Epilogue to Scarcity
These are revolutionary times. Changes as profound as those resulting from the invention of agriculture or the domestication of wild animals are rushing us toward a new world. The human race is now poised on the brink of a new industrial revolution that will at least equal, if not far exceed, the first industrial revolution in its impact on mankind. The first industrial revolution was based on the substitution of mechanical energy for muscle power. The next industrial revolution will be based on the substitution of electronic computers for the human brain in the control of machines and industrial processes.
From the beginning of human existence, mankind has lived under the ancient biblical curse: "By the sweat of thy face shalt thou eat bread, till thou return unto the ground." Before the invention of the steam engine, virtually all economic wealth was created by the physical labor of human beings, assisted only by their domestic animals.
The first industrial revolution only partially lifted the ancient curse. Yet, even this partial reprieve had profound consequences. In all the thousands of centuries prior to the first industrial revolution, the human race existed near the threshold of survival, and every major civilization was based on some form of slavery or serfdom. Yet a mere two centuries after the introduction of steam power into the manufacturing process, slavery has become little more than a distant memory for the citizens of every major country. Today, a large percentage of the population of the world lives in a manner that far surpasses the wildest utopian fantasies of former generations.
There is good reason to believe that the next industrial revolution will change the history of the world every bit as profoundly as the first. The application of computers to the control of industrial processes will bring into being a new generation of machines; machines that can not only create wealth unassisted by human beings, but can even reproduce themselves at continuously decreasing costs. The potential long-run effects of this event are twofold: First, it will allow the human race to free itself from the dehumanizing demands of mechanization. The self-regulating capacity of computer-controlled industries will render it unnecessary for people to structure their lives around daily employment in factories and offices. The first industrial revolution drew people away from the land and concentrated them in urban industrial communities. The robot revolution will free human beings from the pressures and congestion of urbanization and allow them to choose their own lifestyles from a much wider variety of possibilities.
The introduction of the computer into manufacturing has the potential for removing material scarcity from the agenda of critical human problems. The technical feasibility of factories and industries that can operate unattended and reproduce their own essential components implies that manufactured goods may eventually become as inexpensive and unlimited by process complexity as the products of biochemical mechanisms in living organisms. Increased efficiency and flexibility of substitution between materials and processes could render currently projected shortages of fuel and materials largely irrelevant to the 21st century. Unfortunately, the present economic system is not structured to deal with the implications of a robot revolution. There presently exists no means by which average people can benefit from the unprecedented potentials of the next generation of industrial technology. Quite to the contrary, under the present economic system, the widespread deployment of automatic factories would threaten jobs and undermine the financial security of virtually every American family.
[**Author's update** In the 28 years since the last statement was originally written, this conventional wisdom has not been borne out by experience. Although advances in manufacturing technology have reduced the number of workers in some craft unions, and productivity gains have reduced the percentage of the work force engaged directly in manufacturing processes, there is no evidence that automation has increased unemployment in the overall economy. In fact, the evidence is quite the opposite. The correlation between automation and unemployment is strongly negative. Those areas of the world where automation is most prevalent have the lowest overall unemployment, and those areas where automation is least prevalent is where unemployment is the highest. Automation is positively correlated with low unemployment and high living standards.
Furthermore, economic theory predicts that rapid productivity growth creates more job opportunities, not less. Jobs are not created by work that needs to be done, but by profitable enterprises that can afford to hire workers. Productivity growth increases profits, reduces costs, and causes markets to expand. This generates demand for labor, and reduces, not increases unemployment.
Nevertheless, the popular myth that automation threatens jobs remains a powerful influence in politics and at least indirectly effects funding decisions regarding government support for automation research. Almost everyone fears that a robot might someday take over their jobs, even though very few people have ever experienced this happening.**]
This book is an attempt to address some of the fundamental problems of income distribution and capital ownership in a society where most of the goods and services either are, or could be, produced by machines rather than people. It questions the adequacy of conventional economics for the present, as well as for the future. It argues that the primary cause of the recent economic crisis is not a lack of resources or insufficient wealth-producing capacity but an unrealistic view of how wealth is created and an outmoded system of incentives that does not make use of what is available to produce what is needed.
This book claims that, if we properly utilized our scientific knowledge and our industrial capacity, we could not only overcome the present economic crisis, but we could go on to eliminate poverty altogether and guarantee personal financial security to every individual. Furthermore, this could be done in a manner compatible with a clean environment and an ecologically balanced world.
