Everybody is suddenly talking about Universal Basic Capital

Under one plausible theory of technological development Artificial Intelligence (AI) will turn the economy into a dystopian split screen where capitalism fails and where Billionaires and Trillionaires become more commonplace. As AI becomes capable of replacing an ever larger share of human work, the companies selling it will grow astronomically, turning a handful of investors and technologists into the richest individuals in human history while creating a permanent underclass of former workers replaced by machines.

To head off that scenario and the consequences it could have for our political and social order, a growing number of figures in both Washington and Silicon Valley have begun advocating a policy idea known as Universal Basic Capital (UBC) – which is not to be confused with the more common idea of Universal Basic Income (UBI).

The Future of AI, Humanity, and Work, a keynote by futurist Matthew Griffin

The specific proposals vary, but the basic intuition is simple: If the wealth generated by AI will accrue only to the owners of AI companies, then the way to avoid catastrophic levels of inequality is to give everyone an ownership stake in those companies. The idea has been endorsed by figures as ideologically diverse as Bernie Sanders, Gavin Newsom, Steve Bannon, Sam Altman, and even Donald Trump.

Designed the right way, the policy could provide a much-needed hedge against a future AI dystopia. It wouldn’t prevent workers from losing their jobs to machines, but it could guarantee that they share in at least some of the economic upside of the technology. Unfortunately, the version of the idea with the most momentum is very much not designed the right way. Were it to be implemented, it would invite its own kind of disaster.

As the name suggests UBC is a new twist on UBI. Under a UBI scheme, the government would raise taxes on the profits of wealthy companies and then distribute the proceeds in the form of checks mailed out to every American. During the 2020 Democratic primary, Andrew Yang became a political celebrity by running a single issue campaign devoted to implementing the policy before mass AI triggered job loss.

But massively raising both taxes and welfare payments is a political non-starter. UBC avoids that problem, at least in theory. Instead of a monthly check, every American would be given an account containing a chunk of equity invested in a broad portfolio of companies, stocks and other financial instruments. The theory is then that the value of that account would compound over time as the market rises – which it always has over time but which, crucially, no one ever guarantees.

Ultimately therefore, whether or not people receive that money wouldn’t depend on future tax revenues or be vulnerable to shifting political winds - once you have been given the equity, it’s yours.

The accounts could be funded in several ways, such as a onetime levy on the market capitalisation of large companies, to be paid for in stock instead of cash, but while it all sounds nice on paper would it solve wealth inequality? No. Would it solve the problem of mass redundancies from AI? No. It’s just yet another band aid for a society that’s increasingly struggling under the weight of high inflation and technological advancement and shows how desperate politicians are to find an answer that gives people at least some modicum of hope.