The Answer to Automation, Robot tax and Basic Income Is…

The Digital Single Market is expected to create Billions of Euros (between 17 and 415 per year, depending on whom you ask). Except on closer inspection, those Billions are not added to the economy – they are cost savings thanks to productivity increases and lower consumer prices. Increased digitalization means cheaper production, increased online competition means lower consumer prices at least in theory (digital markets gravitate toward dominant players). Cheaper production and lower prices are of course great, but they don’t add to the economy – they can make room for investment and new opportunity, but that does not appear automagically. Owners and managers can choose to enjoy better profits rather than investing in new business.

Parallel to the Digital Single Market policies is a debate about automation and robots. Does automation kill jobs? If so, what to do? This is the flipside of productivity increases and cheaper services: each job produces more, each consumer pays less. Fewer workers are needed. These are the concerns behind those 17 or 415 Billion Euros: the job market may change fundamentally with digital transformations. Bill Gates suggests a robot tax to pay for re-education of those workers. French presidential candidate Benoît Hamon wants “basic income” for all citizens. European Parliament debated a report on the issue, but chose not to take stand.

Should we tax the robots? Try to stop digitalization? Say no to productivity increases and cheaper services? Throw the towel on jobs and pay all Europeans to stay home and smoke e-cigarettes all day? Here’s another idea: why not make the Digital Single Market about growth and creating new jobs? Three ingredients are needed: investment capital, education and functioning digital markets.

Investment first, interest rates are low but investors are risk-averse. Silicon Valley based much of its success on the generous federal loan guarantees in the 1960s that gave 4(!) public dollars for each private dollar invested. EU investment funds are plentiful but difficult to access. Education second, EU has world-class educations by any standard. Take Bill Gates’ point about re-education and also add creative skills and it can be even better. Last but not least, digital markets: curb the niche monopolies that grow from the winner-take-all online economies, not only with competition cases but also upstream regulation. And make sure intellectual property rights are protected online: the output from tomorrow’s jobs will be immaterial, intellectual property is the key to the digital economy.

This is Netopia’s newsletter of March 9 2017