Marshall is considering an distant future economy where, essentially, only executives get paid; all low-wage jobs have been automated away.
For such an economy to function, you'd need an "extreme income tax" to redistribute wealth. Otherwise, the executives would be making ultra-cheap products that no average person could buy, because he wouldn't have a salary to afford it.
This ignores basic supply and demand, though. If no one can buy them, why would they make them? And if Company A is pricing them way too high or unfairly, what's to stop Company B from offering the same thing at a lower price point?
That's sorta the problem. No one can buy them, so nobody makes them. End result is that the economy stops functioning, nobody builds anything, and a perma-depression occurs. This can't be a good thing...
As for what stops company B from competing - it's the cost of tooling up all these automation centers and the risk that after all that, your "prey" may itself get better and nobody will buy your product. Microsoft was massively profitable for the 1990s. Google was massively profitable for the 2000s. Why did nobody compete with them? Because if they did, Microsoft/Google would crush them like a bug.
I guess Marshall would argue that if there were no wealth redistribution scheme, all the non-executives would simply die off, followed by all the executives who made stuff for them, until eventually only a micro-economy existed of executives making stuff for other executives.
I agree that Marshall is concentrating too much on one side of the economic equation, though. He ignores that people could form less efficient micro-economies rather than die off. He ignores that human desire is ever-changing and limitless, capable of out-stripping the most efficient production facility. And he ignores the fact that people have intrinsic value to other people apart from employment: to interact with, to command, to love. People will pay to keep other people alive and happy.
The Luddite fallacy has been wrong for a few centuries now. We have vastly more automation than we did a hundred years ago, yet the unemployment rate is about the same and the median standard of living is much higher.
Something could change to make it correct in the future, but I wouldn't assume that it will happen.
Once we've reached such a future, all basic necessities will be so cheap and plentiful that no one minds having the government pay for them. So I see no reason an "extreme income tax" will be necessary.
I would argue that we've already reached that point. If the government was streamlined by market processes and we ceased blowing surpluses on wars we could easily fund a safety net.
Here in the UK we spend about 30 billion squids a year on defence. About a third of that is service pensions, another third goes on the bureaucracy/long term projects and another third on the actual services themselves.
That's half what we spend on healthcare and one-fifth of what we spend on welfare. Anyone who thinks that by cutting defence spending a government can suddenly afford anything is dangerously misguided.
Here in the US, we spend at least $600 billion a year to start, plus another $30B+ on pensions, plus shitloads of black budget on intelligence. This amounts to about the entire UK budget, just on yearly budgeted defence.
None of this includes the cost of actually fighting our ridiculous wars: the cost of the Iraq shenanigans alone will be well over a Trillion dollars even if Obama pulls out this year and no more money is spent after that.
Who'll make the machines that automate? If there are a million people sitting on their haunches with nothing to do, don't you think some of them will find something constructive to build and employ the rest?
The industrial revolution massively automated practically all aspects of life. I didn't see a world wide job scarcity throughout the 20th century.
For such an economy to function, you'd need an "extreme income tax" to redistribute wealth. Otherwise, the executives would be making ultra-cheap products that no average person could buy, because he wouldn't have a salary to afford it.