Thursday's Top 10 with NZ Mint: The rise of the persnickety robots; Google shrugs, defends US$2 bln tax avoidance thus: "It's called capitalism"; Bank of England may target nominal GDP; Dilbert

Here's my Top 10 links from around the Internet at 2 pm in association with NZ Mint.

As always, we welcome your additions in the comments below or via email

See all previous Top 10s here.

My must read is #1 on the rise of the really amazing robots.

1. The rise of the robots - Here's the New York Times with more detail on how the increasing use of the Internet and technology is reducing the number of jobs and wages for the middle classes in the developed world. It looks at how Phillips is using very fancy robots to do finicky things that humans (or animals as the Chairman Foxconn describes them) used to do.

The theory, of course, is this improves productivity and translates into higher wages and profits, which are then distributed to the populace who can spend more leisure time enjoying the fruits of the machines' labour.

Those who have lost their manufacturing jobs will, in theory, retrain into higher value work and produce even more glorious output for new businesses that form from the ashes of the old ones.

In practice, or course, it isn't working out like that.

The benefits are accruing to the owners of capital, many of whom are in the 0.1%.

They can't possibly spend it all, and instead of investing it in new businesses and jobs and technology, they are hoarding their cash into government bonds. How might this cycle be broken?

Many industry executives and technology experts say Philips’s approach is gaining ground on Apple’s. Even as Foxconn, Apple’s iPhone manufacturer, continues to build new plants and hire thousands of additional workers to make smartphones, it plans to install more than a million robots within a few years to supplement its work force in China.

Foxconn has not disclosed how many workers will be displaced or when. But its chairman, Terry Gou, has publicly endorsed a growing use of robots. Speaking of his more than one million employees worldwide, he said in January, according to the official Xinhua news agency: “As human beings are also animals, to manage one million animals gives me a headache.”

The falling costs and growing sophistication of robots have touched off a renewed debate among economists and technologists over how quickly jobs will be lost. This year, Erik Brynjolfsson and Andrew McAfee, economists at the Massachusetts Institute of Technology, made the case for a rapid transformation. “The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications,” they wrote in their book, “Race Against the Machine.”

2. 'It's called capitalism' - That's what Google Chairman Eric Schmidt said when defending the 2.3% tax rate Google paid on overseas profits.

The company avoided about $US2 billion ($A1.9 billion) in worldwide income taxes in 2011 by siphoning $US9.8 billion in revenue into a Bermuda shell company.

Governments in France, Britain, Italy and Australia are probing Google's tax avoidance as they seek to boost revenue. Mr Schmidt said the company's efforts to reduce its tax bill were legal. "We pay lots of taxes; we pay them in the legally prescribed ways," he said. "I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate."

The company, whose company motto is "Don't be Evil", isn't about to turn down big savings in taxes, he said. "It's called capitalism," he said. "We are proudly capitalistic. I'm not confused about this."

3. Europe risks repeating Japan's lost decades - So says the FT's Sebastian Mallaby in this excellent piece.

The scariest lessons from a Japan-eurozone comparison are social and political. For better or worse Japan has a homogenous society and placid politics; the Liberal Democratic party, architect of the bubble that laid waste to the economy, heads into next Sunday’s election as clear favourite.

Japan’s cohesion is both reflected in and protected by surprisingly low official unemployment, which has never risen above 5.4 per cent in the past 30 years. Contrast that with Spain or Greece, where unemployment stands at about 25 per cent, or France or Italy, where it stands at 11 per cent. Add in riots and demonstrations across Europe, and you begin to wonder how the centre can hold.

4. The Great Renewal - This is the theme of Xi Jingping's new presidency. Here's the 8 themes of that renewal..

5. Nice offices - One of those themes is quelling public anger over abuse and corruption by officials, including building grandiose offices.

Here's one:

Experts and members of the public have reacted with anger to a report that the office building of the Jinan government in East China's Shandong Province is the second largest office building in the world, second only to the Pentagon in size. People's Daily Online reported Tuesday that the Long'ao Building in Jinan, the capital city of Shandong, where the city's government agencies are located, covers a floorage of 370,000 square meters, making it the largest government workplace in China and also the largest single building in Asia.

The news attracted over 7,000 comments on Sina Weibo, mostly from people expressing their opposition to such extravagance.

