AI, inequality and basic income

[00:00:00] We are not going to let a handful of CEOs make these decisions. They're going to be made by the American people. What does that mean? Bottom line, it means that technology is going to work to improve us, not just the people who own the technology and the CEOs of large corporations. This is the Debunking Economics podcast with Steve Keen and Phil Dobbie.

[00:00:24] Well, it's Benny Sanders talking on the Josh Rogan podcast of all places about how AI and big tech is dominating and is adding to inequality. So that inequality is that adding to or subtracting our innovation. How can we really be better off when the world is increasingly controlled by a handful of people? If they run out of ideas, what happens if nobody else is in a position to come up with the next big thing, not because they don't have the ideas,

[00:00:51] but because the money is in the hands of just a few tech trillionaires. That's this week on the Debunking Economics podcast. So Steve, I was in Parramatta Library early on today, which is obviously where eligible single men spend their time these days.

[00:01:18] So women, if you're interested, that's the place to be. Steve will be joining me there soon, I should imagine. But I came across a book by Joshua Gans. I don't know if you know Joshua Gans. He's an Australian economist. I'm sorry, yes, I do, and I don't have much time for Joshua. Oh, I can't. A fellow academic at New South Wales University. He's a high-performing neoclassical. That's why he's one of the people who sits inside the neoclassical envelope and pushes it more than most people do.

[00:01:45] So all the other neoclassicals come up and admire him. But I find his work still sits within the complete neoclassical paradigm. So he's got some insights. I'll give him that. But in terms of his mental framework, it's how do we fit this inside a supply and demand diagram? Well, he's got a book out with Andrew Lee. I don't know how recent it was, but I was just perusing it in the library. Didn't read all of it, but it was called – but I thought the topic was interesting for us today.

[00:02:11] And I think he did have some interesting observations in it, but you might see differently – called Innovation and Inequality, How to Create a Future That Is More Star Trek Than Terminator, which is a point. Which is a very good point. That's what I want to retrieve as well. Well, and it is a question, isn't it? And there's two questions within it. Does innovation create inequality? And the other question he asked is, do we need inequality to create innovation?

[00:02:38] So maybe, you know, there's – and in amongst all of this, obviously, the question that we are racing to a future at an unprecedented rate – and we've talked about this in recent weeks on the podcast – where we are seeing wealth being concentrated, inequality is becoming huge, and we just don't seem to know how to stop it.

[00:03:02] Yeah. And this is why AI is so important in robotics and so on. They're far from reaching the claims that have been made for them by their advocates, of course. But you do have machines which can – you know, have got reasonable control over what they call the hand, which can be instructed to move in the same way that unskilled workers can be. Because ultimately, you'll have sensors that let them know where they have to solder, et cetera, et cetera.

[00:03:30] You know, those sorts of elements of unskilled work. And that, to me, is the main issue that AI poses. And equally, for people working in clerical positions where they're basically processing requests which come in these days electronically and the answers go out electronically, AI can replace most of that without lending you up in disastrous circumstances. There are times you want to talk to a human because there are things which only a human can really understand.

[00:03:59] And, of course, the LM's don't understand anything. They apply patent matching. But you could look at a lot of very routine positions inside most large corporations, certainly inside the government, which can be replaced with robotics. And what this means is that people who don't have any capital of their own are losing the one way they've got a chance to get an income, which is they are needed for processes which can't be automated. Now we're getting to the point where they can be automated.

[00:04:26] So the inequality, the process that people normally talk, which comes out of Schumpeter's logic, is that you have innovation which disturbs an existing balanced manufacturing system and then brings in a new area which wipes out old ones. And then the new areas then start growing and innovation continues compounding and both workers and capitalists ultimately benefit. Yeah. So creative destruction was his term, wasn't it?

[00:04:56] And that's – which is an interesting one because if I was to go to a local shop in the high street and burn it down, I'd go to jail. But if I was Amazon and I forced that shop to close because I was creating disruptive technology, that's fine. We're quite happy with that because that's innovation. And there's no consequence for the innovator about the impact that they're having on the broader society. And that could work two ways, can't it?

[00:05:23] So, for example, there's the externalities of I buy a house in a particular place and then a brand new railway station opens with fast connections into the centre of my city and my house price goes up. I'd benefit from that. But similarly, if you are in an industry that gets attacked by another industry and you lose all your money, you're not getting compensated for that. So there's a question in both of those cases. Should you really benefit from the externalities? And if you're hit by the externalities, should you get some form of compensation? Yeah.

