The Robots Are Coming and Sweden Is Fine
nytimes.com
nytimes.com
Maintaining Sweden’s social safety net also requires that the public continue to pay tax rates approaching 60 percent for their current amount of displacement.
If automation starts to displace a huge number of people, and there is no job to transition, the social contract will break.
I'm really hoping we hit a star trek style utopia (especially in terms of energy and food) before we get close to social contract breakage. I fear we won't though, we already seeing severe signs of the social contract breaking in the United States.
Break because of what?
If a job is stupendously productive because of automation, it can support stupendously high taxes too.
I'm assuming this applies to individuals and populations.
So somehow, sometime, we have to stop relying on income-tax, and start relying on some kind of productivity tax instead, and forge a new social contract based on that.
Otherwise we end up in the situation you describe, an ever-decreasing sliver of the population is taxed to support the masses. And even though their productivity is multiplied enormously by technology, a lot of people will still think it's unfair.
I don't think that's actually true, absent tax evasion. Take the limiting case of the "fewer people being more productive" scenario- someday only one person in Sweden participates in economic work (who operates all the robots, or whatever.) Since all economic production is hers, her salary is essentially equivalent to Sweden's GDP. Tax her at whatever absurd rate Sweden would tax such a person, and you can definitely pay for the social safety net.
(Actually, Sweden collects much more in taxes in that scenario than in the present day, since the entire salary base is being taxed at the highest possible income bracket.)
This is perhaps counter-intuitive, and possibly irrelevant, because we're accustomed to high earners not paying taxes like ordinary folk do. In the above scenario, Sweden's sole worker would likely spend some effort trying to hide her income in the Canary Islands. Whether productivity-concentration harms social safety nets eventually comes down to the tax authorities' ability to stop that kind of behaviour.
So to reach that limit example, you would have both productivity concentration, and an enormous amount of capital concentration in the background, screwing things up, making it harder to reason about the example.
I think Blockbuster vs. Netflix is a very good illustration of what happens when productivity concentrates. With Blockbuster, you had 300k simple low-wage jobs. But they were distributed across the country, so their collective income taxes were also distributed into a lot of local economies, doing good locally.
Blockbuster went bankrupt, and Netflix took their place. So instead of 300k distributed low-wage jobs, you now have 10k high-skill high-wage jobs, but they're concentrated to LA and Silicon Valley. Those employees pay local taxes there, and nowhere else. So from a national perspective, you now need to re-distribute those taxes to the areas who lost tax revenue, somehow, without pissing off the employees, and without pissing off Netflix, and without pissing off the local government in SF and LA. Usually this is done through federal aid/job aid programmes that take money from richer states and distribute to poorer states, but that's an incredibly blunt instrument.
But if you were to tax productivity and if you were able to tax it locally where it's consumed, this change from Blockbuster to Netflix wouldn't have disrupted local economies. Because then it wouldn't matter how many employees did the actual production, or where they were located, and that's good for the places that productivity is concentrated away from.
(Unless, of course, you are of the position that fuck those guys for living in the middle of nowhere, they should move to the cities like everyone else.)
Anyway, tying it all back to the original point, productivity concentration necessitates some kind of new/stronger redistribution mechanism so the gains are spread across the entire population. Previously, and still, when we have income-tax and a high percentage of the population participating in the labour force, that distribution happens automatically.
Maybe a productivity tax to make sure the country as a whole captures part of the GDP, UBI to spread it equally across the population, and then local consumption taxes to redistribute to local governments? I don't know.
One idea is to tax natural resources higher, and labour lower, in order to incentivize more effective production. Of course with the risk that all we get is a new form of tax havens.
They likely don't care about other people. You'd have to frame it for them differently.
Perhaps the glory of an immortal title? Maybe the admiration of the populace? Something like that.
I can see an egomaniac going for that.
The problem in the US is that the higher echelons don't believe that they should be part of that social contract. the social contract doesn't slip if everyone pays their fair due -- including those rich desk pigs who prefer to fatten their bonuses instead of upping their worker's salaries.
I too want poor people to earn and have more money but it doesn't seem true that the rich aren't paying their fair due.
1 - https://taxfoundation.org/new-irs-data-wealthy-paid-55-perce...
Edit: To the people downvoting me, please clarify why. From my perspective I'm directly addressing a point in the conversation with a legitimate source. I don't see why this should be downvoted, so please clarify for me.
