Techno-Socialism: Coming Sooner Than You Think

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The Future Will Never Be The Same

800px-TOPIO_3Fast forward to the year 2033 and imagine for a moment receiving your copy of The Virtual Wall Street Journal. It is early February and the government is about to release the latest figures on the state of the US economy. Based on the action of the futures market, the Virtual Dow Jones Industrial Average is set to open at 14200. Veteran UBS market pundit Art Cashin poetically noted how the Dow has not changed in value since February 2018. At this point candles are lit in celebration of Art’s 103rd birthday. Unfortunately, Art is the last living floor trader on the New York Stock Exchange, so no one was present for the festivities.

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In recent stock market sessions Art has commented on how his great grandchildren had managed to pass on to their great grandchildren approximately $2 billion per capita in interest on the national debt and also noted how JP Morgan Chase had recently completed its first modification of a home mortgage after losing the paperwork since 2006. Unfortunately, the homeowners died of congenital exasperation while sleeping in a public park. When asked to explain how it was possible that the value of the Dow Industrial Average could be unchanged for such a lengthy period, Art thought for a minute, scratched his comb over and remembered that after February 2018 there weren’t any industrial companies left in America. Stock exchange officials had decided to continue posting the meaningless average as a patriotic tribute.

Art Cashin
Art Cashin

At 10:00AM EST, the Labor Department is set to unveil the first edition of its new measure of employment. The new index has been in the development stage since 2024 when Congress, after another failed attempt to abolish assault weapons, outlawed unemployment instead. Under the old employment measurement system, an individual was required to be seeking full time work in order to be counted as unemployed. The old system was never more than an idiot’s guess at what was going on in the real world in the first place. However, in 2018 the last living US citizen gave up looking for work, which meant the labor force had effectively fallen to zero. After that any notion of an unemployment rate seemed dumber than ever.

The Labor Department’s new measure was dubbed the Holistic Accounting of Happiness or HAH for short. It measures the percent of the population employed directly in government jobs (GAHAH) or receiving full HAH compensation (FUHAH). For those of you that don’t see where this is going, look at it this way. The higher the HAH, the better off we are. Of course GAHAH’s get paid for doing nothing while FUHAH’s just hang out at Starbucks. The actual cost of HAH is buried somewhere deep in the Defense Budget.

Reality Check

If all of this sounds a bit goofy, believe me it is. But we make an absurd case for one simple reason. It is not so absurd at all. With increasing occurrence, we are seeing examples of how technology is replacing labor. A recent article in The New York Times interviewed a meter reader for a power company in a major US city. The gentleman pointed out how the power company was replacing existing meters with meters that transmitted information electronically to a data center. He stated that in 2005 the company had 1,200 meter readers but today they needed only about 15.

Consider this: four of the largest technology companies present a model of today’s economy. Google, Apple Computer, Amazon and Facebook collectively employ only about 150,000 people. That is staggering when you consider the value of these companies is nearly $1 trillion. Compare this with a traditional manufacturing company like Proctor & Gamble that employs 126,000 workers. Its value is only a meager $207 billion. The lesson is obvious. Less is worth more and in this case the less means less human beings.

Future Shock, is a book written by the futurist Alvin Toffler in 1970. In the book, Toffler defines the term future shock as a certain psychological state of individuals and entire societies caused by too much change in too short a period of time. The basic idea was that the space of time between life altering milestones has been compressing for hundreds of years and the continuance of this time compression is irreversible. The disruption to societies likewise is irreversible. If you need further convincing, please read on.

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The highly respected 60 Minutes reporter Steve Kroft recently interviewed a former MIT professor/inventor named Rodney Brooks. It seems that Brooks left his position as head of MIT’s artificial intelligence unit to set out on his own creating low-cost robots that are designed to help small manufacturers compete with cheap Asian labor. These robots costs about $22,000 and can last for three years running pretty much non-stop. Based on two shifts of eight hours per day, the robot costs a mere $1.70 per hour! That is about the same wage I made as a kid mowing my neighbor’s lawn. Brooks claims the robots can be programmed in an hour or less and updated with new apps as conditions warrant.

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What makes this noteworthy is that at long last there appears to be a political as well as a spiritual shift in the good old USA to recapture decades of lost manufacturing. Until now, US labor rates have not been remotely competitive with other areas of the world. Brooks’ inventions (named iRobots) provide real hope of recapturing this business. This could be great news for Mr. Brooks, perhaps even turning him into an iBillionare, but it is not a panacea for large-scale job creation.

