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The coming big inequality. Was Marx just early?

27 November 2012

Summary: Slowly more people see, slowly emerging, one of the great challenge for developed nations’ societies: increased productivity creates wealth unimaginable to earlier generations, but its benefits go to those who own the machines. Inequality of wealth creates inequality of income.   Marx might have just been right, but early. Today we have a note from Jeremy Grantham describing this future.  At the end see links to other posts about this engine of inequality.

Excerpt from “On the Road to Zero Growth

By Jeremy Grantham
GMO Quarterly Letter, November 2012
Red emphasis added.

——————-

… as economies mature and jobs move toward services, productivity per man-hour becomes harder to achieve. This headwind will continue into the indefinite future until one day, perhaps, we will reach what has been called a singularity. The last handful of humans engaged in manufacturing – all engineers and designers – are supervising intelligent robots making and designing yet another generation of even more productive and intelligent robots.

… This deepening of capital and technology almost guarantees that productivity will continue to be high in manufacturing even as the percentage of the total workforce employed there dwindles away toward zero. As the rest of us do each other’s art appraisals and investment management we can fantasize about productivity, but it will mainly represent hard to measure qualitative improvements.

On a hypothetical island where services are outlawed and only manufacturing exists, the final position is that automation, and thereby capital, produces everything while all of the mere mortals sit on the beach. And starve? The worthless unemployed who are obviously not carrying their weight?

.

… Up the beach, in a protected, cordoned-off section is the capital owners’ club. There a handful of equally “unemployed” owners sit, enjoying tea and the ocean. How material goods and sustenance are divvied up will determine the future of that island, for the unemployed will be 100 or 1000 times the number of dividend counters.

Is there not a growing element of this unfortunate hypothetical island in our current world, for basically the same reason? Capital deepening and technology (and offshoring) steadily replace manufacturing and farming jobs until one day perhaps there will be no manufacturing jobs at all. The task of maintaining growth then has to be borne solely by service jobs where measuring productivity has always been quite flakey.

It seems true, though, that the most important values that are generated, particularly when things start to go wrong, are in necessities, all of which seem to fall under the heading of “manufacturing”: think about the trade between (necessary) bread and (luxury) haircuts as times get tough: 7  loaves per haircut quickly become 7 haircuts per loaf!

Earlier more philosophical economists than the current generation, like John Stuart Mill, Adam Smith, and Keynes, seemed to take pleasure in the idea of a distant future where citizens had vast amounts of leisure time to enjoy the world’s beauty. They saw that as a sensible response to increased wealth. Unfortunately, they did not tell us much about the problem that, when that day arrives, capitalists – at least those in manufacturing – will own everything and the “unemployed” manufacturing workers nothing.

——————-

About the Author

From the GMO website:

Mr. Grantham co-founded GMO in 1977. Prior to GMO’s founding, Mr. Grantham was co-founder of Batterymarch Financial Management in 1969 where he recommended commercial indexing in 1971, one of several claims to being first. He began his investment career as an economist with Royal Dutch Shell.

Mr. Grantham is GMO’s chief investment strategist and is an active member of GMO’s asset allocation division. He is a member of the GMO Board and has also served on investment boards of several non-profit organizations. Mr. Grantham has been featured in Forbes, Barron’s and Business Week and is routinely quoted by the financial press. He earned his undergraduate degree from the University of Sheffield (U.K.) and an M.B.A. from Harvard Business School.

Christian Science Monitor, 13 February 2012

For More Information

Recent articles about rising inequality:

The next phase of automation, aka The robot revolution:

  1. The coming big increase in structural unemployment, August 2010
  2. The coming Robotic Nation, 28 August 2010
  3. The coming of the robots, reshaping our society in ways difficult to foresee, September 2010
  4. Economists grapple with the first stage of the robot revolution, September 2012
  5. The Robot Revolution arrives, and the world changes, April 2012

Posts about inequality and social mobility: once strengths, now weaknesses:

