Path to a Better World

iUniverse, Inc.

Contents

CHAPTER 1 Prelude to Abundance....................................1CHAPTER 2 The Vision and the Reality..............................7CHAPTER 3 Free Market Capitalism..................................19CHAPTER 4 Peoples' Capitalism.....................................47CHAPTER 5 The Science and Technology Enablers.....................77CHAPTER 6 The Energy Enabler......................................105CHAPTER 7 The Common Defense......................................119CHAPTER 8 Benefits to Humankind...................................131

Chapter One

Intelligent systems technology is developing rapidly, and the rate of development is increasing exponentially. The next generation of advanced automation, particularly human-level artificial intelligence, raises serious social and economic questions. Truly intelligent machines will have the potential to eliminate poverty and usher in a new age of prosperity, opportunity, and economic justice. But they also have the potential to throw people out of work and widen the gap between rich and poor. A way to assure that the result is positive is to broaden access to credit for investment so that everyone can play the capitalist game with income from ownership of capital assets. This book is a plan to make that happen.

Our modern civilization is poised on the cusp of an information technology revolution that will at least equal, if not far exceed, the Industrial Revolution in its impact on humankind. The question is: Will the effect be for good or evil? What will the world be like when most goods and services are produced by intelligent machines? On the one hand, there is a possibility that exponential productivity growth could produce rapid economic growth, leading to an age of unprecedented prosperity. On the other hand, there are questions such as: Who will own these machines? How will displaced workers get an income? What is the potential for rising unemployment, poverty, and civil unrest?

From the beginning of human existence, mankind has lived under an ancient biblical curse: "By the sweat of thy face shalt thou eat bread, till thou return unto the ground." In all the thousands of centuries prior to the Industrial Revolution, most of the human race lived near the threshold of survival. Virtually all economic wealth was created by the sweat and muscle power of humans and domestic animals. The substitution of mechanical energy for muscle power during the industrial revolution partially lifted the ancient curse. A little more than two centuries after the introduction of steam power into the manufacturing process, a large percentage of the population of the world lives in a manner that far surpasses the wildest utopian fantasies of former generations.

The technology of the Industrial Revolution, combined with the emergence of capitalism, has produced a dramatic increase in the rate of economic growth. This led to a degree of prosperity never before experienced during the entire history of the human species. Indoor plumbing, cotton sheets and underwear, flush toilets, clear glass windows, central heating and air conditioning, automobiles, the telephone, radio, and TV are commonplace. Machines powered by electricity and the internal combustion engine largely replaced muscle power in agriculture, manufacturing, construction, mining, and transportation. An exponential increase in scientific and technological knowledge resulted in productivity improvements that have enabled the production of goods and services at a rate far in excess of any historical precedent.

The machines of the Industrial Revolution required human workers to control them, and the processes of commerce required humans to manage them. By virtue of their indispensability, workers have often been able to demand fair compensation for their labor through collective bargaining. During the twentieth century, this led to the emergence of a prosperous middle class.

However, this is beginning to change. The information technology revolution is based on the substitution of computers for human brains in the control of machines and industrial processes. The application of information technology to the control of industrial processes and business management will bring into being a new generation of machines—intelligent machines that can create wealth largely unassisted by human beings.

There is good reason to believe that the information revolution will change the history of the world more dramatically than the Industrial Revolution. Factories and industries that can operate mostly unattended by human workers are already technically feasible and are becoming economically practical. Many of these factories even reproduce their own essential components. Machine tools are used to make machine tools. Computers are indispensable to the design and manufacture of computers. Factories produce the structural materials and tools that are used to build new factories. Modern manufacturing machines and processes are able to construct extremely complex parts directly from computer data files. This suggests that manufactured goods may eventually become as inexpensive and unlimited by complexity as the products of biological mechanisms in living organisms. The potential long-run effects of this are profound and unprecedented.

The present economic system is not structured to deal with the implications of the coming generations of advanced automation. Classical economic theory is based on the labor theory of value. For the vast majority of the population, jobs are the primary source of income. The owners of the means of production represent only a tiny fraction of the population. This socio-economic structure is not well suited for a world where intelligent machines will perform most of the work necessary for the production of goods and services without human intervention. As machine intelligence grows, capital will replace labor as the principal factor in the production equation. The percentage of the population needed for producing all the goods and services that can be sold in the market will decline, unemployment will grow, and wages and salaries will experience steady downward pressures. Unless there emerges new mechanisms by which wealth can be distributed to average people, economic growth will slow, poverty will increase, and a few very rich owners of capital will grow fabulously wealthy.

The problem is that there presently exists no means by which average people can fully benefit from the unprecedented productive potential of truly intelligent machines—quite to the contrary. Under the present economic system, the widespread deployment of automated production systems will enable companies to lay off workers, reduce labor costs, minimize pension funds and increase profits in ways that threaten jobs and undermine the financial security of virtually every American family. In general, investors do not fund corporations to provide employment for workers. They are established to generate profits for owners.

There are two possible futures depending on how ownership of the means of production is distributed among the population.

One is to continue the current economic system wherein a small group of capitalists own most of the capital assets, and businesses increase their profitability by getting rid of workers. In this future, the gap between the rich and poor will grow, high unemployment will become the norm, wages will decline, and the number of people living in poverty will grow. Economic growth will slow as the number of jobs falls and consumer demand slows.

A second possibility is to adopt a new economic paradigm that takes advantage of the potential of technology development, and broadens the ownership of capital stock so that everyone can benefit from increasing productivity and profitability generated by advanced automation. This second possibility could enable the elimination of poverty and the creation of an era of prosperity and financial security for all humankind. It could provide a steady rise in consumer demand and generate rapid economic growth that would solve most of the problems of unemployment and rising debt that currently plague the economies of Europe, Japan, and the United States. It could reverse the decline of the middle class, and provide financial security based on ownership of capital assets to every individual.

