Saturday, January 26, 2013

Some Concluding Remarks About Automation

Before we leave the topic of automation for now, there are a few points that I think need further clarification or elucidation:

1.) You need not be an economist or business analyst to see job loss due to automation in action, you can see it with your own eyes, as I pointed out in the article. Most U.S. media is propaganda for the business class, so it’s best to trust your own direct observations and conversations with people. However, it is good to see at least a little bit of the mainstream media focusing on this issue.

2.) It is often argued that by pinpointing automation as a significant factor in job loss, you dismiss all the other reasons such as offshoring, insourcing, mass immigration, the housing bubble, energy prices, poor schools, etc. Such is not the case. Certainly these reasons are not mutually exclusive. Yes, capitalism is an economic system that is failing on multiple fronts simultaneously, and all attempts at reform are being squelched in favor a nineteenth-century model. But automation is significant, and we need not dismiss it when we speak of other factors. Trying to come up with single issue cause of job loss is silly.

3.) Writing about automation should not be construed as a dismissal of the rigging of institutions against workers and in favor of the investor class, nor as an apology for neoliberalism. Nor does it allow us to ignore things like monopoly concentration, which Paul Krugman has also pointed to as a factor driving jobs loss, or the decline of unions. An all-out war against wages has been fought on multiple fronts since the 1970’s (and arguably for the whole history of capitalism); automation is simply the latest arrow in the quiver.

4.) Yes, there are many idle workers and resources that are not being utilized to their full extent. However, this does not mean we should dismiss the effects of automation. There are millions of things that need doing in this country that are not getting done, from rebuilding our infrastructure to insulating our homes to teaching our children, so we should not just throw up our hands and say we can't create jobs because of automation. The reason these jobs are not getting done is either because they are not profitable for the private sector, or the money does not exist to put them to work. There is a role for government policy in addressing these issues - MMT ideas such as the job guarantee are useful compromises that might mitigate some of the pain from job loss and take care of some of our urgent tasks that need doing.

5.) There is no institution specifically tasked with the creation of jobs in society. As is often said, the economy is merely the actions of individuals acting in their own self-interest. “Jobs” are merely side effects of meeting our needs. There is no law of economics saying there must be enough jobs for everyone.

6.) We need to get past the notion that any government job is somehow illegitimate, or by definition "waste".

7.) Outsourcing through the Internet, self service kiosks, DIY software and online commerce are all forms of job destruction that we can file under automation, even though they are often forgotten. The AP article is wise to identify these.

8.) The notion that we should all just create our own jobs is farcical. Nobody creates a job; they fulfill a need. If those needs are already fulfilled by a big business for less money, they will be. Selling our services to others assumes our peers have money to buy those services, which will be true of less and less people, or business demand is infinite, which it is not. The earning power of the middle class is declining in the aggregate, meaning we cannot simply sell our services to each other or even the one percenters, since their needs are not infinite either.

9.) The idea that new technologies lead to decentralization does not bear historical scrutiny. Technology usually leads to centralization because it is expensive, complicated, requires rare expertise, and leads to economies of scale. Hundreds of car companies consolidated to just three, and so on. Even the Internet is coming under the control of large companies like Google, Apple and Facebook. 3D printing will probably fall under the control of large companies that can afford the technology and take advantage of economies of scale to sell access to it for the lowest price rather than everyone printing out all their own goods in some sort of democratic vision.

10.) 3D printing will not replace manufacturing nor create millions of new jobs. This is more wishful thinking than reality.

11.) It bears repeating that we are not seeing people transition to new jobs, but rather to already existing occupations at lower pay. Statistics tell us that the majority of new jobs will be low wage McJobs no matter how much we educate the workforce. This is borne out in statistics on wealth concentration, declining wages, and inequality.

12.) To date, entire new industries are not being created due to automation, they are merely allowing wages in existing industries to be lowered. For example, the replacement of automobile factory workers by robots has not created vast new industries, except for maybe those who program and build the robots. These jobs will not employ many people, however, even if they were easy to acquire (see below).

13.) High wage occupations are increasingly rare and intentionally surrounded by high barriers to entry (college tuition, geography, nepotism, unpaid internships, etc.). These barriers are not accidental but intentional – they are a feature, not a bug, which is why calls to make college affordable will go unheeded. They are also why online courses are no solution – the entire point of universities and licensure is to limit the amount of people the professional class; the actual education received is irrelevant. "Opportunity hoarding" by the wealthy means that high wage jobs will be simply unavailable for the vast majority of people no matter how much education they receive or how hard they work.

