In one of my favorite sci-fiction films “2001: A Space Odyssey” (Stanley Kubrick Director and Co-Writer with Arthur C. Clarke, 1968) depict an intelligence in the universe that has sent out millions of sentient artificial lifeforms in the shape of a perfect Monolithic Rectangle. To be honest, I should probably let you know that when I was 12, I rented (yes, in the age of VHS rentals) this film that summer so much I actually broke the VHS tape and had to splice it together with clear packing tape—true story. The scene that always impressed me was the scene where David Bowman (Keri Dullea) says the famous line “My God It’s Full Stars” as he travels seemingly into a parallel dimension that the Monolith’s intelligence occupies.
Some of your might be asking what does Liberace’s bedroom have to do with a world of robots and their human managers. And I’ll tell you in the film 2001 Dave Bowman lives out his life as an oddity in the Monolith’s parallel universe in this 18th century modern room— trapped by the AI that controls and watches the life and death of Bowman. And that got me thinking—if the Monoliths are supposedly some type of ancient alien Artificial Intelligence or Artificial Life—then, would our present day analog be a universe full of managers peering down on the last human in the workforce? Perhaps, this is because when you boil down something like “Democratic Socialism” you really just end up with a Technocratic fantasy land.
As I stated in my article “I, Robot” I basically have a problem with the generic Socialist World view that accepts that robots are the answer to a great number of issues at present. For example I will again refer the work of SEIU Analyst Nicholas Warino for the People’s Police Project (3P) in his article exclaiming the value of technocracy—”The Nordic System Invents The Goods” because essentially at the end of the day Warino is a technocratic minion…
When combined with an underfunded, poorly designed welfare state, it’s not surprising the US has seen decades of underwhelming productivity growth, an alarming rise of economic inequality, and death rates not seen elsewhere in other rich countries. If US policymakers want to reverse these trends, the Nordics have a winning formula to follow.
(The Nordic System Invents The Goods)
It’s a cute quote by Nicholas Warino for sure—but, lacks certain realities, about the Nordic System of the present day especially countries like Norway that have shown income inequalities equal to that of the U.K. (a far less socialized European State than Norway). It’s odd that Warino doesn’t mention the fact that since 2018 the Nordic nations have seen a tremendous surge in income inequality .
The answer I think is rather simple—it doesn’t fit the model of economics that technological utopianists like Warino believe Democratic Socialism and technology can bring to the average person. Thus, leaving us with the impression that essentially the robotic take over of the economy will benefit us all and that humans will be freed from the drudgery of menial existence. But, ask yourself, won’t it be a world just full of managers? And I have to say “yes”. However, before we get to the managerial paradise of Nick Warino and the 3P’s creation we must discuss the elephant in the room “Deflation” v. “Inflation”.
At the same time technical improvements in manufacture and transport have been proceeding at a greater rate in the last ten years than ever before in history. In the United States factory output per head was 40 per cent greater in 1925 than in 1919. In Europe we are held back by temporary obstacles, but even so it is safe to say that technical efficiency is increasing by more than 1 per cent per annum compound. There is evidence that the revolutionary technical changes, which have so far chiefly affected industry, may soon be attacking agriculture. We may be on the eve of improvements in the efficiency of food production as great as those which have already taken place in mining, manufacture, and transport. In quite a few years-in our own lifetimes I mean-we may be able to perform all the operations of agriculture, mining, and manufacture with a quarter of the human effort to which we have been accustomed.
John Maynard Keynes “Economic Possibilities for our Grandchildren
(1930)”
It’s clear from this understanding of efficiencies by Keynes that he is envisioning a deflationary pressure pressure on the total monetary system while adding compound interest into the mix. The idea that manufacturing grows each decade for Keynes at a specific rate thus allowing fewer and fewer members of the population to engage in the work of production, is offset by the fact that with each passing year of economic growth the abundance of the economy is greater than the money supply. This surplus of production is translated into a higher standard of living through a gain in the real value of each dollar.
