The world as we know it is coming to an end. A succession of inventions threatens existing economic activities and the income they provide. The political world is slow in responding to the social challenges of a new economic paradigm.

The above will sound familiar to contemporary commentators and historians alike.

Similar words were used to describe the first industrial revolution some two hundred years ago - artisans giving way to Spinning Jenny’s, Slubbing Billy’s and so on. Innovation did not, as feared, lead to mass unemployment. However, it took almost a hundred years of strikes, and lobbying by unions and workers parties before the exploitation of these “new” workers was tackled by meaningful social legislation.

Refrigerators and Soviets

One hundred years after the first, a second industrial revolution, bringing electricity and conveyor belt Taylorism, carried with it an inherent social component. Higher wages through higher productivity allowed for factory workers to buy the Tin Lizzies and refrigerators they themselves were producing. Ever cheaper oil lent a helping hand as well.

Authorities, still under pressure from unions and socialist parties, now had the means, taxing the increased output, to further expand the welfare state. Social reforms within a market framework in addition were seen as a way to fend off the communist threat.

Watts to Watson

The “third industrial revolution” – automated employees, otherwise known as robots, started supplanting workers from the early seventies onwards. This, together with an oil crisis and, after the fall of the Berlin wall, globalizing trade, slowly but surely put the thumbscrews on Western social safety nets.

Today free market competition marches on unchallenged. Meanwhile a “fourth technological revolution” is taking place: smarter and smarter computers have started taking on more and more intellectual jobs.

Watson, one of IBM’s supercomputers, systematically reads and “understands” a compendium of the world’s medical literature to help doctors diagnose illnesses. Bloomberg’s humdrum stock market reports are written with little human intervention. Cars are learning how to brake, steer, park and more. Computers are being programmed to program themselves. Belgium’s embattled autoworkers, as well as office-bound knowledge workers are in dire straits. Not Yash in Bangalore benefits but Samantha, the intelligent operating system given a voice by Scarlett Johansson in the movie “Her”. Reality is fast catching up with science-fiction.

People jobs disappear

Which tasks will the new “knowledge power” perform when all the boring jobs are taken by Siri or Cortana?

Which tasks will the new ‘knowledge power’ perform when all the boring jobs are taken by Siri or Cortana? Which people jobs are set to disappear? What’s left to do for humans? Will these new jobs further loosen the employer-employee relationship? Will the new “on-off-worker”, freed from daily commutes and fixed working hours, experience this as a liberation: the ability finally to reconcile family and work? Or will he or she be enslaved by email and smartphones, on call twenty-four seven, and the crippling fear of what’s (not) to come, like the tons of paperwork between beginning and end of each temporary job?

Red scare to red tape

In an ideal world more technology leads to higher productivity per worker and - when efficiently taxed and redistributed - more funds for social policy. Previous innovation waves rendered social policy both necessary and possible. Government stimulates or steers the transition, as much as possible mitigating negative effects. Traditional levers of such social policy are unemployment benefits, vocational training, investments in infrastructure, etc..

However, since its inception the social safety net itself as well as the financing thereof – adapted to changing circumstances but also to cater to various special interests – has become ever more complex, a tangled-up mess of red tape understood only by hardened professionals and lawyers.

The swollen ranks of dedicated government and payroll agencies add nothing to the economy. They have become as much of a financial burden as the welfare recipients themselves. The most vulnerable are barely able to navigate the Byzantine maze purported to help them. Entrepreneurs, more mobile than ever, turn away in disgust.

Brain drain versus brain dead

Centre-right parties, through their constituents, intuit the problem, but in analysis and recipe offer few ideas beyond tweaks or budget cuts, often allowing problems to fester in the hopes a veritable budget emergency will mandate a more drastic rollback of the safety net.

Education budgets are cut whereas the new economy requires substantial investment.

Education budgets are cut whereas the new economy requires substantial investment. The highly skilled tend to do well in the flex-economy. Governments instead seem to bet on Sunday shopping, after-work shopping, and facilitating the construction of more and more shopping malls. Such nihilistic policies threaten to reduce citizens to ever-more indebted zombie-like consumers.

Socialist governments on the defensive offer tweaks, budget cuts disguised as Pyrrhic victories or the other way around, fingers crossed for the next economic upswing.

