The biggest risk from technological change is inequality

Cross-posted from The Conversation:

Artificial Intelligence (AI), inequality and globalisation were central themes of the World Economic Forum in Davos last week. Fearing that AI will destroy jobs, IBM CEO Ginni Rometty called for a future where jobs are not white collar or blue collar, but “new collar”.

While change is coming, these “new collar” will actually be quite old-fashioned. Teachers, nurses and waiters will all still be important as our economy continues to shift towards services.

Regardless of the jobs, technology will also continue to widen inequality if left unchecked. We must learn the lessons of the industrial revolution and see the world’s labour movements return to their roots: sharing the proceeds of progress with all.

Technology destroys low-skilled jobs

Thomas Mortimer once feared that saw mills would “exclude the labour of thousands of the human race”. That was in 1772 as the industrial revolution gained steam.

Historically, technology has replaced low-skilled jobs and complemented high-skilled ones. The invention of tractors replaced workers with pitchforks, but increased the need for engineers.

Trade has had a similar effect. When we cut tariffs on textiles, some factories closed but Australian clothing designers still flourish.

So far this sounds like an excerpt from a Trump rally. But the story doesn’t end there.

Replacing old jobs with new

When one job disappears, a new one is created in its place. During the industrial revolution, farm workers found jobs in factories. Centuries later, they found them in call centres. We call this “structural transformation”, as economies transition from agriculture to manufacturing and then on to services.

The Australian economy is now about 75% services. It isn’t just digging up things (mining: 7%), making things (manufacturing: 6%) or riding on the sheep’s back (agriculture: 2%). It is about doing things for other people.

What this means is these “new collar jobs” might actually be quite old-fashioned. While we will obviously need more programmers, computer scientists and engineers, we will also need plenty of teachers, nurses and policemen.

Services are not easily replaced. As William Baumol pointed out in the 1960s, it still takes just as many people to perform a Beethoven string quartet as it did in the 1800s. It’s easy to automate an espresso, but people still seem to prefer the personal touch. AI will be hard pressed to replace the caring touch of a nurse on a sick patient’s cheek.

Inequality

However, new technologies still pose a problem: inequality. In Australia, the average individual real wage of the richest 10% grew seven times faster than for the poorest 10% in the 20 years from 1988. While technology increases the size of the economic pie, the slices aren’t shared equally.

When someone’s job is automated they could be unemployed for months while they search and retrain. Older workers may never find another job. If they do, they could be competing with a host of people in the same situation. The costs of progress are borne at the bottom of the income ladder, while the proceeds are reaped at the top.

New technology may change this. While nurses and police officers may be safe, artificial intelligence has already made large gains in diagnosing illnesses, writing legal documents and designing machine components.

Doctors, lawyers and engineers are all now at risk.

The response

Regardless of which jobs are affected, we need to make sure the benefits of technology are shared equitably. It won’t happen naturally. The owners of businesses and machines – capital – are in a better bargaining position than ever. Something must be done.

We must learn the lessons of the past. The industrial revolution gave birth to the labour movement, which argued for better working conditions, minimum wages and shorter hours. All of these helped share the proceeds of progress. They also spurred growth.

Around the world modern labour movements have lost their way. While making important gains on social issues, the left in the UK and US has flirted with protectionism and strayed from its core business. That business is ensuring workers share in the proceeds of progress.

We must open our borders and our minds to the great benefits of globalisation and technology. We must also ensure the proceeds are shared.

A start would be a proper tax framework. Forcing tech companies to pay at least a dollar of taxes doesn’t seem like too much. Basing taxes on global profits, prorated by local revenues, could help.

These taxes can then be redistributed. This could be through more retraining support, higher minimum wages or shorter work weeks. John Maynard Keynes predicted that we would be working 15 hours a week by now. A universal basic income is also a possibility, and we should watch Finland’s experiment with interest.

Unions must help. In an age of self-driving cars, bus drivers might make good aged-care workers. This may hurt unions, whose membership is industry-based, but they will need to help ease the transition.

Artificial intelligence and globalisation offer an exciting future, but if we are all to enjoy it we must look to the past.

Article by Samuel Wills, Assistant Professor/Lecturer in Economics, University of Sydney

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

    • Agreed. To quote Luke Skywalker when he first saw the Milennium Falcon, “what a piece of junk”.

      Does anyone read the Conversation article before cross-posting or are they chosen by algorithm?

