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If you have read the article entitled Robotic Nation and if you have looked at the many robotic news items on this page, then you may be coming to a new realization. We are standing right now on the threshold of the robotic era. Once robots start arriving in the job market in significant numbers — something that we will see happening within a decade or so — they have the potential to dramatically change the world economy.
At least 50 percent of the people working in the American job market today are working in people-powered industries like fast-food restaurants (McDonald’s, Burger King, Wendy’s, etc.), retail stores (Wal-Mart, Home Depot, Target, Toys “R” Us, etc.), delivery companies (the post office, Fedex, UPS, etc.), construction, airlines, amusement parks, hotels and motels, warehousing and so on. All of these jobs are prime targets for robotic replacement.
In 2003 we are seeing the deployment of automated checkout lines in stores all across the U.S. This is the leading edge of the robotic revolution in retail. By 2015 we will start to see voice-recognizing robots helping customers in these stores, inventory-shelving robots putting the products out, cleaning robots sweeping the floors and the parking lots, cart robots bringing the shopping carts back into the store…. Robots will be moving in to make the completely automated retail store a reality in a 2020 time frame.
Companies like Wal-mart, K-Mart, Target, Home Depot, Lowes, BJ’s, Sam’s Club, Toys R Us, Sears, J.C. Penny’s, Barnes and Noble, Borders, Best Buy, Circuit City, Office Max, Staples, Office Depot, Kroger’s, Winn-Dixie, Pet Depot, etc. will all switch to robots at approximately the same time. They will dump 10 million or so workers onto the unemployment rolls at approximately the same time. Other industries like fast food, construction, transportation, warehousing, etc. will be automating as well, dumping millions more. The unemployment rate during this period of time could be remarkable.
Even if you assume that the economy reconfigures rapidly and creates new jobs for all of these displaced workers, it will not do so instantaneously. There will be a year or more of turmoil for each employee as the economy invents the job and the employee retrains to fill it.
More likely, the economy will not be able to absorb all of these displaced workers. The economy has been creating millions and millions of low-paying, no-benefits, service-sector jobs for the last 40 years. These jobs are perfect for robotic replacement. There is no reason to expect that the economy will suddenly figure out a way to create high-paying, exciting, fulfilling jobs for these tens of millions of people displaced by robots. If the economy could do that, it would be doing it now.
In other words, The first wave of robots has the potential to make things very uncomfortable for the American economy. In the 2020 time frame, the rate of economic change will be startling. At the very least it will be a time of intense flux and employment turmoil.
The question that I would like to pose in this article is a simple one: How are we, as a society, going to respond to this robotic revolution? If we handle it properly, the arrival of robots could be an incredibly beneficial event for human beings. If we do not handle it properly, we will end up with millions of unemployed people and a severe economic downturn that will benefit no one. Can we modify the American economy now to prevent this downturn? Are there things that we can do today to smooth the transition to the robotic nation?
The Concentration of Wealth
If you look at our economy as a whole, you can understand why robots have the potential to be so disruptive if we do not handle their arrival properly. Here is a highly simplified view of a typical business, be it a fast food restaurant, a retail chain, etc.:
This diagram shows that a corporation takes in raw materials from suppliers on the left. Using its own assets (factories, stores, offices, equipment, etc.), its employees and its executives, the corporation produces a product or a service. The corporation sells its products and services either to retail customers (people), or it acts as a supplier for other corporations. It then pays its employees for the work they do and sends the profit to the shareholders.
The thing that you notice in this diagram is how important people are to this system. People are where all the money comes from and where all the money goes. When money comes into a corporation, its original source (even if it has passed through several corporations along the way) is a person who spent money. When money leaves a corporation, eventually it pays a person in the form of a wage, a dividend or a benefit.
One thing that has been happening in the economy for quite some time is a concentration of wealth. To put the concentration of wealth into perspective, you can look at a report like the Census Bureau’s Money Income in the United States. [ref] This report shows that:
80 percent of the households in America make 50.6 percent of all the income in America.
The richest 20 percent of the households, on the other hand, make 49.4% of the income.
In other words, the richest 20% of the people in the United States get half the income. The other 80% get the other half.
In the 1960s, the split was closer to 60/40, with 80% of the population making 60% of the income, and the richest 20% of the population making 40%. [ref] Between 1960 and 2000, the income split has gone from 60/40 to 50/50.
In 1960, the wealthiest 20 percent of the U.S. population took home 40 percent of the nation’s income. By 2000 the wealthiest 20 percent took home 50 percent. In the future the process accelerates.
