Technological Unemployment

Since I rarely listen to the radio or watch TV, the few occasions that when I do are very fascinating to me.

This morning, on one the ABC radio stations, I listened to some economist bemoan the Reserve Bank’s lack of resolve.

He argued that traditional macro-economic theory states that the role of the monetary policy of a Reserve Bank is to either raise interest rates to constrain inflation when an economy over-heats, or at other times to drop interest rates to maximise employment within the constraints of inflation.

That sounds all very rational and his argument was that our Australian Reserve Bank is a servant to too many masters and they therefore waffle in between these two courses of action with less than optimum effect.

He also pointed out that the Reserve Bank has accepted that in Australia there will for the foreseeable future be an increasing rate of unemployment that they can do nothing about. He thinks this is outrageous especially considering that there has been no debate on the subject.

Then a few people rang in to comment and its no wonder there’s no effort to have a debate on the subject. Morons to the core, focused only on their own wealth and security.

In any case there’s very little that the Reserve Bank can do about the long term increase in unemployment because it’s mostly driven by technological unemployment in the services sector as a result of new IT products and services. That is, it’s got nothing to do with monetary policy and is in fact the subject of an unrelated arm of economic theory.

Orthodoxy would suggest that any response to the problem of technological unemployment would need to be driven by major government policy. And in order for this to happen one of our governments would suddenly have to grow substantial balls, discover a new stream of creative economic genius, and care not a fig for re-election.

If you consider any supply chain, food products or manufactured goods or whatever, there is an accelerated movement to remove people from the supply chain, even in places like China where labour is much cheaper than in Australia. Apart from removing variable costs, removing labour improves utilization, enhances flexibility leading to more efficient use of capital equipment, and improves ‘yield’ by taking out the unexpected stoppages and mistakes attributable to the wandering or pissed-off mind of a human.

Until now we have responded to this movement by creating ‘fake’ jobs in the services sector driven by government regulations. However IT is even catching up with us here. I can, for example, imagine a robotic haircut within my lifetime replacing my hairdresser with his three year degree in haircuttery.

From here on, unless we come up with another plan, fewer and fewer people will be in employment. The natural result will be a increase in wealth disparity and social unrest. Under current policy the only action that any of our governments would consider would be to increase taxation on the wealthy and create even more of a social welfare state. This seems unlikely unless a good fraction of the population is hurting because the agents of the wealthy tend to have control of the media which substantially influences government policy on these matters.

Another course of action would be to enhance the country’s high value exports by creating and exporting the new IT technologies before they are imported here from elsewhere. This would at least insulate us against the pain that the rest of the world will feel. But we aren’t that good at high tech are we? And in any case we don’t seem to have the quality of politician that could even understand the need for such a policy, little own actually successfully implement one.

Option C would be to go all isolationist and cut-off most imports and ban new technology, thereby returning to past era where labour was more valued. This I would call the Luddite option. Generally speaking Luddites get hanged. When a whole country gets into the act, dire poverty often results as the whole shebang drifts backwards.

The core of the problem is what to do with people when we don’t actually need them to be productive? Just giving them a cheque for being alive doesn’t cut it because without a lack of purpose people tend to be dysfunctional. A whole society of dysfunctional people wouldn’t be a nice place to be.

I suppose we could all become academics. Each of us could spend our lives focused on intellectual development within a chosen niche, excluding those fields of endeavour susceptible to the benefits of artificial intelligence (eg. science, engineering and the North Shore trades such as dentistry, medicine and law).

That is we could have a whole nation of academics in those disciplines where the truth hardly matters, such as historians, philosophers, economists, art critics and the like, funded by taxes on those companies that provide fully automated products and services. This could work.