By Charlie Woods, EDAS
In April this year Adair Turner (Chair of the Institute for New Economic Thinking) gave a speech entitled “Capitalism in the age of robots: work, income and wealth in the 21st-century.” In it he argued that the rapid and unstoppable development of automation, based on robotics, artificial intelligence and machine learning, will have very profound implications for how we live and work. This looks likely to go to the heart of the ‘inclusive growth’ agenda.
Turner argues automation will result in less and less human input going into the production of most of the goods and services we need to live well. As a result today’s economic challenge of how to produce what we need in the most efficient way in an environment of scarcity will become much less of an issue. The more pressing issues will be: how we earn and distribute income, how we use our time and how we measure progress.
He acknowledges that in many respect John Maynard Keynes got here first, almost ninety years ago, with his essay “Economic Possibilities for our Grandchildren” in which he said “for the first time since his creation man will be faced with his real, his permanent problem, how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well”.
Conventional wisdom argues that as productivity increases in one part of the economy it frees resources up that can produce more value in other areas, which will increase overall welfare. However, Turner suggests that this need not be the case if the resources freed up are devoted to very low productivity activities or zero-sum activities that cancel each other out in terms of overall welfare, as people struggle to secure their share. From cyber criminals and the police that try to stop them, to tax lawyers and revenue officers, to many aspects of asset trading.
How income is distributed rather than created will become an increasing focus in a more automated world – as has been reflected in the growing interest in Silicon Valley in the idea of a universal basic income. There are many different dimensions to the distribution question – for example, distribution within countries, between different regions and social groups, between skills and between countries.
The value of using GDP, as currently calculated, as a measure of societal wellbeing, is also likely to be more and more open to question. If wellbeing is poorly understood and measured and income is unequally distributed (and grows ever more unequal as income earning assets become more concentrated), it is likely that the ‘have-nots’ will spend ever more of their time serving the ‘haves’, and growing ever more resentful at their worsening welfare, the inequity all around them and lack of hope. In addition to growing social injustice in such a scenario there will be a real waste of human potential that could be deployed to improve overall wellbeing.
In this environment rent seeking is also likely to become more prevalent and the assets that will be most highly valued will be those whose value is physically constrained and/or subjective such as land in desirable locations, brands and beauty.
The early signs of these trends are already evident, even if the potential magnitude of the change has yet to become fully apparent. There are a growing number of low paid, precarious jobs, alongside an increasing proportion of ‘zero-sum’ jobs and a ‘celebrity brand culture’, while the value of non-produced assets such as land now exceeds produced assets and populist politicians respond to growing feelings of discontent.
Turner suggests a number of policy and practice areas, all of relevance to an inclusive growth agenda, which need further attention:
• Income support such as Universal Basic Income – alongside opportunities for rewarding work and the provision of high quality public services, goods and spaces
• Offsetting the concentration of income, wealth and rents – a greater focus of taxation on property wealth, capital gains and inheritance alongside a careful look at income from intellectual property rents
• High quality urban development – paying more attention to the geography of economic development to help address the high costs of urban living and commuting
• Adequate wages and status for caring services – recognising the limits to automation in these areas and the potential for adding to overall human welfare
• Celebrating craft skills – an opportunity for rewarding work which can enhance overall life satisfaction
• Increased leisure – spending more of the time freed up in leisure than in zero-sum activities might have a more positive overall impact
• Education for life and citizenship – empowering and equipping people to lead fulfilled lives and be equal and active citizens