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Bye-bye Blue
Can The Economy Grow Without Delivering Jobs?

Will our economy continue to grow without creating new jobs? That’s the consensus emerging among some experts who argue that fields as diverse as manufacturing, drilling, and online retail are in for boom times without the concomitant uptick in employment. The culprit? Technology and the information revolution. The FT has more (h/t Tyler Cowen):

Mining, quarrying and oil and gas extraction grew more than any other industry between 2007 and 2012 as new “fracking” techniques made it economic to drill for previously inaccessible resources. […]

Drilling is capital intensive, however, so even though the industry’s sales rose by $142bn, its annual payroll was up only $20bn to $61bn in total […]

Non-store retail, which includes online shops, recorded a boom in sales – up 31 per cent to $380bn. But the number of establishments rose only 12 per cent to 66,339 while employment in the sector was down slightly.

The details of the report are new, but the outlines of the changes are not. As WRM noted in an essay a few months ago, many people seem to think that what we’re seeing is a real break between capitalism and rising living standards. It turns out, people like Karl Marx made the same mistake when thinking about the Industrial Revolution:

The early Industrial Revolution, for example, was another period when productivity was rising fast but wages and living standards for many people were stagnant or falling. […] In those days, agriculture was shedding jobs as British landlords shifted from renting small plots at low rents to subsistence farmers to more profitable but less labor intensive methods of agriculture like raising sheep. The combination of peasants flocking to the cities and skilled workers losing their jobs to new automated techniques meant that more people were looking for fewer jobs. Living standards for many workers fell sharply, and Britain was convulsed by waves of social unrest. […]

In the end, the industrial revolution made pretty much everyone better off in most ways (though arguably jobs in steel factories and coal mines were neither as healthy nor as fulfilling as the traditional jobs on the land).

The information revolution seems to be following a very similar pattern. Old jobs are disappearing faster than new ones can be created, and rising inequality combined with stagnant living standards is making people rightly unhappy. Irritating fortunes are being made while millions of people struggle. Yet the underlying productivity of society as a whole is going up.

Instead of fighting a process that offers us and the rest of suffering humanity its best hope of better living in the medium to long term (and people should never forget that an information economy is going to be better for the environment than an industrial one), we should be thinking about how to manage the change as best we can, and how to accelerate the creation of new jobs in new fields as the old ones fade away.

The Fordist world of guaranteed jobs in large labor-intensive industries is quickly coming to an end. Instead, jobs will increasingly need to be service-related, and for those who have the entrepreneurial initiative self-generated. It won’t be an easy transition by any stretch of the imagination, but there really is no going back to how things were before.

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  • Blaton Hardey

    Let’s face it — employees are cattle and the purpose of the universe is maximizing $$$

    • Andrew Allison

      Well yes, that is, in a certain sense, capitalism. But let’s not forget that it has produced the best fed and housed cattle in history.

      • Curious Mayhem

        The cattle benefit when they have something useful to offer, and the same is true of the entrepreneurs and geniuses.

        The issue WRM points to is that the economy has profoundly changed in the last 25 years and the change is accelerating: what used to be useful no longer is, and the steps of discovering what is useful in this new world are only starting.

      • Blaton Hardey


        • Andrew Allison

          And dispense with capitalization.

  • lukelea

    WRM: “WRM noted in an essay a few months ago, many people seem to think that what we’re seeing is a real break between capitalism and rising living standards.”

    Contrast that with the headline: “Can The Economy Grow Without Delivering Jobs?”

    And then look at WRM’s conclusion: “The Fordist world of guaranteed jobs in large labor-intensive industries is quickly coming to an end. Instead, jobs will increasingly need to be service-related, and for those who have the entrepreneurial initiative self-generated.”

    So I gather the answer to the question, Can the Economy grow without delivering jobs? is yes. As for a break between capatalism and rising living standards, that is possible too in the sense that most, even the overwhelming majority, may experience falling living standards even as the minority sees its living standard rocket. The average may be higher, but, then, you could say the same thing about any aristocracy. The few profit at the expense of the many.

    WRM’s council, therefore, is be clever.

    Well, yeah, but be lucky is better. After all it’s all in our genes, and genes are the original form of luck.

