Probable Future

COVID19, Robots, Artificial Intelligence and the future of Australian Society. 

In relation to recent comments about the Australian “economy” and the budget, it is necessary to acknowledge that the “economy” is actually the people, the citizens, of Australia. Without people, there would be no “economy” and therefor by default no need for a budget (in surplus or otherwise). Pursuing the logic of this it would seem very obvious that people are the important factor – look after people, first and foremost.

Now, I understand that many are considering the benefits of either a Universal Basic Income (UBI) or Negative Income Tax (NIT) to counteract the economic effects of the current COVID19 pandemic. There is also the effect of Robotics and the adoption of Artificial Intelligence (AI) to consider, that will also have long term effects on the economy and society (people) here in Australia.

It would appear to be indisputable that the robotic and AI future has implications not only for commerce and industry but more especially for society in general. Many of the jobs that have been lost in Australia to low wage countries will never return to these shores. The days of the old unskilled, labour intensive jobs are numbered; the mining industry has quickly adopted driverless ore trucks; there are advanced plans to use more driverless trains to transport iron ore; there are farmers using drones and driverless machinery and there are other uses of these technologies, now a reality, that were unimaginable just five years ago. 

Now COVID19 just adds to the confusion roiling world trade and the well-being of hundreds of millions of people.

The world is changing – what was, will no longer be – the status quo has evaporated. The vista of unending employment growth is no longer a likely, or even probable, future. 

While it must be acknowledged that not all jobs will be automated or impacted by AI – for those that are, restructuring workplaces, educating and retraining employers and the remaining employees to adapt to and manage the new technologies will be a necessary long term requirement. 

This is no light matter and needs to be seriously considered. If a large percentage of people in Australia  – or any country for that matter – become unemployed and are unable to see any possibility of future long-term employment, what are they supposed to do? 

The consensus is narrowing down to introducing either a UBI or an NIT.

Many, if not most politicians, and those in business may be horrified at such solutions – giving everyone, and I mean everyone – employed or unemployed – giving everyone a UBI or access to NIT. The universal basic income is already in place, as in Alaska a scheme similar to an NIT has been in place for years. 

In an economic environment that is unable to provide long term paid employment for all, there will be, as an urgent necessity - a requirement - for a population that is underpinned by a universal basic income or a negative income tax. This would open up the possibility of a life without poverty and reduce the vexed problems arising from income inequality.

The gross inequality of incomes world-wide resulting from current globalization impacts unfavourably on the health and well-being of millions of individuals (including here in Australia). Unless this is alleviated anger and frustration will consume many people and overwhelm governments. I am sure you will be aware that currently (2018 figures) the gap between the wages of the typical worker and that of the typical Australian CEO is at least 45 times the average fulltime wage. The disparity is much wider overseas. In the USA, where minimum wages are less than half of Australia’s and CEO salaries above $20 million are common, the difference is more than 200 times. This disparity is economically and socially unsustainable. 

Without some basic assistance it is suggested that people – millions of people – will swamp the Australian Government with pleas for help. If the Government adapts and is proactive it will plan for this eventuality and the only safe option is to pay everyone, repeat everyone – employed or not - pay them a Universal Basic Income or provide the benefits from a Negative Income Tax. There are no other viable options, particularly with an aging population. 

Many will object to such policies claiming they are unsustainable. They will, however, be outnumbered by the millions of educated, unemployed, destitute, poor, frustrated and angry people clamoring at their doors, clamoring for assistance. Clamoring to have enough money to just exist. Again the question needs to be asked, what else are they supposed to do? 

{Note: Negative Income Tax - For people who do not earn enough to pay tax (or earn below the minimum wage or some other agreed amount) their income would be supplemented to arrive at the agreed amount or the minimum wage. Everyone, working or not, would be obliged to lodge a tax return and any supplement would be “refunded” via the ATO, similar to the process for a normal tax refund.}

Both the UBI and NIT would do away with the plethora of welfare payments currently in place; both would be funded, it is suggested, by adjustments to current programs and/or adjustments to marginal tax rates, investment allowances (negative gearing and capital gains?) and corporate taxation, or possibly a very small (.001 percent) financial transaction levy (colloquially known as a “Tobin” Tax).

Any additional funding for the UBI or NIT involves a simple principle: go where the money is. “Since money has been increasing going to the top, that’s where the additional revenue will have to come from. It is really that simple.” (Quote is from The Price of Inequality (2013) by Joseph E. Stiglitz – former World Bank chief economist and 2001 winner of the Nobel Prize for Economics).

Political will aside – what is it that the future unemployed are supposed to live on?

I suggest this is the future - and it’s coming soon – get used to it. Plan for it. Now.  

What now?

Maybe it is because I am at that stage of life often termed (politely) as being of “advanced years”, I tend to look at what is going on around me with a different outlook.

There seems to be a great deal of “hot air” being expended on what to do about the economy, as if the “Economy” was the beginning and end of life. I know that I have mentioned this before in other posts but it is necessary for all to acknowledge that the “Economy” is not some esoteric, alien “thing” somewhere out there. The economy IS the people - the citizens of this Country create the Economy with their labour.  

Money is not self-emergent, it doesn’t arise by itself.

Without PEOPLE there would be no money and no economy. There is an old Roger Whittaker song– one called “From the people to the people”, and the lyrics certainly apply today:

“You take it from the people, you give it to the people. 

Its people who reap and people who sow.

You work with the people or you gotta go.”

These words express very well my philosophy. It is PEOPLE who are of paramount importance. Not MONEY. Not the ECONOMY.  Not the BUDGET. It is people – without people there would be no money and therefor no economy, and by default no need for a budget (in surplus or otherwise) or for a treasurer.

So it’s PEOPLE, stupid! People. Look after people!

The problem, in my opinion, is that what is termed the “middle class” is being hollowed out. The divide between the rich and poor is getting wider. The rich are getting richer with the top 1% owning the wealth of the bottom 70%. These are Australian figures but are typical of a world-wide trend. 

The best solution (in my humble opinion) is not to reduce the rate of income tax to the wealthy but to increase it and so provide a better income distribution via a Negative Income Tax- For people who do not earn enough to pay tax (or earn below the minimum wage or some other agreed amount) their income would be supplemented to arrive at the agreed amount or the minimum wage. Everyone, working or not, would be obliged to lodge a tax return and any supplement would be “refunded” via the ATO, similar to the process for a normal tax refund.

More money in the pockets of those with a low-income means they will spend more. This gives rise to what is termed the “multiplier effect”. In Australia this is about 5. This means that for every additional dollar spent the “economy” benefits by 5 dollars. Retail trade in particular would get a boost – more money spent, more employment, more taxation revenue … etc.

To me it’s a no brainer. Increase the “dole” and everyone will benefit.