was a sudden shift which caused a huge amount of localised human misery.

  9. philthane

    Infinite Economics

    Conventional economics assumes that increased productivity (due to automation or any other technological change) leads to increased consumption and we all get more things and feel better. Unfortunately the planet is finite, you logically cannot have economic growth for ever on a finite planet.

    1. Pompous Git Silver badge

      Re: Infinite Economics

      you logically cannot have economic growth for ever on a finite planet.

      Economic growth is a metaphysical quantity and so is not likely constrained by a finite planet. In any event, the universe is more than likely infinite and there's no good reason I know of to believe that we are forever confined to living on one planet.

      1. Loyal Commenter Silver badge

        Re: Infinite Economics

        Economic growth is a metaphysical quantity and so is not likely constrained by a finite planet.

        It may, or may not be thus. It does arise, however, from economic activity, which in the real world depends on the consumption of physical resources, such as coal, oil, minerals, cotton, wood, energy, etc. which are all of finite supply, to a greater or lesser degree (for example most metals are recyclable, but you'd be hard pressed to recycle coal once it has been burned, and all recycling consumes other resources such as energy).

    2. ecofeco Silver badge

      Re: Infinite Economics

      People can't buy what they can't afford.

      Example: in the U.S. new car sales averaged 10 million vehicles per year during the 1970s and 80s. After the Saving and Loan disaster and resulting recession, car sales have never reached 9 million again with the average being 8 million in the 1990s and then 7 million in this century.

      Why? The 3 recessions from the late 1980s to now have destroyed that much disposable income of the potential buyers.

      https://www.statista.com/statistics/199974/us-car-sales-since-1951/

      Killing the golden goose, customers, is considered a bad idea. Why American capitalism thinks this is good idea is beyond me.

      1. Pompous Git Silver badge

        Re: Infinite Economics

        Why American capitalism thinks this is good idea is beyond me.

        Perhaps it's because it's not capitalism that's at fault. I recall back in the 1960s reading in Scientific American that government spending had outstripped spending by everyone else.

  10. Loconinja

    The author is clearly a student of Henry Hazlitt. For further details, read Hazlitt's Economics In One Lesson. Based on the comments to this article, the lesson is still to be learned by many.

    1. Loyal Commenter Silver badge

      Well, apparently Ayn Rand called it a "magnificent job of theoretical exposition." Given that pretty much everything that Ayn Rand said was total egotistical bollocks along the lines of 'greed is good', I'd take that as an indication that this guy was talking bollocks too. Also he died in the mid '90s, so I'm not sure anything he said is necessarily still applicable to 21st century reality.

  11. Archtech Silver badge

    "True, technological progress can cause temporary unemployment. But a look at history will tell you that, unless we switch to another economic system, there is no reason to fear (or hope) that automation will put people out of work permanently".

    Then how do you explain the fact that the unemployment rate in the USA is 23% and rising? http://www.shadowstats.com/article/c810x.pdf

    1. Pompous Git Silver badge

      Then how do you explain the fact that the unemployment rate in the USA is 23% and rising?

      Hint: offshoring. My "American" shoes are made in Vietnam. Probably by hand.

  12. Anonymous Coward
    Anonymous Coward

    Reality is never simple, but I'll take a stab at it...

    Humanity has only two challenges that it must struggle to overcome, somehow:

    1) Mortality

    2) Greed

    1. ecofeco Silver badge

      Re: Reality is never simple, but I'll take a stab at it...

      You forgot the other 5 Deadly Sins.

      1. Charles 9 Silver badge

        Re: Reality is never simple, but I'll take a stab at it...

        As I recall, mortality isn't one of the Sins. They were Pride, Greed, Lust, Envy, Gluttony, Wrath, and Sloth.

  13. Anonymous Coward
    Anonymous Coward

    I spy a factual error in the argument.

    "Under capitalism, technological progress results in more products, not in more leisure. Factories that improve their efficiency don’t shut down and send workers home early – workers keep the same hours and crank out more goods."

