This
article is written together with Eduardo Giménez, Professor of Economics at the
University of Vigo. It is the first part out of four, which will be published
in this blog. The full article will be published in the book
"Automatization" , which will be published by the European Liberal
Forum at the end of the year.
This morning, the newspaper
picks up that, as every year, Shanghai hosts the trade fair CES ASIA for the
consumer technology industry. A company named Bubble Lab presented at the fair
a sophisticated robotic arm capable of preparing tea, coffee, and cocktails. After
the service, it even cleans the table and leaves it spotless. Mr. Shen Li, representing
the company at the fair, says “I do not know if it's true that is going to end
human work, but the fact is that machines can perform ever more complicated
tasks”. So far, computers and computer-controlled equipment have replaced human
labor in a wide variety of tasks. Yet, as well the above anecdote illustrates, technological
developments can widely expand the set of tasks which can be performed by
machines. Many already suspect that all tasks not requiring creativity will be
made in the near future by machines.
Redistribution
A question then arises: in
such event, what shall await all those who do not have the necessary skills,
namely, creativity? The American film Elysium, released in 2013, describes a
dystopian future in which machines perform most tasks. People who have been
replaced by machines barely survive on a degraded planet Earth, while small
elite inhabits an artificial satellite orbiting our planet. The film is just
science fiction. However, you can imagine a society in which a high-skill
minority performs tasks highly complementary for technological capital and
concentrates most of income and wealth, while most people survives by producing
low-price goods in highly automatized productive process (see Cowen (2013)).
We do not pretend to claim that
we shall get to this situation. Nonetheless, thinking a future in which
automatization of productive processes and increasing importance of
non-rivalries give rise to a polarized society can be convenient in order to
consider new and more suitable ways of redistribution. Proposal such as basic income
(Van Parijs (1995)), the distribution of ownership of some productive assets (Paine
(1797), Roemer (1994)), or a negative income tax (Friedman (1968)) should be
discussed, especially the last one. The big challenge comes from combining the
new mechanisms of redistribution with the necessary incentives for prosperity. However, the
advantages of these redistributive proposals should not be ignored because they
would allow reducing direct state intervention in the provision of goods and
services such as education, health, social assistance and social insurance.
Education
An education system which
fosters creativity and provides the suitable knowledge for the new
technological reality is urgently needed in order to successfully meet the new technological
challenges. We know, this is nothing but a vague generalization. However, many authors
have recognized that educational systems suffer from sclerosis. Goldin and Katz
(2008) blame the US educational system for not having sufficiently adapted to
the demands of the new reality and they do it accountable, at least partially, for the
increase in wage inequality in the United States (see also Acemoglu and Autor (2012)).
Brynjolfsson and McAfee (2014) ask for redirecting the educational system from its
focus on reading and mathematics, typical of the industrial era, towards a
broader set of intellectual and personal skills. Even UNESCO held in 2015 a
World Education Forum "Rethinking Education". Thus, this institution
is aware that something is going wrong with the worldwide education systems.
We do not want to be so
presumptuous to pretend to know what changes the education system should exactly
perform. Notwithstanding, we dare to claim our conviction that the inability of
the education system to adapt to new times has a lot to do with state
interventionism. To overcome atrophy, it is required that the state
interventionism in Education decreases. Thereby, new educational alternatives
will arise from competition and the subsequent processes of creative
destruction. Introducing school vouchers would be helpful (Friedman (1955)). Vouchers
already exist in Sweden and Denmark, but not in most of European countries.
However, the school voucher is not enough. The state must give up the tight
control of the education system. Educational innovation will not be possible if
it is subject to the restrictions imposed by a straitjacket.
In a changing world, in
which many workers are at risk of being displaced from their jobs by machines,
it is important to be very aware the needs of recycling of these workers.
Therefore, the reskilling of workers and training support for unemployed are key
issues. Once again, the best way to achieve the objectives in this area is to
abandon the direct state intervention and to allow that the markets work. To
this end, the severance pays should be substituted for periodic contributions
to worker's capitalization funds (the so-called Austrian fund), which could be
used for reskilling, and the unemployed workers should be provided with
training vouchers with which to finance their preferred training courses given
by the provider that they consider most suitable.
