Review of ‘The Wealth of Humans’, By Ryan Avent, Penguin, €19
Will robots eat your job? Will your kids have higher standards of living than you, in an age where there are too many workers and too much savings, when technological change makes the jobs many people do obsolete? When their citizens see their jobs disappearing due to international competition or technological change, how will politicians react? Will we see an increase in globalisation or a series of Brexits to re-nationalise the global economy?
Ryan Avent’s new book The Wealth of Humans takes us through the arguments around the digital revolution, the development of the world economy and the very notion of work and wealth in a new post-scarcity age.
Like many kids, myself included, Avent was made to mow the lawn to teach him the value of work. Today, his parents’ lawn is mown by immigrants who made their way to the US in search of a better life for their families. A problem arises: his parents are considering the purchase of a lawn-mowing robot. These robots cost about €1,000 and you can control them via your smartphone, or even your smart watch. The result? The summer jobs for teenagers and, more importantly, the low-skilled work for the migrants evaporate in a cloud of green grass cuttings.
The ‘rent’, the portion of income paid to workers or capitalists in excess of what is needed to keep them employed, which Avent’s parents pay, gets transferred from the migrant workers to the company making the robot mowers. This transfer widens income inequality, creating winners and losers within countries, and winners and losers between countries.
These technologies have the ability to eliminate the demand for many forms of labour. But it’s not all alarmist. A dystopian Terminator-esque future isn’t in the offing. Humans will adapt. They will do so because they have social capital.
Capital is productive wealth. If you’re a cab driver, the cab is your physical capital. If you own a business, your physical capital is the building, the machines, the computers. Your intangible capital is the intellectual property of your firm, among other things.
If you’re a worker, your ‘human capital’ is the sum of your skills, talents and experiences. Think of social capital as the set of behavioural patterns in each of your heads. Great companies and great institutions have remarkably deep reservoirs of social capital.
For Avent, “social capital is the human coding that governs the flow of information”. It’s something we generate by our repeated interactions with one another, and it can’t be replaced very easily. Unlike our ability to mow lawns or drive cars, AI can’t replace our social capital.
Humans will adapt to very rapid technological change, to the challenges of AI and driverless cars, the disruption and dematerialisation of supply chains, to the reduction in the bargaining power of labour all over the world, because we have social capital, the wealth of humans described in the title.
However, I think Avent stretches the social capital concept a little too far. I think of social capital as a kind of residual.
If you’ve no access to physical capital to rent out for an income, and very little access to human capital because you can’t get a good education, then you have to turn to social capital to make up the difference. Poor people developed close-knit communities because they had to.
Small firms create successful cultures because they have to, simply to survive. Large companies constantly try to act like small ones to make sure they don’t eat themselves.
Each of these things is resistant to automation, yes, but they are also things that can’t be borrowed or lent, built on, or extended, sold or given to someone else. So social capital, unlike human or physical capital, is limited precisely by and to the people who have developed and depended on that capital.
When one of them leaves or dies, the network along which the capital travels degrades a bit, because trust and information and culture get lost. I’m sceptical that social capital can save us and those of us who live our comfortable lives in the West from artificial intelligence, at least on its own.
We already live in a world where economic growth is very hard to come by, with stagnant economies unable to deliver the kind of increases in living standards people expect to see for themselves and their children.
It wasn’t always so. The Wealth of Humans shows us how, during the 17th and 18th centuries, the technological changes causing the industrial revolution changed the economies, the education and health systems, and the urban landscapes in Britain and France.
The coming AI and robotics revolutions are best placed alongside the introduction of electricity in terms of their impact on our lives.
The Wealth of Humans wisely stays away from prognosticating on what the economy of the world in 2050 will look like, and it is a fundamentally optimistic book, which shows that we can adapt to large changes in the structure of economies and societies, and we will.
I really enjoyed this book. The writing is excellent, humanising what could have been very technical material in places. The topic is one of the most important out there, and this is a great guide to the intricacies of a global economy on the verge of a very big change.