Another Reason for a Universal Basic Income

Another Reason for a Universal Basic Income

If you aren’t honest (about automation), you will continue to have a populist revolt that may not result in good economic outcomes in the future. 

-       U.S. Senator Heidi Heitkamp, via Marketwatch

By J.M. Hamilton (2-26-2017)

The case for a UBI (universal basic income) is unfolding before our very eyes. 

Bear with me, as we look at two seemingly disparate recent events:

One, the nascent acknowledgement of the Deep State’s existence, by a leading fourth estate news organization, the New York Times.

A wave of leaks from government officials has hobbled the Trump administration, leading some to draw comparisons to countries like Egypt, Turkey and Pakistan, where shadowy networks within government bureaucracies, often referred to as “deep states,” undermine and coerce elected governments.

So is the United States seeing the rise of its own deep state?

Not quite, experts say, but the echoes are real — and disturbing.

JMH has written about the Deep State’s extraordinary and abused power before. 

As my readers may know, the Deep State consists of: the DOD; the military brass, who ride the revolving door into the MIC; the intel services, NSA, FBI, CIA, etc, etc, etc.; the police state (i.e. fed, state, county and local law enforcement); MIC contractors (who own and operate much of the Deep State for profit); and the Wall Street banksters, private equity & hedge fund operators, who possess active stockholdings, or ownership, and help finance Deep State operations, directly or indirectly.  Some would broaden this definition to include the Justice & State Departments, and even the Department of Homeland Security. 

And who can forget the Federal Reserve, who has been printing money to keep up with the nation's catastrophic nation building adventures.

Some citizens may still wonder why the U.S. finds itself: perennially at war w/ the world; w/ special ops forces in 70% of the world’s nations; and last we checked, in the closing days of the Obama administration, with the U.S. bombing no fewer than seven nations.  The U.S. too, is the planet’s number one merchant of death.

(The U.S. is estimated to spend a trillion dollars, annually, on this racket... particularly when factoring in interest expense.  And now the Deep State is alleged to be leaking secrets to the MSM, as POTUS Trump has gone on the offensive with the Intel Services.)

But don’t take this libertarian’s/liberal’s word for it.  None other than conservative columnist, George F. Will of Washington Post fame, just did a piece on the topic.  Read here.  Or my pieces on privatized government as a profit center, here and here.

Eisenhower’s warnings w/in his farewell address to the nation have come to fruition, and our Democracy, and elected politicians, are heavily influenced, if not controlled, by the Deep State.  Which, by the way, makes us little better than Egypt, Turkey, or any other third world country run by military dictatorship or junta.  It’s truly frightening to witness, and yet, entirely foreseeable:

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence -- economic, political, even spiritual -- is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades.

In this revolution, research has become central; it also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of, the Federal government.

Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard there are now hundreds of new electronic computers.

The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present

• and is gravely to be regarded.

Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite.

-       POTUS Eisenhower’s farewell address. 

In the 20^th Century, Eisenhower may have been the most prescient individual, rivaling George Orwell.

Two, the acknowledgement that M&A, free trade/globalization, and automation are killing jobs, and all too often opportunity, at an alarming rate.

As written up by the NY Times, in the mere span of a couple of years, since the floor fell out of the oil market, the resurgent fracking - and oil production - industry has automated to a considerable degree.  Automation in the oil field, per the Times, is estimated to have eliminated 33% to 50% of the unskilled labor jobs.  Now, consider that pace of automation, the profit making potential of eliminating all human labor (often biz’s largest expense), and project it into the future….

Even the BOE has estimated that America may lose up to 80 million jobs to automation.

Apparently, many of tech’s titans have seen the future.  Mr. Bill Gates, mega-billionaire of Microsoft fame, is an advocate and believer in UBI, and believes he has a solution for funding UBI; that is, tax the robots. 

But what constitutes a robot?  Is a robot the automated/computerized command center at an oil or chemical refinery; is a robot the software and code; or is a robot any humanoid device or machinery that has replaced human labor?  Is a robot all the above?

