In October 2015, we assumed we had nothing else significant to write about for the few readers of our blog — which is now also a book — regarding the state of human economics. In fact, a decade after the outbreak of the great financial crisis, there is nothing new under the sun. The financial methadone distributed by central banks continues to conceal the urgent need for a new world order: an alternative to the supremacy of the dollar within a fiat monetary system, the “Washington consensus” and a neoliberal version of capitalism, the hegemony of fossil fuels and to cheap Chinese labor. Even former speculative real estate developer Donald Trump is simply executing his mandate, one tweet at a time, trying to rebalance the disastrous economic situation of the US at the expense of the rest of the world, as has been the case since the end of WW2. This time, however, it is not as easy as it was for Nixon in 1971, and we can probably expect a new major crisis or at least another ten, or even twenty years of social and economic malaise.
Relying on the same old panem (increasingly poisoned by the various glyphosates…) et circenses (with Facebook replacing the Colosseum), world leaders may underestimate the tension and social entropy that are brewing and can be felt more and more acutely every day. They hope to avoid the modern guillotine using 24/7 surveillance by cameras and drones, but history has taught us that people only tolerate exploitation up to a certain point. Nature always follows its course, and unsustainable ecosystems are either rebalanced violently or become completely extinct.
Why, therefore, did we decide to pick up our pen again? Perhaps, it is because our instincts tell us that the winds of change are starting to blow. Like our pet dog, a constantly hungry beagle who often mistakes the smell of a crumb for a whole loaf of bread, we may be wrong. If that is the case, we’ll put our pen down again. However, two synchronous developments give us hope: the rise of new grassroots movements around the world and the publication of books like “L’inganno e la sfida” (The deception and the challenge) by Italian economist Antonino Galloni. His historical analysis of the (distant) origins of the 2008 financial crisis, as well as the solutions outlined to move to a (necessary) post-neoliberal society, coincide with what we described years ago in our blog, adding some important narratives such as the real objective of the 1979 G7 in Tokyo, which was to “generalize the rise of interest rates”.
Since we work in the field of technological innovation, this piece aims to expand the analytical framework proposed by Galloni and to introduce concrete examples of implementation policies. We want to divulge the conclusion of our thought process for you early: over time, innovation has brought about profound changes in organization models and economic growth, while technology, we believe, perhaps counterintuitively, represents the only concrete and ready-to-implement solution for a non-violent transition to a post-neoliberal society based on a New Humanism.
The primitive homo economicus was a micro-entrepreneur who only worked for himself (his partner, when she was not hastily abandoned, also had to work in the woods) and took on the entire risk of the business. Over time, the social innovation of human collaboration and the technological innovation of bows and arrows increased productivity and thus the first forms of joint hunting partnerships were born, just like in modern consulting firms. Subsequently, a curious genetic innovation allowed humans to leave the risks and dangers of hunting behind to dedicate themselves to agriculture and lay the foundations for the first rural settlements. For thousands of years, technological, organizational and regulatory innovations were wholly unimpressive in terms of economic growth measured in income per capita, with the exception perhaps of weapons, which were however used to increase the wealth per capita of the very few at the expense of the masses who never had enough to eat. Starting with the Industrial Revolution, and accelerating exponentially over the last century, the frantic succession of innovations and sometimes incredible discoveries (think of quantum physics) propelled homo economicus — whose brain is unfortunately still too similar to that of a reptile — into the modernity of Early Industrialized Countries (as Galloni calls them), saturated with fatty foods, superfluous goods, and more leisure time.
We would nonetheless like to mention three great inventions that were “made in Italy” and are still relevant today: Luca Pacioli’s double-entry bookkeeping system, the bank currencies created by Genoese and Venetian merchants, and the first financial “derivatives” of the Republic of Venice, used to mitigate the risk of rascally pirates seizing boats laden with valuable goods and ducats from rich Venetians. Later on, we will look at how the creativity and entrepreneurial spirit of homo italicus may, as they did in the past, represent the cultural DNA needed for the next phase of social and economic evolution.
