“It is my conviction that we are going through the greatest technological and economic shift in human history, and our political class is completely asleep at the switch.”
On May 4th, Henri Mattila interviewed Andrew Yang, a Democratic Party candidate for the 2020 U.S. presidential election. After working as an attorney and serving as CEO of test preparation company Manhattan Prep, Mr. Yang went on to found the non-profit fellowship Venture for America, where he is currently CEO. He is the author of a number of books, including The War on Normal People, published in 2018. He has been honored multiple times by the White House, most recently being named as a Presidential Ambassador for Global Entrepreneurship.
In this interview, Mr. Yang outlines his vision for implementing a universal basic income scheme in the United States as president, his views on the increasing automation of many American jobs, as well as a number of other issues on which he will focus when elected.
Thank you for joining me today, Mr. Yang. First, for our readers who haven’t read your book War on Normal People, could you provide me with what you think are the key takeaways?
Thank you for having me.
The first takeaway is that our economy has changed for good; we’re in the process of automating away most of the labor categories in the U.S. This is no longer speculative, but we’re in the middle of it. If you look at the manufacturer workers who were displaced over the last couple of decades, about 40 percent have left the workforce, and about half of those went on disability. The labor participation rate in the U.S. has declined to 62.9%, which is a multi-decade low, comparable to levels in El Salvador and Dominican Republic. In addition, American life expectancy has declined for the last two years.
In summary, automation is no longer the future; we are in the middle of it, and we are dealing with it very, very poorly by pretending it is not happening. And those trends are about to get much, much worse as technology accelerates. Truck driving is the most common job in 29 states; there are 3.5 million truck drivers that are going to get displaced over the next five to 10 years. 10 percent of Americans work in retail and 30 percent of malls are going to close over the next four years. So we’re in the early innings an automation wave that has already led to Donald Trump becoming President, mostly due to the automation of four million manufacturing jobs in Michigan, Ohio, Pennsylvania, and we’re about to triple down on that process. By the time we get to inning number six or seven, this country will become almost unrecognizable. I would say those are the big takeaways from the first two-thirds of the book.
The final third of the book is a set of potential solutions that I’ve proposed, the most prominent being the “freedom dividend,” which is a universal basic income of $1,000 per American adult. In addition, I write about an evolution to the next stage of capitalism, which I call “human-centric capitalism,” where we have goals and measurements like childhood success rate, mental health, levels of engagement with work, freedom from substance abuse. I want to steer our economy toward those goals, because GDP will be an increasingly misleading and flawed measurement over time, as more and more work is done by software, AI, and machines.
There have been attempts in other countries to move to a different measure other than GDP; most recently, Bhutan introduced the “Happiness Index.” It has not served the nation well, however, as Bhutan still ranks very low in the annual world happiness report produced by the United Nations.
Unfortunately, I don’t think they did a very good job with the measurement. We need to do better than that, but they had the right general idea. Because GDP, profits, and stock market prices will be an increasingly poor indicator of how the majority of Americans are doing.
You’ve had a very successful career in the private sector. What prompted your decision to enter the not-always-glamorous world of politics?
A lot of it is the conviction and certainty I have that my friends in Silicon Valley are correct; that they are going to automate away millions of American jobs over the next five to 10 years. And when I spoke to senior government officials and policymakers, there was a set of horrifying responses that went like: “We can’t talk about that,” “We should study it,” or “We can educate and re-train Americans for the jobs of the future.” While the data around government-funded re-training is abysmally poor; it has measured efficacy rates between zero and 37 percent. Even when we actually try to re-train workers—which does not happen most of the time—it’s not like when a mall closes, there’s an army of re-trainers there to try to re-train all of the retail workers who just lost their jobs.
So it is my conviction that we are going through the greatest technological and economic shift in human history, and our political class is completely asleep at the switch. They are arguing about the tweet of the day, or cultural food fights of decades ago, as opposed to trying to actually address the elephant in the room that is trashing the place. That is why I decided to run for office, as it became clear that our political class was not up to responding to the transitions that are happening in the economy and to our society.
Back in the early parts of the 20th century in the United Kingdom, there were mass protests in response to the ongoing Industrial Revolution that was, effectively, automating away many jobs that previously required manual labor. In response, some politicians tried to campaign away the automobile, for example, which had displaced the horse-and-buggy drivers. With the benefit of hindsight, we now know that most people whose jobs were displaced by technology eventually found new work, and society was overall better off.
Do you see any parallels between the automation happening today and the introduction of modern technology back then?