We see the reason for this trend regularly in the news. CEO and executive salaries are rising at a startling pace. The average CEO of a large corporation now makes between $10 million and $20 million per year. Since 1980, CEO salaries have risen by a factor of 10, and that same trend is increasing all executive compensation. William McDonough, president of the New York Federal Reserve Bank, notes:
“I find nothing in economic theory that justifies this development… I can assure you that we CEOs of today are not 10 times better than those of 20 years ago.” [ref, ref, ref] At the same time, employee wages are stagnant. The minimum wage has not risen since 1997. Since the minimum wage acts as a foundation on which most other wage scales are based, we are all affected. As a result, sixty percent of Americans make less than $14 per hour today. [ref] In her book The Divine Right of Capital, Marjorie Kelly describes the situation this way:
The wealthiest 10 percent of households own about half of all stock — so that minority has a virtual economic majority…. Because corporate revenues represent a bulk of GDP, and the wealthiest own the bulk of corporate equity, running corporations to serve stockholders means running the economy to benefit the wealthy.
You can see the level of economic power held by the wealthy in today’s society, and the reasons for wage stagnation for workers, in this brief excerpt from the book Fast Food Nation by Eric Schlosser:
The fast food industry pays the minimum wage to a higher proportion of its workers than any other American industry. Consequently, a low minimum wage has long been a crucial part the fast food industry’s business plan. Between 1968 and 1990, the years when the fast food chains expanded at their fastest rate, the real value of the U.S. minimum wage fell by almost 40 percent. In the late 1990s, the real value of the U.S. minimum wage still remained about 27 percent lower than it was in the late 1960s. Nevertheless, the National Restaurant Association (NRA) has vehemently opposed any rise in the minimum wage at the federal, state or local level [minimum wage has been $5.15 since 1997]. About 60 large fast food companies — including Jack in the Box, Wendy’s, Chevy’s, and Red Lobster — have backed Congressional legislation that would essentially eliminate the federal minimum wage by allowing states to disregard it. Pete Meersman, the president of the Colorado Restaurant Association, advocates creating a federal guest worker program to import low-wage foodservice workers from overseas.
While the real value of the wages paid to restaurant workers has declined for the past three decades, the earnings of restaurant company executives have risen considerably. According to a 1997 survey in Nation’s Restaurant News, the average corporate executive bonus was $131,000, an increase of 20 percent over the previous year.
With executive pay rising at a rapid rate and the wages of everyone else stagnant, you can see where we are heading. The wealth will continue concentrating, moving toward 40/60 — the richest 20% will make 60% of the income. The people in the richest 20% will get more and more of the income, while rank and file employees get less and less. Then it will move toward 30/70.
Robots will turbocharge the concentration of wealth. Let’s take America’s largest corporation — Wal-Mart — as an example. Wal-Mart currently employs over 1.3 million people. Imagine that Wal-Mart is able to deploy robots over a relatively short period of time and eliminate one million of those employees.
With most of the rank and file employees replaced by robots and eliminated from the payroll, all of the money flowing into a large corporation has only one place to go — upward toward the executives and shareholders. The concentration of wealth will be dramatic when robots arrive.
How Concentrated?
In the August 18, 2003 issue of Time magazine, the article They’re Getting Richer notes that, since the dividend tax cut in June, 2003, more than 200 firms have raised their dividends. Since executives generally own lots of stock, this means a huge pay increase for them. How big are the increases? Here are several examples:
Robert Glickman of Corus Bankshares saw his dividend income rise from $1.3 million to $5.8 million.
Sandy Weill of Citigroup saw his dividend income rise from $11 million to $27 million.
Henry Paulson of Goldman Sachs saw his dividend income rise from $1.2 million to $3.4 million.
James Cayne of Bear Sterns saw his dividend income rise from $1.8 million to $3.3 million.
Bill Gates of Microsoft saw his dividend income rise from $0 to $82 million.
Sumner Redstone of Viacom saw his dividend income rise from $0 to $41 million.
This is just the dividend income of these executives, and does not include their salaries, annual bonuses, stock options, restricted shares, forgivable loans, free trips on corporate jets, benefit packages, etc.
All of the money for these dividends comes either from consumers in the form of higher prices or from rank and file workers in the form of lower wages. The concentration of wealth accelerates.
With the rank and file employees gone, all of the money in the corporation flows upward to the executives and shareholders. The concentration of wealth will accelerate dramatically because robots allow real automation in the service sector for the first time in history. The amount of money paid to executives and shareholders will be remarkable.
