The East Bay’s Premier Magazine of Culture & Commerce

The East Bay’s Premier Magazine of Culture & Commerce

Econ 2011

Econ 2011

Silicon Valley maverick Martin Ford on the new job-free lifestyle.

As we stumble into 2011 with unemployment hovering near 10 percent (and that’s just for the folks who haven’t completely given up looking for work), it’s hard to imagine that things are going to get a whole lot better anytime soon. The reason? Well, according to Martin Ford, a Silicon Valley software developer and author of The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future (W. Sheridan, 2009), the culprit is automation. And many jobs, he says, are just plain not coming back. Ford, who also writes for The Huffington Post and his own blog, says even highly skilled jobs in the medical field will eventually be done by robots. (“Paging Dr. Cyborg!”) So should we all just crawl into a big heap on the floor and mope? According to Ford, no. As I found out in a recent high-tech phone call, he has a solution to our economic woes. And while the Fordian formulation is probably not destined to become a plank in the Tea Party platform, it just might put some greenbacks back in our pockets.

Paul Kilduff: Delivering pizzas? Is that the only safe job out there?

Martin Ford: It’s a difficult problem. I think that what we see now, part of it is due to automation and technology. My primary concern is the future, and I’m worried about what’s going to be happening in the next 10 years, so it’s more of the long-term concern. The issue is that if things remain kind of stagnant, during the time when everyone is waiting for the job market to recover, technology is going to continue to advance, and we know that it’s advancing exponentially. It basically kind of like doubles every two years. So that means that there are things that are going to happen a lot faster than we expect. So in the longer run, I think it may be a very serious problem. In the shorter run, in terms of the economy turning around, in the next few months, it’s very difficult to predict. But I do think that this whole automation issue is certainly important and it’s especially important in the mid-range jobs. What we see right now is that the jobs in the middle are disappearing because they can be automated, and those were the jobs that used to be there for a lot of people. Jobs that were pretty solid, that were basically repetitive but which required a fair amount of skills, those are kind of disappearing. And what we have now are jobs right at the bottom, which are like the service jobs, working at McDonald’s or Wal-Mart or whatever, which basically haven’t been automated because it’s not affordable to do it yet. And then we have the really top-end jobs, which require lots and lots of training. But ultimately both of those areas are going to be impacted by automation, too, if not off-shoring. In the long run, we’ll have to come up with some alternatives to the old idea that people have to work to generate their whole income and survive in society. There’s going to have to be some alternative to that to at least help people’s incomes.

PK: What are you getting at? Communism? Social democracy?

MF: Well, I believe we’re going to have to basically tweak capitalism. I’m not in favor of moving to socialism but I think we’re going to have to make some changes to capitalism. I think we’re probably going to have to supplement people’s incomes directly. And that’s an idea that has been around for a long time. There’s an idea called the basic guaranteed income, which basically means that everyone would be entitled to an income, kind of like social security, collected from taxes and redirected to people.

PK: So we become like England, everybody’s on the dole?

MF: Well, even in England, they don’t have that. But this is something that sounds very radical in today’s terms, but hasn’t always been quite that radical. For instance, Milton Friedman, who was a very conservative, free market economist, was in favor of what’s called the negative income tax, which is basically the same sort of idea. It means that people who had lower incomes would receive a negative income tax. They get paid as opposed to having to pay into the system. Actually, Richard Nixon, who was a Republican president, had a proposal on the table at one time for a type of guaranteed income. In the past, it’s been directed only at people who are poor, basically. But I think it’s quite possible in the future it may become something that perhaps most people are going to have to rely on at some point. That may be far in the future. That may be 20, 30, 40 years from now. I don’t know. But I think eventually, we probably will get to that point.

PK: I’d like to see it in about six months, man.

MF: I honestly think that it would be helpful in today’s environment if we could come up with something like that. Because the problem we have right now is basically a lack of demand. And people aren’t spending because they’re afraid, right?

PK: Right.

MF: They’re afraid they’re going to lose their jobs; they have lost their jobs. Even if they have a job, they don’t know what’s going to happen five years from now. What’s going to happen when their kids look for jobs? Are there going to be jobs for their kids? Are they going to end up with their kids living at home for the next 10 to 20 years? People are worried about things.

PK: When you talk about a guaranteed income, do you have any idea about how much money you’re talking about annually? Twenty, thirty, forty thousand?

MF: I would think at a minimum, if you started giving everyone $10,000 as a supplement, that would be helpful. Ultimately, I think it would have to be more than that. In my book, The Lights in the Tunnel, what I suggested is that the amount of money you get shouldn’t be actually the same for everyone, but it should vary based on incentives. For example, if you pursue more education then you should actually get paid more for that.