Why, then, are we experiencing a crisis, characterized by a sluggish growth in per capita GDP and significant unemployment for so long? In an article we wrote five years ago, entitled “The world at a crossroad”, we concluded that we would never emerge from the financial crisis because the wealthy and satiated societies of the Western world have reached an inflection point in their own development. Looking back at that article, it’s worth focusing on the part about technological innovation and how the creation of machines, robots and artificial intelligence increase productivity by replacing human labor. Over time, all other factors being equal, this creates unbridgeable imbalances between aggregate supply and demand.
In the past, it was easy to quickly retrain human workers. For example, going from assembling cars in Ford factories to arranging solar panels on the roofs of houses. This time, it will be different: the new (and scarce) job opportunities will go to scientists who can manipulate quantum computing equations, robot programmers, and bioengineers who will cut and reassemble our DNA as required. These are all jobs for which it will simply be impossible to retrain billions of brains. The vast majority of the remaining economic activities will be automated using the technologies we just mentioned and which, according to the late Stephen Hawking, could also take over and destroy humanity. What job opportunities will 10 billion people, our children and grandchildren, have? A potential dystopian scenario lies ahead, just as in the most distressing science-fiction movies: on the one side, the closed circle of the very few incredibly wealthy plutocrats owning 99% of all assets, including automated factories, and on the other everyone else, who will have to survive in conditions of complete economic and financial dependence, living in degraded areas controlled by police-robots. Is this pure science fiction? Perhaps, but the acceleration of technological innovation is a fact and the growing asymmetry in wealth distribution does not bode well.
The alternative route for the world requires positive thinking: cleantech, technological innovations to accommodate and feed three billion more people without creating conflicts, and a social model which resembles the idealistic ones already hypothesized in the past, including shared ownership of automated factories that produce everything the citizens need (primary needs), leaving them with an enormous amount of leisure time to devote to hobbies, family, knowledge, plus various amorous and playful amusements (“The rest of the day could be devoted to the pursuit of science, painting and writing” — Bertrand Russell, In praise of idleness) and to accumulating wealth — for those who wish to work more — to satisfy their Veblerian needs. A document published six years ago by the International Monetary Fund proposes a world governance model to end all kinds of national selfishness, which currently prevent the coordination of economic, financial, and resource policies, as well as all policies that are essential to maintaining peace and well-being among people.
Is this pure science-fiction as well? Maybe not. Quite the opposite, actually. Already in 1930, in a forgotten paper, British economist J. M. Keynes wrote about how humanity would have progressed from a social, economic and technological perspective in the following 100 years thanks to the proper use of the capitalist model.
What should we do in the next 20 to 30 years in order to avoid the dystopian scenario described above, and to achieve the one imagined by Keynes and desired by the majority of the world’s population? We believe that tackling this issue and contributing, each to different extents, to the creation of a more balanced, fairer, more ecologically sustainable, democratic, liberal society, in which technology is at the service of humans and the fruits of capitalism are more fairly distributed, is a duty of our generation. Those who choose to remain in their own spatial-temporal “mental bubble”, dedicating their life exclusively to accumulating material wealth or to hedonism, will have to face the harsh judgment of history and of the new generations.
This call to arms requires a clear strategy and effective operational tools to achieve the set goals and to avoid the risk of failure due to fanciful thoughts and actions. There is indeed a danger of being carried away on the wings of the enraged dragon of anger, even though such anger would not change anything and would be swept away as soon as the fire spitting begins. In a world that is hypercontrolled by satellites and drones, in which weapons still unknown to the masses exist, French-style revolutions are no longer feasible and have intolerable and bloody consequences anyway. Also, a revival of Marxist ideas or other types of extreme socialist ideologies, such as a high taxes on the wealthy, expropriation, huge increases in public debt to fund counter-productive welfarism, et similia, are neither appropriate nor realistic solutions. Does anyone still believe there is any evidence of such measures working in the past? Furthermore, it is not plausible to assume that such a forced re-balancing would happen without catastrophic conflicts between social classes: has anyone ever witnessed Dobermans let other dogs steal their bone? We live in a capitalist society and we should continue to live in a capitalist society, at least until we find an alternative, better framework. As the late Olaf Palme said, “I’m not against capitalism, I just want to trim its nails a little.”
