McKinsey Finds Automation Could Eradicate A Third Of America’s Workforce By 2030

On November 30, 2017, Dom Galeon of McKinsey & Company writes:

A new report by the McKinsey Global Institute suggests that 30 percent of jobs on Earth could be automated by 2030. The displaced human worker, numbering about 800 million, might find alternative jobs if the world is prepared.

A REALITY WE CAN’T IGNORE

By 2030, a little over ten years from now, as much as 30 percent of work done globally could be automated. This estimation is according to the latest report published by private sector think-tank McKinsey Global Institute (MGI) which assessed the effects of automation in various socioeconomic environments.

The new report, entitled “Jobs lost, jobs gained: Workforce transitions in a time of automation,” builds on previous MGI research published in January of 2017. It suggests that as many as 375 million human workers could end up shifting jobs or learning new skills as a result of intelligent automation. These numbers depend, of course, on how fast automation occurs.

The MGI researchers do agree that the jobs “most susceptible to automation include physical ones in predictable environments, such as operating machinery and preparing fast food,” according to a write-up on the latest report. “Collecting and processing data are two other categories of activities that increasingly can be done better and faster with machines. This could displace large amounts of labor—for instance, in mortgage origination, paralegal work, accounting, and back-office transaction processing.”

But, while MGI noted that automation wouldn’t affect countries in a uniform way, the total number of jobs lost all over the world could reach as many as 800 million. In short, job displacement due to intelligent automation is an inevitable reality, primarily driven by the economic benefits that result from labor efficiency when machines take over human jobs.

NOT THE END OF HUMAN LABOR

Previous predictions have estimated very similar numbers to the MGI report about the effects of automation in the next five, ten, or even fifteen years. But, where experts differ in opinion is on how best to move forward. According to MGI, automation would eventually give rise to newer jobs, depending on the specific circumstances of particular nations.

The report puts it this way:

“Our findings suggest that several trends that may serve as catalysts of future labor demand could create demand for millions of jobs by 2030. These trends include caring for others in aging societies, raising energy efficiency and meeting climate challenges, producing goods and services for the expanding consuming class, especially in developing countries, not to mention the investment in technology, infrastructure, and buildings needed in all countries. Taken from another angle, we also find that a growing and dynamic economy—in part fueled by technology itself and its contributions to productivity—would create jobs.”

Some experts, including Google chief engineer and singularity enthusiast Ray Kurzweil, have expressed similar optimism. According to this line of thinking, there will be new jobs ahead, although we might not know what these are just yet. “These jobs would result from growth in current occupations due to demand and the creation of new types of occupations that may not have existed before, as has happened historically,” MGI’s experts wrote. “This job growth (jobs gained) could more than offset the jobs lost to automation.”

In this regard, one of the proposed ways to manage the effects of automation is education and the retraining of the human worker. In a recent speech, World Bank president Jim Yong Kim spoke about the need for investing in education to prepare for worldwide automation. In an article for WIRED, IBM’s Watson senior VP David Kenny even argued that the responsibility for this education and retraining falls squarely on the shoulders of companies, not just formal education systems.

Former Google China president Kai-Fu Lee also expressed the importance of retraining in order to help the displaced human worker adapt to relevant professions. But Lee isn’t so keen on universal basic income (UBI), which many — including economics Nobel laureates and tech billionaires like Virgin Group CEO Richard Branson and Tesla CEO and founder Elon Musk — have considered to be a potentially viable economic solution that could cushion the effects of unemployment due to automation.

At the same time, others are considering the possibility of compensating people for the data they provide companies as an alternative to UBI. There is also the suggestion that robots should be taxed in order to compensate the human worker whose job they took over.

At any rate, MGI’s report remains largely optimistic. While automation is inevitable, it doesn’t spell the end of the human worker. “History would suggest that such fears may be unfounded: over time, labor markets adjust to changes in demand for workers from technological disruptions, although at times with depressed real wages,” the report reads. How many jobs are left for humankind, however, will depend on how we prepare for the worldwide spread of automation.

McKinsey Finds Automation Could Eradicate a Third of America’s Workforce by 2030

 

The Republican Tax Bill Is A Moral Abomination

On November 29, 2017, Senator Bernie Sanders writes:

For the past 40 years, the financial and political elite of this country have rigged the tax code to redistribute wealth and income to some of the richest and most powerful people in this country. The result: we are moving rapidly toward an oligarchic form of society in which the top 1 percent is doing phenomenally well, the middle class continues to decline and 40 million Americans are living in poverty.

And it will probably not surprise you to learn that just as our tax code benefits the wealthiest people in this country, it also benefits some of the largest and most profitable corporations in the world with a myriad of tax breaks, deductions, credits and other loopholes. As a result, one out of five large profitable corporations today pays nothing in federal taxes.

The current Republican “tax cut” bill, paid for by the Koch brothers and other billionaire campaign contributors, continues the push to make the rich richer at the expense of everyone else. It would raise taxes on middle class families making $75,000 a year or less and would throw 13 million Americans off of health insurance. And it would do all of these things to provide permanent tax cuts to the wealthiest Americans and profitable corporations that ship American jobs to China while moving their American profits to the Cayman Islands.

But let’s be clear. This legislation goes well beyond taxes. Its ultimate goal is to radically transform American society and the role that government plays in the lives of the working families of our country. This legislation will increase the deficit by at least $1.5 trillion over ten years. Mark my words. If passed, the Republicans will then rediscover the “deficit crisis,” and push aggressively for massive cuts in Social Security, Medicare, Medicaid, education – higher education in particular – nutrition, affordable housing and more. They will seek to undo every major piece of legislation passed in the last 80 years designed to help working families, the elderly, the children, the sick and the poor.

This is the Republican plan. Huge tax breaks for the rich and powerful. Massive cuts to life and death programs for the middle class and working families of our country.

This is not moral. This is not what the American people want. This is not what our country and our pledge for “liberty and justice for all” is supposed to be about.

That is why I am going on the road this week to talk directly to working people in Kentucky, Ohio, and Pennsylvania about this disastrous piece of legislation. If we stand together – black, white, Latino, Asian American, Native American, male and female, young and old, gay and straight – we can defeat this horrific bill. But I need you to make your voice heard as well. We need to stand together.

