Snapshot
What Martin Ford predicts in his book, The Rise of the Robots, about the state of jobs in the future is far from bright. Are jobs getting away from us?
Winner of the FT & McKinsey & Company Business Book of the Year 2015 Award, Martin Ford’s The Rise of the Robots: Technology and the Threat of Mass Unemployment (2015) talks about how businesses are automating jobs in large numbers, causing unemployment in the millions. Another book deals with the same theme: the ebook Race Against the Machine (2011), written by professors Erik Brynjolfsson and Andrew McAfee of Massachusetts Institute of Technology.
Brynjolfsson and McAfee narrate the story of the inventor of chess.
On inventing chess, the inventor shows his creation to the emperor. The emperor, pleased with the game, asks him to name his reward. The clever inventor asks for one grain of rice for the first square of the chessboard, two grains for the second, four for the third and so on, with each square receiving twice as many grains as the previous square.
The emperor underestimates the size of the reward and agrees to it. The constant doubling results in very large numbers and, at the 64th square, the clever inventor stands to receive a pile of rice much bigger than Mount Everest – much more rice than ever existed on the planet.
Brynjolfsson and McAfee make the point that up to the 32nd square, the quantity of rice is not very large; at the 32nd square, the inventor stands to receive about four billion grains of rice, a reasonable number.
It is when they proceed to the second half of the chessboard that the compounding yields devastatingly large numbers. Brynjolfsson and McAfee use this chessboard scenario as an analogy to explain what’s happening with technology and jobs today.
The authors tell us that we are seeing a constant doubling in the technology domain.
Moore’s law predicts a doubling of computing power every 18 to 24 months. Are we in the second half of the chessboard yet?
More than 32 doublings have taken place since the computer was introduced in the 1950s, and Moore’s law still holds valid. This persistent doubling has resulted in some drastic changes to both society and business.
In the United States, in the first decade of the twenty-first century, the net job growth rate has been zero. Zilch.
This is not only because of the 2008 crisis, but also because several jobs are getting automated by technology and robots. In spite of this (towards the end of their ebook), Brynjolfsson and McAfee see an optimistic future where people will work harmoniously in tandem with robots, and the world will continue to hum along.
In The Rise of the Robots: Technology and the Threat of Mass Unemployment, Ford takes a more pessimistic view. Ford writes:
In general, computers are becoming very proficient at acquiring skills, especially when a large amount of training data is available. Entry-level jobs, in particular, are likely to be heavily affected, and there is evidence that this may already be occurring. Wages for new university graduates have actually been declining over the past decade, while up to 50 percent of new graduates are forced to take jobs that do not require a degree.
In the beginning of the Industrial Age, there were many cotton workers who lost their jobs due to automation of cotton spinning. But other sectors flourished, and many cotton workers secured employment elsewhere.
Now, we are seeing automation in virtually every sector and it raises the spectre of mass unemployment across sectors. The world, according to Ford, may be controlled by an elite minority who own automated industries – and inequality will be high and widespread.
Ford is an expert at tackling the technology part – he covers things like nanotechnology and 3D printing and deep learning – and he is no less adept at economics. He asks what the government can do when faced with the threat of mass unemployment.
We need a paradigm shift in economics, he says. Citing Austrian economist Friedrich Hayek, he recommends the provision of a basic, or guaranteed, income which would help people survive in times of adversity without killing off ambition or aspirations.
What does the future bode for us: the Pollyannaish picture painted by Brynjolfsson and McAfee, or the dismal doom depicted in Ford’s book? This is an important question since the outcome is going to affect us and our children
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.