[00:05:53] I mean, the issue of benefiting from externalities is what Henry George League is all about because they say that, you know, if you – literally, your example, if you have a house and then the government builds a railway station that goes near your house, your house increases in value because of what the government did. And their argument is that that gain should be captured partly by the government on behalf of society. So the increase in your land valuations is taxed to some extent back to the local government.

[00:06:22] It's not only a local government issue that that's it with respect to. And they do benefit from tax revenue. But the idea is that the gains that are caused by things done by the community should be – benefit the community. Whereas the way we've got it set up at the moment, this community obviously benefits from things like a new railway station. But the increase in the land values is captured by those who own the land. And again, that excludes anybody who doesn't own the land right now, which of course adds to inequality.

[00:06:50] Yeah, which is exactly what we're seeing with tech, isn't it? So the tech players – and they may not have been expecting to get the level of profits or even the speed of growth that they're seeing. But they are benefiting. But they are also responsible for creative destruction as well. So does that mean we should just pure and simple be taxing them heavier? I know the counterargument to that will be, well, okay, but if you do that, you're going to stop innovation. And things aren't going to move as fast.

[00:07:19] I mean, the tech bubble, I think, is a classic case of where they put too much money into an innovative process. And most of them are going to lose that money. So I don't think – in that sense, the argument that you should tax the gains away from them will have to be gains in the first place. When you take a look about the amount of money being put into data centers and AI development and so on, and then look at the returns that those AIs are getting and the data centers, the cost of the data centers.

[00:07:50] The revenue – the difference between revenue and cost is about like 10 to 1. The costs are about 10 times the revenues. It appears at the moment it's very hard to get anything accurate in the way it figures on this. But what it means is a large number of these tech bros are going to lose their shirts. And yet – I mean, you can see that. And I think I can see that too. And yet the investment community, their share prices continue to rise. Okay, they're getting knocked back a little bit. There's a question mark. Everything rises before it falls. Yeah. This is enormously so.

[00:08:18] You go back to the South Sea – pardon? Yeah. The South Sea bubble. I mean, what we're seeing is the speculative nature of a capitalist economy because when a new technology comes in, everybody dives in the belief they're going to be the only one that dominates the whole sector. So you get 100 people pouring in. Each of the 100 thinks they're going to be the only survivor. So what do you get? 100 times the investment you need initially. And that's the issue that is inevitable with a capitalist economy.

[00:08:47] This is one thing that Hyman Minsky emphasized. He said that capitalism is inherently flawed because it has ways of generating finance that enables speculative investment. And then the speculative investment itself undermines the monetary system. So you've got an inherent – you can't get rid of this feature of capitalism that when a new technology is developed, there'll be overinvestment.

[00:09:16] Because given the competitive nature of the system, everybody dives in – not everybody, but a large number of people will dive into a small pool. They don't realize it's a small pool. They'll sell it as a very large one. But you necessarily get overinvestment and then a crash on the other side. So that's like the general cyclical issue that capitalism faces in general.

[00:09:37] But this one where you've got a technology which is truly transformative and could mean the fact that workers got jobs because of the inability to mechanize the processes the workers are hired to do, that's gone. And so if it's gone, that means that this is not just a usual cyclical version of increased inequality in a capitalist economy. It's a structural change.

[00:10:04] And on the other side of it, even though lots of these tech bros are going to lose their shirts, the handful of survivors will be able to take over – or their cash flows will eliminate jobs throughout the economy.

[00:10:18] And then in that situation, those people don't have jobs anymore and they don't have a prospect of getting them again because all the various positions they could apply for, unskilled workers, whether that's unskilled manual or clerical workers, or even the skilled ones, lawyers, people giving diagnostic advice, all these sorts of things which AI can potentially replace. They won't have an alternative to go to.

[00:11:12] That's what we find in the industrial revolution. Using energy we find to take the place of slaves and animals and so on we used to use. So the slaves – well, we don't have as many slaves. Slaves still exist. We have far less draft animals than we used to have and their survivors are out eating grass somewhere.

[00:11:33] So there's those technological epoch-changing systems, which means we don't exploit – well, we don't exploit horses anymore in the way that we used to. We don't exploit animals to drag plows and so on.

[00:11:51] So that, in a sense, we should think the same thing about humanity because once we developed industrial machines that can exploit stored solar energy in the form of fossil fuels, and then hopefully we're transforming past that point. The slaves we're exporting are now energy slaves.