It would be more productive to focus on outcomes. How can we structure the tax system to prevent civil disorder ("let them eat cake"), keep people out of extreme poverty, and avoid burdening wealthy individuals so much that they emigrate to lower-tax countries?
1 - https://www.factcheck.org/2008/05/top-1-what-they-make-and-p...
Also, CBO numbers significantly understate the earnings of the top 1 percent. Mark Zuckerberg for example has a net worth of ~70 billion yet that money is vastly greater than the sum of his 'income' over his lifetime.
Professional guilds like lawyers and doctors also limit the number of people in the field to protect wages. The AMA has been essentially an enemy of the people that works to milk the CPT codes. The grift is that a procedure typically is X$ and takes Y hrs to perform. They recommend that some are easier and harder and create a cheap CPT code and an expensive CPT code. This seems fair. Then everyone marks all procedures that can be remotely justified as such as the expensive CPT. There are other grifts but this is one way that health care costs inflate over time.
I think using taxes as a weapon against people is wrong though. So - to say that because some billionaire pays a lower tax rate, because his income comes through capital gains, that we must punish him with steeper taxes, or a wealth tax, or whatever plan you suggest, then I believe that is not only unproductive but also immoral to do so.
The basic problem is that the government is a poor steward of our money. Take education as an example. The US spends more money per student when it comes to education, and doesn't have outstanding scores in math, reading, science, or any category that I'm familiar with. There are problems with our education system, it's unequally distributed, it's not preparing kids for the careers of the future adequately, and other problems - but what's the solution? Spend more money, tax more, and so on?
On a similar subject, why should we take more money from the rich, who already pay a disproportionate share of federal taxes, so that we can buy more tanks we don't need, invade foreign countries, overthrow foreign governments, staff military bases around the world, and waste uncountable amounts of money on silly military projects.
Also, all earned income (wages) is subject to payroll tax from the very first dollar and that is a tax on one's income. But setting aside FICA, there is a disturbing vulgarity in saying only poor people pay nothing in income tax, because rich people also pay nothing in income tax on that exact same amount of money. That's how tax brackets work. Person A makes $15,000 a year and pays no income tax; person B makes $1.5 million but likewise pays no income tax on their "first" $15,000. So I find picking on poor people, who pay a disproportionate amount of their income on sales and property taxes than wealthy people, rather ignorant and obscene.
The mere fact that wealth inequality continues to get worse does tell me there is a deficiency in tax policy. I don't really care about an arbitrary emotive like "fairness" - what I care about is avoiding the destabilization of civility and that is guaranteed to have a breaking point at a certain level of inequality. It is not necessary to enforce a classless, egalitarian society, in order to narrow the wealth inequally gap to something more sane and then maintain that gap (for those who want to protect classism, anyway).
Another (absurd) option, we could cut all discretionary spending in half. So, 1/2 size military, 1/2 size departments of state, health, homeland security, veterans affairs, education and the rest. This might be kinda workable, but we'd probably lose military control in the middle east, which is essentially access to all that oil. i think it'd be tough to enforce copyright without heavy state department involvement, which would risk a bunch of wealth.
I think the 1% get outsized returns from the stability of the government. If you can pick a set of departments to simply eliminate i'd love to see the set, and why it wouldn't risk current wealth. There are a few i'd be sad to see go, but you could probably eliminate education, energy (no more nukes though), nasa, interior, hud, and agriculture. that gets you fairly close to 200 billion, with about 400 billion more to go. those are risky, but probably survivable.
i dunno. I fundamentally disagree, the more you have the more you benefit from the status quo.
What I'm saying is that it doesn't seem true to say the rich aren't paying their fair due. If you think that, then please answer what percentage of federal taxes do you think the 1% should pay and why would that be more fair than what they currently pay?
I would support Paul Ryan's original promise that 'you can file your taxes on a postcard'. With the caveat, every other person and corporation also files their taxes on a postcard.
This, of course, strips a fantastic amount of subtlety and control. Subsidize what you want and tax what you don't is standard tax policy.
On the other hand, i prefer scheme to c++. so simple as to be completely transparent is better than fabulous complexity. But, it turns out that's not a particularly popular world view.