"This indicates that government officials have excessive power in their hands but lack supervision and constraints. With such extravagance, the public will become disappointed and lose their trust for the government," Zhu Lijia, a public management professor with the Chinese Academy of Governance, told the Global Times.

6. The confidence fairy is coming - Paul Krugman is amazed the peasants in Europe haven't revolted yet.

Europe has surprised me with its political resilience — the willingness of debtor nations to endure seemingly endless pain, the ability of the ECB to do just enough, at the very last minute, to calm markets when the financial situation seems ready to explode. But the economics of austerity have played out exactly according to script — the Keynesian script, that is, not the austerian script. Again and again, “responsible” technocrats induce their nations to accept the bitter austerity medicine; again and again, they fail to deliver results. The latest case in point is Italy, where Mario Monti — a good guy, deeply sincere — is leaving early, ultimately because his policies are delivering Italy into depression. (And yes, for the record, this means that Italy won’t get the full Monti.)

So what’s the answer? Stay the course, say the Eurocrats. It will work any day now — the confidence fairy is coming!

7. Radical action required - The Telegraph reports New Bank of England Governor Mark Carney is hinting at using Nominal GDP targeting to replace pure inflation targeting. HT TVHE..

Addressing the Chartered Financial Analyst Society in Toronto, Mr Carney said that in major slumps: “To achieve a better path for the economy over time, a central bank may need to commit credibly to maintaining highly accommodative policy even after the economy and, potentially, inflation picks up.

“To 'tie its hands’, a central bank could publicly announce precise numerical thresholds for inflation and unemployment that must be met before reducing stimulus.”

He added: “If yet further stimulus were required, the policy framework itself would likely have to be changed. For example, adopting a nominal GDP level target could in many respects be more powerful than employing thresholds under flexible inflation targeting.”

8. Here's more from FTAlphaville on China's Shadow banking system, also known as Wealth Management Products, or Ponzi schemes...

More than half of the issuance this year is for tenors of 90 days or less; almost all of it matures in less than one year. They can also be handily moved on and off bank balance sheets, as deposits, in order to meet regulatory requirements — off balance sheet to reduce reserve requirements; or on balance sheet to meet loan/deposit ratios at the end of an accounting period. Chu again:

WMPs are vehicles that can borrow/lend, and banks engage in transactions with their own and each other’s WMPs. This makes the pools of assets and liabilities tied to WMPs in effect second balance sheets, but with nothing but on-balance-sheet liquidity, reserves, and capital to meet payouts and absorb losses. These hidden balance sheets are beginning to undermine the integrity of banks’ published balance sheets.

The possible effects of WMP popularity go beyond the risk of a few of the products blowing up and upsetting investors. As Chu notes, they are eroding the traditionally cheap and plentiful supply of deposits available to Chinese banks


9. 'Pax American winding down' - So says the US Government in a long term intelligence assessment reported by the FT.

China will be the world’s largest economy by 2030 but the US will still remain “first among equals” in the international system, according to a new US government intelligence assessment of global trends.

The report predicts that Europe, Japan and Russia will continue to experience relative decline, and that Asia will come to dwarf the rest of the world in terms of its economic and military power.

10. Totally Jon Stewart on how US states compete against each other for avoid beaver bites


We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.


It is not only the industrial robots we have to look out for.
They have robots that can swim, robots that can run at 28 mph, robots eys have night vision, camera eys that can zoom right in, x-ray vision and so on. They can also communicate with overhead drones so If the middle classes wait long enough before they take to the streets they will be met by a robot police force. If they have a revolution they will have to fight a robot army. Yes, the 1% will be well protected as they will also have robot body guards.
I read an article many years ago which said that China's leaders will be ok until the middle classes reach 25%. Their belief was that you do not get political change untill you have at least 25% of the population middle class.
The West have used this info in reverse. We had more than 25% middle class and everyone was happy. Now, before the middle classes realised what was happenning, they have chopped them down to way below that 25% threshold. Now, like China, they dont have to worry about the middle classes and can do as they please.

Whatever happened to:
"Don't be evil"

I agree with this comment from The Telegraph...