[00:12:11] This is a point that Buckminster Philan made brilliantly a few decades ago, that every human in America basically has 500 energy slaves working for them. Now, what AI means, we get to the stage of the 750 slaves or 1,000 slaves. We don't have to work. But that only applies if there's an income coming to the person who's not only having to work, and that's the problem. And that gets us back to the idea, doesn't it, of do we have a universal basic income?

[00:12:40] Actually, this was a topic of the Y-Cair this last week, which is another podcast I do, and we had Guy standing on that. I don't know if you're familiar with Guy's work, but a big believer that we should be moving towards a universal basic income. Yeah, and you'll find the advocates of automation pushing the same thing. I mean, Musk comes out and talks about universal high income. Yeah. And frankly, that's what we should be aiming for. But then the question becomes, well, where do people get this income? How is it created?

[00:13:09] And then the only – if you're getting the income because you own the machinery, well, you're covered, thanks very much. But if you've all been displaced by the technology, then you don't have any income source. Then the only way you can get the income is somebody has to give it to you, and that's somebody – I think we normally call it the government. Is that right? Yeah. I think. Does that exist? Yeah, I think it does. I've heard of it. It's a fantasy, but yeah. Well, if it's Elon Musk giving out – doling out our universal basic income, then obviously we don't need government because he's in charge.

[00:13:37] So the government has to generate the income now. Is that the sort of thing the American government is prepared for? Well, it's prepared for to give the income to Donald Trump and his family, but the entire – This goes back to creative destruction though, doesn't it? Because in theory, you could say – and I don't know whether this is how Elon Musk sees it – but if he's responsible for the destruction of jobs, he should be paying for that. And the payment of that actually equates to him basically paying this universal basic income or high income to everybody.

[00:14:06] That is the same case as put in China. Yeah. So when you – like we have a state enterprise in China coming up with an innovation and don't – please don't fall off your chairs. It does happen. Then what they do, because they're state-owned, what they tend to do is they distribute the additional revenue to the existing staff or the government drops the retirement age.

[00:14:29] So what's happening – like in the Western world, you're seeing ridiculous attempts to push the retirement age past 67 and even up to 70. And speaking as somebody who's in his 70s and has arthritis in one of his hands, I feel very sorry for manual workers who are looking at this prospect of having to continue working till their 70s when they can barely even pick up the – handle the devices they've been handling in their youth. It's an outrageous suggestion that people should be working in their 70s.

[00:14:59] But what's happening in China is they're dropping the retirement age and they've set up – it's not perfect. I'm not saying everything in China is perfect, but the social system is set up to ensure that the benefits are distributed.

[00:15:11] So with the increase in automation of jobs, what is happening certainly in the state enterprises and to some extent it's a government policy as well, they're dropping the retirement age and they're creating things like universities of the third age, which we have in the West, but doing them far more provisionally and far, far better. And therefore, people get more leisure as a result of the increase in automation. And that's what we need.

[00:15:39] But that takes a social system which reflects the fact we're part of a society and the whole myth of the West – Maggie Thatcher again, there is no such thing as society. That mentality is embedded in the West. And therefore, if you make a gain, it's yours, all yours, and nobody else deserves any of it.

[00:15:54] And therefore, the idea of going from the transition where people have to have a job to get an income to where they get an income because they're a human being, and then they spend that on the outputs of the factories, which are run by AIs and energy-driven robots. Yeah. But the question is who pays for it ultimately, isn't it? So is it paid for by the government with money that they perhaps create?

[00:16:20] Or is it paid for on hefty taxes which are charged at these AI companies? And it sounds like Elon Musk might be prepared to say, well, actually, maybe we should be paying for it. But then he's probably also thinking of the control he has on that. And that does get back again to you are paying for the creative destruction that you are responsible for. It kind of makes sense. I do worry about the fact that if that was the case, he would have so much political power because he was paying for you and I to live.

[00:16:49] But here's another thing as well in all of this. So 100 years ago, and we spoke about this on the YCARE, 100 years ago, of course, John Maynard Keynes said we'd all be working, what, 15 hours a week or something like that? And the rest would be leisure time because of advances in technology. And that didn't happen. And I wonder whether if everybody had a universal income and machines were doing everything, there would still be people who'd say, ah, yes, but I can make some money doing that. I could, you know, enjoy the leisure time.

