No middle class, no democracy: A basic income remedy

By John Rondina

Today, as the world struggles toward political and economic answers to great problems, we have yet to implement workable solutions in the wake of the 2008 financial crisis. Automation and the rise of economic disparity since the crisis is painting a picture in tones and hues of gross inequality.

If the new revolution is all about automation, then how can we make technology serve us rather than enslave us? With the rise of populism, it’s clear that people are feeling disenfranchised. Many critics point to populism as a reactionary, if misguided, response to the adjustments brought on by our technology. These critics issue warnings that we must change or face a dim future.

The bad news 

Vinod Khosla predicts “labour will be devalued relative to capital and even more so relative to ideas and machine learning technology.” People who have earned their living through physical work will find themselves in a difficult situation. Some estimates say that half our current jobs will disappear. 

This isn’t only true of older more experienced workers, it’s true of millennials as well. Many think the official unemployment rate is double what’s reported. In Canada, millennials and workers over 55, at 34 and 16 percent of the unemployed, account for a staggering 50 percent of unemployment. And that’s the official rate.

Think this is a made-in-North America problem? A recent study demonstrates flat or falling incomes in 25 advanced economies. Only two percent of those populations were downwardly mobile between 1993 and 2005. A staggering 70 percent of households incomes fell (in real terms) between 2005 and 2014. 

Lee Drutman and Yascha Mounk have written that elites with “considerable resources, and their dwindling need for … human labour … are likely to co-opt the democratic process to serve their own ends in an even more radical way than they do now …” Drutman and Mounk suggest that elites may “dispense with the pretense of democracy altogether.” 

Should we see the disappearance of the middle class, what is the likelihood of the survival of democratic institutions? Barrington Moore predicted, direly: “no bourgeois, no democracy.” 

In the wake of the financial crisis

Since the financial crisis, the tone of discussions regarding societal inequality and the masses of wealth that have concentrated in the hands of the one percent have reached an urgent pitch. Clearly, there are those in the one percent that understand the profound dangers of societal inequality. 

Progressive thinkers (including some billionaires like Warren Buffett and Bill Gates) have gone on record saying that we need to preserve the middle class and assist the precariat through some form of financial redistribution. 

Drutman and Mounk write that “the more elites have to lose from redistribution, the more aggressively they will try to block any such effort” [of redistribution]. The writers feel not everyone in the one percent is as enlightened as Buffett or Gates. 

Meanwhile, robots continue to whir away in factories worldwide, the soundtrack to the potential for a gloomy future dystopia. 

Generating hope through change

If society is to benefit from the change brought on by automation and machine learning, we have to engage in some intelligent political and economic thought to sustain democracy and our economy. Basic income and its inherent income redistribution could generate real hope. 

Populism is on the rise. People are looking for change. Societal prosperity and democracy itself will depend on our political and economic response to the rise of the machines and this severe effect on our workforce. 

Some opponents to basic income cite a negative effect on the workforce and an increased reliance on redistribution as negatives. The statistics below show that much of our society already depends on income redistribution. As our society ages, we will either redistribute more, better, with less stigma, or we will sink under the weight of a greater proportion of our retirees and population as a whole in the precariat. 

According to the government’s own data:

  • Government transfers account for 41.1 percent of the total income for Canadians aged 65 years and older
  • The 10 percent of Canadians with the lowest family after-tax incomes, received 67.5 percent of their income through government transfers
  • 70 percent of Canadians receive some kind of government transfer payment
  • Over half (56.7 percent) of  investment income goes to Canadians in the top decile 

The above statistics reinforce the point that government transfers are not new. But are we doing our best to redistribute income to the most needy? While interesting policy alternatives like the new Canada Child Benefit have been implemented, the need for its implementation, and the naming of it as a form of basic income supports the need for a more expansive form of basic income that would apply to more people. 

Over the last few decades, tax rates have decreased. Regulation has been slack. Use of automation has accelerated. The tipping point was the financial crisis and through a combination of groupthink, poor thinking and outright greed, we created this crisis -- and technology is accelerating it. 

On any given day, if you simply Google “automation” on Google News, you’ll find hundreds of hits providing automated solutions. The bottom line is: automated solutions mean the replacement of human solutions. Some careful research and forward thinking shows that the replacement of traditional “human solutions” will be exponential. 

What humans still do better than machines

Great political and economic answers to seemingly insurmountable problems require what humans do better than machines: great humanist thinking.

Warren Buffett said earlier this year that prosperity “should not be penury for the unfortunate”. Buffett is an optimist. He notes that in 1900 40 percent of the U.S. workforce were farmers. Today, through productivity and innovation, only two percent of that same workforce are farmers. Employing such productivity gains from technology in a redistribution of wealth through a basic income would be the most positive response to income disparity. 

The problem with the efficiencies generated by a stream-lined gig-based economy? Productivity eliminates people from the equation. Fewer people with income, less tax collected. What we have to ask ourselves is: if automation is unavoidable what kind of society do we want our increased productivity to produce? One of greater disparity or one of increased income distribution with more people raised out of poverty? 

What kind of a society do we want?

We can’t act like Luddites and retreat from technology. We need to employ technology to benefit our whole society. We need to provide the necessities of life to people facing a more precarious world -- a world that will have less opportunity for fewer people under our traditional concept of work. Technology is creating great wealth, but that wealth under current economic design is finding its way to fewer and fewer hands. 

Basic income is the vehicle of redistribution we want. And it is the vehicle of redistribution we need. 

-- John Rondina has worked in multiple sectors including financial services, education, communications, and non-profit. A basic income advocate, he is concerned about how technology and automation will affect and impact individuals and the global economy.