Please sign my petition calling on Congress to REJECT the Republican “tax cut” plan that would take from the working families in this country to give a massive tax break to people and corporations who already are doing extremely well. At a time of grotesque levels of income and wealth inequality, we must not make a bad situation even worse.

Today in America, more than 40 million Americans, including 20 percent of all children, live in poverty. Many in extreme poverty. Almost 28 million Americans have no health insurance. Millions of bright kids can’t afford to go to college without facing a lifetime of debt. Seniors and disabled veterans are struggling to stay alive on inadequate Social Security checks.

Despite all of that pain, the greed of the billionaire class in this country knows no limits. No. We will not allow them to take away from those in need in order to give a trillion dollars in tax breaks to the very rich.

Here’s a radical idea for my colleagues in the Republican Party: instead of just listening to the rich and powerful few in this country, maybe just maybe Congress should listen to the majority of the American people who want a fair tax system.

Maybe just maybe corporate tax reform should start by preventing profitable companies from sheltering profits in tax haven countries like the Cayman Islands.

Here is something you may not know:

A 2008 Government Accountability Office report found that 83 of the Fortune 100 companies use at least one offshore tax scheme to lower their taxes. A 2016 study found that one of every five large, profitable corporations paid no federal income taxes at all in 2012.

The practice of stashing profits in places like the Cayman Islands has become so absurd that one single, five-story office building there is now the official legal “home” to more than 18,000 corporations! Our tax code has essentially legalized tax dodging for large corporations.

We must stop this bill. We must stop the Republicans from moving this country into an oligarchy.

And that starts with all of us standing up, fighting back and making our voices heard. Three weeks ago progressives from coast to coast ran for office at the local and state level – and they won. We have to continue that progress and build on that momentum.

Please sign my petition calling on Congress to REJECT the Republican “tax cut” plan that would take from working families in this country all to give a massive tax break to people and corporations who already have it all.

Brothers and sisters. We must do exactly the opposite of what Trump is attempting to do. He wants to divide us up by the color of our skin, our gender, our religion, our sexual orientation or our country of origin. He wants us fighting with each other while Wall Street and the billionaire class laugh all the way to the bank.

Our job is to bring our people together around an agenda that creates an economy and government that works for all, not just the 1 percent. Defeating this terrible piece of legislation will be an important step forward.

This bill is a moral abomination. I hope you’ll add your name if you agree.

 

 

It Started As A Tax Cut. Now It Could Change American Life.

A job fair in Atlanta in last year. While Republicans promote their tax plan as a way to encourage job growth and economic expansion, its constraints on state and local taxation could restrict spending on health care, education, transportation and social services. CreditBob Andres/Atlanta Journal-Constitution, via Associated Press

On November 29, 2017, Peter S. Goodman and Patricia Cohen write in The New York Times:

The tax plan has been marketed by President Trump and Republican leaders as a straightforward if enormous rebate for the masses, a $1.5 trillion package of cuts to spur hiring and economic growth. But as the billhas been rushed through Congress with scant debate, its far broader ramifications have come into focus, revealing a catchall legislative creation that could reshape major areas of American life, from education to health care.

Some of this re-engineering is straight out of the traditional Republican playbook. Corporate taxes, along with those on wealthy Americans, would be slashed on the presumption that when people in penthouses get relief, the benefits flow down to basement tenements.

Some measures are barely connected to the realm of taxation, such as the lifting of a 1954 ban on political activism by churches and the conferring of a new legal right for fetuses in the House bill — both on the wish list of the evangelical right.

With a potentially far-reaching dimension, elements in both the House and Senate bills could constrain the ability of states and local governments to levy their own taxes, pressuring them to limit spending on health care, education, public transportation and social services. In their longstanding battle to shrink government, Republicans have found in the tax bill a vehicle to broaden the fight beyond Washington.

The result is a behemoth piece of legislation that could widen American economic inequality while diminishing the power of local communities to marshal relief for vulnerable people — especially in high-tax states likeCalifornia and New York, which, not coincidentally, tend to vote Democratic.

All of this is taking shape at such extraordinary velocity, absent the usual analyses and hearings, that even the most savvy Washington lobbyist cannot be fully certain of the implications.

Mr. Trump and the Republican leadership in Congress — stymied in their efforts to repeal Obamacare, and short of legislative achievements — have signaled absolute resolve to get a tax bill passed by the end of the year. As the sense has taken hold that Washington is now a trading floor where any deal is worth entertaining so long as it brings votes, interest groups have fixed on the tax bill as a unique opportunity to further their agendas.

“There’s a Christmas-tree aspect to the bill,” said C. Eugene Steuerle, a Treasury official during the Reagan administration and now a senior fellow at the Urban Institute. As an example, he cited the provisions in the House bill designed to appeal to the religious right.

“People want to add certain things, and if they don’t cost a lot, it’s a way to buy in agreement,” Mr. Steuerle said.

Economists and tax experts are overwhelmingly skeptical that the bills in the House and Senate can generate meaningful job growth and economic expansion. Many view the legislation not as a product of genuine deliberation, but as a transfer of wealth to corporations and affluent individuals — both generous purveyors of campaign contributions. By 2027, people making $40,000 to $50,000 would pay a combined $5.3 billion more in taxes, while the group earning $1 million or more would get a $5.8 billion cut, according to the Joint Committee on Taxation and the Congressional Budget Office.

“When you put all these pieces together, what you’re left with is we are squandering a giant sum of money,” said Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation who teaches law at the University of Southern California. “It’s not aimed at growth. It is not aimed at the middle class. It is at every turn carefully engineered to deliver a kiss to the donor class.”

In a recent University of Chicago survey of 38 prominent economists across the ideological spectrum, only one said the proposed tax cuts would yield substantial economic growth. Unanimously, the economists said the tax cuts would add to the long-term federal debt burden, now estimated at more than $20 trillion.

If the package does have a guiding philosophy, it is a return to trickle-down economics, an enduring story line in which the wealthy are supposed to spend and invest their tax breaks, creating jobs and commercial opportunities for everyone else.

