COVID-19 forced us to shut down entire industries and retail businesses, causing disruptions in the payment chain until activity resumed because business sectors could no longer sustain zero economic activity. In response to this situation, many governments decided to subsidize workers’ salaries to ease the burden on companies and prevent them from having to close permanently. This scenario led to speculation about how to guarantee the basic needs of citizens, prompting us to explore the concept of Universal Basic Income (UBI), an idea increasingly discussed regarding the potential mass unemployment caused by technological advancement. The idea itself involves transferring enough money to all people to prevent hunger, lack of health care, or homelessness. Honestly, I think that if this idea wins, if not implemented correctly, we will be devaluing our own humanity. Establishing a minimum level of equality is healthy. The issue is to see how low or high that level is. Of course, the higher it is, the better, but there is a narrow gap between saying and doing, including figuring out where such a large amount of money will come from, which we will delve into later.
Another frequently mentioned idea is the need to rewrite social contracts and reconfigure economic incentives to thank and value those who carry out productive social activities for the community and not just for the market.
Many of the proposals from Silicon Valley revolve around the same themes. The problem with these themes based on continuous worker education, reduced working hours, or new redistributive measures is that they prepare us for different scenarios whose time frame and actual rate of job loss are still unclear. As you may have deduced, I believe it is potentially higher than what current power circles and the masses think.
Those who embrace the idea of providing workers with continuous education, which I still consider fundamental, believe that AI will gradually enter the scene, causing a slow change in labor markets. Displaced workers could theoretically migrate to another industry that is harder to automate, but this involves a disruptive process, and therefore this transition will take a long time. Even the same analogy exemplifies the bottleneck we will encounter.
Then there are those who advocate for reducing working hours due to the impact of AI implementation. The idea of promoting three or four-day work weeks with fewer hours than currently to “divide” existing jobs among more people is not necessarily the best solution. This premise seems to be based on a series of absolute truths that are unlikely to materialize tomorrow. The first is assuming that this modest mathematical adjustment will be enough for all the active workers on the planet, that it will not interfere with the meritocracy advocated by some, and that wages will be sufficient to meet people’s human and material needs. It might be enough to eat and survive, but I doubt it will be enough to fulfill other desires we may have. This would be leveling down instead of up. It’s not logical to think that this is good. If we are going to level, we must do so upwards and ensure that no matter where one is born, we can still have the same opportunities as everyone else, as the developmental school suggests. In reality, the short work week hides the increase in productivity that has occurred in recent years and is yet to come, and a market unable to consume the excess that will be generated.
In this sense, those who advocate for greater redistribution are generally those who predict the worst scenario of mass unemployment. For them, the newly disenfranchised will not be able to find a new job quickly enough with training and continuous education. It is possible that workers will accept a temporary hit to their income during an economic crisis, as happened at the beginning of the pandemic, but I doubt anyone can be satisfied knowing they will face economic stagnation or decline for the rest of their days.
Techno-optimists argue that in the long run, technology always generates more jobs and collective prosperity. I don’t connect with that idea, and that’s why I try to draw attention to this issue. From their perspective, a techno-optimist would say that advances in production will lower the acquisition cost of various goods and services. These low prices would free up part of consumers’ purchasing power, allowing them to buy more units of other products or spend their money on something else, both options generating new jobs thanks to increased demand. Well, what money are they talking about if many people won’t have an income source in the first place? It’s true that today, in developed economies, drawing a parallel with previous industrial revolutions, more workers are in factories and offices than working in fields, but as AI era monopolies lower prices and wipe out millions of jobs, they will also push up inequality. The bias of techno-optimists is to think that history will repeat itself infinitely, and if there’s one thing we pointed out at the beginning of this book, it’s that history is impossible to predict. Therefore, without attempting to present an absolute truth, but rather a series of questions that invite us to reason and analyze the present evidence, clinging to something that has already happened in such a changing and dynamic world makes as much sense as thinking in 2023 that the Sun revolves around the Earth because it appears so to our eyes and not the Earth around it. Let’s take perspective. Let’s learn from the past, but discuss how to shape the future.
