Original article can be found here (source): Artificial Intelligence on Medium
We are living in one of the most transformative periods of the past 300 years. I’m saying not just because I understand the impact that Artificial Intelligence will have on our lives (read my previous article), but also because I can foresee how the economy is going to be transformed drastically that most economic theories that we use to drive our economic machine won’t be valid or useful anymore. This transformation is what makes me embrace an alternative form of capitalism called ‘human-centered capitalism’ or ‘human capitalism’. But what is this human capitalism?
Before we begin with human capitalism, I want to lay down the problems of the kind of free-market capitalism that we have today.
Most books on economics completely ignore the problems that capitalism has created in the past 40 years. In the past century, the embracing of capitalism and free-market systems around the world has created a huge boost in standards of living and changes in poverty levels that were unimaginable just 200 years ago. But that didn’t come with a price tag. The capitalism that our parents embraced when they were young, created a huge wealth gap between the rich and the poor and resulted in pollution levels that will leave this planet so unsustainable that my generation of people will be the first generation of people who will die solely due to climate change.
Talking about wealth inequality, there is a simple statistic that explains the major problem that capitalism has created. The top 1% of the wealthiest people own 44% of the world’s wealth. Another interesting statistic would be, the 3 richest men in the world own more wealth than 26% of the entire wealth that individuals own North America. Billionaires and rich people are a by-product of capitalism and it might seem like I am just another millennial whining about not being able to work hard and become as rich.
But that isn’t the case. Young economists have another story to tell.
People from our parent’s generation tend to boast that the world that they have given us is much better off than the world in which they grew up. Well, if you use the GDP and inflation rates alone as the metric, then that is true. Capitalism has indeed led to unparalleled levels of innovations and human conditions. If not for capitalism, we wouldn’t have been able to have huge levels of improvements in standards of living. Even countries in Africa have benefitted from capitalism to achieve improvements in standards of living. And her, I want to mention that I’m using a metric called GDP per capita when I talk about improvements in standards of living. That is where this entire argument that we millennials will better lives than our parents is nuanced.
However, if we look at other granular metrics, the notion that millennials in the developing and developed countries will live a better life in comparison to their parents isn’t just true. For the underdeveloped countries and for the countries that have just begun with the hockey stick growth, the notion that the next generation of people will have a better life than their parents is true. But that isn’t the case for the already developing and developed countries.
And I’m here to make the case for millennials. Our lives won’t be better than our parents.
The two metrics that our previous generation of people point out are the GDP per capita and HDI. Almost every economist today disagrees with the use of such metrics as the only indicator of standards of living. People forget that the GDP per capita will still increase if the rich get richer and the poor get poorer. If 100 people get below the poverty line every month, but at the same time if one rich person increases his/her wealth by 15%-20% in a month, the GDP per capita will still increase. If corporate profits keep increasing and wages for their employees remain stagnant, the GDP per capita will still increase. The problem is that most governments today use GDP per capita as a metric to prove that their government has helped improve standards of living. If it was the 1990s, I would have had no contradictions on that statement.
The reason behind the huge wealth inequality around the world and the global climate crisis is that for the past 40 years, most of the countries based their economic policies and fiscal budgets based mostly on the hope that the GDP would increase. I wouldn’t completely blame the policymakers for this. Classical economists mislead them by claiming that the GDP per capita is ‘the’ metric that indicates better living standards and that deregulation is good as companies compete against each other and provide better services. The current numbers on wealth inequality show that the idea that deregulation will improve GDP per capita is true, but as a by-product what we have is stagnant wages for the middle class in developed and developing countries, reliance on debt for higher education by the middle class and uncontrolled accumulation of wealth by the wealthiest 1%. Also, we millennials will be inheriting a world that will have to face the first sets of deaths solely due to the global climate crisis.
This trend has brought economists together to debate whether our current style of capitalism and corporatism should be refined. I side myself with economists that argue that we need drastic changes in the way we measure our standards of living. GDP per capita was assumed that it was highly representative of the average income of a person. But it is now clear that the GDP per capita will increase if corporate profits increase. Also, unlike 50 years ago, standards of living will not just depend on the wages of a person, but will also depend on factors such as air quality, environmental standards, the possibility of retirement, etc. Yeah, we are the first generation of people, where even in developed countries, millennials currently don’t have any policies that provide social security after retirement.