    But but but...

    Back in the 19th century heyday of British industrial capitalism, a typical factory worker did 12 hours a day for 6 days a week. Modern factories are more efficient and these days, a typical British factory worker expects to do more like 8 hours a day for 5 days a week. Technological progress in manufacturing has in fact gone hand in hand with a huge increase in leisure time for workers at least in Britain (and Europe).

  14. bystander

    It is incorrect to consider new technology from microeconomics point of view only. After all any new technology takes money to develop and deploy. And that money has to be returned with profit from sales of product of that technology. And matter what this technology/product is profit will appear only as result of final consumption (usage without profit). Then end game is obvious less workers brings less consumers, less final consumers bring less sold product and therefore less profit from technology products.

    In illustration I can remind famous anecdote:

    In November 1956 Walter Reuther delivered a speech to a Council group of the National Education Association. The transcript of his talk was published as part of his “Selected Papers”, and it contained an extended description of this intriguing episode [WRNE]:

    I went through this Ford engine plant about three years ago, when they first opened it. There are acres and acres of machines, and here and there you will find a worker standing at a master switchboard, just watching, green and yellow lights blinking off and on, which tell the worker what is happening in the machine. One of the management people, with a slightly gleeful tone in his voice said to me, “How are you going to collect union dues from all these machines?” And I replied, “You know, that is not what’s bothering me. I’m troubled by the problem of how to sell automobiles to these machines.

    1. Pompous Git Silver badge

      Re: I spy a factual error in the argument.

      But but but...

      Back in the 19th century heyday of British industrial capitalism, a typical factory worker did 12 hours a day for 6 days a week.

      Unfortunately for Grand Theories, the relationship is not at all simple. Hunter-gatherers worked ~4 hrs/day to make their living and spent the rest of the time presumably doing what we do i n our leisure time these days: getting pissed, fornicating and telling lies. The typical 19th C rural labourer worked six days and at harvest time very long ones. But much of the year was nowhere near as arduous and there were ever so many holidays.

      In the mid 1950s to 1960s my father made machine tools on piecework in the UK. Mostly he only had work 3 days a week and needed to supplement the family income with two part-time jobs: collecting the football pools and selling seafood snacks in pubs on Friday and Saturday nights. My mother had three part-time jobs: bus conductor, football pools collecting and also selling seafood snacks on weekends.

      Moving to Australia in 1965 increased both their leisure time and their income.

  15. Neil Wilson

    The automation argument can be answered very simply - allow people to retire earlier.

    When the state retirement age is heading every upwards towards 70 it's very difficult to take the 'automation' argument seriously at all. When it gets down below 50 there may be a case.

    But of course that isn't the argument for Basic Income at all. The desire for Basic Income comes from a certain section of the middle class who want a 'passive income' they can use to buy new Wellies for Glasto. All the 'justifications' raised are smokescreens to hide the real reason.

    What they forget is that the reason the rich are detested is because they are seen as not having earned their income.

    1. Charles 9 Silver badge

      "When the state retirement age is heading every upwards towards 70 it's very difficult to take the 'automation' argument seriously at all. When it gets down below 50 there may be a case."

      But doesn't that in turn put a burden on the rest of society? When people live longer without working, they tend to end up taking away more than they put in while they were working, which is actually one counterargument to a robust healthcare system that doesn't raise the retirement age to compensate.

      Japan's really feeling the pinch now as their population distribution skews heavily towards the elderly. Many other first-world countries are starting to feel this pinch as well (the US gave some concrete examples; e.g. Social Security was once feed by 20+ workers per recipient. Now it's just 2).

