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.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