[00:17:16] But that didn't work in, you know, in Keynes' hypothesis because we all just realized we could make more money by doing more work. And what's to stop the same thing happening again? So we get paid our universal income and then we find, you know what, I could open a coffee shop or I could sell books or I could write books or I could blog and sell advertising or whatever. Or I could buy some land or I become a property developer or whatever. You start to – you start and then the race continues because you've got all the extra time.

[00:17:45] Yeah, but the thing is the race continues with everybody having a floor they can stand on. Whereas without the UBI, there's no floor, okay? Right, but, okay, sure, but that floor is at a certain level. We all start working harder and harder and harder. That, you know, relatively the floor starts to drop because there's, again, more people get very rich. They push house prices up so that floor is no longer enough because there are people who are, you know, the bastards who are actually trying to push ahead and make extra money.

[00:18:12] What you've got to look at is the systemic features of your economy. And, you know, when you're working as a capitalist and you've got an innovation that means you can sack your entire workforce pretty much, then that's what you see. Well, I'm going to get the same revenue back in. I've reduced my costs dramatically. But you've taken out people who are paying money to a whole lot of other people, including you. And therefore, there's less aggregate demand in the economy. So how do you cope with that?

[00:18:39] Now, in the past, we've coped with it by yet more investment for yet another special technology. And you get this transformative contest between workers and capitalists. And this is the – when I do my mathematical modeling, I'm basing it on a model that actually Marx first put forward, which Goodwin turned into a mathematical model.

[00:18:59] And what Goodwin concluded was that capitalists – so workers have been the main benefit of innovation over time because when the next boom comes in, they get higher wages and their living standards can utilize because of the innovation. But that's expecting that the innovation is going to cause a renewed demand for employment at some point. Now, if we're cutting off that almost completely, then you don't get that cyclical redistribution going on.

[00:19:28] But in the case of AI, what it points out is it wouldn't be a problem if the company was owned by the workers. Yeah, no, exactly. It's a problem that's owned by the single capitalists. So when you have an institution – and apparently Huawei, is what I've been told, is a classic institution of a worker-owned company. I mean, extremely successful. Everybody's motivated to work for it. Any technological benefits come back to the owners. You know, positions might be eliminated.

[00:19:58] Your cash flow is not eliminated when the position goes because you're part of the owner of the system. So it's a question of whether your social system is set up to cope with the dynamics of large displacement of workers. And in that case, America is not set up that way and China, relatively speaking, is. Yeah, well, there's no reason why cooperatives can't operate in a capitalist society, is there?

[00:20:20] But the problem is that these companies are making too much money, so they're not paying for the cost of the creative destruction. Just before we move off, Shumta, I just got this quote I've got on my mobile phone, which I need to read out. So he apparently had said he wanted to be – his three ambitions were to be the greatest lover in – have you heard this one? I know it well, very well. Hit us anyway. The greatest lover in Vienna, the best horseman in Austria, or the world's top economist?

[00:20:50] And he said he's made two of them. No, what he said was – he said he had three ambitions. It would be the world's greatest lover, the world's greatest horseman, and the world's greatest economist. And his adaline said, I never could understand horses. All right. I read that you said he wasn't going to say which of the two. No, no, he did say. He did say. Sorry. Okay. Great lover and the world's greatest economist. And frankly, in terms of – Ladies, that's it. That's it. Just go for the economist. Yeah. Yeah, go for the economist. That's where you're going. You're arguing.

[00:21:20] So, but let's go back to, again, the idea of creative destruction. You don't even need to look at AI, right? So let's look at what's happening in the high street as a result of Amazon, right? So Amazon is making very hefty profits. We've not really taxed them a great deal. In fact, we've ran in fear of taxing them, and we're quite happy to see high street shops closing down. Actually, thank God, Andy Burnham, we were talking about him last week. Yeah.

[00:21:45] And, you know, he's not going to maybe have a big impact, but at least he started on this, you know, by saying, well, actually, there were deductions for rents for large warehouses. Well, you know, solve that, and am I going to increase the threshold at which businesses, small businesses, start to pay rates so that we can try and, you know, address that imbalance?

[00:22:05] And that is an example of saying, yes, you should be penalized somehow for the creative destruction you've caused so we can use that money to benefit the people who are being usurped by this destruction. Yeah. Makes sense, doesn't it? Yeah, it does. So you can't just have the technology. You've got to have a redistribution mechanism as well. And that redistribution mechanism is much easier to consider in a socialist economy than it is in a capitalist one. Yeah. Well, socialism meaning high taxes is what you're saying.

