April 28, 2016

REMOVING THE LABOR COST...:

Does future growth depend on the universal basic income? (George Magnus, April 27, 2016, Prospect)

The most compelling argument for the UBI stems from our evolving social and economic organisation. Radical advances in digital technologies, robotics and artificial intelligence will transform our society beyond our capacity to imagine at this point. Already, new technologies are undermining an array of middle-wage paying, middle-skill level occupations, not just low paid and low skilled ones.

These new technologies are distributing rewards disproportionately to the owners and providers of capital, and to those companies and entrepreneurs who are in the forefront of wealth creation. Textbook economics tells us this is as expected. But it brings to mind the apocryphal conversation between Henry Ford and the Auto Workers union boss, Walter Reuther during a tour of a newly automated factory. "Walter, how are you going to get those robots to pay your union dues?" said Ford. "Henry, how are you going to get them to buy your cars?" replied Reuther. In the end, productivity growth allowed Ford's workers the wages and the wherewithal to buy. But you get the point.

If we automate, digitise and use robotics more, how will people consume what new technologies allow us to produce? If they don't or can't, we are in Marx's world of over-production and under-consumption. We can redistribute income, but only so far. Eventually, productivity growth will come to the rescue, far-fetched though this seems in the near future. We didn't foresee the productivity rise as the early IT revolution took root, and we can't see the productivity shift that will come in the future. In the meantime, we will need new coping mechanisms to help people through a complicated transition, and our economies to sustain an essential growth in demand.


...of goods and services also means that ever less wealth will need to be distributed.

Posted by at April 28, 2016 5:31 PM

  

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