AI and Population

The combination of two topic problems could result in an opportunity.

1. Now that populations in most developed countries are in decline, many commentators are concerned about the economic challenges of a declining population. This is exacerbated by the fact that the only population growth is from immigration.

2.  The rapid development and engagement with Artificial Intelligence applications such as ChatGPT in 2023 raises concerns about changes to the world of work, with the prospect of wide spread unemployment.

On the bright side, if we put the two issues together we could envisage a scenario where populations do slowly decline, with all the related positive effects on the natural world, and the lost productivity is replaced by AI and other forms of automation.

Why Trump?

So Donald Trump is President and the UK elected to exit the EU - here's my take on the explanation.

Free trade and global markets has been great for growing economies in general but not everyone has been a winner. Many studies have shown that wealth at the top has increased while the base of the pyramid is wider and deeper with many feeling a sense of hopelessness.

Traditional working class jobs have been exported to cheaper labour countries with large areas of the US where coal mining, steel production, car manufacturing, etc have all closed down with devastating effects on the local economy. Things are looking rosy in New York or Silicon Valley but not so much in Detroit.

For non-graduates many of the remaining jobs are low wage, low skill and these have largely been filled by immigrants, whether they be Eastern European in the UK or Latin American in the US. The locals might not really want these jobs but they still resent the new comers getting on better than they are.

Trump and the Brexiteers openly promised to reduce immigration. It's an easy sell but this doesn't solve the problem because the locals don't really want to do the work in the low pay sector. They also hint at some protectionism as a means to bring back some of the skilled blue collar work. This could have a positive effect locally in the medium term but global economies could crash as the draw bridges rise.

Fundamentally the only way to deal with immigration is to improve standards in the poorer countries. The bigger the margin between the rich and poor countries the more tempting it is to migrate.

The US in particular enjoys the highest standards of living on the planet by some margin. The problems are not those of competition with other countries they are caused by domestic inequalities. There's more than enough wealth in the US to allow everyone a fair share but there is an inbuilt distrust of any state level attempts at wealth redistribution.

Wealth & Taxes

During the Olympics and Paralympics we have been reminded of just what a great country we live in and suddenly there is a surge of pride and optimism in what we can achieve.

Apart from our sporting prowess what else is great about the UK and what makes it a great place to do business?

Firstly I would point to our innate sense of fair play; maybe this also has something to do with our love of sport. Generally we do not tolerate unfairness in society and this had helped us create a strong legal system with laws that are generally respected and adhered to. If you gain wealth in the UK the system protects your property rights, unlike other parts of the world where you would have to keep the local police and politicians 'onside' by various other means.

Despite the many debates about our school the UK does have a well educated population. Of course improvements can be made but everyone has the opportunity to better themselves through their schooling and this is provided to everyone by the state. This means that businesses operating in the UK can draw on a well qualified workforce. There can be little doubt that a better educated population is also a less violent and more law-abiding one. Together with our state benefits, which provide a safety net, we avoid the desperation that leads to the extreme poverty, and violence seen in other parts of the world. In the UK a successful businessman generally doesn't need to hire personal security guards.

The state also provides universal services such as a routine rubbish collection service that ensures that our streets are clean and hygienic, we care about protecting our environment and maintaining a pleasant and healthy place to live.

The crown jewel of our public services, of course, is the NHS, which ensures that our population is relatively healthy. A healthy workforce is a productive workforce. Again this is provided free to everyone so we have fewer workers struggling with poor health.


Therefore businesses that operate in the UK are benefiting from a wide range of background public services that they can not be sure to get in other parts of the world, especially low wage countries and those with poor records of human rights. It is right and proper that businesses and high income individuals should pay higher taxes because they benefit most from the environment that is created by the public services.

We often hear the argument that taxes need to be lower in order to attract business to the UK or keep high wealth individuals working in the UK but how much truth is there to this argument? How many businesses could realistically move abroad and still operate in the UK market? Well none of our bricks and mortar retail business for a start - they physically need to be on the high street but Internet business can operate overseas and the government needs to clamp down on tax dodgers like Amazon. Tesco is one of our biggest businesses but they cannot leave the UK tax system and still benefit from doing business here, they cannot do business without employing British workers.

