Around 250 years ago – during what is known in the West as the Age of Enlightenment – there emerged two parallel but related tendencies of profound significance for human economic and social development, namely
The invention and application of techniques, especially based on steam power, that facilitated mechanised production and transport, which formed the basis of the first Industrial Revolution, and
The growing recognition of the idea of universal human rights, reflected in the assertion of the US Declaration of Independence that “all men are created equal”.
Taken together these two developments may be said to have made possible the movement towards the formal abolition of slavery which spread steadily across the Western world, starting in the British Empire in 1834 and culminating in its abolition in the USA in 1862. Also, in that very same year in Russia the emancipation of the serfs, whose status was little different to that of chattel slaves, was decreed, a move that may also be said to mark the final end of the feudal system, which had been the main basis of society and the economy in Europe – particularly rural society – for 1000 years or more.
As noted by a number of commentators, the trend towards greater emancipation was to a significant extent facilitated by the technological revolution rather than by growing moral revulsion at the idea of human beings being one another’s property, important as the latter undoubtedly was. This was because the vast increase in labour productivity resulting from mechanised production, in both agriculture and manufacturing, meant that it became less and less cost-effective to maintain a permanent labour force at an employer’s expense, especially where demand was seasonal or subject to frequent market fluctuations. This led instead to the horrors of labour exploitation in 19th century Europe, under which most employers took no responsibility for housing or feeding their operatives during good times or bad – as described by Engels as well as Dickens and other English novelists of the period. This new order was aptly termed “wage slavery” by Karl Marx. Gradually over the next 150 years (to around 1975) the worst excesses of the early 19th century were eliminated as political rights were for the first time extended to the whole population in Western countries and “welfare states” were established. At the same time a substantial minority – if not a majority – of the population of the world’s richer countries, accounting for some 10 per cent of global population, was enabled to attain a substantial degree of affluence at least for significant parts of the post-World War II period.
The rise of robotisation and artificial intelligence since the start of the present century needs to be seen in this context. For if the first Industrial Revolution may be said to have been the essential driver of the phasing out of feudalism and chattel slavery in the 19th century, the present one – whether called the second, third or fourth Industrial Revolution – seems likely to spell the gradual demise of wage slavery. Exactly how this process might unfold, and what form of society and economy will emerge to replace existing structures, evidently remains a matter for speculation. But it clearly holds out the prospect that future generations will come to view the period since the start of the first Industrial Revolution as a continuum leading to the progressive liberation of human beings – thanks to technological advance – from the necessity to undertake paid work in order to procure the means of subsistence, which will instead be guaranteed by the unconditional provision of a Universal Basic Income (UBI) to all.
Just as significant for the future shape of economic development will be the impact of the present technological revolution on the costs of producing and distributing goods and services. As noted in earlier postings, this is clearly going to lead both to an economic environment of increasing superabundance and correspondingly much lower costs, which the energy sector is already starting to demonstrate. This will mean that a cardinal assumption of traditional (capitalist) economics – that resources are scarce and that they must be priced and allocated accordingly – will no longer apply in future, or only to an increasingly limited extent. This in turn will mean that a) profit margins for investors engaging in such productive activities will tend to be small and shrinking, and b) any speculative profits (economic rents) resulting from short-term scarcities will be short-lived.
A parallel development that is likely both to condition the demand for labour on the part of employers and for paid work on the part of would-be employees is the phasing out of the capitalist profits system as the main driver of economic activity – along with prioritisation of economic growth – as capital, which is already in chronic excess supply, becomes ever more redundant (see earlier postings). This tendency, which will be a function of the same rapid technological change that lies behind dwindling demand for labour, will obviously mean a steep decline in the level of fixed investment and associated employment growth. Indeed it may be more pronounced to the extent that, with an adequate basic income for all in place, government policy will no longer need to be geared to promoting increased investment or employment. On the contrary, it should seek to withdraw all artificial incentives to capital accumulation – particularly the right to limited liability, which privileges capital investment – now that society no longer requires it, in contrast to the position in the mid-19th century. Altogether, indeed, there should cease to be any motivation for expansion of aggregate output; rather there is more likely to be pressure to restrain or diminish it, if only on environmental grounds.
