Two big themes
Jeff Booth is a successful Canadian entrepreneur. His book “The Price of Tomorrow” is a warning about two dangerous trends which he thinks are not receiving enough attention. The first is that technology and price deflation will cause lasting widespread unemployment. The second is that the global economy is underpinned by an unstable mountain of debt.
These are obviously serious concerns, and at least on technological unemployment I think he is largely correct – particularly with regard to his proposed solution.
Successful entrepreneur
In 1999, Booth co-founded BuildDirect, a technology company designed to simplify the building industry. He took it to more than $500 million in market capitalization, which ought to count as a success in anyone’s book. Latterly, he spends more time helping younger entrepreneurs achieve their goals, and also talking to people who are thinking big-picture thoughts about the future.
The conclusions he has reached, and his decision to act on them, have made him uncomfortable: “Choosing to write this book meant publicly challenging universal truths which many in our society believe—something that rarely wins popularity contests.”
Technological unemployment
In his working life, Booth finds artificial intelligence (AI) being discussed and deployed everywhere: “Almost every company I’m involved with is in some way using artificial intelligence to make better decisions.” As he listened recently to his compatriot Mark Carney, former governor of the Bank of England, say that AI will be as fundamental to our economies as electricity, he found himself thinking that Carney wasn’t going far enough: “electricity wasn’t an exponential technology, [and] nobody ever thought electricity was going to be intelligent.”
“Technology is deflationary,” he observes, and “we are entering into an age of deflation unlike any the world has ever seen.” The result, he concludes, will be massive, widespread unemployment.
Abundance
The thing I like best about the book is Booth’s proposed solution to the challenge of technological unemployment. “What if, instead of trying to stop deflation at all costs, we embrace it? … Deflation becomes something celebrated because it means that we are getting more for less … We allow ourselves to accept abundance … As technology removes jobs and fewer overall jobs are needed, prices will keep falling, allowing those who lose jobs a way to share in the benefit of technology abundance without massive transfers of wealth.”
This is an unusual conclusion, and it’s the one I propose in my own book, “The Economic Singularity”. If technological unemployment does arrive, there will obviously have to be economic transfers from organisations and / or individuals with income and wealth to those without. It seems hard to do this without onerous taxation – which would be resisted and / or evaded – unless we achieve the economics of abundance: what I call fully automated luxury capitalism.
Meaning
Booth is also persuasive when he concludes that we don’t need jobs for our lives to have meaning: “We are trapped in a system where we don’t know what we would do with ourselves if we didn’t have jobs … allowing abundance without the jobs might actually open an entirely new enlightenment era where we have time to enjoy the benefits that technology brings.” Humans will probably always work, in the sense that we will always have projects and goals. But what a sad species we would be if we always needed that work to be in the form of jobs, directed by other people, with a need to generate revenue. There are three types of people who prove that you don’t need a job to have meaning: aristocrats, comfortably-off retired people, and children.
Evidence and timing
Most people don’t agree that technological unemployment is coming: they don’t see it as an immediate problem, and they are too busy getting through their day, and (hopefully) having some fun. Of those who have considered the possibility, most are persuaded by the observation that past rounds of automation have created more jobs than they destroyed. This book contains no compelling arguments to persuade people that this time is likely to be different.
Booth is probably too pessimistic on the timing of technological unemployment. He thinks it has already arrived, and is being masked by gigantic government expenditures: “vast numbers of people are working longer, in jobs they rightly fear will soon be gone.” This seems to under-estimate the power of what economists call the complementary force, which is the mechanism by which people find new jobs when their old ones are automated, because the economy is generating more wealth. This leads to more demand, and therefore more jobs. It will probably take two or three more decades before machines can do almost everything that humans can do for money, and therefore neutralise the complementary force.
Too much debt
Booth makes striking and important observations about global debt. He notes that in 2000, the world’s cumulative debt was $62 trillion, almost twice its collective GDP of $34 trillion. In early 2020 the numbers rose to $247 trillion and $80 trillion respectively, so debt is now three times GDP. In those two decades, it took $185 trillion of debt to produce $46 trillion of GDP growth.
People have been warning about excess global debt for decades, and presumably there is a point where it becomes unsustainable. Certainly it caused huge problems when the credit crisis began in 2008, but that was at least partly because financiers failed to understand the level of risk their organisations were taking on, with toxic loans fraudulently, or at least negligently, blended with manageable ones.
In 2008, policy makers had a stark choice. They could bail out the banks, and aggravate moral hazard, or they could risk a worldwide depression, as trust in the financial system broke down, and markets stopped functioning. Booth thinks it was inevitable that they took the former option, but he fears it “changed capitalism by gifting many of the engineers of the chaos with risk-free returns at the taxpayers’ expense.” Booth believes in capitalism, “where risk is rewarded and punished, and where the free market is the ultimate referee of your value. That is why it pains me so much to see it breaking down.” Capitalism has many flaws, but it remains the best economic system humanity has invented so far. It seems hyperbolic to say that it died in 2008.
More questions than answers
Citing Ray Dalio, Booth describes four strategies to bring debt and service levels down: austerity, debt defaults, printing more money, and high taxation. The latter takes him into a discussion of universal basic income (UBI), which he dislikes because it disincentivizes work, and because it ignores the fact that people have different needs. Fair enough, but the biggest problem with UBI is that it is either too low (too “basic”) to be useful, or it is unaffordable.
Booth thinks we must adopt at least one of the four strategies soon if we are to escape the burden of debt, and reach the sunny uplands of abundance. “Technology should be driving everything cheaper, [but] rent, housing prices, fuel, food, and many other costs are rising … driven by an enormous rise in credit and debt … Debt combined with deflation is a toxic combination, because borrowers have to pay the same for their interest payments while earning less.” He warns that unwinding this situation will be extremely painful.
To be fair, Booth does not profess to have all the answers. “It is clear that something must be done. But because the issues are so complex and thorny in nature, it is easy to put our heads in the sand and hope others will solve them. I wrote this book to get us all talking and thinking—and asking the big questions.” It deserves to achieve that: the ideas are important, and the writing is clear and easy to read. And often, identifying the right questions is more than half the battle.
