DECEMBER 6, 2012 | BY CHRIS MILTON | Published the Inspired Economist
Thanks to a couple of communist revolutions during the 20th Century the economic map of the world has been polarized between capitalist and socialist thought. Now, at the start of the 21st Century, we’re faced with the problem of how to build a sustainable economy and the whole capitalism vs socialism issue raises its head once again.
The first thing to take on board is that sustainable economics has nothing to do with either of these two great -ism’s.
Their foundation is all about who owns and profits from the mechanisms of production and distribution: capitalism says it should be private wealth, socialism says it should be society as a whole. Capitalism does NOT say it has to be investment in the form of debt and socialism does NOT say it has to be the state which holds the reins.
If you take a look around today’s business environment you will see this all around you. Crowdsourcing is a purely capitalist endeavor where people use their private wealth to invest in enterprises, yet there is not a shred of systemic debt in 99.99% of projects. Co-operatives and B-corporations are rooted in social ownership and benefit, yet there is barely a crumb of state control in them.
This fundamental error has led to confusion around the role of banks and the state. Capitalists want big banks and small states whilst socialists want big states and small banks … at least that’s what the politicians who profit from polemics would have us believe.
In fact the size of banks and the state (should) bear very little relevance to whether the economic system is capitalist of socialist. Banks are needed under both systems as a safe place for capital and a channel through which it is invested; the state is required in both in order to regulate all aspects of society, including business and commerce.
That’s not to say that you can’t get a bloated state under socialism or top heavy banks under capitalism. Of course you can, all I’m saying is that an interfering state and unstable finance system are not requirements of these forms of economy.
What, you may be asking, has any of this to do with building a sustainable economy?
The answer is Lots, because sustainability has nothing to do with either of these -isms. It’s all about ensuring we live as a species, culture and individuals in a manner which can be sustained financially, ecologically and socially. Whether that is implemented using capitalist or socialist principles is almost beside the point, if it wasn't for one very important thing ….
Both have failed.
The horrors of communism show that if you put too much emphasis on society as a whole the individual becomes so repressed the economy finally dies; and decades of western capitalism have resulted in debts so large that governments now face decades of austerity (read: economic repression) to pay them back.
Just as the publishing laws for yesteryear’s newspapers are inadequate for global social media, so last centuries economic philosophies are inadequate for the challenges of this century.
So the final misconception about capitalism and socialism is that they will help to create a sustainable economy and politicians will rehash these old and misconceived arguments as they battle for control of sustainability.
What they don’t understand is that people want to share and generate personal income: they want to co-operate as well as compete. That’s the way the economy is going at the grass roots and it’s what will be the foundation of sustainability.
All capitalism and socialism have to do is get out of the way.
Contingent, Transient and at Risk: Modern Workers in a Gig Economy.
By: Richard Greenwald | Published in The Blog, Huffington Post | 06/25/2012
America is transforming before our eyes, and with our focus on the short-term economic crisis, we are blind to what might very well be the most fundamental economic shift of the past 50 years: the nine-to-five, 40-hour-week job with benefits and some security is fast going the way of the compact disc. It still exists, barely, but is more of an echo than a modern reality. According to a recent Bureau of Labor Statistics report, almost 30 percent of all Americans work contingently as free agents, contractors, day laborers, consultants or are self-employed.
This transformation of the American workplace will be as profound for 21st century as the Industrial Revolution's shift from farms to factories was for the 19th century. One of the fastest growing contingent worker groups today is college-educated, white-collar professionals. They grew up thinking they would lead lives of economic security and corporate advancement. Now they jump from job to job, career to career and project to project working as consultants. Current estimates predict that this trend will only continue to increase in the coming years. Imagine, by 2020 maybe as many as 50 percent of all collars, working on a contingent basis, with a growing majority of them consisting of college-educated, white-collar and professional classes. What was the old middle class, as confusing as such terms can be, may just become part of the new working-class majority.