We can think of it this way if in year T(0) the value of a $1.00 dollar in real purchasing power say gets you 1/10th of a pound of Beef, 1/3rd of a gallon of Milk, and 9/10ths of a loaf of bread than in T(10) the same dollar now buys you a 1 lb of beef and 3.3 gallons of milk, and 9 loafs of bread you can say that the real value of the dollar is now 10 times that of T(0). This of course should translate to homes, cars, rent, and so on. In Keynes world this model looks like the follow:
The pace at which we can reach our destination of economic bliss will be governed by four things-our power to control population, our determination to avoid wars and civil dissensions, our willingness to entrust to science the direction of those matters which are properly the concern of science, and the rate of accumulation as fixed by the margin between our production and our consumption; of which the last will easily look after itself, given the first three.(Keynes PDF).
That final sentence of fixing the rate of accumulation by the margin between our production and our consumption—highlights the important aspect of this future “economic bliss” that Keynes desires a flattened demand curve that will create a steady state of production abundance where required with a flattening of the overall demand curve to maintain a deflationary pressure on commodities on the whole.
In this case the inflationary pressures of transfer payments to the population are far outweighed by the static nature of the economy’s overall flattened demand curve.
But, let’s look at what the People’s Policy Project is advocating for instead of Keynes’ model of a static future with a radically different goal for the economic process from mass consumption to personal fulfillment. Instead the People’s Policy Project seems to push to me at least a future with well crafted social wealth funds that ultimately provide the social state its economic power. These funds can only maintain their wealth generating power if we accept that inflation is constant!
As one can see the power of growth is necessary for an investment fund like these to meet their full potential. Hence the reason Norway’s wealth fund recently went from a decline in 2020 to a $143 billion win fall on the growth of AI stocks. Highlights the greatest issue with the 3P’s and Nick Warino’s love-affair with the Nordic system— competitive market based solutions. Solutions that embrace the instability of markets!
Let’s consider this fact first from this passage “Although the citizen-owners will not be permitted to sell their shares, they will be paid a universal basic dividend each year from the investment income earned by the fund”. What does this mean exactly in a world of robotic workers however? That is the big question for me. What happens when your investment fund has to become the compound interest baring fund that essentially pays everyone? Well, the answer is either Deflation or Inflation of the currency must happen to make the math workout. It would appear to me that the 3P think tank is subtly pushing for an inflationary model.
What is driving this type of wealth fund? The answer is a growth based competitive economy. This type of fund controls assets that are growing and is what gives them the ability to pay off this nice dividend each quarter or yearly. What it doesn’t do is work when you’re also creating robotic workers in your own country to replace your workforce to maintain a competitive edge with your global competitors. In other words this global wealth fund is fine when your country operating with a base of employees still actually creating real wealth in the form of commodities and services. Once, this global wealth fund turns into an advanced form of transfer payments it has no choice but to become an inflationary pressure on the economy.
Hyman Minsky rightly points out that transfer payments have deleterious effects on the economy and “social fabric” is true. But more importantly, Minsky points out the fact that these transfer payments which is what any economic system like this will become with sufficient pressures from robotics and automation is that these funds literally only drain the economy with no initial exchange of value i.e. we aren’t hiring more workers to build cars or trucks—instead the economy is giving person x more money to purchase from company A more of some commodity/service without any real exchange for the money itself.
Now, I’m not a slave to the GNP (GDP) figures like economists of the last century were. I feel there are better ways of measuring the economy’s wealth and well being. Minsky, is correct that that traditional GNP figures will have to suffer some. The question is can these losses on the Government’s balance sheet be made up on the corporate side is still to be fully answered. Furthermore, it isn’t at all clear that national wealth funds will be able to grow enough to support entire economy without a massive amount internal inflation to offset the change in employment. We can view investments payments and their interest payments as form of transfer payment on the private side.
