On November 2, 2016 Paul Wiseman writes on the Associated Press, published in the business section of The Christian Science Monitor:
Donald Trump blames Mexico and China for stealing millions of jobs from the United States.
He might want to bash the robots instead.
Despite the Republican presidential nominee’s charge that “we don’t make anything anymore,” manufacturing is still flourishing in America. Problem is, factories don’t need as many people as they used to because machines now do so much of the work.
America has lost more than 7 million factory jobs since manufacturing employment peaked in 1979. Yet American factory production, minus raw materials and some other costs, more than doubled over the same span to $1.91 trillion last year, according to the Commerce Department, which uses 2009 dollars to adjust for inflation. That’s a notch below the record set on the eve of the Great Recession in 2007. And it makes U.S. manufacturers No. 2 in the world behind China.
Trump and other critics are right that trade has claimed some American factory jobs, especially after China joined the World Trade Organization in 2001 and gained easier access to the U.S. market. And industries that have relied heavily on labor — like textile and furniture manufacturing — have lost jobs and production to low-wage foreign competition. U.S. textile production, for instance, is down 46 percent since 2000. And over that time, the textile industry has shed 366,000, or 62 percent, of its jobs in the United States.
But research shows that the automation of U.S. factories is a much bigger factor than foreign trade in the loss of factory jobs. A study at Ball State University’s Center for Business and Economic Research last year found that trade accounted for just 13 percent of America’s lost factory jobs. The vast majority of the lost jobs — 88 percent — were taken by robots and other homegrown factors that reduce factories’ need for human labor.
“We’re making more with fewer people,” says Howard Shatz, a senior economist at the Rand Corp. think tank.
General Motors, for instance, now employs barely a third of the 600,000 workers it had in the 1970s. Yet it churns out more cars and trucks than ever.
Or look at production of steel and other primary metals. Since 1997, the United States has lost 265,000 jobs in the production of primary metals — a 42 percent plunge — at a time when such production in the U.S. has surged 38 percent.
Allan Collard-Wexler of Duke University and Jan De Loecker of Princeton University found last year that America didn’t lose most steel jobs to foreign competition or faltering sales. Steel jobs vanished because of the rise of a new technology: Super-efficient mini-mills that make steel largely from scrap metal.
The robot revolution is just beginning.
The Boston Consulting Group predicts that investment in industrial robots will grow 10 percent a year in the 25-biggest export nations through 2025, up from 2 or 3 percent growth in recent years.
The economics of robotics are hard to argue with. When products are replaced or updated, robots can be reprogrammed far faster and more easily than people can be retrained.
And the costs are dropping: Owning and operating a robotic spot welder cost an average $182,000 in 2005 and $133,000 in 2014 and will likely run $103,000 by 2025, Boston Consulting says. Robots will shrink labor costs 22 percent in the United States, 25 percent in Japan and 33 percent in South Korea, the firm estimates.
CEO Ronald De Feo is overseeing a turnaround at Kennametal, a Pittsburgh-based industrial materials company. The effort includes investing $200 million to $300 million to modernize Kennametal’s factories while cutting 1,000 of 12,000 jobs. Automation is claiming some of those jobs and will claim more in the future, De Feo says.
“What we want to do is automate and let attrition” reduce the workforce, he says.
Visiting a Kennametal plant in Germany, De Feo found workers packing items by hand. He ordered $10 million in machinery to automate the process in Germany and North America.
That move, he says, will produce “better quality at lower cost” and “likely result in a combination of job cuts and reassignments.”
But the rise of the machines offers an upside to some American workers: The increased use of robots — combined with higher labor costs in China and other developing countries — has reduced the incentive for companies to chase low-wage labor around the world.
Multinational companies are also rethinking how they spread production across the globe in the 1990s and 2000s, when they tended to manufacture components in different countries and then assemble a product at a plant in China or other low-wage country. The 2011 earthquake and tsunami in Japan, which disrupted shipments of auto parts, and the bankruptcy of the South Korean shipping line Hanjin Shipping, which stranded cargo in ports, exposed the risk of relying on far-flung supply lines.
“If your supply chain gets interrupted and your raw materials are coming from offshore, all of a sudden shelves are empty and you can’t sell product,” says Thomas Caudle, president of the North Carolina-based textile company Unifi.
So companies have been returning to the United States, capitalizing on the savings provided by robots, cheap energy and the chance to be closer to customers.
“They don’t have all their eggs in that Asian basket anymore,” Caudle says.
Over the past six years, Unifi has added about 200 jobs, bringing the total to over 1,100, at its automated factory in Yadkinville, North Carolina, where recycled plastic bottles are converted into Repreve yarn. Unmanned carts crisscross the factory floor, retrieving packages of yarn with mechanical arms — work once done by people.