  1. A sad picture of America, but important for us to understand, 3 November 2008 — Our low social mobility.
  2. America’s elites reluctantly impose a client-patron system, 5 November 2008
  3. Inequality in the USA, 7 January 2009
  4. A great, brief analysis of problem with America’s society – a model to follow when looking at other problems, 4 June 2009
  5. The latest figures on income inequality in the USA, 9 October 2009
  6. Graph of the decade, a hidden fracture in the American political regime, 7 March 2010
  7. America, the land of limited opportunity. We must open our eyes to the truth., 31 March 2010
  8. Modern America seen in pictures. Graphs, not photos. Facts, not impressions., 13 June 2010
  9. Why Americans should love Tolkien’s Lord of the Rings – we live there, 13 December 2011
  10. News You Can Use to understand the New America, 14 March 2012 — Articles about rising inequality
  11. The new American economy: concentrating business power to suit an unequal society, 27 April 2012
  12. How clearly do we see the rising inequality in America? How do we feel about it? Much depends on these answers., 27 September 2012
  13. Ugly truths about income inequality in America, which no politician dares to say, 2 October 2012

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33 Comments leave one →
  1. Thomas More permalink
    27 November 2012 1:03 am

    Massive inequality in income also appears to create greatly reduced social mobility, and (even worse) much greater financial instability, which in turn leads to a more unstable society (in the worst cases, mass riots in the case of economic depressions and nationwide bank runs and sovereign national defaults).

    “The movement of inequality globally is very closely tied to financial events, including the breakdown of Bretton Woods in the early 1970s, the debt crisis of the early 1980s – which roiled the world in waves for two decades – and the peaking of the information technology boom in 2000. In the U.S., measured income inequality is very closely tied to the stock market.

    “My argument here is not that inequality causes instability. It is that rising inequality and economic instability are the same thing. Inequality should concern us – in part – because radical instability is dangerous.”

    Source: James K. Galbraith interview in “The Income Gap: A New Look at an Age-Old Problem,” The Fiscal Times, 20 April 2012.

    Another issue Grantham only tangentially touches on involves Baumol’s cost disease. This is shorthand for a well-known economic reality that as more and more goods and services are produced by automated methods, those remaining goods or services which can’t be produced by machines or computer programs grow exponentially more expensive relative to the rest of the goods and services in society. A good example? Maids. During the 19th century, every middle-class American home had at least one maid, often a number of them, including cooks, nannies for the children, maids, and often a hanyman to fix things around the house. Today, only wealthy people can afford such services because the relative cost of having a maid has skyrocketed due to the continual plummeting price of goods like washers and vacuum cleaners or services like water and electricity, relative to the cost of a hiring a human being to clean rooms and do the wash. In the 19th century, the washer and the clothing being washed were much more expensive than the maid who washed the clothing because the clothing was made by hand — today, the washer and the clothing being washed cost much less than the maid who washes the clothing because the washer and the clothing are manufactured mostly by machines with little human intervention.

    Meanwhile, recent advances in AI hare produced unepxectedly rapid progress in getting computers to perform services that until recently were solely the province of human beings. See the Washington Post article “Scientists See Promise in Deep-Learning Programs,” 23 November 2012.

    “Using an artificial intelligence technique inspired by theories about how the brain recognizes patterns, technology companies are reporting startling gains in fields as diverse as computer vision, speech recognition and the identification of promising new molecules for designing drugs.

    “The advances have led to widespread enthusiasm among researchers who design software to perform human activities like seeing, listening and thinking. They offer the promise of machines that converse with humans and perform tasks like driving cars and working in factories, raising the specter of automated robots that could replace human workers.”

    Like

    • Drake West permalink
      30 November 2012 3:17 am

      I love the following axiom:

      Technology and wealth are the two most unnatural things on the planet Earth, and it’s greatest threat. There is nothing more loathsome to the natural balance of Gaia then the seeking of profit through innovation.

      The two are so inexorably linked that no one can really be sure which came first. Did the earliest toolmakers operate wholly in a wealthless world? Could the case be made that the first stone honed to an edge to cut wood or pare flesh from a kill create some crude form wealth for the wielder? Did the “haves vs. have-nots” get founded right then and there. Did the Cro-Magnon who learned to chip the right stone into an axe become ‘rich’?

