Will UBC Be the BFF the Post-AI Economy Needs? TBD

• 073026
• 4 minutes

Despite the recent sell-off, analysts still expect massive growth in the AI market over the next several years. So much growth, in fact, that many leaders and industry experts alike are scrambling to devise policy changes that will protect the economy from the anticipated disruption. The overarching concern is that AI will exacerbate the trend that’s been referred to as the “K-shaped economy,” in which low- and middle-income families continue to lose financial ground while the richest further widen the gap. Already, the top 1% of the U.S. commands nearly a third of total wealth.

It’s easy to imagine how AI could hasten this concentration of capital. In addition to the 10% to 15% of jobs expected to be lost to AI in the next 5 years, more than half of the positions that remain might look very different from what they do now. Then there is, of course, the more direct movement of money from consumers to AI company owners and their investors. Even in the case of stocks, any wealth generated by the market goes to benefit the wealthiest more so than anyone else.

One proposed solution garnering significant attention is what’s known as universal basic capital (alternatively, universal basic equity) or UBC. Not to be confused with universal basic income, UBC seeks to promote equality by redistributing resources. Although it has received relatively little attention until recently, the idea is not new: Founding Father Thomas Paine wrote about it back in 1795.

Some 230 years later, universal basic capital has gained bipartisan interest as a possible measure against an impending AI-driven concentration of wealth. But unlike Thomas Paine’s 1795 proposal, which relied on taxes from landowners to fund benefits paid to young adults, the elderly, and the disabled, the most popular versions today propose instead providing capital to citizens through equity accounts. What precisely would comprise these equity accounts is up in the air, but generally we’re looking at some combination of AI-related stocks. As these companies benefit from the expected growth of AI, so would these accounts, allowing everyone a share in the wealth.

What’s perhaps most compelling about the universal basic capital argument is its widespread support from both sides of the political aisle. From Bernie Sanders to President Trump, politicians from across the ideological spectrum are looking at UBC as a viable option. Even OpenAI CEO Sam Altman seems to feel it’s a good idea, and has reportedly been engaged in talks with the White House on this very matter for over a year— although the details of these discussions are still confidential.

How this hypothetical UBC plan would be funded is also TBD. Various and sundry ideas have been floated, including a tax on tech companies’ data farming activities, as well as treating the capital supplied to citizens as interest-free loans, which they could pay back after their wealth compounds. But the most widely supported ideas involve sourcing the funding from AI companies themselves, either in the form of a levy or taxes, or perhaps through company shares handed over to the government.

Such a plan could be a win-win, assuming the future that AI creates pans out as anticipated— but that’s far from a given at this point. Unquestionably, artificial intelligence is a technological Pandora’s box and its effect on things like the economy and the jobs market has been, and no doubt will continue to be, disruptive. But like at the beginning of the dot-com era, today’s industry leaders may be displaced tomorrow, and all but obsolete in short order.

Also like the dot-com era, AI companies’ current stock valuations are significantly higher than present earnings would justify, and costs still far exceed revenue. As we wrote in April, that doesn’t necessarily guarantee that we’re looking at a bubble, but it certainly doesn’t preclude the possibility. And it’s a possibility that doesn’t seem to be getting much attention: if a market correction were to take place in the future, and a UBC proposal had already been implemented that involved, for example, an AI-heavy mutual fund— well, you see the dilemma.

As one gets into the finer points of a UBC plan, other problems surface. Are individuals allowed to sell or reallocate their stakes? If so, those in more desperate financial situations and those less versed in investing in general would be easy targets for wealthier, savvier investors. On the other hand, if stakes are locked in and people only receive returns from the funds, a new issue arises: “If I own OpenAI shares that I can never sell, we just made OpenAI last forever,” warns Betsey Stevenson, a former top Labor Department economist.

Still, countries like Norway and Australia are successfully utilizing systems for their citizens that aren’t far off from those being discussed for the U.S., and realistically, some form of intervention will likely be needed as the economy endures the tectonic shifts brought about by advances in AI. Regardless, there are bound to be plenty more unforeseen twists and turns before the dust settles.

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