I s fairness necessary now? Nobody would seriously defend an unfair system, but the apostles of unfettered free markets and government austerity prefer to ignore the devastating consequences of their prescriptions as if these were like the weather: inevitable and out of our control.
In the first months of the 2007 subprime mortgage crisis, the proposal to bail out troubled homeowners was swept off the table alleging ‘moral hazard’, even though such a decision could have led to a robust recovery after the crisis. With the same sweep of the hand, taxpayer money went instead to the coffers of the banks that had been part of the real estate sting, creating real moral hazard and leading to the long stock market boom from 2009–2018, which intensified wealth differentiation. Inequality is a socio-political choice.
A recurring historical pattern
For the past forty years most of the world has been experimenting with the gospel of unfettered free markets, spreading the belief that the results would be good for everybody. They haven’t been. The current levels of inequality are unseen since the 1920s. But this is not by chance; it is a recurring historical pattern.
Since the First Industrial Revolution, each successive wave of technical change has destroyed jobs, industries and regions in its inexorable path of ‘creative destruction’ when some make millions and many lose out. Yet those times of greed must end when the situation becomes unbearable and populism rises its angry and resentful face. New forces then recognise the social breakdown, novel policies are adopted, and a win-win game between business and society takes shape to reverse crying inequality. Fairness sets in, each time including additional layers of beneficiaries, it is what we see as social progress, even if it is desperately slow.
The Victorian Boom brought reductions in hours of work, increases in wages, the protection of children and housing for workers. During the Belle Époque taxes on the wealthy were increased and Bismarckian social insurance spread across the continent, while in the US, the Progressive Era was aiming at the same. After the rampant inequality of the 1920s and 30s and the destruction of WWII, the Western democracies set up the welfare state with mortgage guarantees for working class families, free or subsidised education and healthcare, collective bargaining, better salaries, pensions and unemployment insurance, all of which paved the way for the world of the car and of the suburb-based American Way of Life for most citizens of the advanced countries
To have a socially fair economy, we now need to make sure there are enough well paid jobs, with a good safety net, in an environmentally sustainable economic model.
A new beginning
The Information Age led to globalisation, which raised new countries into development (mostly in Asia), but at the same time obliterated the livelihoods of millions in the advanced world and much of the developing one. It is often said that the Western economies lost many of the middle-income jobs to China. The problem is that when they got there they became low-income jobs. It was not in the nature of the jobs; it had been a socio-political choice.
We have once again reached outrageous levels of inequality and violence; justified anger has given a fertile ground for authoritarian populists of all sorts; desperate migrations have led to xenophobia; most countries are deeply divided; successive financial crises and the Covid-19 pandemic culminated in the deepest recession since the Great Depression.
But now, the ICT-Revolution, with its enormous potential, is fully installed. The post-pandemic reconstruction should not lead back to ‘business as usual’, but rather make the leap into a better future, ensuring that every citizen can count on a job, with decent pay and a social safety net.
Fairness also makes economic sense
As inequality increases, with lower salaries and higher profits, redistribution to restore a decent level of equality has become very expensive. Better pay is a better economic solution. In the UK most people in poverty don’t live on unemployment money but on a badly paid job. What if we fully used the potential of ICTs to increase productivity and create well paid new jobs? It is clearly possible both in cutting edge sectors and in the services arising around the new circular economy and a new Smart Green Way of Life. Technologies are multi-purpose tools; societies shape them and decide what is to be done with them. Stalin, Hitler and the Western democracies used the same technologies of the mass production revolution to create widely different societies.
“What if we fully used the potential of ICTs to increase productivity and create well paid new jobs?”
We have seen during the Covid-19 pandemic how well finance is doing, while service workers keep the world running, putting their life on the line for low pay. Wise and courageous socio-political decisions are needed that make possible much better pay for the troves of essential workers in public transport, health, medical and social services, supermarket and store clerks. All those are complemented with the online services of the new smart green economy, which favours experiences and access over possessions. This can lead to a flourishing service sector in the sharing industry, streaming services, wellness and coaching, tailored experiences and ICTs designed around activities, going from mindfulness to extreme climbing.
The digital economy demands flexibility, resilience and adaptation; in such a market we will have to switch jobs several times, so that affordable life-long education is of growing importance and will create even more employment.
Rental and maintenance growth can generate new jobs
The dematerialization of growth thanks to ICT can also provide millions of well-paid new jobs, as can also the maintenance economy. For example, planned obsolescence can be abandoned in favour of truly durable goods in a rental economy. We would see work in a cycle of upgrades, maintenance, repairs, reuse, disassembly and recycling. Products lasting 80–100 years, being rented by several people in their lifecycle, with 3-D printed spare parts and upgrades, can serve the needs of millions of people while using significantly less materials for doing so.
The new system would create opportunities for hundreds of thousands of the erstwhile manufacturing workers where the products are being used, independently of where they were made, while opening opportunities for young professionals doing the constant redesign of sustainable long-lasting upgradeable products.
