This opinion piece from the Economist proposes redistribution on a grand scale to remedy massive unemployment from mechanization of assembly lines.
If society wishes to avoid such an outcome, the only real option is redistribution and a lot of it. That, in turn, could be managed in a few ways. Society could make a go at raising the earnings potential of less skilled workers by investing heavily in education. That will strike many as the most attractive solution, but it is also one that will face limits. Not everyone can be educated to Google-engineer level.
More skilled or richer elements of society could effectively tax themselves by protecting certain job categories in order to maintain employment opportunities for the less skilled. So, driverless cars may soon be an operating reality. But society could pass laws banning or limiting AVs in order to protect certain jobs: taxi driver, for instance, or trucker. Depending on the size and organisation of less-skilled groups, that’s conceivably a benefit they could vote themselves.
This is why socialism does not work. The typical reaction of a central planned economy would be to increase taxes or outlaw technological advances in order to protect jobs. Capitalism coped comfortably with the mechanization of agriculture, introduction of the automobile and the computer. Should we have banned the use of tractors, automobiles and automatic teller machines to protect the jobs of farm laborers, ostlers and bank tellers? The first instinct of central planning is to protect the status quo — which is why socialist countries fail to grow. Visitors to communist bloc countries during the Cold War felt they were going through a time warp: the contrast with Western advancement was striking. A more recent example is the economic stagnation in Southern Europe. Without the creative destructive process that allows capitalist economies to adapt to changing needs, progress grinds to a halt and economic gridlock develops.
Adaptation to new technologies will not come from government think-tanks, ivory tower academics or even big business. It will come from thousands of start-ups, all trying to take advantage of the changes. And the millions of lost jobs will be absorbed into other sectors of the economy as new needs arise.
Larger profit margins from mechanization will be eroded by increased competition. Prices of manufactured goods will fall, leaving consumers with more money to spend. Man has unlimited wants and only finite resources. As Abraham Maslow described: when one need is satisfied, new needs surface to take their place. Increased consumption in other sectors — whether bigger houses, more flat screen TVs, or longer holidays — will generate employment opportunities.
Like evolution, the beauty of the capitalist system is its simplicity. Recent failures like the global financial crisis are not the fault of capitalism but the result of central planners — at the Fed and in government — attempting to meddle with the system. The road to hell is paved with good intentions.
via Nations Must Prepare For Robots Destroying The Low-Skill Job Market – Business Insider.
Redistribution is the answer.
It won’t happen overnight but eventually robots and intelligent automated processes will replace a large percentage of the work force and not just at the bottom end. Intelligent machines will design and manufacture other machines making way for us to spend our days sitting down at the beach watching the waves roll in.
the propect does raise a bunch of questions as to how we manage the transition and share the spoils.
Mazda built factory that produces 1 million cars per annum with just five people to supervise the robots
Do you have a link for this?
Automation and technology seem to create unemployment by making workers redundant.
In principle the situation is identical with that of agricultural workers in under-developed countries.
Mechanization in agriculture increases the area a man can farm and allows farmers to increase their income substantially IF they can obtain additional land, so mechanization increases the demand for land. If, as is usual, there is no spare land, the price of land is driven up – beyond the reach of workers displaced by the machines and they are then forced into unemployment and into shanty towns.
Automation in industrialized countries has the same effect, but in a roundabout way. If automation increases output the factory owners will have increased earnings and the remaining workers in a unionized industry will get an increase in pay. The workers can then pay more for home sites and the factory owners for industrial land.
If land were adequately taxed, such price rises would remain reasonable.
When land taxes are inadequate (as in most economies) these price rises tend to be excessive – even on their own. They are further aggravated by people who speculate or invest in land. Speculators and investors take note whenever land begins to rise in price and immediately add a contribution by bidding against anyone who wants to use land immediately, or by hanging on grimly to whatever sites they own in the vicinity.
Sometimes land price rises can be so extreme even the employed are homeless. During the DOT.COM boom in California’s Silicon Valley the number 22 bus that runs through the valley was dubbed Motel 22. Employed people whose incomes ought to have been sufficient to support a family could not afford to rent or buy, so after a day’s work they paid $3 and rode up and down the 26 mile route until it was time to report for work in the morning. (Reference “Boom Bust 2010”, p 38, Fred Harrison 2005).
Because of excessive land price rise a normal process becomes malignant. It puts land ownership beyond the reach of all but the highest paid workers and – in many cases – beyond the reach of anyone who might employ the redundant worker.
Unemployment, housing stress, and industrial strife only appear to be caused by automation. It is really caused by illogical taxation systems that raise most revenue through taxes on labour and capital, and far too little through taxes on land. If the proportions were reversed, unemployment would not follow in the wake of automation, and the benefits of progress could be shared more equitably instead of just making the divide between the haves and have nots greater. Redistribution via welfare and other government programs (paid for by taxes on labour and capital) does not solve the problem, just produces more distortions.
