Tuesday, 30 December 2014

Robonomics meets the nation state

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In his 2014 article Robonomics, Andy Mukherjee cited Adam Smith, saying "Human beings can never run out of work", wondering if that 'law' will apply in our increasingly automated world. He then examined the 2013 Frey & Osborne study which predicts that 47% of US jobs are likely to be automated, and considered whether robotics will threaten world stability as the gap between those who can earn income widens against those who cannot.

To date we have only been able to automate the 'bottom end': the mundane and repetitive tasks which tend to cause harm to those who perform them. We have freed staff from danger.

However, the future, particularly with the evolution of IBM's super computer Watson, looks as if complex task analysis springing from 'big data' will start to erode the 'upper end': the once sacrosanct role of senior management (Frey & Osborne, 2013; Cameron, 2014; Brynjolfsson & McAfee, 2014).

It is likely that we will see massive restructuring of organisations as they can take advantage of better ways to do things and use fewer people to do that. As I have mentioned in a previous article (21st Century Careers), WhatsApp - which Facebook purchased for $19b - has 55 employees, and Instagram has 11 (Cameron, 2014).

What concerns Mukherjee is who will buy the robot-built cars if the target market is sales assistants; and sales assistants too have been automated? He raises a good point, wondering if "a modern, capitalist society can absorb a technology shock" on that scale (2014). Once we could train our way out of trouble: as we noticed a decline in our industry, we slowly shed staff to more profitable fields. Mass automation is likely to force change upon us much more quickly.

Mukherjee asks if income redistribution could help avoid what he sees as a coming global train smash. He thinks not, because governments haven't started to think about how to redistribute taxation and duties.

But I see another issue: how do governments get their hands on company revenues in the first place?

Revenue on goods and services lies in the hands of multi-national companies. Each nation's government should have access to those revenues through taxes, when the nationally-registered companies' finances are properly assessed.

However, I feel that our artificial ideas of 'nationhood' will be our roadblock to accessing those funds. That's because companies have this awesome trick: transfer pricing.

To use the pre-bankruptcy example of Chiquita, how this worked is bananas sold in the UK were transfer priced out of farms in Costa Rica, Guatemala, Honduras and Panama at a really low price into Bermuda (a tax haven with - I think - zero corporate tax) where all the 'costs' were added and Chiquita paid their 'tax' (ie, none). The 'repriced' bananas, never having been near Bermuda, which were already on the boat or plane to, say, the UK, arrived costing around £200 each. Chiquita made a loss in the end-user country, every time. And so, they paid no tax.

Just like Starbucks do. They too are experts at transfer pricing & their 'head office' is in a tax haven.

Tax havens include Jersey, the Channel Islands, the Caymans, Gibraltar, Bermuda, the Dutch Antilles and the British Virgin Islands. Oh, and Manhattan Island, New York and the City of London (the square mile) (Shaxson, 2012). Fascinating, isn't it?!

So we need to get rid of 'Nations' as separate tax entities if our brave new automated world is to work with redistributing funds to all citizens. We have to have a global agreement that companies can't 'relocate' their way out of paying tax, and then we will have a great future.



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