[00:22:34] No, no, socialism meaning a government which, like the Chinese government, which is, you know, its spending is about half the economy and they're quite willing to spend to maintain income levels of the poor, whereas the West, no, you don't do that sort of thing. And again, I'm not saying China's perfect, but its system is set up so that it's supposed to benefit everybody.

[00:22:59] And therefore, if something like AI comes through, which is going to be massively disruptive, it also has to say, well, what mechanisms can we put in to spread the benefits? Whereas the American, you know, devil take the hindmost where we're going to take the lot and run. The ideological shift that's necessary for America to bring in a universal high income is huge. And I really can't see them achieving it.

[00:23:19] But, of course, the big fear in the West would be in America in particular, they'd say, well, you know, you've got to have those high rewards because that was your incentive for going down that road in the first place, which, of course, is a nonsense. So we'll explore that a little bit when we come back. It's the Debunking Economics Podcast. Me and Steve Keen. Back in a second. This is the Debunking Economics Podcast with Steve Keen and Phil Dobby. So, Steve, this is something interesting as well.

[00:23:48] I got from Joss Gans' book called Innovation and Inequality, How to Create the Future that is More Star Trek Than Terminator. And look, you know, he's quoting figures. We've all seen the comparisons of this. He says in the mid-1960s, the average worker would have to work 20 years to earn what their CEO would earn in a year. This is in the United States. Now it takes 300 years. Yeah. So we've just had, how did we allow that to happen? How did we allow Elon Musk to be a trillionaire?

[00:24:17] How come there are no controls whatsoever in how much capital and wealth can accumulate? Why have we not seen this coming? And I think part of it is because of this idea, particularly in America, that you have to give people the ability to earn untold wealth because that is their motivation for innovation. Yeah. I mean, this is something Sean Peter talks about as well, by the way. And also Mariana Mazzucuto and his name, I'm trying to think of the name. It suddenly escaped me.

[00:24:47] Janeway, Bill Janeway. They all say that innovation is done by people that can afford to lose money. Now, who can afford to lose money? There's two answers to that. There's rich people and the government. Because the government can, of course, it ruins most of its money creation by the rules that have allowed for bond sales and things like that, which we're going to talk about one day. But the government creates money and the rich have money. So the idea is they're the ones who can afford to speculate and gamble and they're the ones who pay for the innovation.

[00:25:16] And that combination, who does the innovation, the state or the government, they should both be doing it. So you need finance before innovation is going to occur. That's true. The innovation should come from whoever's got the best ideas, actually, in reality. Well, your best ideas, but how do you turn the ideas into actual products? And this is what Sean Peter explores in the theory of economic development. And he makes a bit of a logical leap, but he basically says that's what the banking system is for.

[00:25:44] Well, because the proposition he makes is that what he calls the circular flow is the existing level of technology in equilibrium because he thought the volrus knew what he was talking about. So that was – volrus didn't, but that's the idea the market's already in equilibrium. And he said the only way you can make a profit in that situation is to disturb the circular flow, which means you have to have a new technology.

[00:26:06] But what he does to make it actually harder for him to make his overall argument is he said that he imagines an entrepreneur as someone like me with a good idea and no money. So in that case, how do you turn the good idea into money? You've got to borrow the money, and you borrow it from the banking sector. So he fundamentally saw the finance sector as providing venture capital effectively for entrepreneurs to enable them to turn a new idea into a product.

[00:26:33] So you're headed in the monetary system as well as the idea. And, of course, what would happen at the time? Well, what happens if the idea doesn't work out? You lose your house. You lose – Well, yeah, you lose your house. And this is the hassle because banks won't lend to entrepreneurs these days, and they hardly ever will. They take secured loans, and you'll get a secured loan if you have an asset, which you will lose if you fail. But it means it's all asset speculation based rather than actually funding entrepreneurs.

[00:27:03] So there's – I would like to see the vision of entrepreneurs being funded by banks that Sean Peter spoke about actually being feasible. And that would mean you'd need to enable banks to take equity positions in companies they finance rather than debt positions. So we're not actually set up for Sean Peter's vision. But he does talk about innovation being done by people without money. So you can be inspired by – and this is part of what capitalism works as well.

[00:27:32] The reason you'll think about turning an idea into a product is you see the enormous amounts of money already being made by people who have done it before you. So there's this bootstrap issue to how people think about innovating in a capitalist economy. And that's partly why the innovation occurs in the first place, a possibility for huge gains. But what we – we've got to the point where that's debilitating potential investment in innovation.