As President Ronald Reagan slashed taxes in the 1980s, he argued that citizens, not bureaucrats, should decide how to spend their money. President George W. Bush bestowed enormous tax cuts on the affluent.

But the trickle-down story has yet to achieve its promised happy ending. Only the beginning reliably transpires, the part where wealthy people get relief. The spoils of resulting economic growth have largely been monopolized by those with the highest incomes. Pay for most American workers has been stagnant since the mid-1970s, after the rising costs of housing, health care and other basics are factored in.

Nonetheless, Republicans are staging a trickle-down revival.

“Either it’s a religious belief, a belief where no amount of evidence would change that, or they are using the argument cynically and they just want more money for themselves,” the economist Joseph E. Stiglitz, a Nobel laureate, said.

Mr. Stiglitz has long warned of the perils of growing inequality while deriding tax-cutting inclinations. Yet even those who have favored lighter tax burdens are critical of the current proposals.

In the late 1970s, Bruce Bartlett developed what would become the locus of the Reagan tax cuts while working for Representative Jack Kemp, a conservative Republican from New York. Those cuts helped cushion the pain from sharp increases in interest rates by the Federal Reserve, Mr. Bartlett maintains. But Reagan was lowering the highest tax rate on individuals from 70 percent down to 28 percent by 1986.

“What they have here is a big tax cut for the rich paid for with random increases in taxes for various constituencies,” Mr. Bartlett said. “It’s ridiculous. And it’s telling that they are ramming this through without any debate. All of the empirical evidence goes against the tax cut.”

The meat of the package is a permanent lowering of the corporate tax rate, to 20 percent from 35 percent, which business leaders have long wanted. Proponents assert that this would prompt multinational companies to expand operations in the United States.

“We’ve been bleeding corporate headquarters and production for a long time,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and now president of the American Action Forum, a nonprofit that promotes smaller government.

But recent history suggests that when corporations get tax relief, they find abundant uses for money that do not involve paying higher wages. They give dividends to shareholders and stock options to executives. They stash earnings in tax havens.

In 2004, Congress invited American corporations to bring home overseas earnings at a sharply reduced rate, pitching it as a means of bolstering investment. But the corporations spent as much as 90 percent of their windfall buying back their shares, according to Bureau of Economic Analysis research.

If Congress bestows fresh relief on major businesses, signs suggest a similar result. Many companies are enjoying record profits. Those in the Fortune 500 had $2.6 trillion salted away overseas as of last year.

“In our boardroom, the number-one thing we’re talking about is not taxes,” said Jeremy Stoppelman, chief executive of Yelp, the online review platform. “Having a strong middle class out there spending money is what’s most important for our business.”

If the tax bill widens inequality, local communities will likely find themselves with fewer resources to aim at helping struggling people.

A key feature of the Senate bill is the elimination of a federal deduction for state and local taxes. Conservative groups like the Heritage Foundation and American Legislative Exchange Council have sought to end the deduction as a means of reining in government spending.

In high-tax states like California, New York, New Jersey and Connecticut — where electorates have historically shown a willingness to finance ample safety-net programs — the measure could change the political calculus. It would magnify the costs to taxpayers, pressuring states to stay lean or risk the wrath of voters.

Some see in this tilt a reworking of basic principles that have prevailed in American life for generations.

Since the 1930s, when President Franklin D. Roosevelt created Social Security, unemployment benefits and other pillars of the safety net to combat the Great Depression, crises have been tempered by some measure of government support. Recent decades have brought cuts to social services, but the impact of the current bill could be especially consequential.

“This is a repudiation of the social contract that Franklin Roosevelt announced at the New Deal,” Joseph J. Ellis, a Pulitzer Prize-winning American historian, said of trimming benefits for lower- and middle-income families to finance bigger rewards for the wealthy. Health coverage would shrink under the Republican plan while multimillion-dollar estateswould not have to pay a penny in taxes.

The tax cut package, for instance, could trigger rules mandating cuts to Medicare, the government health care program for seniors, the Congressional Budget Office warned. Some 13 million people could lose health care via the elimination of a key plank of Obamacare. Insurance premiums are also expected to rise by 10 percent.

“This tax bill is a grand deception,” said Arnold Hiatt, the former chief executive of Stride Rite, which makes children’s shoes. “It hurts the most vulnerable, and hurts health care and education, which are essential for a healthy economy.”

The proposals break from seven decades’ worth of federal efforts to broaden access to higher education.

Since World War II, the guiding sense has been that “it is government’s responsibility to provide higher education for all those who can benefit from it,” said David Nasaw, a historian at the Graduate Center of the City University of New York. That idea was behind the G.I. Bill, which helped generations of veterans pay for college and training.

The House or Senate bill includes provisions ending the deductibility of tuition waivers for graduate students, repealing the deduction for interest paid on student loans and taxing university endowments.

The endowment tax, in particular, threatens the ability of low-income students to pursue college and graduate studies, said Ron Haskins, a senior fellow at the Brookings Institution. Proceeds from endowments subsidize students from lower-income families, while allowing students across the board to graduate with less debt.

“When the time of reckoning comes to fix huge deficits, social safety-net programs will be first on the chopping block,” Julian E. Zelizer, a professor of history and public affairs at Princeton University, said.

“It’s very far-reaching,” he added, “but there hasn’t been much of a debate.”

America Is Regressing Into A Developing Nation For Most People

On April 20,2017, Lynn Paramore writes on Institute for New Economic Thinking:

A new book by economist Peter Temin finds that the U.S. is no longer one country, but dividing into two separate economic and political worlds

You’ve probably heard the news that the celebrated post-WW II beating heart of America known as the middle class has gone from “burdened,” to “squeezed” to “dying.”  But you might have heard less about what exactly is emerging in its place.

In a new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Peter Temin, Professor Emeritus of Economics at MIT, draws a portrait of the new reality in a way that is frighteningly, indelibly clear:  America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates.

Two roads diverged

In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, and count themselves as lucky to be Americans.

The FTE citizens rarely visit the country where the other 80 percent of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to. They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon.