Why would Google want to fund the EU and the British government both of whom are determined to misuse as much of our money as they possibly can.
Let's face it the British government are giving away billions of taxpayers money in Foreign Aid to fund African dictators, Pakistan - a terrorist state etc etc .
Added to which, as we see from the Census, they are swamping us with immigrants who do not care for us or our way of life. The government needs money from the likes of Goggle to continue with the race replacement programme, the concreting of our green belt to house their immigrants, new schools to educate their immigrants and a huge welfare bill to reward their immigrants.
Why should any taxpayer let alone Google contribute to this farce.

Bang on!


Why should any taxpayer let alone Google contribute to this farce.
It's compulsory for residents, therefore it should be for Google and any other corporate.
It is now noticeable that Obama realises the unsustainable nature of deficit financing and the need to reinstate jobs stateside to facilitate the collection of revenue. I doubt corporates will enjoy the freedom to avoid corporate taxes in the foreseeable future unless the recent trend to pay dividends attracts the tax instead.

Tell that to the dude that has a coffee shop next to starbucks and pays the full tax rate while the multinational neighbour under cuts him by paying feck all tax.
Google lost all credibility when they started filtering search results and auto suggest to match their political views. Don't want to pay tax and manipulate what people view on the web. Not evil, not honest.

I think you'll find the Starbucks next to your coffee shop dude is a franchise, with the franchise owner running it like the coffee shop dude next door and paying the same amount of tax etc plus a royalty to the franchise holder, Starbucks.
I don't think they franchise.
... coffee giant Starbucks has recently revealed it will open its first Starbucks franchise in the UK before the end of 2012.
Aiming to open the first UK Starbucks franchise in the South of England, and the first Starbucks franchise in the world, it is a very interesting time for UK franchising.

Fair point on the franchise holder, his choice . Farage is good value...

Conservative backbencher Blake Richards is proposing penalties of up to five years in prison or a fine of up to $5,000 for protesters who wear a mask or disguise.
While tens of thousands of children are putting the final touches on Halloween costumes and masks, the House of Commons has approved a bill banning people from hiding their faces during riots

but still no chance of jail time if you disguise yourself as a bank while you rob people and bankroll crime.

Robots are coming to a theatre near you and very soon ...
As we speak the straddle carriers at Brisbane port are happily going about their business unmanned. The big miners are working with Komatsu and Cat  and are well on the way to operating unmanned haul trucks in the mining industry - and every one of these removes forever a very highly paid and dreadully boring job that is never coming back.

#1  How might this cycle be broken?

The same way it's always broken - revolution.

Am more positive about number 1, for the following reason. Robots are best at mass production- making lots of more or less the same thing. So for them to have enough customers, there will need to be a significant number of people who can afford to buy their goods. Economies will need to evolve therefore to have enough spending power with the middle classes to buy all the goods made by robots.
Separately, in anything like a democracy, the "middle classes" will always have a significant vote. And they are unlikely to vote themselves into extreme poverty relative to the top tier in that democracy.
They are part of the answer for ageing societies.
I actually think Working for Familes tax credits are a type of mechanism to help, and other countries will likely adopt them. The battle between wealthy Republicans and Democrats at least seems largely about spread of wealth. In the end there are likely to be relative tax cuts for the middle classes, and higher taxes for the highest income/ wealthiest people in the US.
The danger for NZ is that we continue to lose our wealth by taking foreign money for our assets. We will not own any of the robots (or any other means of useful tradeable production) if we do that; and in the end, no other democracy is going to help out NZers ahead of their own people. 

Stephen L - we have more work to do....
Those robots only do efficiency. That the all of what they do. I have no problem with that at all, but it's not a game-changer. (I'll give you less accident-proneness too).
They still need 'bits of the planet' - call it resources - to do something to. Those bits still need extracted - and robotical extraction still takes energy - transported, processed, transported some more, maintained, disposed of.......
The ham-string is still global energy curtailment.
(And that's from someone whose old man designed/built/sold robotics of various kinds for decades).
You're right that those who are displaced, are out of the resultant income-stream. Didn't matter while there was growth popential, was overlooked while we went on our Real Estate ponzi (round two currently underway) but global lack of income via unemployment is closely mirroring global inability to deliver.
Oil is solidly above $100 US (even allowing for the greenback to be less than it was) and that's in a recession time. When the attempt is made to put pedal to metal, up she goes at the margin and 'pop' go all your business models - robot-based or not.