14.) It has been said that what’s different is the rate at which automation is replacing jobs thanks to things like Moore's Law, not allowing industries to catch up as they had in the past. I would suggest that it’s not merely the rate, but that what we're seeing is a qualitatively different state of affairs than before. Most previous automation consisted of ways to augment the efficiency and productivity of the individual worker (powered looms, gas engines, electric tools, etc.), not the replacement of the worker. This had the effect of expanding the economy as a whole. But the microchip is an electronic brain, and this is what’s new. Never before have things like human cognition been successfully reproduced until now. This allows a widespread replacement of workers across all industries simultaneously, and an augmentation of mental capabilities (for example, an engineer with a design program or an accountant with a spreadsheet), rather than just physical ones, meaning even non-physical work will start to be eliminated.

15.) Most jobs created since deindustrialization have been office or service jobs, both of which are under assault by automation. Neither IT nor health care is likely absorb all the job seekers. "Creative" jobs are always a premium and will not be widespread.

16.) While new jobs have been created over the past several decades, no fundamentally new job categories have been created. We do the same jobs, just with computers and automation. The list of major occupational categories from the Bureau of labor statistics is here: There is no category on this list where labor cannot be reduced by automation. As Swedish business consultant Mats Larsson has pointed out, human beings have a finite ability to invent truly new activities. He argues that most recent inventions have been just slight improvements in the speed of rudimentary things that we’ve actually been doing for a long time, such as travel, transport, communication and trade. Innovation, while it still occurs, is ever more costly and incremental. Today, it often has to do with efficiency measures, which, although useful, will not open vast new areas of employment, rather they will merely allow us to do with more with less (people, energy, material, etc). Thus there are no new industries or innovations in the horizon waiting to save us.

17.) Automation means our problems with job creation are not temporary or a phase but structural. Joblessness is not the product of a banking crisis, the national debt, or the business cycle. Even if those were solved tomorrow, the problem would remain.

18.) Corporate profits as a share of the economy are at an all-time high, whereas workers' share of the economy are at an all-time low. This is in contradiction to orthodox economic theory.

19.) Expensive worker benefits like health care will speed up the desire for automation, as will a declining rate of profit.

20.) Because job elimination is such a slow process, it will not produce a critical mass to mitigate against it. It is a slow-motion catastrophe. The idea that people will rebel is unlikely, since they will likely see joblessness as a personal failing, encouraged by the cultural notions of self-reliance and bootstrapping.

21.) The decline in jobs since deindustrialization has been accompanied by a marked rise in incarceration rates and an expansion of the police state. This suggest that the authorities are, in fact, worried about the destabilizing effects of joblessness, but will take no government action outside of protecting the winners, criminalizing poverty, and suppressing dissent.

22.) As economic systems become less inclusive, political systems will follow. Already efforts are under way to narrow the vote and disenfranchise large segments of the voting public, particularly in urban areas. Since the wealthy no longer need the rest of society for any reason, they will be abandoned politically in what I've termed "the final solution for the working class."

23.) Already a complex narrative is emerging of "The Theory of The Moocher Class" (with apologies to Veblen), promoted by the wealthy. The claim is that as jobs disappear, tax revenue shrinks and more people draw on government benefits, it is these government benefits that are the cause of the bad economy in the first place! In the narrative, people are lazy by choice because of generous government benefits, and the benefits are bankrupting the productive class and preventing them from creating more jobs (as if those jobs would not be sent overseas or automated).

24.) We see the creation of a vast new "wealth defense" industry dedicated to preventing any form of redistribution or equitable distribution of worker productivity. This industry actively bankrolls thinktanks, scholars, etc. One of their common themes is that wealth is a perfect meritocracy, where the people on the top "earn" their disproportionate share of returns because they are better than everyone else in ability, moral values, etc. This is a favorite theme of David Brooks. It is also claimed in certain sectors that a declining economy is caused by "bad behavior" such as out-of-wedlock births, rather than such behavior resulting from declining economic opportunity.

25.) The economy will also need to absorb millions of new workers, both male and female, from places like China, who will want to access upward mobility. Corporations can hire talent from anywhere in the world, and have no loyalty to any particular country. While shrinking and aging workforces may mitigate some of the effects, it will not be enough to offset jobs losses due to automation.

