INCLUSIVE CAPITALISM BASED ON BINARY ECONOMICS AND POSITIVE INTERNATIONAL HUMAN RIGHTS IN THE AGE OF ARTIFICIAL INTELLIGENCE.

• Published date: 01 January 2018
• Author: Fleissner, Chris
• Date: 01 January 2018

INTRODUCTION

"Law is the invisible infrastructure that channels and facilitates economic activity.... In contemporary capitalism, property rights work to concentrate private wealth, when they could more profitably work to create and distribute much greater private wealth much more broadly without any redistribution or inflation. " (1)

The global economy of the twenty-first century is marked by wealth disparity, (2) a declining labor share of total earnings, (3) and the emergence of technological innovations with the potential to disrupt the continuing reliability of labor income. (4) These trends have provoked new and compelling inquiries into the institutions and ideals driving the distribution of wealth. (5) Observers arc left wondering whether the evolution or survival of these institutions might generate or require an economic order capable of enshrining not only the protection of individual property rights, but also the capitalist imperative to broaden the distribution of capital acquisition. (6)

An approach to a more inclusive capitalism based on the theory of binary economics has special relevance to this discussion. (7) It reveals market opportunities for low- and moderate-income people to acquire productive capital with the earnings of capital (8) by employing the same market institutions that facilitate capital acquisition for more affluent individuals. (9) It envisions broadening access to the existing system of corporate finance to people who have historically encountered barriers to such systems to acquire income-generating portfolios of stock (10) by securing more equal access to competitive, individual property rights. (11) It also has particular relevance amidst transformational technological change, (12) addresses social anxieties occasioned by economic marginalization, (13) and has attracted endorsements from a growing number of mainstream economists. (14)

Recognized by its proponents as a distinct economic paradigm, (15) binary economics recognizes that (1) capital does work and distributes income, (16) (2) advancing technology "makes capital much more productive than labor," (17) and (3) a broader distribution of capital acquisition with the earnings of capital promotes more growth than a narrower one. (18) As technology advances, production becomes more capital intensive, automation increases, jobs become obsolete, and workers become comparatively more expensive to employ than smart machines. (19) While the rate of job displacement by AI is subject to much speculation, (20) startling breakthroughs in artificial intelligence (Al) have drawn renewed attention to the distinction between human labor and capital assets as wealth producers. (21)

This Note reviews the state of property rights in international law and suggests that binary economics merits greater attention in a time of ever more advanced automation technologies. The first section discusses the potential impact of AI on labor income and the global economy. The second section explores the fundamental principles of binary economics, its economic implications, and alleged theoretical weaknesses. The third section highlights several positive international obligations, conventions, and norms concerning economic resilience through the lens of binary economic reasoning. The Note concludes with a call for increased research and experimentation in economic democratization based on binary economic principles.

I. THE IMPACT OF ARTIFICIAL INTELLIGENCE ON THE CONTINUING RELIABILITY OF LABOR INCOME

Cultural anxiety over technological innovation has a long and storied history. (22) While predictions of widespread technological unemployment during periods of technological innovation have proved largely inaccurate, some workers were indeed displaced during the Industrial Revolution and never lived to reap the benefits of increased factory productivity. (23) Today, the reliability of labor income has again come into question with the advent of advanced automation technology and artificial intelligence (AI). (24)

