Monday, October 26, 2015

Steven Hill’s (author of “Raw Deal”) replies to my blog

Thanks for sharing your very provocative post. It's hard to know what the future will hold, but at the moment I think the most realistic scenario is that work will be carved up in smaller and smaller tasks and gigs/microgigs/nanogigs (what you call task T broken into T1, T2,…Tn) and then many of those tasks will be given to automation/robots/algorithms -- not humans -- to do. The human role may be reduced to merely hitting the button to start the robot. It will be a menial, unskilled job and low paying. More and more workers may well be reduced to that menial role.

In a sense, the gig economy companies like TaskRabbit, Crowd Flower, Elance-Upwork,, Guru, Zaarley, Fiverr and others are pioneering app-driven labor job brokerages which indenture vulnerable 1099 workers who auction themselves off, with the lowest bidders winning ever smaller jobs and smaller amounts of money. Many freelancers will be  lowly paid braceros, offering their services in naked competition against each other. The customers can take the lowest bids, which are guaranteed to keep the bids low for the future.

Yes, this will result in unimaginably enormous productivity increases, and in the past that has sometimes led to greater prosperity for all. What about this time? Who would reap the benefit of this unimaginably enormous productivity increase? Would it be a handful of “Masters of the Universe,” i.e. such as the chief entrepreneurs and investors? Or would the gains be broadly distributed to the general public? Nobody’s crystal ball can tell us the answer, but what we do know is this: over the last several decades, the economy has been restructured so that the wealth gains from higher productivity and new technology have flowed into the pockets of an ever smaller minority of “one-percenters”. We also know that wages have stagnated despite sizable increases in corporate profits. So our nation’s recent economic history shows all too vividly that the general public is in no way guaranteed not certain to benefit from technological innovations and productivity gains. Quite the contrary.

Indeed, the answer to this question is a political one. It depends greatly on what policies and politics are pursued during this interregnum, before our society begins edging closer to this very uncertain future. The onset is arriving, like a giant comet from another galaxy, more rapidly than the public or the politicians realize. And we are heading toward a head-on collision with it.

