During his recent jaunt around the United States to promise each and every American farmer and soda shop patron that he is absolutely not running for president in 2020, Harvard dropout Mark Zuckerberg stopped off to deliver a much-viewed, much ballyhooed commencement speech at his (not quite) alma mater. The chattering classes seized upon the address not only as further evidence that the Facebook founder is under no circumstances whatsoever running for president in 2020, but for his endorsement of a Universal Basic Income.
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Floated in various formulations since the days of Thomas More and Thomas Paine, UBI is a scheme by which a government pays all of its citizens a fixed amount of money on a periodic basis regardless of their employment or socioeconomic status.
In the 1960’s, economist and free markets patron saint Milton Friedman campaigned for a UBI variation he called a “negative income tax,” a progressive cash transfer system inversely corresponding to recipients’ earned income rates, which would replace the “ragbag” of the burgeoning bureaucratic welfare state. True to his libertarian philosophy, Friedman also posited that a negative income tax, unlike entitlement programs with their eligibility requirements contingent on employment, would give poor people an incentive to work rather than an incentive to avoid work and risk forfeiting their welfare eligibility.
An equally famous advocate for UBI in the 60’s argued from the opposite end of the political spectrum; late in his short life, Dr. Martin Luther King, Jr. called for a guaranteed income to counteract “dislocations in the market operation of our economy and the prevalence of discrimination that thrust people into idleness and bind them in constant or frequent unemployment against their will.”
After a negative income tax bill failed to pass Congress during the Nixon administration, the idea slipped into relative oblivion for decades, a notion to be pursued by reactionary political scientists like The Bell Curve author Charles Murray and tiny Scandinavian social democracies. In Finland, where a once booming employment rate has deteriorated markedly with the decline of its once-dominant mobile phone company Nokia, the government announced a pilot plan last year to make unconditioned cash payments from $1,000 to $2,000 per month to 2,000 unemployed Finns.
Back in the U.S., in the years following the financial crash of 2008, the case for UBI has found new currency as the pet policy solution of Silicon Valley’s technoplutocrats. Not just Zuckerberg, but his Facebook cofounder Chris Hughes, Tesla mogul Elon Musk, and Y Combinator chief Sam Altman, to name but a few, have all come out in support of the idea.
Under a UBI scheme that pays each American $1,000 per month, a four-person household would receive $40,000 per year, a substantial sum and a (technical) elevation out of poverty. In Philadelphia, UBI could make a life-changing impact on hundreds of thousands of lives.
At first blush, it seems incongruous that a program so easily smeared as socialist would be taken up so enthusiastically by a cadre of billionaires who embody the pay-off of capitalism’s promises to the virtues of entrepreneurship, innovation, workaholism, and a monomaniacal fealty to “disruption.” But to grasp these Great Men’s rationale for dragging UBI back from the fringes of economic discourse requires consideration of the context from which it arises.
As the American economy picked up its pieces from the Great Recession, the term “jobless recovery” entered the lexicon. A number of factors contributed to a post-crash environment in which productivity, stock market indices and corporate profits climbed even as American workers struggled to find employment—if they could find any at all—that provided income and benefits commensurate with their previous circumstances. Perhaps chief among these factors was the accelerating onslaught of automation, the replacement of human labor with robotics and, increasingly, artificial intelligence.
While anyone who has scanned a frozen pizza over a UPC reader at a CVS (or perhaps more to the point, any CVS employee who has watched a customer scan a frozen pizza over a UPC reader) has witnessed the modern era of labor automation first hand, the scope and depth of the phenomenon has had no equal since the Industrial Revolution of the 18th/19th Centuries. Today, everything from truck driving to mortgage loan processing to arthroscopic surgery to even the work of a journalist is susceptible to automation.
Just like the Industrial Revolution, this new technological cataclysm is destined to restructure not only the daily routines of ordinary individuals but the political and socioeconomic character of entire nations. A 2015 McKinsey & Company report found that as many as 45 percent of paid labor activities representing some $2 trillion in annual wages, are capable of being performed by existing technologies. With even marginal advances in machine learning of natural language, the report predicts an additional 13 percent of those activities could be automated.
Of course, the impact of technological advancement on the lot of the worker has riled and roused political scientists for centuries as well. As Karl Marx pondered in a little pamphlet from 1848:
Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers conjured out of the ground—what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?
Updated for the modern reader, this passage might rather list hydroponic farming, delivery-by-drone, cloud computing and the Hyperloop as the marvels of the age, though the wonderment of the query still stands. And if we want to know who today has a presentiment of such productive forces, we should look to those who are shaping and wielding those forces.
“There will be fewer and fewer jobs that a robot cannot do better,” declared Elon Musk in a speech at the 2016 World Government Summit Dubai. “These are not things I wish will happen,” he added, “these are thing I think probably will happen.” Considering that Musk is among the elite technofuturists setting about to make these things happen, the second half of his disclaimer rings truer than the first. But whatever Musk and his cohort wish will happen, they see UBI as the readiest corrective, with Musk going so far as to state, “It’s going to be necessary.”
