The software company VMware has roughly the same market value as General Motors. VMware has 13,000 employees. GM employs almost a quarter of a million people. In addition to the current workforce, GM supports roughly half a million retired workers through its pensions and health insurance programs. VMware supports 0 retired employees.
Whether we mean to or not, we are deciding now on the shape of a post-jobs economy. What will American culture, politics, health care, and economics look like in an era when formal employment – a job – has ceased to be the most common way that Americans earn a living?
This is not just a question of how we treat the less fortunate, those who do not find jobs in shiny new tech startups. The post-jobs economy is not necessarily an unemployment economy. The shift away from formal employment does not mean stagnation or idleness.
More and more Americans are shedding formal employment in favor of more flexible work arrangements or starting their own businesses. Since 1990, small businesses and solo ventures have accounted for twice as many new jobs as large enterprises. Yes, many people are falling behind in the competition for knowledge-based jobs, but that is neither the only, nor necessarily the dominant theme of the knowledge economy.
The dynamics of the knowledge economy, much higher wages for professionals and rapidly declining inflation, are creating shorter, more flexible careers and more opportunity for entrepreneurship. For those who avoid falling into the dangerous chasms opened up by this economic realignment, the knowledge economy promises a freer, more prosperous world than we have ever known. The key to this future will be adapting our political arrangements to narrow those chasms and update the safety net beneath them.
Decisions we make now about health care, education, and the shape of the social safety net will not only affect the poor, they will determine how many Americans can afford the kind of risk-taking that accompanies entrepreneurship and innovation. For Republicans in particular, there is an opportunity hiding in this transition. If we can shed the notion that government=slavery, we could use a modified social safety net to unlock a massive economic expansion and a radical shift toward greater real personal independence than we have ever before experienced.
Imagine a country in which everyone can feed themselves, pay for a minimal place to live, and get access to health care. No matter how ill, damaged, or even indolent they may be, their children have an opportunity to earn an education and develop their talent if they so choose. Those who choose to work hard can live a lifestyle we can scarcely imagine. The wealth available to those who are particularly successful is spectacular.
Those who don’t work hard or succeed, for whatever reason, still survive reasonably well. Their children will not be precluded from opportunities to develop their talent by their parent’s failures.
Taxes on the successful fund an education infrastructure and a safety net that prevents the next generation from descending beyond help, but government is generally smaller and less intrusive than we have come to expect. A stronger safety net finances a wider room for failure, with less regulation and more individual accountability. Health care is paid for from taxation, but administered by private insurers and delivered by private providers.
The socialist model of deep state regulatory intrusion, public ownership of major capital, and mass unionization will be too restrictive to function. It is crumbling away globally under competitive pressure from more dynamic models. It will have to be replaced with a kind of universal profit-sharing plan.
Such an arrangement is not far from the way we live now, but it would require a government that sets standards rather than dictating outcomes. It would require higher taxes and a stronger safety net, but fewer government employees, more privatization, less support for unions and other interventions that distort market outcomes and dampen innovation. This model would free the innovation engines of global capitalism to crank out massive new wealth without risking the distortions, political and economic, which would come from an unmediated transition to lower net employment.
Without an updated safety net, the wealth concentration created by suddenly declining low-skilled employment would quickly breed economic stagnation. That stagnation would in time dim the prospects of everyone who had not successfully begun earning a living from capital, rather than wages.
That stagnation would narrow opportunities for investment, gradually converting capital owners into rentiers squeezing ever-diminishing returns from depreciating assets. In short, without efforts to support the most important resource in a knowledge economy – human innovation – the system would gradually eat itself, replacing an old overclass with a slightly nerdier new one before closing down. Without smarter efforts to expand opportunities, everyone will see narrowed horizons over time.
The Republican Party’s obsessive fear that someone might get government benefits they do not deserve is blinding us to a prime opportunity. More Americans are entrepreneurs than ever before. African-Americans are twice as likely as whites to start a new business. Republicans are inadvertently making this opportunity harder to seize by standing in the way of efforts to update the safety net.
Our changing economic landscape is creating an environment ripe for traditional Republican commercial values. If Republicans wake to this opportunity and find a way to shed the baggage of the Cold War, there is a potential for a long run of political success and economic dynamism. The makers/takers paradigm that defines the grumpy old Republican isn’t just arrogant, it is utterly false. If we recognize how the knowledge economy has wrecked that paradigm, new opportunities emerge for the party and the country.
It is important to remember that this economic transformation is a global phenomenon. The nation that experiences the greatest success in harnessing economic dynamism without creating a desperate underclass will dominate the next century. We have every reason to be the winners in this race. A bright future awaits if we have the courage and intelligence to seize it.
The rise of the Entrepreneurial Economy, http://people.few.eur.nl/thurik/Research/Teaching/The%20Rise%20of%20the%20Entrepreneurial%20Economy%20and%20the%20Future%20of%20Dynamic%20Capitalism%20-%20Thurik%20et%20al.%20%282013%29.pdf