Monthly Archives: December 2015

On the IT/Robotics third (fourth?) industrial revolution, employment and wealth distribution

A certain panic has recently been setting in that the IT/Robotics revolution, as it continues to mature and develop, will significantly eat into employment opportunities among the middle-and-highly-skilled-working classes.

Highly skilled weavers (the Luddites) lost their role as a result of the first industrial revolution in the late 1700s as weaving became mechanised in Britain. And the industrial revolutions of steam, electricity, the combustion engine, and even later, early automation caused significant and painful socio-economic and employment disruptions – before the wealth and growth created engendered further employment opportunities.

In 1930, as Keynes looked into the future, he predicted an enormous growth in leisure, with people only needing to work for 15 hours a week to provide for their needs. So much, as the Adam Smith Institute people would say, for Keynes’ prediction.  For, not only did ‘needs’ change, but the actual distribution of income and wealth confounded Keynes’ prediction. If the wealth generated currently were distributed more equitably between ‘capital’ and ‘labour’ we might (or might not) be on our way to fulfilling his prediction. But it is not and we are not.

In the developed world, since the 1980s to the present, it is now agreed that there has been a very significant growth in inequality. It is all very well not needing to work as much in a more IT/Roboticised economy, but this has translated into under- and unemployment and/or low incomes for many rather than an unadulterated increase of pleasure in leisure. The very wealthy have garnered most of the wealth of economic growth into their own hands rather than it being equitably distributed among all. This is not because they are evil but because they, themselves, are most likely on a vanity treadmill to ‘keep up with’ (and, if possible, surpass) their own ‘Joneses’. Human nature. Wouldn’t you?

Throughout this process what we in Britain define as the middle-classes – lawyers, accountants, engineers, architects, market researchers, economists, and so forth, have remained reasonably comfortable on the whole. Though it is agreed that middle-class real income in the USA has not actually advanced since since the 1980s. While that of those in the top 0.1% of the population has increased enormously. Here is the picture for the USA.  In the UK the picture is more complex, and open to more ‘interpretation’ but there is some agreement that the ‘middle-income’ group of households is shrinking in comparison with the poor and the wealthy. A detailed ONS analysis of UK middle-income households’ changing wealth since 1977 is provided here.

Many predictions now point to a lot of these people losing their full-time employment to continuously maturing IT/Robotics, therefore, doubtless, needing to join the relatively poorly paid ‘gig’ economy in the next few years, or taking on more poorly paid work in other sectors, save for those with the most enterprising spirit. That doesn’t sound good unless something happens to encourage a more equitable distribution of wealth in advanced economies. Which does not seem very likely.

However, all is not necessarily doom-and-gloom, because this argument ignores the ‘demographic time bomb’ in advanced economies. Populations are tending to decline and age in advanced economies, following Japan’s lead. There will be a medium term demographic respite in some countries, like the UK, where there has been significant recent immigration. But as immigrants settle in, the declining-and-greying population trend will continue even in these countries. This points to a decline in growth and wealth in advanced economies. Unless…

…Unless IT/Robotics turns out to be less of a threat to employment and incomes than has been predicted. It could be a benefit if, instead of increasing unemployment or lower incomes, it ends up substituting for the inevitably missing population numbers. Some really interesting analysis of this is provided in these excellent blog pieces from ‘Rick’ at Flip Chart Fairy Tales, first here and subsequently here.

The distribution of wealth, however, will remain a major issue which is unlikely to be resolved.  Largely because of ‘capture’ of the political process by very wealthy people running the oligopolies and much of the media.  So, although it could, I am not at all optimistic that everything will come together at the right time and in the right way.

I think we may be in for some very turbulent times in the next few decades. This, from here, may be putting it mildly….

In today’s parlance, we speak of “disruptive technologies.” But no-one should be gulled by jargon: New ways of producing things often kill off old industries and jobs before the full benefits of the successor mode of production are realized. A certain degree of violence inevitably accompanies human progress.

According to Steven Pinker human violence is very much on the decline. This is, of course, disputed. But maybe we shall see a reversal, if decline there has been.

In the meantime here is the WEF’s latest report (2016) on the Future of Jobs. Among many other things it posits the following for jobs lost and created worldwide via the ‘fourth industrial revolution’

Winners and losers
Jobs lost
4,759,000 clerical/administration
1,609,000 Manufacturing and production
497,000 Construction and mining
151,000 Sports and creative industries
109,000 Lawyers
40,000 Mechanics/maintenance
Jobs created
492,000 Banking, accounting, insurance
416,000 Management
405,000 IT/data analysis
339,000 Architecture and engineering
303,000 Sales
66,000 Teaching and training

The report needs some digesting. It is survey-based. And while I note ageing population effects are covered in respect of demand and employment I don’t think it really covers the interaction between IT/Robotics/Artificial-Intelligence and ageing/population decline on employment. I need to read the report… (but I may not).

I should mention an amusing but dystopian SF story by Frederick Kornbluth in 1954, called The Midas Plague, which envisaged robots taking over most jobs. Which, of course, meant that most of the ex-workers were too impoverished to consume the robotic production. Yes, indeed, ‘lack of demand’ ensued (or maybe it was Secular Stagnation?). The solution was to force the poor to consume more and more by giving them reverse ration cards. The poorer you were the more your ration card forced you to use the production of the robots. There were sanctions if you didn’t because otherwise the economy would collapse (sound familiar?). Eventually one bright spark got their house robot to do the consuming… It’s a long time since I read that story, but I think it ended in the discovery of the miscreant, who was then promoted to the upper classes, needing to consume less, in order to keep him shtum. But I think Kornbluth may have found a solution to secular stagnation… (Are you listening Prof Krugman, Prof Summers?)

Oh… And here be yet another suggestion of things turning very nasty as a result of what I now guess we must all call the 4th Industrial Revolution (even though I still think it is really the 3rd coming home to roost, but who am I to argue with the Very Serious Gurus of Davos?).

I think I ought to link this to my post of Sept 29 2013. But I’ve just noted that in that post I incorrectly quoted Kornbluth’s 1951 novella The Marching Morons rather than his 1954 novella The Midas Plague.

I’ve edited this post more than enough and will now leave the subject alone.