workplace

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Chapter Thirty-One

There’s a story about Richard Feynman who is reputed to have said that anyone who claims to understand quantum physics almost certainly does not.  This coming from someone who almost certainly did.  I have much the same reaction to anyone who claims to have understood Ricardo on their first read through his work.  Then again, perhaps it’s just my own struggle: every time I grapple with Ricardo it takes me a while to understand where he’s going.  It’s a case of knowing the plot, but failing to follow the details.

In any case, here we are towards the end of the pandemic-induced economic downturn and minds are turning back to the many longer term issues we were all discussing before the shutdown curtailed conversation and re-focused our minds on shorter term issues.  The march of technology and inequality have always loomed large in my mind so it to those that I am now returning.

One conundrum that interests me is that we are constantly being told to regret the loss of “good paying” factory jobs and their replacement by lesser paying service sector jobs.  Looking back to the beginnings of industrialization those same factory jobs were hardly welcomed.  The threat to traditional ways of life, however much a struggle that life might have been, loomed large in contemporary discussions about the march of technology, the arrival of machinery, and the shift from domestic to factory production.

There are echoes of that early controversy in our current efforts to come to terms with the arrival of things like artificial intelligence and other digital technologies that appear, at least anecdotally, to be altering not just the workplace but deeper aspects of society such as the balance of power between the key factions in the economy.

Technological unemployment is back on the agenda.

Which is why Ricardo is worth recalling.  That enigmatic chapter thirty-one, tucked away as it was at the end of the third edition of his “Principles” seems to betray his entire prior thought process.  He, in this chapter, opened the door to the possibility of technological unemployment, which came as a huge shock to his supporters and critics alike.  It isn’t worth getting into the details of Ricardo’s argument other than to reinforce the point that it appears to contradict his more conventional positions on political economy.  Such was the impact of the shift he made that a veritable industry emerged around the effort to understand why he changed his mind, what the importance of the change of mind was, or, indeed, whether he had changed his mind at all.

The fact remains that chapter thirty-one lays out how, in Ricardo’s mind, the steady rise in the use of machinery and the necessary investment of resources to create that machinery, can affect employment.  His conclusion that, at least in the short run, the uptake of technology can create unemployment shocked his contemporaries most of whom were strenuously engaged in the defense of the use of more and more machinery.

It is the very nature of the argument that intrigues me most: the discipline of political economy was developed in that early era of industrialization precisely to explain the changes going on in the economy and consequently in society at large.  The charged resistance to machinery amongst some elements of the workforce, which rose to various levels of violence at times, was seen as a threat to political stability.  Understanding and explaining the shifting economy was seen as a vital part of establishing the necessary authority to enforce laws protecting the rise of industry from its opponents.  The new economy and the political environment were inextricably linked.  Ricardo was often the go-to intellectual key witness in political discussions, debates, and controversies. He appeared to be a reliable supporter of free trade and all other forms of modernization.

And yet here he was arguing that machinery might not, after all, be such a good thing.  Or, more precisely, he argued that opposition by workers to the uptake of machinery by industry was not a blind or poorly conceived reaction.  It was, according to chapter thirty-one, a highly sensible and reasonable one.

Despite all the theorizing in the interim, economists even today slide too easily into the glib defense of automation by assuring that the implied rise in productivity will, inevitably, provide greater prosperity for all.  Maybe it does.  But is the distribution of that prosperity also, inevitably, to the benefit of the people who, per Ricardo’s chapter thirty-one, might suffer in the short term?  Economists tend to overlook the power struggle that it took to ensure industrialization was a broad based success.  That power struggle was not a short term one.  It lasted a century or more.  Certainly rising productivity added enormously to wealth.  To get that wealth shared more equably was not a shoe-in, and those who suffered in the early years never saw their reward.  Only later generations did.

Are we in a similar position today?  Will the rise of digital technologies render the same thorough-going re-organization of society?  And will the benefits accrue across all society or only to a few — the owners of the digital “machines”?

Paul Krugman, in a column in today’s New York Times, argues that job-loss to automation is not obvious in current data.  He uses the typical equipment of an economist to back up his argument: were labor being displaced by technology we should see a shift in the pace of productivity growth.  We see no such shift.  Therefore upset over the loss of jobs to robots etc is simply anecdotal and not supported empirically.