The great challenge of the coming information technology revolution will be the development of an economic system wherein prosperity can be achieved and personal freedom can be preserved in a world where most wealth is created by intelligent machines. This book offers a plan by which this could be accomplished.

Specifically two new institutions are proposed:

1. A Personal Investment Program (PIP) is proposed to finance capital investment for increasing productivity in the production of goods and services. The PIP would authorize the Federal Reserve to issue credit to local banks for average citizens to invest in approved investment funds. These investments would spur economic growth and enable private industry to modernize their plants and machinery. Profits from these investments would be used to repay the loans and return dividends to the individual citizen investors. By this means, the average citizen would receive income from the industrial sector of the economy quite independently of employment in factories and offices. Every citizen would have the opportunity to become a capitalist in the sense of deriving a substantial percentage of his or her income from dividends earned on invested capital.

2. A Personal Savings Program (PSP) would be instituted in parallel with the PIP in order to provide sufficient savings to offset the inflationary effects of PIP investment spending. PSP savings would prevent short-term demand-pull inflation. The PSP would withhold income from consumers by mandatory payroll deductions and convert it into five-year personal savings bonds at market interest rates. Deductions would be graduated according to income (low-income persons would have little withheld, high-income more) and would be adjusted monthly according to a formula based on the best available indicators for inflation. The PSP would allow high rates of investment to generate rapid economic growth and low unemployment while preventing excess demand from forcing prices upward.

I will argue in the following pages that, if implemented, these proposals would stimulate rapid economic growth and reduce unemployment in the short term, and in the long term (i.e., three or four decades) would lead to:

1. A society where every adult citizen would derive a significant fraction of his or her income from invested capital.

2. A society where ownership of the means of production would be distributed widely enough so that every citizen would be financially independent.

3. A society where many people would continue to work for supplemental income or the personal satisfaction that comes from contributing to society and being successful in the work place, but no one would be forced to work out of economic necessity.

4. A society where a diversity of lifestyles would flourish, opportunities for entrepreneurship would abound, and rewards for achievement would be high.

5. A society in which economic growth would be rapid, unemployment would be low, prices would be stable, and prosperity would be widespread.

In short, this book is a plan whereby Peoples' Capitalism could be achieved in the United States before the middle of the twenty-first century without any significant changes in our constitutional form of government. In fact, far from altering any of the fundamental principles upon which this country was founded, this plan would revitalize the free-enterprise system and strengthen democracy. In the process, it would mobilize the full creative resources of our scientific and engineering capabilities to solve our most pressing human problems. The proposed economic system might best be described as a blueprint for Jeffersonian Democracy in a modern technological society.

Chapter Two

At the end of the first decade of the third millennium AD, the great economic and political debates center around economic philosophy and political ideology expressed in terms of left vs. right, liberal vs. conservative, Democrat vs. Republican, capitalism vs. socialism, government regulation vs. free markets. What is the proper role of government vs. the private sector? How big should the government be? How many taxes should the government collect, and from whom? Does the government have a responsibility for enforcing social and economic justice, as well as civil and criminal justice? How much should the government regulate the financial sector, the labor market, the consumer market place, the quality of the environment? And how should the economic problems of slow economic growth and rising debt be addressed?

Often lost in the heat of these arguments are more fundamental questions such as: What is the ultimate goal of the economic system? What kind of world do we really want to live in? What is the best way for wealth to be generated and income distributed? Given the state of scientific knowledge and technological progress, how fast could the economy grow? What is possible in terms of economic prosperity, environmental preservation, individual liberty, financial opportunity, and personal security? In other words, what is our concept of a good society?

I begin with my vision of what an ideal world might be like.

The Vision

A world without poverty

Imagine a world without poverty, hunger, or homelessness where everyone has a decent place to live, with plenty to eat. Imagine a world where everyone has access to a good education and adequate health care. Imagine a world where everyone lives in a safe, clean community without fear of crime or violence. Imagine a world where every human being can look forward to a secure retirement. Imagine a world where every disabled and elderly person can afford assisted living and dignified elder care.

A world of opportunity and prosperity

Imagine a world where opportunities abound to become rich, but no one is poor. Imagine a world where there is no ceiling at the top for how wealthy a person can become, but there is a floor at the bottom to prevent anyone from sinking into poverty. Imagine a world where jobs are plentiful in a wide variety of interesting fields, unemployment is low, and workers are well paid. Imagine a world where every individual has many opportunities to succeed and prosper.

A world of economic justice

Imagine a world where all are financially secure and many are wealthy. Imagine a world where economic growth is rapid and median income consistently grows at the same rate as the overall economy. Imagine a world where everyone benefits from productivity improvements because everyone owns a share of the means of production. Imagine a world where every individual owns capital assets that pay dividends in an amount sufficient to support a decent standard of living.

A world without pollution

Imagine a world where rapid economic growth is environmentally friendly: a world where the air is clean, the rivers, streams, and lakes are pure, the environment is preserved, wildlife is protected, and wilderness is preserved for future generations. Imagine a world where clean, renewable energy is inexpensive and effectively unlimited in supply. Imagine a world where society is both willing and able to afford the cost of a clean environment: a world where the energy to light, heat, and air condition homes, drive cars, run transportation systems, brighten cities, and power industrial plants is derived entirely from renewable sources that are carbon neutral, generate no significant air or water pollution, and create no risk of radioactive contamination.

(Continues...)

Excerpted from Path to a Better Worldby James S. Albus Copyright © 2011 by James S. Albus. Excerpted by permission of iUniverse, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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