      This “We must open our borders and our minds to the great benefits of globalisation” seems to go against the reduce immigration that MB (sensibly) campaigns for.

      In my mind the answer is easy. Universal income and (mostly) closed borders.

  1. ceteris paribus

    It seems OK to trash unions because of the sins of the few. But who else is going to organise and represent the increasingly large section of labour which has no clout?

  2. There is, of course, a completely different narrative that may play itself out: “refeudalisation”, or worse.

    If in years to come some robotic historian comes to chronicle the end of the human race, they might look to the Modern Era – culminating in the 20th Century, the Century of the Common Man and Woman – as a bizarre aberration.

    It is easy to forget that the Modern Era with its Modern Era values of egalitarianism, democratisation and national self-determination is . . . well . . . modern! It hasn’t been around for very long.

    It is easy to forget that when viewed with proper perspective, human history up until the time of the Modern Era was a story of aggressively narcissistic, machiavellian psychopaths competing (sometimes collaborating) to attain positions of power, then using that power to dominate and brutalise their fellow human beings. We know from the historical record that these rulers showed no remorse in wasting the lives of thousands – even millions – of people they regarded as “their” Subjects.

    That is the norm. That is the “base case” for human behaviour.

    In that behaviour, psychopathic rulers were abetted by “sycophants” – typically timid, less dominant males – who sought to promote their own survival and reproductive prospects by allying themselves with the dominant males. Articulate sycophants often provided the “theology” of elite rule, constructing elaborate justifications for the privilege of their patrons.

    In pre-modern times the ability of psychopathic elites to dominate and brutalise others was limited by:

    a) the need to preserve a sufficiently large labour force to provide the raw mechanical energy to support their regimes; and

    b) the limited capacity of individual human beings to kill each other, and therefore by the need to recruit and reward a circle of allies (a “praetorian guard”) which could carry out such enforcement.

    Now, if that long-standing behaviour seemed to change in the Modern Era it was NOT because the psychopaths woke up one morning and said, “Oh my God!! Is that the time!? Is it the Modern Era already? Quick. We’d better start enacting social reforms!”

    Human psychology has not evolved. Evolution operates over a much longer time frame. The psychopaths (and their sycophant supporters) have not gone away.

    All that happened in the Modern Era was a temporary change in the environment: the demands of the industrial economy meant that it was expedient – for a time – for the rulers to make limited concessions to their Subjects.

    The industrial state required the training of large numbers of Subjects to operate the complex – but not fully automated – machinery of industrial production. Having had so much invested in their training, Subjects acquired value and their bargaining power relative to their rulers improved. In the extreme, they could withdraw their labour and quickly impose greater costs on the owners of capital than they themselves suffered.

    Under such conditions, the optimal strategy for rulers (and only after they had tried violent suppression and found it ineffective!) was to make certain limited concession to their Subjects. Thus we had the quintessential ideals of the Modern Era, culminating in the 20th century:

    a) egalitarianism, the ideal that all people are entitled to the same basic opportunities irrespective of their ancestry;

    b) democratisation, the ideal that Subjects are entitled to have some say in how they are governed; and

    c) national self-determination, the ideal that self-identifying communities are allowed to choose for themselves how they will govern themselves.

    If there was one ideal that characterised the 20th century it was surely that of national self-determination: from the first shots fired by Gavrilo Princip in Sarajevo in July 1914, through Woodrow Wilson’s Fourteen Points, through the post World War II era of decolonisation, through the collapse of the Soviet Empire, and right back to Sarajevo and the Balkan Wars of the 1990s. Given the opportunity, like-minded communities like to govern themselves.

    But none of these concessions meant that the psychopaths had gone away. And there was never anything to say that the conditions of industrial production would last forever.

    What we are witnessing now is an elite response to the post-industrial world of AI and robotics.

    No longer are large numbers of Subjects required to run complex but not fully automated machinery. Now it is small numbers of very highly trained technicians required to manage the robotic workforce. Small in number, they can easily be bought off. Better still, they can effectively be reduced to the status of indentured workers through the weapon of crippling student debt. They dare not rebel for fear of their debts being called in.

    As for the rest of humanity, they are now redundant or soon will be. Their rulers no longer need them. And those the earlier concessions are – as the saying goes – “inoperative”.

    To be sure, the masses may get employment of a kind, especially in providing personal services. But it will be employment in the “Uber Economy”, the “Gig Economy”, of savage competition between workers with all economic rent flowing to the owners of the monopolistic market platforms.