Powered by investments and education initiatives worldwide, (25) AI is undergoing rapid increases in capabilities and applications. (26) This trend suggests that machines may displace some forms of labor, (27) render millions of jobs obsolete, (28) and exert downward pressure on wages. While the extent and pace of displacement are highly contested, (29) some analysts estimate that "Almost half the activities people are paid almost $16 trillion in wages to do in the global economy have the potential to be automated by adapting currently demonstrated technology." (30) Others estimate that "about a third of workplace tasks can be automated for the majority of workers." (31) This could equate to a "disruptive tidal wave" in employment, with as much as six percent of jobs being eliminated by 2021. (32) "The proportion of jobs threatened by automation in India is 69 percent, 77 percent in China and as high as 85 percent in Ethiopia." (33) More than 5.1 million jobs may be displaced by automation worldwide as early as 2020. (34) Some posit truly revolutionary implications, claiming that AI represents a nascent economic force unlike anything in historical experience, including the Industrial Revolution. (35) In fact, according to some futurists, labor markets may be approaching the cusp of geometric change, far outpacing the rate at which farming and factory work was automated in the twentieth century. (36) "The next wave of economic dislocations won't come from overseas," (37) President Obama remarked in 2016. "It will come from the relentless pace of automation that makes a lot of good, middle-class jobs obsolete." (38)

To reckon with the power of AI, one need look no further than self-driving cars. Automated vehicles (AVs) (39) promise to save hundreds of thousands of lives by reducing the number of traffic accidents caused by human error. (40) Car manufacturers are deploying AV technologies around the world (41) with numerous anticipated benefits including reduction of carbon emissions and increased mobility. (42) These pilot projects are generating complex debates around machine learning, ethics, and law. (43) AV will change laws (44) and force societies to grapple with challenges to privacy rights (45) and the loss of millions of jobs held by drivers of trucks, busses, taxis, and other vehicles. (46)

Consequently, AI has revived preexisting concerns about technological unemployment, (47) provoking renewed debate about potential interventions to stabilize consumer demand. (48) As AI demonstrates increasing success at executing ever more complex tasks--including performing surgery, (49) trading on the stock market, (50) performing legal analysis, (51) composing symphonies, (52) shaping elections, (53) coaching in the workplace, (54) replicating itself, (55) and winning citizenship rights not enjoyed by many humans (56)--calls have grown increasingly urgent (57) for significant legal, political, and economic measures to ensure that the risks and benefits of AI are distributed fairly. (58)

The precise impact of AI is impossible to predict, particularly given its potential impact on financial markets, (59) consumption patterns, (60) and the legal system. (61) Yet its increasing sophistication raises questions about the long-term reliability of jobs, labor income, and aggregate demand. (62) To the extent that AI replaces human workers, it will suppress wages and slow economic growth. (63) This possibility has stimulated a renewed debate about the future of labor, income, and consumption (64)--and the possibility of a parallel expansion of capital ownership. (65)

While no existing enforceable legal norms require or afford compensation for the economic impacts of technological change, the current acceleration of automation could trigger social upheaval (66) precipitating their creation. Various stock ownership diffusion plans have long been recommended as prophylactics against declines in the share of labor-based income and consumer demand in the face of efficient machines. (67) However, the current convergence of evolving international legal theory and accelerating technological change may now spur their reintroduction into meaningful political discourse. (68)

II. BINARY ECONOMICS

"If democracy is someday to regain control of capitalism, it must start by recognizing that the concrete institutions in which democracy and capitalism are embodied need to be reinvented again and again. " (69)

A. The Fundamental Principles of Binary Economics

To understand how binary economics can address the potentially destabilizing consequences of the declining labor share of total income on consumer demand driven by the twin trends of concentrated ownership and advanced AI, (70) it is necessary to understand three inter-related foundational binary economic principles:

1. Both labor and (real) capital do work and (via property rights, including financial capital) distribute income;

2. Although advancing technology is widely understood to make labor more productive, it may also be understood to make capital more productive than labor in task after task (which helps to explain why profitable corporations continually employ capital to replace and vastly supplement the work of labor); and

3. The prospect of a broader distribution of capital acquisition with the present and future earnings of capital carries with it the prospect of more broadly distributed capital earnings in future years, which in turn will provide the market incentives to profitably employ more labor and capital in earlier years. In other words, the more broadly capital is acquired with the present and future earnings of capital (through borrowing, via capital credit), the more an economy will grow. The third of these premises (the principle of "binary growth") identifies a distinct cause of economic growth that is based on the distribution of capital acquisition with the present and future earnings of...