Is there a “Third Way” then? We strongly believe there is, and we want to introduce it here. We are calling our proposal “New Deal 4.0”, because it revolves around the dissemination and smart use of technological and legislative innovations, instead of mere, albeit partly necessary, public investments, which are reminiscent of Roosevelt’s New Deal. We also believe that we already have a sufficient regulatory framework and enough democratic tools at our disposal — though not perfect and improvable — to allow such a third way to be implemented without the need to overturn the entire system, like Eric Posner suggested in his extremely interesting book. We will finally look at how imagination (especially “made in Italy”) is a key resource that is — to quote Einstein — more important than knowledge.
Since the inequality gap and unhappiness (turned to resentment) have worsened dramatically over the past forty years and may grow even further, the above analysis seems to explain such evidence as being the result of the action of two sharp edges, like the blades of a pair of scissors that can cut and inflict wounds: the acceleration of technological development and neoliberalism (financial and oligarchic turbocapitalism, as described by Galloni). In order to reduce this divide without destroying the two blades (another Luddite rebellion, or chopping the hand holding the scissors) and without wrenching them out of the hands of those who know how to use them and give them to someone less experienced (like in Communism), we need to choose a third option that makes technology available to billions of entrepreneurial hands, while also making the other scissor blade blunter, i.e. taking capitalism back to a more balanced and virtuous model. Billions of (small) entrepreneurs means billions of human beings who are financially independent but dependent on each other and therefore fairer in their behavior, more balanced, with a free spirit and a free mind. Our (few) readers may ask: what about “politics”? The obvious conclusion is that billions of entrepreneurs will vote for people who are more honest and capable, true servants of the community, very different from those our generation is electing. We have made this vision our occupation, but we will save that story for another day.
This model takes us back to the origins, to our ancestors, the hominids, who had to use their enterprise every day to feed themselves and make it through the night. We may think of the third way as a mixed model, where fully automated factories owned by the community (Smart City Communities) satisfy the most important primary needs (food, energy, health, education), while billions of small businesses produce goods and services for all the other needs, from entertainment to fashion, tourism, etc. We believe this is a concrete possibility, as demonstrated by examples of smart public investment and spending, like toll-free motorways in Germany or free education in Europe. This is a first compass for the creation of a strategic public investment plan for the decades to come.
The current hypertrophic financial capitalism is abnormally folded in on itself like an endless paper origami (four million billion dollars of worthless paper according to Galloni) and will implode when a new archetype, such as the one we are suggesting here, emerges and is adopted by the majority of players participating in the socioeconomic game. There will therefore be no need for revolutions or interventions “from the top”, simply because history has always shown that the “old” is left behind only when the “new” is better. Today, we are clearly still tied to a model of technological-financial capitalism based on large corporations (which play dirty by corrupting lawmakers and supervisory bodies alike) and on billions of people who depend on them in order to work and support themselves. Thus, we need to turn oligopolistic corporations into decentralized value chains made up of thousands of small and very small enterprises, which are coordinated and made as efficient as large organizations through the use of technology (big data, artificial intelligence, sensors, blockchain, etc.). The first examples of such platforms are already a reality in the IT sector (think of Alibaba) and we believe that this transformation can be achieved in all sectors of the economy, one after the other. How? For a start, we are glad to see that in the last twenty years many technologies that are required to run a business have become considerably cheaper. Just think of cloud computing, online shops, open source software, video conference calls, and much more. In the past, a lot of money was needed to launch a start-up; nowadays, a few thousand dollars suffice. Last but not least, the role of the State should be to facilitate such transformation and to prevent technological monopolies / oligopolies (think of robots), should they arise. Technology must be easily and cheaply accessible to all small enterprises.