The big green revamping
The need for constant development in sustainable technologies can also become a massive source of good quality employment. 99% of the world’s buildings are not green. Retrofitting those 1.6 trillion square feet of building stock, alone, would create a myriad of direct and indirect new jobs. Transforming suburbs and cities into 15-minute spaces where living, work and leisure are a walking distance away would add even more.
“99% of the world’s buildings are not green”
Apart from those, The Drawdown Project has an impressive list of employment-creating green solutions: from local and sustainable agriculture, through reforestation, mobility solutions, biomaterials and nanotechnologies, computer and sail-assisted ships, renewable energies. The numbers are endless.
Because we are talking about the complete reinvention of production and living on digital, green and fair directions. We must make sure that the green transformation with the help of ICT will replace the inevitable job losses, in contrast with the hands-off insensitive attitude of governments, when facing the losses from globalisation and the early years of the technological revolution.
A modernised state
The old welfare state was an intelligent Keynesian answer to the mass production revolution. But it is now bureaucratic, vertical and cumbersome. It needs to adapt to the nature of ICTs, with their horizontal structures and synergistic networks; to replace the queues and one size-fits-all schemes of mass production with the diversity and adaptability of the ICT-paradigm. We are talking about the State as an enabling platform where inputs go both ways, with active participation of the beneficiaries. And non-profits, social ventures and NGOs are realising that.
The ‘New Leaf Project’ in Vancouver saw positive proactive results in an experiment giving $7500 to homeless people. Hilary Cottam, a social entrepreneur has shown that collaborative and participatory models are a better solution for this new age. The new ‘welfare’ needs to empower people and be more inclusive. The state must become agile, as user-friendly as Amazon, and attract the brightest talents to pursue a mission instead of following stiff rules and doing book-keeping.
The new welfare: providing stability in an unstable environment
Increasing mobility and instability are features of work under the ICT paradigm. The job-for-life model is gone. A green production and jobs policy at the local level and a Universal Basic Income, to be automatically transferred into people’s accounts and returned progressively in income taxes by those earning above that amount, could be part of the solution. Together with public education and healthcare, UBI would create a baseline to guarantee stability in a changing work environment, helping to bridge gaps between jobs, engage in reskilling and lifelong learning, or face unexpected circumstances. It would also be a way to honour usually unpaid tasks, like housework and care for children and the elderly.
“The job-for-life model is gone”
UBI would overcome the humiliating vicious circle of unemployment and social destitution. “That whole design of our social safety net,” say the creators of the ‘New Leaf Project’, “has been approached from a negative perspective that people are trying to cheat the system, that we criminalize people, that we blame people for living in poverty”. It is time to change that mindset, assume people’s capacity for agency and abandon the unfair idea that it is their fault to be poor. And to those who claim that you should not give something for nothing we should ask if they would forbid inheritance.
The stabilising potential of UBI not only as a protective cushion but also as a source of continuous and sustainable demand is not negligible. Such a policy could have helped cope much better with the Covid-19 pandemic and to emerge from it more safely at the other end.
Shifting the focus of productivity and taxation
Under the mass production paradigm productivity was focused on cutting labour costs. Now productivity efforts must focus on reducing materials and energy consumption. Innovation and production — not casino finance and assets — should become the main drivers of the economy and the most rewarding for business and investment. By taxing materials, energy and transport, gradually replacing payroll tax and VAT, we could change the relative cost structure to promote a green, high employment direction, as the most profitable for investment and innovation. In addition, with well paid jobs, the resulting new products and services would find dynamic demand.
A robust safety net needs funding. It is important to note that during the post war prosperity taxes were high throughout Europe and, in the US, under the Republican presidency of Eisenhower, the top rate of income tax was above 90%. That money came out of the pockets of the rich and went through the hands of government towards procurement, bold investment, R&D, job creation, education of the workforce, healthcare, income security for the majorities and other expenditures that became sources of demand and wealth-making opportunities for those same rich taxpayers. It was a positive sum game between business and society with the State becoming the intermediary, the investor and wealth creator, the collective entrepreneur.
Now, income taxes must increase for the upper income brackets. Capital gains should be taxed at a descending level, from very high for one day operations — including high frequency trading, short-selling and windfall gains — all the way down to a minimum tax for gains made after ten years. And tax incentives should be designed so they discourage old wasteful practices and stimulate smart green innovation and investment as well as high job creation.
Time for change
Indeed, the so-called Golden Ages deserved the name because they reversed, at least partially, the excessive inequality that was then obviously visible. They also reduced anger, violence, resentment and the lure of populism by providing better lives and real hope of mobility.
Indeed, the legitimacy of capitalism resides in making sure that the wealth made by a few creates benefits for the many. When that is broken, it’s time to fix it.
But should the new fairness be global too?
Overcoming the underdevelopment of the Global South is a necessity for human justice as well as for reducing violence, wars and migrations. But it can also be argued that full global development is one of the most effective ways of creating good jobs in the advanced world. The mass production paradigm relied on cheap materials and energy to feed a wasteful model of production and allow high wages and standards of living for the global North, while holding the South back in dependency.
That is no longer the best arrangement. Global fairness will contribute to create good jobs in the North. Our next essay in the series will concentrate on discussing that.