On February 15, 2013, Christopher Mims writes on Quartz:
Since the end of the second world war, the proportion of people in the US who are working in manufacturing has declined steadily, from nearly 40% during the war to less than 10% today:
Many have blamed this decline on outsourcing—the movement of factories to countries where labor is cheaper. And there’s no doubt that outsourcing has led to fewer factory jobs in the U.S. and other rich countries.
And yet the U.S., like almost every other rich country on the planet, manufactures more stuff than it ever did. Manufacturers have replaced workers with machines—trading labor for capital. This means the manufacturing workers who remain are many times more productive than their forebears 50 years ago.
Baxter and robots like it represent an inflection point in the long trend of top-of-the-line manufacturing: The point at which the old system, in which unskilled laborers still have a place in factories, is retired forever. In addition to Baxter, new robots from ABB, Universal Robots, Nextage and Redwood Robotics are finally smart enough to tend other robots.
To understand how this plays out in the real world, it’s worth reading economics journalist Adam Davidson’s account of the lives of two factory workers at a highly automated car parts factory in Greenville, South Carolina. One, “Maddie,” is an unskilled laborer, or a “Level 1,” whose job it is to place parts into a machine that performs a particular operation on them without any adjustment from a human. The other, Luke Hutchins, got a two-year degree at vocational school, and can operate machines that require a great deal of experience and mathematical acumen, including calculus.
Luke earns 50 percent more than Maddie, but here’s the really important detail: Maddie’s job, like that of all Level 1′s, is “machine tending.” She merely enables a machine to work. In a few months, says Rodney Brooks, founder of Rethink Robotics, his Baxter robot will get an updated version of its software that will allow it to do machine tending.
Baxter might not replace Maddie immediately, but it suggests that sooner rather than later, the only people working in factories in rich countries any longer will be those who had the time and money to get college degrees. Consider: a large slice of America’s middle class used to consist of people who had started out working in factories despite having only a high school degree. The machines they worked with were comprehensible enough that people could learn on the job, slowly advancing, perhaps all the way up the ladder into management. That path to a middle-class wage is almost gone—and may finally be eliminated altogether.
What has happened in manufacturing is part of a larger paradox at the heart of America’s economy, says Erik Brynjolfsson, director of MIT’s Center for Digital Business. “More wealth was created in the past 10 years than ever before in history,” he says, “Yet at the same time millions of people are being left behind. The median worker in the U.S. is poorer now than in the mid-1990s.”
Not everyone is suffering. Skilled workers, for example, are earning more than ever. So are the very rich, those who own the capital that can be put to work in the world’s increasingly person-free farms, mines and factories. But those who used to make middle-class wages are increasingly slipping into lower-paying, service-sector jobs. That’s led to what MIT economist David Autor calls an “hourglass economy,” with more workers at both the top and (mostly) the bottom of the income spectrum.
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.
But what about China, 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, has plans 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 every-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 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.
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 man, woman and child 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.
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687
Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk
