This one’s for you if you want to learn about how increasing automation might change the world as we know it, and what we should do about it.
Being given a book is always interesting- what do your nearest and dearest think you will enjoy/think you’d like or need to learn about? It would seem that, in giving me this book, my brother wanted to give me a serious lesson in economics!! “The Rise of the Robots” can be quite heavy at times if you do not have a background in economics, but I found that the possibility of the predictions in this book coming true made all the theories and statistics seem relevant enough to be interesting! Ford describes a vicious cycle of increasing automation, loss of jobs, lack of wages leading to a lack of consumption and therefore economic growth which will ultimately cause a lack of investment and contraction of the economy, causing businesses to look for further cost reductions, and increasing automation. Overall, the book is incredibly thought provoking, particularly in its discussion of rising inequality, the reasons for it and possible solutions to it.
But surely this topic can be viewed in a different way. Increasing automation, on whatever scale it eventually happens, has the potential to bring about drastic change. And change is one of those funny things that we always fear, but is the root to all good things. Think about the things that make you happy- surely they were all originally brought about by change- new relationships/adventures/a new job/hobby/friend. By reading this book, you’re taking a step towards embracing change and engaging in solutions to problems that are likely to arise (or may have already started to!). So if politicians could think ahead of their 5 year government term, it might all turn out to be rosy. Pigs can fly right?
“it has become clear that the productivity increases that went into worker’s pockets back in the 1950s are now being retained almost entirely by business owners and investors.” xii
On the increased output that machines may achieve, without human assistance “The result would be massive unemployment, soaring inequality, and, ultimately, falling demand for good and services as consumers increasingly lacked the purchasing power necessary to continue driving economic growth.” p30
On the high levels on inequality in the US and the UK “In other words, one of the most fundamental ideas woven into Western capitalism- the belief that anyone can get ahead through hard work and perseverance- really has very little basis in statistical reality.” p47
“Economists who have studied financialization have found a strong correlation between the growth of the financial sector and inequality as well as the decline in labor’s share of national income.” p57
“rather than simply failing to enact policies that might have slowed the forces driving the country toward higher levels of inequality, America very often has made choices that have effectively put a wind at the back of those forces.” p60
Economies need for the mass market: “The presence of that solid middle is one of the primary factors that differentiates an advanced nation from an impoverished on- and its erosion is becoming increasingly evident in the UK and across Europe, but especially in the United States.” p80
Technology firms have a staggeringly small workforce for the profits they make. “WhatsApp had a workforce of fifty-five- giving it a valuation of a staggering $345 million per employee.” p169
“Markets are driven not just by aggregate dollars but also by unit demand. A single very wealthy person may buy a very nice car, or perhaps even a dozen such cars. But he or she is not going to buy thousands of cars.” This also applies to any other consumer good, showing that increasing inequality, and sequestration of money amongst a smaller percentage of the world’s population, will cause economic growth to stagnate. So not only is it immoral, its also economically bad news. p194
“While it’s certainly possible that two scientists may look at the same data and interpret it differently, in the field of economics the opinions all too often break cleanly along predefined political lines. Knowing the ideological predisposition of a particular economist is often a better predictor of what that individual is likely to say than anything contained in the data under examination.” p199
Automation may reduce the cost of manufacturing, and entertainment but “The most important things- food, housing, energy, healthcare, transportation, insurance- are much less likely to see rapid, near- term cost reductions.” p211 So does this mean that those industries are going to be less affected by automation (if so then surely the jobs in these industries will remain?)
“It is not at all clear how the poorest countries in Asia and Africa will manage to dramatically improve their prospects in a world that no longer needs untold millions of low-wage factory workers.” p222
Moving onto possible solutions, the author discusses two options- a guaranteed income for everyone, and changes to taxation.
In the 1970s, Hayek said the following, which may become increasingly relevant if the automation revolution unfolds “The assurance of a minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born.” p256. This reminds me of a passage from Sophie’s World about John Rawls, who believed that laws should be made on the basis that you could drop dead and come back not knowing your position in society (otherwise referred to as the veil of ignorance).
“we ought to transition to a form of taxation that asks more from those businesses that rely heavily on technology and employ relatively few workers [i.e whatsapp!]. We eventually will have to move away from the idea that workers support retirees and pay for social programs, and instead adopt the premise that our economies in their entireties support these things.” In other words moving tax “away from labor and toward capital.” p276/7