A new book by INSEAD Professor Emeritus Robert U. Ayres argues that Universal Basic Income can play a crucial role in shoring up both the capitalist economy and democratic society in the aftermath of the COVID crisis.
The book, titled “On Capitalism and Inequality”, published by Springer, uses evidence, data and insights to call for a new type of ‘Hybrid Capitalism’. Such a system is the only viable solution to allow both competition and cooperation to co-exist in the long run, says the author.
Ayres’ book points out that throughout history, real people rarely behaved like Homo economicus, who strives to maximize personal benefits in every action. Such a rational utility maximiser has rivals but no friends and cannot cooperate with others. But real humans voluntarily cooperate to build social systems. In fact, they have to in order to survive. Thus, a viable democratic social system must not allow a “winner takes all” approach.
Ayres says: “The only thing that enables the betting game is Wall Street capitalism, to keep going - is economic growth. Growth puts some money back into the pockets of the losers (as a group) – meaning the bottom 80% of US households - and keeps some of them in the game by providing subsidies of various kinds. Yet the US economic growth rate is steadily declining.”
To move forward, the book explains, 21st century societies must reallocate some of the wealth created by competitive activities. He proposes a monthly amount of 1000 USD to be given by the US government to each citizen over age 18. The idea could also apply to most other advanced economies. At first, he agrees, not every person on the planet would be able to benefit for such a scheme. Yet modern countries that are “reasonably democratic and politically stable” would be a good starting point.
Ayres adds: “The people I call the billionaire class have adopted a view of what it is to be human, that is based on pure theory and is inconsistent with reality. While competition is important for the encouragement of innovation, it is not the only way. My argument is that every one of us is a ‘shareholder’, by birth, in the great enterprise that is human civilization. Like any business, that enterprise needs to provide dividends to the shareholders, whoever they are, irrespective of ‘need’ or ‘deserving’. That is what the UBI would do.”
Professor Ayres holds a PhD in Mathematical Physics from Kings College, University of London, a MSc in Physics from the University of Maryland and a BA and BSc from the University of Chicago. He is currently Emeritus Professor of Economics and Political Science and of Technology and Operations Management at INSEAD, the international graduate business school.
He joined INSEAD in 1992, becoming the first Novartis Chair of Management and the Environment, as well as the founder of CMER, Center for the Management of Environmental Resources. He directed CMER from 1992-2000. Since retirement he has been a visiting professor at Chalmers Institute of Technology in Sweden (where he was also a King's Professor) and Institute Scholar at the International Institute for Applied Systems Analysis (IIASA) in Austria, He remains active, producing publications on topics ranging from Industrial Metabolisms and Industrial Ecology, through Environmental Policy and Environmental Economics, to Energy. Professor Ayres is the author or coauthor of 24 books, most recently “Energy, Complexity and Wealth Maximization” (Springer, 2016), “The Bubble Economy” (MIT Press, 2014) and “The Economic Growth Engine” (Edward Elgar, 2009, with Benjamin Warr)