The great challenge of the coming industrial revolution will be the development of an economic system wherein prosperity can be achieved without waste, affluence can be made compatible with the limits to growth, and personal freedom can be preserved and enhanced in a world where most wealth is created by automatic machines. This book is an attempt to formulate a plan by which this could be accomplished. The proposals contained in the following chapters might best be described as a formula for PEOPLES' CAPITALISM, or as a blueprint for Jeffersonian Democracy in a modern technological society. Specifically three new institutions are proposed:
- A National Mutual Fund (NMF) is suggested to finance capital investment for increasing productivity in socially beneficial industries. The NMF would be a semiprivate profit - making investment corporation that would be authorized by Congress to borrow money from the Federal Reserve System. It would use this money to purchase stock from private industry for the modernization of plants and machinery and the introduction of advanced computer -based automation. Profits from these investments would be paid by the NMF to the general public in the form of dividends. By this means, the average citizen would receive income from the industrial sector of the economy quite independently of employment in factories and offices. Every adult citizen would become a capitalist in the sense of deriving a substantial percentage of his or her income from dividends paid on invested capital.
- A Demand Regulation Policy (DRP) would be instituted in parallel with the NMF in order to provide sufficient savings to offset NMF investment spending. This would prevent short -term demand-pull inflation. The DRP would withhold income from consumers by mandatory payroll deductions and convert it into high-interest five-year savings bonds. Deductions would be graduated according to income (low-income persons would have little withheld, high-income more) and would be adjusted monthly according to a formula based on the best available indicators for inflation. The DRP would allow high rates of investment and the accompanying high employment and high production while preventing excess demand from forcing prices upward.
- A Federal Department of Science and Technology is also suggested to focus modern technology more directly on problems relevant to human needs.
It is argued that, if implemented, these proposals would lead within three decades to:
- A society where every adult citizen would derive a significant fraction of his or her income from invested capital.
- A society where industrial ownership and economic power would be distributed widely enough so that every citizen would be financially independent.
- A society where people would work primarily for pleasure or for supplemental monetary benefits. There would continue to be many incentives for working and many jobs available, but no one would be forced to work out of economic necessity.
- A society where a diversity of lifestyles would flourish and rewards for achievement would be high.
- A society in which prices would be stable and prosperity could be maintained without planned obsolescence, make-work, waste, pollution, or continually increasing economic growth.
In short, this book is a plan whereby PEOPLES' CAPITALISM could be achieved in the United States by the turn of the century without any significant changes in our constitutional form of government. In fact, far from altering any of the fundamental principles upon which this country was founded, this plan would revitalize the free-enterprise system. In the process, it would mobilize the full creative resources of our scientific and industrial capacity in a national effort to solve our most pressing human problems.
A Personal Note
As you read this book, it will quickly become evident that it was not written by a professional economist. My expertise lies in the field of science, not economics. If I am an expert in anything, it is in the theory of cerebellar mechanisms [**more recently, intelligent systems**] and its potential application to robot control. As a scientist, I tend to ask what is possible, not what is customary. I have been trained to ask simple questions and to distrust complicated answers. I wonder why, for example, human need should coexist with unused productive capacity. I fail to grasp why fiscal and monetary restraint are the proper policies when inflation is caused by shortages. I cannot comprehend why so much of our unprecedented human and industrial capacity lies unemployed when the world is teetering on the brink of economic collapse.
These are not the type of questions that expert economists ask. They are the type of questions that occur to an educated layman who sees deep contradictions in the fundamental structure of our civilization. They are questions that are increasingly on the mind of thinking people everywhere today.
Yet in this book, I have attempted to go beyond simply asking questions and have proposed some solutions. I do not claim that my solutions are the only possible ones, or even the best. I do believe they are a step in the right direction. Certainly what is proposed here needs much more study and research before it could be implemented. Many of the basic concepts are incompletely formulated. The proposed new institutions are presented only in outline form, and additional supporting documentation is needed at many points. All of the basic hypotheses need to be tested and verified by mathematical analysis, by econometric modeling, by pilot demonstrations, and finally, by intensive discussion and debate in the court of public opinion.
Hopefully, you, the reader, can contribute to that debate. If this book should manage to stimulate a serious discussion of alternative methods of capital financing and income distribution, I would like to publish an expanded and more comprehensive version of these basic ideas. If you would be interested in contributing your ideas or your time in researching and compiling a follow-on to this book, or if you would simply be interested in taking part in a more extensive discussion of these ideas, please contact me at the address below.
I personally believe that one of the fundamental defects in this society is that there are so few means by which ideas of this kind can be aired and discussed. Hopefully, future editions of this book will serve as one such vehicle. I don't believe any plan such as is outlined in the pages ahead can succeed in practice unless it incorporates the hopes and aspirations, needs, and desires of all the people involved. I hope this book will become part of a dialogue. I need your suggestions and am open to your ideas.
James S. Albus
james.albus@gmail.com
james.albus@nist.gov
http://www.james-albus.org
http://www.peoplescapitalism.org