Protectionism and a Universal Basic Income Won’t Solve Our Economic Problems

 
 

For both economic and spiritual reasons, a basic income guarantee isn’t the solution to widespread unemployment due to new technology.

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In his inaugural address, President Donald Trump lamented,

One by one, the factories shuttered and left our shores, with not even a thought about the millions upon millions of American workers left behind. The wealth of our middle class has been ripped from their homes and then redistributed all across the world. . . .

We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.

He has already acted on this promise of protectionism by withdrawing from the Trans-Pacific Partnership, threatening a tariff on goods from Mexico, and ordering that oil pipelines be built with American steel.

But as many others have pointed out, manufacturing jobs have declined in the United States largely due to automation, not international trade. This trend will not be halted through protectionism. For Trump to claim that he will bring those jobs back would be as ludicrous as if President Calvin Coolidge had promised blacksmiths that he would protect their jobs from foreign trade. It wasn’t trade that put the blacksmith out of business; it was the automobile and Henry Ford’s assembly line. And the economy was better for it: more jobs, higher wages, cheaper and better consumer goods.

Nevertheless, unemployment due to new technology is a real problem today. A recent Oxford University study estimated that up to 47 percent of jobs could disappear in the next twenty-five years due to technological unemployment. Self-driving automobiles may mean the end of trucking jobs, public transportation, taxis, and Uber. Self-checkouts and ordering machines are already leading to the displacement of many service workers, robotics have replaced many factory workers, and so on. As the capability of artificial intelligence improves, more jobs will be automated and more human workers displaced.

One common panacea for this problem is the proposal of a basic income guarantee (BIG) or universal basic income (UBI). Elon Musk has speculated that this will be the inevitable response to automation. Russ Roberts’s recent EconTalk podcast with Michael Munger is an excellent primer on the complexities of the proposal in general. While BIG might be an improvement over paternalistic welfare states, I’m skeptical that it could be a solution for widespread technological unemployment for both economic and spiritual reasons.

The Economic Problem

To get at the heart of my skepticism, imagine the following scenario. As more jobs are automated, unemployment rises. In order to provide for people’s basic needs, a BIG is implemented. This could be a UBI, as Hayek cautiously entertained, or a means-tested negative income tax, as Friedman did. At 47-percent unemployment, the difference between the two policies would begin to be immaterial. In either case, a huge amount of wealth would need to be redistributed from members of society who are economically productive to those who are not. At such an extreme, we approach a cannibalistic circularity of redistribution. If incomes are not procured through the exchange of labor for wages, they must be organized through what Kenneth Boulding called the grants economy. The grants economy consists of threat systems of negative grants (“give me X good thing, or I will do Y bad thing to you”) or positive grants in integrative systems (“I give you X good thing and require nothing from you”).

Every society has and needs a grants economy. Law is a threat system. Families are integrative systems. But exchange systems are necessary too. The grants economy stands in contrast to exchange systems in which X good thing is given and Y good thing is received. If I buy a candy bar for a dollar, I want the candy bar more than my dollar, and the candy store wants my dollar more than the candy bar. As a result, total welfare, i.e., wealth, is increased.

This is the key to my skepticism: exchanges alone, unlike grants, are positive-sum.

When income is procured through the threat system of taxation and redistribution, no wealth is created. Thus, when people who have contributed no wealth to an economy are given a grant from those who have, the money they spend is only the fruits of production being returned to the producers. The unproductive consumers are merely a conduit for funneling what was taken back to those who produced it in the first place. It is like trying to increase your bank account by writing yourself a check. And unless the receivers are required to spend 100 percent of the BIG, the result will not even be zero-sum. It will be negative-sum.

As a result, even industries producing needed goods would run the risk of failing to be profitable and thus, despite the efficiency gains of automation, needing to shut their doors. To be clear, this is not meant to be an argument against automation, which I support. Rather, it is an argument against the effectiveness of a BIG for ameliorating the losses of widespread technological unemployment.

