Category: economy

Research Shows Inequality Is Solved With Wealth Redistribution, Not Tax Cuts

Combating Inequality

More so than ever before, the vast majority of wealth is held by a minuscule minority of people. Although this systemic inequality is already proving to be a recipe for economic disaster, there are conflicting arguments on how best to address the situation.

A new study suggests that tax cuts alone aren’t enough to make the changes that are required. Instead, more direct forms of wealth redistribution are necessary if society is to adopt a meaningful level of financial equality. This isn’t about Marx. It’s about the math.

Research performed by the New England Complex Systems Institute simplifies the way money progresses through the economy into two predominant cycles. The consumer cycle sees workers earn wages and use that cash to buy products. The production cycle revolves around capitalists pouring their wealth into the means of production, which is responsible for both the jobs held by workers and the products that they buy.

These two cycles must be in harmony if the wider economy is to flourish – and, at the moment, that isn’t the case. Workers don’t have enough income to buy products, which has led to three recessions and the financial crisis of 2008 since the 1980s.

In-the-Red

Although the New England Complex Systems Institute’s study aims to use math to provide an objective look at a topic that’s often obscured by political leanings, the organization isn’t the first to argue that tax cuts aren’t an effective way of making the US economy more egalitarian. Tax cuts for the richest sectors of society implemented by the Reagan administration, and Margaret Thatcher in England, played huge factors in how the present socio-economic situ came to be.

Universal Basic Income: The Answer to Automation?
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Anyone can learn about the history and origins of neoliberal politics in David Harvey’s workA Brief History of Neoliberalism. But we don’t need to read politico-economic history to know that the same tired tactic of entrusting the top one percent to take care of the remaining 99 percent isn’t going to reverse the process of growing inequality. To the contrary, this math-based scientific study suggests that easy-to-understand actions like raising the minimum wage and eliminating student debt can free the lives of less wealthy or impoverished people attain the financial stability required to spend more money and stimulate the consumer cycle.

These strategies are assented to by legitimate authorities across the world. Indeed, earlier this month the International Monetary Fund (IMF) warned against the practice of cutting taxes for the most wealthy, highlighting the risk of stymying global economic growth. More specifically, there are concerns that changes to the tax code, as proposed by the Trump administration, will only serve to reinforce income equality in the US.

“In our simulations, while tax cuts for higher income groups may generate greater gains in GDP through higher investment and labor supply, they also exacerbate income polarization and inequality, both already at historical highs,” read a blog post published by the IMF in September 2017.

Redistributing wealth on a national or international scale is a complex process, with scarce means of rapid implementation – but it’s absolutely clear that something needs to be done if we’re to make positive changes to a system that favors those at the top to the detriment (and potential ruin) of everyone else.

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Politicians in San Francisco Want to Extend Payroll Taxes to Include Robots

Tax on Robots

More and more jobs are being automated, with robot workers replacing swathes of the human workforce. Much has been said about how the labor of robots will affect individuals being let go, but now we’re seeing more discussion about the broader economic effect in terms of lost tax money.

Now, Jane Kim of the San Francisco Board of Supervisors is attempting to do something about this problem. She’s established a committee dubbed the Jobs of the Future Fund, which will serve to explore how best to smooth the transition toward more automation.

“We’re exploring continuing the payroll tax and extending it to robots that perform jobs humans currently do,” said Kim in an interview with CNBC. The money could be used to train displaced workers to fill other roles, fund free community college programs, or to foster the creation of new jobs in industries where automation is less viable.

Automated Payments

Kim’s stance on the taxation of an automated workforce echoes comments made by Bill Gates earlier this year.

“Certainly there will be taxes that relate to automation,” Gates argued in an interview with Quartz. “Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

The Laws of Robotics [INFOGRAPHIC]
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Automation seems poised to have a huge economic impact. It remains to be seen whether the advantages it brings in terms of increased productivity and the potential for new jobs outweigh its drawbacks. At this point, a sensible tax code seems to be the most sensible way of ensuring that everyone gets to reap the benefits, rather than just the business owners.

