In today's blog, I will continue last week's discussion of the automation myth.

Chapter XII of my book, “Politics for the New Dark Age” provides a lay introduction to productivity, and its role in generating long-term growth. The fact of the matter is when it comes to the technological miracles promised by Silicon Valley, we can see them everywhere except in the economic statistics (the Solow paradox). Since the 1980s, labour’s contribution to economic output per hour work has remained flat, while the return on capital has grown by leaps and bounds. If labour productivity had continued expanding over the last forty years, we’d already be working shorted hours for higher wages. Instead, we have seen the opposite: low productivity, flat or declining real wages, and chronic levels of employment stress.

What’s really going on?

Automation, then, does not made us more productive. So what is it?  My answer is that the drive for automation now, as sometimes in the past, is capital intensification. Think of the difference between productivity and intensity like this: productivity increases output if either your workers or equipment become more efficient; intensity increases output when you add either more workers or more equipment to the production process. It is intensity rather than productivity gains that we have seen under neoliberalism: the outsourcing of labour, de-unionisation and greater labour uncertainty leading to modes of production that rely more and more on expensive capital equipment (including IP) and finance and less on labour input.

Capital intensification is not necessarily a bad thing: in the 1700s, capital needed to be concentrated out of the landed aristocracy and into the bourgeois banks in order to facilitate loans to the first factories (in both the trading and manufacturing sense of that word). Sometimes, productivity leaps do require capital to be concentrated. In an era of low labour productivity, when eighty per cent of labour worked farmland, capital intensification created new industries that in turn soaked up workers. It paid them for their increased productivity and expanded output to match, creating the middle-class consumer out of nothing and increasing prosperity for all. But that’s not what’s happening today, especially post-GFC. Consumer demand remains weak everywhere, and rates of return on expanded output are at historic lows. 

Automation in the modern era, then, is being driven by capital intensification in existing workplaces (especially wholesale, healthcare and other essential services). High levels of inequality mean that capital-owners have historic financial reserves and no productive outlet for investment. Governments bailed out the banks, keeping them flush, and in some places began a historic era of quantitative easing, literally showering banks and the corporate sector with cash in an effort to get them to invest in the real economy. Governments across the world are trying and failing to get corporations to spur growth by investing these savings, rather than using them to big up their stock proces and private wealth. The savviest businesses discovered that they could use this cheap credit, not to expand output, but to produce the same output using more capital and less labour. By doing so, they maintain or increase their share of profit in an era in which economies as a whole are growing slowly.

Automation is, therefore, a capital bubble (Chapter XIII of my book) that will only increase inequality and lead to further capital accumulation. It is for this reason that pushing tax cuts as a spur for economic growth (as governments in Australia and the US are trying to do) is catastrophically ill-timed on both a micro- and macro- level. Since new investments are normally tax-deductible, lowering marginal corporate tax rates will decrease the incentive to invest; higher tax rates increase the incentive for employing additional workers and equipment. At the macro-level, increasing the rate of corporate profit while impoverishing the social programs propping up what remains of consumer spending will only increase capital concentration, slow the economy and increase inequality. Why would governments do this?

Automation is leading to permanent job losses but is doing so for the same social and policy reasons that labour productivity has remained stagnant for forty years. Power in the workplace has shifted decisively in favour of capital (with government assistance) and employment is less secure than at any other time in a century or more. While a minority of those laid off will find new employment as technicians or programmers, the majority are being forced into the retail or ‘gig’ economy as low-skilled personal service workers: Walmart ‘greeters’ and Uber drivers, for example. Such jobs are not only less secure, lower paid and offer fewer benefits than the jobs they replaced, but actively alienate workers from one another and de-skill them, further reducing their collective bargaining power. 

Speculating about the future of work

While the service sector may be the most important part of a highly developed economy, transitioning everyone to a service sector job will not be our saviour from automation because not all services are high-productivity and high-wage. A totally service-dominated economy with flat levels of production and consumption would look very much like a feudal aristocracy. Those who control capital (once upon a time: land; now: financial assets) will live very handsomely indeed on the rents they extract. Everyone else will eek out an existence predicated on hierarchical personal service to such individuals: a true ‘trickle down’ economy. Not only would such an economy be technologically and socially stagnant, I argue it would be prone to potentially revolutionary social disruption.

Truly forward-thinking prophets (or fantasists) of the automation apocalypse warn us that the true threat to the contemporary economic and social order is not automation but AI. AI algorithms that will not only replace high-skilled service sector employees such as doctors, lawyers and teachers, but also manage capital better and more effectively than humans and produce cultural goods on their own. Quite frankly, we’ll cross that bridge when we come to it. True AI would lead to such a profound re-structuring of human life on Earth that the question of economic organisation might seem like a second- or third-order problem. 

An optimistic response to the possibility of hyper-competent decision algorithms is that it would increase the value of non-analytical, emotional and social skills that humans are likely to continue to hold and advantage in, a point Ezra Klein puts emphasis on. While I’m sympathetic to the argument that humanity has a unique social and emotional toolkit that would be hard for us to [reliably] replicate in an artificial intelligence, we presently compensate such skills poorly. The modern cult which privileges rationality as the basis of competence would have to change pretty dramatically, and if we could somehow create a discourse that privileged humanity’s social nature so highly, there would much better uses we could put it.

Policy consequences and responses

From my perspective, the policy solution for the automation dilemma is obvious. Increasing the labour share of income (either through higher wages or greater redistribution) would soak up additional production and create new demand so that the capital intensification of the last decade doesn’t go to waste. Increasing labour power and giving workers a democratic say over the workplace decisions that affect their lives is the best way to manage the transition to new forms of production: if automation is truly unavoidable, then let’s make it work for the many and not the few.

Unfortunately, the automation debate is not intensifying calls for democratising the means of production. Quite the contrary: the right is using it as a cudgel to threaten workers and the centre-left appears paralysed with indecision and fear. For centrists, the policy consequences of automation are expressed in terms of anxiety about its consequences for social stability and the political consensus underpinning the continuation of status quo policies of de-regulation and unrestricted trade. The reason for the sudden surge of interest in harebrained schemes like universal basic income is that the centre is looking for ways to buy off revolution and discharge its social responsibilities to the economic losers without having to re-examine or change the fundamental ways in which production is organised.

For the centre-left in particular, there is a second aspect to their obsession with the automation narrative. For well-educated elites in the public sector and media, there is a fantasy that if the working class comprises enterprising, globally-open “knowledge-workers” (like themselves) then it will also come to share in their elite culture. Under this narrative, elites don’t have to close the gap that has opened between themselves and the proletariat: instead, the workers will come to them. But they mistake labour flexibility for labour uncertainty, and their enthusiasm for using Uber is not necessarily matched by the desire of former manufacturing worker forced to drive a taxi for uncertain wages. The bourgeoise thought this way about the disciplining effect of manufacturing too; as did the feudal landlords and slaveholders before them. Sadly, while culture is in fact a function of economic patterns of production, so long as those production patterns contain exploiters and exploited, the interests of elites and the working class will remain divergent.