As for financing the public investments required to create this new socioeconomic framework and fund new small businesses, the existing tools (just think of the excellent Italian law on innovative start-ups and SMEs) can be utilized alongside innovative concepts of finance and currency, like Galloni himself correctly noted. We are modestly proud to have been among the very few to suggest, many years ago, that a digital currency should be introduced, parallel to the euro, to reflate the battered Italian economy (see Bit-Eurolira, here and here). On the other hand, the Bitcoin/cryptocurrency experiment shows that “money” is merely a collective tacit agreement based on trust among participants in economic and financial transactions. If it works for private business, as it is happening in the crypto community before our very eyes, it will work for government as well.
After decentralizing, and therefore making technology and finance accessible to all, we will need to work with young people, to educate them and encourage them to become entrepreneurs. We confess that, in our opinion, this stage of the change process is the longest and most difficult one, but it is also the most fascinating. We have some concrete ideas on this topic, which we will explain in more detail another time. However, there is a need for an interdisciplinary approach in this respect, so that many people with experience and knowledge can make their contribution.
To summarize, the concrete implementation of the New Deal 4.0 framework follows the following strategic and operational guidelines::
This may seem ambitious, but we believe that implementing this vision is easier than one may think. It all goes back to the previously mentioned Italian imagination, and to historic experiences that have left a mark on our shared DNA, such as the Renaissance or the Republic of Venice. There are laws, procedures, mechanisms, organizations, shared collective ideas and memories, cultural aspects, technological innovations and much more that do not require new tools or radical inventions. They just need to be properly used and applied with no exceptions, and sometimes they just need to be rediscovered. Let’s have a look at a few examples.
Big corporations such as Google and Amazon not paying taxes in Europe? We just need to apply the current legislation on tax inversion, just like bureaucrats diligently do with Italian SMEs.
Judges and bureaucrats corrupt or incompetent? We can introduce a concept of Free Zones so that the best public procedures and justice systems can triumph. All it takes is a little competition!
Politicians and civil servants not working enough, not working well, or being dishonest? Let’s publish online statistics about the productivity and the results of their work. Let’s create a search engine based on artificial intelligence, which tracks and analyzes all published documents and all words publicly pronounced, to create historical proof of promises and facts.
Corruption in public spending spreading? Let’s open public databases to all citizens, and let’s use blockchains to track all expenses, so that everyone is able to verify them online (citizen auditing).
Italian bridges collapsing while private motorway companies make huge profits? Just disclose all public-private agreements and let’s approve laws to protect the community by charging billions of euros in fines. The US is already doing this, why can’t Italy do the same?
There is an endless list of small but extremely concrete things we can do. The common ground is transparency, access to information, and independent auditing systems. The Genoese and Venetians invented the Pittima: a person wearing a red mask who would run after debtors and shout to persuade them to pay their creditors and avoid public shaming. The government of the Republic of Venice would protect Pittimas, who could not be physically attacked. See how there is no need to invent anything? We just need to rediscover our common sense, and all problems can be easily fixed.
To conclude, what could the role of citizen grassroot movements / citizen watchdogs be in promoting such changes? We think that additional centralized political organizations have little chance of credibly profiling themselves as social innovators able to convince and gain the necessary majority consensus for implementing a New Deal 4.0. Instead, we believe decentralized and innovative political concepts, a sort of “meta-parties”, may have a fair chance of succeeding. Here is our idea, which we will explain using an analogy. There are trade unions that represent and defend the interests of workers, just as associations protect the rights and interests of consumers. Citizens, on the other hand, vote without intermediary organizations that can inform them properly and negotiate the political programs proposed by parties running for election. This means that we exercise our most important right, the right to vote, in a complete state of disinformation, with little protection, few control mechanisms and without essential knowledge. It is as if we decided to build a house without consulting surveyors, architects, bankers and other experts. It would make no sense. This is why we need intermediary, decentralized organizations that can stand between citizens and political parties, because politics has become excessively complex (just think of how much we depend on supranational bodies and institutions that decide how much money to print and whether we may or may not have informative food labeling…). We therefore see a citizen-watchdogs “meta-party” as a kind of union protecting the interests of citizen-electors, whose job it is to inform, educate, evaluate, and control, using modern technologies such as Big Data and Artificial Intelligence. In other words, a modern 4.0 version of the old Genoese Pittima.