See the following:

Chinese Graduates Say No Thanks To Factory Jobs (New York Times):
Wang Zengsong is desperate for a steady job. He has been unemployed for most of the three years since he graduated from a community college here after growing up on a rice farm. Mr. Wang, 25, has worked only several months at a time in low-paying jobs, once as a shopping mall guard, another time as a restaurant waiter and most recently as an office building security guard.

But he will not consider applying for a full-time factory job because Mr. Wang, as a college graduate, thinks that is beneath him. Instead, he searches every day for an office job, which would initially pay as little as a third of factory wages.

“I have never and will never consider a factory job — what’s the point of sitting there hour after hour, doing repetitive work?” he asked.

Millions of recent college graduates in China like Mr. Wang are asking the same question. A result is an anomaly: Jobs go begging in factories while many educated young workers are unemployed or underemployed. A national survey of urban residents, released this winter by a Chinese university, showed that among people in their early 20s, those with a college degree were four times as likely to be unemployed as those with only an elementary school education.

It is a problem that Chinese officials are acutely aware of.

“There is a structural mismatch — on the one hand, the factories cannot find skilled labor, and, on the other hand, the universities produce students who do not want the jobs available,” said Ye Zhihong, a deputy secretary general of China’s Education Ministry.

China’s swift expansion in education over the last decade, including a quadrupling of the number of college graduates each year, has created millions of engineers and scientists. The best can have their pick of jobs at Chinese companies that are aiming to become even more competitive globally.
But China is also churning out millions of graduates with few marketable skills, coupled with a conviction that they are entitled to office jobs with respectable salaries.

Part of the problem seems to be a proliferation of fairly narrow majors — Mr. Wang has a three-year associate degree in the design of offices and trade show booths. At the same time, business and economics majors are rapidly gaining favor on Chinese campuses at the expense of majors like engineering, contributing to the glut of graduates with little interest in soiling their hands on factory floors.
China's Army of Graduates Struggles For Jobs (New York Times)

Next Made-In-China Boom: College Graduates (New York Times)
Zhang Xiaoping’s mother dropped out of school after sixth grade. Her father, one of 10 children, never attended.

But Ms. Zhang, 20, is part of a new generation of Chinese taking advantage of a national effort to produce college graduates in numbers the world has never seen before.

A pony-tailed junior at a new university here in southern China, Ms. Zhang has a major in English. But her unofficial minor is American pop culture, which she absorbs by watching episodes of television shows like “The Vampire Diaries” and “America’s Next Top Model” on the Internet.

It is all part of her highly specific ambition: to work some day for a Chinese automaker and provide the cultural insights and English fluency the company needs to supply the next generation of fuel-efficient taxis that New York City plans to choose in 2021. “It is my dream,” she said, “and I will devote myself wholeheartedly to it.”

Even if her dream is only dorm-room reverie, China has tens of millions of Ms. Zhangs — bright young people whose aspirations and sheer numbers could become potent economic competition for the West in decades to come.

China is making a $250 billion-a-year investment in what economists call human capital. Just as the United States helped build a white-collar middle class in the late 1940s and early 1950s by using the G.I. Bill to help educate millions of World War II veterans, the Chinese government is using large subsidies to educate tens of millions of young people as they move from farms to cities.

The aim is to change the current system, in which a tiny, highly educated elite oversees vast armies of semi-trained factory workers and rural laborers. China wants to move up the development curve by fostering a much more broadly educated public, one that more closely resembles the multifaceted labor forces of the United States and Europe.