Is Krugman looking in the right place?

One of the first major effects of the original wave of machinery back in early industrialization was not so much to cause unemployment, although that happened, but to change the nature of employment.  It was as much a social impact as its as an economic impact.  And it rippled out from there to become a political problem.  Simply looking at productivity statistics does not capture such a “first wave” impact.  A gig economy worker is still employed.  But their experience of employment is radically different from that of someone still employed in a more traditional format.

And it is this experience of change that matters because it influences people’s reactions, attitudes, and behaviors.  Major technological shifts manifest themselves as equally significant social shifts.  Experiences and attitudes change.  Only after those social and cultural effects are fully absorbed can we start to understand the longer term economic impact.  We can, for instance, come to regret losing the very factory jobs that our ancestors resisted being created in the first place.

Then, of course there’s that chapter thirty-one.  And Ricardo who said this:

“That the opinion entertained by the laboring class, that the employment machinery is frequently detrimental to their interests, is not founded on prejudice and error, but is conformable to the correct principles of political economy.”

So there can be technological unemployment.  Under-employment too.  It’s that short term versus long term thing again.  And we all know about the long term.

What to do?

 

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Reform of What?

We have heard a great deal in the American media about the so-called Biden reform agenda.  The huge injection of government spending into our hibernating economy is meant not just to sustain it until we arrive at a post-pandemic moment when it will spring back to life by itself, but also to reform it.  That is to say the $1.9 trillion package is not just disaster relief, but is also politically motivated to change the economic landscape beyond the pandemic.

I think the politics of muddling the two goals, relief and reform, into one big package are clear: the Republican party would fight tooth and nail against reform and with the wafer thin majorities that the Democrats enjoy delaying it would court permanent postponement of even the most modest reform.

But the economics are less clear.  Anything that adds a cost to business at a moment when additional costs are more burdensome than usual, is problematic.  Surely we ought to wait until business conditions are on the up before we layer in more expense.

So the politics and the economics seem to be going in two different directions.  Clearly the Biden administration is mindful of the endless election cycles that cripple long term political thinking here in the U.S. and has decided to go for broke.

Good for them.

The problem then becomes: what are we reforming?

Forgotten amidst the panic and hyperbole of the last year or so is that the economy is not just going through a short term downturn brought upon us by a plague, but it is also going through a longer term adjustment caused by a new wave of technological innovation.  That wave will still be present when the pandemic ebbs away.  The consequences will need attention.  As I wrote a couple of weeks ago, the social question, or our contemporary version of it, is back to haunt us.

When we talk about the dislocation caused by sudden waves of technological innovation we tend to think in terms of the higher risk of unemployment that often comes with such a wave.  A great deal of ink has been spilled in parsing apart the kind of technology that adds to, or augments, labor rather than displacing it, so this is not the place to rehearse that discussion.  It seems that the first arrival of a new general purpose technology is more displacing than augmenting simply because those kinds of applications are easier to identify.  Only later, after the technology has become more familiar, do augmenting versions become more common.  It takes a while to digest new technologies, the short run implications are often very different from their long run counterparts.

This difference between short and long run implications are what motivates the glibness economists display when confronted with technological disruption.  They simply point to the long history of the industrial era and argue that, eventually, society benefits sufficiently to offset those shorter term upheavals.

This cavalier attitude consigns a generation or two to oblivion — as happened in the immediate aftermath of the industrial revolution — but allows economists to escape having to be more specific about the social consequences of all that “creative destruction”.  They can maintain their modern pretense to analytical agnosticism and avoid the social and political ramifications of their work.

The difference between the short and long term impacts of technology can also create great irony in our attitudes.  The original angst and revolt against the factory as being an inhuman re-modeling of productive activity has been replaced by an almost nostalgic yearning for “good” factory jobs being lost to robots.  Both attitudes are correct at the moment in which they occur.  The factory did indeed re-write social activity.  It also gave birth, after that initial dislocation and adjustment, to a wave of better paying jobs that drove the emergence of the great American middle class.  So we are right to mourn the loss of those jobs.

