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A New Dawn?

The future is fast approaching. For many, it is already here. Of course, like now, there will be both winners and losers. The growing number of winners, however, has already begun to fall and does not look set to change its trajectory unless we do something about it. Observe the graph below:


Do you notice how the disparity between real GDP per household (US) and median income per household has grown wider and wider since around the time Ronald Reagan was elected president? It’s pretty hard to miss. In fact, while GDP per household has experienced almost uninterrupted growth since 2000, the real median income per household for American families did not regain 1999 levels again until 2016. Just think about that for a second. Average income figures will forever be distorted by the vast amounts of wealth circulated between a small, elite few. When the mean grows faster than the median, greater swathes of wealth are landing in the laps of families at the top of the pile, at the expense of the rest of us.

So while it may have once seemed that things were looking peachy, in reality, there are a number of glaring issues that we must start thinking about now or forever be subordinate to in the decades to come. This sense of foreboding manifests itself in ways other than income inequality; so too does it take the form of automation, a prospect as ominous as it is enigmatic. With artificial intelligence enhancing by the day, it seems inevitable that before long, an increasing number of jobs once performed by humans will be undergone by machines far smarter than we could ever be. Oxford Martin School predicts that up to 40 per cent of UK and European jobs could be replaced by AI within the next 20 years. While this does not take into account the number of new jobs that will subsequently be created within that time frame, it compels us to ponder how states will deal with potentially millions of unemployable civilians.

It is thought that ‘routine and repetitive tasks in manufacturing, administration and call centres’ will be the first to fall into the remit of machines. Invariably people will lose their jobs and history has shown that it tends to be the most expendable employees who are the first to face the chop. Blue collar workers are likely to suffer. The forces of globalism and automation have already begun to have an impact, evidenced by Brexit: a battle between the winners and losers of globalisation. This technological revolution will not be without its fair share of white collar victims though, which is why we should be hopeful of a prosperous and exciting future. Not because it is a good thing that white-collar workers will lose their jobs, but because it will change the psyche of the western world for the better.

Thousands of jobs have already been lost in the financial sector, as transactions have moved online, while it won’t be long until we receive our routine health check-ups by advanced machines, unsusceptible to human error. It is neither out the realms of possibility that lawyers and accountants will become surplus to requirements as technological capacity augments. Consider this: that much of strategy and policy is merely pattern recognition and data analysis, skills that AI is already very much adept at. With robots’ skills likely to increase, there is a very palpable feeling that vast subsects of western populations will soon face the prospect of structural unemployment.

Universal Basic Income, otherwise known as UBI, is a hot topic at the moment. It has been put forward, largely by left-leaning politicians and economists, as a potential panacea for the ills of automation. Using Andrew Yang’s definition, UBI ‘is a form of social security that guarantees a certain amount of money to every citizen within a given governed population, without having to pass a test or fulfil a work requirement.’ Yang also notes how ‘every Universal Basic Income plan can be different in terms of amount or design’ so before you dismiss such a nonsensical notion, hear me out. The short-term costs could be severely damaging, but this article argues that short-term pain is paramount if we are to enjoy long-term gain.

UBI doesn’t have to be universal per se, in that it can be nuanced to suit certain scenarios. For example, under my proposal, the richest 1% – who own around a quarter of the UK’s wealth, would be exempt from UBI, simply because they do not need it in any way whatsoever. Everyone else would be entitled to a yearly sum of capital depending on family size. Using a basket of goods and adjusting for inflation, households would receive a livable income, whether or not they contribute to production and despite the particular circumstances into which they are born (bar the top 1 per cent).

In order to curb excessive costs and to deter families from growing too large, UBI would accommodate households with a maximum of five members. Once things have settled, and it becomes easier to gauge the outcome of UBI and automation, UBI will be available to families of all sizes. This is not to say a family of ten would not receive UBI but that they would only receive a livable income for a household of five, later extending to ten if UBI proves to be a success. To begin with, though, precautions are necessary, and with the threat of overpopulation looming, it may well prove to be a shrewd policy. In cases where a household of say eight has no income-earning members, rendering them solely dependent on UBI, exceptions can be made. On top of this, every single citizen entitled to UBI would be able to opt out of receiving it, due to whatever reason. Hopefully, the altruistic nature of those who are financially stable will win the day.

The success of this is conditional on a multitude of factors, of which the state must attempt to promote and implement. The first is education reform. Courses would be set up to teach people from an early age how they can spend and invest their UBI not just for personal gain, but for the benefit of society. Aided by significant taxation on foods high in sugar, fat and other harmful additives, which would in itself help fund UBI, citizens would be encouraged to adopt nutritious diets. Physically healthier citizens would alleviate national health systems of significant budgetary pressures, aided by the costs saved from automating the health sector in general.

