America of yesterday is not coming back…
An original essay
Authors Note: This essay was written three years ago and while economic conditions in America seem to be improving there is nothing to suggest that the ideas explored here are not likely to become reality.
It is a natural part of the human condition to resist change. Most of us are comfortable with our current circumstance and look fondly back at the way things used to be. The good ole days may not be as good as we remember but an unknown future can actually be terrifying. Nobody understands this better than politicians and many have built their careers selling us nostalgia and fear.
There is a new populist progressive movement in America. The progressive economic philosophies of liberals are resonating with a big chunk of the voting public that see progressive populism as a better alternative to the reckless capitalism that they blame for the 2008 financial crash.
Here’s the problem: Capitalism was not the cause of the 2008 crash but was actually forced into being a participant. Government social and economic policy set the stage for that recession while business tried to find profit within these forced policies. Afterwards the politicians blamed it on the bankers and capitalism. One of the causes was politicians and bureaucrats thinking they could provide for greater home ownership if they lowered interest, flooded the economy with easy money and forced banks to lower their loan standards. Now progressive’s economic philosophy is focused on another ineffective idea stuck in the past: the rebuilding of American manufacturing.
“We must rebuild American manufacturing and rewrite our trade agreements so that our largest export is not our jobs,” expounds one politician. A major Democrat talking point is a plan to restore the economy and it puts the problem squarely at the loss of American manufacturing jobs.
The problem unfortunately is not the exporting of jobs so much as jobs being replaced by automation. Unsurprisingly, restoring America to its factory-based foundation is a major part of the Democrat economic plan (as well as more than a few Republicans). And while there are some indications in recent years that there may be some resurgence in American manufacturing it probably won’t be providing many new jobs.
These positions are understandable because many of us remember the era of American manufacturing from which many of our parents and grandparents made good incomes. But it’s also wholly unrealistic to expect American manufacturing jobs to return. We can’t go back in time.
In the 1950’s, at the height of the factory economy, manufacturing accounted for almost a third of America’s GDP. By 2010, that number had shrunk to 10 percent. Employment in manufacturing peaked in 1979, when nearly 20 million Americans worked in the sector; today, just over 12 million American jobs fall into the “manufacturing” category and that number has been shrinking steadily while the countries population has grown by almost fifty percent.
The return of the American manufacturing job is a dream. It looks back to an America in which a basic education and a willingness to work meant a guarantee of a steady job, where a family could live a comfortable middle-class life, and the bread-winner could retire at 60.
But that America lives only in the past and no amount of political promises can bring it back.
Now, admittedly there has been a recent modest resurgence in domestic manufacturing on the order of thousands of jobs, but true growth requires tens of millions. And with automation making more inroads every day, it should be very clear that the work that once fueled industrial America will soon be done by machines (2014 is a record year for sales of robots).
In 1915, only six years after opening its factory the Ford Motor Company employed 80,000 workers that produced 600,000 cars. In addition to its own employees Ford was directly responsible for another 120,000 jobs through direct component suppliers, and that doesn’t even count the increased workers in materials supply companies. Because of ever increasing wages, Ford made Detroit one of the wealthiest cities in the world. Strong shoulders meant good wages. In contrast, today Google with a larger market cap than Ford, employs less than 20,000 people. While Ford used large amounts of materials and almost twelve man hours to build a car, today Google uses almost no materials and virtually only fractions of seconds of labor to deliver many of its products and services.
Everywhere in the new economy virtual products and electronic services are sold and delivered with no materials or human labor involved. In the recent past, just to produce and deliver a book, a factory with a large work force, had to print and bind it, box it and ship it to retailers (again that doesn’t even consider the workers making paper and ink, composing the pages and making negatives and printing plates). Labor was a part of the process at every step right up to a clerk ringing the sale. Today books are uploaded to a server where thousands and thousands of buyers select and pay for the book and download it without any direct human labor at all. The same is true for music, movies, magazines, video games, software, apps, and dozens of other items.
One aspect of this new economy is that entrepreneurs and corporations no longer need to share much of the retail price with large work forces by paying wages. This alone is a significant contributing factor in the growing divide between the middle class and the wealthy or income inequality as the political class calls it. Not only is the marketplace become digital but manufacturing, distribution and sales are becoming automated. Robots are the future in a much larger way than most people are aware. People who always thought their jobs were secure are being displaced. Years ago telephone operators were automated out of a job, tomorrow it will be bus drivers. In the years to come it’s likely that professional jobs could be in jeopardy as computers are applied to much of the work preformed by accountants, lawyers, even doctors. The fact is that this process of computers taking hours away from professional, white-collar workers has been going on for a number of years already.
While costly, machines eliminate ongoing labor costs, don’t need to sleep or take vacations, and are easy to replace. There can be no argument that we have already entered the age of automation from which there is no return. One study sees the loss of almost another 50% of U.S. jobs over the next 20 years, and that’s all jobs! A study by Boston Consulting Group sees over a 20 percent decline in manufacturing employment in the next decade, all because of robots. They also forecast a significant increase in manufacturing output and efficiency. Additionally automation will replace ever-increasing numbers of non-manufacturing jobs. Fast food employees, retail clerks, drivers, warehouse workers, the list is endless and the major force behind all this is the cost of labor versus the expense of automation. In most face-offs labor looses.
