If Capitalism is broken how could we effectively move beyond it?

Social Contribution, competition through meaningful work, universal basic income and mass volunteering

This is a longish read (by modern standards) so maybe nobody will read it, but apparently Einstein said “If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and five minutes thinking about solutions”, so here I’m trying to set the scene, highlight some of the problems I have found and then outlining a possible solution. There may be problems I have missed and/or my solution might not fit, but in any case I wanted to get it out there and I can’t really get it much shorter without losing too much substance.

On Monday I went to a debate put on by an organization called intelligence squared, hosted by the Economist’s Anne McElvoy on the topic of Capitalism and whether it is still the best form of economic organisation that we have or if we need something new. It pitted the outspoken and theatrical former Greek finance minister, Yanis Varufakis against Gillian Tett, Chair of the Editorial Board and Editor-at-Large, US of the Financial Times.

Gillian was defending Capitalism, saying that it is still the best way to stimulate innovation through competition and arguing that better regulation is what’s needed to fix the current problems that are causing distorted markets etc. In my opinion one of the most powerful arguments in her support came from an audience member during the Q&A, pointing out the current monopolies are no worse than what Rockefeller had with Standard Oil, and that new regulation successfully brought that under control.

Yanis was arguing for his form of Socialism, the details of which were never really laid out as he kept urging people to buy his new book, which explains everything. He talked more about the problems of Capitalism and differentiated current tech company monopolies, from previous monopolies, by arguing that they operate outside markets and create their platforms.?

I was not fully convinced that this was a real differentiator to monopolies, since arguably monopolies also don’t have to operate on a “market” as such but offer their services in their own arena, but I don’t think that’s important. I can’t say much about his “own brand of socialism” as it wasn’t detailed, but I was interested by concerns and aspirations both sides listed. I did not feel the other sides always engage with those fully. I was also intrigued to notice certain concerns that were not tackled deeply at all.

Below are what I think are some of the most critical issues to consider when it comes to Capitalism and how we organise the global economy:

- How do we stimulate continuous growth and innovation??

* Capitalism clearly works, and other forms like socialism haven’t in the past

- Wealth disparity caused by Capitalism causes social unrest and unhappiness

- Wealth disparity results in concentration of power and ability to lobby, which undermines the effectiveness of system correction through regulation

These topics were also raised or touched on during the presentation. I would add a couple of additional points:

- The accumulation of wealth and power stifles competition.?

* The wealthy have more capital to buy success and outspend competition (this may be a controversial point so I may need to elaborate later)?

* Many people can’t compete with great ideas in the first place as they don’t have the time. They need to spend all the time on making ends meet

+ Anecdotal evidence to the contrary, stories about people who succeeded despite hard challenges, don’t undermine the truth that on average it is harder to compete if you don’t have enough money for your day-to-day survival and therefore that it is detrimental to overall competition

- The pursuit of capital, has been an unsatisfactory provider of meaning to people’s lives, with ever higher rates of depression and mental illness being only the most visible signs of this?

- A really good way to regulate the economy needs a good feedback and recalibration mechanism (e.g. if capital begets more capital and stifles competition in the process the system does not recalibrate effectively)

Yanis introduced his speech by comparing the current times to when Adam Smith first wrote of Capitalism and Marx of Socialism. The beginnings of a new time. I tend to agree that we are at the tail end of the current social and economic organisational structure. The argument goes that we went then from feudalism to a capital focus world view. Yanis thinks now we are at the next change over. While I agree with that, I don’t agree that it will likely be from Capitalism to Socialism. To me essentially Socialism and Capitalism are two sides of the same coin. Its society focused on capital and how it gets distributed in society. I think we could be ready to move into a new system?

So here is my idea of where we can move next. At the heart of it I think we can continue to evolve best if we manage to shift the main value in society from capital to valuing social contribution. You help find the cure to a disease that’s great social contribution. You help to look after elderly people, even “just” your parents that’s social contribution. You build an amazing app or service that brings people joy or makes their life easier or better that’s a great social contribution. You make your head fund some more money through some brilliant trades… in itself that’s not a great social contribution. If you helped finance something that was a great social contribution in the process, maybe that’s a half point.?

Sounds like wishful thinking or just wishy washy, but this is how I think it could work and why I think it would be better than the current system. In my opinion it addresses the big criticism of non-capitalist systems. How do you keep up innovation and growth. A lot of research has been done into the area of motivation and what has been demonstrated is that the best driver for innovative and creative work is meaning. It is not money. In fact, financial incentives stifles innovation and only work well for repetitive tasks (idea credit Drive: The Surprising Truth About What Motivates Us - Daniel H. Pink). Putting value on social contribution is far more likely to ensure people feel meaning in their work.

Also, I’m not advocating the suppression of capital accumulation or a Scandinavian style “negative feelings towards people who stand out”. We should celebrate the most capable in our society. But we should celebrate them for their social contribution, not how much money they managed to accumulate, irrespective of how they did it.

Next, I want to explain how I would start the shift to such a new social structure, before highlighting some of the other potential benefits. I think we need to start with Universal Basic Income (UBI). This means everyone in society get enough money to live on. Here are some important points. Everyone gets it so it’s not means tested, which means there is no stigma in getting it / living of it. It is not the only money you’re allowed to have, but if you want to earn more, you can.

