Throughout history and particularly since the start of the industrial revolution in the late eighteenth century, homo sapiens' innovative skills have transformed life on this planet. But is this transformation for better or worse? Well that depends from which perspective you view life on earth now and what it might be heading for. There is no doubt that large sections of society in all parts of the world are better off today than their predecessors were, say, one hundred years ago. There are also large sections of society that live in poverty and the gap between rich and poor, in most countries, continues to get bigger. And what about the planet? Well, homo sapiens continue to take more out than they put back in, driven by an obsession with economic growth, and the waste products pumped into the atmosphere are creating notable destructive changes in the climate. So it's a mixed picture.
Against that background, innovation continues relentlessly particularly in engineering and technology. Indeed, for those lucky enough to have meaningful employment with a good income in return for their efforts, living standards can be good with a healthy balance between work and play. Automation in all the employment sectors has improved productivity reducing working hours for some, whilst making the less fortunate redundant. So is automation a good or bad thing? Are robots going to make us all redundant? Well, in the nineteenth century the Luddites thought they knew the answers to those questions. They protested violently against the machinery introduced in the textile industry during the industrial revolution, which made it possible to replace them with low-skilled, low-wage labourers, making them redundant. Their protest took the form of wrecking the machines, particularly the automated looms. An agricultural variant of Luddism consisted of breaking up threshing machines. Despite their efforts, automation continued. Indeed, many economists believe in the 'Luddite Fallacy', which says that advancing technology creates more jobs than it destroys. Returning to the case of the Luddites, the automated looms made clothes cheaper, so consumers experienced lower prices and after buying the same amount of clothes, had money left to buy other goods, for example scarves and hats, which created more jobs. Simple economic theory isn't it?! But what happens when robots get a foothold in the service sector and, for example, cut our hair? Well the same principle applies. Haircuts are cheaper meaning that we have money left over to buy other things thus creating employment in other sectors.
Whenever I am assessing the validity of arguments like the one I have just proposed, I like to engage in thought exercises that explore the extremes. So imagine a world where everything is done by robots. Unlike humans, robots don't want to buy the products and services that they produce and if there are no human jobs, people will have no money to buy the products and services. So the whole economy will collapse, because without money there is no market. If we move back slightly from that extreme scenario and consider the case where there is a mixed manufacturing and service economy of robots and humans, then people will be paid for doing a job, the owners of the robots will get returns on their capital investments, so the robot owners and humans in employment will have the purchasing power to buy goods and services produced by humans and robots. What these two thought exercises illustrate, however, is that eventually total automation leads to economic collapse. Searching for a solution to this problem, led me to the concept of Peoples' Capitalism, which sounds like an oxymoron!
The late Dr James Albus was an American engineer and former head of the Intelligent Systems Division of the Manufacturing Engineering Laboratory at the National Institute of Standards and Technology. He was noted for his contribution to robotics but he was also a strong proponent of People's Capitalism, which tried to answer the question - how do we live without jobs? His vision was a world without poverty, a world of prosperity, a world of opportunity, a world without pollution and a world without war. Sounds good doesn't it?!
One of the important facets of his proposal was to provide everyone, whether poor or rich, the opportunity to acquire capital by way of credit for investment in credit-worthy, wealth-producing capital assets. In other words, in the extreme thought experiment that I described earlier, everyone would have a share in the ownership of the robots. In that extreme case, peoples' incomes would be the return on their capital investments rather than selling their labour because in a totally automated society, the market for labour wouldn't exist. Moving back from the extreme to a more likely scenario, peoples' incomes would be a mix of returns on capital investment as well as revenues for their physical or mental efforts.
What about poverty? Well Dr Albus made the point that the 2.8 billion people living in poverty on the planet are there not because they don't have a need for products and services but because they don't have the means to purchase anything beyond their basic needs and even the basics suffer. Yet there is no shortage of manufacturing capability and the shelves of stores are always full of products. In recessions, companies don't blame lack of capacity but do point the finger at lack of demand. So the 2.8 billion very low income market represents a fantastic opportunity if the incomes were higher. Dr Albus claimed his alternative model would address the problem by providing income to the current poor population through their investments in capital, which would be funded by loans paid off over, say, 30 years through the returns on their investments.
Now this short post cannot adequately cover the work of the late Dr Albus on Peoples' Capitalism or the work of others in the economic field often referred to as binary economics and neither would it be right for me to endorse it or otherwise. But what I do know is that innovation will continue and that should make life better for all of us yet current trends suggest that won't be the case. Albert Einstein said insanity was doing the same thing over and over again and expecting different results. There are things that we are doing wrong on the planet but we continue doing the same things regardless. So perhaps the time has come to embrace the new world with its robots and challenge mindsets, economic and others, that are heading us in the direction of an apocalypse........I love robots!!
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