      Technology and wealth could be looked upon as evil twins, with wealth getting mostly the worst rap. Technology enables wealth to do more. Wealth allows innovation to excel as well breeding more and more distance between the owners of technology and the those subjugated by it. Invention is a power generator through wealth creation. Winchester wasn’t a powerful man because he invented his rifle, he was because he sold many thousands of them.

      Think of all that plagues the world today, if wealth could be separated from technology we would do much better. Some of you will claim that technology is the definitive trait of the the dominance humanity exercises of the world. We can do anything, so we think. The only thing we cannot do, at least in the current linear progression of our history is separate our desire to innovate wealth for some and not for all.

      My feeling is that as long as technology is married to profit seeking, the human race will continue to be hampered by impurity from its philanthropic potential. Notice how the very rich turn to such actions at some point, like those titans such as Rockefeller, Morgan, Gates and Buffet.

      It seems to bring the natural world to the brink of disaster from almost every direction. From climate change to nuclear proliforation, from the wage depression Thomas speaks of above to the disintegration of the very fabric of society by overactive use of Internet technology. Will we somehow turn this around in the next decades? Will we begin to possess great technology without muddling it the incessant need to turn a profit from it? I doubt is because the governments which may have had some chance to organize great innovation for the common good seem to fall into corruption or go into abyssmal debt.

      The grand experiment of science working toward bettering society is consistently derailed. Universities work on great advances with the greatest collection of intellectuals in the history of the world, but they are insulated beings by the great wealth that these same institutions possess. Governments grant money to the innovators of the world because these innovations cannot be created with money. An inventor can create something amazing in his basement or garage for a small investment, but it inevitably is only considered a success if it makes money.

      We have no hope…

      Like

  2. Lee Wood permalink
    27 November 2012 1:24 am

    LINCOLN’S BARGAINING CHIP

    President Abraham Lincoln’s most powerful BARGAINING CHIP in lobbying for the passage of the 13th Amendment was the’ EXCEPTION proviso’ in the Thirteenth Amendment that continues to provide for “…Slavery…as a puni
    shment for crime…”!

    In his ‘suit for peace’, and later lobbying for the 13th Amendment, Lincoln, and his surrogates, doled out patronage, position, and other bribes for Congressional votes confirming the 13th Amendment. However, staunch Confederate Slavocracy (advocates for retaining ownership of the means of production, Black African Slaves) were only won with this HIDDEN BARGINING CHIP promise of ‘prison slavery’ replacing ‘chattel slavery’, combined with Constitutional authority.

    Lincoln used this BARGAINING CHIP in his suit for peace with the Confederacy, in the US Senate, with multiple Abolitionists who were divided over this opportunistic short term very meaningful gain, and in the US House of Representatives. The probability is that Black African Chattel Slavery would not have been abolished in America if Lincoln had not provided this compromise of replacing Chattel Slavery with Prison Slavery!

    The long term horrendous negatives, as seen today, were only anticipated by a few legislators, while others correctly seized the time to break the material and Legislative chains of approximately 4,000,000 Chattel Slaves – in comparison to an estimated 7,800 prisoners across the entire country, or less. Immediately after the Civil War the prisoner populations started rising with newly emancipated freedmen recaptured, thrown into prisons, and leased back out old slave run businesses (from 7,800 prisoners total before emancipation to over 200,000 black prisoners; to approximately 2,500,000+ prisoner slaves, probationers, and parolees today.

    Today, with the complete abolition of chattel slavery, the Bargaining Chip proviso compromise is no longer viable to the general public, only to vested interests that currently profit from this great abandonment. This non-viable continuation of Prison Slavery must be Abolished without further delay!