In a survey by the consulting firm Deloitte, global manufacturing executives predicted that that the United States — now No. 2 — will overtake China as the most competitive country in manufacturing by 2020. (Competitiveness is measured by such factors as costs, productivity and the protection of intellectual property.)
The Reshoring Initiative, a nonprofit that lobbies manufacturers to return jobs to the United States, says America was losing an average of 220,000 net jobs a year to other countries a decade ago. Now, the number being moved abroad is roughly offset by the number that are coming back or being created by foreign investment.
Harold Sirkin, senior partner at Boston Consulting, says the global scramble by companies for cheap labor is ending.
“When I hear that (foreigners) are taking all our jobs — the answer is, they’re not,” he says.
The Christian Science Monitor reports that in reality, United States manufacturing output is at an all-time high, worth $2.2 trillion in 2015, up from $1.7 trillion in 2009. And while total employment has fallen by nearly a third since 1970, the jobs that remain are increasingly skilled.
“Across the country, factory owners are now grappling with a new challenge: Instead of having too many workers, as they did during the Great Recession, they may end up with too few. Despite trade competition and outsourcing, American manufacturing still needs to replace tens of thousands of retiring boomers every year. Millennials may not be that interested in taking their place. Other industries are recruiting them with similar or better pay. And those industries don’t have the stigma of 40 years of recurring layoffs and downsizing.
“We’ve never had so much attention from manufacturers. They’re calling and saying: ‘Can we meet your students?’ They’re asking, ‘Why aren’t they looking at my job postings?’ ” says Julie Parks, executive director of workforce training at Grand Rapids Community College in western Michigan.
Gary Reber Comments:
This is another recent article that looks at a future where there will be hordes of citizens of zero economic value. That is, unless the system can be reformed to empower EVERY citizen to acquire OWNERSHIP in the wealth-creating, income-producing capital assets resulting from technological invention and innovation.
Because non-human productive capital is increasingly the source of the world’s economic growth it should become the source of added property ownership incomes for all. The reality is 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.
Rather than focus on Job Creation, Job Retraining, and a redistributed Minimum Guaranteed Income that holds back technological invention and innovation, our economic policies should focus on wealth-creating, income-producing capital Ownership Creation.
Given that there is no question that robotic technology will continue to expand the productivity and in large measure destroy jobs and devalue the value of human labor, the question that SHOULD be urgently addressed is WHO SHOULD OWN THE FUTURE TECHNOLOGY ECONOMY? Will ownership continue to concentrate among the 1 percent wealthy ownership class who now OWNS America, or will we reform the system to provide equal opportunity for EVERY child, woman, and man to acquire personal OWNERSHIP in FUTURE non-human capital assets paid for with the FUTURE earnings of the investments in our technological future?
The conclusions should surprise no one who is conscious and who has even causally observed the constant shift to non-human productive inputs in the manufacturing, distribution, and sales of products, as well as the delivery of services, that has been occurring during their lifetime. The first burst of this phenomena was the Industrial Revolution. But now we are in an age of technology sophistication that is permeating every sector of industry and our day-to-day lives.
There’s nothing new about machines replacing people, but the rate of replacement is exponential and the result is that productivity gains lead to more wealth for the OWNERS of the non-human factor of production, but for others who have always been dependent on jobs as their source of income, there has been a steady decline to poverty-level labor incomes.
What must be understood (which unfortunately is not understood by conventional economists) is that there are two independent factors of production––human or labor workers and non-human or physical productive capital––productive land, structures, machines, super-automation, robotics, digital computerized operations, etc.
Fundamentally, economic value is created through human and non-human contributions.
Also what needs to be understood is that human productivity has not advanced (our human abilities are limited by physical strength and brain power––and relatively constant), but that the productiveness of the non-human factor of production––productive capital––is the reason that private sector corporations, majority owned by the “1 percent,” are utilizing the non-human factor of production increasingly to create efficiencies and save labor costs. It is the function of technology to save labor from toil and to enable us to do things that otherwise is humanly impossible without non-human input.
The critical question becomes who should OWN productive capital? The issue of OWNERSHIP is unbelievably overlooked by those in academia and politics, as well as by the author of this article. Yet we live in country founded upon private property rights.
Today, large streams of data, coupled with statistical analysis and sophisticated algorithms, are rapidly gaining importance in almost every field of science, politics, journalism, and much more. What does this mean for the future of work?
But what about China and Asia, the place where all the manufacturing jobs are supposedly going? True, China has added manufacturing jobs over the past 15 years. But now it is beginning its shift to super-robotic automation. Foxconn, which manufactures the iPhone and many other consumer electronics and is China’s largest private employer, is on track to install over a million manufacturing robots within three years. Thus, in reality off-shoring of manufacturing will eventually be replaced by human-intelligent super-robotic automation.
The pursuit for lower and lower cost production that relies on slave wage labor will eventually run out of places to chase. Eventually, “rich” countries, whose productive capital capability is owned by its citizens, will be forced to “re-shore” manufacturing capacity, and result in ever-cheaper robotic manufacturing.