    And the New Elite are responding precisely as one would expect an aggressively narcissistic, self-serving elite to respond. They are relentlessly winding back any concessions hitherto made, while their sycophant economic theologians are busy justifying it all as being for the “Greater Good”.

    Inequality is quickly returning to its historical norm, as Piketty has documented. Piketty’s U-shaped graphs show inequality of wealth in the most developed countries declining into the mid 20th century then rising steadily again. It’s the past century that was the anomaly. We are returning to a “feudal” state in which property is owned by the magnates and almost everyone else is reduced to the status of dependent serf.

    Where conventional property has proved insufficient, the Elite have invented novel forms of “intellectual property” to expand the scope of private ownership.

    As for democratisation, in most countries it never developed beyond “elective” government dominated by elite parties. Moneyed interests and pressure groups found it a trivial exercise to subvert that. Campaign bribery and the revolving door of jobs-for-the-boys ensure that the interests of politicians and senior bureaucrats remain aligned with those of the elite.

    This past year has seen an outbreak of rebellion, but it’s unlikely to last.

    In the wake of Brexit and the Trump rebellion, there is now open talk in elite circles on whether it is appropriate to allow “obviously ignorant” people to vote on critical issues. “They’re not college educated, you know.”

    There is now open talk in elite circles on whether those who “receive more in welfare payments than they pay in tax” should be allowed to vote at all. Oddly, there is no suggestion that those monopolists who receive more in economic rent than they pay in tax, or those lobbyists who receive more in government contracts than they pay in tax, or those too-big-to-fail bankers who receive more in bail-outs than they pay in tax, should be similarly disenfranchised.

    Remember that the universal adult franchise is modern. In most countries it’s barely a century old. There is nothing to say that the Elite won’t campaign to remove it again. Or effectively subvert it by making it difficult for lesser mortals to enrol. Or re-jig the electoral system to ensure that minor parties have no hope of election.

    And even if minor parties and “outsiders” do get to be elected, they usually prove to be a disappointment. Those attracted to politics are inevitably those who yearn to exercise power. Look, for example, at the 2010 election in Britain where the Liberal Democrats were given a once-in-a-century opportunity to reform Britain’s voting system and introduce proportional representation. The party leader Nick Clegg threw it all away in return for the chance to be Deputy Prime Minister for five years.

    The closer a party gets to exercising real power, the more it attracts to its ranks those who crave power.

    Likewise in the US, those who threw in their lot with Donald Trump out of sheer desperation for an alternative may not have long to wait before suffering the pangs of disappointment.

    In any event, the Elite are entrenching their gains by taking ever more critical decisions out of the hands of elective government altogether: the privatisation of strategic monopolies, essential services and critical databases means that elected politicians are forced negotiate with private magnates on terms dictated by the private magnates.

    And finally there is national self-determination which has been eroded by the growth of undemocratic, opaque and unaccountable “neo-empires” like the EU, and so-called “trade” agreements which have less to do with trade and more to do with signing away sovereign powers to unaccountable committees of elite business interests.

    Organisations like the EU may be created with the best of intentions, but no sooner do they come into existence than an “iron law of megalomania” takes hold. They begin to attract those self-same narcissistic, machiavellian individuals who are drawn to the prospect of exercising dominion over millions of other human beings. As with any empire, the Subjects soon end up suffering in the pursuit of some “greater good”. Witness the economically counter-productive brutality inflicted on Greece. Witness the “Lost Generation” of unemployed European youth sacrificed to the Eurozone fantasy.

    Now, like Elites throughout history the post-modern Elite seek to weave a cloak of virtue to conceal the nakedness of their self-interest. Their theologians devise all manner of mellifluous apologia.

    Elite theologians love to talk about “The Rule of Law” . . . . provided always that it’s law enacted by – and interpreted by – the Elite themselves: a cosy club of Ivy League or Oxbridge or Grandes Écoles pals who have an uncanny knack of ensring that “The Rule of Law” is always consonant with “The Rule of Privilege”.

    Like Anatole France we are left to marvel at that “Majestic Equality of the Law” which protects the property of both the immensely rich and the dirt poor to an equal degree.

    We are left to marvel at that “Majestic Equality of the Law” which allows both the plutocrat and the poor man to bribe politicians with campaign donations or the promise of lucrative directorships.