Proving PDK that I cannot often walk and chew gum at the same time. On the argument re robots vs people; at a macro level, there will need to be enough people with the demand to buy the goods to justify the robots in the first palce- we seem to agree on that.
I actually accept that energy will be a significant constraint almost regardless of the robots vs people argument, as you point out. 
So who gets the spoils may come down to countries with concentrations of the economic capital; or some other mix of energy, people, infrstructure and resources. New Zealand is probably relatively well placed with low but well educated population; reasonable infrastructure, the ability to produce food efficiently, a highish proportion of renewable energy, and enough fossil fuels nearby to do okay. We could do a lot better if we boosted our ownership of capital, but will leave that debate for now.
It's harder to be confident for say Africa or India, who do not seem to have much of anything other than lots of people. If people are no longer essential due to robots; and there is a resource crunch, then things could get worse before they get better in such places.

we hear  lot of negatives from you.
I want to hear your solutions.
What does your NZ of 2050 look like? 

Bees are flourishing because the present corporate monoculture has largely been replaced by a contiguous patchwork of small landholdings with signficant biodiveristy. Neighbourhood reuse and recycle initiatives are firmly established. Non-fiat trade has become the dominant medium of exchange. Education originates and is delivered via the neighbourhood as part of that medium of exchange. Healthy diets (by the consumption of locally grown, non-processed produce) and actively lifestyles (by necessity) mean than the population is much healthier. People have re-learned how to treat most illnesses with nutrient and herbal remedies. The aged are looked after by the younger and are still contributing to the non-fiat trade and exchange within the community but the longevity has decreased due to a quite different manner of end-of-life intervention.  Lots of spinning and knitting is needed by these more sedentary citizens and no older persons are lonely. Roads are awash with bicycles and horses. People stop to impart information and discuss their goods and produce surpluses in comparison to that of their neighbours. Agreements to exchange are thus forged on a daily basis.  My grandson's youngest child walks three miles down the road to exchange fresh goats milk for fresh fruit on a daily basis - on the way home he gathers some watercress. Largely abandoned CBDs are a principle source of building materials for reuse in the outlier communities.  Community collectives negotiate with dismantlers as representatives of building/infrastucture owners. Metal refashioners/forgers are a flourishing trade. Building codes are non-existant - the rentier class has seen much of its assets similarly dismantled for materials purchased by outlier community builders (who need no more licence than that determined by the reputation of their previous craftmanship). Houses for young families are built by and materials largely paid for by the wider community who recognises the importance of growing and retaining young persons within their immediate area. Electricity is generated and reticulated by community cooperatives. Similarly telecommunications infrastructure is locally owned, maintained and shared. Little waste goes to landfill - composting too is a community initiative.
The most popular folks in the community are the ones who sing and play the guitar - and if they ever arrive at a neighbourhood gathering without it - the kids will be sent down the road to fetch it.  While the guitar is going in the background and the kids are belting out 'the latest popular culture' - the adults are sampling one another's home brew (be it beer or wine) and makin fun of the efforts of the others.  The worst of the wine is turned into punch - and mothers give in to the pre-teens regards having a cup each.  They disappear round the corner of the shed and the girls drag the boys into a game of spin the bottle.  The toddlers spy on them and run off to tell the adults.
And I could go on.
Suffice it to say, 2050 is a wonderful time and place.  Television doesn't exist and radio for news and entertainment has seen a massive resurgence.  

and %60 of the worlds population has been destroyed by war,famine and disease.
 The elites wiull have guted the rest of us before they give up

Uggh, spare me from this new-age hippie nightmare!

Hahaha - yeah, I kind of hear you there .. but it's a better than imagining the teens chucking up in a filthy gutter on K Road while the olds drink cartons of DB in an uninsulated, mouldy lounge room with the 50" flatscreen playing re-runs of the Simpsons from decades ago ... you know, the good old days.
Meanwhile, Grans now 95 - lost her marbles well over 10 years ago, hasn't had a visitor at the resthome in 5 years as the family can't see the point in it - but the staff keeping pumping the antibiotics into her every time she sneezes.  Can't risk losing the government funding through accusations of lack of patient care, you see!

Yeah that's kindof a creepy scenario too, eerily reminiscent pretty much how life is now in NZ for a lot of people.

