from the world's big
The pandemic has given us an early glimpse at how truly disruptive the fourth industrial revolution may be, and the measures we'll need to support human dignity.
- The coronavirus crisis has acted as a catalyst for two powerful transformative forces: automation and universal basic income.
- These two intertwined forces will undoubtedly gain steam, writes Frederick Kuo, and the pandemic will hasten the acceptance of them from a scale of decades to years or mere months.
- This crisis has ushered in a glimpse of what a dystopian future could look like as a rapidly advancing fourth industrial revolution inevitably causes severe disruption in our economy and labor structure.
COVID-19 will expedite automation<p>As the mobility of human beings grinds to a halt due to public health directives and fears of infection, our need for food, resources and social connection has forced us to increasingly rely on technology to fill urgent gaps. In the United States, Amazon is seizing this opportunity to further entrench its <a href="https://nypost.com/2020/03/31/coronavirus-is-only-making-jeff-bezos-and-amazon-more-powerful/" target="_blank">domination</a>, while in China, robots are being deployed to serve those in <a href="https://www.cnbc.com/2020/03/18/how-china-is-using-robots-and-telemedicine-to-combat-the-coronavirus.html" target="_blank">quarantine</a>. In a world where fear of contact with other humans has become pervasive, businesses that can adapt quickly and significantly automate their supply lines and cut points of human contact stand to thrive in this new market. </p><p>Whereas before this crisis, the need for automation was mainly driven by the desire for increased profits and improved efficiency, the momentous shift in public consciousness today regarding simple human contact may make automation almost a necessity for many businesses to survive. When humans trust a robot to handle or deliver their food or goods more than they trust another human, or when crowded workplaces present public health hazards, jobs for humans will be unceremoniously eliminated. Given existing technologies, experts have estimated <a href="https://www.brookings.edu/blog/the-avenue/2020/03/24/the-robots-are-ready-as-the-covid-19-recession-spreads/" target="_blank">36 million jobs</a> may be vulnerable, ranging from trucking and delivery to food service and repetitive white collar jobs, the labor market may face a significant restructure driven by <a href="https://www.vox.com/recode/2020/3/31/21200010/coronavirus-recession-automation-brookings-mark-muro" target="_blank">new technology</a> and a radically altered market for those technologies. In a recent survey conducted by auditing firm <a href="https://www.theguardian.com/world/2020/mar/30/bosses-speed-up-automation-as-virus-keeps-workers-home" target="_blank">Ernst & Young</a>, more than half of company bosses throughout 45 countries had begun implementing existing plans to fast track automation.</p>
Mainstream acceptance of UBI<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="44c33c426c79ad9f2c6148d8f9f63bc4"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/UEsK7hpIkVI?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>In early 2019, <a href="https://time.com/5804656/ubi-yang-coronavirus/" target="_blank">Andrew Yang</a> began gaining news coverage regarding the central theme of his presidential campaign: $1,000 a month in universal basic income (UBI) dispersed to every American. His primary argument for the necessity of this safety net rested on the belief that the coming age of automation was about to inundate vast scores of our current jobs with a shrinking percentage of elite tech corporations gobbling up more and more of the profit. When Yang first introduced his vision, it seemed to belong to a remote dystopian future with little relevance to the booming economy and low unemployment figures that was the reality until only weeks ago. On the right, he was lambasted as a communist seeking to turn American citizens into dependents to the state. On the left, his ideas were dismissed as other Democratic hopefuls touted the Green New Deal and job programs.</p><p>Fast forward to today and Andrew Yang's UBI theory has moved straight into the forefront. Trump, perhaps cognizant that the "Yang Gang" pulled a great deal of support from his own supporters, quickly recognized the popularity of his ideas and the need to provide supplemental income to Americans as shelter-in-place directives began to take hold throughout the country. The massive <a href="https://www.nbcnews.com/politics/congress/coronavirus-checks-direct-deposits-are-coming-here-s-everything-you-n1168936" target="_blank">$2 trillion</a> coronavirus emergency stimulus will provide every American earning $75,000 or less, regardless of current employment, a check of $1,200 per person and $500 per child for the duration of the crisis. There has been little debate over the necessity of this measure because it has proven to be widely popular to the public, regardless of political standing. It lifts some of the immediate and pressing need to work and helps take some of the edge off from isolating at home, thus contributing to a quicker resolution of this health crisis by sending fewer people out into the streets.</p>
Continuing the countdown, Big Think's seventh most popular video of 2019 explains why universal basic income will hurt the 99%, and make the 1% even richer.