Meanwhile, the one million displaced employees will flow into a job market that is flooded by robotically-displaced workers. Since all major corporations with large numbers of employees will be doing the same thing, it is difficult to imagine the economy suddenly creating enough jobs to absorb all of the displaced workers. If the economy does not create new jobs for them, they will be living in government welfare dormitories.
A Question of Freedom
While discussing these questions of unemployment and wealth concentration, we should ask a second type of question as well. The arrival of robots should be an amazing time in human history. With robots doing all the work, we should in theory be able to enter an era of incredible human freedom and creativity. Instead of turmoil and massive unemployment, robots could theoretically release us from work. A significant portion of the population should be able to go on perpetual vacation and achieve true freedom for the first time in human history. This freedom would enable a period of creativity unlike anything that we have seen in the past. Is there a way to design the economy so that this level of creativity is possible?
Think about the era we are about to enter. Within 50 years in the likely case, and without question within 100 years, robots will perform every task essential to human survival. Robots will grow, package, transport and sell all of the food we eat. Robots will build all of the housing we live in. Robots will make, transport and sell all of the clothes we wear. Robots will manufacture all consumer products, put them on the shelves and take the money that we pay for them. And so on. Robots will displace the tens of millions of employees who are doing all of this work now.
In our current economic system, all of these displaced workers will become unemployed. If they are not able to find new employment quickly, they will burn off their savings and they will become homeless. “If you don’t work, you don’t eat” is a core philosophy of today’s economy, and this rule could make a rapid robotic takeover extremely uncomfortable for our society. See Robotic Nation for details.
The question to ask here is simple but profound. Does the economy have to work that way in a robotic nation? Is there a way to eliminate this dependence on a job? With the robots doing all of the work, can we actually eliminate our economy’s requirement of employment? Can human beings, in other words, actually achieve true freedom as the robots make this freedom a possibility?
Harry Potter and the Economy
Chances are that you have heard of J. K. Rowling. Even if you have not, you have heard of her work. J. K. Rowling is the author of the Harry Potter books. Her story is fascinating.
At the time she was writing the first Harry Potter book, Rowling was a single mother. In a Publishers Weekly article published on December 21, 1998, there are two important pieces of information about Rowling:
“Lacking child care and unable to take a job without it, she [Rowling] went on public assistance. In many ways, she says, it was one of the lowest points of her life.”
And:
“She found Christopher Little in 1995, in the Writers’ & Artists’ Yearbook (the UK equivalent of Literary Market Place). He was the second agent to see her book — the first had sent it back “virtually by return of post,” with a form letter. In the year that followed, three publishers declined the book on the grounds that it was too long for children.”
Obviously Rowling’s original book, Harry Potter and the Sorcerer’s Stone, was a good book. It sold millions of copies. Her fourth book, Harry Potter and the Goblet of Fire had a first press run of 3.8 million copies — the largest first press run in history. Over 30 million copies of the series have been sold.
When you think about it, it is a miracle that any of us ever got to read Harry Potter. Consider the fact that a book with this much potential was written by a person on welfare. Think about how many other works — music, art, literature, engineering, science, invention — have never seen the light of day because of the same sorts of social problems (or because the potential author/artist/inventor is working 12 hours a day scrubbing toilets in two minimum wage jobs to make ends meet). Think about the arrogance of the first three publishers who rejected the manuscript. Think about how many valuable works have never seen the light of day because of that same arrogance. Society as it is designed today wastes an unbelievable amount of human potential through mechanisms just like these.
At the very least, Rowling’s story shows us that the economic theory underpinning our world contains an element of dysfunction. It should not be the case that highly creative people sitting on top of billion dollar ideas have to go on welfare (and reach “one of the lowest points” in their lives by doing so) in order to express themselves. By removing this dysfunction, we could discover millions of Rowlings.
The Linux phenomenon specifically, and the open source phenomenon in general, point in the same direction. Linux is one of the best operating systems on the planet, and it is free. It has been created by thousands of programmers who have donated their time and skills to the creation of Linux. What if we create an economy that encourages the creation of things like Linux? If people could make a living without being employees, we could unlock an unimaginable ocean of human creativity and human potential.
Other parts of our economy are showing similar levels of dysfunction. For example, in the U.S. today a growing number of baby boomers are headed toward retirement age. They will all stop working and make the transition to the social security system. However, the social security system is known to be in big trouble. Estimates vary, but as early as a decade from now, social security and its partner, Medicare, could collapse due to lack of funds. We will find ourselves in a situation where we have no way to support the growing elderly population. As medical science finds ways for people to live longer and longer, we as a society find ourselves wishing that the elderly would actually die sooner. That is dysfunctional.