    1.) https://petitions.whitehouse.gov/petition/remove-exception-prison-slavery-13th-amendment-us-constitution/V3xWg7F3
    2.) and, http://www.change.org/petitions/united-nations-and-united-states-petition-to-abolish-prison-slavery-remove-the-13th-amendment-s-exception-for-prison-slavery#

    Remove the EXCEPTION for Prison Slavery from the 13th Amendment of the US Constitution | We the Peop

    petitions.whitehouse.gov

    US/UN Petition to Abolition Prison Slavery calls for changing the Thirteenth Amendment of the US Constitution to remove the Exception for “slavery…as a punishment for crime…”; with the return of all citizenship, labor, familial, economic, civil, Constitutional, human rights

    Like

    • 27 November 2012 5:39 am

      Although Lee Wood’s post kind of trailed off into an unrelated topic towards the end, it does raise an interesting idea.
      Black African Slaves in the American South probably served an economically similar role to the one robots will presumably fill in our future.

      It might be reasonable to conclude that the status of lower-class White Southerners during the period of institutionalized chattel slavery would be similar to the status of lower-class humans following the robot and AI singularity of the future.

      I’m not an historian, so I can’t say exactly what that means, but maybe someone with more knowledge on the topic can chime in. What was it like to be a White Southerner who was too poor to own any slaves?

      Like

  3. 27 November 2012 2:07 am

    “The last handful of humans engaged in manufacturing – all engineers and designers – are supervising intelligent robots making and designing yet another generation of even more productive and intelligent robots.”

    Make me think of this: “Second Variety” by Philip Kindred Dick (1953) — “The claws were bad enough in the first place—nasty, crawling little death-robots. But when they began to imitate their creators, it was time for the human race to make peace—if it could!”

    Like

  4. anonymouse permalink
    27 November 2012 2:40 am

    I think you may have missed one of the larger points of the GMO letter linked above. Resource depletion and environmental costs are poorly accounted for in most measures of economic activity, particularly GDP. The effect of rising costs in energy and resource extraction is to force a larger and larger percentage of gains made from productivity (and population) growth into simply maintaining the current state of the economy. 10% growth in the cost of oil is not “GDP growth” even though most statistics count it as just that!

    from the GMO letter:
    “The bottom line for the U.S. is that if resource prices rise at an accelerated 9%, then obtaining sufficient resources will use up all of our growth potential in just 11 years. After that, the balance of the economy will be in reverse! If we get lucky and cost increases decelerate to 5% a year, then we will have 31 years to fix our problems.”

    IE, since non-renewable resources by definition can only become more scarce, overall economic growth will not just slow but reverse. Unless we can change the raw physical and energetic inputs to our economy into a more sustainable form, the economy of 2112 will be smaller than that of 2012. This point is touched on several times throughout the article.

    While growing inequality is a problem, to assume a cornucopia of new ( even if unequally distributed) wealth is our largest problem is not really an accurate statement.

    Like

    • 27 November 2012 3:02 am

      His speculation about resource prices has two components: that prices rise, and that these prices will have the adverse effect he describes. Both are guesses, without much analytical support. The second is especially problematic for the US, with its rich endowment of natural resources. Agriculture, fossil fuels, and a wide range of other industrial minerals.

      The next wave of automation is already happening — as described in the posts listed at the end — with no end in sight. It’s probably already depressing employment and wages, increasing the returns to capital, and increasing inequality of income and wealth.

      Like

  5. Duncan Kinder permalink
    27 November 2012 6:38 am

    Roger Penrose, in The Emperor’s New Mind, asserts that humans have a capacity for the imagination that, in principle, cannot be reduced to an algorithm.

    If Penrose is correct, then no machine can ever match this imaginative capacity.

    Herein lies humanity’s comparative advantage. ( Or so I would imagine. )

    Like

    • 27 November 2012 7:36 am

      Penrose is a physicist poet. The Emperor’s New Mind is more poetry than physics, IMO. Not much evidence, lots of wild speculation. The advances in neurobiology, early stages that they are, suggest he’s wrong.

      But Penrose’s theory is irrevelant to the next phases of automation, which involve at best semi-intelligent machines. Unfortunately such jobs are the majority, and improving mechanical sensory, manipulative, and analytical capabilities will slowly erode their numbers. Parking lot and toll booth attendants are just the first wave.

      How many jobs are there for high-end knowledge workers?