[00:28:01] The banks are not providing the capital for people without money. They're providing the money – the capital people with money. And so what you get is you get a lock. You don't get the innovation. You get locked out by the financial system. So a point Josh Gans makes – I don't know if he's necessarily sort of saying this is carte blanche the way it is, but it's just an interesting discussion point. Yeah. Does inequality actually also create innovation?

[00:28:26] So he gives the example of everyone left university and they were paid half a million dollars and they could get a decent, you know, secure job. They wouldn't have any reason to innovate. But if they weren't particularly rich and they thought, well, I could get rich because I've got this fantastic idea, then I will innovate. And that's how they start to grow. The problem is have they, as you say, have they got access to the capital to make that happen?

[00:28:50] Well, surely if when they get – because I wonder how many people who do have a great idea and then the idea really takes off. They might have wanted to make themselves fairly wealthy, but did they want to make themselves uber wealthy or really did they just want to see their business grow? And if they become uber wealthy and that's at the expense of this creative destruction, then surely they would accept that they just get taxed heavily for it.

[00:29:15] And the benefit of that is early on they'd have more government support, less tax maybe, the access to capital for those early innovations that are not coming from the established wealthy set in the country. Yeah, potentially. And like a lot of innovation occurs with no monetary return at all, like the World Wide Web. I've forgotten the name of the guy who invented it, but Berners-Lee, I think it was. Yeah, Tim Berners-Lee, yeah.

[00:29:45] Working for the American Defense Advanced Research Projects Authority, DARPA, and what he wanted was a system that would survive a nuclear attack. We might need that system shortly courtesy of the American government, but the idea was a technology for communication that couldn't be taken up by a nuclear strike. That's where the internet came from. And he made no money out of that, but we couldn't imagine the world without that particular invention.

[00:30:11] So, we have a whole range of different ways in which inventions occur. And the thing we're looking at is we want to have – we do desire a high rate of innovation. So, does our system encourage it or does it stop it? And, of course, if you're a wealthy tech bro, you think, of course, it's enabling it, but it's enabling you. It's disabling the others. Yes. And if you gave them a very hefty tax, I mean, that's the argument that's often given, isn't it?

[00:30:37] If you tax them very heavily, if they make a mozza and you tax them heavily, you remove the incentive for them to innovate, which is just rubbish. Because they're still – if they're that type of person and they've got access to the capital early on, they're going to innovate. They're not going to go, oh, well, do you know what? I'm only going to become half a trillionaire. Therefore, I'm not interested. I mean, they're still going to do as much as they possibly can.

[00:30:59] So, just tax them for the consequences they have on society and use that to help other people get jobs and help other innovators to come up with other ideas which will compete against their place. Or you change the corporate system so you have something similar to worker share ownership as an automatic part of establishing a company.

[00:31:25] So, I don't think the taxation is the way to go through it, but something which says your corporate system, when it's set up, must be something which benefits the workers you hire, not just in terms of wages but also in terms of a share of profits, which is like Huawei. Okay, so I'm not talking – I'm not pulling an idea out of my backside. It's something which does exist. You get worker cooperatives in the Mondragon region. Cadbury's was originally a worker cooperative. So, all these things are historical examples.

[00:31:52] So, what we've got is – this comes down to the whole shareholder value mentality of mainstream economics. As I said, the whole role of the company is to increase shareholder value. Now, that denied the fact that it had other stakeholders, the workers inside the company, the firms that the company itself interacted with, the region where the company was. And if you look at the German system, that's probably gone into decay quite a bit since I first read about it. But the German system post-war had two boards.

[00:32:21] They had a corporate board and they – what I think was called the Offershrut. On the office right was an overseeing board that had the members of the company but also representatives of the workers, trade union, local community and suppliers. And the two boards had to agree on decisions to go forward. So, you had a sense that the company's behavior had to benefit all those groups and not just the founders.

[00:32:46] So, the American obsession with, you know, let the founder make a fortune and the devil take the hindmost is what's leading to this massive inequality and social dysfunction. Yeah. So, it would be like the EU saying, well, do you know what? American tech firms, if you want to operate in Europe, that's fine. But set up a European division of your company and you've got to have a proportion of the board or a proportion of the shareholders, which are people working within the business. It's got to be partially owned.

[00:33:15] Somehow, it's got to be partially owned by society, not just by you and your shareholders in America. Yeah. Yeah. The big challenge I see coming out of AI is the fact that the benefits are so concentrated because a whole social class potentially loses its means for getting an income. And this is like, if you look at the worker capitalist relationship over time, then of course, when capitalism first occurred, most of your imports were done by workers.