The working poor represent another area of dysfunction. We have a large segment of the American population — tens of millions of people — who are playing by the rules. They are working hard. Many of them are working two or three jobs — they are some of the hardest working people in our economy. Yet they cannot make ends meet because wages are so low.
We have been unable to raise the minimum wage since 1997 largely because of the fear of an economic downturn. The fear is that an increase in the minimum wage will force employers to cut their payrolls, or put even more pressure on corporations to automate and shift jobs overseas. So we have tens of millions of minimum wage (or near minimum wage) workers employed by an economy which cannot raise their wages even though productivity is rising. At the same time, that same economy is increasing executive pay dramatically. That is dysfunctional. As discussed above, robots will only increase the level of dysfunction in this area.
As a society, and as a nation, robots give us a choice. We are entering an historic era that has the potential to completely change the human condition. Yet we enter it with an economic system that is unable to spread those robotic benefits to a large portion of the population. Our economic system as it stands today stifles a great deal of creativity, has no way to deal with the elderly and is unable to significantly raise wages for the majority of its citizens. Robots allow us to remove these dysfunctional elements from the capitalistic system.
Stating the Goals
Should we ban robots from the workplace? Probably not. Banning technology from the workplace is the path to economic stagnation. It also means that people rather than robots will be scrubbing toilets for the next millenium.
Should we significantly increase the minimum wage so that people working in minimum wage jobs can actually make a living? Probably, but it is unlikely to happen. And most minimum wage workers will still become unemployed as robots arrive.
Should we reduce the work week, say to 30 hours per week (then 20, then 10), to decrease unemployment and increase leisure time? It would be outstanding if we could make this decision as a society, but all indicators today point in the opposite direction. The working poor are making so little money that they are having to work 60 hours a week in two or three jobs. Many salaried employees are compelled to work far more than 40 hours per week. We would have to reverse a number of trends to move our society to a 30 hour work week, and corporations will resist these changes every step of the way.
Should we dramatically increase the welfare and unemployment systems to accommodate all of the workers displaced by robots? That is unlikely to happen. Besides, who wants to be on welfare?
Should the government hire all displaced workers in make-work jobs? Probably not. Do we really want tens of millions of people employed in meaningless jobs run by the government?
Should we tax robotic labor? We have never taxed any other form of automation, so it is difficult to imagine this happening. For example, a burglar alarm is a robot that replaces a security guard. Should we tax all burglar alarms? And a traditional tax would go to the government, which would then have to distribute the money through something like the traditional welfare system — a system that has proven extremely uncomfortable to society in the past.
None of these “traditional solutions” are going to help the robotic nation. So how are we going to solve this problem?
We start by stating our goals for the economy and then attempting to find a solution that helps us to reach them. Five important goals are listed in the sidebar on the right. If we can achieve these goals, in a context where robots are dramatically increasing productivity and doing more and more of the mindless work that wastes human potential, we will have an economy whose strength and growth defies imagination.
How do we achieve these goals?
Economic Goals
Goal #1 – For the strongest possible economy, we need to create the largest possible pool of consumers, and those consumers need to have money to spend.
Goal #2 – For the strongest possible economy, we need maximum economic stability. Every economic downturn has occurred when people stop spending money, either because they don’t have money to spend through unemployment, or because they are afraid to let go of their money for fear of future unemployment. Consumers need to have confidence in the economy, both on the spending and the receiving ends of the equation.
Goal #3 – For the strongest possible economy, we need to create the largest possible pool of innovators — people who create innovative new businesses, new inventions, new products, new art (films, music, etc.) and new intellectual property. Capitalism is strongest when new ideas are maximized.
Goal #4 – For the strongest possible economy, we need for people to invest in these new ideas, both individually and in groups. An idea is nothing unless it is put into action. Without the money provided by investment, there can be no new businesses and no new products.
Goal #5 – For the strongest possible economy, we need for people to have maximum freedom. People need the freedom to choose the products they want from an open marketplace of maximum size. They need to be free to start businesses of their own. They need to be free to work on their ideas and carry them as far as possible. At the same time, people need to be free to take time off and relax as they so choose. The notion that you have to work 60 hours a week to make ends meet is the antithesis of freedom.
