Donald Trump needs to be ready for rise of the machines

The upside of the Trump win is what the markets have chosen to focus on since Wednesday: public spending and tax cuts.

Robots taking human jobs is a big threat to US employment. Picture: AFP

The first four of Donald Trump’s “seven actions to protect American workers” involve some form of protectionism: get out of the TPP, renegotiate NAFTA, label China a currency manipulator and end all foreign trading abuses.

Separately, he plans to legislate an “End to Offshoring Act”, which would whack tariffs on US companies that make their products overseas and ship them back to the US.

All of which would — if they happened — represent a massive shake-up of the way the global economy is run, lead to lower growth and potentially bring the world’s two most powerful economies into dangerous conflict.

That’s the downside of the Trump ascendancy, of course.

The upside is what the markets have chosen to focus on since Wednesday, which is public spending and tax cuts — fiscal stimulus.

As Winston Churchill is supposed to have said: generals always fight the previous war. Protectionism might have boosted employment 10 years ago, but now it’s more likely to provide jobs for American robots. Maybe that’s why, in his acceptance speech, Trump didn’t really talk about his trade plans — he focused on infrastructure to employ America’s displaced workers.

It’s certainly why the Silicon Valley entrepreneurs driving the automation revolution have been lining up all year to call for a “universal basic wage”: they know that the next backlash will be against automation, not globalisation, and that if something is not done about workers’ jobs and incomes the next wave of “protectionism” will be aimed at them.

Neither Donald Trump nor Hillary Clinton, nor Malcolm Turnbull for that matter, have been talking about this, but the subject has tentatively begun to enter politics. One of the early ­Republican candidates, Marco Rubio, had a kind of universal basic income in his tax plan last year, but of course it, and he, went nowhere.

The president of Silicon Valley’s largest start-up incubator, Y Combinator, Sam Altman, is pushing for a universal basic wage of $2000 a month. He has long been on a mission to guarantee a basic income because, as he says, the robot-run economy is on the way. A few months ago, he set up an experiment in Oakland, California, in which 100 people will get $2000 each month, no matter what.

Tesla CEO Elon Musk said recently that “there’s a pretty good chance we’ll end up with a universal basic income, or something like that, due to automation”.

Bond guru Bill Gross suggested it six months ago, while co-founder of Coursera and chief scientist at Baidu, Anthony Ng, tweeted recently: “More than ever, we need basic income to limit everyone’s downside, and better education to give everyone an upside.”

What they all seem to be talking about, without actually saying so, is the dole — but higher, permanent and easier to get.

In the US, unemployment benefits are generally paid by the states, at $450 a week; after the American Recovery and Reinvestment Act passed during the GFC in February 2009, the dole lasts for 99 weeks, instead of the previous 26 weeks. After those nearly two years, you’re on your own.

The entrepreneurs who are suggesting a universal basic income are not offering to pay for it, of course, but they will have to, if it happens.

At the moment, though, taxes are going the other way — down. Trump is proposing to offer a kind of tax amnesty for corporate profits held offshore, which might produce a big one-off boost to revenue, but he has also promised to cut the business tax rate from 35 per cent to 15 per cent.

At the moment the dole is funded by the Federal Unemployment Tax, which is basically a national payroll tax, set at 6 per cent of taxable wages.

In the robot economy, payroll taxes will decline, since robots don’t get wages — along with company tax collections, if Trump gets his tax plan through.

But in much the same way that America now pays for looking after the unemployed by taxing the employed, the only way some kind of universal basic wage can be funded is by taxing robots.

Of course it might all turn out OK. As the proponents of the “she’ll be right” school of thinking about automation usually say: those displaced by the industrial revolution of the 19th century eventually found other jobs, and everyone ended up doing fine.

Except that I’ve read there was a lot of poverty, and people selling matches on street corners, in Victorian times.

The big difference is that the poor didn’t have the vote then.

The Luddites who tried in vain to stop the machines were quickly followed by the Chartists who agitated for universal suffrage, because in those days voting was confined to those who owned property.

Those movements evolved into trade unions, Karl Marx and eventually into the Russian Revolution. That was in Europe. Property qualifications for voting in the US were progressively abolished from 1792 to 1856; women weren’t given the vote until 1926.

Trumpism is a sort of successor to Luddism, Chartism and Marxism, except this time the disenfranchised have direct power at the ballot box — they just needed to harness it, and they did, shocking the property-owning elites.

The “previous war” that they are now fighting through president-elect Trump is globalisation and immigration, but he is already starting to move on to a sort of ­Depression-era infrastructure burst to lift employment in the knowledge that anti-trade bills won’t do much to lift employment in the age of automation.

That might work for a while, although a lot of the bulldozers will be driverless, but then what?