- Big Think's #7 most popular video of 2019 features Douglas Rushkoff, who says universal basic income is a band-aid solution that will not solve wealth inequality.
- Funneling money to the 99% perpetuates their roles as consumers, pumping money straight back up to the 1% at the top of the pyramid.
- Rushkoff suggests universal basic assets instead, so that the people at the bottom of the pyramid can own some means of production and participate in the profits of mega-rich companies.
How does the largest welfare program imaginable have libertarian supporters?
- The idea for a universal basic income, or UBI, is increasingly popular.
- While it seems like a left-wing handout, many prominent right wing thinkers have endorsed the idea.
- The libertarian version of UBI does have a few key differences from the more standard version.
The libertarian case for the basic income<p>For those who don't know, <a href="https://en.wikipedia.org/wiki/Milton_Friedman" target="_blank">Milton Friedman</a> was an economist working out of the University of Chicago during the middle part of the 20<sup>th</sup> century. A leading thinker behind monetarism, he favored tinkering with the economy through controlling the size of the money supply rather than through fiscal policy. Even people on the American center-left acknowledge his brilliance as they criticize his <a href="https://www.nybooks.com/articles/2007/02/15/who-was-milton-friedman/" target="_blank">mistakes</a>.</p><p>When it came to the problem of poverty, Friedman supported letting the free market and private charity have a chance to solve it first. However, he understood that dealing with it effectively at the large scale likely required at least some state intervention. As he explains in <em><a href="https://books.google.com/books?id=CE49HAiRugAC&dq=capitalism+and+freedom&hl=en&sa=X&ved=0ahUKEwjsju27z-HiAhVlu1kKHeFgCu8Q6AEIKjAA" target="_blank">Capitalism and Freedom</a>, </em>its the free-rider problem that causes this:</p><p style="margin-left: 40px;">It can be argued that private charity is insufficient because the benefits from it accrue to people other than those who make the gifts [...] I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people's charity therefore partly accrue to me. To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did. We might not be willing to contribute the same amount without such assurance. In small communities, public pressure can suffice to realize the proviso even with private charity. In the large impersonal communities that are increasingly coming to dominate our society, it is much more difficult for it to do so.</p><p>He argued that this justified having the state take steps to reduce poverty, as it is harder to skip out on paying money to reduce poverty when that is tax fraud rather then miserliness. This didn't mean Friedman supported the welfare state though; he argued instead for a much simpler solution in the form of the <a href="https://www.econlib.org/library/Enc1/NegativeIncomeTax.html" target="_blank">negative income tax</a>, or NIT. </p><p>In our current welfare system, there are a myriad of programs that each deal with a different aspect of life for the poor. One program provides food aid, another deals with housing, yet another provides low-cost utilities, and another one deals with income security for the elderly. A large number of regulations, such as minimum wage laws, exist to help hold wages high enough to keep other working people off the welfare rolls.</p><p>Friedman viewed this multitude of agencies as wasteful and suggested that a single program would do the same job with a smaller government by just giving cash to people who needed it. As a libertarian who placed a high value on the freedom of choice, he also suggested it was a much more dignified way of helping the poor than telling them what they could and could not do with the money we give them as is currently the case with things like food stamps. </p>
How would it work?<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="3ab7d5eb8f57b818fcc271523e57fbfd"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/xtpgkX588nM?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>The mechanism is relatively simple. Dr. Friedman explains it above in his interview on Firing Line.</p><p>For those who didn't watch the clip, it is easily explained. The income tax system is changed a bit to include an exemption based on family size. Only earned income above that point is taxed. If you make less than the exemption amount, you instead receive a subsidy.