Trojan Horses Are Everywhere

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30IN_ROBOT_670972fBut the emergence of techno-socialism is not limited to factory workers. Techno-Trojan horses are reaching out to every part of the economy.

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Another New York Times article a few days ago revealed how applications to the nation’s law schools have dropped by 38% over the course of the past five years. The explanation cited for this trend was (1) the dramatic rise in tuition costs for three years of law school, (2) the diminishing job opportunities as the more mundane areas of law have been encroached on by online legal services.

There are many scary aspects about the future of technology but the possibility of fewer lawyers is not one of them.

Now even the folks at Proctor & Gamble have gotten onto the bandwagon. In a recent five-year plan to save $10 billion, the company announced it would reduce non-manufacturing jobs by 5,700. Now that Mr. Whipple is really squeezing the Charmin.

Little, if any of this should surprise. This headline generating news is stuff the 6 o’clock news is focusing on with increasing frequency these days. But here is the problem. Because there is such a wow factor to technology, much of the story line focuses on the wow factor. The typical punch line to these reviews, even the thought-provoking peps at 60 Minutes, is – AND MORE TO COME!

One does not have to be a nerd, geek or savant to figure that one out. The long-term consequences of technology replacing humans is every bit as relevant as the national debt, global warming and maybe even as important as the ultimate question- Where will Tim Tebow play football next season?

American history has proven that the creative genus of this country is best when it’s back is against the wall. Warren Buffet is known to have warned against betting against the strength of the United States. But then, Warren Buffett also claims not to understand technology. There are a few basic forces we need to consider.

At the present time, we are a country deeply in debt at a federal, state and personal level. We are also a country where the costs entitlement programs such as social security are mounting rapidly promising to push the government even further in debt. In the history of the 20th century, we have increasingly relied on three primary sources for survival: corporate job creation, government job creation or government transfer payments (welfare, social security etc.).

Of these three resources, the richest unquestionably are corporations, especially technology companies and those supplying technology. Take Apple Corp for example that holds a cash hoard of over $137 billion or Microsoft with about $80 billion. These are only two of the companies that are so technologically advanced that it seems they only need humans to create great products and then count the money. By our calculations, the top five technology companies are loaded down with nearly $300 billion that they cannot spend. Now imagine how much more cash can be saved when the current employee base can be reduced from 150,000 to a more efficient number like say 5.

These companies are making money so fast even they cannot reinvest before more money comes pouring in. How long before technology companies with their overload of cash and labor eliminating technology become viewed in the same light as the oil companies in the 1970s, the Enrons of the 1990s or the banks in 2008.

Stepping back and reviewing childhood memories of The Jetsons television series, it was a show that portrayed technology as a positive force in the future. The wow factor of technology presented hope for an easier, more enjoyable, even more exciting future. Man landing on the moon offered hope of technological advancement even greater than Moonboots. The single theme to these experiences was a long-term orientation toward the future. Unfortunately, the issues of technologies’ impact on the distant future are less well understood than global warming and even less agreed upon.

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There Is A Solution- A Modest Proposal: 2013

One thing appears totally clear, man cannot exist solely on playing golf for an entire lifetime nor can he afford the green fees. The government cannot afford the green fees either. Right now the federal government cannot afford the current 14 million unemployed, the 47 million on food stamps, not to mention the 70+ million retiring baby boomers. Personal debt including home mortgages and credit cards in relation to gross domestic production only shows that people cannot even afford themselves. If over the course of the next 20 years or so, federal tax revenues from W2 wage earners declines both in absolute and relative terms, the present situation can only get worst.

So what is the long-term solution? TAX ROBOTS: what else could be more logical. By 2033 robots will control all the world’s money anyway. They may be ATMs today but soon they are going to be your daddy. If we start to think of robots and other machines of labor as if they were human, we can begin the process in a calm and logical fashion. In Europe and other parts of the world there is a VAT, or Value Added Tax. We could call ours a JET for Jobs Eliminated Tax. Start by assigning Tax ID numbers then establish tax rates based on rates of output, hell, we could even create a Medicare system for older machines that breakdown. There is no limit to the possibilities if we begin now. There is no reason why the very same joy and excitement that was the spirit of The Jetsons cannot be replicated by 2033. Let’s not treat this with the same denial we treated the thinning of the ozone layer over Antarctica.

Today the wealthiest 1% of the country is under pressure to pay their fair share. But in 20 years this may not be enough to support a group of possibly 200 million technologically displaced people. Does techno-socialism sound absurd? It’s coming sooner than you think. If we do this right, not only can we have all the time in the world for golf but also we can eliminate green fees forever.