The Tech Bias Against Politics

I see four reasons why Silicon Valley sees nothing but basic income as the preferred solution to our mounting social problems.

First, Entrepreneurs in general, especially when they’re young, well-educated white men from privileged backgrounds, have no reason to have any familiarity with the complicated and unattractive world of the social state. This is true in every country.

The 1960s counterculture inspired the tech world’s libertarianism — pictured are legendary counterculture figure Steward Brand (left) and Amazon CEO Jeff Bezos

Second, there’s a myopia that is specific to the US: the social state there is designed so that only the poor, the old and the unemployed are eligible for social benefits. The fact that the US used to be the sole developed country without universal health insurance makes the US social state all the more of a riddle (even though healthcare sucks up 20% of GDP).

Third, there’s a libertarian ideological bias in Silicon Valley that seems to turn people into ignorant morons when it comes to social state-related issues. As engineers, some don’t even get the political stakes. In any case, few express any interest in government-related issues, which remain uncharted territory (even though the US government made Silicon Valley).

Fourth, even when they genuinely care about the less well-off, Entrepreneurs tend to focus too much on what they perceive as a giant inefficient bureaucratic machine rather than on the variety of life-saving benefits that this machine provides. In their eyes, because it’s supposedly so inefficient, the social bureaucracy should be swiftly replaced by a simple seamless app—and, hey, let’s call it “basic income”!

Despite much progress, there’s still a wide gap between technology and politics

Because of those biases, all the tech people who try and imagine new forms of benefits for the digital age tend to completely disregard the most critical dimension of all: politics. Yes, there is a political dimension to the social state, and it is not pretty—just consider the ongoing fight around Obamacare. The best way to understand social state politics is to realize that the world of the social state is effectively divided into two worlds.

The first is that of social insurance, or contributions-based benefits. In the Evonomics article I mentioned above, Tom Streithorst explains that “demand is the Achilles heel of the modern economy.” Fortunately, as he reminds us,

Over the past 80 years, we have solved the problem of demand in three very different ways. The first is war… The second, during the post war Golden Age, was rising salaries… In our most recent era, from 1982 until the financial crisis, the engine of economic expansion was ever increasing levels of private debt.

This incomplete list reveals, once again, an American bias. War, rising salaries and household debt (what Colin Crouch calls “Privatized Keynesianism”) may have played a key role in supporting demand in the past, especially in the US. Yet they’re only one part of the picture when it comes to supporting household consumption! There is also the entire system of the social state, mostly consisting in social insurance, which represents no less than 19.2% of GDP in the US, 21.7% in the UK, 25.9% in Germany and even 30.1% in Denmark, one of the most redistributive social states in the world (see OECD social protection figures of 2014).

Jason Furman, the White House’s chief economist, made the convincing case that Obamacare helps support entrepreneurship

So it’s not as if there was nothing to support demand on an ongoing basis. The social state, notably social health insurance and pensions, effectively complements household income with social benefits and subsidized services. It transfers money to the many, letting them consume more, or it spares them from the obligation of saving more, thus freeing a substantial part of their professional income for additional consumption. If that is not a massive permanent boost of demand, I don’t know what is. Indeed, it is widely documented that mitigating risks for individuals through social insurance sustains economic growth, supports small businesses, enhances individual freedom, and makes entrepreneurship thrive.

Politically, social insurance programs are extremely resilient. Paradoxical though it may seem, recipients who are blinded by their hate of government often don’t realize that the social insurance programs they enjoy are operated by the government. Just read that article “Keep Your Government Hands Off My Government Programs!” about what Prof. Suzanne Mettler of Cornell University has dubbed the “submerged state”.

There’s actually a second world of the social state, that of what the Americans call welfare. Welfare is not about social insurance providing contributions-based benefits to middle class people. It’s about aiming benefits at the poorest people, those confronted by economic problems whose gravity you likely can’t even fathom, sometimes aggravated by mental health problems, crime-ridden surroundings, and a lack of basic public services such as healthcare, transportation, and education.

Swedish Social Democratic Prime Minister Olof Palme, who was tragically assassinated in Stockholm in 1986, thought that welfare benefits were politically destructive and dedicated his life to developing universal government programs instead.

Because it benefits mostly the poor, the very existence of welfare has become a powerful argument for conservative politicians seeking to polarize the electorate. You may remember that Ronald Reagan, as a presidential candidate, made great profit out of denouncing what he called “welfare queens”. It’s fair to say that basic income, if implemented, would endure the same political fate as welfare in general: “We, the rich, don’t need that basic income. So why not aim it only on the poor, so as to lower our taxes… and then denounce them as welfare queens?”. (You can read this backstory article about the real-life “welfare queen”.)

Speaking of which, a historic speech by Olof Palme, the late Swedish Social-Democratic Prime Minister, is worth quoting at length to help you grasp how tough the politics of the social state has been through the ages—and how much basic income, unlike social insurance, would be vulnerable to conservative critics: