Friday, October 30, 2015

Recommended Reading: "A Radically Beneficial World: Automation, Technology and Creating Jobs For All"

From Charles Hugh Smith's new book, "A Radically Beneficial World:  Automation, Technology and Creating Jobs For All"

There’s another driver of automation the conventional narrative misses: the rising costs of human labor.

Unlike a human worker, a robot doesn’t require healthcare insurance, worker’s compensation, 401K pension benefits, and all the other costs of labor overhead. A robot doesn’t go on strike for higher wages.

As socio-economist Immanuel Wallerstein has observed, the cost of labor is rising globally as a result of structural forces that are immune to productivity gains, recessions, tax credits or other factors:

1.    Urbanization
2.    External costs  (environmental damage, etc.) that must now be paid
3.    Rising payroll taxes as the public demands more services from the state

These trends are especially visible in China, which has seen wages soar, costs of pollution control soar and demands for state services soar.

So where does this leave us?

•    Technology no longer creates more jobs than it destroys.
•    Profits decline as automation commoditizes labor, goods and services globally.
•    Digital and robotic tools are falling in price while the cost of human labor inexorably rises.
•    As costs of automation plummet, barriers to entry fall and competition increases, pushing everyone into automation if they want to survive.

As profits fall and jobs are eliminated, the tax base narrows and the state collects less tax revenue. Even the state must automate to reduce costs.  

Put all these together and the conclusion is inescapable: the conventional narrative solutions (belief that more jobs will be created than destroyed, guaranteed income for all) are wishful thinking.

The same can be said of calls for the state to hire tens of millions of displaced workers in a supersized make work program—where is the money going to come from as tax revenues falter?

Yes, government can borrow money, but this is not a sustainable way to fund tens of millions of jobs. If profits and job growth aren’t coming back, borrowing money is a temporary stopgap, not a solution.

Kindle edition available here:


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