On June 21, 2014, Steven Rattner writes in The New York Times:
JUST over 50 years ago, the cover of Life magazine breathlessly declared the “point of no return for everybody.” Above that stark warning, a smaller headline proclaimed, “Automation’s really here; jobs go scarce.”
As events unfolded, it was Life that was nearing the point of no return — the magazine suspended weekly publication in 1972. For the rest of America, jobs boomed; in the following decade, 21 million Americans were added to the employment rolls.
Throughout history, aspiring Cassandras have regularly proclaimed that new waves of technological innovation would render huge numbers of workers idle, leading to all manner of economic, social and political disruption.
As early as 1589, Queen Elizabeth I refused a patent on a knitting machine for fear it would put “my poor subjects” out of work.
In the 1930s, the great John Maynard Keynes predicted widespread job losses “due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.”
So far, of course, they’ve all been wrong. But that has not prevented a cascade of shrill new proclamations that — notwithstanding centuries of history — “this time is different”: The technology revolution will impair the livelihoods of millions of Americans.
Even The Economist has weighed in, with a special section declaring on its cover that robots are the “immigrants from the future.”
Let’s go back to first principles. Call it automation, call it robots, or call it technology; it all comes down to the concept of producing more with fewer workers. Far from being a scary prospect, that’s a good thing.
Becoming more efficient (what economists call “productivity”) has always been central to a growing economy. Without higher productivity, wages can’t go up and standards of living can’t improve.
That’s why, in the sweep of history, the human condition barely improved for centuries, until the early days of the industrial revolution, when transformational new technologies (the robots of their day) were introduced.
Consider the case of agriculture, after the arrival of tractors, combines and scientific farming methods. A century ago, about 30 percent of Americans labored on farms; today, the United States is the world’s biggest exporter of agricultural products, even though the sector employs just 2 percent of Americans.
The trick is not to protect old jobs, as the Luddites who endeavored to smash all machinery sought to do, but to create new ones. And since the invention of the wheel, that’s what has occurred.
When was the last time you talked to a telephone operator? And yet if rotary dial telephones hadn’t been invented, millions of Americans would currently be wastefully employed saying “Central” every time someone picked up a telephone receiver. More recently but similarly, the Internet has rendered human directory assistance nearly extinct.
Of course, I can’t prove that the impact of some new wave of technological innovation won’t ever upend thousands of years of history. But it hasn’t happened yet.
If technology were supplanting jobs, productivity — the measure of each worker’s output — would be rising sharply. However, that’s not happening. In fact, productivity growth in recent years has been sluggish (an even scarier concern). That has led to fears about the opposite problem, the possibility that technological advances won’t be robust enough to provide the productivity increases needed to sustain income growth.
I don’t buy that either. As recently as 30 years ago, few of us would have foreseen the information technology revolution, with the vast gains in efficiency that have flowed from it.
To be sure, technology has changed the nature of work — more specialized training is now required for many jobs — and consequently, it has contributed to the sharp rise in income inequality.
But technology is not the prime culprit behind our languid employment and income growth. That honor belongs to globalization, and particularly the ability of companies to substitute far less expensive and increasingly skilled labor in developing countries.
To address these very real challenges, we should be embracing technology, not fearing it. That means educating and training Americans to perform the more skilled jobs that cannot yet be performed by workers in developing countries. And let’s not forget that we are world leaders in industries like education, medicine, technology, entertainment and yes, even financial services.
Many of these sectors generate skilled jobs — nurses, who are in high demand, earn an average of $65,000 per year — and even substantial export dollars. Of course, not every worker can be retrained, and so we must help those who aren’t suitable for the new jobs through more robust social welfare programs.
We mustn’t become a nation of robot worriers. That will merely guarantee that our incomes and standards of living will continue to stagnate.
Steven Rattner has “productivity” confused with “productiveness.” The economic growth gains have not been the result of human labor productiveness but due to the non-human factor of production–– capital assets in the form of productive land, structures, machines, tools, super-automation, robotics, digital computerized processing, etc. Fundamentally, economic value is created through human and non-human contributions.
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.
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.
Most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in binary economist Louis 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.”
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 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.
At Agenda 2000 (an advocacy firm founded by myself with Louis Kelso as Chairman), we used 90 percent, while the Rand Corporation statistic was 98 percent, to represent the productive capital factor input to creating products and services. In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages to purchase capital. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work with capital work. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes capital ever more productive. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through jobs, minimum wage, and welfare. Such policies do not function effectively.
In a democratic growth economy, based on Kelso’s binary economics, the ownership of capital 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 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 economic growth. 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.
There are a list of papers by economic scholars that support the point that technological and system changes account for almost 90 percent of “productivity growth.” See footnote 6 of Norman Kurland’s (President of the Center for Economic and Social Justice) paper “A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation” published in 2001 (Vol. 30) by the Journal of Socio-Economics and pages 173-195 of the CESJ book Capital Homesteading for Every Citizen. This point is also on page 25 and footnote 49 on page 10 of the Capital Homesteading book. (See www.CESJ.org)
See also the excellent article by Professor Robert Ashford on pages 99-132 of CESJ’s Curing World Poverty book to explain how the term “productivity” as used by economists differs from the term “productiveness” as used by Kelsonians. “Productivity” stems from the erroneous “labor theory of value” and a one-factor analysis that rejects the value of “Say’s Law of Markets.” Kelso’s binary or two-factor theory of economics would avoid redistributive non-market-based distributions of income under the wage slave, welfare slave, charity slave, consumer debt slave system in today’s slow-growth world by enabling all citizens to own and increase their incomes from all non-human increases to the productive process.
These papers and free downloadable books are available at the CESJ Web site at www.cesj.org and should be read by economic commentators such as Steven Rattner at The New York Times. Unfortunately the published article provides no way to comment.