</p><p>The size of the subsidy would change based on how much you make and would also be subject to a subsidy rate. This means that if a person makes $1000 less than the exemption point, they would only get a certain percentage of that difference back as a subsidy. Friedman argued that the subsidy rate shouldn't any higher than 50 percent, as it would discourage work if it were raised past that point. </p><p>As an example, suppose we lived in a society where with an NIT where the exemption for me is $10,000, and the subsidy rate is 50 percent. If I were to only make $8000, I would pay no taxes and get back half of the $2000 difference between what I made and the exemption point, or $1000. </p><p>If I made exactly $10,000, I would neither pay taxes nor receive a subsidy. If I made more than that, I would start to pay income taxes on the income above that point. If I made absolutely nothing, I would get the largest subsidy possible under this system, $5000, which would be the "guaranteed" income under this arrangement. </p><p>Such a program would also have the advantage of not having a "welfare trap," the point where making more money at work causes welfare payments to go down by a larger amount and leaves the recipient worse off. The trap is a well-known problem and is bashed by many economists as a significant flaw that discourages people from trying to improve their situation. </p><p>The numbers used above were just for discussion; the exact numbers used in a working system would reflect economic realities. It should be said that Friedman intended to keep the guaranteed rate low enough to encourage people to still work while at the same time being high enough to correct for the failures of private charity. </p>
Has it ever been tried?<p>Yes, it has, and it <a href="https://basicincome.org/news/2017/12/basic-income-guarantee-experiments-1970s-quick-summary-results/" target="_blank">worked</a>.</p><p>Several experiments in the 1970s in the United States and Canada showed that the negative income tax could work as intended. The guaranteed income was set as equal to the poverty threshold and, as predicted, the labor supply fell because of this. </p><p>This fall was not as significant as experts feared, however. The simultaneous rise in high school graduation rates suggests that at least part of this fall in labor supply was caused people having the economic security to stop working and finish their education. Claims that the program resulted in an increased divorce rate were initially reported but are now known to be the result of a statistical error. </p>
What do others think of the NIT?<div class="rm-shortcode" data-media_id="LJS0KnfW" data-player_id="FvQKszTI" data-rm-shortcode-id="bdd90d971ab20b9a5ac3a3c5506c478c"> <div id="botr_LJS0KnfW_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/LJS0KnfW-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/LJS0KnfW-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/LJS0KnfW-FvQKszTI.js"></script> </div> <p>Criticism of the idea comes from two directions.</p><p>On the right, critics often object on a fundamental level to any redistribution or an income tax of any <a href="https://mises.org/library/fallacies-negative-income-tax" target="_blank">kind</a>. Some who do support the NIT see it merely as the best version of a bad deal.</p><p>On the left, criticism tends to focus on either the mechanism of the NIT or on the details of Friedman's plan. Josh Martin, an executive committee member at the <a href="https://usbig.net/" target="_blank">US Basic Income Guarantee Network</a>, explained his objections this way:</p><p style="margin-left: 40px;">A negative income tax and a universal basic income seek to achieve the same goal — to ensure an income floor for everyone. But, given the choice between the two, a UBI is preferable as it solidifies this income floor as a universal benefit, while an NIT would only provide the income floor to those who need it. This conditionality makes it easier for politicians and for people who don't receive the NIT to justify cutting the program as they don't receive the benefit personally.</p><p>This concern that a purely redistributive program will be subject to political difficulties later is a common one. It is part of the reason why regressive taxes on the <a href="https://www.archives.gov/exhibits/treasures_of_congress/text/page19_text.html" target="_blank">poor</a> fund Social Security — you can't attack it in the way Mr. Martin describes. A system of basic income that pays <em>everybody</em> a set amount each month is similarly protected; it's hard to cut a program everybody gets direct benefits from. </p><p>Universal basic income is an increasingly popular idea that will likely exist in some form someday. It enjoys support from every part of the political spectrum for various reasons. While the far left and the far right might disagree on why a universal basic income program is needed or what form it should take, the fact that they agree on the need for such a program is surprising enough to almost count as an endorsement in itself. </p>
The 2020 presidential candidate said companies like Amazon should "pay their fair share" as automation begins to displace human workers.
