Our new paper entitled “Addressing Inequality: The First Step Beyond COVID-19 and Towards Sustainability” is now available. I will provide the story behind this paper in a subsequent post.
As with most journal articles there is a story behind the work, but these are rarely told. In this post, I thought I’d share why we wrote our paper entitled Universal Basic Income and Inclusive Capitalism: Consequences for Sustainability.
Over the past two decades, I have worked closely with Prof. Nicholas Ashford, Prof. Robert Ashford, and Charles Caldart to identify strategies that could transform the industrial state towards sustainability. This research has resulted in two editions of our textbook entitled Technology, Globalization, and Sustainable Development. While the scope of this work is vast, at its core is how regulation/policy, innovation, and new economics can be leveraged to create an environment for disruptive change towards sustainability.
When we started this collaboration, the trends in income inequality were clear, but the national/international conversation related to using some form of universal basic income to address inequality was limited. Following the 2008 global financial crisis, this situation started to change, as did the conversation about the role of automation/AI in displacing well-paid employment opportunities.
We have long argued for the need to consider “employment” as a fundamental, but frequently overlooked, aspect of sustainability, which is why we put the words Environment, Economy, and Employment on the front cover of the textbook. What many people may not realize (without a careful read of the textbook) is that we view employment from two perspectives – (1) traditional employment that provides people with an income from their labor and (2) employment of the capital they may own that also provides an income.
Given our focus on employment, we have been tracking how technology (think automation, digital technology, software, AI, robotics, etc.) has been reshaping work and what this means for the idea of full-time, well-paid work. The first section of the new paper presents some of these trends, especially related to the hollowing out of the middle class in the US and many OECD nations.
The second section of the paper looks at the macro environmental challenges we face and raises a critical question. If we advance a scientifically-optimistic “efficiency” agenda (i.e., do much more with much less) to address environmental problems, is this approach likely to result in less well-paid jobs? We believe this could be the case. As knowledge/skills are continually embodied into more advanced forms of capital (technology, AI, etc.), the ability of labor to claim its share of the work being done (what we call productiveness; which is not the same as labor productivity) declines. It is also important to add that while the total number of jobs may actually remain the same or increase, what we are focusing on is what is doing the work and what this means for income (i.e., income from labor and from technology/real capital ownership).
The implications from this understanding of the economy point to some challenging questions. For example, if human knowledge and skills (especially, routine manual and cognitive tasks) are being embodied in technology/real capital, the question of who or what is really doing the value-added work becomes important. It also raises uncomfortable questions about the ability of workers to claim a greater share of the wealth being created, if the majority of the work being done (value being added) comes from the technology/real capital side of the equation.
Over the years, I have tried various ways to explain what is a set of complex and interconnected ideas, but during a conversation I had with our new Dean in 2017, I found a “two ice hockey stick” analogy to be useful. Put simply, both hockey sticks represent curves of the two most pressing issues of our time, increasing inequality and increasing environmental problems. As mentioned above, the typical set of solutions to environmental problems is to essentially do more with less through efficiency/advanced technology (the scientifically optimistic solution to unsustainability). The problem is that as the capability of technology grows, its ability to capture value-added aspects of work also grows. Thus, the environmental solutions adopted may worsen inequality as the number of well-paid jobs declines.
A different problem is revealed if we only consider the inequality ice hockey stick (the inequality challenge) and its potential solutions. For example, if the solution to inequality is to provide everyone with some form of basic or guaranteed income, this raises an important question about what this surge in effective demand (i.e., consumption) would mean for the environment. Hence, both ice hockey stick curves need to be addressed at the same time, in a holistic and integrated way.
During my conversation with Dean Richard Blythe, I used the two ice hockey stick analogy to explain my current research agenda, which led to an invitation to join the Dean, Enric Ruiz-Geli, and Marcelo Stamm for the first Dean’s Discussion focused on Innovation Ecologies. My main remarks in the video of this conversation (below) run from minutes 7-14. Interestingly, the Dean’s Discussion and engagement with Enric and Marcelo helped expand my thinking to include the importance of architecture, but not in the traditional sense related to the artistic design, engineering, and construction of buildings. Rather, in relation to the ‘financial’ architecture behind the construction and ownership of buildings/infrastructure, and what this means for inequality and the ability of community members to participate and engage in the use of newly developed facilities/space. More on this below.
Around the same time as the Dean’s Discussion, I read Andrew Yang’s new book – The War on Normal People – which provides a data-rich description of how technology/AI is displacing jobs in America. Yang’s solution to this problem is to provide every citizen over the age of 18 with $1,000 a month, which is now commonly known as the Freedom Dividend. As my Tweet to Yang below highlights, while our understanding of the inequality challenge is the same, Yang’s book did not mention the environmental problems that may accompany a surge in effective/aggregate demand. Hence, the idea for a paper was born that connects the inequality and environmental challenges (the two ice hockey sticks) with an economic theory that understands the ability of capital to do work (like labor) and addresses inequality through its broad ownership.