Too Much Tax?

The other side of the argument warns that enforcing a tax as this technology is starting to flourish will discourage widespread adoption. “Why would we want to put disincentives on companies using the best technology available?” asked Jeff Burnstein, president of the Association for Advancing Automation, in response to Kim’s stance.

Automation is already revolutionizing the way various industries operate. It’s clear that we should make full use of this technology, but it’s high time that we figure out a way to do so that takes into account all the possible pitfalls for our economy and our society.

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Slack CEO Voices His Support for Universal Basic Income

The Financial Freedom to Take Risks

Facebook CEO Mark Zuckerberg is one of many famous tech celebrities that believes everyone should have some amount of basic income. Now, one more voice is joining in to support the social media creator’s idea, and its Slack CEO and co-founder Stewart Butterfield.

Butterfield isn’t only known for making the team messaging app, but is also the co-founder of the Yahoo-owned, popular image website Flickr. On Twitter, the CEO shared his stance on the matter, saying that just by giving people a small amount, people may be more open to pursuing entrepreneurial idea and investments.

Butterfield joins Tesla CEO Elon Musk, Y Combinator president Sam Altman, and Microsoft co-founder Bill Gates. Zuckerburg has spoken repeatedly about his opinion on unconditional basic income (UBI), and has pointed to Alaska’s UBI program as as example the U.S. could learn from. Musk, in February, said the rise in autonomous technology will greatly impact the workforce, and could eventually force government to introduce a basic income program.

Photo Credit: Cade Roster / Flickr

Those Opposed

Despite the number of people in favor of the concept, knowing how much it is, and knowing how it works, it’s hard to tell if it will be incorporated any time soon, or at all. The idea of a “free handout” or “free money” doesn’t sit well with everyone, and some would probably prefer to earn their wages with hard work.

Universal Basic Income: The Answer to Automation?
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Furthermore, not every wealthy tech luminary and philanthropist agrees with UBI. Dallas Mavericks owner Mark Cuban, for example, has called it “one of the worst possible responses” to the evaporating job market. That said, he also believes existing safety net programs should be better, if only to be more efficient and able to distribute more money with cheaper operating expenses.

One thing is clear: basic income is a conversation that needs to be had, with its positive benefits put on display more prominently than its presumed faults.

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Study: The Driverless Vehicle Market Will Hit $7 Trillion Annually by 2050

Saving Industries

With interest from both seasoned and startup automakers, the autonomous vehicle (AV) market is expected to grow exponentially in the coming decades. A new study conducted by research firm Strategy Analytics and commissioned by Intel predicts that driverless vehicles will constitute a $7 trillion economic value by 2050, with $4 trillion from consumer use and another $3 trillion from business use.

A change that major won’t be abrupt, of course. The study predicts that the growth will be gradual, with the market reaching $800 billion by 2035.

Business deliveries and long-haul trucking would account for much of the market value. As countries face a growing shortage of qualified truck drivers — nearly 100,000 in the U.K. and an expected 200,000 in the U.S. by 2025 — companies will be forced to turn to autonomous trucks. The concept has already made its way into pop culture, with a long scene in the movie “Logan” featuring self-driving trucks along the freeway.

In addition to long-haul shipping, the currently in-flux landscape of retail buying will also contribute to the growth of the AV market. With goods being delivered directly to homes via self-driving vehicles the same day they are requested, in-store purchases will occur less and less frequently, perhaps signaling the final blow to the already struggling brick-and-mortar retail model.

Saving Lives

Apart from detailing the economic repercussions of autonomous vehicles, the study also notes how AVs are poised to save lives. Between 2035 and 2045, self-driving cars are expected to save roughly 600,000 lives by eliminating or reducing the severity of accidents on the road. That will result in an additional savings of $234 billion in accident costs.

