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The Super Depression Is Coming, And Only Basic Income Can Prevent It


Source: | Original Post Date: May 29, 2014 –


Did you read about the Great Depression in high school? Well, the one that’s coming is going to be twice as bad, and the only thing that can prevent it is basic income.

The Economist predicts that 47% of all jobs could be automated within 20 years. The unemployment rate in the Great Depression peaked around 25% — and things were bad, really bad.

Before 1930, countries like Canada and America didn’t really have social programs like welfare and food stamps. There was no social security net. If you ran out of food, you had to try and get help from churches and outreach groups. There weren’t any government-run programs.

The knee-jerk response that people like to use against repercussions from automation is the Luddite argument. The Luddites were 19th-century English textile artisans who protested against newly developed labor-saving machinery from 1811 to 1817.

They were protesting all the new inventions that came out of the industrial revolution. They were afraid that the machines would put them all out of work… And they were right. It did. You see, all throughout human history we’ve been inventing new ways to make things easier, and each major invention usually puts some people out of work.

Now here’s the difference between what’s happening now (automation) and what happened in the 1800s. The Luddites were a relatively small group of people, and they eventually all moved on and found new jobs. What we’re looking at today is completely different because it affects millions of jobs, and the social safety nets we designed after the Great Depression cannot handle the sudden flood of people.

Eventually new industries will emerge and people move on to more creative-type jobs as robots take over the soul-crushing labor-oriented activities. You’re already starting to see it now. People are building careers on YouTube and Twitch. There are professional cosplayers, streamers, and gamers. But not everybody can be an entertainer.

The social safety net doesn’t just consist of government programs like welfare and food stamps. It’s a collection of various things like donations to food banks, getting financial support from your family, etc. But there’s a limit to the number of people that can rely upon the net before the entire system collapses under its own weight.

Think of the social safety net like a bridge. There is a maximum amount of weight that each bridge can hold before it breaks. If you stay under that limit, then it’s no problem. But if there’s a panic, and the bridge is overloaded, it’ll break… and we can’t just fix it tomorrow. It requires major repair.

Think of every system (bridge) as having three stats: Maximum Load, Current Load, and Expected Load.

The question is, how many multiples of the Expected Load will it take to reach the Maximum Load? Two, three, four?

That’s the million dollar question. How much unemployment can the social system support before we run out of food and welfare money?

Google just unveiled their self-driving car, which they plan on letting you summon to your front door like a taxi. And fast-food joints like Panera and McDonalds are moving from cashiers to automated kiosks and tablets.

Millions of cashiers are going to be put out of work, and before they’ve educated themselves (if they can even afford it) to perform the jobs of the future, millions of drivers are going to be put out of work by self-driving cars.

There are 5 million truck drivers in the USA getting paid more than $60,000/year. That’s 300 billion per year in labor costs just begging to be cut. Google’s self-driving car is going to obliterate those jobs.

If 47% of all jobs become automated, it doesn’t mean unemployment is 47%, it’s much worse than that. There are many more cashiers than there are taxi drivers.

The welfare systems that were created after the Great Depression had an expected load of 5-10% unemployment and a maximum load of between 15-25%. With all the cuts we’re seeing to social programs lately, the maximum load today might not even be as high as 15%.

But when unemployment goes over 25% the social system is going to collapse. There just simply won’t be enough food at the food banks, and there won’t be enough money in the federal budget for welfare.

Nobody wants to start a panic, so instead of the government saying “Hey you’re all fucked”, what we’ll see is increased means tests, and reduced payments as they attempt to handle the flood of unemployed workers.

But it will only get worse, because remember, the social safety net isn’t just government subsidies, it’s also food banks and financial aid from family members. So what happens when automation puts your entire family out of work? Now your parents have stopped supporting food drives and they can no longer afford to help you with your bills.

We’re looking at a complete—fucking—meltdown. Nobody has enough to pay their bills, there is little support from the government, and the food banks are empty. Crime is going through the roof, because people aren’t going to die in the gutters, they do what they need to survive.

And while you’re shivering in the kitchen, staring into your empty fridge, the Oligarchs are barely noticing anything. They have what they need to survive. Actually the 85 richest people control as much wealth as half the planet, so they’ve got a bit more than they need to survive.

So what’s the solution? Many economists theorized that one of causes of the Great Depression was income inequality. The economy produced more than it consumed, because consumers did not have enough income. Pretty good theory, if you believe the reason we got out of the Great Depression was World War Two.

War = jobs: Doctors, miners, farmers, scientists, soldiers, merchant seamen, school teachers, railway and dock workers, utility workers much more.

Jobs = income, income = spending… And spending drives the economy.

But unless we start World War Three, there aren’t going to be enough jobs in the future so we need another solution. Something simple, and efficient: Basic Income. We’re just going to give them the money.

Basic Income studies in Manitoba and Namibia have shown that just giving people money has many benefits:

* Lower health care costs
* Less petty crime
* Less domestic disputes
* Increased economic growth

Giving poor people money is in everybody’s best interest because they spend it. All of it. If they still have credit they spend over 100% of their monthly income.

And spending drives the economy. If you own any kind of business that does transactions under $1,000 you should be praying to the heavens that basic income gets implemented because it will result in a direct increase in your sales.

While housing the homeless, and feeding the poor is the right thing to do — it’s only a feature of basic income. Let’s talk benefits.

1. Everybody gets basic income. Even if you’re making 50K/year. So your income just went up $15,000.
2. Employers lose life/death leverage over employees so your boss will be forced to improve working conditions or people will quit. That means if you’re working, your environment is better. If you’re purchasing something, the employees are happier so you get better service.
3. You’re less likely to get mugged on the street. People only steal because either they need money, or they want money. Since they no longer need your money to survive, that entire group of muggers can sit at home peacefully.
4. Tired of being accosted by beggars? They’re gone. They don’t need to beg anymore. Their survival is guaranteed.
5. No more awkward conversations with family members who need help paying their bills or buying groceries.

How do we pay for this?

Guess what? You’re already paying for it.

* Welfare
* Food stamps
* Child tax credits
* Fraud related to all of the above

All of these are inefficient ways of disturbing money. You have to rent buildings, pay social workers, operate 1-800 numbers, design websites, and on and on. So instead, we just deposit the money into their bank accounts. Presto. Simple.

The bad news is, even if we kill all the bloated, inefficient social programs we still come up short. But we can pay for it with a small increase in taxes to the ultra-wealthy and by eliminating subsidies to corporations who are supposed to be creating jobs. Instead they’re using the money to invest in automation and eliminate jobs.

Have you seen this video? Amazon was doing this three years ago…

Automation is good. It’s the path to utopia. Historically, technology has eliminated jobs but created new ones. The same thing is going to happen again, but the jobs are going to go to robots or genius-level humans. Not everybody can perform high-level tasks in competitive STEM fields.

There’s no reason why a handful of people should benefit from humanity’s greatest inventions while the rest of the planet starves on the street. Just give them the money. Even if the homeless never amount to anything more than a consumer, they still [provide value]( to the economy *and* society.

If we don’t reinforce the social safety net in the next 20 years — it’s going to collapse and cause a Super Depression. We need basic income.

Or Elysium might become a reality.