[00:33:44] Because, you know, the manual labor, like the original spinning Jenny, went from one spinning wheel with one person to six spinning wheels with one person. But it's one person's labor that meant the thing turned. And then you attached a shaft to it and a coal-fired power station to the other end. And you turn it that way. You displace the worker.

[00:34:09] But then there's so many other areas where you're starting to use this energy, give fossil fuel energy to expand work that the workers get employment elsewhere. This is the first time we're breaking that link. And that's why this one matters so much, that if we don't find a way of distributing the benefits through society, then 80% of society is going to miss out or 90% because they're unskilled workers. Yeah.

[00:34:33] And so, again, it gets back to creative destruction and saying, well, okay, you've got to pay, irrespective of the structure of the organization. I mean, you might have members of society helping to drive it and making decisions which are in the interest of society rather than the interest of the individual who's running the business. But there's still all the people who may not be parties of that who are still getting influenced by it. And so, do you tax them?

[00:34:57] And the argument against taxing is, well, that's going to make it more expensive for them to do what they're going to do, which means it's going to slow their progress. And I'd go, well, slow progress, given the speed of progress right now, is probably a good thing, actually, if anything to slow it down. Do we get revenue out of the tax or does the tax enable a high level of government spending? Yeah.

[00:35:23] Again, the taxation works well at local authorities and state levels because that actually is a revenue stream for them. For the federal government, it doesn't work anywhere near as well. Well, no, but it could be – and, you know, yes, so the government could create the money. Either way, it's like saying, well, somehow you've got to compensate the people who are getting impacted by all of this. So, Bill Gates, for example, talked about robot tax, if you remember. He basically said his idea – this is Bill Gates, you know, who earned quite a bit of money. It's worth a few minutes, yeah.

[00:35:53] And saying that every robot that replaces a human, basically the company should pay what would be the equivalent of the income tax that that human paid. So that there's – you know, because it's – and that would slow down the scale at which, you know, these companies would scale up their automation processes. And then you've got things like, you know, obviously carbon tax, which is a tax on the impact that you're having on society.

[00:36:19] If you've got a carbon tax, why not have a tax for social disruption? You know, for the damage you're doing to society, for all the high streets that you've closed and all the people that you've made unemployed. Surely these companies, because they're benefiting from the upside, they also should be paying for the creative destruction as well. And that has to be a cost in their business, which at the moment is completely ignored. So they are benefiting from the upside while ignoring the impact they're having on the rest of the world. And that's got to stop, surely.

[00:36:49] Yeah, I think – like I agree. It's a question of whether – what mechanism you bring in to do it and whether it's feasible to imagine America or Europe or the – versus China or parts of Asia for actually implementing a rule like that. Yeah. Because it's a global race, so they won't, of course. Sorry? It's a global race. It's a global race. So they won't introduce those rules because they don't want to – Well, someone will.

[00:37:16] I mean, the Chinese have got more likelihood to do that because of the social objectives built into their system. They will do things like say, okay, you know, if we displace workers, then the workers are part owners of the company in that sort of work cooperative way. So they get a higher revenue coming out of it. They're doing less work and getting a higher revenue. Like, this is where the Star Trek future comes in because the vision of Star Trek is where machines do everything, do all the manual work.

[00:37:45] And you're left with just – when you're going out and exploring the universe, then the Star Trek myth or doing artistic things. It's a – you go back to humans being creative in their own community social circles rather than being basically wasted, which is what happens at the moment. If you lose your job, you don't have enough income to be able to do anything other than get wasted.

[00:38:11] So we have a garbage bin at the end of our creative destruction rather than a recycling system. And it is a recycling system. So right at the very beginning, I gave the example of if I was to burn down a shop, I'd be found guilty of burning down that shop. I'd go to jail or pay a hefty fine or whatever. But if I stop that business being in business because I've created something that is so competitive, there's just no way they can react. Yeah.

[00:38:41] I get away with it. And yet you could – I'm surprised, you know, maybe we will start to see test cases where there are companies that are found guilty of corporate negligence. The impact of their business on society is seen as being negligent because it's detrimental to the broader economy. Benefit to the individual company but not a benefit to the economy as a whole.

[00:39:08] I don't know legally how that stands but it feels like that's the direction you have to go in as well. So you can't have carte blanche to introduce something which is going to be beneficial to you but damaging to society as a whole. You should be sued for that. Well, there should be some system that distributes the benefits more widely. Yeah.