    We are left to marvel at that “Majestic Equality of the Law” which guarantees freedom of trade but not freedom to have a job paying anything more than minimal and uncertain wages.

    Elite theologians love to talk in honeyed terms about the “end of borders”, but they don’t really intend to abolish borders. All they are really doing is replacing “national borders” (over which the mass of ordinary citizens might have had some control) with “private borders”: elite private property.

    The Elite do not intend to rub shoulders with the plebs. They retreat to their private mansions, their private country estates, their private campuses, their private gated communities, all surrounded by private borders marked with “KEEP OUT. Trespassers Will Be Prosecuted!” signs.

    The Elite do not intend to stand, crushed cheek-to-sweaty-cheek with the prols on inadequate and overcrowded public transport. They whizz from their private mansions to their private offices on roads which have been tolled or “road-priced” or “congestion-charged” out of the reach of the masses. It’s rather like the Zil Lanes of old Soviet Moscow but justified nowadays by deference to that Great God, “Efficiency”.

    And from behind their private borders the Elite sermonise piously on the supposed intolerance of those outside! Hypocrites blind to their own hypocrisy.

    On all fronts the trend is the same: the alienation of public rights – over which the citizens used to have some say – to elite private interests.

    And if all of that sounds depressing, it may be only the beginning.

    Unless there is some spectacular change, at some point the Elite may decide that the continued existence of masses of redundant and increasingly disgruntled human beings is a threat to their own security.

    In this past year we have seen the Chinese unveil lethal weaponised robotic “security guards” with rudimentary artificial intelligence that can be used to control “anti-social” elements. In the US we saw the first remote execution of a suspected criminal by a police robot.

    If that does not send a chill down your spine, then perhaps you’d better sit up and start paying attention. The technology of robotic “pacification” is indifferent to Good and Bad. Not only do the Elite not need workers. They no longer require humans for their Praetorian Guard.

    Now, some might be inclined to dismiss this as “conspiracy theory”. But here’s the thing: there is no conspiracy. There’s nothing underhand going on. There are no secrets. All this is happening in plain sight. One merely needs to look about and then remember that human psychology has not evolved.

    There has always existed within the human population a small proportion of individuals who are not like the rest of us. They are aggressively narcissistic, machiavellian, possibly psychopathic, with a strong appetite for attaining power and dominating others. They may not always be apparent. One of the defining characteristics of psychopathy is “superficial charm”. The psychopath knows more about you than you know about yourself. He or she knows exactly which buttons to press to gain your confidence, your trust, even your admiration.

    Had it been possible to establish genuine Democracy with the right of recall, veto, initiative and referendum there might have been some hope for the rest of the human race, some hope of effectively controlling these people. That is why elite theologians universally abhor genuine Democracy in favour of the corrupt system of “elective” government: elective government which perversely attracts the most undesirable narcissists.

    Elective government provides no safeguards. It will prove no barrier to containing the psychopaths once the cost of pacification falls as a result of robotics.

    You don’t need to be Einstein to see how this game must play itself out.

    For most people it’s not going to be a happy ending.

    • Ronin8317MEMBER

      Pretty sure we’ll be ruled by AI before long. A major reason for Hillary Clinton to have lost is she is using an ‘AI’ (codename ADA) to determine where to focus her election campaign, so even egomaniacs will follow whatever the AI tells them to do!!

    • I couldn’t agree more, I wish it wasn’t so, but history tell us this is probably a fairly pragmatic view to take.

    • I always enjoy reading your views although I don’t agree with the conclusions.
      I simply can’t see an organized controlled end to this democratization experiment, no the end won’t be “controlled” in any sense of the word. Today’s elite might be able to buy the allegiance of most technologists however that’ll still leave a good number of non-allied highly skilled individuals that simply don’t worship the new elite. If this group is not constrained than they’ll wreak havoc, it’ll be asymmetric warfare at it’s worst. As we all know, in asymmetric warfare the closer you stand to your enemy the more losses you inflict on them and the more frustrated they become with their own inability to create or even project the concept of safety. Without safety the Plebs get worried…very worried. This simply creates a degenerate cycle of despair, we can see this played out every evening on the news, some Middle eastern individual or organization intentionally inflicts harm, harm on itself, harm on the broader society, harm on its neighbors, makes no sense but it’s a future we all need to get used to. There’s a reason why they call triacetone triperoxide (TATP) the “Mother of Satan”.