It is too early to know how well the effort will pay off.
As for the political counterreaction to any sort of reform, see: The Right's 47 Percent Theory Seems Stronger Than Ever Among The Wingnuts...  and The Theorists of the Moocher Class: Veronique de Rugy and Paul Ryan (Brad DeLong). Here are some quotes describing this emerging narrative:
DeMint: "Almost half of Americans are getting something from government, and the other half are paying for it. And we're on a track where 60 percent are getting something from government and 40 percent are paying for it. You can't sustain a democracy with that mix…. We've got to understand we're in trouble, that we don't have much time." Or this from Steve Doocey on Fox and Friends: "Coming up! A controversial question. With 47% of Americans not paying taxes--47%--should those who don't pay be allowed to vote?" Who? The 47 percent themselves… [who] vote into office people willing to take from the top half…. Consequences? The system eventually collapses into itself, as those at the margin work less and also join in demanding more…
A Nation of Government Dependents?: **49% of U.S. Population Lives in Households Receiving Government Benefits:88 In 2010, 49 percent — or nearly half — of the U.S. population lived in a household receiving government assistance... “way up from 1983, when fewer than a third were government beneficiaries.”... 16 percent of the population lived in a household receiving Social Security benefits, and 15 percent in a household receiving Medicare benefits. Medicaid benefits had the largest share of dependents, with 26 percent of the population living in a household receiving such benefits. About 35 percent of Americans in 2010 lived in households that received benefits from at least one means-tested transfer program... 15 percent... receiving food stamps, 2 percent unemployment compensation, and 6 percent supplemental security income. The percent of the population living in a household receiving benefits for low-income families with children reached 8 percent, and those receiving temporary assistance for needy families reached 2 percent.... The more people receive government assistance, the more difficult it will be to reform these programs. The majority of future federal spending will be to finance this growing nation of dependents.
See also: Too many “takers”? Look to science fiction for the hard-Right answer! (Fabius Maximus):
Jerry Pournelle’s Codominium stories from the early seventies used this idea as an explanation for social breakdown: economically parasitic non-working citizens, paid for by ever-shrinking numbers of taxpayers.  It’s been around a long time as a just-so story.

Totally impervious to facts, too; neither pointing out that money is the creation of the state nor demonstrating just how brutally hard poor people tend to work will put a dent in it.

My take is that it’s not really economic at all; it’s an attempt to de-legitimize democracy as a political process, because democracy keeps getting the wrong answers.
And, as they note:
Jerry Pournelle’s science fiction novels about Falkenberg’s Legion describe not just the problem of too many “takers” (the 47%, a shiftless amoral idle mob) but also a solution: mass murder. Millions read Pournelle’s stories and smile at the “happy” endings. And not just Pournelle. Apocalypse porn is popular on the Right, with mega-deaths leaving behind a purified world of the righteous, such as Larry Burkett’s Chirstian sci-fi novel Solar Flare (1997).
Even existing programs are under assault, making things like a Universal Basic Income or a reduction in working hours almost impossible to imagine. I suspect what we'll see is more and more people becoming dependant on the ever smaller proportion of people who have jobs. Children will be dependant on their parents, spouses will be dependant on the other spouse (one-income families will return, just with lower living standards), boyfriends will be dependant on girlfriends, siblings will live with each other, roommates will be more common, friends and relatives will help each other out, etc. People without a social support network (like me) will be abandoned to homeless shelters or forced into suicide.

On a more positive note, given Americans' obsessive love affair with cars, the automation of driving might be the tipping point that makes Americans sit up and notice what's happening. See: Look Ma, No (Human) Hands (Paul Krugman).


  1. Thank you for another excellent piece ..

  2. Love your blog. I also read the series on automation the past few weeks on the AP newsfeed to my phone on the way to work.

    You are incredibly thoughtful and your analysis runs deep.

    You claim that you don't have a social support network, so you place yourself in the group that will "be abandoned to homeless shelters or forced into suicide."

    Please don't go there! Find a group to join. I myself have as a main life goal, and at least medium-term-goal, to find a community of like-minded individuals to form some kind of community with, if not find an existing one. I am not Amish, I don't want to join a new religion, but there ARE alternatives.

    One of the alternatives you didn't mention in the automation theme was simply opting out as much as possible, and creating one's own parallel economy with as many people as you can find to do this.

    In other words, why stay in the main economy and try to compete with computers? Why not give up?

    Have you heard of the amazingly prescient book, "This Ugly Civilization" by Ralph Borsodi?

    He pre-dated the 1960's-1970's "back to the land" movement by decades, and thought about it very formally and economically. His claim: that living a simple life on a homestead and producing as much as you can yourself and in your community, and then bartering or working for the remainder, will provide everyone with more of the most precious commodity: free time. Time to do what is truly important: music, art, thought, spirituality, friendship...

    You would obviously add an incredibly amount to any such intentional community. Please comment in reply if you want to discuss these ideas more. No, I'm not actively recruiting yet, but passively I sure am.

    I am a father and husband, and am exceedingly lucky to have the job I do now. It's in the field that is possibly contributing to mankind's downfall: software (although my own company's product is fairly benign in that regard). I have been struggling most of my life with finances, because I spent too much time trying to find meaning in the system (grad school, the humanities, etc.). What a fool's errand. I should have simply worked my ass off earlier, bought some land, and retired from this "ugly civilization." I still intend to, with anyone who will join.

    Keep up the good work.



Note: Only a member of this blog may post a comment.