The shift from nine-to-five jobs to a gig economy has fundamentally forced us to rethink our relationship to work and the centrality work plays in all our lives. This sea change has brought with it a new work ethic that values multitasking, embedded communities of workers, the blending of leisure and work activity, and the rise of creativity and independence, along with money as co-measures of success. We seem to be returning to a craft sensibility as workers blend leisure and work and work harder, faster, and longer, but also find time to squeeze in a social life too. They constantly work, as defined blocks of time are meaningless for them. This squeezing in, mixing, or blending completely blurs the lines between social and work worlds. Most accept this quickened pace because they get some enjoyment out of work by finding ways to make a living doing things they are passionate about. They are combinations of 19th-century craftsman, outworkers and high-tech gurus. They struggle in what they may not yet fully understand as a continually shrinking economy.
The last time we witnessed such a massive shift in the way we work and think about work was the 1950s. In 1956, no book better depicted the new development than William Whyte's The Organization Man. America was becoming a nation of white-collar workers, leaving behind its blue-collar roots. Whyte, a sociologist whose book catapulted to the bestseller list, captured the angst and compromises that accompanied the mid-twentieth-century world of the white-collar workers. Most had been raised with a blue-collar ethos rooted in the Great Depression, and many still clung to what Whyte called an antiquated attitude toward work that would get them nowhere. Whyte argued that the Protestant work ethic, which was the predominate ethos of the previous 100-plus years, was dead by the 1950s. He identified a new three-part social compact that had recently developed but was previously not, he said, defined: "A belief in the group as the source of creativity; a belief in 'belongingness' as the ultimate need of the individual; and a belief in the application of science to achieve the belongingness."
There is a pressing need for a historical understanding of this current shift. First, few journalists see freelancers as workers. They instead see them as what Richard Florida calls "the creative class." Yet these white-collar folks are workers. And, in the new economy, collar doesn't signify class the way it once did.
The reality is much more complex than our journalistic literature reveals, and the current lack of nuance should worry us all. Micropreneurial, freelancing, is both low-wage and lucrative, both dead-end and limitless, depending how one focuses the lens and what skills one possesses. Who wouldn't want to be their own boss, control their career, and pursue their creative talents? Yet few Americans can position themselves to take advantage of the new situation. This means that a whole new army of workers is being created who do not recognize their class status and therefore are cut off from labor and working-class organizational traditions. They do not even have an echo of memory of labor activism. The biggest hurdles they face deal with having them recognize that their economic insecurity is a result of larger economic and structural forces that, as individuals, they can not surmount. They need to realize they are not alone and the only way out, the only way to a decent and secure life, will be the result of structural changes, and that will only come through some form of organized political pressure.
Hopeful examples might be the Freelancers Union (FU), which has over 140,000 members, and Occupy Wall Street. The hope for American freelancers will be in collective activity to bring on political change. We seem to be living in a transformational political time. It might be possible that what we are witnessing with the Occupy Wall Street movement is what the former secretary of labor Robert Reich has called "only the tip of the iceberg."
It seems that many, including freelancers (this growing group of once privileged and educated workers), might now be recognizing the structural and economic issues confronting them. They are joining with unionized workers in a movement. What comes out of this could be very interesting. I am excited to watch and hope.
Automation Will Change the World Sooner Than You Think
By: BY STUART DOBSON – 15 ,MAR ,2012 | Published in the Social Rebirth.
The Lights in the Tunnel” by Martin Ford explores the implications of the increasing automation of labor. It begins by visualizing the world economy, and how it will change as automation increasingly eliminates labor. Many commonly held beliefs are dispelled throughout the book with convincing logic and some unquestionable evidence. This is not something we can afford to ignore. Even without the current rapid advances in technology or full artificial general intelligence, automation is going to have some significant effects on society, and it is going to happen sooner than you think.
