Daily Times

A recent BBC news story shed light on the dangers of robot-driven automation designed to manufacture hubs in Africa. Citing a new study by the Overseas Development Institute, the report said there is an imminent danger looming over jobs in low-skill manufacturing once the cost of using robots in industry falls below human wages.

This would prove to be disastrous for many thriving factories located in Africa and much of Southeast Asia. Tech experts have predicted that this will not take longer than two decades.

Capitalism, we can safely argue, perpetuates inequalities. People with smarts and money will always have an inherent advantage over the poor and uneducated in free-market economies. And since capital grows faster than wages thanks to the power of compound interest, the gap in wealth between the haves and have-nots will continue to grow.

The more pressing problem for left-leaning economists and social scientists is the rapidity with which this gap will widen in the ‘second machine age,’ where most manufacturing and routine administrative tasks will be taken over by robots. Today, there is a close relationship between productivity, profit and wages. In a robotic future, however, these concepts will be unmoored of one another.

In the near future, capitalists who own robots will be able to multiply their productivity and profits without a corresponding increase in wages, as the majority of blue-collar jobs go extinct. Unemployment will rise as a result, triggering violent class warfare that could threaten the very fabric of many global societies.

How to go about preventing this? In a recent think-piece in the Washington Post titled Here’s how block-chain can reduce inequality, Nicolas Berggruen wrote bridging inequality in the age of artificial intelligence (AI) will require rewiring how we currently allocate capital. Meaning governments should change their focus from redistributing wealth to ‘pre-distributing’ capital.

The emphasis hence should not be on ‘universal basic income,’ but ‘universal basic capital.’ In Berggruen’s own words, “Why not give a share of everything to everyone within a society? For example, imagine a society in which a third of its goods are owned by society itself, a third is owned by workers and a third is owned by capital — so that everyone has a share of everything.” And of course he believes “block-chain” is the game-changing, self-regulating technology that can make this possible.

The wholesale changes he recommends give the impression that capitalism as an economic system has failed and a new model will soon become necessary to prevent the world from sliding into civil wars. I believe his thesis and conclusion leave many unanswered questions.

One, human greed and increasing distrust of governments in developing countries are why income inequality is growing, not capitalism. When rich individuals and corporations cheat the government of taxes and launder money abroad, they are committing crimes against the citizenry. A cursory glance at those named in the Panama and Paradise Papers leaks are all the proof you need.

This state of affairs, in turn, compromises state investments in healthcare, education, pension funds and infrastructure etc. Berggruen’s piece, however, completely sidesteps the public sector’s role as the biggest employer and investor in most modern states.

Next, his thesis summarily ignores the way entrepreneurship work. Pre-distribution is folly for the simple reason that gross profit in accounting is total sales less cost of goods sold.

Capitalism, we can safely argue, perpetuates inequalities. People with smarts and money will always have an inherent advantage over the poor and uneducated in free-market economies

Cost of goods sold is the monetary risk entrepreneurs bear on an idea or product. It is the personal capital they put on the line in hopes of reaping profit later. In the age of robots, for example, how does compelling the capitalists to outlay the initial cash for the robots — seeing as they can’t appear out of thin air — and taxing them before a dime has been made, reduce inequality? Won’t this in fact encourage capital flight and discourage small businesses?

Moreover, assuming governments will play an outsized role in creating this capital, how do we prevent the demonstrable economic lag that results from bureaucratic lethargy, or the leverage that elites will always exercise over public officials in making those wheels move faster and hence gaining an unfair advantage?

Also, why should people trust the transparency of block-chain when it can be hacked like any other technology tomorrow if not today? After all, no one thought US voting machines could be manipulated remotely. And it relies on supercomputers connected to the Internet, that again, are owned by people.

The mere fact that governments pursue deregulation and privatisation to shore up floundering state industries is ample proof that bureaucracies, unlike private enterprises, simply have no incentive to innovate.

And even if states were able to implement universal basic capital and began taxing at the source, how do we decide who bears the losses? If businesses or individuals have a good year, the government loses. If they have a bad one, the entrepreneurs do. When national taxation is redirected to the production side, it will turn into a futures market.

Our collective solutions to this impending crisis in labor markets have thus far camped in two opposing corners. Classicists insist technological disruptions are cyclical and governments will adapt to this one over time as they have every time before from steam engines to the Internet. How? By retraining workers with a focus on STEM subjects, reassigning them to higher-value industries, and heavily taxing the output of robots.

On the flipside, the post-modernists believe the coming change cuts into the very core of human purpose. They warn that unless governments fundamentally rewire the relationship between capital, productivity and wages in societies — ie instituting universal basic income or pre-distributing capital — the very cornerstones of the incumbent world order will crumble.

Both perspectives have their merits and shortcomings, yet the greatest boon of the robotic age may be that it revives the rapidly dying art of face-to-face communication in the wake of social media-driven insularity. Once job creation focuses on areas requiring the human touch — such as judgment calls, empathy and compassion — we may regain the tribal sense of community that the electronic age has incrementally erased from our daily lives.

The writer is an Islamabad-based independent journalist

Published in Daily Times, March 28^th 2018.