The two sectors, notes Temin, have entirely distinct financial systems, residential situations, and educational opportunities. Quite different things happen when they get sick, or when they interact with the law. They move independently of each other. Only one path exists by which the citizens of the low-wage country can enter the affluent one, and that path is fraught with obstacles. Most have no way out.

The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression,and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S.

The result is profoundly disturbing.

In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.

In the developing countries Lewis studied, people try to move from the low-wage sector to the affluent sector by transplanting from rural areas to the city to get a job. Occasionally it works; often it doesn’t. Temin says that today in the U.S., the ticket out is education, which is difficult for two reasons: you have to spend money over a long period of time, and the FTE sector is making those expenditures more and more costly by defunding public schools and making policies that increase student debt burdens.

Getting a good education, Temin observes, isn’t just about a college degree. It has to begin in early childhood, and you need parents who can afford to spend time and resources all along the long journey. If you aspire to college and your family can’t make transfers of money to you on the way, well, good luck to you. Even with a diploma, you will likely find that high-paying jobs come from networks of peers and relatives. Social capital, as well as economic capital, is critical, but because of America’s long history of racism and the obstacles it has created for accumulating both kinds of capital, black graduates often can only find jobs in education, social work, and government instead of higher-paying professional jobs like technology or finance— something most white people are not really aware of. Women are also held back by a long history of sexism and the burdens — made increasingly heavy — of making greater contributions to the unpaid care economy and lack of access to crucial healthcare.

How did we get this way?

What happened to America’s middle class, which rose triumphantly in the post-World War II years, buoyed by the GI bill, the victories of labor unions, and programs that gave the great mass of workers and their families health and pension benefits that provided security?

The dual economy didn’t happen overnight, says Temin. The story started just a couple of years after the ’67 Summer of Love. Around 1970, the productivity of workers began to get divided from their wages. Corporate attorney and later Supreme Court Justice Lewis Powell galvanized the business community to lobby vigorously for its interests. Johnson’s War on Poverty was replaced by Nixon’s War on Drugs, which sectioned off many members of the low-wage sector, disproportionately black, into prisons. Politicians increasingly influenced by the FTE sector turned from public-spirited universalism to free-market individualism. As money-driven politics accelerated (a phenomenon explained by the Investment Theory of Politics, as Temin explains), leaders of the FTE sector became increasingly emboldened to ignore the needs of members of the low-wage sector, or even to actively work against them.

America’s underlying racism has a continuing distorting impact. A majority of the low-wage sector is white, with blacks and Latinos making up the other part, but politicians learned to talk as if the low-wage sector is mostly black because it allowed them to appeal to racial prejudice, which is useful in maintaining support for the structure of the dual economy — and hurting everyone in the low-wage sector.  Temin notes that “the desire to preserve the inferior status of blacks has motivated policies against all members of the low-wage sector.”

Temin points out that the presidential race of 2016 both revealed and amplified the anger of the low-wage sector at this increasing imbalance. Low-wage whites who had been largely invisible in public policy until recently came out of their quiet despair to be heard. Unfortunately, present trends are not only continuing, but also accelerating their problems, freezing the dual economy into place.

What can we do?

We’ve been digging ourselves into a hole for over forty years, but Temin says that we know how to stop digging. If we spent more on domestic rather than military activities, then the middle class would not vanish as quickly. The effects of technological change and globalization could be altered by political actions. We could restore and expand education, shifting resources from policies like mass incarceration to improving the human and social capital of all Americans. We could upgrade infrastructure, forgive mortgage and educational debt in the low-wage sector, reject the notion that private entities should replace democratic government in directing society, and focus on embracing an integrated American population. We could tax not only the income of the rich, but also their capital.

The cost of not doing these things, Temin warns, is incalculably high, and even the rich will end up paying for it:

“Look at the movie,Hidden Figures: It recounts a very dramatic story about three African American women condemned to have a life of not being paid very well teaching in black colleges, and yet their fates changed when they were tapped by NASA to contribute to space exploration. Today we are losing the ability to find people like that. We have a structure that predetermines winners and losers. We are not getting the benefits of all the people who could contribute to the growth of the economy, to advances in medicine or science which could improve the quality of life for everyone — including some of the rich people.”

Along with Thomas Piketty, whose Capital in the Twenty-First Century examines historical and modern inequality, Temin’s book has provided a giant red flag, illustrating a trajectory that will continue to accelerate as long as the 20 percent in the FTE sector are permitted to operate a country within America’s borders solely for themselves at the expense of the majority. Without a robust middle class, America is not only reverting to developing-country status, it is increasingly ripe for serious social turmoil that has not been seen in generations.

A dual economy has separated America from the idea of what most of us thought the country was meant to be.

https://www.ineteconomics.org/perspectives/blog/america-is-regressing-into-a-developing-nation-for-most-people

 

A Republican Tax Plan Built For Plutocrats

On November 21, 2017, Martin Wolf writes on Financial Times:

How does a political party dedicated to the material interests of the top 0.1 per cent of the income distribution win and hold power in a universal suffrage democracy? That is the challenge confronting the Republican party. The answer it has found is “pluto-populism”. This is a politically successful, but dangerous, strategy. It has brought Donald Trump to the presidency. His failure might bring someone more dangerous, more determined, to power. This matters to the US and, given its power, to the wider world.

The tax bills going through Congress demonstrate the party’s primary objectives. According to the Center on Budget and Policy Priorities, in the House version of the bill, about 45 per cent of the tax reductions in 2027 would go to households with incomes above $500,000 (fewer than 1 per cent of filers) and 38 per cent to households with incomes over $1m (about 0.3 per cent of filers). In the more cautious Senate version, households with incomes below $75,000 would be worse off. This simply is reform for plutocrats. (See charts.)

That is far from all. The bill might also increase the cumulative fiscal deficit by about $1.5tn over the coming decade. Yet, according to the independent and respected Congressional Budget Office, the US fiscal position is already on a deteriorating path, with spending forecast to rise from 21 per cent of gross domestic product in 2017 to 25 per cent in 2028-37. The planned tax cuts would worsen the pressure to cut spending. The outcome desired by the Republicans is to slash spending on nearly all of the non-defence discretionary spending of the federal government, plus its spending on health and social security.

