Amazon will change the nature of shopping once again, as it did with its fulfilment centre. Photograph: Bloomberg/Bloomberg via Getty Images
On December 8, 2016, Tim Dunlop writes on The Guardian:
Amazon has launched a real-world shop that allows customers to walk in, take what they want and walk out. No checkouts, no queues. As they explain in the FAQ about Amazon Go:
“Our checkout-free shopping experience is made possible by the same types of technologies used in self-driving cars: computer vision, sensor fusion, and deep learning. Our Just Walk Out technology automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart. When you’re done shopping, you can just leave the store. Shortly after, we’ll charge your Amazon account and send you a receipt.”
This new model of shopping not only challenges established retailers, but it raises serious questions about the future of work and the changing nature of the economy more generally. Furthermore, it suggests the role of government will need to change, involving itself less with regulating business and more with redistributing wealth.
At this stage the store is only available to Amazon employees, though public versions are due to be opened in the US early in 2017. An Australian version is likely some time after that. Indeed, Amazon is currently gearing up to launch a number of its services in Australia, including AmazonFresh, its grocery delivery service.
All of these are likely to shake up the various cartels (Coles/Woolworths, David Jones/Myer) that dominate certain retail sectors in Australia, but it is Amazon Go that is likely to be the real disruptor.
The ramifications for employment seem obvious. In the US, around five million people are employed in retail, while Australia has 1.3 million and Britain 2.8 million. Stores like Amazon Go could therefore mean many job losses. Retailers could realise savings of something in the order of 15% of running costs, an amount that is likely to make the technology very attractive. And really, it is just the next logical development from the automated checkouts already in use in most supermarkets, or the self-serve kiosks McDonald’s is already rolling out.
Of course, Amazon Go may create work too, most likely value-add services involving things like handling returns or gift-wrapping, but that is hardly likely to make up for other job losses. It will also need people involved in stock ordering and logistics, though again, not many. Amazon is already well advanced in using robotics to do these things, with years of experience developing such technologies in its “fulfilment centres” (the creepy name they use for their warehouses).
So by any measure, it’s hard to see how an operation like Amazon Go doesn’t ultimately mean fewer jobs.
Is it all bad? Of course not. I mean, no queues or checkouts? From a shopper’s point of view, what’s not to love?
Amazon Go addresses another rising problem too. There has been concern for a while that cities and other retail centres will hollow out as people increasingly shop online, but imagine shopping if all the big stores were like Amazon Go. With no checkout queues, it’s easy to picture a vibrant city or suburban centre where people come to buy the stuff they want, are less stressed about it and are therefore willing to linger in public spaces listening to buskers or drinking coffee. Who knows what other services they might avail themselves of?
But there is a more important point to make.
Amazon Go, along with businesses like Uber, Airbnb, Netflix, and even Google and Facebook, are part of a fundamental restructuring of the economy and the work that goes with it. It is not simply that the technology is causing jobs to be lost. It is that it is changing the relationship between businesses and employees, governments and citizens.
We are moving from a globalised world of manufacturing giants to a networked one of technology giants.
In the former, the role of government was to coordinate and create markets, local and international, and to define the rules under which we all operated. Firms themselves tended to do just one thing – make cars, for instance – and so benefited from a permanent, full-time workforce. This provided security and prosperity to a substantial middle class.
In the networked world of technology companies, firms are no longer stand-alone silos that do a single thing. They tend to be project-based, pulling together casual workforces to achieve particular outcomes. Their employees are almost by definition contingent (and often not technically employees).
The role of government in this sort of economy is more to facilitate innovation and education, but that won’t be enough.
Left to itself, this sort of economy is also a recipe for massive inequality and insecurity. Platforms like Uber or Amazon Go, because they need so few workers, tend to funnel the wealth they generate to owners and investors rather than distribute it broadly via wages.
The role of government therefore becomes one of equalisation, of finding ways to see that the wealth generated in the new economy doesn’t simply flow to a tiny number of people at the top of the new corporations. The most efficient way for governments to do this is by the mechanism of a universal basic income, a guaranteed wage for everyone, that not only provides a financial floor below which no one can fall, but allows us to redefine the sort of work we do and find meaningful.
That is to say, by breaking the link between survival and work, UBI allows us all to not only benefit from the technology, but to reinvent what we even mean by the concept of work.
Aside from climate change, this reinvention of work is the most wicked problem facing humanity, and we can see the unease it causes reflected in the politics surrounding Brexit, and of Donald Trump, Bernie Sanders, Jeremy Corbyn and Pauline Hanson. What all these politicians have in common is they promise to “bring back the jobs” because they understand how important a decent job is to most people.
But developments like Amazon Go are a sharp reminder of how hollow such promises are. Our societies are being transformed right before our eyes. Automation is increasingly displacing human workers and so the politicians we need are not those playing on our insecurities by conjuring an image of the past, but those who can offer us a realistic vision of what comes next.
Redistribution of earned income from those who infuse productive input, including wealth-creating, income-producing non-human capital assets, into the economy to those who provide less or no productive input is not the answer.
The role of physical productive capital is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal costs, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
The result is that the price of products and services are extremely competitive as consumers will always seek the lowest cost/quality/performance alternative, and thus for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their products or services.
People invented “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention and innovation. Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”
Furthermore, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. If both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive, and ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the American economy.
To put this in context, it is important to briefly note that throughout history, man has endeavored to overpower the time constraints of physical and biological processes. It is now an accepted fact that accelerated scientific and technological innovation has directly led to a speeding up of all physical and social processes in the name of progress. The competitive drive has led to a frantic national and international chase for more efficient methods of production and distribution. In the process, humanity has pushed to develop even more powerful technologies, on the assumption that such technologies would accomplish more and more useful functions in less time. The results have been a dramatic acceleration of change and concentration of wealth ownership.
In a democratic growth economy, based on binary economics (human and non-human productive inputs), the ownership of productive capital assets would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income, from full earnings dividend payouts, would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote environmentally responsible economic growth and more profitable enterprise. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy. As a result, our business corporations would be enabled to operate more efficiency and competitively, while broadening wealth-creating ownership participation, creating new capital owners and “customers with money” to support the products and services being produced.
Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.
Without boosting corporate tax rates with the stipulation that full earnings payout to the owners of the corporation eliminates the corporate tax and thus double taxation, there will not be a strong incentive to finance future capital asset formation by issuing and selling new stock with the opportunity to be purchased by EVERY citizen using insured, interest-free capital credit, repayable out of the future earnings of the investments in growth. Thus, we need to implement policies that simultaneously creates new owners of future wealth-creating, income-producing capital assets simultaneously with the growth of the economy.
Without this economic system reform, the result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.
