Monday, 28 January 2013


My post in reply to Dr Raghu Rajan on education and unemployment was actually timelier than I initially thought: In the last couple of weeks, I’ve read several articles directly or indirectly discussing the evolution or indeed the very future of Labour.

One development, on-shoring (or the re-localisation of industrial activity in Developed countries) was seen as a general positive while another, the ever greater level of automation in the industrial sector was seen as a potential threat to the very need for (human) workers.

“It's quite possible that, say, 50 years from now the production of nearly all goods and services will be automated. And this might usher in a golden age of solar-powered plenty that allows us all to reach new pinnacles of human potential. Let's just stipulate this for the sake of discussion.
But what happens while we're busy getting there? Answer: the owners of capital will automate more and more, putting more and more people out of work. Liberals will continue to think that perhaps this can be solved with better education. Conservatives will continue to insist that people without jobs are lazy bums who shouldn't be coddled. The lucky owners of capital won't care. Their numbers will decline, but the ones who remain will get richer and richer. The rest of us will have no jobs, and even with all this lovely automation, our government-supplied welfare checks will be meager enough that our lives will be miserable.”

About the robots: there’s no question that in some high-profile industries, technology is displacing workers of all, or almost all, kinds. For example, one of the reasons some high-technology manufacturing has lately been moving back to the United States is that these days the most valuable piece of a computer, the motherboard, is basically made by robots so cheap Asian labor is no longer a reason to produce them abroad”.

(NB: The whole piece is worth a read because he is referencing an article on monopoly power. I had planned to write a piece on how monopoly and rent-extraction had been rising in the last 30 years and contributing to our crisis but I couldn’t find good numbers confirming my hunch. Official sector concentration numbers loudly declare that all is well in the world. These guys say different and have plenty of examples to back their thesis:

So, anyhow, robots… Robots are increasing in numbers and it is indeed very possible that, within the next 25 to 35 years, there will be more robots than people. And the story will play out mostly as Kevin Drum describes it.

With one major exception: Capital owners will NOT be happy. Sure, at present, every individual company is happy to automate away its workers. That reduces the labour cost, one of the biggest expense item for most businesses. The only tiny whiny little problem is that one’s company labour cost is another’s revenue. So far, I think that a lot of big companies are doing exceedingly well, profit margin wise, because they’re capitalising on inertia – the fact that Westerners are, overall and all things considered, quite rich and that most of them have paying jobs (Even a 20% real unemployment or underemployment rate means that, conversely, 80% of the population is still employed). But both things are the result of long gone policies and social structures. When the process kick-started 30 years ago will reach its climax, I have a serious problem in figuring out who will buy all the goods those robots will produce.

And, if nobody is buying and if purchasing power, instead of ‘just’ stagnating, actually goes in reverse, well, I suspect being an owner of capital will feel pretty useless. Sure, you’ll have all those robots and factories and commercial real estate. And it will all be sitting there, doing nothing/little for lack of customers… What will be the point?

But it’s not like there are no historical parallel to the situation. The Romans had much the same problem. Except that, in their case, it was slave labour that had taken all the work, in the farms and the workshops, much to the initial satisfaction of the great aristocratic families. However, these families soon found out that the normal Roman free citizens were not happy about the situation and, from then on, Roman political life revolved around figuring out how to keep the Roman mob (the plebs) content enough for them not to riot or rise up.

One of the solutions they had to this problem was the original ‘dole’ – A free distribution of grain, at the state’s expense - the ‘bread’ in Juvenal’s famous quip about ‘bread and circuses’.

Eventually, this ‘solution’ proved too expensive for the state but one suspect that the tax rate applied to the rich land-owning aristocrats might have had something to do with it, once pillaging neighbouring countries or civilisations became impossible. Plus ca change…

What would a modern (and more stable?) version of this be once robots will have taken all the work?

The most daring proposition revolves around how we distribute the wealth created.We have to remind ourselves of WHY people bothered gathering themselves in societies and organising work.

This was to maximise material welfare. If I cannot access society’s material and technological advances, then those advances, as far as I am concerned, do not exist. But there is something utterly perverse in having a population interested in goods and services that can be produced and having that same raw productive capacity sitting idle because the population cannot pay the owners of those means of production.

To a large degree, we have dealt with past productivity gains by reducing the time we spend working and increasing the purchasing power of any hour actually worked. This process mostly stopped in the last 30 years but it will need to resume if we want to put the 2007-8’s crisis behind us for good.

But, furthermore, if you truly imagine a society where robots do nearly all the work, including in most service industries then increasing the purchasing power of any given hour of work will not be enough. We will have to radically rethink ownership of the means of production. That may sounds ‘communist’ or ‘Marxist’ but giving everyone a right to, at least, consume a portion of what is being produced (or, more directly, ownership of the machines themselves) is the only way to deal with the issue. Failure to do so early enough - and peacefully enough - may well result into one more ‘big’ revolution movement similar to the one which accompanied the transformation of the feudal system into our capitalist one. More positively, we should remember that such an evolution is the ultimate dream and purpose of technological progress: Mankind lifting Adam’s curse.

Since this not meant to be a sciences-fiction blog, I will stop there but will point out that ‘post-scarcity economies’ have been discussed fairly extensively in anticipation literature. It may not always be a paradisiac utopia (human beings freed of wants may not be a pretty thing, in actuality) but such a world would make macroeconomics strangely (for me) irrelevant. It's not the worse fate in the world for a sciences to disappear because the problem it meant to solve also disappeared...

No comments:

Post a Comment