PK: Okay.

MF: The reason for that is that if ultimately jobs are going to go away, or jobs are going to be a less important part of people’s income, we need to maintain an incentive for people to do things like pursue education. Otherwise, they’re going to play video games all day and our whole society in the long run will fall apart.

PK: Aren’t people doing that already, Martin?

MF: Yeah, to some extent, I think they are. My kids are, I know that.

PK: What’s our tax rate going to look like if we establish this kind of a program?

MF: One thing I believe really strongly is that we need to return to a more progressive tax rate. So the solution to this is not to just raise taxes on everyone, but you’re going to have to have a higher rate on higher incomes. This is something that we used to have during the Eisenhower administration. For the wealthiest people, which in today’s terms would be people who are making millions of dollars per year, the top marginal tax rate was 90 percent. So in other words, Uncle Sam was coming for 90 cents on the dollar for the people with the very, very highest incomes. That was in 1950, when we were at the height of war and industrial power. You remember the thing about what’s good for General Motors is good for the United States?

PK: Right.

MF: That was then. I mean, that was when we were at our pinnacle, okay? So people who argue today that if you raise taxes, it’s going to destroy business, that it’s going to destroy corporations, the history shows very clearly that that was not the case.

PK: Where do you think this not wanting to pay taxes thing came from? I don’t know that many really wealthy people, but I know some people that are doing okay, and they don’t seem to be crying that much about paying taxes. I don’t know if they want to pay 90 percent taxes, but . . .

MF: Well, 90 percent, I mean, I’m not really advocating that. That’s high, and that was sort of the legacy of World War II. But, I mean, World War II was a situation where we needed to come up with the money, and everyone sort of pulled together, right? And we had these progressive tax rates. And today, we’re in a somewhat similar situation. The government right now is on a deficit that looks very much like it was in World War II. But obviously, as a country, we’re not all together in the same way. I think that the whole thing about low taxes started with Ronald Reagan. He basically flattened the tax code so that we’re at the top marginal rate. Remember, when we talk about the top rate, we’re only applying that rate to, like, the last dollar that is owned by wealthy people. We’re not taking 90 percent of all of their money. We’re taking 90 percent of what they earned above a certain very high threshold. I think a lot of them don’t quite understand that about being progressive.

PK: Yeah, they’re not taking 90 percent of your money.

MF: We’re not impoverishing them. We’re taking extra from people that are really earning a lot.

PK: The theory of trickle down—that just never happened. I mean, basically, you give some rich guy a big tax break, they’re just going to buy another yacht, right?

MF: There’s an argument that if you cut taxes on the rich people, they have more money and they will invest that money. And if they invest that money in the United States—which, back at the time when Reagan was president in 1980, was perhaps likely—then it will in fact create jobs. But now we have several things going on. We’ve got globalization, which means that if a wealthy person’s going to actually invest the money in something productive, they may well choose to do it in China rather than the United States. The next thing is that we’ve got all these weird financial products now, derivatives and hedge funds and all that stuff. And all of that is very attractive to these people, so they have a tendency to put it into that kind of casino-type investment, rather than in something that’s going to result in a factory getting built to employ people. And the other thing you have happening is what I’m talking about, which is that technology is basically eliminating jobs, or making it much harder to create jobs. And so when you cut taxes on the wealthy, whatever they do with that money, it doesn’t necessarily create jobs anymore. Certainly not here in the United States. And so trickle down can’t work, because if you think about it, the only possible way for money to trickle down from the wealthy people to the rest of us is through jobs, right? Because that’s where the vast majority of people get their income. If, in fact, jobs are not getting created then it [trickle down] clearly is not going to work. It’d be much, much better to get more money into the hands of all the regular people, because those people are going to go right out and spend it right away. They have to. They don’t have a choice. That’s what’s really going to drive the economy and raise GDP [gross domestic product], and that’s going to raise our tax revenues, right? So if people start spending again, [and] the whole thing starts moving, then [the] government will start collecting more revenues. And that will get us out of the problems that we’re having. That would be a much better and much more effective way to do it than all the austerity stuff, which is saying the government needs to cut spending—don’t renew unemployment benefits; cut money for colleges, schools. All this kind of stuff. That’s really just sending us into a death spiral because it’s going to make everything worse.

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Martin Ford Vital Stats

Age: 47

Birthplace: Redding, England

Astrological sign: Aquarius

When Grows Up Wants to Be: Mature

American Idol: Franklin Roosevelt

Blogsite: econfuture.wordpress.com

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