In the last election, trade protectionism came up as a major campaign issue and influence because of a decline in manufacturing jobs, particularly in “rust belt” states like Ohio and Pennsylvania. The traditional concern about free trade is that these jobs went to other countries, like China or Mexico, where worker wages & conditions are lower. But that’s only half the story – in fact far less than half. It’s not that the United States is producing less – in fact manufacturing output continues to rise every year. The jobs are vanishing because of what economists call “gains in productivity” – something which, in manufacturing, generally means robots. (See a recent Ball State University study for details and analysis.)
As we look to the future, we can expect more of the same, regardless of any trade barriers we do or do not put in place. And these changes aren’t just happening in manufacturing – productivity enhancements, from more efficient software for office workers to automated manufacturing plants to disruptive service distribution systems (like Uber or AirBnB) continue to allow more to happen with less. Sometime within the next 5 years, self-driving cars will start rolling out on American roads, eliminating taxi jobs, lowering the cost of rides, and almost certainly reducing demand for privately owned automobiles. Self-driving trucks will hit jobs in the trucking industry. Not long after that, artificial intelligence will start making serious inroads into professional service sector careers like engineering and financial management. Most of these jobs will still exist in some form, but because of the radical improvements in efficiency from AI assistance, one engineer will be able to do the work of three; which raises the question, what do the other two do for a living?
This kind of disruption has been going on for a long time in manufacturing, and before that in farming, but we can expect the pace to pick up drastically in the next decade. Jobs are going to vanish much faster than they can be created. This could be a disaster as we’re currently structured, because right now we have a job-based economy – to participate, most adults need to have a job.
Now let’s step back and look at this issue from another angle. What would we want from a national or international economy? If it’s working well, we would hope that it would meet everyone’s basic needs, that it supplies many interesting products and services beyond those needs, and that it provides opportunities for people to be rewarded for their unique contributions. The “problem” we’re talking about above is, essentially, that we’ve invented a bunch of robots that can do most of the work.
Surely this is a huge opportunity, rather than a problem?
If we were in a small tribe, and one person invented a better hunting tool, such as a crossbow, hunting would be easier, and everyone would benefit. The issue wouldn’t be about putting hunters out of work, it would simply mean that the hunters wouldn’t have to work so hard, and perhaps some of them could take up more creative pursuits, like building or storytelling. Why can’t we do that on a national or international level? What if we saw this disruption as an opportunity for humanity as a whole to have more ease in their lives, to work less hard, to spend less time doing what they hate and more time enjoying life and working on things that have meaning for them?
We can do this by shifting to an Abundance Economy. Here’s the difference: A job-based economy is set up with the rough premise that every able-bodied adult must contribute in order to get their basic needs met. An abundance economy shifts to the premise that every person in a society is going to get their basic needs met no matter what – and if you want to do better than that, you can creatively contribute, and be rewarded appropriately.
The simplest and most straightforward mechanism for this in the United States is by instituting a Universal Basic Income, with stronger progressive taxation. Every citizen would get a basic amount every year to cover food and housing. (I’m also imagining universal health care, aka “medicare for all”.) This would be covered by raising the highest tax rates, particularly including capital gains taxes. Right now, if someone in our society makes an innovation, that individual or corporation collects the benefit; this has resulted in the vast disparities in wealth, where the patent-holders and innovators can become billionaires but most Americans have great difficulty keeping afloat. (Suddenly the cross-bow inventor gets fabulously wealthy, but the rest of the tribe has to work just as hard – is that the best solution?) Progressive taxation is designed to counter exactly this problem – we still want creators to be rewarded for their creations, but if those creations are massively successful and displace other economic players, some of the benefit must also accrue to society generally.
This is an extraordinary shift in the social contract that Americans have been living with, but the benefits would be massive, both individually and economically. Homelessness and destitution could become things of the past – and the fear of those conditions, the fear of starving or losing housing, could be put to rest. Individuals could be bolder about their own economic decisions, such as the decision to try a new career or to start a new business, because they wouldn’t feel that they had to hold on to a current job for dear life. Most importantly, it’s a necessary adaptation to the coming revolution in the service economy.
One modest step in this direction would be to provide a tax cut to lower and middle income Americans by raising the “Standard Deduction” on our tax forms. Currently the combination of Standard Deduction plus Exemption is a little over $10,000 per person – so if you’ve made less than $10,000 this year, you don’t pay taxes. Let’s raise that to something more like 20 or 30 thousand, to recognize that there should be no taxes on the basic cost of living, the amount of money it takes to meet basic needs. Let’s keep this tax cut revenue-neutral by raising taxes on the top bracket to the 50% level used in the early 1980’s – this meets a basic and intuitive sense of fairness, that if your job or business is producing massive personal wealth, at some point, for each two dollars coming in, there’s one for you, one to support your country.
But we don’t necessarily need to be modest, either – in fact the province of Ontario, Canada is beginning a trial period of a universal basic income this year! It’s being spearheaded by conservative strategist Hugh Segal, who describes it as the action of “rational people when looking to encourage work and community engagement and give people a floor beneath which they’re not allowed to fall.” It’s also underway in Finland and the Netherlands.
Let’s dream of a world where no one has to fear hunger, homelessness, or being unable to address medical emergencies. Imagine a world where all of those are givens, and the reason people create, the reason they get up and contribute in the morning, whether as a teacher or a volunteer or a waitress or a CEO, is because they’re inspired to do so. Let’s make the Abundance Economy happen – not just in our lifetimes, but in the next ten years.