Will Automation Require Progressive Unemployment Solutions?

Automated pharmacology production
Wikimedia Commons / FLAGRANGE

This is the third essay  in a series in which I answer progressive criticisms of neoliberalism (often mistakenly called conservatism). The author of these criticisms is a gentleman whom I will call Chease, who has often crossed rhetorical swords with me. I am delighted with the dispute and just wish even more progressives would challenge my depictions of neoliberalism.

The discussion so far has included whether or not free-markets would automatically create income inequalities, and secondly whether progressivism is the answer for racism. The third part of the discussion, whether the threat of automation destroying jobs will require progressive solutions, will be a much greater challenge.

Will Automation Destroy Most Human Jobs?

An often repeated truism is that while history never repeats, it often rhymes, and such is the case for automation destroying jobs. The issue first arose during the industrial revolution, most famously with the Luddites, English

textile workers and weavers. They feared their livelihoods would be destroyed by industrial weaving machinery, and they went around destroying factories using it. Today, automation enhanced by the computer is currently striking unease in many, and the solution to the problem of human jobs lost to it is truly uncertain.

The reason the threat of automation taking away our jobs has arisen yet again is due to the ability of computers to direct the operations of other machines. When industrial machines first came into existence, humans were still needed to organize and direct their activities. Now computers can control any routine kind of machine operation, or for that matter, any kind of routine activity, including the routine analysis of information. That is the key for whether a job is vulnerable to automation: whether the job is a collection of routine actions that can be either controlled or directly performed by  a computer. This places the jobs of many information workers, no less than those of manufacturing workers, on the chopping block.

Chease raises the issue with the following statement (I have taken the liberty of breaking the statement into paragraphs to enhance readability):

First, why we need progressivism: we need progressivism for the same reason we always have, to accommodate social functions to the increases in wealth that technological progress brings. The free market economy is in the process of automating itself. Higher unemployment is going to result as labor productivity (discounting the hours worked by machines) continues to rise.

We need mechanisms to compensate for the loss of social cohesion that this will cause. Government is the default name of any such mechanism that arises through a functioning republic. To believe that the private sector will fix this problem is to fail to learn from industrial revolutions of the past, which led to popular uprisings, which in turn led to socialist autocratic governments. Progressivism, which you despise, is the compromise that allowed capitalism to exist in the western world. Without the labor movement, that was suppressed in Tsarist Russia for example, we would have all gone communist.

The political will to allow labor unions to exist was a result of a knowing respect for capitalism’s efficiency, which Russia and other dictatorships lacked. Automation will cause a similar disruption in socio-economic functions. We need to tax the machine owners or the machines themselves, depending on your semantic preferences, in order to appease the unemployed. [A reference, no doubt to a recent Bill Gates proposal. CBT] We need to focus on figuring out how to have an expanding welfare state, which will inevitably take the form of a basic income for many unemployed citizens, while also encouraging darwinian competition of capitalism and its innovation.

We need to deal with the influx of wealth that automation will provide, which will be the impetus for a violent revolution if it is distributed only to the legal owners of the capital that produced it, as it was in the past, as it has always been. Humans are jealous by nature, and the haves of society must protect themselves by being taxed. Just as we allow police to violate, in a relatively small way, the principle of liberty in order to protect private property, we must allow politicians to facilitate theft on a relatively small scale in order to prevent massive violence and massive infringements of personal liberty that would likely follow revolutionary violence.

This is the pragmatic solution. It may be unacceptable to someone who believes that foundational principles, if valid most of the time, must be followed without exception. I can see clearly in this example how the principle of private property, when rigidly followed, may come into conflict with the principle of liberty.

The progressive solution to the threat of job-stealing automation is a redistributive welfare program to support the bulk of the population, funded by taxes on the owners of the automated machines. If we do not respond this way, declares Chease, we will inevitably face the violence of a socialist revolution. Après nous, le deluge, declaims Madame de Pompadour.

Economic Adjustments to Automation

Is a redistributive welfare program  the only or best way to react? How did capitalist economies adjust during the industrial revolution, and can such adjustments be made in today’s world? This is indeed a very difficult problem to solve, and the last word on resolving it probably has not yet been written or uttered.

History tells us that with the start of the industrial revolution, there were rapid technological  improvements that, while making some jobs obsolete, created a whole raft of new kinds of jobs. Just in textile production, there was the invention of Eli Whitney’s cotton gin, Samuel Herrick’s dressing machine, Samuel Crompton’s spinning mule, and Edmund Cartwright’s power loom. Initially, the newly industrializing textile factories had to be on the banks of a fairly swift flowing stream in order to harness its power through water wheels to drive the factory’s machines. Later, however, the development of steam power relaxed the requirements for factory sites. Following his invention of the cotton gin, Eli Whitney demonstrated to President John Adams how interchangeable constituent parts of a musket could be created separately and then assembled to manufacture the whole musket. In this way Whitney opened the way for the productivity increases from an increased division of labor and the efficiencies of the assembly line.