Oddly enough another major talking point of progressive politicians is raising the minimum wage to ever-higher levels. They preach that everyone is entitled to a “living wage” and business should be required to provide it. As should be obvious by now this will become another major motivation for businesses to further automate. The cost benefit analysis is simple and irrefutable and progressive politicians are lying for their own short-term gain when they promise higher minimum wages.
The robots are here, or will soon be here. And chances are, your job may well become theirs.
That’s why manufacturing is simply not a viable, sweeping, long-term solution for the problem of America’s shrinking, struggling middle class, no matter how good it sounds in progressive political slogans. There is no undoing technological innovation.
But all this doesn’t predict inevitable doom! America doesn’t need manufacturing to thrive. GDP tripled during a drastic reduction in the manufacturing workforce from 1970 to 2010, at the same time the population increased by almost a half. In fact, American GDP increased roughly 20 percent from the end of 2001 to March of 2013, despite virtually no increase in hours worked and jobs created, an increase in productivity brought on largely, if not primarily, by automation in the workplace.
To illustrate this consider the following observation by economist Milton Freidman: “When the United States was formed in 1776, it took 19 people on the farm to produce enough food for 20 people. So most of the people had to spend their time and efforts on growing food. Today, it’s down to 1% or 2% to produce that food. Now just consider the vast amount of supposed unemployment that was produced by that. But there wasn’t really any unemployment produced. What happened was that people who had formerly been tied up working in agriculture were freed by technological developments and improvements to do something else. That enabled us to have a better standard of living and a more extensive range of products.”
Of course, these sorts of events mean plenty of pain for millions of workers. That is a very real thing. But only in recognizing the reality of coming innovation and automation can we help future generations adapt.
There is no denying that at one time factory jobs and the manufacturing sector were critical fuel for America’s economic growth. But failing to realize that the world has changed in profound ways, and expressing the naiveté necessary to believe we can turn back the hands of time, is unbecoming of our leaders and that includes conservatives.
We need to recalibrate our thinking. The good middle-class jobs are or will soon be far removed from assembly lines. They hopefully will reside somewhere but it is difficult to say where. And the unvarnished truth is that ever increasing dollars will likely fill the pockets of the new entrepreneurs who will own the computer and software companies, or the manufacturers who own the robots. The new elites in our society will be these entrepreneurs, programmers and robotics engineers.
Avoiding disaster and insuring progress requires planning for the inevitable future: an economy rooted in engineering, information technology, and computer science, not the jobs of yesterday that are never coming back. But there also needs to be intelligent thinking and discussions on how to deal with massive job dislocation along with new ways of providing social and economic support to those impacted families as well as how to fund these programs. Our current system of education, regulation, welfare and taxation are simply not up to the challenge of the coming new world. We need to formulate a set of policies that provides for the new job dislocations and losses, doesn’t use the tax code to just punish and confiscate wealth, and also recognizes that governments cannot just tax and print their way to a financial solution.
Entitlements like Social Security and Medicare have a long tradition with strong popular support but that isn’t enough to protect their future solvency. Greatly expanded social safety nets seem important now but they could very likely be critical in the future. Unfortunately the current policy of funding these programs with borrowed money is dangerous and cannot continue.
Formulating and adopting new ideas will be difficult but they could also be virtually impossible if progressives and conservatives don’t stop playing politics with our nation’s future. Of course it will be difficult to tell people that the world they have known is dying and radical changes are necessary, but if the political class doesn’t start soon it may soon be too late.
Progressive notions of economics and government are stuck in the past. Socialism and communism have demonstrated over and over again that they are not a system that fosters innovation and economic growth, but rather usually lead to economic collapse. Unfortunately for conservatives the miracle of free markets and capitalism are entering a new era and already sowing the seeds of an unequal, technology based, oligarchy. While it is possible that the current economic crises is only a transitional one, it will none the less be serious and likely displace millions upon millions of workers. Clearly new thinking is necessary but it also requires us to set aside many of our long held beliefs and notions.
There are already visionaries talking about answers to these many challenges. Perhaps government could invest and become a non-voting shareholder in many of the nations companies, using dividends to finance necessary social programs. Or maybe government should loosen its hold on real estate and resources and become a partner in land use for mining, recreation and commercial development. It also might be possible for new “New Deal” type work programs where individuals find purpose and are made partners in redeveloping and cleaning up neighborhoods and cities. There is still much that people can do to make themselves productive members of society but it requires new thinking from government, business and social organizations.
As Ray Kurzweil, futurist and director of engineering at Google, said recently:
“You can point to jobs that are going to go away from automation, but don’t worry, we’re going to invent new jobs. People say, “What new jobs?” I don’t know. They haven’t been invented yet. Sixty-five percent of Americans today work at information jobs that didn’t exist 25 years ago, two-thirds of the population in 1900 worked either on farms or in factories… We’re constantly inventing new things to do with our time, but you can’t really define that because the future hasn’t been invented yet.”
But rest assured, we must rise to the challenge and invent our brave new world. That’s progress, and it is coming — whether progressives and conservatives like it or not “The Times They Are a Changing”.
Come senators, congressmen
Please heed the call
Don’t stand in the doorway
Don’t block up the hall
For he that gets hurt
Will be he who has stalled
There’s a battle outside
And it’s ragin’.
It’ll soon shake your windows
And rattle your walls
For the times they are a-changin’.