The Distributed Economy: A Potent Antidote to Rising Inequality in the Age of AI
Inequality is an economic disease with nefarious consequences for societies and has become more pressing than ever. Over the past few decades, inequality has been on a steady rise, with statistics painting a stark picture of the widening gap. According to the World Inequality Report, the top 10% of the population now captures approximately 37% of the total global income, while the bottom 50% only accounts for 13%. The wealth disparity is even more stark, with the wealthiest 1% owning 44% of the world's wealth. A report by Oxfam reveals that the world's ten richest men have seen their combined wealth more than double from $700 billion to $1.5 trillion during the pandemic. Meanwhile, the World Bank estimates that between 119 and 124 million people were pushed into poverty in 2020 due to COVID-19. In the US, the largest economy on the planet with a population of 332 million people, 44 million face hunger daily - a whopping 13.2%, or one in every eight people. What does that tell about ourselves? The wealthiest nation in the world is not capable of extending a helping hand to their own, lifting them out of poverty. I want to avoid getting trapped in a political discussion about the free market model versus government support, especially where propaganda misinforms the population, mixing the notions of absolute need for social policies with socialism. Therefore, we need to look at the problem with pragmatism and try to find solutions that will not get caught in the bipartisan growing abyss. We need to find solutions to revert inequality growth without threatening the free market existence. Some new illuminated think we can, and so do I.
That is the exact point where the distributed economy model comes in. The notion of a distributed economy posits that resources, production, and decision-making should be spread across a network rather than concentrated in a single central authority. Inspired by peer-to-peer networks, the model promotes decentralization, peer-to-peer interaction, inclusivity, accessibility, and resilience. The beauty of the model is that by transforming every household and every person into economic agents, it enables more people to be productive, lessening the need for government or social support. Authors like Jeremy Rifkin in "The Zero Marginal Cost Society" and Yochai Benkler in "The Wealth of Networks" have explored the transformative potential of distributed economies. By decentralizing resources, production, and decision-making, this model ensures that the benefits of technological progress are shared equitably among all participants. The distributed economy model thus offers a potent countermeasure against the growing inequality, especially in the AI era, where more income concentration will come in its first years as jobs are eliminated, and small businesses become irrelevant. To put it clearly, the initial phases of AI adoption will exacerbate existing socio-economic inequalities through job displacement, wage suppression, and the concentration of wealth in the hands of a few entities and corporations that control these technologies.
The distributed economy, on the other hand, has the potential to democratize access and participation, preventing wealth and power from being monopolized by a single central authority. The principles of the distributed economy are already being implemented in various sectors, ranging from cryptocurrencies like Bitcoin and Ethereum to decentralized energy production via solar panels and sharing economy platforms such as Airbnb and Uber. Norway's notable allocation of oil royalties to a national pension fund is another example of how natural resource wealth can be equitably distributed, ensuring long-term financial security for all citizens.
Cryptocurrencies and DeFi:
Micro-Entrepreneurship: Individuals in countries with unstable local currencies use cryptocurrencies like Bitcoin to preserve their wealth and conduct transactions. For example, in Venezuela, amidst hyperinflation, small businesses and entrepreneurs have turned to Bitcoin for purchasing goods and services.
Investment and Savings: DeFi platforms such as Compound and Aave allow individuals to earn interest on cryptocurrency holdings, providing passive income. People can lend their digital assets and earn interest rates that are often higher than traditional savings accounts.
Energy Sector:
Homeowners as Energy Producers: In countries like Australia and Germany, homeowners are incentivized to install solar panels. They can sell excess energy back to the grid, turning households into small-scale power plants. That not only reduces their electricity bills but also contributes to a sustainable energy network.
Community Energy Projects: In Brooklyn, New York, the Brooklyn Microgrid project allows residents to buy and sell solar energy within the community marketplace, fostering local energy resilience and sustainability.