The building industry can only work from within the UK and almost all of the service industries need to be in the UK to interface with their customers. Some workers might come from other countries but this is a relatively small number and easily controlled. Some manufacturing could move overseas, indeed much of it has already done so but despite the apparent advantages of low wage labour markets several foreign companies choose to build cars in the UK.

In summary I would argue that the UK offers a great environment for businesses and business people to work and live and we should not be scared of them leaving if they don't like our system of public services and taxes on the wealthy to fund them.

Occasionally a truly unique entrepreneur emerges but generally speaking if Business A didn't exist then similar Business B would take it's niche and thrive just as well. Successful people like to think they did something special but often they were just in the right place at the right time and marginally more lucky that their competitor. We should not be scared by threats of business people flying the country - it simply won't happen because they are onto too good a thing here in the UK.

National Insurance & Person Tax

Surely the government is making a mistake by increasing National Insurance contributions. As energy and other raw materials become scarce and therefore expensive it is going to be increasingly important to make it cheaper to employ people (especially in the developed world). A healthy economy has a high level of employment, with just enough slack (unemployment) to allow for some flexibility.

Since public services employ a very significant percentage of the population it makes little sense to take with one hand and give straight back with the other (in increased employers contributions).

I would reduce National Insurance with the aim of eliminating it altogether. NI was designed as a tax that everyone pays at a similar level and everyone takes a pension, health care and employment cover. The reasons for the way NI works are long since lost in the mists of time and are not well understood. High earns may complain about the way Income Tax increases on higher earnings but you don't often hear that NI actually works the other way around. If you model the total personal tax it comes out at about 25% across the board.

Maybe the first step would be to bring it down to 10% but eventually I would like to simplify the personal tax regime by having single direct tax based on Income;

First £8,000 tax free - this needs to be sufficiently higher than the level of benefits available to the unemployed to maintain an incentive to work
Further £20,000 at 25% - medium level earners are significantly better off
All additional income at 50% - those earning over £100K might be penalised slightly

Alternatively it would be interesting to model what happens if a flat tax rate of, say, 30% would work. There is an argument that capturing 30% from everyone is better than taking 50% for the few rich people not employing a good accountant.

It would also be necessary to recover the tax income handed back to employers by reducing or eliminating their NI contributions. We want businesses to employ people, indeed it needs to be efficient to employ a person instead of purchasing an energy intensive machine. Additional Corporation Tax might penalise good businesses but we could take a tax off energy intensive businesses in the form of a steep Carbon Tax.

Population & Housing

Having seen David Attenborough present the Horizon special the other night it seem obvious that the UK government needs to set a target population for the country to work towards. Somewhere between 50 - 60 million seems about right. Achieving the target might take a generation but policy should be bent towards the goal starting with a look at tax and benefits that relate to children other than the first.

Further efforts need to be made toward addressing our high levels of teenage pregnancy, indeed education towards making it the norm for couples to wait until at least the age of 25 would almost certainly lead to better parenting.

The overall population target should be adopted at regional level by adopting the current policy towards new housing development. Instead of expanding the housing stock a mechanism should be developed to promote the building of new energy efficient houses while simultaneously redeveloping older houses where it is not economical to bring them up to modern building standards. Maybe there is an opportunity to resolve the inequity of Stamp Duty at the same time?

Q: how to make it economically desirable to demolish old energy-inefficient houses?

Economy and Population

I have been reading "The Great Boom Ahead" written by Harry S. Dent, Jnr in 1993. His hypothesis is that economic cycles are tied to periodic fluctuations in population, that the baby boom following World War II meant resulted in a peak of consumption between the mid-90's and 2007. He actually predicts that there would be an economic crash around 2008 and that our economy would remain in recession until 2022 when the next birth boom reaches the peak of their spending power.

It makes you wonder whether our economy is just a great big ponzi scheme based on growing population and increased consumption! If you study the impending pensions crisis you definitely get that feeling.

Now combine this with a need to decrease our population long term in order to foster a sustainable society.

How would companies grow without a growing market for their goods? Who would invest in companies without growth potential? How can companies develop improved products without the market to sustain a return on investment?

Investment based on profits (dividends) not growth (share price)?
Profits based on efficiency, quality, customisation not ecomony of scale, mass production?