// archives

UBI

This tag is associated with 4 posts

If The Model Is Broken, Fix It

If the model is broken, should you try to fix it, or should you scrap it and get a new one?

In questions of technology, increasingly the answer is: scrap it. Computer repair shops are dying out: if your laptop doesn’t work, just buy a new one. What applies to consumer technology, however, does not necessarily apply to politics.

The political model of Western-style democracy, which grew up alongside and then within a capitalist economic model, is now broken. Exhibit Number One is Donald Trump, but there’s lots of other evidence too.

One-third of French voters backed Marine Le Pen, a cleaned-up, user-friendly neo-fascist, in last year’s presidential election. In last September’s German election, one-eighth of the electorate voted for Alternative for Germany, a party whose more extreme wing is neo-Nazi – but it is now leads the opposition in the Bundestag, the German parliament.

Last month in Italy, the two biggest parties to emerge from the election were both led by populist rabble-rousers, one from the left and one from the right. Not to mention Brexit in Britain. And in every case the themes that dominated the populists’ rhetoric were racism, nationalism, hostility to immigrants – and jobs.

Trump rarely talked about anything else during the presidential election campaign: immigrants are stealing the jobs, free-trading American businessmen are exporting the jobs, the foreigners are eating America’s lunch. Down with free trade! America First! Etc.! (Hint: Donald Trump is not a Republican. He is a populist.)

Trump may not know a lot, but he knows One Big Thing. We are living in a new era of mass unemployment, and nobody has noticed. As Trump said the night after he won the New Hampshire primary in February 2016: “Don’t believe those phony numbers when you hear 4.9 and 5 percent unemployment. The number’s probably 28, 29, as high as 35. In fact, I even heard recently 42.”

It’s not really 42 percent, but it’s not 4.1 percent (the current official US rate) either. According to Nicholas Eberstadt’s ‘Men Without Work’, the real unemployment rate among American men of prime working age (24-55) – including those who don’t get counted because they have given up looking for work – is 17 percent.

Why didn’t we notice? Because the unemployed weren’t protesting in the streets like they did in the Great Depression of the 1930s, although the rate is getting up to Depression era levels. After the Second World War, all the Western democracies built welfare states, mainly so a new generation of radical populist leaders would not come to power the next time there is mass unemployment.

It has worked, in the sense that there is not blood in the streets this time around, but the jobless millions are very angry even if the welfare state means that they are not starving. They do vote, and unless something is done to ease their anger, next time they may vote for somebody who makes Trump look good by comparison.

But if the problem is unemployment, then the answer is not obvious, because the main cause of unemployment in Western countries is not immigration or ‘offshoring’ jobs, as Trump pretends. It is computers.

One-third of American manufacturing jobs have vanished in the past 20 years, and the vast majority of them (85 percent) were destroyed by automation. The algorithms and the robot arms have already killed the Rust Belt, and there is a plausible prediction that almost half of existing American jobs may be automated out of existence in the next 20 years.

What would our politics look like then? Not very democratic, unless we do something to ease the anger of the unemployed. This doesn’t just mean giving them more money – a massive expansion of the welfare state – but also finding way of taking the shame out of unemployment, because it is the humiliation of being seen as a loser that breeds the anger.

The leading proposal on the table right now is called universal basic income (UBI). Every citizen would get enough to live a decent life whether they are working or not, although most people would probably keep working as well in order to have more money. And making it ‘universal’ takes the shame and anger out of it: UBI would be a birthright, not charity handed down to those who have lost their jobs.

UBI may not work in practice, but at least it is addressing the right problem. And there is enough money to take this approach: the jobs are being destroyed, but Western economies are still growing richer.

Whatever the solution is, it has to tick two boxes: putting money in the pockets of those without work (which is very much in the interest of the owners and managers, whose business model is also broken unless their customers have money to buy their goods and services), and doing it in a way that does not breed humiliation, resentment and radicalism.

Some may argue that this is saving capitalism, not smashing it, and they would be right. But evolution is better than revolution, and fixing the model that is currently broken, essentially by a major expansion of the welfare state, is a better bet than abandoning it.
_______________________________________
To shorten to 725 words, omit paragraphs 2, 11, 15 and 16. (“In questions…politics”; “But if…computers”; and “It may…radicalism”)

(Not Quite Universal) Basic Income

In Switzerland last June, they had a referendum on a universal basic income that would have given each adult Swiss citizen $2,500 per month. It was a truly universal basic income, because it would have gone to everybody whether they were working or not – and the horrified Swiss rejected it by a majority of more than three-to-one.