      Like

    • 28 November 2012 7:11 pm

      Not many, but there will probably be a huge market for amateur porn star

      Like

    • Drake West permalink
      30 November 2012 3:24 am

      pornography will flourish, but not with human actors. There are already thousands, if not million of 3-D modellers and producers generating increasingly realistic and high demand pornography. Perhaps in the next decade human actors in media from porn to commercial advertising will disappear. There will be no market for human porn stars.

      Like

    • 30 November 2012 3:30 am

      Agreed. Sex is often the first application of new tech. VCR’s, 800 telephone lines, the Internet — high quality animation, and eventually robots of some sort.

      Like

    • Duncan Kinder permalink
      1 December 2012 6:13 am

      Fabius:

      I’m sorry you cannot imagine the value of Penrose’s argument.

      1) Whatever advances in neurology may be are irrelevant to Penrose’s argument, which rests on math and not biology.

      2) As to what sort of jobs may be available – or even whether society needs “jobs” – the issue is whether the creative imagination or some algorithm can reach an answer.

      3) As to whether that which is man made could generate higher demand that that which is machine made, we might consider John Ruskin’s “The Nature of the Gothic” in _The Stones of Venice_. , where he asserts the Gothic style placed greater value on contributions from workers than did the Renaissance style. There is nothing sacred or exclusive about Ruskin’s thesis. But is could stimulate the imagination.

      Like

    • 1 December 2012 6:26 am

      FM: “Penrose is a physicist poet. The Emperor’s New Mind is more poetry than physics, IMO. Not much evidence, lots of wild speculation. The advances in neurobiology, early stages that they are, suggest he’s wrong.”

      Duncan: “I’m sorry you cannot imagine the value of Penrose’s argument.”

      I don’t believe your statement is a logical deduction from mine. I can easily imagine the value of Penrose’s theory, just as I can imagine elves.

      (2) “whatever advances in neurology may be are irrelevant to Penrose’s argument, which rests on math and not biology.”

      No matter what the basis of his argument, biology can prove him wrong by proving a biochemical basis for reasoning.

      (3) “As to what sort of jobs may be available – or even whether society needs “jobs” – the issue is whether the creative imagination or some algorithm can reach an answer”

      I don;’t understand what that means. The division of the benefits from increased productivity is a social decision, which we (and each society) will collectively make.

      Like

    • Duncan Kinder permalink
      1 December 2012 6:14 am

      A link to Ruskin’s “The Nature of the Gothic“, from The Stones of Venice, Vol. II.

      Like

  6. guest permalink
    27 November 2012 9:07 am

    The trend towards widespread automation highlights another set of contradictions related to demography.

    If machines take over, then obviously the need for a human workforce diminishes — so we should cheer fertility rates below replacement and the announced reduction of the world population.

    Instead, there is barrage of warnings that this will impair economic well-being — because the assumption is that there will not be enough consumers, not enough contributors to Social Security, not enough high-skilled workers even.

    But if those people are unemployed and unemployable because of robots, without any reasonable income, how could they consume and pay Social Security dues?

    The contradictions are severe, and at some point will result in a serious systemic crisis.

    Like

  7. 27 November 2012 3:11 pm

    Serious systemic crisis to come? Heavens, that started last week. More silliness. Great Arm Waving!

    Will robots need houses? Will they shop at Wegman’s or WalMart? Pensions? Soc Sec? Will they watch Cooking Shows or buy Season Tickets to the Jets? Will autism dog their offspring? Or is a cure for Cancer passe? Who will worry about Health Care Insider Trading?

    Why does this all start in America? Is it something in the water? Oh pray tell………

    Breton

    Like

    • 27 November 2012 3:17 pm

      Breton,

      That comment makes no sense at all to me. Guessing at your message, there appear to be two misunderstandings.

      (1) People’s activities are limted not by what they want, but what they can pay for. Rising unemployment and falling wages would diminish incomes for the working classes, if automation advances as expected.

      (2) It has not “started in America”. Japan is further advances (and better positioned to benefit) from these trends. Germany, too.