      • I hope you’re right. I hope this will prove to be a self-defeating prophesy.

        But there can be no change unless people are moved to action. The Elite will never abandon their privileges out of philanthropy. (They will never wake up one morning and say: “Oh! My God . . . etc, etc”)

        Now is the best chance in decades to take advantage of intra-elite competition and institutionalise democratic changes.

  3. Watched the full Global Trumpism interview with Mark Blyth (smart bastard!!) where he dissects this situation brilliantly.

    https://www.youtube.com/watch?v=txNVg64RkYs

    Capital is taking more global wealth from labour than ever before and society as a whole needs to see a benefit from the next stage of the rapidly advancing technological revolution. The alternative is more Trumps and Brexits driven by an ever expanding mass of disempowered people.

  4. On a barely related note..it would be nice if the old “white collar/blue collar” thing fucked right off. I don’t mean the description- I mean the dress code. Business clothes are useless. They’re poorly suited for the Australian summer climate, and they can only be used for office work. Too prone to stains, ripping etc because they’re made out of weak fabrics just so that the wearers could signal their class by the fact that they wear impractical clothing. But white collar workers these days often earn less than ‘blue collar’ (or rather: “high vis”) workers. So now its just a pointless exercise in showing “I work in an A/Conditioned office”..which doesnt impress anyone.

    • my mum worked in the fashion industry for most of her life. she worked here from 1960s – 90s. in the 80s-90s clothing manufacturing was offshored to china. mum noticed the difference when retailers started to import clothing from there. cheaply put together, using crappy fabric. it certainly did not match the australian standards (which according to her was some of the best in the world, in terms of fabric quality and sewing standards). profit margins dont discriminate between blue collar or white. as long as you are buying this shit that is all that matters. the benefit of built in obsolescence in the garment industry is you have to replace your crappy worn out shirts more often. productivity gains for the 1%. a big up yours for the workers and environment.

      globalist neoliberalism at its finest.

      “only be used for office work. Too prone to stains” – too prone to BO as well. it is cheaper to use polyester or poly/cotton in shirts, only polyester is a derivative of petrochemicals. stinks to high heaven when you sweat. 100% cotton or wool on the other hand, not as bad. mum bought material from a shop and it said 100% cotton. she tested it by burning a small piece. how can you check: if it burns and it is “crispy” then there is some polyester or other non breathable fabric in it. if it burns and it still remains soft (the burnt bit), is a good indication it is 100% cotton.

  5. pyjamasbeforechristMEMBER

    Tax the asset owned (directly or indirectly) by each individual instead of income earned. Equality problem solved!

  6. Technology is truly agnostic, it born debt free and created to only reward those that master Technology.
    Some would suggest that Technology is indebted to capital for it’s creation, I would counter that it is capital that wants to make technology it’s whore and only time will tell if they succeed. Personally I wouldn’t count on technology bending it’s knee to capital because the electronic widgets that make advanced technology possible are becoming cheaper by the day, they still follow Moores law (maybe not exactly) but from a widget cost perspective they’re not far from it. Complex compute cores with arrays of GPU’s are available for less than $25 and run on the smell of an oily rag, this cost/power structure is revolutionizing ideas like voice recognition, universal 3G/4G access is creating a world where the worlds fastest computers are available to do our biding anywhere and everywhere, the true benefits of ubiquitous Mbps access are only beginning to be dreamed of. These dreams don’t owe anyone anything, they don’t need harbourside houses or beachside bungalows their businesses owners aren’t compelled to rent high dollar offices or bribe influential politicians. It’s not only the poor that’ll loose their jobs to technology it’s also the worlds rent seekers that need to make sure technology pays it’s dues.

  7. Very fluffy article, says ‘When one job disappears, a new one is created in its place.’ this of course is pure bullshit.. more like one new job will replace 10 old jobs. The other thing that kept people working 100 years ago when technology was progressing was shorter working hours, from 60, to 48, to 40 to 37.5. This is how it should progress however as the politicians, just like the elite, dont govern for the people anymore the simple answer to this (shorter hours shared out) will never happen this side of a revolution. Instead we have the gig economy in part time McJoblets.

  8. I wonder if the reluctance of intelligent, educated people to have children, and the reverse for the working-class, is increasing inequality. Given intelligence is based on genetics and upbringing, it could be understood that wealth is being concentrated into a smaller % of intelligent individuals. The solution then is to levy an additional tax on the rich who have insufficient numbers of children?