Well, the first thing is that if you were to rely on history as your sole guide, there has been massive civil unrest in response to the Industrial Revolution in the U.S. For example, Labor Day was inaugurated in response to a series of riots that killed dozens of people and resulted in the equivalent of billions of dollars worth of damage. Labor unions were founded in 1886, and negotiated for things like the 40-hour work-week, no child labor, and all of these things. And then we instituted universal high school, which did not exist before the Industrial Revolution. So there were massive conflicts and social changes through the Industrial Revolution. Even if one were to be optimistic and say, “Oh, it’s going to be like that,” you’d expect there to be massive strife, conflict, re-organization, et cetera.
Second, the data is really, really clear as to what happened to the manufacturing workers in the Midwest. And I spent the last six-and-a-half years working with entrepreneurs and businesses in Detroit, Cleveland, St. Louis. There was no magical reorganization of work; instead, many workers went home and killed themselves by the numbers. One reason you have, again, 40 percent of former manufacturing workers leaving the workforce and going on disability, and shockingly high suicide rates—anyone who thinks that there will be some magical reorganization of the workforce is, one, not a true student of history, and two, not paying attention to the real data on the ground rate now.
A national-level universal basic income scheme would obviously be an enormous program. Recent studies conducted in places ranging from Kenya to Finland have not provided many helpful answers as to the benefits of such a scheme. You have previously cited a Canadian study from the 1970s as your primary evidence that demonstrated the feasibility of universal basic income. Do you plan on conducting further studies before implementing this new kind of welfare program?
Absolutely—of course I would like to first study it in certain locations, and roll it out gradually. It is a significant change. One thing I’m looking forward to asking, when I’m president, which state would like to have universal basic income first?
Of course there’s more learning to be had, but I’m very confident that universal basic income would dramatically improve the lives of tens of millions of individuals and families. There might be some tweaks and tailoring, but I’m very bullish on the substance.
One of the dangers of doing little experiments—I mean, we’re living in an experiment right now—I’m really not that concerned about somehow money not being allocated in a way that every nickel and dime is spent in some person’s version of the ideal. We have
You mentioned in an interview with Yahoo! on April 27th that “we are easily the richest, most advanced country in the history of the world; we can easily afford $1,000 per adult per month,” citing U.S. GDP of nearly $19 trillion. However, U.S. federal debt-to-GDP ratio stands at 105%, one of the highest in the world. How do you envision this program to be paid in a way that would be satisfactory to both sides of the aisle?
First, I would like to say that decades of prior mismanagement should not preclude us from doing the right thing. And it is eminently affordable on the face of it, as you said, our economy is 19 trillion, up by four trillion in the last 10 years alone. The cost of the freedom dividend of $1,000 per month per adult is approximately $2 trillion, per year. But we are already spending $5 to $6 trillion on direct income support, welfare benefits, disability payments, which would then be incorporated into the freedom dividend where an individual who is currently receiving benefits would have the option of opting in for the $1,000, or they can keep their current benefits.
But in any case, it’s not additive, with 25 percent paid for, at least. The trap we’re in right now is that income taxes are very bad at harvesting revenue from new technologies, automation, AI, and software. Because the beneficiaries tend to be very large global technology companies who are not paying their fair share of taxes; they just move it all to other places like Ireland. We need to move to a value-added tax regime, which every other industrialized country currently uses. The main way I would propose to pay for universal basic income is to implement a value-added tax at half the European level. A 10 percent value-added tax in the U.S. would generate between $700 and $800 billion, which gets you to two-thirds of the cost of UBI.
And the remaining third, I believe, would be realized through a combination of economic growth based upon putting a thousand dollars into every American consumer’s hands; it would grow the economy by $2.5 trillion according to the Roosevelt Institute. 25 percent of which we would get back in taxes because of all the economic activity, so that would generate an additional $600 billion or so. That would save at least $100 billion in decreased healthcare costs, homelessness services, incarceration, rehabilitation, and other things government currently spends over $1 trillion on.
A universal basic income of $1,000 per month is very achievable if we start focusing on the right things.
If you make this pitch to fiscal conservatives, there likely will be demands for a greater reduction in overall welfare spending. Otherwise, universal basic income will effectively become just another welfare program. Have you considered other places where to cut spending?
Well, the $500 to $600 billion I just described does not include Medicare or Medicaid, but it does include food stamps and disability welfare benefits. Healthcare is its own problem, and I believe we need to move to Medicare-for-all, and have the government negotiate more reasonable rates. Right now, we spend twice as much on our healthcare as other industrialized countries; it’s up to 18 percent of GDP, and we get less results. And the reason for that is that our healthcare system does not reward healthfulness nor successful treatment, it just rewards activity. The price you get is completely arbitrary based upon what kind of insurance you have. In Medicare, you get much lower rates for every treatment or drug than private insurance companies; they just have more bargaining power.