Imagine how profitable Uber could be if it didn’t have to pay 75% of its fares to a person. Imagine the profitability Apple would have if its assembly factories didn’t need human hands at all. Imagine Walmart no longer having people at its cash registers. Pay attention to this because we will likely start seeing people lining up to use manual cash registers in supermarkets, fast-food restaurants, or even clothing stores, while perhaps a human-operated register remains completely empty. Do we want to avoid that small formal conversation that occurs when we reach the register? Do we want to avoid being judged by those eyes that see how we waste our money on unnecessary things while the person charging us has to settle for much less than we have and take for granted? This action, which results in contempt for others, even when we know that our decision can help them keep their job or lose it faster, we will call it homomalestemi. It’s not that we are anti-human, nor that we prefer machines over other people, yet we are aware that these small decisions only stir up the hornet’s nest. To put it in concrete numbers, and without forgetting that behind each one is a name, a surname, a story, and dreams, remember that Amazon has already opened 28 stores in its Amazon Go supermarket chain[153], where there are no cash registers. How long before more supermarkets adopt this methodology? The political, social, and economic hurricane that will impact us is unprecedented. This hurricane will even attack our conception of ourselves since, since the industrial revolution began, we tend to see our work not only as a means of survival but as an attribute that contributes to our pride, ego, and identity. Whether you’re a hairdresser, butcher, farmhand, or physicist, you cling to the identity your profession gives you, and if AI displaces us from our jobs, it could eventually take away part of our identity and purpose at the same time, just as happened to Lee Se-Dol. It will not be easy to eradicate this tradition from our culture, but it will be necessary, and it may be good to stop perceiving a person according to their economic value to the market for once.
Depression levels increase rapidly, up to three times, in those who fall into unemployment for at least six months[154]. Suicide rates double among people looking for work compared to those who already have a job. Problematic drug and alcohol use increases according to unemployment rates. The consequences of mass unemployment can be devastating for society as a whole.
While consulting firms like PwC estimate that AI will inject $15.7 trillion into the global economy by 2030, other researchers from the University of Oxford concluded in 2013 that 47% of jobs in the United States could be automated within the next two decades. McKinsey Global Institute has also estimated that between 400 and 800 million people will be displaced by automation and will need to find new jobs by 2030[155].
The Silicon Valley elite knows that the technologies that will generate billions of dollars in profits for them will eliminate the jobs of many other people, which is why they are early advocates of Universal Basic Income. This is not a solution. We are wasting the opportunity to create a better redistribution system, and instead, we are taking a sedative. As altruistic as this measure sounds, it seems to me that its purpose is to keep the silent majority of an unequal society calm. I use technology and have no plans to become a hermit or Amish, but I am not reassured that the people who cause the problem in the first place and who benefit the most from it are the ones designing the solution. I’m not suggesting that we declare war on capitalism or the tech industry that we so appreciate, but we are calling on them to work together to find solutions to this and other problems. Perhaps at some point, material abundance will be such that we will no longer pursue economic incentives, but asserting that would be pure futurology, and we don’t intend to do that here. Instead, we want to talk about facts, data, and real concerns. It may happen at some point, but the current social contract dictates otherwise. Also, if the economy is destroyed by the lack of consumers, where will the tax money come from to cover the necessary disbursements for Universal Basic Income? What will we do? Tax data generation or the purchase of certain robots? Not only do I not see it working in the long run, but I also don’t see it as feasible from an economic sense due to the lack of incentives. What is the magic number for this tax in a jobless society?
