In 122 BC, Gaius Gracchus initiated a policy that would later be known as “Bread and Circuses.” Roman landowners had slowly but surely replaced their workers with cheap slaves from the colonies. This resulted in high unemployment of the Roman population. As the empire found itself in a situation where production flourished but the population suffered, they introduced a policy of free grain and entertainment, which led to new stability.
Replace landowners with shareholders and slaves with robots, and you will see where we are headed.
You, may probably love your job. It gives you status in society, an answer to the favorite small-talk question, “What do you do?” Maybe you even think it gives you a purpose in life. And, if nothing else, it puts some money into your bank account every month. But if you had the choice: take the blue pill and keep working for your money as you’ve always done, or take the red pill and you will never have to work a day in your life again. What do you do?
This is the question we are facing, as we are increasingly automating our economy. If the fact that the bots are coming for your job is news to you, I suggest you watch this video by CGP Grey, one of many that will bring you up to speed.
In the simplified economic model, there are households, which are people like you, businesses, which are owned by people like you, and a public sector, or the state. The households provide labor for the businesses in exchange for an income by the businesses, which they can pay to the businesses in order to receive products and services of the businesses. And everyone pays taxes.
Enter the Automated Economy
The first thing we need to do to adjust this model is cross out the labor connection between households and businesses, because businesses will get their labor from the bots. The average Joe won’t be working a regular job, through no fault of his own. He has a good education, but there is just no field in which he can compete against the best bots out there. We won’t be referring to him as “unemployed,” much like we don’t refer to most people as “not a movie star” or “not an athlete.” His situation will be the status quo. Without an income from businesses households can’t pay taxes, but even worse, can’t spend money, thus causing an eventual collapse of the entire system, and we don’t want that because wealth creation through production and consumption is largely responsible for our well-being.
The most widely suggested way to fix the chain at this point is a Universal Basic Income (in short, UBI), a state-distributed payment to cover your basic needs.
“Hold on there,” you think. “This sounds a lot like communism!” It’s not. Bear with me. The elephant in the room is, where does the state get enough money to pay every citizen a monthly income?
In a communistic system, the answer would be the state just owns all production. But in a capitalistic Automated Economy, not so! Anyone can start and own a business, and the state will have to get its share through taxes. With that in mind, let’s go back to our model.
Who do you think has been the greatest beneficiary of automation so far? You might be inclined to say, “The households! Because they get free money!” But that ‘free money’ is really just a replacement for what they’ve gotten before when there were still jobs to do. So getting it without work sure is an advantage,but they aren’t the biggest winners in this new system. The correct answer is: the businesses.
They won’t have to pay any employees anymore, remember? This saves them a fortune. A business’s largest expense by far is usually people. All this money is now saved. That’s why under the old, or rather current, system a gradual move towards more automation results in two things: a buildup in a business’s cash reserves, and a growing income gap as ever-more wealth is distributed among fewer employees, things which we can already observe today.
So that’s why in a capitalistic Automated Economy, there will simply have to be a higher tax on company profits. And the entire system is financed. And the best thing is, if we play our cards right, everybody wins!
Shareholders of the businesses still end up with higher profits, and citizens can live on a steadily increasing UBI.And it makes sense that everyone wins, because the entire system has become so much more efficient.We have an automated workforce that runs on electricity cost.
Instead of humans working an average 40-hour week, the bots are now running the show at 168 hours per week. They don’t get sleepy, they don’t need breaks, and they make way fewer mistakes. You can live in a nice place, which is designed and built by bots, and buy some of the products you like, which are manufactured by bots. All that you can do on your basic income. As GDP grows, meaning economic output simply increases, your UBI gets higher and your property gets better.
That’s a simplified model.
The complete model, which includes value-added taxes and savings and trade, I’ll explain in a seperate document.
When the heat is in place, the rest of the body can work. Once we know the destination, we need to find a way to get there. This transition isn’t going to happen overnight, but gradually over many years. The transition to industrialization had its downsides, and we should try to avoid such. So governments need to put in place the right mechanics for it to be smooth. One such mechanism could be using automation indices. This idea is still completely hypothetical.
Automation indices measure the level of automation some organization has reached over time. There would be two of them: a business automation index (in short BAI), and a national automation index (in short NAI). The BAI determines how much automation a particular company has reached, and is used to calculate the taxes they have to pay. For example, a company with a BAI of 1 has reached complete automation and falls into the highest tax bracket of a corporate base tax, which is simply today’s corporate tax plus 100 percent of an automation tax, which is around the same. A company with a BAI of 0.5 has reached half its automation potential and falls into a medium tax bracket, of a corporate base tax plus another 50 percent of the automation tax rate.
“Great!” you think. “But how on Earth do you calculate, or determine, the BAI for a specific company?” All I can tell you is that everything that’s needed to calculate the BAI can already be found in a company’s financial statements today.
What about the national automation index?
The NAI is calculated using a weighted average of all the BAIs of a country’s businesses to determine the automation of the national economy as a whole. It is used to adjust the Universal Basic Income on a yearly basis. Using such mechanics, countries could pay a Universal Income starting today. It would start out very low, as even our most advanced economies are still caught up in old structures. But even at 50 dollars a month, we would have set the first cornerstone for our transition. And once the mechanics are in place, countries should be racing to get from here to there.