Something truly new may be afoot

Luddites have been with us from the start and always been proven wrong. New types of jobs invariably emerged to make up for those lost through technology, and our standard of living climbed ever higher. No surprise, really. Markets, providing they’re relatively unhindered, are tailor-made to take care of coordination problems of this sort.

Question is, are we justified in expecting a similar outcome today or is something qualitatively different unfolding?

For markets to work, the income flowing to households must be sufficient to enable them to consume the final fruits of the productive process while also saving enough to fund the investment necessary for its continued growth. As automation and robotics move up (and for that matter down) the value chain, and more and more jobs simply vanish, it’s becoming easier by the day to imagine that income flow progressively drying up.

In the early 20th century, farm jobs became mechanized and there was less need for farm labor, and some decades later manufacturing jobs became mechanized and there was less need for factory labor. Now business processes—many in the service sector—are becoming “mechanized” and fewer people are needed, and this is exerting systematic downward pressure on jobs. We  don’t have paralegals in the numbers we used to. Or draftsmen, telephone operators, typists, or bookkeeping people. A lot of that work is now done digitally. We do have police and teachers and doctors; where there’s a need for human judgment and human  interaction, we still have that. But the  primary cause of all of the downsizing we’ve had since the mid-1990s is that a lot of human jobs are disappearing into the second economy. Not to reappear. (W. Brian Arthur – The Second Economy)

If that’s so, the distributional machinery of capitalism could falter. Not only might great swathes of people find themselves relegated to observer and supplicant status, but demand might also come to perennially lag supply.

The results wouldn’t be all bad; real prices for all manner of goods and services ought to fall, perhaps quite sharply, as has already happened with electronics in recent decades. Anyone still employed would therefore in all likelihood fare rather well and those in charge of driving the transformation supremely so. The fear is for the rest, the growing multitude whose talents would no longer answer to any realistic market need. What’s to become of them? Are they to be carried by society out of fellow feeling? If so, what demands may in time be made in return and how are they to gain, or retain, self-respect?

One of the difficulties is that these changes, profound though they are, mostly take place in the shadows. Individual manifestations may be obvious but the sheer scale of the underlying shift is for the most part invisible and our collective perceptions will almost certainly lag behind the unfolding reality. We’re also likely, therefore, to look for explanations in the wrong places and impose policies that simply won’t work. Like, for example, continuing to artificially boost demand through monetary and fiscal measures when what’s needed is to let the markets respond to this transformation organically while concentrating government efforts on cushioning the inevitable individual casualties. And, perhaps, providing constructive social avenues for the expression of all those talents and energies the market no longer needs.

I’ve always had great faith in our capacity for spontaneous self-organisation, and also therefore in markets. Perhaps we (and they) are capable of sorting through this novel challenge as well, quite possibly in ways presently unimagined. Still, it’s hard to escape the uneasy feeling that something truly new in human affairs may be afoot.

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