- Andrew Yang is a 2020 Democratic presidential candidate whose key campaign promise is to give every American adult $12,000, regardless of their current income.
- Yang said his universal basic income plan could be funded by a value-added tax levied on tech companies.
- Yang's proposal has no shortage of critics, but he maintains that his UBI program would grow the economy by trillions of dollars.
What's a value-added tax?<p>A value-added tax is typically defined as a tax on the amount by which the value of a product has been increased at each stage of the production chain. Here's a simpler explanation from tax expert William Gale taken from an interview he gave to <em><a href="https://www.theatlantic.com/business/archive/2010/03/how-does-a-value-added-tax-work-anyway/36834/" target="_blank">The Atlantic:</a></em><br></p><p style="margin-left: 20px;">"The example I always use is a loaf of bread you buy in a store for a buck — so you have a farmer, a baker, and a supermarket along the production chain. Let's put the VAT at 10 percent.</p><p style="margin-left: 20px;">1) The farmer grows the wheat and sells it to the baker for 20 cents. The VAT is 2 cents. The baker pays the farmer 22 cents, and the farmer sends 2 cents in VAT to the government.</p><p style="margin-left: 20px;">2) The baker makes a loaf and sells it to the supermarket for 60 cents. The VAT is 6 cents. Now the supermarket pays the baker 66 cents, of which 6 is VAT. The baker sends the government 4 cents -- he pays 6 cents in VAT but receives a two cent credit from the government.</p><p style="margin-left: 20px;">3) The store sells the loaf to me for a dollar. I pay $1.10. The store sends the government 4 cents total - the 10 cents it collected in VAT on its sales, minus the 6 cents it paid to the baker in VAT, which it gets back in a credit. In total, the government gets 2 cents from the farmer, 4 cents from baker, 4 cents from the store. That's 10 cents on a final sale of a dollar — for a 10 percent VAT."</p>
Why tax Silicon Valley?<p>The big winners of new technology are going to be companies like Amazon, not the American people, according to Yang. That's a problem, considering the retail giant paid nothing in federal taxes last year.<br></p><p>"Is it Amazon's fault that they paid zero in taxes?" Yang <a href="https://www.msnbc.com/morning-joe" target="_blank">told MSNBC</a>'s <em>Morning Joe</em> in March. "No, it's our fault."</p><p>Amazon recently <a href="https://ir.aboutamazon.com/node/32656/html" target="_blank">noted</a> that it's set to pay $756 million in state and international taxes this year, and that it "<a href="https://www.cnbc.com/2019/02/15/amazon-will-pay-0-in-federal-taxes-this-year.html" target="_blank">pays all the taxes we are required to pay</a> in the U.S. and every country where we operate."</p><p>As companies such as Facebook, Google, Uber, and Amazon benefit from A.I., millions of Americans are expected to lose their jobs. Yang said a third of the country will be at risk of permanent unemployment. Others in the tech industry paint a similarly stark picture, like Taiwanese venture capitalist and A.I. expert Kai-Fu Lee, who in January told CBS News' Scott Pelley that he believes 40 percent of the world's jobs will be replaced by robots that can automate blue-collar and even some white-collar jobs.</p><p>"Chauffeurs, truck drivers, anyone who does driving for a living — their jobs will be disrupted more in the 15–25 year time frame," he said. "Many jobs that seem a little bit complex, chef, waiter, a lot of things will become automated."</p><p>With these job losses looming over the horizon, Yang <a href="https://www.cnbc.com/2019/03/18/value-added-tax-wont-push-companies-out-of-the-us-presidential-candidate-andrew-yang.html" target="_blank">thinks</a> Silicon Valley should "pay their fair share," as he told MSNBC.</p>