So, we need to bring our healthcare costs into line. But I happen to agree with the fact that our current welfare programs are designed in a way that could be dramatically improved upon.
The Department of Education recently has sought to create a school voucher program. While this may sound like a reasonable plan to help improve student outcomes, many people on the left say that instead of embarking on this largely untested program, the government should instead focus on improving existing public schools. I think this analogous to some of the criticism you might get regarding UBI: instead of implementing with a transformational, largely unproven social program, why can’t the government just focus on improving existing welfare systems?
Andrew: Well, in the case you cite regarding the schools, we spend a lot of money in our schooling system. It’s just that we don’t necessarily spend it on the right things. So in many cases here in America, it’s not really a question of resources; we spend a lot in our healthcare, and we just get bad results. We spend a lot on education too, and we get bad results.
So it’s not helpful to try and plow more money into flawed systems thinking more money will simply turn thing around. So to me, plowing more money into dysfunctional welfare systems that have perverse incentives for most everybody is not a winning formula, and that we do need new approaches, and policies, that will empower Americans and reward things that we all want for ourselves. Right now, if you look at our disability programs, the churn rate is less than one percent—because no one is going to risk a lifetime of benefits for a tenuous part-time job that can disappear.
And so no one ever feels any better when tested during the disability program. But if the person is going to get the money regardless of if he feels better, they might get that part-time job, and feel good about himself—that would be vastly superior. I mean that, there is a real change of approach that’s necessary.
You almost sound like a Republican.
You know, I get that a lot.
If you were to spend money fixing the public school system, what do you think the current approach would be? You spend money on expensive consultants, you get reports for it, you do all these things and maybe monitor the teachers, and find new ways to have report cards and what not. And it probably would not really help anything. We’re slaves to complexities, systems and processes, and we’ve now come to the point that they’re all stacked on top of each other. I mean, the best thing we should do with our money is probably to pay the teachers, and get better teachers, and you’d end up with better results. But that would be the last thing anyone would think of, because we don’t trust the teachers either.
In America, we won’t trust our people, but the only thing we will trust are systems, and more systems and processes—and it’s immensely counterproductive. We need to start trusting our people again; we have to trust ourselves.
Switching gears from economic policy. You might have heard of Students for Fair Admissions, which recently sued Harvard University alleging that the school engages in unlawful racial bias against Asians, violating Title VI of the 1964 Civil Rights Act that bars discrimination on race. The issue of affirmative action will most likely continue to be a hot-button issue for the foreseeable future. As an Asian-American who has attended two Ivy League institutions, do you have a stance on affirmative action?
First, I think this kind of lawsuit is based on a premise that’s never been true. If you look at history of admissions practices, they’ve always had a preference for legacies, which has not included many Asians in the past. So there has never been a truly objective process. A lawsuit like this is coming at the issue from an inaccurate place.
Asian-Americans are in a unique position because we are a little less than six percent of the population, and between 15 and 20 percent of elite institutions. Now, to me, I don’t think that even Asian-Americans would be well-served, if we were—as you see in various campuses in California where we all of a sudden became more than half the school—that would fundamentally change the character of the school in a way that, to me, would be unproductive for everyone’s interests. Studies have shown that if you have people with certain abilities, where they go to school doesn’t really matter in terms of life outcome. It’s not what degree you manage to get on your wall. You’re still the same person. And to me, what Asian-Americans need to realize is that we are who we are, independent of what an admissions officer thinks. Someone who is going to be successful is going find success regardless.
To me, the biggest problem in higher education is the increasing cost of tuition. These universities keep gouging the American people, who then have to take out massive loans. That’s actually the fundamental issue with education right now, that there isn’t an incentive for any of these universities to exercise real restraint on cost. Has college gotten three times better in the last 25 years? Of course not.
Related to college admissions: you had stunning financial success with the standardized test prep service Manhattan Prep, which was acquired by Kaplan. Study after study has shown that the benefactors of expensive test preps are students from America’s wealthiest families. According to Manhattan Prep’s website, the most popular test prep package starts at $1,399. Do you think that expensive test prep services help to contribute to income inequality?
Yes, I think test prep services definitely get used by affluent parents, so I would say it does contribute to educational inequities. When I was running Manhattan Prep, we did everything we could to give our courses away for free to people who were working in non-profits or who demonstrated that they were heading to school for a pro-social reason. But it’s of course the case that wealthier people use test prepping services at higher levels, and so have advantages as a result.
It’s one reason why something like universal basic income is so important, so that we can create some degree of equity of opportunity that is not based upon what family you were lucky enough to be born into.
Thank you for joining me today, Mr. Yang.
Thank you, it was a real pleasure.