Peter Radford / Economics, Politics / capitalism, democracy, innovation, plutocracy, shareholder value, the future of work, wages /

Why Innovate?

May 29, 2018

Every so often one of the numerous news feeds that fill my inbox contains a story that stops me short. In this era of Trump dominated news I have become numb to the corruption that he has brought in his wake and to the absurdity of his autocratic style with its contempt for the rule of law. Instead I focus on why it was that so many Americans were willing to elect someone so ill fitted to the job. The insecurities of the contemporary workplace offer a partial answer. So when I read Steve LeVine’s “The Future of Work” feed from Axios recently, not only did it stop me short, it gave additional insight into that electoral conundrum.

Not that I was reading anything particularly new. Sadly the there was no news. What struck me, however, was the brazen attitude and expression of the CEO’s quoted. LeVine didn’t give us his source, I assume it was some conference or other, so I am simply quoting his article verbatim before I comment:

“Few Americans have enjoyed steadily rising pay after inflation over the last couple of decades, a shift from prior years when the working and middle classes enjoyed broad-based wage gains as the economy expanded.

Why it matters: Now, executives of big U.S. companies suggest that the days of most people getting a pay raise are over, and that they also plan to reduce their work forces further.

Quick take: This was rare, candid and bracing talk from executives atop corporate America. The message is that Americans should stop waiting for across-the-board pay hikes coinciding with higher corporate profit; to cash in, workers will need to shift to higher-skilled jobs that command more income.

Troy Taylor, CEO of the Coke franchise for Florida, said he is currently adding employees with the idea of later reducing the staff over time “as we invest in automation.” Those being hired: technically-skilled people. “It’s highly technical just being a driver,” he said.

The moderator asked the panel whether there would be broad-based wage gains again. “It’s just not going to happen,” Taylor said. The gains would go mostly to technically-skilled employees, he said. As for a general raise? “Absolutely not in my business,” he said.

John Stephens, chief financial officer at AT&T, said 20% of the company’s employees are call-center workers. He said he doesn’t need that many. In addition, he said, “I don’t need that many guys to install coaxial cables.”

Because of the changes coming, AT&T is pushing employees to take nano-degree programs to prepare them for other jobs — either at AT&T or elsewhere.”

Do you have the same reaction that I did?

What shocks me most is that it appears uncontroversial that workers ought not expect generalized pay raises. Instead they can only expect increases if they acquire new skills. LeVine calls the conversation bracing, I prefer to use other language that I will not divulge here. The key is to draw attention to the notion that corporate profits and wage increases no longer move together. This is not news. Profits have gulped up a larger share of our national income for decades now. Wages have, as we all know, suffered as a consequence. What is remarkable is that this separation is now so commonplace that CEO’s feel emboldened to trot it out as a fait accompli, as if it were a force of nature that we cannot resist.

Of course, they appear to be saying, the future of work is grim. It’s grim because of technological innovation and automation. And unless you, the worker, get educated in the relevant skills you are doomed to be one of those who slide further into the mire of financial insecurity. They have no qualms about the devastating social consequences of that outlook. They care not one jot about their respective workforces as groups of people. They care only generating profit. With that profit flowing to their respective shareholders.

Now I don’t want to appear a Luddite, I appreciate the march of technology as much as most, but there ought to be a social benefit from that march. In the past the great waves of technological change have wrought equally great waves of social upheaval. We are all aware that the social and economic histories of the past two hundred years or so are deeply intertwined. We can reflect on the massive increases in standards of living that flowed from those past waves. We recognize that the average person today is far better off materially than even the wealthiest person of the pre-industrial age.

We are all better off in other ways too: we eat better and live longer than our predecessors.

Those previous upheavals forced changes in our political structure too. This is what, I imagine, must frustrate utopian thinkers of both extremes in politics. Instead of creating a seething and volatile working class that then seized power, industrialization and its aftermath simply multiplied the middle class. It opened the doors hitherto barred to most ordinary people. It spread opportunity and reward more widely than at any time in history.

But we would be naive to extrapolate from that experience. Or, at least, we would be naive to assume that the progress we now reflect on as being the inevitable consequence of prior waves of technological innovation will be reproduced by the current wave. It took a long and difficult struggle to wrest generalized progress from those prior waves. Capitalists do not surrender their gains easily. We must remember the unrest that was necessary to force a more equal distribution of the social gains innovation produced.

What is different in this wave of change is the breezy technocratic framing given too its consequences. CEO after CEO blathers on breathlessly about the future. Wages, we are told, will never again rise across the board. No, not this time. This time only the skilled will benefit.

We didn’t have the same corporate structures before. In the past the battle was more raw. Workers and capitalists were in more immediate contact. Most large business empires were privately owned by their founders or their families. So conflict was more intimate and could be more easily characterized in utopian or ideological terms.

How do workers engage in battle with technocrats? How do they re-frame the discussion in the face of a managerial elite educated in endless technical justifications for efficiency and shareholder value as the exclusive goal of what we all call work? And how does society justify having to absorb the entire cost of an upheaval foisted on it by the motivation of private interests searching for private gains?

Most of us did not ask for all this automation. We did not necessarily agree with the redefinition of corporate objectives that excludes workers as being on a par with shareholders in the division of incomes. It is all just happening to us.

Let me reframe my thought: why innovate if the consequent changes don’t make us better off? All of us, not just the owners of the machines. There ought to be a congruence between both private and social gains. Otherwise we no longer live in a democracy. Because in a democracy the benefit of the majority is its defining characteristic. That’s why we invented democracy: to make sure the gains of innovation were fairly spread across the entire population rather than concentrated in the hands of a few. Democracy is designed to undo the extremes of capitalism. If it fails, if we allow it to fail, then the dystopia hidden behind the blank technocratic blandness of the CEO’s quoted by LeVine will deprive the the majority of the inevitability of progress so often assumed by the cheerleaders of technology. Such a future would have no democratic legitimacy. It would be a fraud on the efforts of of bygone workers.

Why innovate to produce such a future?