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Thread: Robots are destroying cashflow in economy.

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    1 out of 1 members found this post helpful.

    Robots are destroying cashflow in economy.



    Destruction of cashflow in society, its consequence and solutions.

    Introduction:
    The main function of money is to serve as product substitute to ease commercial transactions, also as storage of wealth, and reward for work, as salary. We don’t want to be paid in what we produce, in wheat, pork, shoes, computer programs or electricity, as it used to be in era of barter economy before the money was invented. Money makes it easier, that’s its function.
    Money doesn’t sit still in our pockets, and in must flow through our economy to serve its major function.
    Here is a simple model of money circulation in economy:

    Money flow, no government.jpg

    Factories make products, workers are paid for their work during production, workers share their money with their families, who as consumers spend their money buying products in stores, then stores use this money to buy products from companies, then firms pay employees, etc. The same money is used again and again in never-ending circle of cash flow, from companies to workers to whole society to stores to companies to workers, and so on. Like a perpetuum mobile of life of money.
    Any hiccup in this flow and we have a serious problem like last financial crisis causing loss of jobs, pain for families and global recession. It is very important for governments and their federal bankers to keep cash flowing.
    It used to be like this for centuries, but…



    Black cloud on a horizon.
    Due to taking over production jobs by automation and robotics the typical money flow is being disturbed in economic cycle. The workers are being substituted by automatic production line and soon by verity of robots. If customers don’t have money, who will buy products from stores? And who will buy new products from factories if stores don’t have money? If nobody will buy, because nobody has money, factories will stop production. Even robots will be useless, and factories will close, and there will be no goods to get. Total disaster!
    Workers are losing their place in money flow circle. If they don’t bring money home, to their families and society in general, how would we keep the money circle going?
    I believe we, as society, already starting to suffer this cash flow disturbance. Economic growth is low compared to historical numbers, expected inflation doesn’t materialize, and even when unemployment is shrinking today in economic uptrend, salaries are not growing. The jobs are moving to service sector and well-paid production jobs are vanishing. Should we mention, that income inequality skyrocketed recently? Factory management and investors are making fortunes from automatization of production, while workers and society in general are left outside the loop. This can’t continue like this for the sake of all involved.

    Government to the rescue?
    We will need to complicate the cashflow circle a bit, and introduce Government as growing factor in cash flow distribution to complete modern cash flow circle.

    Money flow, expended.jpg

    In last century government role in running economy and monetary policy increased a lot. It took over big chunk of cash flow, introduced fiscal laws, taxation, regulations and fast-growing social services. Government is already deep in money flow circle, to help consumers or to be a consumer itself. Government shares money with whole society to buy goods and services. It is trying to distribute money through society more equally, more just. People, the consumers, are the center of attention of government. Well, at least in principle, because knowing economic mess many governments get thier countries in, it is hard to believe. But I digress.
    Government collects VAT tax from stores, corporate tax from firms and income tax from workers. Whoever makes money must chip in to the common purse. This money goes to whole society, either government services like healthcare and roads or to help the poorest of society to become valid customers and acquire goods. The richer the society in general, the easier is life, easier doing business, happier are the people. The poorer the society, the hungrier and angrier are people, often ending in revolution. It is also much harder to do any business with poor consumers, poor society.

    So, what happens when Workers are eliminated?
    We have this:

    Money flow, no workers.jpg

    In near future, workers are gone, and the only substantial way to move money to consumers, the society, is through government. Government needs to make sure that money still flows even though people will no longer work in production. It could be done through, guaranteed minimum income, pensions, supplemental maternity/paternity money, support for infirm and sick, perhaps in preventive health initiatives, and other government programs.
    Obviously, there is not enough money coming only from taxation of businesses and VAT now, to satisfy new circle of money. When workers are out of the circle, there are no longer personal income taxes collected to help government balance its budget for current services, never mind guaranteed income. Guaranteed income will become the biggest new expenditure for government. This guaranteed income must be equivalent to what workers used to bring home. Roughly speaking, government will need to come up with 80% more money than it collects in corporate and VAT taxes, to replenish the flow of cash.
    On basic level, as much money should flow to customers, as is needed to buy all the products made by factories. How can we accomplish this without people working?

    What are the solutions?
    - Tax all firms 80% of their income, or amount of money they used to pay to employees, and give this money to consumers.

    Sounds simple, but this solution brings serious problem. For example, business can move production, to the lower tax district, to other country to avoid such astronomical taxation.
    The solution to this tax avoidance problem will be to tax companies the same percentage around the globe. This will level the playing field, sort to speak. Though, how realistic is this to happen? Who will make all the 200 plus countries to agree on this?
    If possible. there is another benefit of this equal corporate tax around the globe. Equal corporate tax would help distribute global capital and production of goods more evenly through the world. Without its heavy conglomeration in low tax jurisdictions, as it is now.

    - All the customers should become shareholders of all companies in a country. Consumers could be paid directly by firms in dividends, without government help.

    The problem is that corporate dividends should increase substantially to 50% of company’s revenue perhaps, not stay at 0 to 5 percent as in present. Is it doable? Who will control this process? How many shares new born babies should get?

    - Perhaps in the future, money could be eliminated completely. Consumers can order products directly from factories, what they need is made by robots and delivered to consumer door in few days. Place an order online and wait.

    But will we fall into trappings of socialistic economy where nobody has incentive to produce anything, and initiative to build new factories? If there is no profit to be made, it creates chronic shortage of products? Well, it used to be like this when people were involved in production. One other hand, Robots don’t need incentive to work at 100%.


    Whatever the real solution will be, it must come in next couple of decades, or we are screwed.
    Last edited by LeBrok; 31-07-17 at 00:04.
    Be wary of people who tend to glorify the past, underestimate the present, and demonize the future.

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    many people with little skills and little ambition will soon be redundant and useless for the economy and even for society as a whole
    they will have to be supported by giving them an amount of free money
    but it would not be wise to distribute free money just like that
    some conditions will be imposed and some tricks so that these people will still feel somehow connected to the economy and society

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    Quote Originally Posted by bicicleur View Post
    many people with little skills and little ambition will soon be redundant and useless for the economy and even for society as a whole
    they will have to be supported by giving them an amount of free money
    but it would not be wise to distribute free money just like that
    some conditions will be imposed and some tricks so that these people will still feel somehow connected to the economy and society
    In 100 years everybody will be useless for economy, maybe except few geniuses who will "keep improving the system". Yet every human will want to live in dignifying conditions. Heck, there will be enough resources and goods to make every human live in best conditions ever. Will you refuse them to have it?

    Are you suggesting forced work comps just to keep some people busy? Even though their work will be completely useless in "robot economy".

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    Quote Originally Posted by LeBrok View Post
    In 100 years everybody will be useless for economy, maybe except few geniuses who will "keep improving the system". Yet every human will want to live in dignifying conditions. Heck, there will be enough resources and goods to make every human live in best conditions ever. Will you refuse them to have it?

    Are you suggesting forced work comps just to keep some people busy? Even though their work will be completely useless in "robot economy".
    I'm just telling a lot of people are useless, and many more will be in the future.
    And every thing will be done that these people won't feel like it.

    That is because these people will be the large majority.
    It will be the dictatorship of mediocracy and useleseness.

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    Quote Originally Posted by bicicleur View Post
    I'm just telling a lot of people are useless, and many more will be in the future.
    And every thing will be done that these people won't feel like it.

    That is because these people will be the large majority.
    It will be the dictatorship of mediocracy and useleseness.
    To get philosophical, we are already useless. The world can perfectly exist without people for billions of years to come, as it was for billions of years before people showed up.

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