The ancient Greek myth of Icarus shows how hubris and over-ambition in the wonders of science, innovation and technology can ultimately lead to our doom. The Mexican billionaire Carlos Slim wrote recently that the IT revolution will be a first in that it “will kill more jobs than it creates.” Take North America as an example. from 2000 to 2010 Canada and America witnessed a 40% increase in industrial output which in monetary terms exceeds $2.4 trillion. Yet during the same period, 5.6 million factory jobs disappeared. These seemingly contradictory statements cannot be resolved by simply blaming free trade or globalisation. Rather, it is automation which accounts for an overwhelming 85% of those jobs lost. We are literally evolving ourselves, through our new inventions, out of competitiveness in the free market. Robots are safer and cheaper in the long run by not having wages or pension plans and also without ever the risk of unionization (for we dare not imagine a Union of Robots, let alone robot strikes).
For centuries, working families have lived in fear whenever new inventions were introduced – fear that machines would make them redundant, from the early wind mills used to grind cereals to the mechanised mills that replaced hand looms. Industrial riots due to fear of automation is not a new phenomenon: as early as the 1810s, mobs of English textile weavers, inspired by the folkloric Ned Ludd who smashed stocking frames thirty years before, organised and subsequently vandalized mechanized looms in revolt to what they saw as the “fraudulent and deceitful manner” of automation in exploiting workers. However, the historical fears of mass joblessness were unfounded. Whilst some did get left behind, the capitalist industrial revolution saw the first instance of creation of new wealth and replaced the feudal landed gentry. The sceptics of yesteryears lacked imagination on how the economy would grow and how technology would create new industries… as well as new ills.
In 1905, as Einstein published his Nobel Prize winning paper on the photoelectric effect, not even he could have imagined how his discovery would lead to the development to quantum physics which would be the foundation of the IT revolution on which a third of the world economy is driven. In a study conducted by the World Bank, it found that 57% of all current jobs could be automated over the course of the next 20 years. To add salt to the wound, in a joint MIT-Boston University paper evaluating the impact of robots in the employment market from 1990 to 2007, it concluded on the low end that one robot replaced 3 workers and reduced wages by 0.5%.
Engineers and economists from a wide variety of backgrounds have had consensus on the idea that as science and technology moves forward, the number of jobs created would always outpace the jobs that followed the direction of the Dinosaurs. However in the present situation, those same fears have unfortunately materialized over the course of decades, thus begging us to pose the question, “Is this time different?”
By taking the American automobile industry as a microcosm, it shows the relationship between increasing output corresponding to a decline in workforce. This decline in the automaker is most evident in the decay of Detroit, the birthplace of Henry Ford’s revolution, which has seen precipitous decline in population and riddled with the blight. In the 1920s, except for Ford’s anti-Semitism, working in one of his new mass producing assembly lines was a golden ticket for the non-college educated poor to enter the middle class – health insurance and salaries double the minimum wage were a novelty unheard off. In 1979, the United Automobile Workers (UAW), the largest union for car manufacturing workers, peaked with a record of 1.9 million active members. The UWA has seen a constant slump ever since, currently with 390,000 members, a decrease by almost 80%.
Whilst there can be other factors involved, namely anti-union legislation, it is a stark fact that vehicle sales have doubled since the recession of 2008. After 2001 & 2004, 2016 saw the largest total vehicle sales: 18 million. The economy has not stagnated, it is more productive and efficient than ever before, yet angst of the former industrial heartlands in both the UK and America have delivered us Brexit and Trump. Whilst unemployment numbers are at historically low levels, the hidden truth is that wages have not kept up with inflation nor productivity. Luckily for western economies, there has been a slow decline, thus enabling the economies to adjust into a tertiary serviced based one. Frighteningly even some service jobs, like cashier workers, are now threatened by automation through self-check-in counters.
Whilst the decline in manufacturing in the West has given rise to dangerous demagogues, the greater dangers lie in the developing world. Over the last twenty years, over 400 million people were lifted out of poverty in China. Yet literally hundreds of millions are still waiting in China, let alone the billions in the developing countries who are yet to industrialize in Africa, Southeast Asia, Latin America and India. In a 2016 report published by the UN Conference on Trade and Development, it was predicted that over the next two decades, two-thirds of jobs in the developing world will disappear: “the increased use of robots in developed countries risks eroding the traditional labor cost advantage of developing countries.” Whilst certain industries would still require a large labour force like the textile industry, the vast majority of manufacturing sectors will see a diminishing role of labour.