Invention after invention followed. In 1860 James Clerk Maxwell completed the four partial differential field equations for the electromagnetic field. These equations taught us how we could use inductive effects (changing magnetic fields create changing electric fields and vice versa) to generate electricity, which was in common use by the end of the century. By 1908 Henry Ford was producing automobiles on an assembly line, making (relatively) rapid transportation available to the masses. By doing this, Ford indirectly created a large number of jobs in the nascent oil industry.

The point of this extremely brief history of the industrial revolution is to suggest that rapidly changing technology, which creates automation, also creates a large number of new, previously unheard of jobs. These are jobs needed to support the new technology, to manufacture the needed machines and maintain them in use. We can depend on this effect to help replace some of the jobs destroyed by computer automation. How many computer programmers were needed prior to the 1960s? Computer programing is not a routine kind of activity that can itself be programmed, and it does not really need a college education (although that helps) to participate in it. The assembly line workers of a previous generation might well morph into computer programmers.

In addition, there are many other kinds of jobs that do not have the regularity required to automate easily and affordably by computer. Gardeners, plumbers, electricians and others who address many varying, non-regular problems are probably fairly safe from computer automation. One might also ask how many physicists, teachers (especially in the primary grades), lawyers, engineers, chemists, biologists, news reporters, and other kinds of researchers might be vulnerable to automation.

This last point suggests another way by which free-markets might adjust to computer automation. The kinds of jobs mentioned in the previous paragraph, while generally well paying, are not the kind to make a worker into a multimillionaire. However, as productivity increases through the use of automation, the cost of producing those goods and services will plummet. In almost any industry, any product created with the use of a large number of human workers accumulates most of its cost from their wages, salaries, and fringe benefits. Eliminate the workers by automation and you eliminate most of the costs. Therefore, in terms of the economic value of other things produced by the economy, goods from automated industries will lose most of their economic value! Nor will investors have to invest nearly as much to produce automated goods since they will not need to invest in human labor. The goods produced through automation may be just as, or even more useful to the end user, but their prices will plummet.

On the other hand, the wages and salaries of workers in activities not automated must necessarily rise, since their products will be more scarce relative to the goods from automated industries. We can then depend on Adam Smith’s invisible hand to adjust prices of goods produced by not-automated industry upwards, while the prices of goods from automated industries will be adjusted downwards.

Another very valid point is presented in an essay entitled Badly Confused Economics: The Debate on Automation posted on the website for the Center For Economic And Policy Research. In it the author Dean Baker questions the obsession of the media on the loss of jobs through automation. He writes,

This obsession is bizarre for two reasons. The first is a simple empirical point. In contrast to the concern about automation leading to massive displacement, in recent years the pace of automation has been extremely slow. Productivity growth, which is a measure of the rate at which workers are being displaced by technology, has averaged less than 1.0 percent annually in the United States over the last decade.

In short, lately the vast bulk of job losses (or their lack of increase) that we have experienced in recent years has absolutely nothing to do with automation! Instead, the loss or slow increase in the jobs available have a lot more to do with all the reasons for the very low economic growth we have seen in recent years. As I have emphasized in many posts, the cause for low and decreasing economic growth rates are explained by progressive economic policies adopted by the federal government. These economic policies also explain the lackluster growth of the European Union and of Japan. Since the amount of material required to justify this view is very large, I will merely give links below to my posts justifying this view.

• The Causes of the Great Depression
• Why Did the Great Depression Last So Long?
• Causes of the 2007-2008 U.S. Financial Crisis
• Economic Effects of the Dodd-Frank Act
• The EPA, CO2, Mercury Emissions, and “Green Energy”
• The Burden of Government Regulations
• The Debilitating Effects of Obamacare
• The EPA, CO2, Mercury Emissions, and “Green” Energy
• Economic Effects of Current Tax Policy
• Economic Damage Created by the Fed
• The Rahn Curve, Hauser’s Law, the Laffer Curve and Flat Taxes
• Big Corporations Abandoning the U.S. at an Increasing Rate

Of course this does not mean we will not have to deal with the effects of automation in the future. It has the prospect of being a very important problem.

I have one final thought about how a free-market might adjust to provide for the masses in the presence of automation. Those who own the means of production will certainly receive income in addition to what they earn in their day jobs.  So why not increase an emphasis on what has been called the “ownership society?”  Not only would investing in the stock market give individuals and families extra income, but it would also provide for future retirement. Perhaps government restrictions on the present use of funds from 401k and IRA accounts could be lessened, or some other tax free investment account created to help maintain individuals and their families.

All of these considerations make me think that an increased reliance on free-markets would serve the American people — including those in the lower income percentiles — a lot better than would dependence on a progressive welfare program.

I will finish my reply to Chease’s progressive critique of neoliberalism in my next post, where I will discuss how the clash of ideas between the Left and Right is increasingly becoming violent.

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