How a universal basic income would affect Americans<p>Yang said his program would offer not only a reprieve for displaced workers, but also space for people to pursue more meaningful work.<br></p><p style="margin-left: 20px;">"If you have a little bit more freedom from scarcity, then you can start making moves towards the sort of work that you want for yourself, that you value, that you find fulfilling and exciting," Yang said in an <a href="https://youtu.be/-DHuRTvzMFw" target="_blank">interview</a> with Ben Shapiro.</p><p>Yang argues that removing financial pressure from Americans would allow more people to experiment with entrepreneurism, potentially leading to the creation of companies that create enormous value for the economy.</p><p style="margin-left: 20px;">"You're going to end up creating hundreds of thousands of new entrepreneurs, guaranteed, if you have something like the Freedom Dividend, because there are so many Americans who would love to take a shot," Yang said in an interview with Kmele Foster of The Fifth Column podcast.</p><p style="margin-left: 20px;">"Now, you could argue that, 'Hey, maybe some of these people should not be being entrepreneurs [...]' But you'd wind up with a really significant number of diamonds in the rough, and the way our system works is that a number of diamonds could potentially create so much value that it doesn't really matter what happens with the five people next to them. So, there would be, to me, if anything, an unlocking of human capital that would end up enhancing our system's dynamism."</p><p>Of course, Yang's plan has many critics. Some say the <a href="https://fee.org/articles/andrew-yang-s-math-doesn-t-add-up-on-universal-basic-income/" target="_blank">math behind the Freedom Dividend doesn't add up</a>; others argue that giving Americans a UBI would make them lazy. It's hard to predict what would happen, but one oft-cited UBI <a href="https://www.nber.org/papers/w24312" target="_blank">study</a> conducted on the Alaska Permanent Fund offers a clue: The results showed no real impact on full-time employment rates, while part-time employment increased by 17 percent.</p><p style="margin-left: 20px;">"It is reasonable to expect an unconditional cash transfer, such as a universal income, to decrease employment," the authors <a href="https://www.forbes.com/sites/adigaskell/2018/03/05/does-a-universal-basic-income-discourage-work/#49d4cf1a541b" target="_blank">said</a>. "A key concern with a universal basic income is that it could discourage people from working, but our research shows that the possible reductions in employment seem to be offset by increases in spending that, in turn, increase the demand for more workers."</p>
How financial insecurity sinks American IQ scores<div class="rm-shortcode" data-media_id="D69qJ1La" data-player_id="FvQKszTI" data-rm-shortcode-id="6df77fb96aba3c00a504dc0a51042f64"> <div id="botr_D69qJ1La_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/D69qJ1La-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/D69qJ1La-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/D69qJ1La-FvQKszTI.js"></script> </div>
Tax megacorps like Amazon to fund universal basic income, says 2020 presidential candidate Andrew Yang.
- The Freedom Dividend is a universal basic income proposal initiated by 2020 presidential candidate Andrew Yang.
- Yang's plan would give $1,000 a month, or $12,000 per year, to every American over the age of 18, every year. This would get every U.S. adult just below the poverty line which is currently $12,770 a year.
- How would it be funded? Yang suggests a value added tax on megacorps like Amazon (which paid zero tax last year). Funnel that money back into the American's people's hands to boost the economy, improve mental health, increase education and lower violence.