On July 16, 2012, Andy Kessler writes in The Wall Street Journal argues that technology creates jobs through a process that happens during every business cycle and always, always creates jobs.
So how does productivity result in more employment?
Three ways. First, some new technology comes along that allows something never before possible. Cash from an ATM, stock trading from an airplane’s aisle seat, ads next to Google search results.
The inventor or entrepreneur who uses the invention benefits from sales and wealth and hires people to produce the good or service. We don’t hear about this. Instead we hear about the layoffs of bank tellers, stockbrokers and media salesmen. So productivity becomes the boogeyman for job losses. And many economic cranks would prefer that we just hire back the tellers and toll collectors.
This is a big mistake because new, cheaper technology becomes a platform for others to create or expand businesses that never before made economic sense. Adobe software killed typesetters, but allowed millions cheaply to get into the publishing business. Millions of individuals and micro-size businesses now reach a national, not just local, retail market thanks to eBay. Amazon allows thousands upon thousands of new vendors to thrive and hire.
Consider Uber, a 20-month-old start-up, whose smartphone app knows where you are and with a simple click arranges a private car pickup to take you where you want. It doesn’t exist without iPhones or Androids. Taxi and limousine dispatchers lose. Customers win. We’ll all be surprised by new tablet applications being dreamed up in garages and basements everywhere.
The third way productivity results in more employment is by attracting capital to satisfy new consumer demands. In a competitive economy, productivity—doing more with less—always lowers the cost of products or services: $5,000 computers become $500 tablets. Consumers get to spend the difference elsewhere in the economy, and entrepreneurs will be happy to sell them what they want or create new things they never heard of, but will want. And those with capital will be eager to fund these entrepreneurs.
How can government do the right thing to help productivity and the employment it fosters? Get out of the way. Every government-mandated low-flow toilet, phosphorous-free dishwasher detergent, CFL light bulb, and carbon-emission regulation is another obstacle on the way to a productive, job-creating economy that produces things consumers really want.
Mr. Kessler fails to address the exponential concentration of ownership among a minority. While new jobs can be created by new technology applications, by the year 2050 most products and services will be provided by digital computerized superautomated machines, and non-human intelligent-based operations. Thus far, economic growth in past decades has disguised the destruction of jobs and degradation of jobs that have occurred as a result of technological innovation and invention. As such technological advancements push forward, this will present a serious problem for the masses who remain solely dependent on a job for income.
Mr. Kessler fails to acknowledge that 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.
The non-human factor of production is the product of tectonic shifts in the technologies of production. Human-level artificial intelligent machines and digital computerized operations are and will continue to destroy jobs or degrade job opportunities because increasingly machines are providing skills and abilities previously unique to human workers. The advent of truly intelligent systems of production is effectively increasing the size of the work force beyond that provided by human workers. Thus, the idea of job creation for humans is a dead-end proposition and calls for big jobs programs such as WPA-type projects to rebuild America’s infrastructure are worthwhile but the resulting jobs, financed by borrowing or tax redistribution, are temporary and disappear once the project work has been completed. Corporations embracing technological innovation and invention in the form of the non-human factor of production understand that their profitability increases because machines work for nothing more than the cost of their manufacture and maintenance. When “cheap” labor becomes scarce, then corporations will pursue aggressively employing “machines” to replace human labor and the impact will be catastrophic for ordinary people dependent on jobs alone. As the cost of computer-controlled machines become less than the cost of human workers, and the job sills and productivity of the machines exceed those of human workers, intelligent “machines” will rapidly replace human workers. The increase will be exponential, and each generation of intelligent machines will be more powerful and less expansive than the one before.
It is the full utilization and application of technological innovation and invention in the form of intelligent machines that is the future and the economic engine that can result in growth of 15-plus percent of the GDP. But unless we restructure the mechanisms by which people acquire ownership in these “machines” the resulting levels of productivity growth via technology would be devastating to human workers whose income from wages and salaries would no longer exist or be limited, except for a minority of top-echelon educated individuals necessary to the design, engineering, and operation of the machines. As for the masses, the middle-class and poor, the current job-focused economic model relies on the sale of their labor as their primary source of income.
Kessler, a former hedge-fund manager, as well as conventional wisdom thinking economists and public policy experts do not address the fact that the economic value of labor is being constrained by the rapidly increasing capabilities and falling cost of advanced digital computerized automation. Simply stated: if what labor can earn is based on supply and demand, and the supply of workers is rising due to growing world population, while the demand for workers if falling because of improved productivity, the market value of labor can only go down. Compound this with the exponential growth of job-destroying and degrading technology and the result will be the disastrous collapse of middle-class income.
What is needed is a modern-day Homestead Act, which I and others refer to as the Capital Homestead Act (see http://cesj.org/homestead/index.htm).
The policies and programs recommended (also see my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://foreconomicjustice.com/11/economic-justice/ or follow me on Facebook at http://www.facebook.com/pages/For-Economic-Justice/347893098576250 and http://www.facebook.com/editorgary) provide mechanisms for achieving rapid economic growth and widespread private, individual ownership of future productive capital investment in the form of intelligent machine technologies, robotics and superautomation in a manner such that everyone benefits and no one loses. Under this platform, those who are ambitious, hardworking, and successful wold continue to be rewarded for their achievements, with rapid growth providing opportunities for prosperity and affluence. Jobs, at least in the short term would be plentiful and due to rapid and sizable economic growth deficits would shrink. Financing for small businesses and opportunities for entrepreneurship would abound. And owner-consumers would have plenty of money for consumption so that market demand for the products and services produced would be strong and steady.
Our present scenario relies on jobs ONLY for the 99 percent. No jobs equals no income and thus no consumer demand. As businesses minimize labor costs, a further shortage of consumer-customers result. And with fewer customers, businesses need fewer workers, which leads to fewer jobs. The result is a downward spiral that can only be fixed by a upward spiral reversal of economic growth simultaneously with broadened private, individual ownership in future productive capital investment. By stimulating economic growth in this manner, in the short term, increased investment would create demand for labor workers to build new machines, factories, plants, and infrastructure to facilitate commerce. Thus, jobs would be created that generate income and market demand increases, and such investment would cause business corporations to hire and invest even more. As investment spending pays for itself, once paid for it creates income for investors from dividends, interest, or rent. Thus, ordinary Americans would benefit from dividends through investments made through Capital Homesteading, which would be used to buy the new products and services that their investments produce. Dividend income to every man, woman and child leads to more customers, which creates more profits, which creates more dividends, which creates more customers. The result is an upward spiral of economic growth putting ALL Americans on a path to prosperity, opportunity, and economic justice.
http://online.wsj.com/article/SB10001424052702303740704577527200796292034.html?mod=djemWMP_h