Sunday, October 25, 2015

No one would be unemployed and no one would hold a job

Several days ago Steven Hill presented at the Graduate Center CUNY in New York his new book “Raw Deal: How the ‘Uber Economy’ and Runaway Capitalism Are Screwing American Workers.  It discusses (according to Steven’s presentation; I have not read the book yet) the decline of trade unions, the future of jobs and robotics. It struck me that there are (In his presentation as well as in most of what we read), when it comes to the future of work, two narratives that often seem contradictory. There is a narrative of job-automatization and robotics whereby most of our jobs end up taken by the robots. Then there is a narrative of people working more and more hours as work intrudes into their leisure time: instead of taking it easy throughout the day as the first narrative implies, we would use our “free” time to rent apartments we own or drive our cars as taxis. According to the first narrative, we are in danger of having too much leisure time; according to the second, of having none.
Let’s consider the two scenarios in turn, and separately.
Suppose first that most of “routine” jobs are replaced by robots. This seems quite possible (from today’s perspective). If capital replaces labor easily, we shall have the elasticity of substitution exceed 1 (a point argued by Piketty in his “Capital..”), and the return to capital will not fall in proportion to the increase in the capital/labor ratio. This means that more and more of net income will belong to capitalists, and thus to the owners of the robot-producing companies. Suppose Google cars become ubiquitous, and Google drives (so to speak) out of business Mercedes, Ford, Volkswagen…The money will be made by the owners of Google.
In that future, the distribution will move even further against labor, income inequality will increase, unemployment will be higher and there would be a generalized problem of finding a job. Since the economy will have become richer (there is just more stuff), there may be some kind of  income support paid to everybody. The society would look as follows:  lots of people at the minimal guaranteed  income with loads of free time,  the employed with incomes somewhat higher than the social minimum working mostly in services, and relatively few fabulously rich owners of the means of productions.  Basically, Mark Zuckerberg, personal trainers and the unemployed guys living in Miami.
How would the alternative scenario look? There we have robotics as well but what robotics does is to break jobs into the tiniest  possible segments, parcel off each of these segments to people who are temporarily hired to do that tiny parcel alone, and then combines hundreds of such tasks in one final product. Instead of having a worker W working for a company C full time and doing a task T, such that on the task T there is a bilateral exclusive commitment between the worker and the company, we would have task T broken into T1, T2,…Tn, and branched off to workers W1, W2…Wn. Now the workers will in turn each also work on other tasks and for other employers: so the worker W1 will in the same day work on tasks T, Z and Y, each for a different company. There would be multiplicity (non-exclusivity) on both sides: workers will no longer be committed to a single employer, not will the employer depend for task T on a single worker. Since tasks are so segmented, it makes it possible to hire less professional and thus cheaper labor, often using their “free” time.  This is why professional taxi drivers are now being replaced  by guys who spend 1/3 of their workday as sales agent, 1/3 as bar tenders, and 1/3 driving their own cars as cabs. Or why hotels are in competition with people who rent their own rooms. Or why I might use every minute of my leisure time to do jobs for which I have no training and that would replace people who have trained for them and done them for years.
Under that scenario, we should see a dramatic reduction in specialization (say, vocational education would end), blurring of the difference between leisure and work, and a pressure on the labor share. Everybody would be the jack of all trades and master of none. There would be only limited unemployment (since practically everybody could do some extremely simple tasks into which all jobs are divided).
But perhaps it may be better to think of the two scenarios as just one scenario that would combine lots of labor substitution with heavy segmentation of tasks (and much more intense labor discipline made possible thanks to automation). In that case, jobs to which we have become accustomed would cease to exist: lots of today’s functions will be automated, and for many others, “amateurs”, not professionals, would do them.   
And we should not be making the “lump of labor” fallacy: the amount of jobs is not limited to the jobs that we know today. There will be entirely new jobs that we cannot even imagine. Steven gave one such example that exists already  now: “invisible girlfriend”. People pay to receive, at some intervals, text messages which are ostensibly sent by their girlfriends. In the eyes of other people their esteem goes up: many girlfriends compete for their attention. In reality, some mustachioed guy in short sleeves is writing these messages and getting paid for them. Or to give another example: women whose job is to be surrogate mothers to either gay couples or heterosexual couples who cannot have kids. Now, that job did not exist until recently, that is until (a) legal changes allowed for surrogate motherhood (and also for gay marriage) and (b) technological  progress that made  “artificial” insemination possible.  When I give this example, people often ask me: but can male auto-workers from Detroit become surrogate mothers? No, but this is always the case in the transition period when the occupation is on its way out. But after a while there would be no more auto-workers at all, and yes, some women can become surrogate mothers and have that as their main income-earning job.          
Technology will create new jobs, and if anything, I think we shall have more to worry about not having any free time than having too much. As commercialization of our lives progresses, we  shall perceive (as we already do) every hour spent, without directly or indirectly contributing  to more money as wasted. Unemployment will become impossible. Being unemployed implies that you are specialized and that there is a (relative) shortage of such specific jobs.  But not so in a new economy: everybody can carry Thai food from one place to another, everybody can exhibit himself or herself naked on the Internet, everybody can open doors, pack bags, or even write blogs. No one would be unemployed and no one would hold a job.

Friday, October 16, 2015

Disarticulation goes North

In the neo-Marxist literature on under-development one of the most important theories was about the disarticulation of the countries in the South (the erstwhile “Third World”).  What was meant by the term was that the Center, the developed North, established within a peripheral country only enclaves of modernity whose function was to keep the South producing for the needs of the North without being able to create an internally connected production structure, going from raw material extraction to their processing, and ultimately production of high value added commodities.  What mattered to the North was the extraction of raw materials. This was entrusted to be organized to a local comprador bourgeoisie, whose economic interests thus coincided with those of the former colonial powers. The economy was, to use Samir Amin’s terminology, “extroverted”, that is directed only towards abroad and lacking in domestic ability to develop. Both the polity and the  economy were disarticulated.

As a summarized history of the failed developments in the South up to approximately 1980s, the theory did make lots of sense. No country developed without an internally-integrated economy. Raw material producers never created a successful economy. But as a prescription to sever the links with the North and develop independently, the strategy, even when tried half-heartedly, was a failure.

Sociologically and politically, the importance of the disarticulation story is that economic divergence of interests between the comprador bourgeoisie and the rest of society leads to a class split within the countries of the South. The comprador bourgeoisie was supported by the North and was maintained in power, against the interest of the majority, by West’s constant political or in some cases military support.

Let us now with this approach in mind, turn our gaze toward today’s North. In a recent piece published in the New York Times, Paul Theroux, after traveling through the American South, was shocked by the depth of poverty there, wrought in his opinion by the destruction of jobs that have all gone to Asia and by import of cheap commodities from China. He was even more distraught by the apparent lack  of interest of American political and economic elites who seem to even fail to notice the plight of the Americans in states like Mississippi and most ironically in Arkansas where philanthropists such as the Clinton Foundation have not been much seen even as they proudly boast of  efforts “to save the elephants in Africa”.  