In all, then, this is a determined effort to shift resources from the bottom, middle and even upper middle of the US income distribution towards the very top, combined with big increases in economic insecurity for the great majority.

How, one must ask, has a party with such objectives successfully gained power? In all, we can see three mutually supportive answers to this question.

The first approach is to find intellectuals who argue that everybody will benefit from policies ostensibly benefiting so few. Supply-side economics, with its narrow focus on tax cuts, has been the main theory employed, because it directly justifies tax cuts for the very wealthy. But it is untrue that the tax cuts of the Reagan era unleashed an upsurge in trend US economic growth. Since the economy is now nearing full employment, the benefits of fiscal stimulus would be especially small.

Supporters of the proposed cuts argue that the reductions in corporation tax will lead to a big rise in business investment. Here are two powerful pieces of contrary evidence: the share of post-tax profits in US GDP has already nearly doubled since the early 2000s, with no beneficial effect on the rate of investment; and the UK has progressively slashed its corporate tax rate from 30 to 19 per cent since 2008 with no identifiable benefit for investment. Lowering the corporate tax rate is merely a windfall for shareholders. If one wanted to raise investment, one would make it fully deductible from tax. The proposed repeal of the estate tax, which is of benefit only to the heirs of the largest 0.2 per cent of estates in the country, really gives the supply-side game away. Who wants to argue that people live longer if death is less taxed?

The second approach is to abuse the law. One way has been to give wealth the overriding role in politics it holds today. Another is to suppress the votes of people likely to vote against plutocratic interests, or even disenfranchise them.

The third approach is to foment cultural and ethnic splits. This is sometimes described as the “Southern strategy”, which shifted the old South from the Democrats to the Republicans, after the former enacted civil rights. Yet this is too limited a view of the strategy. More interesting is the echo of the antebellum South itself. The pre-civil war South was extremely unequal, not just in the population as a whole, which included the slaves, but even among free whites. A standard measure of inequality jumped by 70 per cent among whites between 1774 and 1860. As the academics Peter Lindert and Jeffrey Williamson note, “Any historian looking for the rise of a poor white underclass in the Old South will find it in this evidence.” The 1860 census also shows that the median wealth of the richest 1 per cent of Southerners was more than three times that of the richest 1 per cent of Northerners. Yet the South was also far less dynamic.

The South was a plutocracy. In the civil war, whose stated aim was defence of slavery, close to 300,000 Confederate soldiers died. A majority of these men had no slaves. Yet their racial and cultural fears justified the sacrifice. Ultimately, this mobilisation brought death or defeat upon them all. Nothing better reveals the political potency of tribalism.

A not dissimilar threat arises for today’s plutocrats. The economics and politics of pluto-populism have stoked cultural, ethnic and nationalist anger in the party’s base. Skilful demagogues are able to exploit this anger for their own purposes. At least Mr Trump remains a servant of the plutocracy. But his former adviser, Steve Bannon, seeks someone to promote rightwing populism shorn of its more blatantly plutocratic elements.

The plutocrats are riding on a hungry tiger. The pluto-populism of the Republican elite brought forth Mr Trump. This is not going to be forgotten. If the current tax bills get through, the tensions within the US are almost certain to get worse. Latin American inequality leads to Latin American politics. The US the world once knew is drowning in a tide of unconscionable and apparently unlimited greed. We are all now doomed to live with the unhappy consequences.

https://www.ft.com/content/e494f47e-ce1a-11e7-9dbb-291a884dd8c6

https://www.washingtonpost.com/news/wonk/wp/2017/11/22/37-of-38-economists-said-the-gop-tax-plans-would-grow-the-debt-the-38th-misread-the-question/?utm_term=.22d344e5ba42

Senate Passes Sweeping Tax Bill That Overwhelmingly Benefits the Wealthiest Americans

 

‘X’ Marks The Spot Where Inequality Took Root

On August 5, 2015, Stan Sorscher of the Economic Opportunity Institute writes:

In 2002, I heard an economist characterizing this figure as containing a valuable economic insight. He wasn’t sure what the insight was. I have my own answer.

The economist talked of the figure as a sort of treasure map, which would lead us to the insight. “X” marks the spot. Dig here.

The graphic below tells three stories.

First, we see two distinct historic periods since World War II. In the first period, workers shared the gains from productivity. In the later period, a generation of workers gained little, even as productivity continued to rise.

Figure 1: The X marks the spot where something happened.

Figure 1: The ‘X’ marks the spot where something happened in the mid-1970’s. (Click to embiggen)

The second message is the very abrupt transition from the post-war historic period to the current one. Something happened in the mid-70’s to de-couple wages from productivity gains.

The third message is that workers’ wages – accounting for inflation and all the lower prices from cheap imported goods – would be double what they are now, if workers still took their share of gains in productivity.

A second version of the figure is equally provocative.

Figure 2

Figure 2: Follow the money (or the lack of it).

This graphic shows the same distinct historic periods, and the same sharp break around 1975. Each colored line represents the growth in family income, relative to 1975, for different income percentiles. Pre-1975, families at all levels of income benefited proportionately. Post-1975, The top 5% did well, and we know the top 1% did very well. Gains from productivity were redistributed upward to the top income percentiles.

This de-coupling of wages from productivity has drawn a trillion dollars out of the labor share of GDP.

Economics does not explain what happened in the mid-70s.

It was not the oil shock. Not interest rates. Not the Fed, or monetary policy. Not robots, or the decline of the Soviet Union, or globalization, or the internet.

The sharp break in the mid-70’s marks a shift in our country’s values. Our moral, social, political and economic values changed in the mid-70’s.

Let’s go back before World War II to the Great Depression. Speculative unregulated policies ruined the economy. Capitalism was discredited. Powerful and wealthy elites feared the legitimate threat of Communism. The public demanded that government solve our problems.

The Depression and World War II defined that generation’s collective identity. Our national heroes were the millions of workers, soldiers, families and communities who sacrificed. We owed a national debt to those who had saved Democracy and restored prosperity. The New Deal policies reflected that national purpose, honoring a social safety net, increasing bargaining power for workers and bringing public interest into balance with corporate power.

