The Central Paradox of the 21st Century

The Central Paradox of the 21st Century

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“Stop whining young people, you’ve never had it so good”. That’s the debate topic sponsored by The Spectator last week at the British Museum. On the one hand, the statement is insane and insulting.  60% of the unemployed are under 35, recent university graduates on average owe £45,000 for their education and more than a quarter live with their parents because they can’t afford the rent. Entry-level jobs are evaporating, and even internships require impressive resumes.   Most young university graduates with paying work are in jobs that could have been filled by high school graduates.

It’s not just Millennials.  Older workers have it tough too.  A friend of mine, over 50, a graduate from a top university, head of PR at a Wall Street firm took a voluntary redundancy a few years ago, confident his skills and talent would soon land him an equivalent job.  When no one hired him, he set himself up as a consultant but unfortunately, his phone didn’t ring.  Today, he is slicing bologna at his local deli. This is not an atypical tale.  In the modern world job security is a joke.

My father and grandfather had jobs for life.  They gave their youth to the corporation and in return the corporation took care of them until retirement.  Today, no one has a lifetime contract. Lean and mean firms hire freelancers and even staff have few guarantees.  You can be on top this year, unemployed the next.  No matter your age, no matter your skills, our work lives are evermore precarious.  It seems the typical career path is interning in your 20s, finally getting a paying job and rising up the ladder in your 30s, over the hill by 45.  Unless you are a premiership football player, the person who had your job ten years ago got paid more, worked less and had more fun than you do. Each generation of workers seems worse off than its predecessor.

But from another perspective, the optimists at The Spectator do have a point. As employees we may be suffering but   as consumers, we live like kings. We can fly to Dubrovnik for £22, £500 will buy us more computing power than NASA had when they put a man on the moon, Tinder makes hooking up a breeze. Our life expectancy is higher, we eat better, dress better, have more entertainment options than any humans in history. Within living memory, an orange was an acceptable Christmas present. Today even people in council estates buy each other electronic toys that would have amazed James Bond fifteen years ago.

If you are creative, you can publish your short stories on Tumblr, make a movie on your mobile phone, post it on YouTube where millions might see it.  Swedish design that not that long ago was the height of modernist sophistication is now available to the hoi polloi at IKEA. Peasants in Mexico wear fashionable clothes made in China.  Peasants in Iraq have satellite dishes and watch the World Cup live. It is schizophrenic: as workers we have few rights and less power.  As consumers, we live like gods.

Our unheard of affluence as consumers, our precarious existence as workers both stem from the same source: inexorable productivity increases.  Every year, as technology advances we can make more goods and services with fewer inputs of labour and capital.  It used to take dozens of men to unload a ship. Today one man on a computer and another on a crane are faster than 100 longshoremen could ever be. When I started in television, producing a broadcast quality news story required a cameraman, soundman, editor, reporter, producer, and transmission engineer.  Today, one person can fulfil all of those functions and generally will get paid less than any one of us used to.

Productivity increases boost our societal wealth and so make us all collectively richer but they also make more of us redundant.  This is an old story and the traditional answer is that we Luddites should stop complaining and happily give up our handloom weaving gigs because technology will soon find us something even better.  Perhaps that is true, in the long run, but try telling it to the children of  autoworkers in Detroit or the grandchildren of ship builders in Newcastle.  Technological progress today is a job killer and this process is likely to accelerate. Even China is not immune. Today it has fewer manufacturing jobs than it had in 1996 even though it is producing almost twice as many goods.

The rise of robots is no longer science fiction.  More and more jobs are being automated.  The computer is doing to the office worker what the internal combustion engine did to the horse 100 years ago, making him obsolete.  ATM’s killed bank tellers, automated check out will soon eliminate supermarket clerks. Kodak, which recently went bust, at its peak employed 145,000 workers. Instagram had only 14 employees when it was sold for  $750 million.

This paradox between our affluence as consumers and our precariousness as workers poses economic, political, and moral conundrums.  If we can produce more with less, and workers become redundant, who will buy the goods? A robot can make a mobile phone but it cannot purchase one.  Workers are also consumers. Fire your workers, your profits will rise until the day no one can afford to buy your product.  Henry Ford was a visionary for paying his workers enough so they could buy his cars.

Ultimately, our production possibilities frontier and so our societal wealth is determined by our level of technology.  That keeps expanding. Thus every year we should be richer. Each generation should be better off than its parents.  That we are not is a problem of distribution.  When Harold Macmillan told Britons in 1957, “most of our people have never had it so good”, post war prosperity was due to the introduction of labour saving technology but also because societal wealth was shared.  The rich got richer during the post war golden age (1945-1973) but so did everybody else.  Productivity gains were almost instantaneously transmitted into wage gains.  Today the benefits of productivity gains adhere to the CEOs of companies and their shareholders, not workers.

Progressives are stuck with the notion that to cure inequality, to restore demand, we should raise wages and reduce unemployment.  These are worthy goals but as technology eliminates more jobs it becomes a Sisyphean task.  If you are a regular reader of Pieria, you will not be surprised I suggest a basic income guarantee as the long-term solution.  As technology reduces employment opportunities while increasing production, nothing else will allow us to maintain demand sufficient to meet supply. 

Ever since the invention of agriculture ten thousand years ago, we have learned that from the sweat of our brow we will earn our daily bread. This deep-seated truth is now out of date.  Capitalism and technology have in large part solved the problem of supply.  We need to solve the problem of demand. The first step is to realize we live in a post scarcity economy, that austerity is not the answer.  The second stem is to recognize we need to divorce work from consumption.  Otherwise, technological progress will impoverish us rather than enrich us and that would be tragic, ironic, and absurd.


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