Now, some might argue that productive capacity of the economy in my scenario isn’t eroded from these transfer payments from a wealth fund invested in massive corporations with only a hand full of human-managers and legions of robotic and automated processes. That is true—productivity itself will increase but the fact remains these types of payments are in no different than transfer payment like unemployment. Instead of actually producing the productivity the new economy will be built on a series of transfer payments in the form of investments in competitive companies. The teal creators of human wealth will not be humans but the machines themselves—the robots that move products from the shelves to the customers. The human factor in the economy will be negligible to say the least. All it will end up doing is endlessly recirculating from transfer payment to investment, to transfer payment again, and finally back to investment in ad infitinium. Or will it become an unstable economy full of little bubbles in the economy since everyone will have to take their transfer payments and invest them into other companies to they can grow the economy?
While the transfer payments create a wage floor that is in a constant state of rising the inflation— the real problem that Minsky attributes to Keynes’ analysis is the creation of money from the financial transactions itself.
The question of banking isn’t exactly addressed in the 3P policy papers on either "Wealth Funds” or “Nordic Innovations in Robotics and Automation”; but, the fact remains that some form of speculative lending must exist in any economy with competitive market based economy. Which means that debt financing as Minsky outlines in the above passage will exist. Furthermore, this type of debit is further alienated from the labor market than even Keynes’ himself described— instead the labor market is now a small cadre of managers that operate the day to day operations of a company , while a vast majority of the population sis engaged in speculative financing; this is all thanks to the fact robotics have taken over the majority of occupations that once created real wages and productivity of the economy. Instead, the employees are now machines themselves that while having increased productivity in theory may or may not have decreased costs.
The routine nature of repairs and costly nature of updating machinery, like robots will often not be born out in reality like the Jetson like fantasy world that so many people envision right now. Robots purchased solely to crush labor power frequently end up costing the corporation more in productivity than they save in labor destruction. David F. Noble eloquently provided such proof in his work “The Forces of Production” (1984) where G.E. Corporation in Lowell Mass. turned to automation in an attempt to defeat labor forces in the company’s jet turbine business. G.E. felt that CNC machine tooling (now a reality) was the key to turn highly skilled labor in the machining departments into simply pushbutton employees. It failed miserably at first because the engineers that designed the turbine engines lacked the understanding of how to translate a blue print into a viable algorithm that was effective in turning raw materials into finished products. A secondary system was employed where engineers and tool & die makers united forces to create programs that could solve these problems. It worked amazingly well , so well in fact, that G.E. worried about solidarity between management i.e. Engineers and workers i.e. Took & Die Makers. So, clearly G.E. did the only rational thing— end the program to ensure that solidarity couldn't be maintained.
Now, I bring this example up because their will be no solidarity between the first groups of people that are automated completely out of work: telemarketers, tele-answering services, taxi drives (Nick Warino ), truck drivers, Shipping, fast food, coffee production, farm production, warehouse, production line work, etc and so on. All the work where large corporations feel they are replacing low-skilled workers with far more productive machinery. These jobs will be eliminated and replaced with robots or automation and the question is what impact will that have on the population? In the 3P universe they will be getting a generous paycheck from the Government Wealth Fund. Okay, but does that work out in the end?
What happens when you quarterly dividends aren’t just a supplemental payment designed to over come income inequality—what happens when they become primary living wages? That’s where the necessary inflation comes into make these income payment enough for the entire system to be based on basically.
The fading jobs requires another solution to make the competitive market— massive competition! In fact the problem here would be prefect competition. Well the closest you can come to it in the real world— where we would have almost equal numbers of consumers and producers with about as near prefect information as possible. The new labor market is not the production of material commodities or services; but, the speculation and creation of directly owned stocks as their primary income generation offset by the indirect stock own in the national wealth fund that the 3P advocates. The best data I could find put the 2019 direct stock ownership meaning the amount of stock you directly control is roughly 15% of the population— or about 49.5 million people. Imagine what would happen to the value of the stocks if the number of publicly traded companies doesn’t expand to meet the demand and instead the shares are split and re-spilt over and over again to meet the new demand? Overproduction occurs and the stock’s value rapidly decline and soon people will need own billions of shares to make a few extra dollars. The Wealth Fund will essentially failure.