What is often missing in this muddled reaction is that the social acclimatization necessary to turn the evil factory into a benefactor of the blue collar worker was accompanied by a political change.  The workplace changed.  So did the distribution of political power.  The middle class produced by all those well paying factory jobs was able to inject itself into politics and press back against the more predatory instincts of unfettered capitalism.  A balance was achieved that brought about a period of relative calm and, perhaps ultimately, complacency.  The workplace settled into a predictable package of benefits and responsibilities.  Business management accommodated itself to this package.  Trade unions protected it.  Government legislated to perpetuate it.

And modern technology has blown it apart.

It is not just the risk of unemployment that has risen sharply as we leave industrialization behind us and enter into the digital world, but even those who maintain employment are deeply affected.  The workplace itself is being altered in ways that render more and more fully employed workers precarious.

How so?

The logical conclusion of the shareholder revolution is that corporations pull apart their operations in order to exploit their so-called “core competencies”.  They break up operations into ever finer pieces and outsource those considered not “core”.  The entire sequence of productive activities is thus fragmented which gives justification for an intense analysis of their relative value.  Workers in the lower value components are at risk of seeing the old package of benefits slowly eroded as the corporation attempts to match the value with the cost.  A consequence of this activity is the rise of the contract worker who has lost the older benefits associated with post-war employment and who now receives only a wage.  Gone is the retirement plan.  Gone are the health care benefits.  Gone is the fully paid vacation.  Gone is the sick leave, family leave, or any other form of paid time off. The worker is exposed, by this process of marginalization, to the realization of the end result of the single minded pursuit of profit on behalf of the shareholder class.

But this process of marginalization requires a technological backbone to maintain the original process intact even after the fragmentation has been implemented.  The digital revolution is doing the work that the industrial revolution once did.  It is upending an existing social system, along with its accepted norms of social relations, and replacing it with a newer one.  The gap between the arrival of this new set of relationships and the political reaction to alleviate its rougher edges, is the gap where we now live.  It is a gap populated by a precarious workforce that might be employed, but which is suffering  constant fear of failure, fear of ill health, and fear of poverty in old age.  All the same fears, indeed, that the post-war social system had dealt with.  Meanwhile the owners of the new technologies also live in this gap and exploit it to create fortunes at the expense of their fellow citizens.

All this is to say that it is not just the labor replacement or augmentation potential of new technology that matters.  It is the downward displacement potential it has too.  It is the re-working of the workplace that matters most.  Factories as drivers of higher wages were the hard won end-product of generations of conflict long after they first arrived on the scene in 1700s England.  Our “fissured” workplace is the new battleground.  The gig economy is the new reality.  Digital technologies underpin the logistics of these new workplaces, just as steam and electricity were the basis for the factory system.  Who owns those technologies?  Who chooses them?  How does the middle class recapture those benefits it lost due to marginalization and shareholder primacy?

There’s a lot to reform.  I am not sure that the $1.9 trillion Biden package includes much along these lines.  Perhaps the next wave of policy initiatives will.  We can hope so.

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The Future of Work is Now

The future of work has become one of the most hotly debated and analyzed topics of the past couple of years. No one with a pretension of a serious nature or a desire to be seen opining on the “big” issues can afford not to have a point of view on it. Thus we are bombarded by an endless torrent of articles, books, academic papers, and speeches on the way in which the workplace will be changed by the emergence of  various technologies. The usual umbrella under which these technologies lurk is the one we call artificial intelligence.

There is no doubt that AI will have an enormous impact. There are countless breathless accounts of the number of jobs that will simply disappear as AI sweeps through the economy. These accounts usually appear from those involved in the invention and application of AI. They all end up expressing some form of fatalistic vision where the workplace will inevitably collapse under the impress of technology, wages will similarly collapse for those poor souls unable to keep up with the onslaught of robotics, with the resultant picture being grim for just about everyone except for the few who remain in the so-called “knowledge economy”.

The almost total agreement between all these accounts with respect to the dystopia they articulate is matched only by the paucity of mitigating prescriptions. Just about all of them agree that education is the only escape hatch available to the ordinary worker. Consequently there are as many equally breathless accounts about the need for everyone to engage in constant learning of one form or another as there are accounts of the impending wage disaster if we don’t all suddenly become perpetual students.