We can see Mr. Gate’s concern… he’s fast-forwarded, and the future appears – largely – human labor free, particularly in regards repetitive tasks.  But even formerly bullet proof professions aren’t immune from job cuts. The poor don’t pay income tax; albeit, they get hit w/ predatory/regressive taxation all the time.  The upper middle class, and wealthy, pay the bulk of the nation’s taxes, via income taxes.  The uber wealthy – corporations, multinationals, & the billionaire class - often dodge taxes and basically write the tax code to their advantage; hence, the reluctance of the U.S. congress to go where even angels fear tread: revisiting the U.S. tax code. 

Now eliminate the middle class due to automation, M&A consolidations, and free trade and globalization, and one can see the tax burden growing exponentially, particularly w/ an aging baby boom population.

Hence, the mass exodus of major corporations out of the United States (so as to dodge taxes).  One can imagine beads of sweat forming upon Mr. Gate’s furrowed brow.

Capitalism (crony or otherwise) – as practiced today – does not provide enough employment for the world’s labor pool, and it's only going to get worse. M&A, a known job killer, aggravates the situation by eliminating labor/aggregate demand, which spawns successive waves of additional job killing mergers and acquisitions.  In the short run, Mr. Trump may, indeed, be successful in bringing jobs back to America (and he should be encouraged); but that event, will likely coincide w/ American manufacturing’s biggest push yet towards complete automation.

On free trade & globalization, economists have commented on how free trade agreements have harmed both U.S. labor and are a threat to national sovereignty.  And JMH, too, has taken up the topic on several occasions, here, here, and here.

M&A, automation, free trade/globalization, and AI are killing jobs at an alarming rate.  Simultaneously, the Deep State has bankrupted this nation with endless warfare and nation building, and has a pernicious impact upon U.S. global affairs and our nation's standing in the world.  Therefore, the case for a UBI has never been more clear.  Do the elite want to stave off, or prevent, a Luddite revolt, or eliminate a corrupt shadow state?  Better to come up with a UBI now, and not wait for the revolution.

But, as JMH stated going into this piece, there’s yet another reason to create a UBI.  Take the two examples provided above: the inexorable rise of a privatized deep state, from WWII forward (a shadow state that threatens the very fabric of our democracy); and the recent reinvigoration of an - increasingly labor free -  fossil fuels industry, due to petrol market rigging by OPEC and speculators (a fossil fuels industry that threatens the very survival of our planet).

The point here is simple.  If a leader or POTUS … or more importantly, the majority of the country’s citizens, want to eliminate an industry (because said industry, such as the private prison industrial complex – is exceptionally prone to moral hazard), what’s the biggest issue preventing the elimination of said industry?

Answer: JOBS.  

One can hear the refrain from the U.S. Chamber and the Business Roundtable in response to such a proposal, and foresee the subsequent lobbying efforts that would amount to scorched earth.

We’ll kill jobs and employee payroll if the U.S. eliminates or significantly curtails the MIC; we’ll kill opportunity for thousands of employees, if we end the morally bankrupt enterprise of privatized prison contractors; the U.S. will crush a million or more jobs, if the U.S. dumps big carbon (coal, gas, and oil) and goes entirely, renewable. (Interesting: The Chamber & the Roundtable are nowhere to be found, when jobs are being cut to juice quarterly returns.)

Institute a UBI, w/ a basic benefits package, and those types of arguments are eliminated.  And America, and other countries who choose to institute a UBI, are free to eliminate entire industries that are – as w/ the horse and buggy – antiquated, or operate against the earth’s, humanity’s and future generation's best interests. (All of this helps to explain why free trade agreements are negotiated behind closed doors by multinationals, and away from the public's prying eyes.  Many of these free trade agreements contain ISDS provisions that allow multinationals to sue nation states - w/in extrajudicial courts - run by and for multinationals - for passing legislation, rules, or regulations that are detrimental to said multinational's profits.  These free trade agreements are little more then multinational welfare, and this predatory behavior and these agreements should be destroyed and transparently renegotiated.)

Up until now a UBI really has not enjoyed public backing from the establishment, but that is beginning to change.  As with many progressive advances, this latest wave in favor of UBI is coming from the West Coast and the tech sector.  To be sure, JMH is not advocating the end of private sector jobs & opportunity; but rather, UBI would work in harmony w/ the private sector. 

In fact, UBI just might save capitalism. 

Look for economic considerations and how to fund for a UBI in my next piece.

Copyright JM Hamilton Publishing 2017