Instead, the most logical course of action is that people will start to create small businesses on a mass scale. Something the 3P is not fond of actually. In this article for the Jacobin Magazine 3P founder Matt Bruenig “Small Business Is Overrated” where he wrote how small businesses were not the economic engines they are were touted to be. And yet, ironically, if we accept his modeling of a society with a welfare state that is highly robotic and automated then the only things that exist are small businesses with oddly large investor bases. Which is exactly what occurs today with so many Silicon Valley Tech companies that have under 300 employees but an IPO of $130million or more. It sounds great, but, it only occurs because of the vast sums of money floating around the investment circles with nowhere to park it.
And that brings us to prefect competition— with companies now reduced to mostly human managers and their workforces off loaded to a digital realm and robotic minions every company has a zero wage labor expense. Furthermore, the middle management departments of the daily operations of things become the domain of Large Language Model AI that can optimize the allocation of resources within the factory or the farmer’s field there is no reason to have bloated salaries, pensions, or healthcare. What efficiencies exist to compete against each? The answer is the technology. But, soon you will find that even the technology has to be written and created by the machines itself because it is faster and more capable of detecting errors in millions or even trillions of lines of computer code. In the end the competitive resources necessary for market dominance will end up being the things that no one has control over- NATURAL RESOURCES…
That’s right the critical nature of this future will be the access to natural resources. Computers operating machinery and operating the very means of production will have only one concern for market dominance cheap resources! The great irony of this near perfect competition is that it will not yield the results that so many want. instead of many companies producing low cost goods and finding the most optimal manner to allocate resources in a society. The second law of thermodynamics will demand that system’s relative entropy will decrease overtime leaving only few companies to exist for whatever reason.
Nicholas Georgescu-Roegen , Energy And Economic Myths (1976)
The only difference is in the model of the 3P understanding is that while the companies get smaller and smaller on a human scale of employees to increase their market share they must expand regularly on the physical machine scale—more, robots, more computer data centers, and more raw materials turned into waste. This is why I liken this process to the film Soylent Green— the companies devour each other to gain market share in the hopes of reducing the last great finite element in this equation that cannot simply be multiplied by any accounting magic tricks the natural resources. As this increased demand occurs to both satisfy the expanding economy and the bubbles of instability constructed around debit based finance in the form of investors we find that the 3P’s wealth funds and robotic fantasy lead to only vast inflation as too much money chases too few finite resources.
Keynes’ already predicted this outcome with idea that essentially the demand for higher needs in a material sense must be conquered and the focus of economy returned to sustaining the “absolute-needs”. Keynes’ isn’t as clear as to what he declares these absolute-needs are precisely but the general sense of the article is that they are needs that all humans require: food, shelter, education, and so on i.e. the general welfare of humanity will be 4-8 times higher in quality it assumes. Part of this solution has to do with a general decrease in demand for the population to want more than what it needs. This coupled to an overabundance of the absolute needs produced with fewer man hours if any so that people seek not the accumulation of wealth solves many of the issues of the Economic Problem.
Where as the 3P model of a National Growing Wealth Fund in a competitive economic model filled with Government Owned Robots I feel is only a recipe for an economic disaster. Soon, the economy will collapse into pockets of highly organized units that control a majority of the local and global market shares. While the population itself its trying to always pump up the market value of their investments and their by increase their own value relative to others. Instead of demand decreasing this model is all about increase demand and the new commodity will be the very investments that were supposed to unshackle the masses and free them. Instead they will be forever chasing one bubble after the other until the ecological future of the Earth is totally destroyed!
In the end the last human worker will be the oddity that machines keep around only as a piece of wonderment at what it economics was truly about for humans.
Great piece. It's alarming to see many championing automation without addressing the larger societal implications. In my opinion, true equality must be our foundation before we even consider delving deeper into this realm. Without it, we risk dire consequences.