[00:39:26] And that's again – this is why it's – when you think about it, it's quite crazy to have Elon Musk talking about a universal high income because that means he's talking about high government spending to enable people who don't have a job to earn enough to buy the goods and services being produced by the company here in his friend's own.

[00:39:45] So to me, it's the ideological contrast between the rapacious capitalist attitude that you get from Musk and his friends versus the fact they realize they're going to continue selling when they wipe out the mass market. Then how are they going to – how's the mass market going to have the money to buy their products? Yeah.

[00:40:02] So this is a real dilemma and the only solution is something which is semi-socialist, whether that's requiring firms to have worker management or worker shareholding so workers benefit from the higher profits and therefore that compensates for jobs that might be lost. Or you have a government which spends money to give people, irrespective of whether they're working or not, and gives them a sufficient income to be able to buy goods and services and be comfortable.

[00:40:30] But if they want to be more than comfortable, then they've got to go back and join the innovation cycle themselves. Yeah. Well, Elon Musk did talk about – I mean, he's been quoted once. I think he's quickly backtracked on it. But he did actually say that, you know, in this world where everyone is given the money that they need to do what they want to do because computers and robots are doing everything else, he did raise the question actually whether in that world money would be needed at all, which is like the early days of communist Russia. Went down that road as well, didn't they? So he's going full circle on all of that.

[00:40:59] But here's the other thing as well, just as a final point, which is – I mean, clearly laws need to change and we're just very slow on changing them because the world's not caught up with the impact of all of this. Even though it's been going on, as we said, since the 60s where, you know, the wealth divide has just been growing so enormously. But it's a small circle of people who are putting money into these businesses. So this is a point which you might like from Joshua Gantz. You should read this book actually. You might like some of the points he raises. Why not? Okay. I haven't seen him for 30 years on IDAD.

[00:41:30] Oh, I don't know where he is now. I think he's out of Australia. He's living somewhere else, isn't he now? I'm not quite sure where he – I think he might have gone to the States. But anyway, because the same companies, same people are putting money into these companies. If you've got two companies and they're in competition with each other, then that's a healthy environment. If you've got two companies where they've got shared ownership, they're not going to compete quite so much. They're going to start colluding because they see it's a beneficial interest for them both. So you don't get full competition in that sort of scenario.

[00:41:59] And these big tech bros are talking to each other. We're seeing with AI, there's AI deals being done left, right and center. And it's not full-on competition. It's just how can we, as a very small select group of society, garner more and more control over everybody else? Us, the 0.1%. How can we collectively get one over everybody else? And that's not competition. No. There certainly is a lot of collaboration. I mean, they're cutthroat.

[00:42:29] Some of them are going to die in this AI battle. So the cooperation won't survive a massive competitive venture. But, yeah, certainly there's collusion at the top level. And if you want to see who talks about that, read Adam Smith. He actually talks about you rarely get a group of businessmen together except to undertake a conspiracy against the public. And that's Adam Smith. Yeah. A while ago now. A while ago now. And it's still happening.

[00:42:57] So, I mean, it's clear there's some basic rules of competition and innovation and domination that need to be introduced. So we need to be saying things like, you know, there needs to be a limit on joint ownership between one company and the next. There needs to be some sort of way of compensating for the creative destruction that you've caused.

[00:43:21] There needs to be some way that the ownership and operation decisions of these companies, which have a detrimental impact on society, should be determined by society rather than this small group of individuals. I mean, it's a big job. Yeah. But we're not even looking at it. We're not even addressing it. Because in this race to dominate AI, most countries are just saying, sure, come in here. We won't tax you very much because we realize if we tax you too much, that's going to be a disincentive for you to be here or for you to come up with your fabulous ideas.

[00:43:50] We're just going to roll over, let you tickle our tummy and you just, you know, take what you want. And we're not doing anything about it. Yep. Okay. We'll crash into this one rather than working out. And gee, that's so unusual. Normally, we work these things out before we have an accident. Yeah. Well, that's where we are. Exactly. All right. Very good. We'll catch you next time, Steve. Thank you. Okay. See you then. Bye. The Debunking Economics Podcast.

[00:44:19] If you've enjoyed listening to Debunking Economics, even if you haven't, you might also enjoy The Y Curve. Each week, Roger Hearing and I talk to a guest about a topic that is very much in the news that week. It's lively. It's fun. It's informative. What more could you want? So search The Y Curve in your favourite podcast app or go to ycurve.com to listen.