Nathan Gardels is the editor-in-chief of Noema Magazine.
Well before the COVID crisis, it was clear that digital capitalism was divorcing income and employment from productivity growth and wealth creation. That is what intelligent machines are meant to do in commercial enterprises. They displace the need for costly wage labor in the production of goods and services while capturing the value of personal data every consumer produces through as much algorithmic hegemony as they can attain.
As with much else, the pandemic has accelerated and exacerbated this structural transformation. While large swaths of economies everywhere are facing the worst downturn in memory with record levels of unemployment, Big Tech’s fortunes are soaring. Microsoft, Amazon, Apple, Facebook — and Tencent in China — are handsomely profiting as all of us who are sequestered, socially distanced, laid off or furloughed seek to stay connected through these proprietary gatekeepers.
Enormous new concentrations of wealth are thus piling up in the already deep pockets of those at the top of the digital economy. Just as the pandemic has further exposed this runaway capitalism, so too has it opened the opportunity to address it because it is so obviously unsustainable in the long run.
As Thomas Piketty famously documented in his book “Capital in the Twenty-First Century,” the central dynamic that drives inequality is the gap that inexorably compounds over time between those who own capital — in this case digital intellectual property and technology — and those who must live off wages alone from the diminishing value of their labor, if they are employed at all.
This is where the notion of “universal basic capital” comes in. We could go a long way toward mending inequality if everyone owned a share of wealth in the first place — pre-distribution — instead of trying to more fairly level out society by only redistributing income after the fact. The idea is not just to break up concentration of wealth at the top, but to build it from below. In short, the best way to tackle inequality that is growing too vast to last is to spread the equity around.
To the extent that labor’s input becomes less and less relevant to wealth creation in the digital age, fostering an ownership stake by all in the robots (so to speak) that are displacing gainful employment while exploiting personal data will become especially critical.
There are many permutations and modalities to reach this goal with respect not only to prospering Big Tech but to the dominant service sector as well as those otherwise viable firms that need taxpayer bailouts to stay afloat as the pandemic ravages their markets.
Worker ownership is one path. “Since service work is on average less well-compensated than manufacturing, and the distribution of income in services is much more unequal, addressing inequality will require some kind of income support for workers beyond their wage compensation,” Jason Oakes writes in Noema this week.
“There are many such programs currently under discussion,” he continues, “including universal basic income, a large increase in the earned income tax credit or some form of a federal job guarantee. In addition to any of these, the ‘one person, one share’ principle of employee ownership found in worker cooperatives and ESOPs allow for this work subsidy to be much more widely practiced and to take place outside of the purview of government, which makes it less of a partisan political issue.”
Also in Noema, top hedge fund manager Ray Dalio and Nobel economist Joe Stiglitz discuss — and agree — that taxpayers who socialize the market risk by bailing out companies so they can survive the great pandemic recession must also capture the profitable upside when prosperity returns.
This could be done through pooling all government investments in companies as they rebound into a social wealth fund from which dividends would either be distributed to citizens or invested in public goods. “It would reduce the burden that would be put on taxation, on redistribution, while augmenting people’s assets,” Stiglitz argues. “It would generate more buy-in to the economic system because people would feel like they have an ownership stake in that system.” Like Oakes, they both see such an approach as non-partisan. “It’s an odd duck that is neither capitalist nor socialist,” in Dalio’s words.
In a Berggruen Institute white paper, Nils Gilman and Yakov Feygin explore how the U.S. might move toward a “national endowment” grounded in the idea of universal basic capital. Their proposals encompass three inter-related approaches: a sovereign wealth fund based on partial ownership of new technology (“the robots”) that would make distributions to citizens; the establishment of universal personal savings instruments such as “baby bonds”; and a national investment authority for public goods such as infrastructure that disproportionately benefit the less well off.
Their ideas are under discussion by members of the U.S. Congress who are hopefully anticipating regime change in Washington in the coming months.
Finally, in the home state of Silicon Valley, several members of the governing boards of the University of California and the California State University system are contemplating the establishment of an endowment for California’s public higher education funded by a surcharge, or “royalty,” on the ad revenues of Big Tech, or the equivalent in stock transfers. “It is an entirely consistent social policy to seek revenue and shared wealth from the knowledge industry to fund public higher education institutions that train the minds of the future and are the principal ladder of upward mobility for the state’s population,” one of the trustees told me. California’s governor, Gavin Newsom, also prominently raised this idea of a “data dividend” in his State of the State address last year.
All of this suggests that, as at other times in history, crises are the crucible of progress. They till the social soil and prepare the ground for new ideas that were previously deemed impossible to be planted and take hold. This global pandemic, where the digital meets the viral, is one such historic opportunity to yawning not to seize.