For those outside of academia, one of the best ways to advance an idea is to share, discuss, and debate it at academic conferences. Fortunately, two opportunities arose. The first was a conference at Oxford University on Endogenous Growth, Participatory Economics, and Inclusive Capitalism, and the second was the 12th Biannual Conference of the Canadian Society for Ecological Economists (CANSEE) in Waterloo. Both of these conferences helped define the boundaries of the paper and allowed me to experiment with different ways of communicating key ideas such as the two ice hockey sticks. My CANSEE conference presentation is provided below.
A video of my CANSEE presentation can be accessed by clicking on the image below. [Note: select the fifth video from the top of the list on the right of the screen, which has a graph behind the play icon.] My presentation starts at minute 29; however, I recommend first listening to Prof. Jennifer Clapp’s presentation on “Financialization and its Sociological Effects.” Her research reveals the rapid growth of financialization and its implications for the social and biophysical world. I would argue it also makes a powerful case for rethinking how we consider the architecture of financial investments/arrangements and what this means for ‘real’ capital ownership, inequality, and environmental sustainability.
The several month timeframe of the conferences provided a window to search for UBI proposals to incorporate into the paper. A keen eye will spot eight UBI proposals in the CANSEE presentation, but our final paper included 14 UBI proposals alongside a proposal for a federal work program. When reviewing each of these proposals, our attention focused on the rationale behind the programs, how they would be financed, who would be illegible for funds (e.g., was there a work or age requirement), how much people might receive, and whether the programs had any connection to the environment. What was illuminating was the sheer diversity of ideas and how the ideological framing of the inequality problem tended to dictate the solution. For example, those who view work as essential for individual/social well-being tended to advance a conditional UBI (i.e., the basic income is received if the recipient is working). In contrast, those who view inequality as a product of the current economic system tended to advance an unconditional UBI (i.e., the income is received regardless of the recipient’s employment status).
What the writing of this paper revealed is the need for additional articles that describe how the Binary Trust would function, what a government-backed inherently sustainable corporate investment certification system might look like, and what needs to change for sustainability investments to look promising from a return on investment perspective. From an advancement of knowledge perspective, I’m looking to collaborate with colleagues in architecture/engineering who are interested in exploring how the financial architecture behind their developments could transform the use of their architectural/engineering designs. The basic idea is to integrate the visible (physical) and invisible (financial) components of architecture in ways that enrich society and the biophysical world.
Given Yang’s connection to the genesis of this paper, it seemed fitting to show how a binary economics approach to inclusive capitalism could be implemented alongside his UBI proposal. Another important argument of the paper is how this system needs to be focused on inherently sustainable investments. Put simply, the paper advocates an approach to addressing both ice hockey sticks at the same time and in an integrated, holistic way.
A week before the final article was published, Elon Musk endorsed Andrew Yang as his pick for the next U.S. President. Thus, I decided to launch the release of the paper with the following tweet.
Our new paper that considers how to advance a universal basic income with a new approach to inclusive capitalism was published in Sustainability. There is an interesting story behind this paper that I will write about in a separate post. More soon …
Over the past forty years, income growth for the middle and lower classes has stagnated, while the economy (and with it, economic inequality) has grown significantly. Early automation, the decline of labor unions, changes in corporate taxation, the financialization and globalization of the economy, deindustrialization in the U.S. and many OECD countries, and trade have contributed to these trends. However, the transformative roles of more recent automation and digital technologies/artificial intelligence (AI) are now considered by many as additional and potentially more potent forces undermining the ability of workers to maintain their foothold in the economy. These drivers of change are intensifying the extent to which advancing technology imbedded in increasingly productive real capital is driving productivity. To compound the problem, many solutions presented by industrialized nations to environmental problems rely on hyper-efficient technologies, which if fully implemented, could further advance the displacement of well-paid job opportunities for many. While there are numerous ways to address economic inequality, there is growing interest in using some form of universal basic income (UBI) to enhance income and provide economic stability. However, these approaches rarely consider the potential environmental impact from the likely increase in aggregate demand for goods and services or consider ways to focus this demand on more sustainable forms of consumption. Based on the premise that the problems of income distribution and environmental sustainability must be addressed in an integrated and holistic way, this paper considers how a range of approaches to financing a UBI system, and a complementary market solution based on an ownership-broadening approach to inclusive capitalism, might advance or undermine strategies to improve environmental sustainability.
Suggested reference: Hall, R.P.; Ashford, R.; Ashford, N.A.; Arango-Quiroga, J. Universal Basic Income and Inclusive Capitalism: Consequences for Sustainability. Sustainability 2019, 11, 4481.