The Reality of Automation
This is not science fiction. Far-off notions of intelligent androids performing our every wish are the least of our worries. Automation is set to displace workers in many areas with little advance in technology. Much of this displacement is simply a question of design. With profit as the incentive, it is only a matter of time.
You might also be reassured by the belief that “Robots can’t do everything”, and that until the day they take all the jobs, or perhaps just your job, you don’t have to worry about it.
Wrong.
The entire system of consumerism depends on the majority having jobs. There is in fact a tipping point, a point where there are not enough people earning an income to sustain our current system.
The Tipping Point
With no buyers, there can be no sellers. The lack of consumer confidence will result in less demand and businesses will be less likely to take on more staff. The economy will embark on a downward spiral of unemployment.
This, of course, is not just a problem for the average worker, but for the rich elite, who will no longer have a market from which to make their fortune. Not only will fewer workers be bad for the economy, but with the massive drop in income tax revenues, even public services are set to be hit hard by the coming unemployment tsunami.
Nobody will be safe. Even cheap labor jobs in countries such as India and China cannot sustain their level of growth once automation hits critical mass, partly because they rely on Western prosperity in the first place, but also because their jobs will also be subject to automation, both at home and back in developed countries.
Then there is the misconception of the “Luddite Fallacy”, the belief that the economy will always create new jobs, and advancing technology will continue to create new industries for displaced workers.
Martin Ford’s argument is that accelerating automation technology will ultimately invade many of the industries that have traditionally been labor intensive. He also argues that any new industries that are created by these advances are unlikely to be labor intensive, focusing more on capital and expensive equipment – take Google’s extremely low staff number compared with its income as a prime example.
Therefore, our fate is sealed – and the idea that every person must “earn their living by the sweat of their brow” is all but obsolete. Ironically, it is capitalism that has led us to this transition.
$lavery
There was an interesting point made in the book: This concept of “free labor” has happened before.
The slave trade in America was active for over 200 years. It made slave owners rich beyond their dreams, while poorer whites, unable to compete against free labor, lived in abject poverty. So how did it continue for 200 years, with so much poverty? Well, the slave colonies relied on exports. There was a constant flow of new money from overseas.
A system that depends on external resources can only increase its prosperity as long as the external resources continue. Today, we function under the illusion of separate countries trading with each other, but in essence, the whole world is the market, so really there is nobody to export to. Growth in this case can only come from inside the system – from more of the Earth’s limited resources, including labor.
Today, we are the slaves. Although we are paid, our money is simply to drive the system of consumption. It is what allows the producers to grow. At first, this sounds like a good thing. Essentially, the corporations provide us with value.
The problem becomes apparent when we realize that the system relies on us as much as we rely on it.
The labor of the working classes feeds this system. This is why we are, in effect, forced to work.
We need to consume to live, but to consume, we must work. This system, where producers are also the consumers, relies on itself to function. Production drives consumption and consumption drives production. Break this cycle and the system cannot continue.
A World Without Jobs
Our automated future will decouple production from consumption. Things can still be produced, but there will be no way of affording it, because we won’t have jobs.
How can we have production if there is nobody to consume?
While Martin Ford does a great job of identifying the problems of automation in the current economy, most of his solutions are fundamentally flawed. One suggestion is an overwhelming “Robin Hood” style government welfare system that taxes producers to allow the consumers to continue consuming. He says that even the most hardcore libertarian will have to agree to this, as without it, there will be no market to which any business can sell its goods.
He explains that in this system, there would still be incentives for people to do good for society, and capitalism would still reward those who become the best producers.
However, it soon becomes clear that many of the problems of capitalism (relentless growth, inherently aberrant behavior, destructive affluence etc) are still not addressed in his suggested solutions.
Additionally, his argument is based on the assumptions that consumption is necessary for growth, and that growth is necessary for progress. This is a very narrow view. To believe that consumption is a necessary factor in progress is an assumption with little grounding, and as we all know, growth for the sake of growth is the ideology of cancer.