In Finland last January, the government actually launched a pilot programme for a “basic income”, but it was a timid little thing that gives the participants in the trial just $600 per month. It certainly isn’t universal: it only goes to jobless people who are receiving the lowest level of unemployment benefit.

And in Canada last Sunday, the province of Ontario launched a pilot programme that sits somewhere between the other two. It pays out more than the Finns – CAD $1,400 a month (US $1,050). Moreover, you don’t have to be unemployed to get it, just poor.

“The project will explore the effectiveness of providing a basic income to people who are currently living on low incomes, whether they are working or not,” explained Ontario Premier Kathleen Wynne. But it’s still far from universal, and its supporters are keen to stress that the ultimate goal is to get people back into work. As is Finland, they believe (or at least profess to believe) that the only real solution to poverty is full employment.

In the early 21st century, this quaint belief is about as credible as the Easter Bunny, but in last November’s US presidential election campaign both Hillary Clinton and Donald Trump were still peddling the same sepia-tinted fantasy of crowded assembly lines and the return of the Good Old Days.

Trump was even promising to “bring back the jobs” from abroad, as if they were all now sitting in China or Mexico. He may or may not know that most of the missing jobs whose loss created the “Rust Belt” were killed by automation and simply don’t exist any more, but he certainly doesn’t mention it in public. And Clinton was equally reticent about the fact that full employment is not a realistic option for the future.

A lot of other people have finally focussed on the real future, however, because if you want to understand the rise of Trump you first have to acknowledge what automation is doing to jobs, especially in the United States. And then you have to figure out how to prevent this huge shift from causing a great political, economic and social disaster.

That is why Universal Basic Income is now a hot topic in political circles throughout the developed democratic countries: it might prevent that disaster. But the curious thing is that none of trials now being undertaken is actually universal, with everybody getting the same “basic income” regardless of what other income they may have. Why not?

UBI is not meant to be merely a more effective and less bureaucratic means of helping the poor. It is also intended to abolish the stigma of “unemployment” and the misery, anger, and political extremism it breeds. If everybody gets the basic income as a right, the argument goes, then receiving it causes neither shame nor anger. And if the anger abates, then maybe democratic political systems can survive automation.

But nobody really thinks we should introduce UBI at a national scale today. We will need a majority of people to go on working for a long time to come, and we don’t even know whether enough people would choose to do so after they start receiving the basic income. That is one of the questions that the current pilot programmes are designed to answer.

However, these UBI test programmes are being smuggled in disguised as anti-poverty projects, with the announced objectives of streamlining the system and encouraging people to re-enter the job market. That’s because the public really isn’t ready for full-blooded UBI. There is a very strong popular belief that people should work for a living, even if the society as a whole is very rich and the work doesn’t actually need to be done.

This prejudice applies especially strongly to the poor. As Harvard economist John Kenneth Galbraith once put it, “Leisure is very good for the rich, quite good for Harvard professors – and very bad for the poor. The wealthier you are, the more you are thought to be entitled to leisure. For anyone on welfare, leisure is a bad thing.”

So these early experiments with guaranteed income pretend to be aimed solely at getting people back into work. But meantime they will be gathering valuable data about the actual behaviour of people who have a guaranteed basic income.

When the supporters of UBI come back with concrete proposals for national systems in five or ten years’ time, they may have much more solid arguments than they do now.
_________________________________
To shorten to 725 words, omit paragraph 6. (“Trump…future”).

Universal Basic Income

There’s a new idea that might be the solution to runaway populism. Well, it’s not that new, really – it has been kicking around in left-wing circles for a least a quarter-century – but it has suddenly gone mainstream. It’s called Universal Basic Income (UBI), and pilot programmes to see if it really works in practice are being launched this year in four different countries.

It’s populism that gave us Brexit in Britain and President Donald Trump in the United States. It could soon give us President Marine Le Pen in France. But the fundamental lie of populism is that it can “bring the jobs back”. It doesn’t even admit where they really went.

Indeed, in the 2016 presidential campaign in the United Statesneither candidate ever mentioned the ghost at the feast. Donald Trump promised to “bring the jobs back” from the foreign countries that had “stolen” them, mainly by ending free trade, while Hillary Clinton promised “a full-employment economy where everybody has enough to raise a family and live in dignity.” Neither of them ever mentioned automation.

