Paul Krugman is getting serious about the effects of technology and robots on the economy. He’s made noises about this theme before, but this time he’s taking things a bit further by offering a potential solution to the more sour consequences of the new industrial revolution.
If the fight is between capital and labour, and capital is winning, it seems subsidies in the form of some basic type of income may be called upon.
As Krugman notes, the issue relates to the fact that it is now jobs on all fronts that are being jeopardised. Highly skilled, unskilled not to mention the professions most suited to little grey matter.
The new inequality we are seeing has little to do with how well educated you are. It’s hard to penetrate beyond the barrier on education alone. The new inequality is about capital owners and non-capital owners.
And increasingly, it’s about technology capital owners. Those who own the robots and the tech are becoming the new landlord rentier types.
As Krugman concludes:
Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).
So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.
I can already hear conservatives shouting about the evils of “redistribution.” But what, exactly, would they propose instead?
This, of course, fits our counterintuitive model of the world which looks at this crisis from the point of view of efficiency and abundance jeopardising the rate of profit. In that sense, we believe this crisis really started with the dotcom collapse.
It was disrupted capital from the old-economy world which drove the subprime fiascos, as it strove to secure itself to anything so that it could preserve its diminishing value.
This is because the dotcom era created something of a self-canabalising effect for most of the capital system. The more you invested in technology, the greater the efficiencies. The greater the efficiencies, the greater the abundance. The greater the abundance the more likely capital itself would be undermined, since you can’t put a price on air, or anything else which is abundant.
What’s happening now, arguably, is that the canabalising effect is being stalled by the monopolisation effect instead. The owners of the capital — which has the potential to create abundance — are protecting their rate of profit by stalling efficiency (a la patent trolling) and by means of the monopolisation effect.
This may not go on forever if the rise of technology jumps over into the Wiki open commons world, at which point it becomes accessible to everyone irrespective of the monopolies.
But for as long as the monopolies exist and gate-keep access to the higher living standards provided by their own technology, some sort of subsidising effect is needed from the government to stop people becoming totally disenfranchised from the system.
And to avoid this:
Either that, or governments should work harder to dissipate the tech-based monopolies which are emerging.
Undoubtedly, conservatives as Krugman notes will find this sort of thinking a bitter pill to swallow. But really, it’s better to think of it more as compensation for “not working” — since more work only accelerates the abundance problem, while leading us to another commodity and natural resource constraint — than redistribution of wealth per se.