Sharing Economy:
Asset Monetization: Platforms like Airbnb and Uber allow individuals to monetize underutilized assets, such as spare rooms or cars. For instance, a student might rent out their apartment on Airbnb while traveling, thereby subsidizing their rent.
Skill Sharing: Websites like TaskRabbit or Fiverr allow individuals to monetize their skills, from handyperson services to graphic design. That democratizes employment and provides flexible earning opportunities.
Agriculture and Food Production:
Farmers' Cooperatives: Small-scale farmers in countries like India and Kenya use cooperative models to pool resources and access larger markets, ensuring fair prices for their produce.
Urban Farming Networks: Platforms like CityBee in Lithuania enable urban dwellers to rent out their underutilized land for agricultural use, connecting landowners with local farmers.
Digital Art and NFTs:
Artists' Royalties: Digital artists can mint and sell their artwork as NFTs on platforms like Rarible and OpenSea. That allows artists to receive royalties directly each time their art is resold, ensuring continuous income and recognition.
Education and Knowledge Sharing:
Online Tutoring: Platforms like Preply, Chegg Tutors, and Skillshare allow individuals to share their knowledge and earn money by tutoring or creating courses on subjects they are proficient in.
Open Source Development: Developers contribute to open-source software projects and can receive donations or bounties for their work, fostering a collaborative and equitable tech environment.
Healthcare:
Telemedicine Platforms: Apps like Teladoc allow healthcare professionals to offer their services remotely, providing them with additional sources of income and increasing access to healthcare services for patients.
By enabling individuals to monetize their assets, skills, and knowledge, the distributed economy model contributes to a more equitable distribution of wealth and fosters economic resilience at the grassroots level without raising public spending.
Governments have a significant role in facilitating active participation in the distributed economy. By providing subsidies, grants, or low-interest loans, governments can empower individuals to install solar panels, start small businesses, or invest in new technologies. Educational and training programs funded by the government can equip people with the skills needed to thrive in a distributed economy.
Governments can also ensure fair compensation for data and mandate that companies like Google, X, and Meta compensate users for their data, ensuring that the economic value is shared equitably. Not to mention, paying authors intellectual property rights utilized to form LLM (Large Language Models). Those trillion-dollar companies became country-sized-income corporations by aggregating and selling products based on our data. Every contributing user must get a fair share of those revenues. Putting in perspective, if governments create the proper regulations, we all can make passive income for the entire population, reducing inequality and reducing the need to fund programs like a UBI (Universal Basic Income). Think of getting paid for energy surplus selling, data selling, and natural resources royalties. Examples of UBI across the globe show that type of money is immediately retrojected into the economy, boosting taxes and supporting economic growth, differently from corporations skillfully avoiding their taxes.
Potential Drawbacks and Limitations
While the distributed economy model offers significant advantages, it is also important to acknowledge potential drawbacks and limitations:
Regulatory Challenges: The decentralized nature of cryptocurrencies and other distributed systems can pose challenges for regulatory oversight, potentially leading to misuse or fraudulent activities.
Technological Barriers: Not everyone has equal access to technology or digital literacy to participate in the distributed economy, requiring governments to educate and finance the less privileged.
Job Displacement: While the gig economy provides flexibility, it may also lead to unstable employment conditions and a lack of job security for some individuals.
Quality Control and Consumer Protection: Decentralized systems may face challenges in ensuring consistent quality and protecting consumers from substandard products or services.
Environmental Concerns: Some aspects of the distributed economy, such as cryptocurrency mining, have raised concerns regarding their environmental impact due to high energy consumption.
In conclusion, the distributed economy model presents a promising solution to combat rising inequality that the advent of AI will propel. By decentralizing and democratizing economic participation, it ensures that the benefits of AI are broadly shared. Governments, through financing and supportive policies, can enable individuals to become active participants in this new economic paradigm. Embracing the distributed economy could be the key to fostering a fair, resilient, and inclusive future.