This is curious, because the great killer of jobs throughout the developed world for the past two decades has been automation: computer-controlled machines replacing human workers.

Hundreds of thousand of ATMs (Automated Teller Machines) have replaced hundreds of thousands of human bank tellers. Seven million industrial jobs in the United States have been eliminated in the past 35 years by automation, while factory production has actually doubled. And the self-driving cars that are now being road-tested will eventually destroy most of the 4.5 million driving jobs – long-distance trucks, taxis, and delivery vans – in the USA.

I can watch what automation is doing in my own neighbourhood. There’s a big supermarket a five-minute walk from my house, and I’m in there almost every day to pick up something or other. Over the years I have got to know most of the people at the check-out counters, at least enough to chat a bit. And now the familiar faces are disappearing, one or more every month, to be replaced by automated self-checkout stations.

And don’t be fooled by the fantasy that computers create equal numbers of new jobs when they destroy old ones. When you lose your secure, well-paid job to a machine, you may end up with a minimum-wage MacJob if you are lucky, but you are just as likely to end up with no job at all.

It is the anger of millions of people in this situation that broke normal voting patterns and provided the extra votes that gave the Brexit campaign victory in last June’s referendum in Britain and made Donald Trump president in the US election in November. As automation continues to spread the anger (and the reckless lies of populist politicians) will only get worse.

The automation will continue to spread. The estimated impact over the next twenty years includes the loss of 47 percent of all existing jobs in the United States, 57 percent in Europe, and a stunning 77 percent of manufacturing jobs in China. That could mean a lot more anger, a lot more populism, and conceivably even the collapse of democracy.

It is also dawning on the owners and chief executive officers of major enterprises that if half the population are impoverished by long-term unemployment, they will not be able to buy the goods and services that the capitalist economies produce. That could lead to the collapse of their whole business model, so the right wing is now starting to look into UBI too.

The principle of UBI is that every citizen gets a basic income that allows them to maintain a decent standard of living WHETHER THEY ARE EMPLOYED OR NOT. They may also choose to work in order raise that standard of living, and that income would be taxed (probably quite heavily), but it would still be possible to get rich. This is about saving capitalism, not ending it.

Why do it this way, rather than just giving the unemployed some money? Because that is humiliating for them, and the humiliation feeds the anger. If everybody gets it, there is no shame in taking it.

Where would the money to fund UBI come from? Part would come from ending all existing government social payments: if you are getting UBI, you don’t need unemployment pay or an old-age pension. But heavy taxes on financial services and on automated factories and services would certainly be needed as well.

The biggest question is how many people would still choose to work if everybody was getting the Universal Basic Income. If 47 percent of today’s remaining jobs are being done by automated machines in 20 years’ time, then 53 percent of today’s jobs will still need to be done by people.

Finding the answer to that question is one of the main purposes of the new pilot programmes. They are getting underway this year in Canada (in the province of Ontario), in the city of Utrecht in the Netherlands, and in Finland. Others are being considered in Scotland and in Italy. Something big may be starting to happen.
________________________________________________
To shorten to 725 words, omit paragraphs 6 and 7. (“I can…at all”)

2016 Year-Ender

The main message of 2016 was that we are entering a period of economic and political upheaval comparable to the industrial revolution of 1780-1850, and nothing expressed that message more clearly than Donald Trump’s appointment of Andrew Puzder as Secretary of Labour. Even though it’s clear that neither man understands the message.

Puzder bears a large part of the responsibility for fulfilling Trump’s election promise to “bring back” America’s lost industrial jobs: seven million in the past 35 years. That’s what created the Rust Belt and the popular anger that put Trump in power. But Puzder is a fast-food magnate who got rich by shrinking his costs, and he has never met a computer he didn’t like.

“They’re always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age-, sex-, or race-discrimination case,” he rhapsodised. They also never take lunch or toilet breaks, they’ll work 24 hours a day, and they don’t have to be paid. So out with the workers and in with the robots.

It was not evil foreigners who “stole” most of those seven million American jobs, and will probably eliminate up to 50 million more in the next 20 years. It’s the ‘intelligent machines’ that did most of the damage, starting with simple assembly-line robots and ATMs. (”Every Automated Teller Machine contains the ghosts of three bank tellers.”)