Land, the earth’s crust, is just as essential to our lives as the sunlight and the atmosphere. You would expect it to play a fundamental role in how our civilization functions.
Thank you Alex. Interesting to note that UK house price rises relative to the rest of Europe, since 1975, are largely attributed to restrictions on the release of new land for development. See Abundance of land, shortage of housing | Institute of Economic Affairs.
There is no question governments interfere in land prices but there are three contributors to Australia’s unaffordable housing – debt, planning restrictions and very bad tax policy. Focussing on one only can deflect attention from the others.
Leith van Onselen has several articles in Macrobusiness re the planning restriction effect. One link is
http://www.macrobusiness.com.au/2011/09/housing-supply-australia-look-to-texas-to-solve/
He says
“Further, whilst easier access to credit can exacerbate a housing bubble – or any bubble for that matter – something must set up the expectations of capital gain, and the systematic discounting of downside risk, which is at the centre of a bubble. And having planning policies that continually retard the ability of supply to respond quickly to demand, thereby creating a sustained pattern of rising prices, generates those expectations and discounting of risk.
Such restrictive planning policies can also generate rising housing-related revenues and political donations from developers who have to ‘buy’ access to the political system to get their needed approvals and who can then ‘game’ the system”
Once land is supplied land banking is prevalent.
Compare planning delays of 3 to 7 years, ten years at the worst, with the length of time to sell the very last property in any development. Some developments 20 years old are still drip-feeding.
David Collyer at Prosper Australia wrote this article
http://www.prosper.org.au/2012/12/06/englobo-2/ researching seven share market listed developers. Listed developers are a minority of developers but their behaviour is publically visible and is likely to be representative of many other developers. Seven companies average 18.4 years of supply land-banked each, with a combined disclosed end value of $63 billion. They sit on huge tracts around the capital cities, squeeze out smaller players and drip-feed the market.
Apartment billionaire Harry Triguboff gave this advice “You have to buy lots of empty land” “You keep the land and it brings you no income, so you claim it against your tax.” His comments were reported at:-
http://www.afr.com/p/national/riddle_of_place_we_call_home_3hG6nF4SQH1QYyv4DTRk5M
Added to developer landbanking would be the holdings of many private speculators holding unused or poorly used land.
Tax policy promotes this socially and economically destructive behaviour.
Fred Harrison, one of the few to predict the GFC, in this blog
http://www.fredharrison.com/?p=295#more-295
comments on the politico-housing complex:-
“To rationalise the rent-seeking, politicians deploy fanciful myths. Thus, Britain suffers from a housing shortfall. Never mind the nearly 1m vacant dwellings that could be brought back into use under the correct fiscal incentives! And so, Britain’s planning minister, Nick Boles, says that the shortage would be solved if construction was allowed to take place on a further 1,510 sq. miles of countryside”
“Even if Britain’s builders constructed on double the amount of land prescribed by Boles, many people would still be priced out of the homes they need. There would still be a perceived shortage. That shortage is prescribed by a tax regime that is designed never to deliver sufficient housing, whether the population is increasing or shrinking”
We should all be asking who really benefits from high land prices?
The unholy alliance between state governments and property developers will only be broken when property transfer duties are replaced with land taxes. At present both benefit from high property prices. Property developers were the largest contributor to NSW Labor when they were in office. Not sure of other states but likely to find similar links.
An average of more than 50,000 people slept each night in New York City’s homeless shelters for the first time in January, a record that underscores an unsettling national trend: a rising number of families without permanent housing.
~ Wall Street Journal
The basic idea of this piece seems to be at complete odds with history not to mention economics. .As an example, In 1900 in the US there were 16 million farmers producing food for 100 million people. Ag productivity increased through use of fertilizers and machinery to the point that today we have 2 million farmers producing enough food for 350-400 million people. The Economist piece and several of these comments seem to imply that the “fair” solution to these facts is to tax the employed to help the 14 million unemployed farmers. This of course did not happen nor should it have.
The increased productivity of the Ag sector gave consumers more money to spend on other things. Those 14 million farmers are now making automobiles and computers.
I have heard this argument for redistribution from many including leaders like Obama, who famously claimed that ATM’s caused unemployment among bank tellers. This is nonsense and neglects the folks that build and maintain the ATM equipment, install and keep full of cash these same machines, write the software, etc. etc Increases in productivity create wealth not unemployment.
This article by the Economist implies that the solution to today’s and tomorrows unemployment is to simply rehire the 1 million telephone operators that no longer are needed…or at least to pay them like they still were employed.