      1. Casapaz

        Retirement of boomers in economy

        All of the retirees defiantly puts a huge strain on the economy. Not because they have stopped working, but because many will spend a lot less money because they don't need to, and their income is limited and fixed, plus they might have to help their children which quite possibly still live in their basement

        Many of the retirees leave companies and no younger person will replace them. The job has already been automated or contracted out, or the trainee that may replace them makes much less than them. Of course there will be a "talent shortage" when we can't find someone with 20 yrs experience anymore and companies will bemoan that they can't find qualified canidates pushing to allow them to hire foreign talent rather than training people.

        Contrary to what most of the press has been spouting, we won't need millions of more workers to take care of the consumption habits of the retirees. Most of them aren't needing to buy houses, cars, pay for education, etc. Of course health care is where retirees are going to spend more, but until there is a massive wage inflation among nurses and caregivers, I don't think that is a problem.

        The reason japan is feeling the pinch is because they have the same problems with the job market and not enough higher paying jobs which leaves less taxes for the government.

        What Japan needs to do is implement a UBI so that employers can't threaten peoples survival with 80hr workweeks or no job and no money.

        What has actually happened is that China has finally taken most of the manufacturing jobs, and if they haven't then automation probably has. Governments are afraid of increasing the debt. The whole cycle has started breaking down because the people that actually want to buy what is being produced don't have a job to pay for it.

        1. Charles 9 Silver badge

          Re: Retirement of boomers in economy

          "Contrary to what most of the press has been spouting, we won't need millions of more workers to take care of the consumption habits of the retirees."

          Not saying you do. In fact, the problem behind the problem is that it's difficult to correct a severe population imbalance without consequences. First world populations waxing elderly (which also puts political pressure: seniors are consistently the most active voters). China heavily male, and so on. Best I see it, this can't help but get ugly at some point because, in spite of imbalance, none of the imbalanced side are going to be willing to step aside.

          "What Japan needs to do is implement a UBI so that employers can't threaten peoples survival with 80hr workweeks or no job and no money."

          Only one problem. Who PAYS for it that isn't going to just up and leave the moment you try?

          "What has actually happened is that China has finally taken most of the manufacturing jobs, and if they haven't then automation probably has. Governments are afraid of increasing the debt. The whole cycle has started breaking down because the people that actually want to buy what is being produced don't have a job to pay for it."

          Which then raises a real specter. What happens when NO ONE is able to pay for the stuff and the people with all the money, realizing the game is up, have gone into their walled gardens to cater exclusively to each other?

  16. J.G.Harston Silver badge

    We already do this for old people. Everybody over 67 gets £120 a week (rising to £155 in a couple of decades) regardless of personal circumstances or history.

    No, no, don't say "they've paid taxes!!!" You get a UK state pension whether you've been rich enough to pay taxes or not. It is a universal non-means-tested payment. There is a contribution-based amount which it topped up to the flat rate if you haven't paid any enough contributions. So if you've paid zero contributions you get a 100% top-up.

  17. hamishmacewan

    Negative interest rates? That's not how capitalism works.

    But they exist none the same.

    Sad that simple supply and demand should elude so erudite a poster. We paid for production, when production was scarce, that's economics. When production is abundant, and consumption is scarce, what does economics say we will pay for?

    In short, supply and demand trumps legacy outcomes of risk/reward models.

    1. Charles 9 Silver badge

      Re: Negative interest rates? That's not how capitalism works.

      Either storage or spoilage, as now you have a surplus.

  18. Brian Allan 1

    "No work, no pay!" In an AI future this will still apply, only then the individual without work will no longer be required, period...

  19. Casapaz

    How basic income would change the economy

    So, one of the main reasons against basic income is it's "unaffordable" and if the government spent all that money on its citizens the government would have to raise taxes dampening the economy.

    There are two ways this plays out: the government raises taxes on the wealthy and some of the upper middle incomes which causes them to look elsewhere in the world to live. "But the rich would leave"...and less taxes from them etc.

    Yes the pound would take a short term hit but the economy would recover fast because of increased spending power of all the citizens plus tourism, plus weaker currency means greater competitiveness for manufacturing.