Autonomous Car Forecasts: When Will They Actually Be on Our Roads?
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The study confirms what previous studies have predicted about the life-saving potential of autonomous cars. By removing the human element, which accounts for an estimated 95 percent of car accidents, AVs could save up to 40,000 lives each year in the U.S. alone.

While early adoption will likely come from more developed countries, the study expects the bulk of the self-driving economy to be centered in Asia, with that region producing around 47 percent of revenues. Meanwhile, Europe would generate 24 percent, while 29 percent would come from the Americas.

Wherever the AV economic revolution begins, the vehicles are clearly the future of safer and more profitable transportation. We’re in for a life-changing disruption.

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Bitcoin Surges Past $2,200

The Rise of Bitcoin

Bitcoin (for its history, see this infographic) has experienced unprecedented success since their domain name was registered on anonymousspeech.com. Monday, it was reported that the single bitcoin hit a landmark point, reaching $2,251.61 dollars, which far exceeds the price of gold. Its exchange rate has increased in 23 of its past 26 sessions. It has been the top performing currency every year since 2010 (besides 2014). By the summer, it will be accepted at more than 260,000 stores in Japan, since it is officially legal tender in the country. The verdict against the Winklevoss Twins to not allow it to enter the U.S stock exchange may, in the wake of this success, be overturned.

All of this seems to point to Bitcoin becoming a currency on par with the Dollar, Pound, Yen or Euro; or — because of its decentralized and digital nature — it could become the global currency.

Bitcoins. Photo Credit: PROfdecomite, Flickr
Bitcoins. Image Credit: PROfdecomite, Flickr

Why This Might Not be so Great

These figures, however, may not tell us the whole story. “All that glitters is not gold.”

The first thing that Bitcoin will have to do to continue its rise is to become more stable. The reason Bitcoin is so successful is also the reason it could fail. It has the ability to swing and shift extremely quickly: we need only look at when it dropped 15% in a matter of minutes in response to the Winklevoss Twin’s ETF verdict. One key characteristic of a successful currency, rather than its worth as an asset, is stability, which Bitcoin has not yet achieved.

Second, it will need to increase its transaction speed. In comparison with payment processors like Visa, the number of transactions Bitcoin can process is tiny: around 7 compared to thousands. This is because of each transaction has to be validated and verified by an individual due to it being part of a blockchain. And, even though it has the potential to stretch to 27, unless this value is increased there will forever be a serious limitation to how much bitcoin can grow.

Third, these exciting new figures may be artificially caused by an indirect centralization (centralization not through the legal process, but by market means — similar to a hostile takeover of a company). While Bitcoin is an uncentralized currency, if an individual miner (or collection of miners) take control of most of the mining then they are able to abuse the majority loophole, created as a democratic foundation of the currency. This would also allow the individual or group to rewrite the blockchain. As the majority of the miners are Chinese companies, and demand for the currency is increasing in the country due to the value of domestic currency falling, some fear the rise of state control in a system designed to be anti-state.

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Blame Displacement of Jobs on Automation, Not Offshoring and Immigration

A New Wave of Automation

As the world continues to achieve unprecedented levels of advancement in AI and robotics, we must, at the same time, come to terms with the fact that our fundamental understanding of technology is also being challenged. Technology was once viewed as a tool that drove human progress forward. Today, technology is threatening the employment and job security of millions.

High-profile personalities such as Stephen Hawking, as well as economists, have begun to shine the spotlight on this issue of technological unemployment—the displacement of human jobs by increasingly sophisticated means of automation.

Eatsa, an automated restaurant chain where customers have zero interaction with a human staff. Credit: Jason Henry for The New York Times.

In a column published in The Guardian, Hawking points out that, “[…]the automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining.”

Economists are not discounting the fact that globalization is at least partially to blame for unemployment. They cite trade relations with China during the 2000s as an example, which according to researchers from MIT, led to the loss of over two millions jobs. Still, the impact of automation will have a greater, more disruptive effect on the labor force.

