The idea in a nutshell : Some people (including and especially the owners of big businesses) are going to make a lot of money from Artificial Intelligence ( AI. ) Many people will lose their jobs. Successful social outcomes in these circumstances depend on taxing the winners to pay for the benefits needed by people displaced from their jobs. Unfortunately, the very companies investing in AI, which stand to make so much money from them are the same multinationals who have successfully evaded tax for years – specifically : Google, Facebook and Amazon. This spells disaster.

‘Experts’ are split on whether AI will help or slow the economy

‘Experts’ are literally 50%/50% on whether the impacts of AI will be positive or negative.

I wouldn’t call myself an expert on this subject. I will admit to having researched it for a few months and having mixed feelings about the impacts of AI. I have posted articles in favour of positive economic effects resulting from the development and deployment of AI. I have also posted on the opposite side of the argument.

Because, both things are possible at the same time

Remember, these forecasts (of AI effects which are positive and AI effects which are negative) are not mutually exclusive. It is plausible, in fact, it appears likely, that the overall, whole economy will be much better off as a result of the rollout of AI.

That does not eliminate the significant possibility that a significant level of unemployment will result and / or that wages for the majority will fall. Synthesising the two points of view demonstrates some apparently clear problems and, potentially, some less clear solutions.

The winners are likely to be businesses which can automate people’s work

I think the people who own businesses (let’s call them capitalists, it is one of their names) will automate a lot of the work their staff do, using AI. This will have the effect of reducing their costs of production and raising the productivity of the employees that remain. Capitalists have an obligation to their shareholders do it.

Success depends on the ability to tax the wealth that Artificial Intelligence creates

Successful social outcomes like happy populations and a ‘fair’ distribution of wealth come from tax re-distributing wealth through tax. Countries sometimes use progressive tax systems on individuals and international agreements on company tax laws.

But, the companies ‘inventing’ AI also avoid tax

This situation appears to boil down to a single and unfortunately very obvious fact. The companies investing so heavily in AI are likely to garner the first and majority of the benefits. That’s why they’re investing.

Apple, Google and Facebook are all putting a lot of money into the area. These are the very same companies which avoid the largest tax burdens in the world. For the last few years, they have stolen the headlines by steadfastly refusing to pay tax. Governments have tried to shame them although, at least publically, Google et al appear to care little.

Facebook, Google and Apple are all using lawyers and accountants, avoiding tax with ‘Double Irish schemes. Some estimates (including the one linked to here) suggest that, together, they avoided $8bn in tax recently.

I am not suggesting that these companies have done anything wrong. They are avoiding tax. Avoiding tax is not illegal.

The technology they’re developing may exacerbate the problem

The weight of knowledge and understanding about the effects and capabilities of AI is heavily in favour of the private sector. Specifically, it is almost entirely owned by Google, Facebook, Amazon and the companies they have bought to augment their understanding. There is no incentive or legislation in place for them to share that with governments.

It could be that these companies would use the power of their AI to establish new schemes, loopholes and facilities to reduce further their ability to pay tax.

Why are governments outsmarted by these tech companies ?

One of the problems appears to be that international governments are slower to react to these changes than the technology companies are.

The inertia stems partly from each of at least 4 different things :

  1. Incentives: Invent AI for the government, you help the country. Do it for yourself and you make a motza.
  2. The level of information the government(s) has about AI (lower)
  3. The level of bureaucracy (higher)
  4. The effectiveness of lobbying which appears to align the interests of elected senators and congressmen ntatives with companies bankrolling their campaigns rather than the people they are supposed to be representing. Google donated to 162 senators in the latest election cycle.

The private sector has a huge, perhaps 10 year lead on governments from around the world developing AI systems. That said, it is not all a one way street. The Federal Reserve and the Bank Of England have started considering the use of AI for the purposes of influencing monetary policy.

This was all forecast a long time ago

It’s years since I studied all of this but my recollection is that the central theme to Karl Marx’s work was that exactly this would happen. Over 100 years ago, Marx suggested that there was an incentive for capitalists to automate their tasks. He said that over time, this would displace workers and postulated that the result would be a revolution in which the dispossessed proletariat would rebel in a social uprising and decide that socialism, not capitalism was the fairest economic solution.

So, what do we do about it ?

The redeeming features of this circumstance are transparency and democracy. Perhaps ironically, companies which are investing in AI have played key roles in creating a culture in which information is more available than ever before. You are reading this blog which is an example. We do, at least, know that these internet companies are avoiding tax.

While it is true to say that the internet may also make us feel better informed simultaneously reducing the availability of thorough investigative journalism, the government led public shaming I’ve mentioned above does show that the message is getting out.

Although degrees of ‘freedom’ vary around the world, most, in the developed world live in a democracy. Exerting grass root pressure on politicians in your country to push for international agreements on tax which reduce the high profits of the companies which benefit from the rollout of AI would seem prudent.

However, the prognosis is not good. These companies have enough money to manage the messages they leak better than governments. At its most basic, this idea suggests that we are pitting two groups against each other. On one hand, we have the smartest, richest, multinational tech companies in the world, bolstered by new ‘magical’ technology they have invented themselves and staffed with the best legal and accounting staff in the world. If they get their plan right, they stand to make billions of dollars. On the other, we have the loose affiliation of governments from around the who need to tax those tech companies through international agreements and, in so doing, risk losing the financial support (donations) they depend on.

It is often good to hope for the best but still plan for the worst. I will be making sure I have the ability to respond effectively to a Marxist social uprising from the displaced and to support myself in the event that I am displaced as well, just in case. It might also be worth investing in some Google, Facebook and Amazon shares.

PS : $8bn a drop in the ocean, isn’t it ?

The $8bn avoided by Google, Apple and Facebook is an international number. Alone, it does not constitute a material proportion of government tax receipts – even if we pretended that the entire $8bn was due in Australia (and it’s not)

The Australian government made about $360bn in tax revenues last year. At the same time, about 1600 companies made $1.6 trillion in Australia. 38% paid no tax at all. Corporation tax, taken as a whole is a material component of government income. From a mathematical standpoint, if the money from AI goes to corporations and reduces employment, almost every other tax income category would be negatively affected – payroll tax, income tax and GST revenues would all likely fall. To maintain government income at even static levels, the only place extra revenue can come form is corporation tax.