    The government impements UBI but doesn't raise taxes enough to cover for it. The pound would take a hit but the rich wouldn't flee as much. At least the "stimulus money" is directed where it will actually be spent.

    If the UBI amount is modest amount initially, it might not cause a shock and we could just begin to forget what income insecurity and poverty are.

    In either scenario the outcome seems seems better than the current situation of increasing poverty, income inequality, and the government trying to make up for the loss in GDP by getting more rich immigrants or not rich immigrants that the government thinks will boost GDP.

    The welfare trap and income tested benefits disincentives working. Basically the government plus the rich sold us out and expect we keep paying for it with the majority of our measly paying jobs. (Because money is what you pay, value is what you give when you're working )

  20. Casapaz

    Marginal job market.

    Okay here is an idea:

    Why don't we actually find out people's marginal propensity to work rather than their marginal propensity to survive?Implement UBI and this would happen.

    If there is a low demand for workers but a high demand for jobs we see what the marginal propensity to survive is: minimum wage.

    Those idiot politicians that say UBI disincentivises work or that there are jobs, just not desirable ones, or that welfare or unemployment insurance is an incentive to work just don't get it and should take a class in human psychology.

  21. Kiwi

    Someone's probably said it but...

    Late to the party as I so often do...

    In the future, it will be mathematically impossible for everyone who wants a job to find one. We can therefore no longer deny income to those who don’t work.

    We have that here in NZ. As do many other countries. The reason so many are out of work? Well, yes, sorry Mr Key et al but the big reason is that so many jobs have become "automated" or gone overseas, largely to factories that have a huge amount of machinery replacing jobs.

    The ideas espoused in the article - that increasing productivity can go on forever, are obviously flawed. So the shoe maker can double her work. And in time instead of doing 400 shoes per week she'll do that per hour. But instead of paying people to do more productivity, many companies lay off excess staff. After all, the shoe factory has several limits on how many shoes it can produce : limits on market (how many people will buy their product), limits on supplies (they can get 50 ton of leather shipped in per week, therefore they can only use 50 ton of leather per week - doesn't matter if they can run through that in a minute or the whole week, that's the limit).

    I used to do some support work in a large warehouse not far from me. 10 years ago they had some 50 people working 3 shifts to handle the various jobs : some loading/unloading trucks, some doing office work, but the vast majority doing the work of grabbing product off the shelves, loading it onto pallets for the various shops ready for the incoming trucks to collect. Now each shift has 2 forklift operators, 2-4 people handling orders (ie putting the orders into the computer), and just 3 people on the shop floor. The rest have been replaced by automation. There's been a slight increase in the overall workload - a couple more shops added, but the savings are significant - the savings on over 30 people's worth of wages per year is quite significant.

    Then there's the flow on effect. The shop that they generally went to for lunch etc? Well guess what happened to a large part of their custom when those workers were made redundant. Fortunately they have a fairly large catchment area but if another firm replaces a large amount of staff.

    When I was born, it was reasonable to not only expect you'd have your job for life, but that you could also bring your child into the same role. But most products were made here, and most products were quite labour-intensive to make (compared with today). Then we got cheap imports, machines that could literally replace a hundred workers, and so many jobs lost to automation or lost overseas. We now have children whose parents have never had a job, and that is much likely to get worse. And it's not from comfortable benefit levels - they're barely subsistence levels.

    So yes, it is quite certain that technology will replace more and more jobs. You cannot have ever-increasing sales of product to sell, you are limited by how many people will buy and how much raw materials you can receive/process

    1. Charles 9 Silver badge

      Re: Someone's probably said it but...

      So like I said, wealth has gravity. Those that have a lot of it tend to naturally accrue more as people still demand their daily bread and you demand their wealth in exchange. It's like a big poker tournament: eventually people will drop out as they run out of wealth and eventually the ones left with all the wealth will close off their walled garden and start hashing it out amongst themselves. It's happened before, and this time they likely have the resources to actually keep the unwashed masses at bay.

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