Dear Mr. Harris-
You have requested that economists in particular contact you in regard to the 08-19-11 Addendum to your blog post
"How Rich is Too Rich?" I am not an economist, but I follow economics very closely. I'm an engineer by degree and run a construction company, so it is perhaps in my nature, as well as required of my position, to know what's happening in the world, economically. I hope you will take a few minutes to think about my take on your ideas, however, because admittedly this is long, I will not be surprised or disheartened if you do not.
First, I will assess your first idea:
Future breakthroughs in technology (e.g. robotics, nanotech) could eliminate millions of jobs very quickly, creating a serious problem of unemployment.
In a very broad sense, I think that the creation of a massive robotics industry causing large scale unemployment would perhaps be akin to the fear once upon a time that the rise of the automobile industry would have caused large-scale unemployment due to their replacing horse-drawn carriages. To shamelessly steal from DeVito's speech in
Other People's Money, there was once a company that made the world's best buggy whips, whose employees surely found themselves eventually unemployed due to the rise of the automobile. But as those people lost their jobs due to the rise of an industry that made their profession nearly obsolete, so too did a new industry arise whose ability to employ massive numbers far surpassed the ability to employ of carriage-makers, horse farmers and buggy whip makers combined. In the aggregate, employment rose.
Will robotics eliminate jobs? Of course, it has already eliminated thousands upon thousands of jobs, from the automobile industry to the airplane manufacturing industry to the construction even of submarines. Many welds on the newest submarines, for instance, require accuracy that only robotics can achieve. This means that welders that worked on submarines are out of that particular work. But they are still welders. They just need to weld elsewhere. Perhaps they might even go to work for the company that is manufacturing the robots.
If we look to the future of robotics, the scenario that kills millions and millions of jobs is the perhaps Asimov's Foundation series scenario, or more recently, the scenario in the movie, Surrogates, where robots become so commonplace, there is nearly one robot, or more, for every human being.
But who makes the robots? Surely for the smaller components and the excessively detailed work, there are other robots. But there are still going to be assembly line jobs. There are going to be jobs for the people who need to supply the materials, all the way back to the original mines they came from. Robots won't do everything. All along the way there will need to be people to do the work. Perhaps this is best explained easily in Leonard Read's
pamphlet, "I, Pencil." If the industry grows to such a magnitude as you suggest, then yes, surely it will create massive unemployment in other currently existing industries, but it will create massive employment in a new, growing industry. Such is the nature of capitalism and economic progression.
But many of your readers responding to you have already covered this basic idea, and you are looking for something more.
I am suggesting, however, that there is nothing that rules out the possibility of vastly more powerful technologies creating a net loss of available jobs and concentrating wealth to an unprecedented degree.
To this I would suggest that there is and always has been this possibility, however the missing piece of the equation is necessarily the rate of population growth. It did not used to be uncommon for families to have 4, 6, 8 or even 10 or 12 kids. When our economy was largely driven by agrarian life, it was economically necessary for a family to have as many workers as possible to work the farm. Given the rise of mechanical farming equipment, the farm family has gotten smaller over the years. In the early-to-mid 20th century boom in manufacturing, we saw our population skyrocket as we had an economy that we were comfortable still having several children per family, as factory workers would have assumed that their kids could eventually go to work in the factory, if nothing else. I would suggest to you that as many manufacturing jobs have moved overseas, families have trended to get smaller as a response, with families focusing on grooming their children for white collar work, whether as engineers, academics, or businessmen.
The moving of blue collar manufacturing positions overseas has also been a response to the market. Union contracts in the United States grew to the point that the manufacturing of goods locally has in large part become untenable. I would put this largely on the unsustainable nature of a pension model for retirement, moreso than the wage rates themselves, but this is another topic altogether. So if we are talking about a "serious problem of unemployment" I assume we are talking about it locally in the United States, because technically speaking, the jobs haven't disappeared, they have gone elsewhere, where the labor can be had for significantly less money.
I make this point because, if we were to see such a significant rise in robotics, it would be not only because the manufacture, sale and maintenance of the robots was that much cheaper than American labor, but
also that much cheaper than rock-bottom foreign labor. Looking at it macro-economically, taking the world market as a whole, and taking employment to be a
worldwide phenomenon, because it
is a worldwide phenomenon, I feel the possibility of a rise in robotics to replace employment of human labor to such an extent that all levels of human employment are made economically obsolete to be something that is probably a few hundred years down the line, should it ever happen. There's an entire world's worth of cheap labor to exploit before a saturation of robotics seems likely to even begin to take place.
Now, on to your next idea:
The federal government should levy a one-time wealth tax (perhaps 10 percent for estates above $10 million, rising to 50 percent for estates above $1 billion) and use these assets to fund an infrastructure bank.
You do, strangely, caveat this by ultimately saying "Leaving aside fears of government ineptitude, please tell me why it would be a bad idea for the rich to fund such a bank
voluntarily."
Let me first point out that these are two wildly different things. The federal government descending upon the rich and absconding with 10-50% of everything they own from behind the barrel of a gun is
not the same thing as our country's 400-something billionaires voluntarily pooling their money together to charter a new bank that would be used to fund infrastructure projects. To insinuate anything of the kind is disingenuous.
The latter would most certainly not be a bad thing, though let's remember that the structure of such an entity would be as a bank, loaning money out to municipalities and states and the federal government to fund infrastructure projects. This money would have to be paid back with interest, and that this is really not any different than how this already happens, except for the fact that this bank would be something like another Federal Reserve style central bank dedicated solely to infrastructure, though, I would assume and hope, not allowed to print money. To that effect, I guess I don't really understand the point of it, other than that it's an accounting trick to move debt out of treasuries and into another entity. The debt still grows, only it doesn't affect the country's balance sheet. At some point it becomes another Fannie/Freddie-type of entity, with so much debt that it doesn't even know how much of it is even good anymore.
This is to say nothing of the point, also, that if the super-rich are the ones funding this bank, they are getting even richer because of it, thereby increasing the wealth gap you are hoping to close.
If you have taken the time to read through all of this, thank you.
Sincerely,
Paul Kroenke
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