In that period, the prevailing social contract said, “We all do better when we all do better.” My prosperity depends on your well-being. In that period of history, you were my co-worker, neighbor or customer. Opportunity and fairness drove the upward spiral (with some glaring exceptions). Work had dignity. Workers earned a share of the wealth they created. We built Detroit (for instance) by hard work and productivity.

Our popular media father-figures were Walter Cronkite, Chet Huntley, David Brinkley, and others, liberal and conservative, who were devoted to an America of opportunity and fair play.

The sudden change in the mid-70’s was not economic. First it was moral, then social, then political, ….. then economic.

In the mid-70’s, we traded in our post-World War II social contract for a new one, where “greed is good.” In the new moral narrative I can succeed at your expense. I will take a bigger piece of a smaller pie. Our new heroes are billionaires, hedge fund managers, and CEO’s.

In this narrative, they deserve more wealth so they can create more jobs, even as they lay off workers, close factories and invest new capital in low-wage countries. Their values and their interests come first in education, retirement security, and certainly in labor law.

We express these same distorted moral, social and political priorities in our trade policies. As bad as these priorities are for our domestic policies, they are worse if they define the way we manage globalization.

The key to the treasure buried in Figure 1 is power relationships. To understand what happened, ask, “Who has the power to take 93% of all new wealth and how did they get that power? The new moral and social values give legitimacy to policies that favor those at the top of our economy.

We give more bargaining power and influence to the wealthy, who already have plenty of both, while reducing bargaining power for workers. In this new narrative, workers and unions destroyed Detroit (for instance) by not lowering our living standards fast enough.

In the new moral view, anyone making “poor choices” is responsible for his or her own ruin. The unfortunate are seen as unworthy moochers and parasites. We disparage teachers, government workers, the long-term unemployed, and immigrants.

In this era, popular media figures are spiteful and divisive.

Our policies have made all workers feel contingent, at risk, and powerless. Millions of part-time workers must please their employer to get hours. Millions more in the gig economy work without benefits and have no job security at all. Recent college graduates carry so much debt that they cannot invest, take risk on a new career, or rock the boat. Millions of undocumented workers are completely powerless in the labor market, and subject to wage theft. They have negative power in the labor market!

We are creating a new American aristocracy, with less opportunity – less social mobility and weaker social cohesion than any other advanced country. We are falling behind in many measures of well-being.

The dysfunctions of our post-1970 moral, social, political and economic system make it incapable of dealing with climate change or inequality, arguably the two greatest challenges of our time. We are failing our children and the next generations.

X marks the spot. In this case, “X” is our choice of national values. We abandoned traditional American values that built a great and prosperous nation. Our power relationships are sour.

We can start rebuilding our social cohesion when we say all work has dignity. Workers earn a share of the wealth we create. We all do better, when we all do better. My prosperity depends on a prosperous community with opportunity and fairness.

‘X’ Marks the Spot Where Inequality Took Root: Dig Here

Gary Reber Comments:

Actually, in the first period since World War II, the contribution of labor was still the primary factor of production, while in the second period productivity gains were attributed to the non-human factor of production: capital (productive assets, including job-displacing physical and informational technologies, structures, land and other natural resources, patents and copyrights — or non-human “things” contributing to the production of marketable goods and services — an evolving system that puts things above most people).

Fundamentally, economic value is created through human and non-human contributions. NOTE, real physical productive capital isn’t money; it is measured in money (financial capital), but it is really producing power and earning power through ownership of the non-human factor of production.

The role of physical productive capital is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets.

Full employment is not an objective of businesses nor is conducting business statically in terms of geographical location. Companies strive to achieve cost efficiencies to maximize profits for the owners, thus keeping labor input and other costs at a minimum. They strive to minimize marginal costs, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

The result is that the price of products and services are extremely competitive as consumers will always seek the lowest cost/quality/performance alternative, and thus for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their products or services in order to generate profits and thus return on investment (ROI).

Over the past century there has been an ever-accelerating shift to productive capital — which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 239 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advances amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive — the core function of technological invention and innovation. Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, free-market forces no longer establish the “value” of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.

Furthermore, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. If both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive, and ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the economy.

We need to provide universal access to future ownership opportunities without redistribution. That is, reform the tax and monetary system to enable every child, woman, and man to purchase capital on credit collateralized with insurance, and pay for it out of the future earnings of the capital itself.

Achieving universal capital ownership is a just, third way in which everyone controls his or her life, and safeguards liberty, by having private property in capital.

What American citizens need is a Capital Homestead Act to own shares in the unlimited frontier of growth capital, what Lincoln’s 1862 Homestead Act offered to homesteaders in America’s land frontier.

Support the Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

 

Boston Dynamics CEO Believes Robotics Will Become “Bigger Than The Internet”

On November 15, 2017, Dom Galeon writes on Futurism:

A Great Disruption

In the world of ever-advancing artificial intelligence (AI), robotics continues to offer glimpses into the future intelligence machines could usher in. It also serves as a reminder (or warning) about the potential alternate side of that future, which has been played out time and time again in science fiction.

We’re not quite there yet, but according to Boston Dynamics CEO and founder Marc Raibert, robots will shake things up for humanity more so than any previous technological innovation — even the internet.

“I happen to believe that robotics will be bigger than the Internet,” Raibert said when he spoke at the Future Investment Initiative back in October, according to CNBC. “The Internet lets every person reach out and touch all the information in the world. But robotics lets you reach out and touch and manipulate all the stuff in the world — and so it is not just restricted to information, it is everything.”

It was apropos that Raibert spoke about the disruption robots have the potential to bring about at the same event where Hanson Robotics’ Sophia received the first citizenship granted to a non-human. Trained to understand and mimic human emotions, Sophia is a prime example of how robots are becoming incredibly human-like.

Capable Robots

For Raibert, that likeness is about more than appearance. “When we have robots that can do what people and animals do, they will be incredibly useful,” he said. In order to do this, he added, robots must possess three key abilities: mobility, dexterity, and autonomous perception.