Capitalism Supersized
The following suggestion at first seems impractical because it is so simple: What if we, as a society, simply give consumers money to spend in the economy? In other words: What if the way to achieve the strongest possible economy is to give every citizen more money to spend? For example, what if we gave every citizen of the United States $25,000 to spend? $25,000 sounds impossible the first time you hear it, but consider the possibility.
Would this simple step — giving money to every consumer — accomplish the five economic goals set forth in the previous section? Yes. It would be a huge boost to the American economy:
The economy would be strong because of all of the consumer spending.
The economy would be stable because income (and therefore spending) would be guaranteed.
With $25,000 per year to spend, innovators would no longer be forced to work — they could focus their energy on innovation, living off of the $25K per year they receive. Inventors would have time to invent, writers to write, entrepreneurs to breed new companies, etc. They could devote all of their time to innovation.
There would be billions of dollars for people to invest, especially in their own businesses. And investors would have a stable marketplace into which to introduce new products.
Most importantly, it would create a nation where the citizens are truly free. If every person had $25,000 per year in today’s dollars to spend, they would be able to live their lives even if they lost their jobs. If robots took their jobs it would not be catastrophic. People would be able to weather the robotic takeover, retrain and move into new careers.
Sources for the $25,000
The obvious question involves the $25,000. Where will it come from? That is what is so interesting about this idea. We have never thought of our economy in this way before. Once we start thinking in this way it is easy to imagine numerous sources for the money. If we start today, we can begin ramping up to reach the goal.
Here are several examples to help you understand the possibilities.
Example #1 – public advertising
There are approximately seven billion $1 bills circulating in the economy at any given moment. What if we sold the backs of all these $1 bills as ad space?
Assume each $1 bill passes between 100 people before it becomes so tattered that it gets shredded by the treasury. According to this page, “The average life of a dollar bill is eighteen months.” That means that every year, there are something like 500 billion ad impressions available on the backs of $1 bills. What if we sold the ad space on all these $1 bills to companies like Coke, Disney, Home Depot and Wal-Mart?
If we sold that ad space (along with all the ad space on the backs of $5, $10, $20 and $50 bills) at the going rate for advertising, it could generate something like $5 billion to $10 billion per year in revenue. That’s a lot of money. There are nearly 300 million people in America. Since this ad space belongs to “We, The People”, the ad revenue would get divided equally among all the citizens of the United States and everyone would get a check for something like $25 per year.
How would we distribute the money? It is easy to imagine a central account. The billions of dollars in ad revenue would flow into this central account, and the money in the account would get distributed on an equal basis to every American citizen.
We would all get our $25 dollar checks from the central account, and what would we do? We would spend the money. It would be just like getting a tax rebate. The $25 that we each spend would stimulate the economy, and the economy would grow.
$25 is a far cry from the $25,000 suggested above — it’s only 0.1% of the goal. But it is a start. What you can see from this example is that:
It is easy to imagine a system where every person in the country gets a check.
It is easy to imagine a source of money for those checks that does not necessarily involve taxation.
It is easy to imagine that, once everyone gets their checks, they will spend the money and in so doing stimulate the economy.
It is also easy to imagine other sources of advertising income:
Each time you drive on an interstate highway you pass underneath bridges. We could sell the natural advertising space on those bridge overpasses.
We could sell signage space along the side of the road.
For that matter, we could sell advertising space on the interstate highways themselves. What if we painted ads right onto the asphalt?
If we want to be extreme about it, we could put ads on the side of the Washington monument.
The point is, there are lots of places to put ads on publicly-owned infrastructure and those ads would generate billions of dollars in revenue. If all that revenue adds up to $100 billion per year flowing into the central account, then each citizen of the United States gets a check for about $350 per year.
There are many other ways to generate revenue that can flow through the central account to every American citizen, and every source of revenue moves us closer to the goal of $25,000 per citizen per year. I have listed several ideas below. I am not suggesting that these are all perfect ideas, or that I agree with all of them. I am simply listing them to spark discussion and get all of us thinking about the possibilities.
Example #2 – Natural resources
In Alaska, there is a central account like the one we are discussing here already in operation. It is called The Alaska Permanent Fund. In 2002, each man, woman and child in Alaska received a check for $1,500 from this fund. The money came from oil reserves in Alaska — a natural resource that is the property of “We, The People”.
$1,500 per man, woman and child per year is real money. There are all sorts of natural resources in the U.S. that could provide money to the central account in the same way: oil, natural gas, timber, precious metals, water, etc. Instead of the revenue from the sale of these natural resources going to “the government”, the revenue would go to the central account and be paid equally to every citizen of the United States. Alaska shows that such a system will actually work and will provide real economic benefit to the citizens of the United States.