Taxes and regulations
Tax systems should also be adapted
to the new technological reality. In many countries, Spain is a good example,
labor incomes are excessively burdened by taxes. If machines and overseas labor
are replacing domestic workers in performing many tasks, labor income can no
longer bear the tax burden. In particular, welfare state funding should not
mainly fall on labor income any longer, as it currently happens in many
countries. The contributions to social security and other charges on labor should
be cut back, as well as more flexible labor relationships should be allowed.
Reducing the tax burden on
labor without a dramatic increase in other taxes, it might be only possible if
welfare state efficiency is improved. This would likely require new
organizational models in public services. Greater individual freedom to choose
and increased competition would help to promote efficiency. Higher
capitalization of the pension systems, accompanied by a higher level of private
participation in their management, a higher weight of the private sector in
providing health services, and a higher private participation in employment
insurances and active employment policies are some directions to improve. Moreover,
substituting machines for workers and the growing importance of new forms of
human capital might affect the birth rate, which would have significant impact
on the pension system.
The market regulations could
hinder innovation. The regulation of GMOs in Europe or the difficulties faced by
the so-called share economy –a silly name, certainly- to enter in
hyper-regulated markets are some examples of how regulation can hinder
innovation. Particular consideration should be given to financial regulation. The
regulation of financial markets should also be cautious. Otherwise, innovative
activities may suffer due to difficulties to be financed. Thus,
eliminating some regulatory barriers and rethinking regulation seems necessary
to face the new technological reality.
Moreover, polarization of
the labor market reflects that large sections of the middle-class may currently
be adversely affected by new technologies, at least in the short term. Everyone
is aware of the importance of the middle class preferences in determining
public policies in a democratic society. The reaction to technological change may
lead, therefore, to successful demands for greater barriers to trade or to
technological adoption, as well as to pressures to implement redistributive
policies in favor of these sections of the middle-class (more public employment
oriented to these sections, for instance). One cannot help thinking that some recent
political processes in Europe follow this logic.
Convergence
Information and
communications technologies are expanding and facilitating access to
information (and, thus, to knowledge and technology) to everyone anywhere.
This, together with reduced transport costs and the elimination of political
obstacles to mobility of goods and productive factors, is facilitating
interactions at a global scale and technological adoption by developing
countries. Friedman (2006) asserts that, after the end of the eighties, we are
in a new stage of globalization (which he calls globalization 3.0).
If technological progress is
equalizing opportunities for countries (flattening the world, as Friedman
(2006) likes to say), then one should not be surprised to observe in the near
future the proliferation of spectacular economic miracles and a rapid change in
the geo-economic map. However, the spread of prosperity-promoting institutions
around the world cannot stop. Institutions securing property rights and
ensuring a free and open society are indispensable for innovation and
accumulation. If so, access to information facilitates technological adoption
and, consequently, the rapid convergence of the laggards to the most advanced
will be seen. However, it must be borne in mind the flip side. A country that
rest on its laurels may experience a rapid relative decline.
Democracy
Finally, the main problem
that any organization must to solve is to transmit all relevant information to
all concerned agents. The information and communications technologies
facilitate processing and transmitting information. Therefore, the development
of information and communications technologies might induce, in the near
future, institutional changes that would improve the functioning of state.
References
Acemoglu, D. & Autor, D.
H. (2012). What does human
capital do? A review of Goldin and Katz's The race between education and
technology. NBER Working Paper 17820.
Brynjolfsson, E., &
McAfee, A. (2014). The second machine age: work, progress, and prosperity in a
time of brilliant technologies. WW Norton
& Company.
Cowen, T. (2013). Average is
over: powering America beyond the age of the great stagnation. Penguin Publishing Group.
Friedman, M. (1955). The
role of government in education. Economics
and the Public Interest.
Friedman, M. (1968). The
case for the negative income tax: a view from the right. Issues in American Public Policy. Ed. JH Bunzel. Englewood: New Jersy,
111-120.
Friedman, T. L. (2006). The
world is flat: The globalized world in the twenty-first century (pp. 3-543). London: Penguin.
Goldin, C., & Katz, L.
(2008). The race between technology and education. Cambridge, MA: Harvard.
Paine, T. (2004). Agrarian
Justice (1797). In The Origins of
Universal Grants (pp. 3-16). Palgrave Macmillan UK.
Roemer, J. E. (1994). A
future for socialism. Harvard University
Press.
Van Parijs, P. (1995). Real
Freedom for All: What (If Anything) Can Justify Capitalism?. Clarendon Press.