Naturally, when robots become good, their usefulness increases. “I think one of the most important applications will be taking care of people,” Raibert offered. “They will help you take care of your parents so that you don’t have to spend so much time doing that.”

All three “skills” are present in the type of robots Boston Dynamics develops. Just recently, the company released a video showing the latest iteration of their robot dog called SpotMini. The video showcases how SpotMini moves in an incredibly life-like manner. It aims to exhibit dexterity and successfully navigate its environment.

SpotMini isn’t the only robot in their workshop: Boston Dynamics has also been working on perfecting their two-legged robots, ATLAS and Handle. Boston Dynamics is now under telecommunications giant SoftBank, which the company hopes will help these developments continue, and possibly, go even farther.

SoftBank’s CEO, Masayoshi Son, has a reputation for his commitment to achieving the singularity; the point (which some have argued is inevitable and imminent) when robots become smarter than humans. Son has predicted that robots with an IQ of 10,000 will exist in the next 30 years.

Right now, many robotics companies are focused on putting smaller supersmart robots out commercially. Two recent examples of these “pets” would be Sony’s robotic dog and the Wall-E look-alike Cozmo. While these bots are cute and capable, the next major development in robotics will likely be bipedal robots that move like human beings. If Sophia is any indication, robots with a similar appearance and conversation prowess may soon become very familiar to us.

Boston Dynamics CEO Believes Robotics Will Become “Bigger Than the Internet”

 

 

Americans Who Haven’t Gone To College Are Way Worse Off Today Than 40 Years Ago

FILE PHOTO: A production line employee works at the AMES Companies shovel manufacturing factory in Camp Hill, Pennsylvania, U.S. on June 29, 2017. Picture taken on June 29, 2017.   REUTERS/Tim Aeppel/File PhotoThomson Reuters

On November 11,  2017, Elena Holodny writes on Business Insider:

  • American men who have only a high school diploma have seen a reversal of fortunes over the last few decades.
  • While real wages have increased over the last several decades for those who have a higher level of education, they have held flat or fallen for those with lower levels of education.
  • There is no single catalyst for the decline in lower-skilled and middle-skilled labor, and this is a long-term problem that is weighing on the US economy.

Several decades ago, regular Americans could get by with a decent job and a decent wage with only a high school diploma.

But things are very different today.

In a note to clients, Bank of America Merrill Lynch’s Michelle Meyer and Anna Zhou shared a chart showing trends in real wages broken down by levels of educational attainment from the 1970s to today.

While real wages have increased over the last several decades for those who have a higher level of education, they have held flat or fallen for those with lower levels of education. As you can see in the chart below, those who have a college degree or higher have seen wages climb, while those who have less than a high school education, a high school diploma, or some college without a bachelor’s degree have fared worse.

“Wage growth has been slow to recover [since the Great Recession] on aggregate with only 2.4% yoy nominal wage growth as of October. However, there are differences by education with relative weakness for less educated men,” Meyer and Zhou said. “This shows the demand shift away from this population, leaving them on the fringe of the labor force.”

wages degreesBAML

There’s also been a huge dip in prime-age male labor force participation. The fraction of men aged 25-65 who are working or actively seeking work has steadily dropped over the years, which you can see below. (Note that this chart goes from 1948 to 2014, going back further than the above chart.)

prime-age male labor force participationCouncil of Economic Advisers under Obama Administration

Putting those two trends together, we see an unusual situation where we have both lower wages and less labor supply. This is contrary to economics  101, which tells us that if there are fewer people available to do a job, they can theoretically command a higher salary, even in lower- and middle-skilled professions.

And, so, that brings us to demand. The Council of Economic Advisers under the Obama Administration noted in a report in 2016 that the demand for low- and middle-skilled workers has declined in recent decades, which has pushed less-educated workers out of the labor market while at the same time holding down wages:

“A number of studies have identified declining labor market opportunities for low-skilled workers and related stagnant real wage growth as the most likely explanation for the decline of prime-age male labor force participation, at least for the period in the mid-to-late 1970s and 1980s (Juhn, et. al. 1991; Juhn and Potter 2006). More recently, economists have suggested that a relative decline in labor demand for occupations that are middle-skilled or middle-paying may have begun contributing to the decline in the participation in the 1990s (Aaronson et al. 2014). As demand for these middle-skilled workers has fallen, they may have displaced lower-skilled workers from their lower-skilled jobs (Beaudry, Green, and Sand 2016), leading some lower-skilled workers to leave the labor force. Aaronson et al. (2014) find that, since 1985, participation rates for less-educated adults fell further in States with greater declines in middle-skilled employment shares.”

There is no single catalyst for the decline in lower-skilled and middle-skilled labor. There is some empirical evidence, however, suggesting that globalization and automation have at least partially contributed to this phenomenon recently. America’s high incarceration rates might also be a contributing factor.

It’s also worth mentioning that male education levels have stagnated relative to those of women in the US. This, in turn, makes women more competitive applicants for a variety of jobs — especially those in the services sector.

“These forces have, among other things, eliminated the large numbers of American manufacturing jobs over a number of decades … leaving many people — mostly men — unable to find new ones,” the report from the CEA said.

So, not only are men losing jobs amid demand shifts, but they are not getting back into the labor force.

http://www.businessinsider.com/high-school-graduates-worse-off-today-2017-11

 

Billionaire Ray Dalio: There Are Two Realities In This Country—For The Bottom 60 Percent It’s A ‘Miserable Economy’

Ray Dalio

Cameron Costa | CNBC

On November 7, 2017,Catherine Clifford writes  on CNBC Make It:

Billionaire entrepreneur and financier Ray Dalio says there are two very different economic realities in the United States right now. That divide is threatening the nation’s stability, the Bridgewater Associates founder says, and it’s only going to get worse as technology replaces workers.

“[T]here are two economies. We talk of ‘the economy.’ Recognize that you can’t talk about the economy … there are two economies,” says Dalio, speaking to Recode executive editor Kara Swisher on her podcast, Recode Decode, published Monday.

There’s the “top 40 percent” and “the bottom 60 percent,” says Dalio. And for those at the bottom, life is hard without a lot of hope.