“The era we’re in is one in which the scope of tasks that can be automated is increasing rapidly, and in areas where we used to think those were our best skills, things that require thinking,” says David Autor, a labor economist at Massachusetts Institute of Technology.
Businesses are spending more on technology now because they spent so little during the recession. Yet total capital expenditures are still barely running ahead of replacement costs. “Most of the investment we’re seeing is simply replacing worn-out stuff,” says economist Paul Ashworth of Capital Economics.
Yet, while the problem is one that no one can no longer ignore, the solution also is one starring them in the face but they just can’t see the simplicity of it.
The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and labor devaluing technological innovation and invention so not all of the benefits of OWNING FUTURE productive capacity accrues to today’s wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through stock OWNERSHIP dividends so they can afford to purchase the products and services produced by the economy.
None of this is new from a macro-economic viewpoint as productive capital is increasingly the source of the world’s economic growth. The role of physical productive capital is to do ever more of the work of producing more products and services, which produces income to its owners. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. 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. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.
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. Binary economist Louis 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, according to Kelso, 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. Kelso postulated that if both labor and capital are interdependent 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.
The 400 wealthiest Americans and the other 1 to 10 percent richest Americans are rich because they OWN wealth-creating, income-generating productive capital assets. The disenfranchised poor and working and middle class are propertyless in terms of OWNING productive capital assets.
Because productive capital is increasingly the source of the world’s economic growth, shouldn’t we be asking the question why is not productive capital the source of added property OWNERSHIP incomes for all? Why are we not addressing how the system facilitates greed capitalism and envy while concentrating productive capital OWNERSHIP among the 1 to 10 percent of the population?
The change that is necessary is to reform the system to provide equal opportunity for EVERY American to acquire wealth-creating, income-generating productive capital assets on the basis that the investments will pay for themselves––and on the same terms that the wealthy OWNERSHIP class now utilizes. They are able to use the investment’s earnings to pay off the capital credit loans used to finance their investments, without having to use their own money or deny themselves consumption.
A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production.
There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual OWNERSHIP so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.
The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden OWNERSHIP in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate OWNERSHIP shares and earn a new source of dividend income derived from their capital OWNERSHIP in the “machines” that are replacing them or devaluing their labor value.
The solution will require the reform of the Federal Reserve Bank to create new OWNERS of FUTURE productive capital investment in businesses simultaneously with the growth of the economy. The solution to broadening private, individual OWNERSHIP of America’s FUTURE capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every child, woman, and man to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become “customers with money.” The proposed Capital Homestead Act would produce this result.
Through Just Third Way reforms, economic growth would be freed from the slavery of past savings (“old money”), while creating a domestic source of new asset-backed, interest-free (but not cost free) money and expanded bank credit to finance new capital repayable out of future savings (earnings). To ensure that OWNERSHIP of future private sector growth and newly created wealth is universally accessible to every citizen, such newly created money and credit would only be available through economic democratization vehicles, administered through the competitive member banks of a well-regulated Federal Reserve central banking system.
Under the first tier, future increases in the money supply (“new money”) would be linked to actual growth of the economy’s productive assets, creating new OWNERS of new capital asset wealth through widespread access to interest-free capital credit repayable with future profits. The Federal Reserve would create (i.e., “monetize”) interest-free credit, with lenders adding their normal markup as service fees above the cost of money. This would establish an unsubsidized minimal rate for financing technological growth. This would provide the public with a currency backed by increasingly more efficient instruments of production, real wealth-producing capital assets, rather than unsustainable government debt.The creation of new money and credit would be non-inflationary and would simultaneously broaden purchasing power throughout the economy. To accomplish this, a key reform is a two-tiered interest policy by the Federal Reserve that would distinguish between productive and non-productive uses of credit.
The second tier would allow substantially higher, market-determined interest rates for non-productive purposes, for which “past savings” would remain available. The Federal Reserve would be restrained from future monetization of national deficits or encouraging other forms of non-productive uses of credit, causing upper-tier credit to seek out already accumulated savings at market rates.
Capital Homesteading would also provide through capital credit insurance a rational way to deal with risk, as well as an additional check on the quality of loans being supported by the Federal Reserve. Capital credit insurance and reinsurance policies would offset the risk that the enterprises issuing new shares on credit might fail to repay the loans. Such capital credit default insurance would substitute for collateral demanded by most lenders to cover the risk of non-payment, thus enabling the poor and others with few assets to overcome the collateralization barrier that excludes poor people from access to productive credit.
Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.See the article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html
Also see “Achieving The Green Economy” at http://foreconomicjustice.org/?p=9082.
Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline and “The Income Solution To Slow Private Sector Job Growth” at http://www.foreconomicjustice.org/9872/the-income-solut…ector-job-growth.