But the automation keeps moving up the skill sets. The first self-driving cars are now on the road in the United States. That’s another four million jobs down the drain, starting with taxi drivers and long-distance truckers. In recent years eight American manufacturing jobs have been lost to automation for every one lost to “globalisation”, and it will only get worse.

A 2013 study concluded that 47 percent of existing jobs in the United States are vulnerable to automation in the next 20 years, and the numbers are as bad or worse for the other developed countries. This is what is really driving the “populist revolution” that caused two of the world’s oldest democracies to make bizarre, self-harming political choices in the past year. First Brexit, then Trump.

Leaving the European Union will hurt Britain’s economy badly, and putting a man like Donald Trump in the US presidency is a serious mistake. Yet half the voters in each country were so angry that they didn’t care about the likely negative consequences of their vote.

There is more to come. Beppe Grillo’s populist Five-Star Movement may win the next election in Italy. Marine Le Pen’s National Front (no longer openly anti-Semitic, but still basically neo-fascist) could win the French presidential election next spring. The Netherlands and Germany may see hard-right, anti-immigrant parties in governing coalitions after their forthcoming elections.

Some people fear that we are seeing a re-run of the 1930s. Economic growth has slowed since the crash of 2008, and unemployment is much higher than it looks. The official US unemployment figure is only 5 percent, but almost one-third of American men between the ages of 25 and 54 are “economically inactive”. So angry populist leaders are popping up again all across the developed world.

The ‘Dirty Thirties’ ended in the Second World War, and there are obvious parallels today. The European Union is fraying at the edges, and Donald Trump has talked about curtailing US support for NATO. He has also threatened to slap huge tariffs on Chinese exports to the US, and it’s probably a bad idea to push China too hard when it is already in grave economic trouble.

But this is not the 1930s. There are no ranting dictators promising revenge for lost wars, and government benefits mean that unemployment is no longer a catastrophe for most people in Western countries. The old white working class (and some of the middle class) are angry because jobs are disappearing and because immigration is changing the ethnic balance in their countries, but they are not angry enough to want a war.

Trump’s election means that we are in for a wild ride in the next four years, but he will ultimately disappoint his supporters because he is barking up the wrong tree. He cannot bring back the jobs that were lost, because most of them were not lost to his favourite culprits: free trade and uncontrolled immigration.

Even if Trump understood this, he could not admit it in public, because there is nothing he can do about it. He might ban immigrants coming in to “steal American jobs”, and he can tear up free-trade deals to his heart’s content, but his own cabinet contains people who have built their careers on eliminating jobs through automation.

This is change on the scale of the (first) industrial revolution, and you can’t fight it. But then, you really don’t need to. American industry has shed seven million jobs since 1979, but the value of US factory production has more than doubled (in constant dollars). It is only jobs that are being destroyed, not wealth.

It is not a disaster for a rich society to reach a point where the same goods are being produced and the same services are being provided, but most people no longer have to work 40 or 50 hours a week (in jobs that most of them hate). Or rather, it’s not a disaster UNLESS HAVING NO WORK MEANS HAVING NO MONEY OR SELF-RESPECT.

The main political task for the next generation (post-Trump) in the developed countries will be to ensure that those without work have an income they can live on, and don’t lose their self-respect. Other ways will doubtless be suggested, but one way of achieving this that is already getting attention is a Universal Basic Income (UBI).

The UBI would provide everybody with enough to live on. Since everybody got it, there would be no stigma involved in living on it. And 53 percent of today’s jobs will still be there in 2033, so those who really wanted to work could top up their UBI with earned income. There would still be millionaires.

The first national referendum on UBI was held in Switzerland last June. It was a radical new idea, so of course it was overwhelmingly rejected. But this idea will not go away, and there will be more like it. The rich countries can stay rich and stable if they understand the nature of the task – but the developing countries may face a grim future.

No UBI for them — they are not rich enough, not even China. But automation is eating into their newly gained industrial jobs too. A recent Citibank report estimated that 77 percent of Chinese jobs are at risk from automation, and in India there is talk of “premature deindustrialisation” (i.e. industrial jobs in India may be peaking right now, and will then go into decline).

That would not just mean continuing poverty for many, but huge political turmoil – populist revolutions and super-Trumps. The future (including the near future) will be quite interesting.
______________________________________
This article is longer than usual at 1175 words. To shorten to 850 words, omit paragraphs 7-11. (“Leaving…a war”)

To shorten further to 725 words, omit also paragraphs 5 and 13. (“But…worse”; and “Even if…automation”)