Let’s understand how money is created today. New money is created through debt. What? Yes, money is created through debt. To explain it, let’s first imagine a closed economic system, which, although not the model according to which the real economy operates, will help us understand the point in question. Suppose an economy of 10 people, where a bank lends 10 coins to each individual, putting 100 units into circulation. In exchange for this service, the bank imposes a 10% interest rate that must be returned after a year. Here lies the first problem. The bank put 100 coins into circulation but expects a return of 110 coins at the end of the year, i.e., 11 coins per person who took the loan. This would be impossible to fulfill, and at the same time, for anyone to honor their debt, another must lose part of their initial position. Today, what the public considers debt, in the banks’ books, is actually an asset since part of their income flow comes from there, even if some clients default on pending payments. However, today we do not work in closed and static economies. The policies of central banks affect the money supply of an economy, which can vary due to different factors, from interest rates to the value created by people through their work or investments. With this in mind, let’s now investigate where banks originally get the money they lend to their clients and what fractional reserve banking is, thus approaching the current system.
When a client deposits their money in the bank, they also expect interest in return. What happens next is that the bank proceeds to lend that money in exchange for a higher interest rate than it will pay to its depositor. This is part of the fractional reserve system, which allows banks to keep only a small portion of their clients’ deposits. How small? In the case of European Union banks, they only have to keep 1% of deposits[156], putting the remaining 99% back into circulation. For US institutions, before the pandemic, the minimum reserve requirements were 10% of deposits, but during the COVID-19 outbreak, this was eliminated and brought to zero[157]. Money in, money out, with interest in between, of course. Now that we understand how money is created, let’s ask ourselves where the tax money to fund Universal Basic Income would come from in a workerless society.
If wealth is created by a set of machines that have owners, then the incentives must be aligned so that the owner of the means of production has a profit. Otherwise, they wouldn’t waste time or resources on such tasks. Let’s return to the example of a closed economy. There we have a producer who generates the goods demanded by the economy. If we have 100 coins representing the total monetary base of our system and through a UBI, we proceed to give 1 coin to each of the 100 people in our society, our producer will not have capital to invest in the necessary goods nor will they have incentives. The option left is a centralized economy, which historically hasn’t worked due to the impossibility of economic calculation. Additionally, without incentives, there will be no push towards greater technological progress and human welfare. It doesn’t matter if the central entity is a person or an AI. Even thinking that people would buy goods and services from the producer with money taken in taxes, even if at the end of the day they can keep 1% of their profit and you take the rest away, economic concentration will eventually reemerge after repeating the cycle several times. The numbers simply don’t add up if we intend to continuously spend and redistribute the entire monetary base equally among all members of society. Without incentives, there is no progress. While time is infinite, the bureaucratic and economic measures imposed by the regimes of the day will never have the same fortune.
[153] ScrapeHero. (2022). Number of Amazon Go locations in United States. ScrapeHero. Retrieved on February 12, 2023, from https://www.scrapehero.com/location-reports/Amazon%20Go-USA.
[154] McGee, R. E., & Thompson, N. J. (2015). Unemployment and Depression Among Emerging Adults in 12 States, Behavioral Risk Factor Surveillance System, 2010. Preventing Chronic Disease. Retrieved on February 15, 2023, from https://doi.org/10.5888/pcd12.140451.
[155] Manyika, J., Lund, S., Chui, M., Bughin, J., Woetzel, J., & Batra, P. et al. (2017). Jobs lost, jobs gained: What the future of work will mean for jobs, skills, and wages. McKinsey. Retrieved on June 29, 2021, from https://www.mckinsey.com/featured-insights/future-of-work/jobs-lost-jobs-gained-what-the-future-of-work-will-mean-for-jobs-skills-and-wages.
[156] European Central Bank. (2016). What are minimum reserve requirements? European Central Bank. Retrieved on February 11, 2023, from https://www.ecb.europa.eu/ecb/educational/explainers/tell-me/html/minimum_reserve_req.en.html.
[157] Reserve Requirements of Depository Institutions. (2022). Federal Register. Retrieved on February 18, 2023, from https://www.federalregister.gov/documents/2022/12/01/2022-26065/reserve-requirements-of-depository-institutions.