The tried and test model for countries to escape poverty through having a cheap labour force and building a solid tax-base is broken. Even high paying jobs which require advanced college degrees like investment banking may face the crunch as current low-level computer programmers are experiencing. Aside from China, the other engine of global economic growth over the last two decades has been India. However, due to poor governance and strict land and labour laws, India’s economic growth has been driven by its service sector like pharma, but the flagship of which has been IT outsourcing. But even the ex-CFO of Infosys, India’s second largest IT firm, agreed that the future looks dim, with another expert predicting automation could mean a 14 percent decline in India’s IT workforce with half a million jobs at risk by 2021.
The transportation sector is one field where, in both the developed and the developing nations, there is still high paying mass employment opportunities. A report published in May by the International Transport Forum grimly summarized that up to 70% trucking jobs would be made redundant with self-driving cars by 2030. These reports led to the Indian Transport Minister Nitin Gadkari shortsightedly proclaiming India will ban such “destructive technologies”. This is not a solution.
Whilst there are no easy solutions, there are policies governments can employ to mitigate some of the dangers. At the heart of our social contract is the promise that the next generation will do better than their parents. Yet, at least in the near future, this illusion will remain a mirage of hope. This millennial generation will be poorer than their parents, a first in centuries, which should send shock waves. For now, we must strengthen the welfare state by reducing the burdens of our already poorer youth; introducing debt free college and greater property rent controls would go a long way. But like a perfect Catch-22, with vanishing jobs comes diminished and weakened tax-base which would pay for these greater government spending commitments.
Perhaps there is a lesson to be learnt from 1950s America. The post war period in America which saw a continuation and even strengthening of FDR’s New Deal to LBJ’s Great Society war-on-poverty before being swallowed up by the Vietnam war saw the greatest expansion of the middle-class in American history. Although the Jim-Crow segregation laws of the times denied all this progress to non-white men, for white individuals this was the golden age of upliftment. This is the time Trump harkens back to when he says his modern day fascist slogan of “Make America Great Again”. This was the period the “again” was referring to. As New York Times writer Thomas Friedman explains, for white men, this was the period when one needed a plan to fail, instead of a plan to succeed. GDP on a decade average from the 1940s to the 1960s grew at a rate above 4%. Now imagine adopting an economic model of the 1960s with the social policies regarding gender, race and religion of today. That period saw the Marshall Plan in Europe, the creation of the NHS and mass hospital building programs in the required at the time in the UK and governments invested in the cutting-edge renewable energy of the day, Hydroelectric. Billions were spent on highways, rail networks, tunnels and bridges in a post war world. These required substantial government taxation, but it created jobs that even now cannot easily be replaced by robots.
But there has been a redistribution of wealth in recent years. Take the American example, in 1950. Corporate taxation contributed 35% of federal revenues. Now that has been reduced to 9%. Because whilst America’s official corporate tax rate stands at a high 35%, with the addition of tax loopholes placed by well-funded lobbyists, the effective rate is much lower, with many companies like GE not even paying a cent in federal tax. Yet one could be forgiven if by hearing the American media, one concludes tax “reform” (a euphemism for cut) in corporate tax rates should be Trump’s main legislative goal. This is the manufacturing of consent by corporations facing record profits and record high stock prices, the same corporations who are abandoning human workers in place of artificial intelligence.
By shifting back the tax burden back on the very corporations who are saving money by automation and away from the people, it would enable government to pay their expanded financial liabilities. Ultimately by handing back money to people and through the velocity of money, the short-term hardships of the working class can be alleviated.
Maybe, like Icarus, we too have flown too close to the Sun, and we have created our own Frankenstein’s monster in the pursuit of efficiency. When President John Kennedy inspired a generation to reach the Moon, he warned that space would not be conquered by those who wanted to wait and stay behind but by those who moved forward. We cannot be heirs of those in the late 19th century decrying the loss of horse carriage manufacturing jobs. The solutions for externalities of automation still remain unanswered. Perhaps the future will mean a three day work week with a reduced reliance on labour and greater emphasis on artificial intelligence. However what is certain is that innovation will also be our salvation, but that will require abandoning the gradual drug of tranquillity and embracing change. And for this, governments must invest in education, perhaps making computer programing compulsory in high school like a foreign language, to equip the future generations with the skills the jobs of tomorrow require.