The reason why capital gains are taxes less includes things like you were already taxed on the money when you earned it before investing it so the capital gains tax is the second time you're getting taxed on that money, and that capital gains tax affect the risk to return ratio of investments. In other words, if you are taxed on capital gains more that diminishes the potential gains of your investments, while leaving your potential losses alone. If the balance of risk to reward shifts too much towards "risk" then investments will fall and the whole economy will suffer.
I agree with you that our taxes should be simpler.
Also, as a general rule, the more land you own, the more you benefit from public expenditure. This is because the value of land rises as taxes are spent improving the surrounding environment (roads, schools, parks, etc). The 'return' on this investment is captured in property values and so is essentially a tax rebate for land owners.
Utopia and dystopia may be a fine line, but I like the theory that Star Trek is a dystopic, culturally desolate future. [0]
Therefore when the Swedish state spends money, people earn more from the production that induces. The machines are run for longer and more is made. Taxes then automatically recover that.
Extra Spending causes extra taxation.
The analogy is straightforward. If you have an advanced electrical economy you have to supply more power into the grid than is consumed to handle the phase shift of advanced inductive power plant. That extra power is then taxed back by the electrical grid 50 times a second.
You have to generate that extra power, and have wires big enough to take it, even though it is never actually used. If you don't supply it, then the motors just don't create as much real power.
To get the correct amount of real power out of a modern mechanised economy, the currency issuer has to spend more into that economy as reactive power and that then returns to the source as taxes and additional savings in the currency every cycle.
Mechanisation reduces the power factor of an advanced economy - requiring more reactive power, government spending, to be supplied to maintain the optimum level of real output.
Calling something a "contract" implies that other people agree to it. But in reality, the "social contract" that we follow now was created by people who are hundreds years dead, and never asked anyone else if they wanted to join it or not.
Maybe it is good that this "contract" is ending.
As for manufacturing: yeah most of that already left for China/Asia in the 70s and 80s. And what remains is already computerised and done by robots.
Again, if you mean the US. If you meant Sweden, yep, what you said is very true, Swedish industry has a very long history of automation.
http://ec.europa.eu/eurostat/web/products-datasets/-/tsdec43...
Some work is less amenable to automation, mundane care for the elderly, fixing plumbing, or even sweeping streets. This work either becomes very expensive, or is done by semi-legals who are willing to accept a much lower standard of living.
> "we minimised low wage work long ago with automation. As a business you want to AVOID employing people at all costs."
Given the abundance of low-skilled workforce, I have my doubts.
In this particular case, I've seen scores of advanced economies where the eloi are clueless about the stinky and dirty morlocks breaking their backs to power the paradise, and I believe a tiny bit of blindingly obvious sarcasm is not an overreaction.
"Robots, or automation, are not the problem. Too little worker power is."
There will be problems because of automation and I think most Swedes realize this. The safety nets that are in place provide a buffer, and possible solutions, if you should loose your job because of it. I'd say that's where the optimistic attitude in this article comes from.
Sustaining those safety nets is indeed going to be hard if unemployment increases. There probably won't be any "silver bullet" solution to the problem either.
[edit] spelling
This example is perfect for what a working symbiosis man / machine, not tehnology is the problem but value of human labour costs and machine investments. In Scandinavia this is not only fine but normal.
Probably not, but I'm concerned about society as a whole, not a few hundred or thousand rich people. They'd be fine anywhere in the world. I'm talking about advantages for regular people who want to make something of their lives and don't have millions or billions in the bank. For these regular people, industrial power and economic output doesn't mean shit when they can't get health insurance, education, or jobs. Industrial power and economic output are irrelevant when you're bankrupt because of medical bills which you can't pay because you don't have a decent job since a bachelor's degree costs more than a lot of houses and education below high school level is almost nonexistent.
https://www.google.com/amp/s/www.thelocal.se/20171214/what-s...
Please.
Edit: given that bringing up refugees invites downvoting, I want to clarify that this may not be among the major causes of Sweden's decision to raise retirement age (and is not the core idea of my message), but it's not negligible either: according to this guy http://voxeu.org/article/fiscal-cost-refugees-europe , current immigration policy costs Sweden 1,35% of annual GDP.
Here is a related cartoon:
Edit: Adding to this the retirement age has not yet been raised, but is only proposed to be raised.
Some might even say retirement is the goal of life, defined however the individual wants to define it.