Basic Income and Productivity in Cognitive Capitalism

Article: FUMAGALLI, Andrea & LUCARELLI, Stefano (2008), 'Basic Income and productivity in Cognitive Capitalism', Review of Social Economics, Vol. LXVI, issue 1, March 2008: 14-37.

Abstract

In this article basic income (BI) is not considered merely as a measure to raise both living standards and social well-being. Rather, the authors argue that it should be seen as an indispensable structural policy for achieving a healthier social order governed by a more equitable compromise between capital and labour. Embracing the French Regulation School approach, Fumagalli (University of Pavia) & Lucarelli (University of Bergamo) maintain that such a compromise is founded on the redistribution of the gains of productivity. In advancing the argument, they focus on the socio-economic transformation that has overtaken the Fordist paradigm within Western Countries and propose the term Cognitive Capitalism (CC) to describe the economic system. The authors address the relationship between the exploitation of knowledge and the accumulation of surplus, pointing out that such a process is based on the exploitation of dynamic scale economies. Their analysis highlight the ambiguity concerning the growth circle of contemporary capitalism. According to Fumagalli & Lucarelli, BI is compatible with the present form(s) of accumulation, as it increases productivity, through network and learning processes whilst increasing demand via levels of consumption. Such a result is not always guaranteed. It depends, on the one hand, upon how much BI positively affects productivity; the greater this probability, the lower the role played by intellectual property rights and the higher the diffusion of network economies (general intellect and social cooperation) and on the other, it depends upon the way BI is financed.

Conclusion

"The transition from Fordist capitalism to CC has been characterized by the shift from a stable, although conflictual, structure of accumulation to an unstable one. This instability is mainly due to the absence of a relationship between supply conditions (affecting productivity trends) and demand conditions (affecting a fair income distribution), which in the Fordist regime was able to guarantee a dynamic equilibrium. The introduction of BI can be the first step towards a positive solution. BI is compatible with a model of accumulation based on the exploitation of dynamic scale economies. If BI was to be introduced, we would witness two positive effects on demand and output. Through enhancing network and learning processes, BI would increase both productivity and demand, via consumption. This twofold result cannot always be guaranteed. On the one hand, it depends on how much BI positively affects productivity. The greater its probability, the lower the role played by intellectual property rights and the higher the diffusion of network economies (general intellect and social cooperation); on the other, it depends on the way BI is financed. This latter point requires a taxation system which does not tend to penalize investment activity in immaterial production (net economy) but focuses on rent.

These results depend on the assumption of a closed economic system in which international markets play no role at all. Output internationalization and financial globalization could succeed in minimizing or postponing these contradictions In order to understand the effects of the introduction of BI in the context of CC, it is necessary to stress that the real wages are no longer indexed to the increase of productivity. As Boyer notes, decentralized and individualized contracts would “enable a readjustment of wages scale as the emergence of new forms of remuneration indexed to company performance and to evaluation by financial markets” (2004b: 54). Therefore, it is necessary to analyze the relationship between an increase in productivity and an increase in demand, through capital gains generated in the stock market. This is similar to an income multiplier that provides wealth only for people who can invest in financial markets. Secondly, linguistic and immaterial technologies are characterized by a high degree of cumulativeness and appropriability, especially as far as immaterial investments are concerned. Therefore, it is necessary to provide a better definition of the investment function. For instance, it would be useful to separate immaterial investment activity from material investment dynamics (machinery). As BI is able to improve network and learning processes, it is positively correlated to investment activity, thanks to the increase in productivity. The second type of investment, Fordist in kind, is, on the contrary, penalized by BI because of the higher tax levels. With this change, the increase in productivity can affect the level of demand through investment, and the function of the output growth rate can become positive. In order to provide a dynamic equilibrium between output and demand, the role played by financial markets in affecting demand cannot be considered as structural."

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Authors' addresses: [email protected], [email protected]