book_chapter/chapter_14.txt

Chapter 14 
Can Capitalism be saved?
Most economists would say Capitalism is stronger than ever. WeÕre not most economists. WhatÕs the problem?
CapitalismÕs life expectancy
Capitalism is committing suicide. This is not an accident. It is woven into the very fabric of the institution. All capitalisms must sow the seeds of their own demise by the very processes that make Capitalism Capitalism. Marx and Lenin both thought Capitalism was doomed. Their predictions were off by 100 to 200 years, their reasons incorrect, and Capitalism certainly outlasted Communism. 
But thereÕs a new threat. Businesses, especially large ones, must ultimately be more profitable than their competitors, or the competitors will buy them, or drive them out of the market.
Profit = Revenue Ð Cost
Increasing revenue is harder than cutting cost. The easiest way to cut costs is to cut labor. The easiest way to maintain production and cut labor is to replace people with robots. 
This is happening in nearly every industry. In the past, it has been possible for labor to shift to new jobs that machines are incapable of. We believe that automation will soon reach a point where thereÕs little left to shift to. As machines get both more dexterous and smarter, fewer people will be able to compete and thus they become permanently unemployable. 
Without employees there will be no paychecks.	
Without paychecks there will be no consumers. 
Without consumers there will be no customers.
Without customers there will be no businesses.
The very businesses that laid off their workers to increase profits, will have goods and services to sell, but no one able to buy them. As businesses fail, we go into the dark ages, or change the economic system. Either way, Capitalism dies.
You can read a long-winded explanation in [Ford 2009]. Another version is in [Rifkin 2014]. [Santens 2015] predicts the demise of one of the most popular professions: truck drivers, due to automated trucks. The even more popular profession of teacher is under attack from on-line courses like EdX (Harvard and MITÕs free online education site). Lights in the Tunnel predicts that no profession is immune to the onslaught of automation.
Tweaks to Capitalism
LetÕs explore some possible transformations of our economy that others have proposed to get us out of this jam.
Stop Automating
The Luddite cry heard as far back as 1811 [Wikipedia 2017b], is the first defense to consider. If a company doesnÕt automate, someone else will. Consumers will buy the cheaper product and our ÒhumaneÓ non-automating corporation goes out of business, thus having to lay off the very workers it was trying to protect. Simply put, we canÕt stop automating and maintain todaysÕ Capitalism. Also few would want to give up the wealth-generating benefits of automation.
Retrain Workers
This is the favorite response of politicians. Retraining has worked for hundreds of years. But there are signs that it wonÕt continue to work. First, trends donÕt go on forever. Second, there are two primary areas that have resisted automation, human physical dexterity and human intelligence. But this resistance is now breaking down, due to more precise robots and progress in AI. 
Income Redistribution
Universal Basic Income (UBI) has been proposed as a way to reduce welfare costs. The money for it would presumably come from taxing the rich, or corporations. It might work. Bernie Sanders was fond of saying, ÒWhen the 1% own as much wealth as the bottom 90%, I call that income redistributionÓ [Sanders 2016]. 
UBI requires companies to pay more taxes. What corporation wants to do that? And the major corporations inßuence their own tax rate. It is possible that Capitalists reluctantly agree to it if the immediate alternative were civil unrest, as they agreed to the New Deal when the Depression caused massive unemployment. 
We think UBI is a feasible shorter-term solution, for the case where a minority of people would be out of work due to automation. However, it is unlikely to work when most people are laid off because the drastic change in tax laws is just not politically feasible in our current economic and government structure. It also wonÕt quell civil unrest due to inequality and the likely corruption and dissatisfaction of citizens with a corrupt government made more probable by the expanded volume of money filtering through governmentÕs fingers. In either case, any economic system that adopted UBI would not be Capitalism by definition. We explore the idea of a guaranteed income in greater depth in The productivity of dead people. 
Big changes
If tweaks wonÕt do it, perhaps something more drastic will. 
Communism
Communism is a socioeconomic order structured upon government ownership of the means of production, absence of social classes, and the ambition, at least in the long term, to get rid of the state. Communism as an ideal of cooperation and equality, has a certain appeal. Unfortunately in practice, it has led to totalitarian regimes that limit freedoms, and are less efficient than Capitalism at allocating resources. China has done amazingly well economically in the last few decades, but this is largely due to the extent that it has abandoned Communism and become more like Capitalism.
Socialism
There are many forms of Socialism, but broadly, they fill the spectrum between Capitalism and Communism. Socialism may have democratic government, some form of individual compensation for work, yet still have the means of production be collectively owned either by the nation or smaller organizations and at least some central planning. The right mix of features in Socialism can improve upon aspects of both Communism and Capitalism. It hasnÕt proved great for innovation, breaks no new ground in decision making processes, misses the nuances of individual choice, and hasnÕt replicated itself as widely as Capitalism. If Socialism had solved our major problems, we wouldnÕt have written this book. None the less, its better ideas deserve attention.
Plutocracy
Dyed in the wool Libertarians would argue that the problems with Capitalism are not the fault of Capitalism per se, but rather our Òwatered downÓ implementations of Capitalism due to too much government control. They claim that the Òfree marketÓ, if left to its own devices, would fix what apparently ails Capitalism. 
Without controls, the inequalities inherent in Capitalism become extreme. This leads to Plutocracy, a form of oligarchy and defines a society ruled or controlled by the small minority of the wealthiest citizens (Wikipedia). The United States is going through an experiment in the ÒmeritsÓ of Plutocracy right now. We see even poor, yet uninformed, citizens voting for Plutocracy. It tends to undermine Democracy, particularly minority rights. 
How do plutocrats get the rest of the citizens to give up their wealth and rights? Fear is the strongest motivator. They convince citizens that thereÕs some bad guys to be afraid of and the only way to protect yourself is to give the plutocrats more power. Its made easier when thereÕs scarcity amongst the population, ironic because the plutocrats will take even more of the citizenÕs money. 
Implausible? Hitler used the fear of Communists to become a dictator. BritainÕs right wing used the fear of immigrants to defect from the EU and gain power for themselves. The fear candidate in the 2016 US Presidential election beat the hope candidate with a party that is undermining Democracy [Krugman 2016]. 
No good options? 
We covered the most commonly proposed tweaks to Capitalism. Many more have been proposed by others. We donÕt perceive any as being sufficient, implementable and still qualify as Capitalism. Nor have the Òbig changesÓ to other forms of government worked to date. We believe tweaks to them are also unlikely to solve our major problems. Fortunately thereÕs another option: Innovation.