I recently read this four-part blog post on New Consensus titled Why Capitalism Can’t Survive AI. Overall a great piece, but it could go further!
I was skeptical of the math at first, but the overall argument is sound. The economic shock that will result from AI is fundamentally different from historic economic shocks, and our current system is not prepared for it.
Their argument is essentially as follows:
- AI results in productivity gains that lead to layoffs of high-paid knowledge workers.
- This leads to a demand spiral, where lost income from layoffs begets lower consumption begets layoffs, and so on.
- Government assistance is normally able to prevent this spiral by plugging the initial leak. This allows businesses to wait out the temporary slump in demand rather than further cull their workforce to stay afloat. AI is fundamentally different from a temporary issue like COVID; it’s not going away, and no bridge of government funding covers that gap.
- Some point to UBI, but the math simply doesn’t work out trying to tax the rich at anything other than 100% because eventually wealth continues to consolidate while businesses (running autonomously, owned privately) make any profit and taxes fund everyone else’s existence. Those private owners are able to accrue wealth even at a 99% tax rate.
- Therefore we have to tax profit at 100%. At that point, Exley argues, this isn’t capitalism anymore.
Their conclusion is that the productivity gains of AI back capitalism into a corner. The only economic option is a form of public ownership where profits are socialized while maintaining private ownership. If this means we are no longer living under capitalism, my response is that We Don’t Agree on Capitalism. The Marxist critique of capitalism focuses on capital, the flow of profit, and the economic dynamics that spring from it. The anarchist critique is focused on power structures.
A society could tax business profits at 100% but decide to maintain corporate hierarchies. This may even be an improvement on our current situation (which consists of corporate hierarchies and profits absorbed by the ownership class), but it does not address the crux of the issue.
Take this paragraph, for example (emphasis added):
Note, however, that converting a company into a public enterprise doesn’t mean its owners lose control over it. Imagine a small or medium-sized manufacturing firm that produces valuable equipment the whole economy depends on. The turbulent death of capitalism by AI makes it impossible for the firm to function as a private company. When it gets rescued through conversion into a public corporation, the owners and managers can remain in control. In fact, this process will be almost identical to the process of taking a company “public” in the capitalist sense, selling shares and giving up most ownership to public markets. Just as founders often make a killing when their company goes public on private markets, these owners and managers could be handsomely compensated. If that’s what we, meaning the public, decided should happen.
I’m not against handsome compensation necessarily. I take issue with the power imbalance that results from abject wealth. Having money in your pocket isn’t a problem, but having power over other people is.
Exley clarifies that state ownership does not have to mean centralized planning. Advocating for the continued private control of businesses is a reaction to the (understandable) critique of government bureaucracy and skepticism of its ability to run an economy. The alternative then, could only be the market and private ownership, apparently. Instead, I’d rather advocate for cooperatives as our productive backbone, as laid out in Geert Reuten’s Design of a Worker Cooperatives Society.
Public ownership and reinvesting profit in public wellbeing would be an improvement, but we need to aim higher. We need to go a few steps further toward Economic Democracy, where collective productive decisions are made in common rather than privately. The times call for democratic control of the economy and our workplaces in order to collectively steer the direction of society, rather than leaving control in the hands of capitalists or a political establishment.
I’m not sure if AI will have the effect predicted in these essays, but I do hope it sparks more of a conversation about public ownership. I would love an economy run by copies of the Tennessee Valley Authority and rural-electric-style cooperatives. I would not love swapping out one set of shareholders for another, carrying on business as usual where workers are squeezed for profit and deprived of their agency.