Healthy body, healthy mind. Healthier people are happier, and happier people are more productive in every way. Increasing the marginal revenue product of labour could significantly improve GDP levels and a state’s overall economic performance. And to lose jobs in one sector is not to say jobs will not be created in another. On the contrary, UBI has the potential to fuel the proliferation of hundreds of new markets by taking advantage of the situation we could face. Over the past century, hours worked per week have fallen dramatically and look set to drop considerably more if millions of people face long-term unemployment. This is as much of an opportunity as it a catastrophe, and the latter needn’t be realised if we are smart.

With more time to spend as we wish it wouldn’t be foolish to predict an upsurge in criminal activity. The incentive to delve into the underworld of drugs may rise for certain demographics deemed unemployable in the modern world. Rather than create more criminals let us legitimise these industries by legalising all currently illicit substances. Not only would this reduce drug-related crimes but so too would it reduce drug abuse. HIV infection in Portugal plummeted following their decision to legalise all drugs. In Colorado, where it is now legal to smoke marijuana recreationally, fewer people are being incarcerated and fewer crimes are being committed. Cannabis legalisation has the potential to annually raise approximately one billion pounds in the UK alone.

If the state can harness the entrepreneurial aptitude of the general population, then UBI could ignite an unprecedented leisure market, one that could create millions of new jobs and improve the lives of everyone in the process. In the words of Jim Pugh, co-founder of Universal Income Project: ‘Most people want to contribute to society. If we can provide them with basic financial security, they’ll find a way to do it.’ If people are more certain about the future then they are more likely to take a long view of things. A greater degree of financial prudence could well ensue, but I cannot emphasise enough how important the role of education will be in facilitating this.

The first question you may ask in response to all this is likely to be: ‘how do you expect to pay for all of this?’ While I have already posited a number of methods, none will be as important as regulation and taxation. Part of the existing problem is too much wealth is in the hands of too few people. And these people have no intention of sharing the spoils. Monopolistic firms have become so powerful that their influence transcends that of mere states, encompassing a global paradigm to which they have significant leverage over. States have become lapdogs for these MNCs, reluctant to give them any motivation to shut up shop and reinvest elsewhere. This state/corporation dynamic needs to end now for the betterment of humanity.

Corporation tax, first and foremost, has to increase. It has become counter-productive for both business and government for firms to wield more hegemony than entire nations. So why should we encourage this further? Deploying greater rates of corporation tax for firms with over a 45% market share would help to reduce barriers to entry for smaller firms, and could also improve wages for existing workers within monopolistic firms despite greater taxation. Why I am hopeful of this is because simple economics dictates that greater market competition will lead to more competitive wages.

One could argue that increasing corporation tax could result in job losses as firms offload the burden of larger costs onto their employees, and instead, we should be lowering corporation tax to enhance the prospects of wage increases. The statistics show that this is not what happens. Of the ten best performing economies since 2011, none have cut corporation tax and only four had lowered it in the five years prior. Ultimately, no clear correlation exists between recent corporate tax cuts and wage growth in affluent western countries. Firms are not reinvesting profits back into their workforce, at least not to the extent they should be. In Britain, tax reliefs for the wealthy and corporations amount to about £400 billion a year – it has been proven, quite clearly, that trickle-down economics isn’t working.

Moreover, lowering corporation tax not only reduces government revenue, but it is also often rectified with excessive borrowing, evidenced under the Trump administration. While borrowing in moderation can be a good thing, intemperate borrowing is a dangerous phenomenon that tends not to end well. Implementing taxes such as the Alternative Minimum Tax, which uses a separate set of rules to calculate taxable income after permitted deductions (as a means of preventing wealthy taxpayers from escaping their fair share of tax liability via tax breaks), could prove extremely effective at ensuring those at the top of the helm contribute to society. Individuals aren’t  dissuaded to earn more money by the prospect of paying more tax; firms, on the whole, don’t behave much differently.

Countries where UBI has been tested, namely Finland and Canada, rank in the top ten happiest nations in the world. Described as ‘stable, safe and socially progressive’ states where corruption is minimal and trust in political leaders is high, these countries are leading by example, and it is time the rest of the world followed suit. The fact that automation could affect people from all walks of life may just be the springboard we need to propel ourselves out of the cesspit of neoliberalism and into a more progressive, more equitable world. Once we have purged ourselves of the notion that our value and self-worth can be measured by numerical figures, only then can we set upon the quest to enlightenment. A new dawn is upon us; we must seize the day before the light goes out.

Written by Ellen Bowen

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