?(I will touch on how this could be affordable but I admit this is high level speculation that it might be affordable and while I am confident long term it is sustainable; the transition might end up being hard like many transitions.)

The benefits I see are

1.?????People will look to do things that they consider to be meaningful, which in turn means they will do them much better.

a.?????There will be people reading this being confident that many people will be lazy and choose not to work given the opportunity. But I would argue that if you aren’t forced to work you will want to get meaning somewhere so you will do something (Maslow’s Pyramid)

b.?????Some people in paying jobs now don’t put much effort in because they are disheartened with their job, but they need a paycheque. This situation is likely to diminish and therefore efficiency should rise. You are more likely to work in a given job because you want to?

2.?????The opportunity for competition, and with it innovation, will rise. Jeff Bezos is a smart, driven, and hardworking man and he built an amazing company. But he also had the opportunity to do so. Many of the +1m amazon warehouse employees around the world are probably very grateful for the job but wouldn’t have the time to work on another great startup idea after their long day at work.

3.?????Mental well-being will improve if we provide the structures for people to find meaningful occupation (see volunteering below)

4.?????Social care, which is a problem around the world, will improve, as people are more likely to take time to look after their elderly family members again.

While there is obviously a big cost associated with UBI, Rutger Bregman points out some factors that might mean it’s more affordable than we think, in his book Utopia for Realists. It’s a simple system to needs less administrative overhead then other forms welfare payments like unemployment benefits, means tested subsidies, tax breaks, child benefits etc., so in a total replacement calculation those savings should be considered. A few studies on UBI suggest people take better care of their health when they have the money to do this, resulting in huge savings in national health and care costs. Parallel savings could be expected through resultant reduction in crime and therefore policing cost. And as we touched on already mental health and elderly care might reduce as a burden and cost to society. I would also argue that taxes might increase if social productivity increases. This is as deep as I can go in my defence of UBI at this stage, but there is clearly a big question of how it should be structured and could be implemented.

I think the next critical piece might be some combination of crowdsourcing and volunteering. Some people will find their own meaningful occupation or start new ventures where they need help, but many people will still need help to find things to do that are meaningful to them. Fortunately, research seems to indicate that helping others seems to provide meaning to people. So, whether it is government or entrepreneurs or corporates, “job ads” will likely have to change to show how a role is meaningful. And if it’s not, it may demand higher financial compensation to attract people. But while money can still be used to motivate people in this way, UBI prevents the exploitation of people through minimum, but necessary, wages.?

It may well be that Government will have to rely on help from volunteers to run various social services and it may mean that there will be economic pressure to use robotics, AI, automation, and other innovations to get rid of jobs that too many people find meaningless or too unpleasant. If you have to pay too much to attract someone to do a shitty job, the economic value in automating it might be high enough to do so.?

My assumption is that if everyone has enough to live on and many more people are doing jobs that bring meaning to them, then there will be less resentment about wealth disparity. Also, while being rich, famous, and successful in such a society is possible, it may be that it will be more correlated to actual social contribution (for one it will be much harder to get rich through the exploitation of others). The wealth disparity, which currently keeps growing getting more acute (Capital in the Twenty-First Century Book by Thomas Piketty) may reduce.?

A final idea I wanted to raise was brought up by Jeff Booth in The Price of Tomorrow: Why Deflation is the Key to an Abundant Future. He argues that one of the major challenges to our capitalist economic model is that it’s based on inflation and continuous growth, however there are strong deflationary pressures that will make this hard to sustain. Essentially technology is making it cheaper to deliver services, so while UBI has a cost, if we embrace deflationary pressures from technology, the cost of living may be coming down. He also argues that in the future energy cost may be minimal thanks to “free” renewable energy. Given what’s currently going on in the energy markets, I almost feel embarrassed writing this, but it does seem reasonable that with time, more efficient battery technology and renewable energy may make this a reality.

So, in summary, a society that values social contribution above all rather than capital. Use UBI to liberate people from the necessity to work and thereby drive them to take up occupations that are meaningful to them and where therefore they will work better. At the same time the freedom to work on things that are of interest will stimulate innovation, reduce wealth disparity and social resentment.

Still open and other questions that I can still see are:?

- Is UBI / such a transition really affordable

- Making “social contribution” the highest social value is hard, and while capital is not a perfect measure of value at least capital is an easy one because it’s clearly countable and fungible?

- Will volunteering and meaningful jobs provide enough opportunities to stimulate a whole population that doesn’t have to, but can choose to work

- Can you decouple the question from how the economy is structure from how government is structured? I have given this no thought, but if those two are inextricably linked, then is our current form of democracy adequate?

- I already said I believe “a really good way to regulate the economy needs a good feedback loop and recalibration mechanism”. Does this solution offer this?

- One friend suggested a new cryptocurrency that would correlate with social contribution somehow. I haven’t thought about the technicalities of that yet, but thought it was too “in vogue” an idea not to mention

In this essay I did not spend 55 minutes of my hour on the problem, but I wanted to show that if we embrace all or many of the problems, we can come up with quite different solutions from the old capitalism vs communism debate.?