Writing for the Wilson Quarterly, Daniel Akst gives voice to a growing concern:
- “…has the day finally come when technology will leave millions of us permanently displaced?
- “Judging by the popular press, the answer is yes, and there is plenty of alarming data leading some people to support that view. Between January 1990 and January 2010, the United States shed 6.3 million manufacturing jobs, a staggering decrease of 36 percent. Since then, it has regained only about 500,000.”
Of course, this isn’t all down to technology – globalisation has played its part too. However, while the costs of shipping have gone up (and those of outsourcing have become more apparent), the costs of computing and robotics continue to go down. The fear, therefore, is that technological progress will push more people out of a greater range of jobs than ever before.
How will we cope? Instead of trying to predict the future, Daniel Akst looks back to the past, to a previous wave of automation in post-war America:
- “Automation was a hot topic in the media and among social scientists, pundits, and policymakers. It was a time of unsettlingly rapid technological change, much like our own. Productivity was increasing rapidly, and technical discoveries—think of television and transistors—were being commercialized at an ever more rapid rate. Before World War I, it had taken an average of 30 years for a technological innovation to yield a commercial product. During the early 1960s, it was taking only nine.”
When the greatest economic minds of the era tried to predict the long-term consequences they usually got it completely wrong. For instance, this is what the economic historian Robert Heilbroner said about Herbert Simon – ‘a manifold genius who would go on to win the Nobel Prize in Economics’ – when the latter predicted that the average family income would reach $28,000 by the early 21st century:
- “He has no doubt that these families will have plenty of use for their entire income… But why stop there? On his assumptions of a three percent annual growth rate, average family incomes will be $56,000 by the year 2025; $112,000 by 2045; and $224,000 a century from today. Is it beyond human nature to think that at this point (or a great deal sooner), a ceiling will have been imposed on demand—if not by edict, then tacitly? To my mind, it is hard not to picture such a ceiling unless the economy is to become a collective vomitorium.”
The idea that consumer demand might have a limit now seems absurd, and Simon rightly dismissed it by declaring his “great respect for the ability of human beings” to spend money “without vomiting”. However, his own predictions were also way off-beam:
- “Nobody at the time foresaw the coming stagnation of middle-class incomes. His estimate of the average family income in 2006 translates into more than $200,000 in current dollars.”
Instead of a future in which people earned more money than they could spend, things turned out the other way round – or at least they did among those on lower-to-middle incomes. The productivity gains brought about through automation did indeed make us richer overall, but they did so unevenly:
- “Like trade, automation makes us better off collectively by making some of us worse off. So the focus of our concern should be on those injured by the robots, even if the wounds are ‘only’ economic.”
In the post-war period, redistribution, especially through welfare payments, was the answer to the impact of automation on jobs. Akst believes that this must continue to be the case:
- “The issue, in other words, isn’t technological but distributional—which is to say political. Automation presents some of us with a kind of windfall. It would be not just churlish but shortsighted if we didn’t share this windfall with those who haven’t been so lucky.”
The trouble is that the post-war expansion of welfare was a disaster, creating a dependent and dispirited underclass. It cannot be the answer to the new wave of automation now threatening the livelihoods of middle income earners.
In any case, our public finances cannot take the strain – far from extending welfare up the income scale, governments are withdrawing it. Daniel Akst is right when he says that “the robots will surely keep coming”, but the same does not apply to handouts for the middle class.