Example #3 – Fines
When a corporation does something wrong, it gets fined by the U.S. government. For example, a dozen leading investment banks were fined approximately $1.5 billion this year for conflicts of interest during the Internet bubble. The tobacco settlement is another example — a $300 billion or so fine against tobacco companies ($300 billion represents approximately $1,000 per person in the U.S.).
Instead of going to “the government”, the revenue from all of these fines would go into the central account, to be distributed to every American citizen. American citizens would get a check and they would spend the money. In the process they would stimulate the economy and the economy would grow.
[In recent news there is this article: Microsoft Fine Is $613 Million. That would work out to about $200 per person in the United States. There is also this: FCC Proposes $9 Million Fine Against Qwest. If you type the word “fine” into Goolgle News, you realize that just this example alone could yield billions of dollars for the central account.]Example #4 – Auctions
With all of the wireless devices now in use (wireless phones, wireless networks, etc.), it is quite common for governments to auction off pieces of the radio spectrum. There was an auction in the U.K. not so long ago that brought in $35 billion ($35 billion represents about $100 per U.S. citizen). The radio spectrum is the property of “We, The People”, so the money from spectrum auctions would flow to the central account to be distributed to every American citizen. Each citizen would get a check from every spectrum auction, each citizen would spend the money, and in the process each citizen would stimulate the economy.
Example #5 – National Lottery
Most states in the U.S. now have state lotteries that flush money into state treasuries. If we create a national lottery, the proceeds would go into the central account and get distributed to every citizen of the United States.
Example #6 – Copyright Licensing
This is an esoteric idea, but still interesting to consider. Congress has recently been granting copyright extensions so that companies like Disney can maintain control of copyrighted works, including characters like Mickey Mouse. This article discusses the case if you would like some background. If congress had not acted, Mickey Mouse and many other works would now be in the public domain.
An alternative to these blanket extensions would be to let copyrights expire, but then allow companies like Disney to pay for an exclusive license to continue using a property. The revenue from the license would flow into the central account and be distributed to every citizen of the United States. Each citizen would spend the money, and in the process each citizen would stimulate the economy.
Example #7 – “Extreme Income” Taxes
As mentioned earlier in this article, executives in the U.S. are making more and more money every year. Executive salaries have risen by a factor of 10 in the last 20 years. The average CEO now makes tens of millions of dollars every year, and that trend pushes up all executive salaries as well. Meanwhile, the wages of rank and file workers are stagnant. What if “We, The People” vote for an “extreme income” tax, on these excessive salaries? The President of the United States, after all, only makes $400,000 per year. Someone making $10 million per year is clearly overpaid.
So we pick a number — say $500,000 or $1 million — and we heavily tax income over that level. What is the justification for doing that? This diagram explains it:
When an executive makes $20 million per year, the money does not materialize out of thin air. It comes from consumers in the form of higher prices that they pay for everything that they purchase.
For an executive to make $20 million per year, a company has to overcharge consumers for the products they purchase from the company. It is not as though the $20 million paid to the executive appears out of thin air — it comes from consumers in the form of higher prices. An “extreme income” tax simply takes that excess compensation and returns it back to consumers, where the money originally came from.
The same logic could apply to inheritance taxes. Imagine that an executive who makes $20 million per year dies with $1 billion in assets. We heavily tax “extreme assets” like that when the executive dies and return the money back to the American people, where the money originally came from. The money is distributed to each American citizen equally through the central account, and the money stimulates the economy.
Example #8 – National Mutual Fund
The idea of a national mutual fund owned by all of the citizens of the United States has been proposed by a number of different people. Such a mutual fund would own shares of stock in every corporation in the United States and give every citizen of the United States equal ownership in the mutual fund.
The shares for this national mutual fund could come from a variety of sources. Two possibilities include:
Whenever any corporation is formed, some percentage of the corporation’s shares (e.g. 20%) would automatically become the property of the national mutual fund. Existsing corporations would contribute the same percentage of their shares as well.
Whenever a corporation declares retained earnings, the percentage of shares represented by those retained earnings would become the property of the national mutual fund. The logic: For the corporation to have retained earnings, it had to overcharge consumers. Since the money came from consumers, it is given back to consumers in the form of shares.
Like the The Alaska Permanent Fund, this national mutual fund would pay dividends every year, and these dividends would flow into the central account for distribution.
