Elon Musk is a visionary. He thinks he will build a spaceship to take rich people to Mars, and make a profit. He also thinks he will produce an electric car he can sell at a profit.
Along with these visions, he has a vision for a universal federal welfare scheme that will pay the vast majority of Americans a comfortable living because robots will have taken their jobs.
There is a pretty good chance we end up with a universal basic income, or something like that, due to automation. “I am not sure what else one would do. I think that is what would happen.
How good a chance is “pretty good”? I would rate this chance at about the chance of winning the next state-run lottery for $300 million, with 10,000 people buying one ticket each and then dividing the payout. It sounds reasonable until you look at the figures.
He is not alone in this suggestion. But the question arises: “Who will pay for this historically unprecedented permanent transfer of wealth?” How much? From whom to whom?
Robots do not pay taxes. So, revenues from income taxes and Social Security and Medicare taxes will fall.
What about corporations that use robots? Let’s look at the main one: Amazon. Amazon bought the main supplier of warehouse robots, Kiva Systems, in 2012. It no longer sells them. It employs 100% of Kiva’s output.
So, will the government tax Amazon? No. Why not? Because Amazon never makes a profit. It is corporate strategy to avoid profits. It never pays dividends. It never pays corporate income taxes. Its market share grows.
The people who say that there must be a permanent wage for non-working Americans do not understand the rudiments of economic theory. The free market system is consumer driven. Consumers own the most marketable commodity: money. Businesses compete to get access to this money: purchases. Businesses must constantly cut prices and increase quality. If one business makes a profit after the payment of all expenses, the others imitate this success. Profit margins then shrink.
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