Zuckerberg and his cohort have made their fortunes by zeroing in on humans not as workers but as consumers. When automation and other factors strip people of their disposable income, their capacity to consume diminishes. The answer, then is for the government to directly subsidize consumption.
Mark Zuckerberg’s stated support for UBI, while rooted in the same rarefied insight as Musk’s, is more aspirational in its tone. Before his audience of newly-minted Harvard grads, Zuckerberg couched his argument in terms of a “new social contract.” He went on to proclaim (not sounding at all like a Presidential candidate) that, “We should have a society that measures progress not by economic metrics like GDP but by how many of us have a role we find meaningful.”
The Zuckerbergian case for UBI, with its high-flown appeals to meaningful roles and the pursuit of our passions, treads the sunny side of the libertarian street, appealing to the restless entrepreneur within all of us, who needs only a few thousand bucks a year to bet set free. However, neither Zuckerberg nor his fellow tech titans have addressed the necessary corollaries to any discussion of UBI—namely, the questions of what it would replace and what it would it cost.
Current proposals for a hypothetical UBI from across the ideological spectrum in the U.S. peg the benefit within a range from $10,000 to $12,000 a year, at a cost in the neighborhood of $3 trillion, or a little over 14 percnt of GDP. Current federal guidelines set the poverty level at $24,600 for a family of four. Under a UBI scheme that pays each American $1,000 per month, a four-person household would receive $40,000 per year, a substantial sum and a (technical) elevation out of poverty. In Philadelphia, where 26 percent of the population lives below the poverty line and an appalling 12 percent struggles to survive on income equal to or less than half the poverty level, UBI could make a life-changing impact on hundreds of thousands of lives. But the real effect of any such program depends entirely on the trade-offs.
Left-leaning proponents call for funding such a program through new corporate taxes, carbon and natural resource levies and, of course, increased taxes on the wealthiest individuals. This approach, provided it maintains or expands existing entitlement programs, would best serve those most in need of additional income. But it is pure delusion to think Washington would enact such a plan in the current political climate.
Conservative advocates of UBI take as a given that any program of government cash transfers would be offset by cuts or the outright elimination of current welfare programs, and have set in their sights everything from Medicaid to food stamps to the earned income and child tax credits. This funding approach essentially takes the form of a regressive tax on the poor, as it relies on gutting programs from which only the poor directly benefit. A UBI in this guise would not only further threaten America’s most vulnerable citizens but would offer an illusion of validity to the reactionary shibboleth that poor people are poor simply because they can’t manage money.
If the denizens of the Silicon Valley demimonde have refrained from sketching a plan to pay for UBI, it may well be that to them, it simply doesn’t matter. Pundits have suggested that these tech executives are motivated by sincere feelings of guilt and responsibility over the fact that they have become mind-bogglingly rich while the country as a whole grapples with entrenched downward mobility, widening income inequality and deep uncertainty about the economic future. Others suggest that jumping on this wagon will provide them populist political cover for future electoral plans. But there is a simpler rationale for this recent and pervasive call for UBI by this exclusive and elite group, one that doesn’t involve speculating into their consciences or political ambitions.
Zuckerberg and his cohort have made their fortunes by zeroing in on humans not as workers but as consumers. Their billion-dollar algorithms reduce people to their purchasing habits and preferences. When automation and other factors strip people of their disposable income, their capacity to consume diminishes and, with it, the profit potential of those billion-dollar algorithms. The answer, then is for the government to directly subsidize consumption.
Zuckerberg, Musk and others are undeniably correct that we are undergoing an epochal change in the nature of work, wealth, income and consumption in this country. Without some kind of major intervention, the upheaval will prove an insurmountable economic catastrophe for individual citizens, their families and communities, and for the nation as a whole.
You can’t use a Medicaid card to buy a 12-pack of lip balm or a new pair of khakis via a Facebook ad, but you certainly can with cold hard cash. As consumer markets consolidate around a few online mega-retailers and crush all competition, even as Americans find it harder and harder to maintain a livable income, America lurches toward becoming a giant company store. And it would suit these mega-retailers just fine if Uncle Sam issued the scrip.
Whatever their true motives may be in advocating for UBI, Zuckerberg, Musk and others are undeniably correct that we are undergoing an epochal change in the nature of work, wealth, income and consumption in this country. Without some kind of major intervention, the upheaval will prove an insurmountable economic catastrophe for individual citizens, their families and communities, and for the nation as a whole.
On its face, UBI appears to offer a solution that is a straightforward as it is politically radical. But we should be wary of embracing any panacea without carefully examining its costs, consequences and unintended side effects. Whether shopping online for chapstick and khakis or fundamentally reorganizing the American economy and welfare state, the old adage still applies: caveat emptor.
Ajay Raju, an attorney and philanthropist, is chairman of DilworthPaxson and a founder/board member of The Citizen.Header photo: frankieleon via Flickr.