Steps to make the tech revolution boost America, not just the 1%.

Summary: We’re repeating the mistakes of the first 2 industrial revolutions as the wonders of increased productivity go to the 1%, while families in the middle class race like rats to preserve their way of life. Solutions require the same kind of collective political action we’ve successful accomplished before. We’ll get there. We choose how much unnecessary suffering (& perhaps violence) America experiences before then. Our grandchildren will wonder why we found the obvious so difficult to do.  This is the last in this series about the 3rd industrial revolution.  {!st of 2 posts today.}

Well, in OUR country,’ said Alice, still panting a little, ‘you’d generally get to somewhere else — if you ran very fast for a long time, as we’ve been doing.’

‘A slow sort of country!’ said the Queen. ‘Now, HERE, you see, it takes all the running YOU can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!’

We all see the new industrial revolution.

Although controversial a few years ago, now almost everybody sees that another industrial revolution has begun. Economists debate its effects to date (some say almost nil; others see larger impacts), but all agree big changes lie ahead. The debate has shifted to the appropriate public policy approach.

Techno-optimists like Marc Andreessen advocate a faith-based approach, which they call libertarianism. It requires amnesia about the first 2 industrial revolutions, a total FAILure to learn. That suits members of the 1% like Andreessen, who benefit from growing inequality — and who would have to pay for any new public programs or income redistribution. They’re foghorns, endlessly repeating that all is for the best in this, the best of all possible worlds (until it’s ruined by “socialism”).

So far we have taken that advice. What is the result?

We race for prosperity, like Alice with the Red Queen.

Reacting to a social force like automation as individuals means playing a game we cannot win. It casts American society as a race like that of the Red Queen, where families must run as fast as we can to stay in place. Many fall out exhausted, losers in our New America.

The remaining jobs that employ large numbers of people at high salaries offer larger returns for tools that increase their productivity. While that does not necessarily reduce the demand for these services (e.g., there’s an almost unlimited demand for health care services or butlers), the first round effect is fewer workers as corporations seek higher profits by fulfilling the existing demand more cheaply.

As a second order effect, wages of those using the new tech tend to fall, as the new tools often require less skill. Part 3 showed these effects have already hit attorneys, optometrists, and pilots. They’re just the first affected from the coming wave.

The net effect is probably a lower national income, so we have less leisure time, more stress, and an inability to buy the goods and services our new machines can produce. As described in part 4, more education does not help — any more than frogs can crawl over each other to get out of a pot.

Let’s play a different game — and win.

We need not participate in this mad race with the Red Queen, as the increased productivity of new tech can easily benefit all of us. Channeling the benefits of technology is a political problem of distribution. We can start with the most successful tools that worked before, and use our experience (and that of other nations) to improve them.

Unions worked for America by partially equalizing the negotiating strength of workers and corporations, and they still do in Germany and other successful nations. Their implementation in America was flawed; they developed near-terminal weaknesses under pressure from corporations and criminal cartels (requiring government protection, which Hoover refused to provide). We can do better today.

Higher minimum wages have proven effective in America and in other developed nations (their ill effects when used sensibly are largely conservatives’ fantasies). Another way to encourage entrepreneurship and provide an easy form of redistribution is free or low-cost health care — like that provided by almost all other developed nations.

We abandoned the powerful tool of steep marginal taxes, like those the US had during its high-growth decades after WWII — before we listened to supply-side fantasies and moved to the present flat tax system (on total taxes), which also gave us massive fiscal deficits. These tax cuts produced little for Reagan, nothing for Bush Jr, and nothing today for the people of Arizona and Wisconsin (but has forced a debt restructuring).

These and other measures can mitigate the ill effects of the new industrial revolution, spreading its benefits to all Americans. As we learned from the first two, the result would be less social conflict and a stronger nation. Let’s not repeat history.

Other posts in this series

1. A graph showing the end of America as we know it. – The gap between growth in wages & GDP.
2. At last economists see the robot revolution. Here’s why they worry.
3. Automation hits the professions. Most remain delusionally confident, so far.
4. Education, the glittering but fake solution.
5. How we can learn from previous industrial revolutions and so enjoy the 3rd.

For More Information

I recommend these books about the new industrial revolution: Martin Ford’s Rise of the Robots: Technology and the Threat of a Jobless Future (2015) and The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (2014) by Eric and Andrew McAfee.

See all posts about these topics: The 3rd Industrial Revolution has begun. and About inequality & social mobility.  Posts of special interest:

1. Krugman discovers the Robot Revolution!.
2. How do we respond to the Robot Revolution?
3. 2012: the year people realized the robots are coming.
4. Journalists warn us about the coming revolution, but we don’t listen.
5. The next industrial revolution starts. Beware the Pied Pipers who lull us into passivity.
6. A graph showing the end of America as we know it. – The gap between growth in wages & GDP.
7. At last economists see the robot revolution. Here’s why they worry.