While I count myself amongst those concerned about the AI dominated future I consider myself a bit of a heretic.

Why?

Well, for one, no one has yet explained adequately how all this education will be paid for. How, for example, would a displaced worker afford the time or expense to make a transition, undergo a re-education, and yet still finance a continuation of her lifestyle? The unremittingly libertarian core creed of the technologists bringing us the future would appear to eliminate a collective response to this question. The state having been gutted of revenues here in the US is hardly capable of stepping in to play the role of financier of last resort to all this education.

Without an answer to this question all analyses ending with a call for ever more education are, in my opinion, sterile and worthless.

And any of them that do provide an answer that includes a role for private employers is simply missing the point: private industry has, for decades now, withdrawn itself from worker education.

Which is my main point today.

The future of work, if by that we mean the reconstruction of the workplace as a fractured, lean, and bleak landscape, is here already. It is here courtesy of the efforts over the past thirty years of private industry and its pursuit of shareholder value.

This salient fact is missing from the discussion by those obsessed by AI. They ignore the recent history that has seen a massive shift of risk onto the shoulders or ordinary workers. A shift that went unbalanced by an equal shift of reward such that prior standards of living were not undone.

The brilliance of the corporate adoption of the notion of shareholder value is that it provides what appears to be a profound and irrefutable logic to explain the grubby grab for a greater share of the national wealth by the shareholders of the economy.

Nowhere is it said that the objective of management is to maximize returns to shareholders. Nowhere, that is, except in the mainstream management literature. The notion of shareholder value is a modern conceit. It was constructed as a consequence of the unfortunate anti-social turn in economics during the 1970’s. It is a natural outcome of the determination of large corporations to push back against the post-war social contract that allowed space for increasing wages for workers. Those wages were viewed as an appropriation of profit that “ought” go to shareholders. After all those shareholders were being re-invenetd as noble entrepreneurs taking risks in order to provide the energy that resulted in growth from which workers would then benefit.

The problem during the 1980’s and later was that the economy’s innovative energy was apparently dissipating. Growth was slowing down. Gains in productivity were becoming patchy and harder to extract from arriving technologies. And yet the demands of investors were not recognizing this slowdown. On the contrary the demand was for ever increasing returns on capital.

One way of meeting the demand for higher returns in an environment that appeared to militate against them was to change the goals of the entire corporate reason for being.

By simplifying the purpose of a corporation and focusing it exclusively on shareholder value the way was opened for increasing portions of the national wealth to be allocated to profit, away from wages, and thus satisfy the rising demands of investors.

The consequence was a constant re-writing of the workplace arrangement, with every step designed to reduce worker compensation so as to free up cash for profit.

Nowhere has this process been more successful than in the deterioration of the value of benefits included in the overall compensation package workers now receive. The average worker is now more responsible for their own benefits than at any time in the post-war era.

But this shift of risk away from shareholders and onto workers was insufficient to maintain the momentum of returns to capital. More was needed.

Hence the adoption of more extensive measures such as outsourcing, offshoring, and the adoption of contingent work arrangements. All of these are logical consequences of the drive for ever more profit. And they have been standard practice for two or more decades.

The result is that our current workplace bears little resemblance to that of the immediate post-war years. It is dominated by contingent work, by a paucity of benefits, by stagnant wages, and by a the collapse of true opportunity. It is a bleak place. And it is here already.

Despite this there has been practically no institutional response. The policy conversation still takes place as if the older, richer, and more reliable workplace still dominates. Private industry having stripped away at the share of wages in our economy bemoans the inevitable slow growth. It takes no responsibility for having shaped the macroeconomic landscape. Our politicians are obsessed over the future and the onrush of AI and related technologies, yet they ignore the threadbare landscape in front of them.

Yes technology will shape the workplace. Yes it will produce a future of work. Yes we need to be concerned about that.

But what about the workplace shaped by the ideologically driven technology of shareholder value?

That technology has already produced its own future of work.

And that future is now.

We need to deal with it.