Regardless of Martin Ford’s suggestions, we cannot ignore the most pressing implication of the decoupling of labor from the production/consumption cycle. That is, the elimination of the assumption that everyone must work.
This is a profound concept that will have significant implications on society. Without a job, how can one survive? If not everyone has to work, why should anyone? It wouldn't be fair if some people went to work and some didn't.
What do we do when the lack of employment combines with technology and actually removes our requirement to work? For example, when our essential amenities are provided for free by renewable-energy-powered, fully automated farms, house building machines, and more, and the masses suddenly realize that work is no longer obligatory – we will see a near instantaneous collapse of the labor based economy.
These imminent tipping points will force us to rethink the roles of humans in the economy. This is perhaps the most pressing issue in our transition to a new kind of economy.
Luckily, the world is changing, and changing fast. We are seeing more and more possibilities, game changers, emerging ideas. The Internet is opening up entirely new landscapes of economic paradigms. Movements are forming that no longer participate in the current economic system. Technology is enabling people to manipulate the system to their own ends. Some have suggested the eradication of money altogether.
The movement towards a new system, a system where producers and consumers are no longer the same thing, where jobs are no longer obligatory, is already in progress.
As our very survival depends on our employment, it is critical that this transition happens from the ground up.
Ref: http://socialrebirth.org/automation-will-change-the-world-sooner-than-you-think
Krugman and DeLong on Automation
Published by eConfuture - Technology and Economics.| March 7, 2011
Two notable economists have recently weighed in on the issue that I've been writing about extensively here: job automation and its impact on the future economy.
Paul Krugman links to a 1996 article in which he imagined a future where “information technology would end up reducing, not increasing, the demand for highly educated workers, because a lot of what highly educated workers do could actually be replaced by sophisticated information processing — indeed, replaced more easily than a lot of manual labor.”
That’s very much inline with what I think is likely to happen. In fact The Atlantic recently published an excerpt in which I talk about how a Radiologist’s job might be easier to automate than a housekeeper’s.
Brad DeLong seems less concerned:
I don’t see a problem with the number of jobs: I don’t see any reason that technological unemployment should be any more in our future than it has been in our past.
Really? Keep in mind that in the U.S. we need to create over a million jobs a year just to keep up with population growth. Within the next decade or so, I think it’s likely that millions of jobs in both low skill areas and high skill occupations are going to be increasingly susceptible to automation. If that happens, we’ll need to replace all those jobs while still keeping up with growth in the workforce. (And of course that’s on top of digging out of the massive unemployment hole we’re currently in).
As Krugman notes, one economist that has done extensive work in this area is David Autor of MIT. Autor co-authored a paper that looked at how computers have substituted for labor going all the way back to the 1960s and found that, as we might expect, routine and repetitive jobs are highly susceptible to automation. Autor has found that, as a result, the job market is currently polarized: A great many of the middle-skill jobs that used to support a solid middle class lifestyle have been automated—leaving us with high skill/high wage jobs that require lots of education and training and lots of low skill jobs with very low wages.
The problem I think we face in the future is that both the high-end jobs and the low-end jobs may erode quite rapidly as information technology advances. The key thing to understand here is that our definition of what constitutes a “routine and repetitive” job is changing over time. At one time a repetitive job may have implied standing on an assembly line. As specialized artificial intelligence applications (like IBM’s Watson for example) get better, “routine and repetitive” may come to mean essentially anything that can be broken down into either intellectual or manual tasks that tend to get repeated. Keep in mind that it’s not necessary to automate entire jobs: if 50% of a worker’s tasks can be automated, then employment in that area can fall by half. When you begin to think in these terms, it becomes fairly difficult to make a list of jobs that (1) employ large numbers of people and (2) are completely safe from automation.
