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redistributing the wealth from AI productivity gains

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Urbanomics blog has a summary of ideas for redistributing the (potential? expected?) wealth gained from AI, rather than letting it all flow to already deep-pocketed corporations and investors.

  • “Clever tax reforms, such as levies on corporate profits that are above a normal return on capital, on land and on natural resources”
  • inheritance taxes
  • “public wage insurance” (I think we like to call this “unemployment insurance” in the US? although “public wage insurance” sounds like a more neutral term implying a random event rather than blaming the victim)
  • “active labor market policies”, with Denmark as an example. This appears to combine unemployment payments with assistance on training and job searching.
  • “partial nationalization of AI firms”
  • “citizens’ dividend from AI businesses”
  • “giving citizens shares in AI companies”

The article makes the point that there is no real economic difference between tax policy and public ownership of the private sector. In the US at least, there is obviously a massive political difference. Entrenched wealthy and powerful interests are going to fight tooth and nail against any new taxes, even though something as simple and proven worldwide as a small value added tax would make enormous sense. That would soak up part of those windfall profits in proportion to how well the companies are doing. You could redirect the proceeds by beefing up unemployment and disability insurance, while incentivizing education and retraining (but I would let the private sector handle that last, as the government is notoriously bad at it). Going a step further, you could give people benefits and subsidize jobs in housing, childcare, education, and health care. You could invest in public infrastructure, (non-military) research and development, all of which create jobs and provide a positive return. This is all assuming you don’t want to just hand people money and let them decide if they want to do something productive or enjoy more leisure time (we could just expand the successful program we already have and call this Social Security for All) – we seem to have moral issues with this in the US. A VAT that kicked in only when the economy or productivity growth exceeds a certain threshold would actually be pretty painless. The wealthy and powerful are actually smart enough to understand this, and so they create disingenuous anti-tax propaganda and buy off politicians to make sure we can’t have these nice things.

So if all those rational and relatively painless policies I just mentioned are politically impossible in the US, at least unless economic growth actually accelerates enough to change that conversation, we can turn to “ownership society” type tricks. Redirect any surplus tax revenue (let’s assume there will be some if there is an acceleration in economic growth, even without any shift to more efficient or fair tax policy) to baby bonds and/or individual retirement accounts. Match with shares in index funds, effectively creating a sovereign wealth fund carved into a hundred million little accounts with individual citizens’ names on them. This may work out to the exact same thing mathematically as a VAT and income redistribution scheme. The finance industry would find a way to fleece people in fees and extras of course – this is morally reprehensible when the equivalent government-run program would not do this, and yet if this is the price of buying off the wealthy and powerful to make the policies politically possible, then it may be the best way forward that works within the existing system.

some policies to combat inequality

This article in the blog Urbanomics has some ideas on what can be done to combat rising inequality. The blog is India focused, but the suggestions are more or less general.

  • Increase minimum wage.
  • Increase labor’s bargaining power “through institutional (unions, workplace management councils, etc.) and regulatory measures. At some time in future, broad caps on the salary and compensation ratios across levels becoming a norm cannot be ruled out.”
  • Stop exempting gig and contract work from various laws and policies [things like not requiring the entity hiring them to provide health care and other benefits?]
  • Labour-intensive sectors should become the focus of industrial policy. Scarce resources should not be wasted on low-labour-intensity sectors like semiconductor fabrication or data centres… internships, apprentices, reduction in EPF and other costs, wage support for new entrants, industrial policy support through employment generation-linked incentives, etc. [this one is more in a developing country context I suppose]

All this seems…complicated…to me. But maybe these are politically feasible policies. Simple but maybe politically infeasible policies would be to just raise taxes on the rich and powerful and redistribute the proceeds to the masses, as cash, services directly provided by the government, or services indirectly subsidized by the government. In the U.S., perhaps taxes wouldn’t have to be raised as much as we think if we shifted away from some of the massive hidden subsidies we already have – low capital gains tax rates, the cap on social security payroll taxes, deduction of mortgage interest, the 30-year fixed rate mortgage, gas taxes that support highways but not public transportation, and many others. All of this would be politically difficult, of course. But with the Democrats seemingly having become the party of no big ideas, perhaps there is not so much to lose if somebody were to start proposing some.