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Luddites had humanity’s best interests at heart. So does Bill Gates. And with his statement urging taxation of robots to slow down pace of automation, he has proven himself to be a modern-day Luddite. His ideas on robots will, hopefully for the sake of humanity, meet with the same fate that Luddites’ did.
There is little doubt that automation will destroy jobs in sectors ranging from transport to finance . This is a serious issue that will change humanity as we know it, and steps must be taken to smoothen the transition. However, Gates' ideas are absurd, and would be ruinous for the economy and society at large.
The gist of his ideas is that in order to be “net ahead” as a society once a robot has taken the job of a human, the displaced labour must be able to do other work so as to increase the total production. Since the displaced labour needs retraining, the robot must be taxed at the same level the human was, so that the tax can be utilised for training of displaced workers for employment in sectors such as hospitality, which need the human touch. According to Gates, “Government’s got a big role to play there,” since the markets can’t be expected to deal with issues of job losses and resulting inequity. He further says that taxation to reduce the pace of automation will mitigate public resistance to it, in the face of which it can’t thrive.
Let’s see why his words don’t make sense.
Firstly, for the purpose of paying tax, how does one define robots? Is any machine a robot, or for that matter, isn't Gates’ Microsoft a robot too? By this definition, every machine ever created can be classified as a job-devouring robot, even though every machine has birthed scores of job opportunities by enhancing productivity. If at all the puzzle of 'how to define robots' is solved, we would come to the question of who pays the taxes. Since robots can’t pay taxes by themselves, presumably either the owner or the manufacturer of robots will foot the bill. Gates means as much when he says the money can come from “some type of robot tax”.
Safety nets have to be created to provide succour to those left behind by globalisation, and to prevent them from hitting back through the ballot to elect those who threaten international security and trade, which is a far bigger danger than automation will ever be.
Having the manufacturer pay tax for producing robots will then give rise to a new type of tax — production tax. So far, taxes are levied either on income or on consumption. Corporations are taxed on their profits, not on what they produce. Having a tax on robot production would amount to double taxation — the manufacturer pays taxes on what it earns, as well as on what it produces. This would mean that production efficiency — quality and/or quantity of robots — is lowered and that the higher costs are simply passed on to consumers, both of which hamper Gates' “net ahead”. On the other hand, having the owner of the robot pay taxes will either lead to reduction in their consumption — which means lower tax revenue and reduced aggregate demand — or, in case they’re manufacturers of something else themselves, their production efficiency being lowered and the higher costs of their product being passed on to consumers, thereby again hampering the 'net ahead'.
Secondly, Gates' ideas will fail for the simple reason that manufacturers of robots can simply move to countries that don't tax them. This would also mean job losses for the country that loses the manufacturer. Once robots become an essential part of daily life, the owners will move out too, to the extent they can.
Thirdly, how can Gates be so sure that the governments will correctly retrain the displaced employees? How long before the hospitality sector too sees robots capable of replacing humans? Large-scale attempts by governments to take over the function of the markets will result in massive inefficiencies and corruption opportunities.
Fourthly, what does Gates mean by public resistance to automation? Does it mean people will stop using Amazon Go stores because they will eventually consume millions of jobs in the retail industry? Will people refrain from using the self-check-in facility at the airports because it takes away jobs? None of this will happen, just like it didn't when the industrial revolution started and when MS Office was introduced. Automation is the bittersweet reality of human future. Those who don’t accept it will perish.
There is little doubt that automation, like globalisation, will be a zero-sum game for some. Safety nets have to be created to provide succour to those left behind, and to prevent them from hitting back through the ballot to elect those who threaten international security and trade, which is a far bigger danger than automation will ever be. However, Gates’ ideas are not the answer.
