Lord Adair Turner, former boss at the now defunct financial services authority, man who was once in the running for taking over as governor of the Bank of England, and supporter of funding government spending via QE, has joined the ranks of those who are fretting over the effect that technology is having on the world.
In an interview with Business Insider, Lord Turner said: “We have an economic malaise where the capitalism system is not delivering as well or to enough people to maintain its legitimacy.
"There’s a certain sort of equality of citizenship that requires that everybody does OK. I think that may breakdown. I think it may breakdown because of the fundamental nature of technology. You have to be aware that the way that capitalism works will vary depending on the different stages of technology that we’re in."
Lord Turner is the chairman of the Institute for New Economic Thinking, the think tank set-up by George Soros.
He cited as an example Facebook, with a market cap of $370 billion and which employs just 14,000 people.
He explained that “technology has this extraordinary feature that once you develop one copy of software, the next billion copies don’t cost you anything.”
He is right. The marginal cost of digital products, which is to say the additional cost incurred by producing an extra unit of a product, is zero.
And economic theory says that price is a function of marginal cost, in a digital world, economic theory says that the price of a digital product is free.
If products are free, that may seem like great news for consumers, but it is not so good for workers – and alas workers and consumers are often one and the same.
But the services economy is different – and if there is one skill that technology is unlikely to ever be able to acquire, it is the skill for social intelligence, or empathy.
And social intelligence is often vital in the services economy.
But if companies with a market cap of $370 billion employ 14,000 people, where will the demand come from to fund these jobs? Well if products are so cheap that they are virtually free, or indeed are free, we won’t have an inflation problem and that means governments can print money and hand it out to citizens, without risking inflation.
And that, in a nutshell, is what Lord Turner is advocating.