Luddites

Keynes said ” We are being afflicted with a new disease … namely, technological unemployment. This means unemployment due to our discovery of means of economizing the use of labour outrunning the pace at which we can find new uses for labour. But this is only a temporary phase of maladjustment”.

In America since the 1970s technology has displaced many jobs. Amazon employees less than one tenth of the people that were employees in the retail shops that it replaced.

Robots have taken people out if the factories; the ones that remain in the US that is. Globalization, enabled by technology, has meant a transfer of manufacturing to lower cost countries.

As a result real middle class wages have fallen as workers have accepted lower salaries and lessor conditions just to survive. This is supply and demand working as it inevitably does; at a low enough price there is usually a buyer at an auction looking for a bargain.

Consumer spending makes up 70% of the American economy and due to the fall in real middle class wages, which drives the bulk of consumer spending, the economy is going backwards in real terms.

The wealthy have continued to thrive because their investments are global. Hence the widening wealth gap in the US. Unfortunately the wealthy simply can’t spend enough within the US to kick the economy along.

Keynes was correct but the long period for readjustment in the context of global leveling means a lot of pain for a lot of people.

Especially if the basic cost of living is subject to an institutionalized high floor price. As it is in the west due to our heavily mandated socio-legal systems.

Paradoxically the expensive rules and regulations, designed to make our lives safer and risk free, and that also drive this high floor price are themselves part of the process of finding new uses for labour.

Eventually it may all equalize, maybe painfully, but there is one interesting horizon that might upset the plan. A systematic shortage of resources is going to take us out of Keynes’s implied steady state.

In this scenario labour may have a strong negative non-linear impact on the global economy. That is, the NPV of a person may be negative due to the price of survival being greater than the profits of labour despite the best efforts of technology.

Science fiction has played out scenario after scenario, describing what may happen. My guess is that we will be surprised.

One thing is for sure; this is a race between technology and resource depletion, or peace and chaos. We would be very well placed to accelerate our global investments in technology and technology education.

Just maybe, it’s possible that the current wealth disparity in the US is caused by or a result of the impact of diminishing finite resources. That is we may have already left the steady state of effectively infinite resources and nobody has got the connection because it has been expressed in an obscure manner. That’s a scary thought.