Example #9 – Other Taxes
There are a wide variety of new taxes that we might create to pump money into the central account. The difference between these new taxes and “regular” taxes is that the revenue from the new taxes goes directly to every citizen of the United States, rather than going to “the government” and being subjected to the whims of the political system. American citizens have the freedom to decide how they will spend the money, rather than politicians. New taxes that we might consider include:
A value added tax.
A national property tax.
A national sales tax.
A robotic income tax.
“Extreme income” taxes and inheritance taxes as described above.
And so on.
Any of these new taxes would act as levelers. The biggest problem with the robotic nation is going to be the massive concentration of wealth that robots allow. These taxes would affect the wealthy and corporations far more than normal citizens, and would spread the concentrated wealth back out to the general population, where the money came from. People in the general population will spend the money that they receive. Just like a tax rebate, this spending will stimulate and grow the economy, to the benefit of everyone.
Example #10 – Punitive Damages
When a person sues a company and wins, there are normally two components to the award: part is compensation for the damage done, and part is punitive. For example, a person suing a cigarette company might receive $5 million as compensation for injuries, as well as $3 billion to punish the cigarette company and send a message. [ref]
That punitive damage award is uncomfortable. Millions of people have been damaged by cigarettes — why should one person get all of the money for all of that damage?
Instead, we should send all punitive damage awards from lawsuits to the central account for distribution to everyone.
Example #11 – Naming rights
This article discusses Los Angeles’ plan to sell naming rights for the city, and naming “official” beverages, cars, etc. like the Olympics does. We could do the same thing for each state and the nation, and pour billions of dollars into the central account.
Example #12 – Sin taxes
The government regularly taxes things like cigarettes and alcohol in order to deter their consumption with higher prices. All sin taxes could go into the central account instead of to the government.
Example #13 – Luxury Taxes
Luxury taxes have been applied to things like expensive cars and boats. These taxes could be made permanent, and the revenue from them could flow into the central account.
Example #14 – “Extreme Profit” taxes
There are a number of companies in the U.S. that now operate without any real form of competition. In these cases, the checks and balances of the market system break down, and the companies are able to take in incredible amounts of profit at the expense of consumers.
Microsoft is one example of the phenomenon. If you look at Microsoft’s financial statements for 2003, you can see that the company took in $32 billion in total revenue and made a gross profit of $26 billion. Net income is $10 billion (31% of revenue), or approximately $100 for every American household.
How does Microsoft compare to a “normal company”? Wal-Mart is no slouch as a company, and Wal-Mart concentrates wealth as fast as it can, but it makes an interesting comparison to Microsoft. Wal-Mart takes in $246 billion in total revenue per year — more than seven times as much revenue as Microsoft. Yet Wal-Mart’s gross profit is only twice that of Microsoft, and Wal-Mart makes less in net income than Microsoft does ($8 billion, or 3% of revenue).
In cases like Microsoft (as well as other examples like pharmaceutical companies), where gross profit and net income are clearly out-of-bounds because of a breakdown in a market system, these windfall profits can be taxed away and returned to the place they came from — consumers — through the central account.
Any other example of windfall profit (e.g. oil companies when gasoline prices spike upward) can be taxed and depositied in the central account in the same way.
As these unfair profits are returned to people through the central account, the recipients will spend the money and the economy will grow.
Example #15 – Lexus Lanes
Many large cities have installed special traffic lanes on major thoroughfares called HOV (High Occupancy Vehicle) lanes. The idea is to reward people who carpool by giving them a way around congestion.
Lately, however, the trend is toward turning these lanes into toll lanes, so that wealthy people can bypass traffic. This article discusses the trend.
If laws like this pass, the money that these new toll roads generate should go into the central account for distribution. As pointed out by Rep. John Douglas, R-Covington, in the article: “People already paid to build these roads, and they pay to keep ’em up.” Since that is the case, the people should get the money generated by the tolls — through the central account. They will then spend that money and the economy will grow.
Example #16 – Email postage
In March of 2004, Bill Gates of Microsoft proposed a postage system for email to deter spam. Email would no longer be free — instead, everyone would pay a few cents per email.
Trillions of emails are sent every year in the United States. If you assume 10 trillion emails per year at a penny per email, then email postage would produce approximately $100 billion per year. All of the money generated by this email postage fee should flow into the central account. As people receive their checks from the central account, they will spend the money and stimulate the economy.
What would you do with $25,000 per year?
Should we enact a $25,000 per year stipend for every citizen of the United States? The easiest way to answer that question is to make it personal. Ask yourself this question — what would you do if you, personally, received a $25,000 stipend per year?