      Like

  8. Mikyo permalink
    27 November 2012 4:55 pm

    Imagine that all local shops get replaced by global big box stores. The big boxes will be replaced by global catalogs like amazon and ebay. But then amazon stops making deliveries and begins to give away free desktop 3D printers. Who will finance them? Who will regulate how they can be used? When we are almost all unemployed, how can we prove that we ‘deserve’ one?”

    Like

  9. 27 November 2012 6:05 pm

    As I recall, my father fought a War against both Japan and Germany. So a referral to those two Countries is not a good recommendation. Do you know any Germans or Japanese? Thay are as a population still a little edgey.

    “This country needs higher wages for workers and incarceration for ninety percent of corporate executives.
    I think we will get there eventually, but eventually is a long time.”

    Robots will not take over. Madness of this scenario will not prevail just because some wish it to happen. (Your friendly technocrat Corp CEO)

    People consume because they can; when they can’t it will slowly cease. People work because they must and they like meaningful pursuits; when they can’t they will just stop.

    How long do you think the many will watch the well-set Table of fine food for the Others while they are left scraps and bits? How long do you think Americans will live like the poor in, say Egypt, existing on a slogan of “It is Grand to be Poor and Stupid as long as I am Christian and Heaven awaits me!”?

    None of this makes any sense because it doesn’t. Not all questions are worth asking. The American Dream for many is now openly discussed as a nightmare. Robots will not make it better.

    We are inside a Great Reset; it has been evolving for maybe 40 years. Why in heaven’s name do you think the Fed is buying $40 Billion (the tip of the emerged iceberg) worth of Mortgages of one sort or another!? And they literally handed out Trillions in the last 4 years. Some will tell you this makes sense.

    Pay no attention to the Soothsayers or Doomsdayers. It is not good—none of it. This will go on until it can’t.

    And Robots will not take over. (Is that easier to take?)

    Breton

    Like

    • 27 November 2012 9:21 pm

      Breton,

      It’s nice of you to confess your bigotry regarding Germany and Japan. Lets hope the people the US has mistreated show a more forgiving attitude than you do. Otherwise the hatreds that abound in this world will continue to be passed down through time.

      In an ever-smaller world with ever-easier access to nuclear, biological, and chemical WMDs, we can no longer afford these grudges about deeds done generations ago.

      Like

    • 28 November 2012 4:57 am

      “It’s nice of you to confess your bigotry regarding Germany and Japan. ”

      Now that was too harsh a reply on my part. But why must so much prejudice and bigotry towards our fellow man be rife, despite the ever-shrinking world. Perhaps because of the shrinking world.

      Like

    • 28 November 2012 4:33 am

      (1) “Robots will not take over. ”

      Who said that they would? That’s not relevant to anything in this post, which discusses automation.

      (2) “People consume because they can; when they can’t it will slowly cease. People work because they must and they like meaningful pursuits; when they can’t they will just stop.”

      I have no idea what that means.

      (3) “How long do you think the many will watch the well-set Table of fine food for the Others while they are left scraps and bits?”

      How long have people done so in the past? Centuries. Longer.

      (4) “How long do you think Americans will live like the poor in, say Egypt, existing on a slogan of “It is Grand to be Poor and Stupid as long as I am Christian and Heaven awaits me!”?”

      That’s the question! Only time will show the answer.

      (5) “None of this makes any sense because it doesn’t.”

      I think the limiting factor is your imagination. A limited ability to imagine dark futures — that’s not a bad thing! An optimistic view of the future is a fine thing. Cherish it!

      Like

  10. Mikyo permalink
    27 November 2012 7:39 pm

    I was thinking of a science fiction style, ‘singularity.’ Everyone is always doing something, even if it is not profitable. Maybe i am wondering, what, if anything would people do if all their needs were filled by machines? Those printers and robots are already being made. But, i suppose that you are right. Of course there will never be enough for everyone. Ugh! My brain is melting.

    Like

    • 27 November 2012 9:23 pm

      Mikyo,

      It’s not clear to me why you find the prospect of increased wealth and income inequality so difficult to imagine. It’s been the rule for most of history in most societies.

