Sunday, January 1, 2017

Capitalism Is Not the Answer; Capitalism Is the Problem - But What To Do?

A recent article in The New Yorker, “Rage Against the Machine,” commenting on several recent books about the future of robotic automation, shows clearly the disaster - massive unemployment - that will be created by this technology in the next 10-20 years due to the unending desire of corporations to increase profits by reducing labor costs through automation.  Capitalism is thus clearly not the answer to our economic future, as many hold.  Capitalism is the problem.*

To answer the question of how many jobs are at risk, the article cites a 2013 Oxford University study which concluded that “nearly half of all occupations in the United States are ‘potentially automatable,’ perhaps within ‘a decade or two.’”  Another said that if a job can be learned by repetition, then whether manual or cognitive the job can probably be done by a computer.  The various books cited arrive at more or less the same conclusion to the question, “How long before you, too, lose your job to a computer?”  The answer is, “Not long.”

The article makes clear that this process is already well underway.  Amazon uses 30,000 robots in its fulfillment centers.  A huge electronics factory in China succeeded in reducing its labor force from 110,000 to 50,000 using robots.  And textile plants which have been “re-shored” (bringing production back to the U.S.) have brought with them almost no employment.  A factory in South Carolina, for example, that produces 2.5 million pounds of cotton yarn a week employs only 150 workers.

This is certainly not a new force.  In small, localized ways, the impact of automation on jobs was already being felt 50 years ago.  But over the decades it has grown and has now reached the critical mass where its impact will be like an avalanche.

The future all these books foresee is a “brilliant,” “prosperous,” technological world, but one where a vast percentage of the working age population will be unemployed.  And so they dutifully come up with various schemes for government to provide the unemployed a minimum living income.  That doesn’t cut it as far as I’m concerned,

In the past it was argued that retraining technology-unemployed workers and providing youth superior school education was the key to ensuring high employment in the technological workplace.  In this future world, however, it seems not even education will guarantee a place in the work force.  The quantity of jobs just won’t be there relative to the size of the population because of the greatly reduced workforce needed to produce a given amount of product.  Nevertheless, equality of educational opportunity will be even more important.

The really scary thing is that none of these books, written by people from various fields - law, finance, and political theory, say we have to somehow stop this from happening.  Nor do the glowing reviews or the New Yorker article.  There is a forgone conclusion that it will happen, that it’s on balance good, and the only question is how to provide for the unemployed masses.  

Clearly, the angst felt by white middle class workers in 2016 will only get worse, and the affected group will broaden, regardless what the Trump administration does because it’s responding to the wrong threat - the past, not the future.  If this future does come to pass as described, the robotization of the workplace will be the death knell of the American worker.  Even white collar technology jobs such as software engineering will be impacted.  

In this envisaged future, income inequality in the U.S. will be far worse than it currently is.  The vaunted American standard of living will be no more.  It will destroy our democracy because it will create a society where half the population has nothing to do and lives on the dole, and the other half is well-employed.  It portends huge unrest which could bring about a police state, an age of fascism, because that is the only way the elite employed will be able to keep their status secure.  I know this sounds extreme, but the future depicted by these books is extreme.

It we want to be true in any sense to Lincoln’s “government of the people, by the people, and for the people,” America cannot allow this to happen.  The American people cannot allow this to happen.  The American government cannot allow this to happen.

So how do we avert this disaster?  This is so complex and important that there needs to be a public discussion within and between government, business, academia, and the people.  The issue can no longer be ignored.  We must together find a way to manage the future for the benefit of all.

I can see two possible avenues to explore.  They both have their challenges, to put it mildly.  But I think the first is more practical, easier to realize, and delivers more benefit than the other.

The first avenue is a new division of labor, so to speak.  The law concerning corporations would remain more or less unchanged.   They would compete globally and roboticize their operations as they felt warranted.  

At the same time, a reenergized government would take on or resume the task of making America’s infrastructure second to none through a new version of the WPA (Works Progress Administration) which would directly or through subcontracting employ the vast numbers of manual or low-technology workers left out of the new-technology job market.  Thus there would be no massive unemployment.  This would not be government as an employer of last resort, but an employer charged with keeping America strong and using the vast workforce needed in that effort.

The virtue of this approach is that we would be meeting two national security needs - one existing, the other new - with one stroke.  This would truly be making a virtue of necessity.

The other avenue is to put an end to the age of unchecked, government-supported capitalism.  In its place would be a system of socialized capitalism in which companies would be limited in the extent to which, in the name of increasing shareholder returns, they could reduce their workforce. 

Corporations are a creature of the law.  They were created, and shielded from many liabilities and taxes, because their growth was felt to ultimately benefit the welfare of the larger society, the common good.  But it’s getting to the point, or already is there, where this is often no longer the case; just the opposite.  And so one can argue that it’s time to change the rules.

There are several problems with this scenario.  Many will say that this approach would make products more expensive.  But to my mind this is not a problem.  We have too long wanted things to be as cheap as possible without thinking of the dear price we were paying.  Globalization with its job dislocations was the first price we paid; robotization with an even greater impact is the next.

One problem, possibly intractable, is how the economics of this would work out.  I know America does not exist in an economic bubble, that global competition exists.  Another is that it would certainly be strongly opposed by powerful forces.  In the end, I think the scenario suggested above goes a bit too far.  It is too much of a change and I would not advocate it given the alternative solution.

That said, I do think that social consciousness should be part of a corporation’s decision-making process because they exist only by the grace of the law to benefit the greater good.  Having lacked that perspective, corporations have done much harm to that greater good, whether it’s as polluters, manufacturing products that include dangerous chemicals, destroying the environment, etc.  The process therefore must be broadened beyond the question: what’s best for the shareholders?  And so I think it’s time to change the rules. 

Finally, although in one sense this has nothing to do with the issue of automation and the reduced workforce necessary for a technology-driven economy, the issue of population growth is relevant.  The reason why we need to produce so much and employ so many is our ever-expanding population. This also provides the economies of scale necessary for the investment in robotization.  As recently as 1960, the population of the world was only 3 billion, far more manageable.  Now it is 7 billion and expected to reach 9 billion by 2040.  So in addition to helping control climate change and the destruction of the environment, controlling the population would mostly obviate the need for the economy and firms to constantly grow.

We must all come together to talk about how to manage the future for the benefit of all Americans.  Regardless of the path taken, we cannot end up with a country, a society, as nightmarishly pictured by the books cited in the New Yorker article.**
* This does not contradict the post I wrote some time ago, “The Problem Isn’t Capitalism, It’s Our Society,” which addressed a different issue … people have railed against capitalism for causing the exploitation of people and the environment.  The reasoning there was that the same basic problems have existed in all modern societies regardless of the type of economic system.

** Eric Brynjolfsson and Andrew McAfee, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, Norton
Martin Ford, Rise of the Robots: Technology and the Threat of a Jobless Future, Basic Books
Jerry Kaplan, Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial IntelligenceI, Yale
Alec Ross, Industries of the Future, Simon & Schuster