The best and worst of 2050. Have a go - your imagination might cheer us all up!!!! :-)

Challenge accepted!
Best Case: Most of the world's energy needs have been met by advances in nuclear and biotechnology. There have been rapid advances in medicine, food production, manufacturing and technology which generally serve to make like easier in every respect. Science and technology are at the fore of human endeavour, general ignorance has been shunted well and truly to the sideline. In NZ, housing is actually affordable due to the (much anticipated) death of most of the boomers, and a new era of more evenly spread wealth distribution has begun. The world population has plateaued.

Worst case: No new technology for energy production has been developed, we still rely on an ever-decreasing supply of coal and oil. People continue to breed like flies, and generally exist in poverty supplemented by hand-outs and a dependency on medication. Conspiracy theories thrive in this tightly controlled environment, science and education have been largely replaced by degrees in environmental planning and media studies. The boomers have found a way to live forever by sucking the life from younger generations, a process they happily engage in (they still own all the property). Powerdownkiwi was ABSOLUTELY right in all his dire predictions, and he's the only one truly prepared for the energy crisis, a fact he constantly rubs our faces in.

I agree with you about the hippy utopia.
Only need to look at those "alternative" lifestylers back in the 60s and 70s.
Center Point and Burt Potter comes to mind.
Too much weed smoking and harder stuff + the usual personal power games and weird personal politics causes the utopia to turn into dystopia fast.

Good go at it - but, oh dear, I'm a boomer who teaches environmental planning :-).  Hope we can still be friends!!!!
PS - the exercise is harder if you personalise it down to the story of the family life - rather than the big ticket item (i.e. non-personalised) headings.  But ... back to my marking :-).

I'm very embarrassed now! It was all written very tongue in cheek, the boomers are the butt of a lot of ill directed angst that's unwarranted, so we can absolutely be friends!
Personally, I guess best case scenario is more about a future that any kids I bring into the world will be reasonably prosperous and safe in. Worst case, they'll be saddled from a young age with too much debt (for education etc), with no hope of home ownership and the prosperity it brings. I'm not too much into the real doomsday stuff, I think people can get way too caught up in that and it drives them nuts!

Workig for Families is not a tax credit, how can it be when the less you earn the more you get. Its middle class welfare plain & simple. Yet another vote buying scheme the country can not afford

Hi rc,
The way I look at it Working for Families (WFF) is actually a massive wage subsidy for employeers stopping empolyees from demanding a real living wage that keeps up with broad, not CPI, which is all a load of bollocks, inflation.
WFF is a great big disincentive to orgainised labour curtosity of the architects of our command economy. Without WFF workers would have to organise in order to negotiate renumeration on equal power terms with their employeers.
I'm sure there are minds quite capable of comprendeding this simple arguement in the Labour party, yet they introduced this slap in the face to unions under the guise of caring for working people.

I accept that once someone has got all their tax back, plus some, then calling WFF a tax credit is a somewhat misleading euphemism. Am not sure what proportion of recipients are in those circumstances.
It does though seem reasonably enough structured to encourage more work; my reading of the chart - http:// - is that WFF payments reduce $6 for every extra $30 earned.
From a society/economic point of view, the system does seem to allow for necessary but otherwise low paid people, and their kids, to live an okay life, where they otherwise would struggle considerably. And so it allows those jobs to be done. As Bruce Hitchcock points out, it probably keeps a fair few businesses alive (or even prospering) because they can pay their staff less than would be necessary without this system. Unemployment may well be considerably higher without this system.
Are the levels right; can we afford it; does it encourage sub optimal work to be done; does it have other unintended consequences- like having more children just to qualify; or working only the minimum to qualify; are all valid questions.
Even I would prefer we were not borrowing from foreigners, or selling power companies, to pay for it; albeit I think there are better ways to fund such spending, at least to a point where the exchange rate was more competitively valued.

Re: #5 - I would suggest on a per capita basis Christchurch City Council's offices are as grandiose as any in China.  That's probably where Chairman Bob got the idea on his annual ratepayer funded holiday, sorry fact finding trips to China.

You got the wrong part of the show, Jon rapping at 05:12 is as good as a white dude can do :)

Re Robots. Anyone else been into a Fonterra plant recently? Sure they are largley 'old school' heavy manufacturing robots but they are thoughout modern dairy comodities manufacturing plants. Their robot forklifts are so high tech they will not allow them to be photographed.
One of my articles from this year which mentions them.