Crossing the Rubicon

In 49 BC Julius Caesar crossed the Rubicon river which marked the border between Gaul and Italy. In doing so he precipitated the Roman Civil War, which ultimately led to the end of the democratic Republic and the appointment of Caesar as dictator for life.

During the time of the Republic, provincial governors served as generals of the legions within the territory they ruled. To protect the Republic from its own armies, Roman law mandated that any provincial general who entered Italy with his legions was guilty of treason and automatically forfeited his command. The crime for such treason was death, not just for the commander but all of his troops as well. For Julius Caesar crossing the Rubicon was a point of no return.?

So it happened this week that the Australian newspaper reported that for the first time since statistics have been kept, the number of eligible workers in full-time employment fell below 50%. Like the crossing of the Rubicon all those years ago, this represents a point of no return for skilled labour in our modern economy. We are now officially in a Post-Capitalist age – although no one will say that in public just yet. The already strained economic models which try to explain market economies in terms of capital and labour are officially outdated, but no doubt they’ll linger on for years to come as tools of confusion and distraction.

We have entered a new economy predicated on digital and financial capital. Skills and qualifications will become increasingly devalued. People who lack either digital or financial capital will become increasingly marginaliszd. Their economic and political fortunes will start to resemble those of Australia’s first Indigenous peoples. The reason for this is that digital technologies, by their very nature, conform to power-law distributions. When an industry gets digitized (think music or photography) its products become cheap and abundant while any profits generated by the industry get massively concentrated.

I was talking recently to a friend who completed his PHD at Sydney University in 2017. When he began his thesis in 2013 bitcoin was trading at $103. By the time he finished in 2017 it was on its way to $18,000. It’s now trading at around $7,500. Many other cryptos have followed a similar trajectory.

Most people perceive the rise of crypto-currencies as an inflationary mania in an asset class that’s little more than a fiction. But in reality, it’s quite the opposite. The rise of crypto currencies represents a massive (and I claim permanent) deflation in the value of skilled labour. Digital currencies are just one class of digital products whose value is soaring, while the value of the industries being disrupted by these technologies collapses. Unfortunately for humans, much of what we do can be cheaply and easily digitized.?

Over the course of his PHD, the value of my friend’s labour collapsed (in digital terms) from roughly $1000 bitcoins a year, to 6 or 7. Even today I could buy his talents for a whole year for less than 15 bitcoins. Had I bought those coins in 2013 when he began his PHD for $1,500 (the market price) the trade I could make today: i.e. his labour for a year, for $1,500 worth of digital coins, represents a travesty. But this is our future.

According to the ABS only 40% of eligible workers under 30 are in full-time employment. No stats are given for people over 55 but I’m pretty confident that many of them are also experiencing a decline in full-time employment. A number of friends my own age have been laid off from senior roles only to find themselves working as self-employed consultants or as ‘temporary executives’ through labour hire companies – even as their kids rely on them for financial support well beyond their childhoods.

Almost 32% of our workforce is employed part time and 25% of all Australian workers are in the ‘gig economy’ which means they lack permanent, regular work with benefits and instead subsist at the whim of the casual job market. One wonders how people in the gig economy will ever enter the housing market in Sydney or Melbourne. As this trend exacerbates, one wonders what will become of lifetime home mortgages and private school enrollments. Neither of which are sustainable on a ‘gig’ income.

As these changes have swept through our economy, the traditional representatives of working Australians, the union movement, have been missing in action (MIA). They no longer speak for anyone other than the narrowest interest groups. Instead they live off their property assets and pension fund royalties while functioning as finishing schools for aspiring politicians.

Some time back I approached one of the larger trade unions with an appeal that they sponsor a public discussion on the impact of automation on employment. They were not interested but to prove themselves technically savvy, they installed a chat bot to talk to their members should any of them bother to ring up and ask for representation??? They then went back to their wheeling and dealing for the next nomination to a safe Labor seat.

Ironically, just as the union movement went MIA, the ABS data has revealed a substantial increase in the number of Australians working under industrial awards – up 25% since 2012. I read this to mean that a significant portion of the population are falling down to the lowest level of the employment ladder, award-based jobs. Only now they have no one to represent them.

The solution to this problem is not more training and it’s not ‘make work’ programs. The answer is a structural change in how wealth is calculated and distributed in our society. We need an intelligent discussion on this topic as a matter of urgency. But bringing up wealth redistribution proposals in Western societies today is like challenging the authority of the Catholic Church during the middle ages – a heresy.

We don’t need a policy on minimum income. We need a policy on maximum income. Western societies have become so inured to economic injustice that we think it’s OK for the 3 richest men in America; Bill Gates, Jeff Bezos and Warren Buffett to own as much wealth as 50% of all the people in that country. The insanity and injustice of this situation becomes apparent when you ask yourself; would it be efficient, or fair if these 3 men got to possess the whole northern half of America exclusively for themselves while everyone else was crowded into the southern part of the country?

Imagine if the Great Lakes, Vermont, Boston, Portland and Seattle, in fact the whole top 20 states of America were deemed the ‘private property’ of just 3 people and off-limits to everyone else. What person in their right mind would think such a situation was tolerable? There’s not even a corrupt politician who could bring himself to support such an idea. But when it comes to our economy, we’ve all been indoctrinated into thinking such distortions are natural and right.?

Digital technologies represent the greatest wealth creating boon we’ve ever seen in history, far bigger than the industrial revolution. Our problem is that we don’t know how to handle the wealth they are creating. This wealth is not just financial, it’s also temporal: the requirement to have the whole population labour for 8 hrs a day to create the goods and services we need is already more of a convention than a necessity. Very soon we will see whole industries automating to a large degree. Human power will go the way of horse power. Our challenge at this point will be unique in human experience. What on earth are we going to do with all that wealth and time???

Alan Hamilton