The Spiritual Problem

People derive a significant amount of their lives’ meaning from their work. This does not mean that most people consider their jobs meaningful in themselves. Rather, as Kirsten Weir wrote for the American Psychological Association’s Monitor on Psychology,

Some may derive meaning not from the job itself, but from the fact that it allows them to provide for their families and pursue non-work activities that they enjoy. Others may find meaning in being able to advance themselves and be the best they can be. People with a craftsmanship orientation take pride in performing the job well. Those with a service orientation find purpose in the ideology or belief system behind their work. Still others extract meaning from the sense of kinship they experience with co-workers.

Notably, most of these reasons involve some sort of other-orientation. Labor puts us in a unique relation to our neighbors and the material world. It pulls us outside ourselves and situates us in society and the world around us. “Work,” wrote the Reformed theologian Lester DeKoster, “is the form in which we make ourselves useful to others.” Without work, we are left with a nagging sense of uselessness. According to Genesis, human beings were even made to work in Paradise—it is fundamental to who and what we are. As Arthur Brooks has pointed out, earned success is a key factor of happiness.

While it is only a correlation, we may note the high incidence of opioid addiction, alcoholism, and obesity in regions of the country especially hit by the technological unemployment that President Trump has erroneously blamed on international trade. Technological unemployment may not be the ultimate cause, but it can’t help. According to Christian tradition, lack of work—especially manual labor—engenders acedia: a spiritual listlessness that pushes us to seek unhealthy distractions. Absent the virtues of labor, the vices of idleness multiply and erode our moral culture.

Thus, even if a BIG could successfully overcome the cannibalistic circularity outlined above and counteract income losses, we would still stand to lose in other ways by subsidizing such large-scale unemployment. People need work in order to find meaning in their lives. Work helps to socialize us and promotes more virtuous living. A BIG might be an improvement over our current safety net, but we should be cautious about expanding it beyond that function, both economically and spiritually.

Alternative Solutions

So if a BIG isn’t big enough, how might we escape such a gloomy future? I have three suggestions that could augment this proposal.

The first is the most important, because it will help ameliorate both the economic and the spiritual problems of technological progress. The Oxford study’s projection is an excellent reminder that the markets of the future will not look like the markets of today. There’s nothing wrong with that; this is how it has always been. Markets are as mortal as the human beings who participate in them. As Schumpeter pointed out, they advance through creative destruction. No one in the nineteenth century could imagine a market for washing machines, not to mention web developers. We would do well to practice an economic memento mori instead of the static economic fantasy of protectionism.

As time goes on, we will find that certain jobs are more resistant to automation than others. In something of a reversal of trends from the last decade or so, creative applications of the liberal arts may even increase demand for people with those skills. Furthermore, automation will create markets to serve its own needs. We will probably have a greater demand for mechanics and programmers, for example. No doubt, with our aging Baby Boomer population, we will see increased demand for elder care in the next twenty-five years as well. And who knows what markets may be created by future technology that few have yet imagined? Even if 47 percent of current jobs will be automated, new labor markets may be created to replace them. A better use for the funds of a BIG program would be retraining workers and investing in new enterprises to contribute productive labor to the economies of the future.

The second solution I envision is that, absent economically gainful employment (and perhaps with some lesser form of BIG to support them), people will find other ways to work, whether volunteering, taking up hobbies, pursuing artistic endeavors, or something else. While this won’t directly address the economic problem, it could go a long way toward addressing the spiritual aspect. Even so, I’m optimistic that the spirit of enterprise dies hard. It would not be surprising if people manage to monetize these occupations as well.

If exchange between economically productive actors is what creates wealth, international trade should be given high priority. If a nation lacks a sufficient supply of productive market actors to sustain itself, the easiest solution would be to expand one’s neighborhood to seek out such actors all over the world. Indeed, given the inherent economic problem outlined above, a BIG of such a massive scale would probably require international trade. Unfortunately, this means that in the short run our president, as well as trade opponents on the left such as Vermont Senator Bernie Sanders, will only end up making us less prepared for the change to come.

Dylan Pahman is a research fellow at the Acton Institute for the Study of Religion & Liberty, where he serves as managing editor of the Journal of Markets & Morality. He is also a fellow of the Sophia Institute: International Center for Orthodox Thought and Culture. He earned his Master of Theological Studies in Historical Theology with a concentration in Early Church History from Calvin Theological Seminary. Follow him on Twitter @DylanPahman.

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