The wealth of humans: work and its absence in the twenty-first century

The Wealth of Humans, by Ryan Avent, a senior editor at The Economist, addresses the economic and social challenges imposed on societies by the rapid development of digital technologies.  Although the book includes an analysis of the mechanisms, technologies, and effects that may lead to massive unemployment, brought by the emergence of digital technologies, intelligent systems, and smart robots, the focus is on the economic and social effects of those technologies.

The main point Avent makes is that market mechanisms may be relied upon to create growth and wealth for society, and to improve the average condition of humans, but cannot be relied upon to ensure adequate redistribution of the generated wealth. Left to themselves, the markets will tend to concentrate wealth. This happened in the industrial revolution, but society adapted (unions, welfare, education) to ensure that adequate redistribution mechanisms were put in place.

To Avent, this tendency towards increased income asymmetry, between the top earners and the rest, which is already so clear, will only be made worst by the inevitable glut of labor that will be created by digital technologies and artificial intelligence.

There are many possible redistribution mechanisms, from universal basic income to minimum wage requirements but, as the author points out, none is guaranteed to work well in a society where a large majority of people may become unable to find work. The largest and most important asymmetry that remains is, probably, the asymmetry that exists between developed countries and underdeveloped ones. Although this asymmetry was somewhat reduced by the recent economic development of the BRIC countries, Avent believes that was a one time event that will not reoccur.

Avent points out that the strength of the developed economies is not a direct consequence of the factors that are most commonly thought to be decisive: more capital, adequate infrastructures, and better education. These factors do indeed play a role but what makes the decisive difference is “social capital”, the set of rules shared by members of developed societies that makes them more effective at creating value for themselves and for society. Social capital, the unwritten set of rules that make it possible to create value, in a society, in a country or in a company, cannot be easily copied, sold, or exported.

This social capital (which, interestingly, closely matches the idea of shared beliefs Yuval Harari describes in Sapiens) can be assimilated, by immigrants or new hires, who can learn how to contribute to the creation of wealth, and benefit from it. However, as countries and societies became adverse at receiving immigrants, and companies reduce workforces, social capital becomes more and more concentrated.

In the end, Avent concludes that no public policies, no known economic theories, are guaranteed to fix the problem of inequality, mass unemployment, and lack of redistribution. It comes down to society, as whole, i.e., to each one of us, to decide to be generous and altruistic, in order to make sure that the wealth created by the hidden hand of the market benefits all of mankind.

A must-read if you care about the effects of asymmetries in income distribution on societies.


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