If high skill jobs that require college degrees start getting substantially automated, that will threaten an important aspect of the social contract: if there’s anything left of the American Dream, it is the idea that if you work hard to educate yourself, you’ll have a better shot at prosperity. If that promise comes up short, it may ultimately destroy the incentive for broad-based pursuit of education. There’s significant evidence that this may already be happening: one study recent study suggests that as many as half of college graduates are ending up underemployed.
So if the high skill jobs begin to evaporate, those people will have to turn to lower-skill or trade jobs. We may see people who might otherwise have pursed advanced education competing for jobs as plumbers or mechanics. Perhaps they’ll win that competition. But then what happens to the person who would have actually been a better fit for that job?
Since the middle-skill jobs are already gone, those who fail to find high skill positions will fall down the rungs and have to compete for lower skill positions. And yet a lot of these “jobs of last resort” in areas like fast food, retail and other service sectors are also going to be susceptible to automation (See this recent article in the LA Times: “Retail jobs are disappearing as shoppers adjust to self-service.”)
What happens to the workers who lose the low skill jobs? Well, they won’t have many options; by definition if they've been working jobs of this type for any length of time, they have no savings to fall back on. Safety nets for adults without young children are few. Many of these people will be headed for a tent city (video).
What about Consumption?
What neither Krugman nor DeLong seems to have thought much about is the impact that all this has on consumption. Rising unemployment and declining wages has to impact consumer spending and confidence—perhaps dramatically. As I've pointed out previously, falling wages will put a deflationary squeeze on households. This is because major fixed costs such as housing (mortgage or rent), health insurance, food and energy will not fall even as income does fall. This will leave average households with less and less to spend on discretionary items—and that likely means weak demand for any business producing a non-essential product or service. And, hey, that’s most of the economy. Those businesses, in turn will see increasing pressure to lay off workers or further automate.
Every product and service produced by the economy ultimately gets purchased (consumed) by someone. In economic terms, “demand” means a desire or need for something—backed by the ability and willingness to pay for it. There are only two entities that create final demand for products and services: individual people and governments. (And we know that government can’t be the demand solution in the long run). It all comes down to individual people buying stuff.
Of course, businesses also purchase things, but that is NOT final demand. Businesses buy inputs that are used to produce something else. If there is no demand for what the business is producing it will shut down and stop buying inputs. A business may sell to another business, but somewhere down the line, that chain has to end at a person (or a government) buying something just because they want it or need it.
This point here is that a worker is also a consumer (and may support other consumers). These people drive final demand. When a worker is replaced by a machine, that machine does not go out and consume. The machine may use resources and spare parts, but again, those are business inputs—not final demand. If there is no one to buy what the machine is producing it will get shut down. So if we automate all the jobs, or most of the jobs, or if we drive wages so low that very few people have any discretionary income, then it is difficult to see how a modern mass-market economy can survive that. (This is the primary focus of my book, The Lights in the Tunnel).
Some people (like CEOs of global corporations, for example) might argue that it is somehow ok to undermine broad-based consumption in the United States, because the rising consumer class in China and other emerging economies will pick up the slack. Aside from the fact that, as an American, I don’t find that very appealing, I’m very doubtful of that argument for a few reasons: (1) Chinese manufacturing will automate and may do so much more rapidly than was the case in the US because they simply have to import the technology, not invent it. That will make it hard for China to create enough new jobs as millions of workers continue to migrate from the countryside to cities. (2) China is still highly dependent on exports and the US is a vital market. A major decline in consumption here will cause unemployment in China, and that will make it very difficult for the Chinese to rebalance their economy toward more domestic consumption. This is something they have been talking about for years but can never seem to pull off . If the average Chinese sees increasing unemployment and an uncertain future, it’s just not going to happen, and the Chinese economy will remain dependent on exports and infrastructure investment.
In general, I think this is a problem that a great many people should be giving serious consideration. Information technology continues to accelerate: the impact will be here long before we are ready. The fact that the first line of Krugman’s post is “And now for something completely different” should give you some idea of how much attention this issue is getting from professional economists.
Ref: http://econfuture.wordpress.com/
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