Investment: U.S. companies doing their part

An Interview with Robert Shiller

«Donald Trump’s infrastructure program is sweeping, well-articulated and based on the objective necessity of modernising the United States,» opined Robert Shiller — Yale economist, born in 1946, Nobel Prize winner in 2013 — on the the U.S. president’s proposals during a recent visit to Italy.
«The biggest mistake is to make fun of him or even worse to consider him an adventurer. Putting aside military considerations, his well-articulated economic programme should be analysed carefully. A program, which, let’s not forget, has been received with great hope and consensus not just among blue-collar workers in the Midwest who are deluded and scared by globalization, but above all by the business community. You can’t just consider people who live on the coasts—Los Angeles and Boston—who are traditionally considered liberal, but also the vast ‘fly-over’ country in between, as Americans call it, that are often distressed rural and industrial areas where the opinions of intellectual talking heads on TV are meaningless.»

But why did so many votes come from financial circles?

«Because they are eagerly awaiting the cuts in taxes that he promised - for companies and for individuals - and, most of all, the deregulation that he himself announced. Banks and companies insist they are too restricted in their operations by rules introduced after the financial crisis, like the Dodd-Frank Act, and they also disliked Obama’s healthcare reform, [an initial attempt to reform Obamacare was rejected by Congress.] Deregulation will be welcome.»

And the infrastructure project?

«The president has put out the figure of one trillion dollars in investment, a number that could grow with public-private partnerships that anticipate participation of major groups from around the world. To finance it, the administration will obviously issue government bonds but will also turn to innovations like a tax on the repatriation of capital. This was actually first proposed by the Democrats with the call renewed by Hillary Clinton during the electoral campaign and addresses the massive reserves that big U.S. companies, as well as some individuals, keep abroad. Trump is counting on hitting 200 billion through this process. That would certainly be significant financing. The president has given it eight years and it’s not impossible. Actually, at a certain point in the electoral campaign, Trump even said that, over these eight years, which would correspond to a second mandate, he is planning to erase the federal deficit. That went too far. And, in fact, he never repeated that.»

Cargo Train
Cargo train
There’s another notable aspect of Trump’s economic programme—protectionism. How far can he push?

«Well, at a meeting in early April, with the Chinese president, both sides agreed to a moratorium of 100 days in the trade controversy with China. There’s also a change that things could ease up with Europe as well. Let’s not forget that the latter controversy is based on the old question of beef exports from the U.S. to Europe. Europe has requested that the meat be hormone-free. America has created entire mini-industry to produce meat without additives and the WTO said it could be freely exported to the continent. To break the impasse, Brussels just needs to open the “spigot” of America exports and reset import quotas.»

You are particularly attentive to technology. You recently made a splash with your position in favor of Bill Gates’ proposal of taxing robots. Could you discuss that?

«To be precise, the idea of a tax on robots was first raised in May of last year in a draft law of a report to the European Parliament prepared by Parliamentarian Mady Delvaux for the Legal Affairs Commission. Emphasizing how robots can accentuate inequalities in the world, the report said it could be useful for companies, in their annual financial statements, to introduce a summary of the contribution that robots and artificial intelligence provides to corporate results in order to anticipate appropriate taxation and social contributions. The reaction to the Delvaux proposal was very negative, with the remarkable exception of Bill Gates, who is always very aware of the social impact of the technological revolution. He supported it. And I also believe it’s something we should consider. The last 12 months alone have seen a proliferation of devices like Google Home and Amazon Echo Dot “Alexa” that perform many household activities. We’ve see two taxi services Singapore, Delphi and nuTonomy, introduce driverless cars that are starting to replace taxi drivers. In America, we discovered that Doordash is using miniature remote controlled cars with “spatial” technology from
Starship Technologies to substitute the young people who deliver food to homes; like the special robots that deliver Domino’s pizza in New Zealand using two compartments, one that keeps the pizza hot and another that keeps the drinks cold. And this list could continue.»

However, would you disagree that robots are part of the path to modern technology that can’t be stopped, and that robots provide a major contribution to productivity, even though it can be difficult to identify which machines should be called “robots”?

«None of that changes the fact that there must be studies to revise the regime. I am talking about for companies, and to figure out how to intervene. I don’t want to reach the excessive level prophesied by Frank Ramsey in long-ago 1927 where all human activities are taxed. But it’s also unwise to create vast areas of exemption. I’ll go further: a modest tax, even temporary, would perhaps be useful to slow down the destruction of jobs brought on by robotization. One could also think of a task-based tax: the proceeds could finance, nation by nation, retraining programs for those who lose jobs—jobs for which, in many cases, an individual has trained for a long time and that represent his or her life. Do you see what I mean when I say that the contribution of robots to the growth of inequality should be slowed?»