There are a million things you would likely do if you had the freedom provided by $25,000 per year. If you have children or grandchildren, you would spend more time with them. If you have always wanted to start your own business or go back to college, you would do that. If you have been wanting to write your novel, start a new career or research an invention, you would do that.
You would use the freedom provided by a $25,000 stipend to make your life better. That is why we should enact the $25,000 per year stipend. See the FAQ for more information.
The Advantages of Economic Security
Why do we give tax rebates in the United States? The idea behind a rebate is to stimulate our capitalistic economy by giving consumers more money to spend.
The proposal presented in this article is a simple extension of the tax rebate concept. The idea is to stimulate the economy continuously through monthly rebate checks to every citizen from a central account. We could call this approach Turbo Capitalism. We will turbocharge the capitalistic system by continuously giving consumers more money to spend in the economy. Or we could call it an Economic Security System. We will give every citizen the money he or she needs to be independently financially secure. In a robotic nation, economic security is perhaps the most valuable thing a human being can have.
Money flows into the central account from a variety of sources and then flows equally to every American citizen. They spend the money and in the process stimulate the economy — turbo capitalism
The money that flows into this central account can come from a variety of sources, several of which are mentioned above. The proceeds then get distributed equally to every American citizen on a monthly basis.
The advantages of a system like this would be significant:
Most importantly, an economic security system eliminates many of the problems that will otherwise appear with the arrival of robots and the robotic nation. As people become unemployed by robots, the payments from the central account offer people an independent and secure stream of income. Unlike welfare, there is no stigma attached to the payments from the central account. Everyone gets an equal payment, so the central account is completely fair to everyone. The payments are not subject to the whims of politics, as they are with welfare payments.
An economic security system solves the social security problem. Since every citizen receives a check, we can dismantle social security. Existing social security taxes can be redirected into the central account.
An economic security system eliminates poverty. Under this system, every citizen in the United States receives the money needed to live a middle class existence, regardless of whether or not they are working. All of the money currently spent on poverty can be redirected to the central account.
An economic security system provides a tremendous level of economic stability. Since everyone has guaranteed income, they also have guaranteed spending and this will largely eliminate significant economic downturns.
An economic security system increases opportunity. For example:
A person who wants to go to college will have the opportunity to go at any point in life. This will help people retrain for new careers, and also unlock people from life-long economic strata.
A person who wants to start a business, large or small, knows that the business is being started in a stable economy. The person also has income to fall back on during the critical first years when the business is working to become cashflow positive.
An economic security system maximizes the economic freedom of every citizen, and in the process maximizes the creativity of inventors, authors, entrepreneurs, etc. If creative people have the freedom to live their lives without being employees, we will unlock an unimaginable ocean of human creativity and human potential. This system gives the American people true economic freedom for the first time in American history.
You, Personally, and the Robots
What about you, personally? Think about your situation. It does not matter who you are or what you do for a living — you are vulnerable:
If you are working anywhere in the service sector — fast food, retail sales, hotels, airlines, delivery, transportation, etc. — your job has the potential to be replaced by a robot.
If you are in the upper middle class — engineers, programmers, airline pilots, teachers, professors, insurance adjusters, etc. — your job is vulnerable (either to robotic takeover or offshore outsourcing).
If you are in middle management, your job is vulnerable.
Even if you are in a position that today seems untouchable — doctors, lawyers, etc. — your job is vulnerable.
In other words, like it or not, we are all highly vulnerable to job loss in the robotic nation, and we are entering an era of unprecedented economic change. When any one of us loses our job in the current economy, we are completely naked. The government gives an unemployed person a tiny payment for three or six months, and then you are on your own to pray that your savings can hold out until you find a new job. Your home, your belongings, your family — they all hang in the balance.
Do you, personally, want to continue to live with that level of personal economic vulnerability? Do we, as a society, want to continue to create an economy and a society that is poised at any moment to swing drastically downward based on a huge variety of rather tiny and uncontrollable perturbances such as terrorist attacks, oil supply variations, stock market bubbles, weather, etc.? Or would you like to see us begin putting in place a system that provides each of us with some measure of personal economic security?
Robots have the potential to do so much good for the world, because they will finally free people from the requirement of human labor. The only way for all of us to experience these benefits, however, is to create an economic system that maximizes freedom and choice for everyone in the economy. The proposal presented in this article shows that there are ways to enhance the capitalistic system and in the process make life better for everyone. My hope is that we begin discussing and then implementing systems that will let our society and our economy get the most benefit from the new robotic nation. We should use robots to give every citizen true economic freedom for the first time in human history.