    I reject this whole line of reasoning, by the way. It is bankrupt in so far as American democracy and everything this country stands for is concerned. The answer is reform. What kind of reform? Well, I can tell you this much: WRM hasn’t a clue. He should admit it.

    • Andrew Allison

      There’s no dichotomy between a break between capitalism and rising living standards, and the economy growing without producing jobs. Unless, perhaps you are willing to acknowledge the Downton Abbey solution, namely that a “service” economy may not be so bad after all.

    • Loader2000

      WRM whole point is that the transition from manufacturing to information economies will result in greater living standards for everyone in the long run (just like the industrial revolution did after initial falling standards of living). His other main point (that he has made in several essays) is that the painful part, the part that actually has lower standards of living, is the transition, not the end result. His solution logically follows and is summed up as: “Resistance is futile, push through the transition period as fast as possible to get the the prosperous other side rather than implement reforms that try to freeze the economy into an obsolete model.”

  • Bruce

    We can argue about the nuances. However, what isn’t arguable is that a healthy business climate and a reasonable tax code would provide tailwinds in trying to overcome some of the structural obstacles we face. Employment growth is deterred via the current economic shifts as well as the hostility toward business by politicians and bureaucrats. Also, when people throw around the term capitalism to describe our economy, they are inaccurately describing our current economic system. We have a modified socialism, masquerading as capitalism where government chooses preferred businesses and writes laws to benefit them or gives them direct subsidies. Don’t call this capitalism. You diminish yourself when you.

    • Andrew Allison

      Bruce, my friend, I fear that you are missing the point. There are plenty of jobs available to those who have the skills, none of which require a college degree, and the willingness to perform them.

  • lukelea

    Economic analysis and policy prescription has always been WRM’s weakest point, just as foreign policy is his strongest. Don’t fret though: who is equally good at everything?

    • Andrew Allison

      I beg to differ. WRM’s strong suit is, unquestionably, the lessons of history. The first question regarding a post which appears to irrational is: did he author it (another plea for attribution)? WRT posts which the good Professor does author, it seems to me that we should cut him the slack associated with his need (for his benefit and ours) to retain access to that which informs him.

  • TheRadicalModerate

    Replacing low-skill farm labor with low-skill manufacturing labor is one thing. Replacing low-skill manufacturing labor with high-skill knowledge labor is quite another. I really hope that we have some pedagogical breakthrough that allows us to train almost everybody to have valuable labor suitable for knowledge work. But I have to say that I don’t see how that will happen.

    • Andrew Allison

      Here’s a suggestion. Stop telling kids (and their parents) that they need a college degree in order to live a good (college loan debt-free) life.

      • Joseph Blieu

        Science Fiction writers solved this problem long ago, invent jump drives for interplanetary travel and send the surplus populations to pioneer new planets from basic agriculture to modernety. Then outmigrate when the information age is reached locally. Alternates are severe population control and an idylic life served by robots.

        • Jim__L

          Some very bright engineers are working on reusable rocket solutions to make the costs of getting off the ground no higher relative to a year’s wages than was passage on a ship to America in past centuries; other bright engineers are working on in-situ resource development so that emigrants will be able to carve out settlements for themselves once they get there.

          The enemy here is the idea that funding the perfection of life on Earth is infinitely more important than this technical solution. If that idea wins, we’re going see the severe population control tried in a few places, and overwhelmed (in true prisoners’ dilemma fashion) by groups that did not decide to pursue severe population control.

          The future belongs to whomever shows up…. and whomever has the boldest vision.

        • TheRadicalModerate

          Space travel obeys the same laws of economics as everything else. If it’s cheaper for a robot to make everything on Earth, why wouldn’t it be cheaper for them to make stuff on another planet? Especially since they can live in a lot more environments than a human can.

          Even if we could send huge numbers of humans to other Earth-like planets (and I’m not holding my breath), I don’t buy the happy nineteenth-century agrarian community on Alpha Centauri model. Robots arrive first, and the humans follow when everything is set up for them.