The key issue raised by Theroux was whether trade, that is, globalization was responsible for this plight. The second issue that was raised was why there is so little empathy with the domestic poor or interest in doing something about their destitution.  

In an answer to Theroux, Annie Lowrey points out that however awful the poverty in Mississippi is, it is not as bad as poverty in parts of Africa (Zimbabwe is used as a comparator both by Theroux and Lowrey). Globalization that has lifted out of poverty several hundred million Chinese at the cost of making ghost towns in Mississippi is not a zero-sum game.  Moreover, from a cosmopolitan point of view, the rich Americans’ concern with African poverty rather than with poverty in Mississippi or Arkansas makes sense because people in Africa are much poorer.

Technically, Lowrey is right on all points. One can safely claim, to the extent that these things that be causally proven, that the rapid worldwide progress in poverty alleviation is due to globalization. It is also true that on any income or consumption metric, poverty in parts of Africa is much worse than in Mississippi. But of course none of that may be politically or socially relevant because national populations seldom care about cosmopolitan welfare functions (where happiness of every individual in the world is equally valued).  They work with national welfare functions where a given level of destitution locally is given a much greater weight than the same destitution abroad. There are studies that show the revealed difference in implicit national vs. cosmopolitan weighting of poverty (the ratio for the US is estimated at 2000 to 1); there are arguments for this, going back to Aristotle who in Nicomachean ethics thought that our level of empathy diminishes as in concentric circles as we move further from a very narrow community. And there are also political  philosophy arguments (by Rawls) why co-citizens do care more for each other than for the others.

But I think that it is insufficient to leave this argument at a very abstract level where one group of Americans would have a more cosmopolitan welfare function and better perception of global benefits of trade and another would be more nativist and ignorant of economics. I do not think that the real difference between the two groups has to do with welfare concerns and economic literacy  but with their interests. Many rich Americans who like to point out to the benefits of globalization worldwide significantly benefited and continue to benefit from the type of globalization that has been unfolding during the past three decades. The numbers, showing their real income gains, are so well known that they need no repeating.  They are large beneficiaries from this type of globalization because of their ability to play off less well-paid and more docile labor from poorer countries against the often too expensive domestic labor. They also benefit through the inflows of unskilled foreign labor that keep the costs of the services they consume low. Thus rich Americans are made better off by the key forces of globalization: migration, outsourcing, cheap imports, which have also been responsible for the major reduction of worldwide poverty.  Perhaps in a somewhat crude materialist fashion I think that their sudden interest in reducing worldwide poverty is just an ethical sugar-coating over their economic interests which are perfectly well served by globalization. Like every dominant class, or every beneficiary of an economic or political order, they feel the need to situate their success within some larger whole and to explain that it is a by-product of a much grander betterment of human condition.

A new alliance, based on the coincidence of interests, is thus formed between some of the richest people in the world and poor people  of Africa, Asia and Latin America. Those who are left out in the cold are the domestic lower-middle and middle classes squeezed between the competition from foreign labor and indifference of national ruling classes. As in the neo-Marxist theories applied to the South, the divergence of economic interests within a country produces political disarticulation. The rich favor the continuation of globalization as it is, the lower middle classes are looking at the ways to change or reverse both globalization and migration that comes with it. Two political camps are thus formed, not only in the US but in practically all rich countries: the camp of ideologically cosmopolitan rich whose incomes keep on increasing and the camp of nativist lower-middle classes who feel that nobody is defending their interests.

The disarticulation in the North produces political polarization with clear dangers of transforming democracy into either a plutocracy that would continue with current policies, or alternatively a populist regime that would give way to the frustration of the middle classes by reimposing tariff rates, exchange controls and tighter migration rules.  

The idea that globalization is a force that is good and beneficial for all is an illusion. Tectonic economic changes such as those brought by globalization always have winners and losers. (The first sentence of my forthcoming book “Global inequality”, Harvard University Press, April 2016, says exactly that.) Even if globalization is, as I believe, a positive phenomenon overall, both economically for the reasons Lowrey mentions and ethically because it allows for the creation of something akin to community of all humankind, it is, and will remain, a deeply contradictory and disruptive force that would leave, at times significant groups of people, worse off. Refusing to see that is possible only if one is blinded by ideology of universal harmonies or by own economic interests.