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March 26, 2005

Don't Tax Him, Don't Tax Me, Tax That Robot Behind the Tree


The U.S. and Japan have vastly different roots, cultures, and presences.  No great people in the world, not even the English, has been as insular as the Japanese and as a result over the centuries they have built up an isolation from the ways of foreigners that has bred a particular strain of xenophobic antibodies no other successful society has been able to sustain into the 21st century. In contrast, just as they took over Chinese calligraphy flipping it 90 degrees, there is nothing in their culture that prevents them from adopting the most advanced science, technology, and learning from other societies while turning them into uniquely Japanese institutions.

The US, in contrast, has from its very beginnings, been a meeting place of cultures, modeled first on a mainly Protestant and European enlightenment blueprint but one, created and erected by African, Southern and Eastern European, and Asian labor and ingenuity. Just one hundred years ago, European science, art and technology dominated the world. At that moment, few would have predicted the devastating wars and unprecedented barbarianisms that dominated the life of that continent in the following half century.

Today, as the scientific and technological mantle has moved to the United States and Japan, now the first and second largest economies. much is being made of the aging of populations in the leading countries of the industrialized world.  The great baby boom population wave of the postwar years is moving towards retirement and contemporary birth rates have not kept pace.  In fact, in most of these countries birth rates have either stabilized or have continued to drop well below replacement levels.

Without doubt, the aging of the industrialized world's population is a major phenomenon but it is important to understand that in reality it has almost nothing to do with the kind of political nonsense that is being made the currency of the present debate on Social Security. Politicians who couldn't care less about anything but getting re-elected in the next two years suddenly have moved their gaze into the distant future as if they have license to clomp about where most futurologists fear to tread.  As if on cue, they wring their hands and exclaim from their talking points sheet, "in 2052 there will be only 3 workers for every retiree" as if this fact alone has any real meaning in the debate.

The industrialized societies have, of course, become the dominant countries mainly because of their ability to greatly increase something the economists call "productivity": what that means in plain terms is that by using ever more sophisticated tools more gets done by fewer workers; this goes from producing food on a farm to turning out widgets in a factory. Second, and equally absurd, this population calculation also assumes a hermetically sealed  US that will not absorb all those immigrants who would readily come here to fill any job openings that go untaken. Third, it misses the very present point no politician wants to face: we have already gone much further than people would have believed possible in the outsourcing of labor to other continents where the supply of cheap, young. trained and able workers is largely untapped. Finally, it doesn't even consider the kinds of advances that might occur through breakthroughs like molecular nanotechnology

And this leads us back to Japan --which coincidentally is hosting this week in Aichi the 2005 Robotics World Expo-- a nation that already has an older population than any other developed country and will not, without great dislocations, be able to absorb a large immigrant population to fill the void. No coincidence that Japan has become the country most focused on the development of advanced robotic devices. Whether they will be able to advance the technology as fast as they need to or whether they will have to have a mix of immigrants, outsourcing of their production capacity and robotics to meet their economic growth needs, is, of course, still an open question.

From an economic standpoint, productivity gains, whether through outsourcing or automation get reflected in corporate profits.  During the latest economic recovery cycle that began in 2002, the US economy has managed gains of 3 to 4 percent a year, despite the fact that fewer and fewer new jobs have been created. In fact, this recovery (mainly stimulated by massive debt and devaluation, though that's another story) has mainly been a recovery in corporate profits accompanied by a real estate bubble..

What we can safely defy anyone to argue against is that in 2052 or 2042 for that matter, that 3 workers will not be turning out the equivalent of what it took 12 workers to turn out in 1955. If robotics advance as fast as we think they will, it's much more likely that 3 live, breathing 2055 workers will be turning out the equivalent of 120 1955 workers.  Pushed by their own particular brand of necessity, the Japanese will go first in this area but the US and Europe will not lag that far behind.  In this country, the driving force will probably be the military; a recent look at DARPA's --the DOD agency that funds advanced research-- grants shows how their focus has shifted to robotics. The Air Force recently placed a major order for unmanned flying drones.  These robot planes are sometimes piloted by humans sitting in front of terminals but it is only a matter of time before more and more of the "decision" power is shifted to the onboard computers.  Meanwhile US Ground forces have been forced into a role of occupation; a posture in which robots are useful for any number of mainly defensive but highly vulnerable roles like defusing bombs and carrying out screenings for suicide bombers.

The Social Security debate like so many of the other prevalent debates these day, can result in making us all a little stupider.  Sure, there will be fewer workers per retiree and older humans will need more health care.  But if we insist on trying to tax only the human payroll factor in the economic equation because that worked in 1935, or worse, try to convince ourselves that we somehow deserve less because machines are doing more of the job, we are totally missing the point.

Posted by dymaxion at 01:41 PM

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January 14, 2004

Of Robots and Happy Marriages


Silicon Valley Part 3

Is the Average American Worker 10 Times More Productive than his Indian Counterpart?

