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Making the Future Economy Work

 9 min read / 

The economy often appears to be a dark mistress one is either intimate with or is doomed never to understand. So, banishing the fog and getting the basics out of the way: an economy is the state of a country or region regarding the production and consumption of goods and services and the supply of money. Simple enough.

Despite this apparent simplicity, it will come as no surprise that it is tough out there for many people surviving off this well-known, widely-spread, meritocratic system of free markets called capitalism. In the West, some are realising that we live in a post-economic world: nominally wealthy, yet plagued by a slew of everyday horrors such as medical bankruptcies and income inequalities.

One of the many reasons for this is that our economy is not as socially productive as it has traditionally been, in part because it never learnt how to nurture a middle class that can thrive in a highly automated and digital society.

The Digital Economy

Where do the inequalities plaguing Western societies come from? One would argue that the digital economy, wherein the more and more computing power and the best software brings in the bigger bucks, is partly to blame: large companies now live and thrive on data analysed by AIs. They are fed data.

Behavioural data and engagement statistics are repeatedly and consistently blended for sale, with the sum of every interaction becoming part of a process aimed at improving the business of attracting and retaining users. Most of the current top-tier tech companies have arrived at where they are because people are not paid for the information that is used to dole out regular dividends.

And because information is held to be free (one of the 21st century’s biggest lie) more and more people will not be paid for what they produce, even beyond “basic” data. This can be seen in journalism and music already, but their fate awaits many other industries: advanced AIs are already outperforming many white-collar workers, including legal researcherspharmacists and chess players (?). The digital economy is steadily digesting the physical economy and the jobs it provides, leaving a gap between those that give the information and those who wield it.

This has been a long time coming: in 1930, Keynes predicted that in the future (around 2030), production problems would be solved and there would be enough for everyone, but machines would cause “technological unemployment.” It would be a time of plenty, but the means of getting a share in it, jobs, might be scarce. He was, as usual, bang on. The economy has moved from issues of production to issues of fair distribution.

How is this addressed? Keeping track of where information came from, and pay the relevant people when their data turns out to be valuable, no matter what kind of information is involved or whether a person intended to provide it or not. This does not need to take an authoritarian turn, as markets could determine the price of data. The world has moved from an era of scarcity to an era of abundance, and the rise of inequality is not only caused by people not being needed. More precisely, it is because of an illusion that they are not even there.

Which leads to:

The Ghost Economy

When one raves about inequalities, who does one talk about? One speaks of the invisible workforce: people who clean offices, sort recycling, fulfil online orders. Usually a ragtag crew of felons, high-school dropouts, single moms, the disabled, indebted students, desperate immigrants, the over-qualified, the under-qualified and the starving, all of them “ghosted” by the traditional economy. For them, Smith’s “invisible hand” takes on a whole new meaning.

When a person is so broke that they have to endure the shame of a horrid uniform, the shame of handing out flyers in the street, the shame of welcoming suits to a conference all day, a person slowly fades away. Unseen. Unheard. But in boardrooms, far removed from this suffering and indignity, things are better than ever. Shareholders, CEOs and venture capitalists are enjoying record profits. And so began:

The Gig Economy

Many jobs have become gigs, and the gigs are unsteady. Part-time. No health benefits. No pension, no unemployment insurance, no maternity leave, no way to plan a life, sign a lease, pay off debt. No stability. No other options. The model has many names: the gig economy, the on-demand economy, the peer economy, or the platform economy, yet the companies partaking in it share many similarities. They usually have ratings-based platforms, mobile payment systems and claim to give workers the chance to make a living (or earn some extra cash) “in their own time”, rather than through the corporate ladder. This means that the distance between the main employer and the worker who fulfils these gigs widens, allowing for the same type of casual cruelty that is exchanged between people who meet on Tinder.

What often unites the gig economy’s stakeholders is a belief that living in a meritocracy underlined by the free market means that social mobility is within anyone’s grasp: the presumption that they are playing a fair game. It has never been easier to be a billionaire and never been harder to be a millionaire: in this game, there are winners and losers and no in-betweens (the median savings account balance is $5,200, yet the mean is $34,000). That is the genius of companies like Uber. It took the traditional corporation, with its C-suit responsible for controlling workers and machines, and cut it in two, creating a management structure that needs not deal with the political demands of workers, while heralding the virtues of autonomy, flexibility and the “go-getter spirit”.

And thus was born:

The Sharing Economy

Uber and AirBnB’s businesses are characterised not by sharing, but by advertising spare or underused capacity for rent, with the platform taking a percentage. Managers hang onto the sharing narrative because it props up the claim that market mechanisms could rebuild the very communities that the markets themselves have eroded.

This not only separates managers from the grunts: it also shifts the costs of working to the “self-employed”, as well as the risks this entails. This is a venture capitalist’s wet dream. Give a startup a comparatively tiny amount of liquidity to hire developers who will create a platform and run advertising campaigns, and then watch as network effects work their magic over the entirety of the internet. Magically, they are suddenly in control of a company built with cheap digital tools extracting value from expensive real-world, physical assets (think cars, buildings, people). The entity holds itself together not via traditional employment contracts, but rather by the freelance workers’ dependence on its platform to access the market they now rely on to put food on the table.

“But”, one may argue “surely every new system has a group of winners and a group of losers, and society is benefiting in the long term. That is just good business”. Indeed, a company like Uber offers a service directly benefiting the customer, who is saving on the taxi fare otherwise paid but makes drivers’ revenues less stable. Airbnb has made travel more affordable for people who can not afford a hotel, yet it also means that a significant amount of cash does not make its way directly to the hotel employees such as housekeepers, receptionists and cooks, and instead goes to the people who own a cosy second home in central Paris. Instead of driving wealth down as advertised, it seems the sharing model is simply diverting traditional service-worker earnings into the top 10%’s ever-expending pockets, drawing wealth slowly upward.

And so it comes to the logical conclusion of:

The Post-Work Economy

Even when work quality is miserable, people still associate it with the idea of self-reliance and self-realisation. But what if it was not so? If the goal of the economy is to provide decent-paying work for everyone, this economy is not doing a good job at the moment. For the future economy to work, there may be the need to get rid of the illusion that professional status is inherently and strongly correlated to self-worth.

In response, many are calling for a universal basic income: a plan to give every citizen a modest flat annuity from the government, as a replacement for all current welfare and unemployment programs. This would safeguard people for whom work does not lead to increased financial security and would arguably allow everyone to benefit from automation, not just the lucky few.

Before dismissing this idea too quickly, it is important to consider the idea, not in the context of our current economy, but of what the economy could become in a future dominated by robots and AIs. A government implementing a basic income philosophy would acknowledge that there are too few work hours to be worked by all available workers and respond by injecting liquidity into the mechanism. Workers would need to be able to exchange hours of work at full pay, for hours of free time paid for by the state.

Other fixes are possible, with various levels of difficulty: fine employers who do not give equal pay, limit the use of temp workers, extend basic protections to all workers, create models for portable benefits as people switch job more and work for more than one employer, or mandatory prorated benefits. Taxation on robots has also been proposed by many people. The possibilities are there for any government bold enough to look into them.

Profit-seeking and benefit-giving are not at odds: shareholders are best served when all stakeholders are well served.

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