There hasn’t been a consensus on how we must transform our economy and the way we measure its growth. One popular form of capitalism proposed by some major tech entrepreneurs and economists at MIT and Harvard is human-centered capitalism or just human capitalism. This form of capitalism was used extensively in popular media by tech entrepreneur Andrew Yang when he wrote the ‘The war on normal people’. I had read other articles and studies that suggested new directions for the changing economy, but Andrew Yang’s book analysis is the only convincing proposal that I’ve read.
We are living in one of the major economic transformations in history. Experts are calling it the fourth industrial revolution where unlike the previous industrial revolutions, this time, instead of creating more high-tech jobs, we will be entirely replacing humans forever. We are already seeing it with the emergence of solid self-driving cars and the automation of retail jobs due to Artificial Intelligence. This transformation isn’t being discussed adequately by the media and a lot of legislators haven’t even begun hearings on this issue.
In our current form of capitalism, we quantify goods and services using a monetary value. This is the problem behind using GDP per capita as a metric to explain standards of living. This problem will be made only worse by the advances in Artificial Intelligence. Companies will keep phasing away human labor, but still will be reaping huge profits which will lead to an increase in GDP, but will lower standards of living.
This is why we need to move towards Human Capitalism — a new form of capitalism where we measure the economy by human value and not by monetary value. What Andrew Yang proposes is that, instead of using corporate profits to drive our government policies and economic indicators, we need to use new indicators such as ‘average disposable income’ that can explain the state of a normal middle-class person in the economy. Disposable income is the maximum amount that a person can spend without getting into debt or without depending on any social security. If we use this metric, then it is clear that the majority of the middle-class people of age 23–30 around the world will have a negative income because of the student loan debt that they have. If we use this metric then it is clear that the majority of the middle-class people of age 30–55 around the world will have a negative income because of the housing loan debt that they have.
Also, there are people in the economy who don’t get any wages but indirectly contribute heavily to the economy. Take stay at home moms and dads as an example. These people take care of children and household work, which is important as it matters for the children and spouses that depend on them for increasing wealth and help grow the economy. The same applies to special needs children. There are zero policies around the world provided by legislators and policymakers that consider these people as economic value to the country.
This current form of capitalism makes it seem like the above-mentioned people aren’t even a part of the economy. This is why Andrew Yang proposes Universal Basic Income (UBI). By providing a basic income to every citizen, irrespective of what they do, people who don’t directly contribute to the economy will be able to finally feel that they are a part of the growing economy, leading to boosted confidence and larger participation in the economy. By doing this, we finally find a way to attach a basic and direct monetary value to the labor done by the homemakers and currently unemployed people. This money will be spent by people in local economies leading to an increase in sales among local communities and less valued artifacts such as art and entertainment.
But, how do we pay for UBI? Governments don’t have infinite money and they just can’t hand over cash to people without the government itself getting into debt. This is where Andrew Yang proposes one of the most radical ideas — taxing robots and automation software. To be honest, in the tech community, this idea isn’t radical. Artificial Intelligence researchers have talked about this for a long time and even I talked about it at various workshops and meetups. Artificial Intelligence will permanently do away a lot of jobs and its time that we start taxing software that uses Artificial Intelligence.
One example is self-driving cars. Self-driving cars will lose replace truck drivers and taxi drivers. Companies will get to increase their profits drastically, but millions of people will be out of jobs. It is the duty of any government to ensure basic social security for such people. By taxing every kilometer of distance driven by a self-driving car, governments will be able to raise enough money to give back to the people who will use that money to retrain themselves for better jobs. Another example is Youtube gets data from you and recommends videos based on your data and generates revenue using targeted ads. But Youtube, despite its skyrocketing profits is not providing a fair share of that revenue back to us. This is where a combination of AI tax and Universal Basic income can come in. Many economists have calculated that, if companies are pressed upon with an AI tax, the government can easily raise money for UBI. Google makes profits out every google search that we make and it is only fair if we tax such AI-driven software.
Human capitalism puts forward human value at the center and slowly leaves behind monetary metrics such as GDP as the only metric for measuring human well-being. It brings in new measures such as disposable income, added value to labor that doesn’t directly yield monetary addition to the economy, etc. Human capitalism is in its infancy and we need more ideas and debates to ensure an economy that works for all of us and not just the wealthy few just like the one we have now. New policies need to take into account what has happened in the last few decades and not be based on economic that were proposed more than a century ago. UBI is one such proposal and they are many more strategies that are required. A transformation from our current style of economics is essential and it is already too late as AI is already taking over many jobs and transforming our ways in which even we AI researches didn’t foresee.