Silly question, you might say.

Do Americans have a corner on high tech and innovation?

I'm reminded that back in the early 1960's when John F. Kennedy proposed the space race with Russia, we were in a fight for the high ground in space as well as in the hearts and minds of the world's population.  Kennedy was also looking at a big spending program that would generate jobs, business and new technologies. There was probably no little hint of nostalgia in President Bush's proposal today to build a manned space base on the moon around 2020.

To jumpstart the program, Bush would add several hundred million dollars a year to NASA's budget over the next 5 years.  To put the proposal in perspective, the administration also announced today that it wants Congress to put roughly three times as much, $1.5 billion, into a program to support marriage --right here on earth.  People will be taught "happy marriage skills"; something we'll have to take the 5th on.

Bush's space program, estimated to ultimately cost hundreds of billions of dollars --in the next guy's budget, of course-- will not really kick in until around the same time that the first baby boomers reach retirement age and start collecting their Social Security and Medicare payments.

For the President, the payback from the space program will come in new technology and savings in future space flights, perhaps in inverse proportion to the ratio of moon to earth gravity.

The proposal coincides somewhat ironically with the unmanned probe on Mars that seems to us to be proving, quite handily, the advantage of having non-manned missions in terms of cost and scientific payback.

Whether there might be a big payback in generating fuels and oxygen from under the moon's surface or not, is hard for anyone to say for sure, so we won't hazard more than a passing sneer.

More sure, however, is the role that robotics will play in the earth's economy over the same period that Bush is planning to build a manned space program.  In order for the advanced economies of Europe, Japan and the US to support all those retirees at the same time their populations diminish to an average 1.8 children per couple, worker productivity will have to increase at the fastest pace in history.  the burden will not only be on governments but also on the pension funds of unions and corporations like General Motors, which is expected to owe about a fourth of the price of every car it produces in pension benefits to its aging work force.

Back when JFK was announcing his space program vision, it could be argued that the American automobile was the best in the world.  My 1965 Impala SS, for example, had a V8 engine that cranked more than 366 HP.  The car had an automatic transmission, power windows, steering and brakes and even included leather bucket seats up front. If I remember correctly, though a bit extravagant, it also cost less than $3,000, or roughly the equivalent of $30 grand today. Comparing that car to the equivalent German, French, British or Japanese car of the day is a little like comparing Arnold Schwarzenegger with DC's Anthony Williams. 

At the time, the US carmakers owned over 98% of the North American market. The union guys who made the cars earned more, say, than the average journalist or high school teacher of the day and got equivalent or better pension, medical and vacation benefits.

There were cracks, of course, in this picture window world that came back to haunt the industry.  For one thing, in order to insure a regular turnover in car sales, the automakers had built in obsolescence.  You could be pretty sure that within three years, that Impala would have already lost its original water and fuel pump, was rotting around the wheel wells and there was a good chance the engine had lost half its punch and was burning oil as the rings and valves lost their efficacy.

Still, though you might have thought so at the time, it wasn't Detroit that ended up dominating the world automobile markets.  Today, of course, Toyota is among the top three US auto producers and Chrysler is owned by a German company.

Miniaturization, automation, remote controls, chip and software based smart functionality are already entering into every phase of modern life from medicine to manufacturing processes.  Japan Inc appears to have taken the lead in a number of these areas.

It seems to us that if the vision thing was based on anything more than short-term political gain, it would have relied on a real assessment of where future productivity gains are going to come from.

The Pollyanna's claim we don't need the same kind of efficiency here in this country as do, say, more homogeneous societies like Japan and Western Europe where language and other societal barriers serve to keep immigrants out. The US will subsidize, so to speak, its declining birth rates with immigrants from Latin America.

Perhaps, that's what Bush really had in mind today, when he put aside all that dough to promote domestic bliss.... more people, fewer robots!     




Do American's have a natural born right to defy the economic law that says at party's end the piper must be paid?

Perhaps, also a silly question.  We're told that spending causes economic activity that leads to higher incomes that leads to greater taxes and......yes, we all live happily ever after on this planet and beyond.

The American dollar, after all, is accepted as a Reserve Currency held by central banks across the planet as the basis for the economic viability for their own currencies. Since the Second World War, dollars have supplanted gold as the reserve currency of choice.  Since the US government does not back those dollars in any way, there is no cost to printing as many dollars as the world is willing to accept.

Should major countries around the world decide to balance their reserves with something that appears equally or more stable, say the Euro, then the US will have lost its very profitable, favored status franchise.

Watch the price of oil. Producers will not sit around forever seeing the real price fall in Europe, Japan and England while the US tries to jump start its economy by revving up the printing press.  You might see $3 a gallon prices by the summer.  And that would be the same as a de facto revaluation.  Needless to say, it would not make Karl Rove very happy.


Copyright 2003 Richard Mendel-Black All Rights Reserved

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Posted by dymaxion at 08:39 PM

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