The New Economy

Some argue that the situation isn’t nearly as dire as some imagine it to be.

Elon Musk, who believes that rising automation will lead to the implementation of universal basic income, sees it as an opportunity. “People will have time to do other things, more complex things, more interesting things,” says Musk. “Certainly more leisure time.”

It’s also entirely possible that as industries begin to assimilate technology into their business models, that it will create new jobs.

“It’s literally the story of the economic development of the world over the last 200 years…just as most of us today have jobs that weren’t even invented 100 years ago, the same will be true 100 years from now,” argued Marc Andreesen, a venture capitalist who was also responsible for creating Mosaic, the first widely used web browser.

Automation can also serve to complement human skills. As Stefan Hajkowicz illustrated in his article in The Conversation: “Spreadsheets didn’t kill off accounting jobs. On the contrary, smart accountants learned how to use spreadsheets to become more productive and more employable.”

True. But experts think this industrial revolution is different.

Machines right now might be only capable of doing repetitive, formulaic jobs, but even so, it was already enough to displace thousands of human workers. What happens when prototypes of robots that were taught to mimic the human mind become available? It’s not hard to imagine that knowledge-based, creative, and service-oriented jobs will eventually be overtaken as well.

Our society is evolving—this is the inescapable reality, and change is the watchword of our age. Uncertainty and fear are the inevitable corollaries of the enormous changes stealing upon us; we feel as the cotton picker must have felt at the arrival of the cotton gin, or the coachman beholding the first horseless carriage. Some speak of a melding of our biological minds with the mechanical AI we create, and new phases of human evolution; but these are remote fantasies, of small comfort to the man or woman whose livelihood is rendered obsolete by the march of progress.

But our species’ most remarkable trait is its adaptability—with any luck, we’ll weather this storm as we’ve weathered so many before, and doubtless the people of 2117 will marvel at and even long for our quaint, unsophisticated age and our uncomplicated lives.

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A $10 Million Investment Is Set to Determine If Universal Basic Income Would Work in the U.S.

Throwing Money at the Problem of No Money

The concept of Universal Basic Income (UBI) has been popping up left and right all around the world lately. Discussions and tests are and will be carried out by countries like Finland, Canada, and Uganda to find out if granting periodic and unconditional cash transfers to every individual in a community could solve that area’s economic problems. These studies, however, remain inconclusive, with some reporting that UBI has a positive effect on a population while others report a negative one.

The latest in a long line of groups trying to uncover a definitive answer to this question is the Economic Security Project (ESP), an eclectic group of people with signatories that include activists, investors, and visionaries. This group has pledged to spend $10 million in the next two years in order to find out if UBI can work in the United States.

This wide-ranging project would involve the ESP funding a diverse group of organizations, each with a distinctive question they would like answered regarding the benefits, or lack thereof, of UBI. The Roosevelt Institute, for example, will contribute macroeconomic modeling, behavioral studies, and public opinion research on UBI. Another group, the Chesapeake Climate Action Network, aims to find out the feasibility of carbon pricing and dividends to fund UBI.

Credit: Associated Press/Paul Sakuma
Credit: Associated Press/Paul Sakuma

We Need Answers

Poverty is not currently as big of a problem in the U.S. as it is in places like Kenya and Uganda, but a major concern for the U.S. is the encroachment of automation on American workforce. How will those unfortunate enough to have the same skill-set as the robots that could replace them survive once they no longer have jobs?

It’s a concern that worries government officials, financial experts, and scientists, and the UN has even predicted that 75 percent of jobs in developed nations could be lost to automation. As a solution to this potential job loss in the coming years, some have been pushing for UBI, but first the ramifications of such a system must still be studied. If this $10 million investment generates solid evidence one way or the other with regards to UBI, it could give officials a better action plan for humanity as it enters the age of automation.

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