Free to decide

What if you could radically reduce the size of government, create hyper-flexible labour markets, and at the same time offer flexible workers unprecedented protection? The idea to provide every citizen with a basic guaranteed income, no questions asked, is not new and has been field-tested on a small scale for decades. People as far afield as Martin Luther King Jr. and conservative economist Milton Friedman have advocated various forms of the scheme.

Under most scenarios government would no longer need to hire armies of officials to make sure the unemployed are actually sitting at home doing nothing. Citizens would be free to decide whether and how much they want to work in addition to a monthly-allocated living wage. Benefit traps, fraught retirement age negotiations, whether and how much pensioners are allowed to work on the side, would become a thing of the past.

Waste of space

The cost of such a guaranteed basic income varies according to the specific monthly amount put forward. A Belgian working group of basic income proponents recently suggested 1500 euros per month per adult citizen, funded by scrapping a panoply of targeted benefits as well as thousands of government workers doing the targeting.

Even more difficult to quantify, and usually not included in cost-benefit estimates, is the innovation dividend. The entrepreneurially-inclined who, in uncertain times, cling to a brain-dead nine-to-five job, are suddenly free to pursue innovative and potentially lucrative ideas.

Costs related to stress, burnout and absenteeism decrease. The unemployed who in the present context gain little by accepting a job are activated, while others are free to care for sick or elderly family members. More broadly: doing what you like doing equals doing a better job at it. Again: everybody wins.

Overhauling the education system will be critical to transitioning to this hyper-flexible, hyper-social, hyper-innovative future. Businesses will benefit from better-motivated employees, but will have to compete harder to retain them.

Cake or death

Economists will have to use other indicators than hitherto employed to gauge the health of economies. Activity rate, working population, and unemployment, would in this scenario need to be redefined.

As long as the overall size of the cake increases, everyone automatically receives the same slice of that cake as long as he or she lives.

Of interest to the new, freer economy will be the overall productivity per worker on the one hand, and what is paid out to citizens. Automation, electronic or mechanical, will no longer be a threat to the system.

As long as the overall size of the cake increases, everyone automatically receives the same slice of that cake as long as he or she lives. If the aggregate economy adds enough value, any which way but loose, all citizens benefit. The overall productivity increase of these highly motivated, thinking citizens provided with a basic income will improve a nation’s competitiveness without rolling back the social safety net.

Local economy

Like the first and second industrial revolutions the current shift combines novel production techniques with a new energy paradigm. Europe not only competes with China and others on labour cost, but also on access to increasingly expensive fossil fuels –current, temporary dip notwithstanding. The present Western economic system is based on cheap oil, allowing one to commute and shop far from home.

But how many people would put up with daily traffic if, supplemented with a basic income, they could work closer to home in a job not necessarily based on producing or moving objects? Both the renewably energy revolution, and basic guaranteed income point to a more local economy. Electricity from wind and sun is typically consumed closer to the source, negatively impacting nations’ trade balance less than oil or gas and costing less in treasure (and lives) to get the stuff to consumers.

Bathwater

The US Affordable Care Act, known as Obamacare, was conceived as a (more or less) universal health insurance –one of the last industrialized countries to adopt one. Perhaps equally important, the logic of the law cuts employees loose from employers who in many cases picked up the tab for increasingly expensive health policies. The fear of getting sick without such a cover is thus no longer a factor in the insured individual’s choice of work. The Basic Guaranteed Income extends that philosophy to the cost of life itself. A living allowance, not unlike passing Start in Monopoly, covering basic needs also dispels the erroneous notion that to live better one need only earn and consume more.

To completely disconnect growth from ‘making more things’ has, partly due to the current technological revolution, not only become possible but necessary.

Economists however shouldn’t fret. The concept of growth itself shouldn’t be thrown out with the bathwater. In Belgium for example, greenhouse gases emitted per unit of value added, declined between 1995 and 2008 by 35%. According to a recent report the amount of globally emitted CO2 seems to have slightly declined in 2014 compared to previous years for the first time not due to an economic crisis.

To completely disconnect growth from ‘making more things’ has, partly due to the current technological revolution, not only become possible but necessary.

Moving towards a Basic Guaranteed Income policy will reinforce ecological de-materialization of the economy and digital flexibility. Economic development will become synonymous with development as such, something intangible, increasingly taking place in the minds of its participants: self-determination, self-realization, at once global, freer than ever and more together. Or as economists call it: the pursuit of happiness.