It would be hard to overestimate the significance of such an outcome of contemporary economic evolution. This is for three main reasons:
The ending of a profit-based system inevitably geared to maximising growth would mean that the assets supporting the value of securities (stocks and bonds) on the financial markets would become progressively less attractive to investors, especially as they appeared less and less likely to grow in value. By the same token funded pension schemes designed to provide workers with an adequate income in retirement will become ever more insolvent until they collapse altogether, as many are already doing. The same fate awaits other funds representing large accumulations of assets , including so-called Sovereign Wealth Funds which many states have established on the basis that they will provide them with a source of income in the event of major economic dislocation.
Such tendencies would in their turn lead to a drastic long-term reduction in the value of assets and securities, and hence in the size of the financial system which has come to occupy a dominant position in the economy of the Western world – and of the UK in particular, where it presently provides employment for millions of people;
Acceptance of the idea that nobody will be obliged to work in order to obtain the basic means of subsistence will be a historic first for the human race and will utterly transform economic, social and political relationships from anything that has gone before.
The fact that the progressive failure of funded pension schemes and similar funds is already the focus of turmoil in industrial and financial markets is another compelling reason for the early introduction of UBI. For it graphically demonstrates how the capacity of accumulated capital assets to yield an adequate income stream has dwindled with technological advance, so that a capitalist economic model can no longer deliver adequate pensions or any other form of guaranteed income while at the same time providing an acceptable rate of return to shareholders. By the same token, however, the enterprises of the new “post-capitalist” structure – many of which will be relatively small-scale and collectively owned – will increasingly be able to deliver goods and services at a fraction of the costs and prices presently attainable, especially as there will be no need to generate extra value added (surplus value) to meet the demand of capital markets for higher returns. Existing, profit maximising enterprises can be expected to struggle mightily to try and maintain a high market value in order to avoid further erosion of their margins and return on capital, but ultimately this will be as vain as the efforts of the Luddites and machine breakers in the early 19th century to halt the advance of mechanisation.
Evolution of a new economy
Although it is impossible to foresee precisely what processes will occur – or in what sequence – to bring about this new economic order, it seems likely that they will include the following features:
Chronic global financial crisis as existing enterprises, government structures and markets experience repeated breakdown due to failure to balance the books in the face of competition from new, low cost businesses;
Progressive moves to greater equality of income, particularly through adoption of UBI, the affordability of which will be greatly enhanced by the diversion of a growing share of corporate value added to finance an adequate UBI;
In the medium-to-long term, to the extent that major enterprises – including new media-based giants like Amazon and Alphabet (Google) – are not brought under state control, their surplus value added will be diverted via taxation to finance both an adequate UBI and collectively provided public services such as health and social care;
Progressive reductions in overall living costs thanks to technological improvements and consequent productivity enhancement. Such reductions should interact, in a dynamic process, with the diversion of excess corporate value added to facilitate greater affordability of UBI.
It seems obvious that such processes will not be able to take place in the present globalised economic environment, where the kind of radical changes that are envisaged could not be adopted by universal agreement – or even at the level of groupings such as the EU. Hence it seems likely that the economic organisation of the world will re-fragment into nation states or even smaller, local entities pursuing their own agendas independently of each other. In fact this process of fragmentation was already occurring even before the collapse of the WTO Doha Round of tariff reductions in 2015 and is also manifest in unrest within the North American Free Trade Area, the EU and the ECU. Indeed, as we shall show in more detail in our next posting, the benefits of international trade, so long taken for granted, are increasingly being called in question and may well be foregone without much, if any, disadvantage.
It is possible to conceive all kinds of ways in which human society might evolve under the emerging conditions of liberation from wage slavery. Writing in 1891, Oscar Wilde – positing an economy in which machines would be able to do all the menial, degrading or boring work required by society – anticipated a world where the ownership and management of production would be collective (socialistic) while individuals would be free to fulfil their potential as human beings – or, as he preferred, as creative artists. Although, as Wilde himself conceded, such a vision was clearly Utopian in the conditions prevailing at that time, it is by now far easier to imagine it becoming a reality – perhaps far sooner than we may expect.