      Like

  11. 27 November 2012 9:48 pm

    The loss of manufacturing jobs to robots was talked about more in the 80’s. Since the 80’s, the robots had a tough time keeping up with cheap labor overseas — and now China can have both cheap labor and high tech. The west has no high-tech advantage anymore, really.

    Nowadays, it seems more typically that factories are closed to move production to Mexico or other low wage places. I think any manufacturer that puts a lot of money into expensive equipment, including robots, for manufacturing here in the USA usually is seen as part of the solution, not the problem.

    Like

  12. Ben Hill permalink
    28 November 2012 6:40 pm

    Though I don’t agree with the ending, too Utopian, the description of how automation eliminate most jobs is excellent in this story: Manna by Marshall Brain.

    Like

    • 28 November 2012 8:41 pm

      Thanks for posting this! Marshall Brain is often cited in posts about automation here!

      Is he utopian? Massive automation could have wonderful effects for humanity, and I’m confident it will for many — perhaps most nations. Sharing the benefits is a solvable social problem, with many examples to learn from in history ( eg, Solon in Athens).

      Will America be among those nations? It’s up to us.

      Like

    • Ben Hill permalink
      28 November 2012 11:23 pm

      Like all Utopias, just in theory, usually turns out badly. Just seemed tacked on the end of a good story. Automation is coming, it will be a double edged sword.

      Another link talking about auomations effects. Bruce Greenwald, I think you might have posted this before. “Interview with Bruce Greenwald on Structural Problems in the Economy and Unemployment” by Robert Huebscher, 110 November 2009 — Greenwald is Professor of Finance at Columbia).

      I think the end result will be good for most people, it’s the transition that worries me.

      Like

  13. 28 November 2012 10:55 pm

    I think one of the problems with the “outsource everything to make tons of money on the margin” model is that, when you start doing that, the efficiency of your labor drops dramatically. Nobody in their right mind is going to work as hard for an employer that treats them as disposable kleenex to be used, crumpled up, and thrown away. Since a job has little value in such an environment I’d expect to see pilferage go up, along with all sorts of other time-wasting on the job activities. I’ve heard this echoed from some young people I know who are going into the work-force – they’re going to take advantage of anything a company offers them but they intend to keep their resumes up to date, always be on the lookout for something better – they all know “loyalty” is a one-way street for companies.

    Automation’s an interesting factor, but since mostly it’s being done in China, to supplement and further drive down the costs of slave labor, it may not confer that much of a cost/competitive advantage for the factory owners. Eventually, we’ll get labor unrest and (gasp!) perhaps even organized labor – that would be the obvious and expected reaction to the playing-field getting unfairly tilted toward the corporatists.

    For those of you who enjoy etymology, the word “sabotage” is from the French luddites, who used to throw their wooden clogs (“sabots”) into the machines. It was fairly effective – a machine with broken gears is not more cost effective than the now thoroughly pissed-off laborer. I’m guessing that capitalists have enjoyed such stable relationships with labor in the last few decades that they’ve forgotten how bad it can get. And who’ll shed a tear for them, aside from their own kind?

    Like

    • d j permalink
      29 November 2012 2:31 pm

      Marcus, some employees will work harder than others, no matter how their ‘boss’ treats them. Not to excuse bad boss behavior, mind, but so what? The point is, loyalty is a two-way street for both employee and employer. And pilferage is still theft; if you don’t like your job, go get a different one.

      As an employer I value employee longevity, so my compensation structure and work environment are tailored to achieve that end. Other employers don’t care about longevity, which is actually good for me because I have more and better employees to choose from when I’m hiring.

      Also, automation is not “mostly…being done in China”. The good ol’ USA has plenty of automation, and enjoys the benefits of the most productive employees in the world, largely because of long-term capital investment and a market that was relatively unfettered for a long time. This is not a bad thing. Without automation and the ‘horrible’ job loss that comes with it, we would employ a lot more ditch-diggers (for example). And a ditch-digger typically does not enjoy the long and healthy life we expect for our middle class these days.

      Like

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  1. Giornalisti e robot | USIGRai
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