          • Joseph Blieu

            Not if the purpose is to create a healthy challenging environment for those with the least ability. Luke Skywalker’s Uncle had robots on Tattooie but he was still a hard working agrarian. On the plus side the use of an infinite number of habitable planets will make environmentalism unnecessary, we can use them up and spit them out.

    • byron

      Low-skill agricultural labor transitioning to low-skill manufacturing jobs was the Industrial Revolution — people flooded off the farms and into the factories. That worked because factory jobs were simple and repetitive, and the skills required could be learned on the job.

      The Information Revolution is different in at least a couple of ways.

      One way it’s different is the high skill levels required, which means you can’t transition displaced low-skill factory workers. On-the-job training is still critical, but it needs to start with somebody who already has a foundation of college-level technical knowledge.

      Another way it’s different is that when information is digitized, geographical location becomes less and less important. Work can be subcontracted or accomplished in branch offices that are a continent away. That means a local applicant applying for a tech job in a Colorado firm, or a company in Texas trying to get a subcontractor contract with a Silicon Valley firm, will be competing with individuals and subcontractors applying from India and China.

      I think TRM, pessimistic as s/he is, still underestimates the nature and depth of the problem.

      Suppose, very optimistically, that the U.S. could adequately train, say, 65% of workers top be competent in high-level information technology skills. The problem would still remain that India and China have huge populations, which means that their absolute numbers of workers at the highest skill levels can always dwarf the U.S. numbers. Worse, given the bell-shaped distribution of abilities generally, the higher the cut-off, the more dramatic that disproportion becomes. And when it comes to true genius-level abilities, those countries will have many, many times the number of such people than the U.S. has. For every Steve Jobs or Bill Gates the U.S. has, China and India will have dozens — already have dozens.

      • TheRadicalModerate

        Thanks for providing the Full Screed. I was being uncharacteristically terse. You’re bang-on.

        Two other things:

        1) Automation enables the “winner-take-all effect”, which has the consequence of intensely concentrating wealth to a small number of three-sigma productive people, who are ironically then too busy to enjoy it.

        2) We don’t know how to educate people at high scale. Each individual takes a long time, and a lot of labor, to educate. We’re getting better at this (cf. MOOCs, Khan Academy, etc.), but we’re not getting better faster than engineers are improving artificial intelligence and robotics. And you don’t have to educate the software for a robot. You just copy it.

        I haven’t been able to come up with a solution for this short of an incredibly robust welfare state, with possibly 80% of the population being dependent upon it. The good news is that automation makes lots of things very, very cheap, so such a welfare state is probably affordable. But being on the dole is an awfully dreary existence. At least that might be a tractable problem.

        • Jim__L

          Absent actual starvation, having status in their own circle matters more to people than material wealth — in fact, arguably it is the status that that material wealth brings that gives it its value.

          This will cause civil unrest to the point of open rebellion long before we hit the 80% dependent mark. Being dependent destroys human dignity, it’s that simple.

          • TheRadicalModerate

            Being dependent destroys human dignity when the dependent are in the minority and looked down upon, but I’m not sure that that’s true when they’re the majority. I think the real question is whether people can occupy their time with something fulfilling, even while they’re dependent on the government for a basic income. (There is obviously an interesting question about whether a large dependent majority will vote themselves so many goodies that they crash the system, but money and power will remain money and power. That may not bode very well for democracy, though…)

            The real question is still going to be whether humans can generate goods and services that are more valuable to other humans than what machines can produce. Child-rearing, teaching, personal care, and some aspects of health care fill the bill–a lot of these are things that machines will be able to do competently, but there may be a premium on the human touch. I don’t think that gets you anywhere close to full employment, but it might go further than you think if average work hours are very low.

            Ultimately, I suspect that the long-term answer here is, “If you can’t beat ’em, join ’em.” The symbiosis between human and machine is going to get tighter and tighter until there’s really no distinction. That’s going to be a very, very different world from the one we live in. It may not even be a recognizably human world. But I’m pretty sure that the “people” that live in it will get along just fine.

          • Jim__L

            I’m reminded of the line from Invader Zim, showing an alien’s childhood… “I love you, cold unfeeling robotic arm!”

            It’s funny because it’s clever, and absurd. I don’t think it will ever stop being absurd.

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