“If you look at the economy of the bottom 60 percent, it is a miserable economy. Not only hasn’t it had growth and economic movement and so on, it has the highest rising death rates, it is the only place in the world where death rates are rising because of a combination of opiates, other drugs and suicides,” Dalio says. (Indeed, Princeton Professors Anne Case and Angus Deaton found that drugs, alcohol and suicide are a major reason behind rising death rates among non-Hispanic whites in the U.S. with a high school diploma or less.)

One on One with Ray Dalio

One-on-one with Ray Dalio

Meanwhile, the most privileged at the top have a radically disproportionate amount of wealth.

“The top one tenth of 1 percent of the population has a net worth that is equal to the bottom 90 percent combined,” according to Dalio, who also wrote about his calculations in a LinkedIn post.

“So, we have two existences, two parallel existences, that are taking place,” he says.

Billionaire investor Warren Buffett, the CEO of investing house Berkshire Hathaway and the hallowed Oracle of Omaha, has also laid blame at the extreme wealth inequality in the United States.

Billionaire Warren Buffett says 'the real problem' with the US economy is people like him

Billionaire Warren Buffett says ‘the real problem’ with the US economy is people like him

“The real problem, in my view, is — this has been — the prosperity has been unbelievable for the extremely rich people,” Buffett told PBS Newshour.

“If you go to 1982, when Forbes put on their first 400 list, those people had [a total of] $93 billion. They now have $2.4 trillion, [a multiple of] 25 for one,” Buffett said on PBS Newshour in June. “This has been a prosperity that’s been disproportionately rewarding to the people on top.

To improve the situation in the United States, Dalio says there needs to be honest conversation from both political parties and productive, “thoughtful disagreement.” Leaders need to be able to disagree, consider each other’s ideas and then collectively come up with the best path forward.

The notion of finding the best way forward though honest conversation and collective intelligence is at the heart of Dalio’s new book, “Principles: Life and Work.”

In the book, Dalio outlines the strategy he became famous for ruthlessly implementing in his wildly successful hedge fund, currently with $160 billion under management. At Bridgewater, Dalio says the best ideas rule, irrespective of where they came from. He calls the management philosophy an “idea-meritocracy.”

“We have to work together, to find out how you have thoughtful disagreement and then have idea-meritocratic ways of getting past that disagreement that keeps us together rather than than at each other’s throats, because I do believe that this split in the country is the greatest problem of our time, and not just economically — socially, politically,” Dalio says.

Further, Dalio suggests that the wealth gap will only become more severe.

“It is going to worsen because technology is a fantastic way of raising productivity by also reducing the need for people in a lot of different ways,” Dalio says.

“People are going to by and large, either know how to code or be increasingly unemployed because they are being replaced by the product of that. We have to deal with that issue.”

Indeed, tech billionaire and SpaceX and Tesla boss Elon Musk has indicated the acceleration in automation will leave so many out of work that the government would have to pay people a universal basic income so they can afford to live.

https://www.cnbc.com/2017/11/07/billionaire-ray-dalio-for-many-in-the-us-its-a-miserable-economy.html

 

 

Three Researchers Left Elon Musk’s AI Company To Launch A Start-Up

On November 8, 2017, Chelsea Gohd writes on Futurism:

At OpenAI, researchers pushed the boundaries of artificial intelligence and robotics. Now, several researchers have left Elon Musk’s non-profit to form a start-up that’s taking machine learning to the next level.

Leaving Elon

Not content to simply transform the worlds of energytransportation, and space exploration, in 2015, Elon Musk founded OpenAI, a San Fransisco-based artificial intelligence (AI) research company. The non-profits’ goal is to further the technology in ways that will benefit humanity as a whole, and over the past two years, they’ve pushed AI into new territory. Recently, several researchers from OpenAI stepped away from the company to found Embodied Intelligence, a robotics start-up with a more singular focus: propel robotic automation to a higher level.

Understanding Machine Learning [INFOGRAPHIC]
Click to View Full Infographic

Through their previous work, the founding members of Embodied Intelligence — former OpenAI researchers Peter Abbeel, Peter Chen, and Rocky Duan and former Microsoft researcher Tianhao Zhang — explored the potential of robots to mimic complex human action.

Now, they are now confident they can use their past experience to improve the type of robots that are currently used in industry and even in the home. They’ve already received $7 million in initial funding from Amplify Partners, a Silicon Valley venture capital firm, and other investors, so clearly, others are also confident this team of four will be able to achieve its goals.

Advancing Robotics

Embodied Intelligence will specialize in finding ways to enable machines to learn how to do things on their own. That might sound like a small piece of the puzzle, but that ability is the basis for advanced AI robotics.

Breakthroughs in machine learning will allow robotics to advance from machines that we program to do specific tasks to machines capable of “learning” and behaving in human-like ways. They’ll then be able to accomplish much more complex and nuanced tasks.

“Today, every motion that an industrial robot makes is specified down to the millimeter. But most real problems can’t be solved that way,” Sunil Dhaliwal, the founder of Amplify Partners, told The New York Times. “You have to be able not just to tell the robot what to do, but to tell it how to learn.”

The company is using a method called imitation learning to do just that.

A researcher wearing a virtual reality headset and holding motion trackers repeatedly completes a task in the digital world. A robot then uses that data to learn how to complete the task in the real world. The result? “We now have teachable robots,” said Abbeel.

That bold claim is what makes the Embodied Intelligence team’s work so exciting. We can already program robots to do incredible things that humans can’t. They can clean up radioactive debris,reach unreachable spaces, and complete surgical procedures with added precision. The next step is to eliminate the need to program these actions into the robots, giving them the ability to observe, act, and learn independently.

While we can currently program a robot to follow specific instructions that tell it how to assemble car parts, a robot equipped with the right machine learning software could learn how to put together a car it had never worked with before based on past experiences — no additional programming required.

Elon Musk has a history of success, so a person must be fairly confident in their own capacity for success to leave one of the tech luminary’s companies. Abbeel and his team are such people. Beyond confidence, however, they also have the right experience to bring their robots of the future to life.

Three Researchers Left Elon Musk’s AI Company to Launch a Start-Up