Thursday, March 28, 2013

Redefining labour | FT Alphaville

Redefining labour

This is the third installment in FT Alphaville's "Beyond Scarcity" series, a somewhat radical look at the impact of technological progress and efficiency on the volume of goods and services being produced by the system, asking whether "abundance" could now be a key determinant of deflationary forces in the western world.

On top of this, we have considered the role played by "artificial scarcity", whether imposed wittingly or unwittingly by industry participants as a counterweight to such deflation, and to what degree such measures could now be running into scalability issues. In short, whether there is a limit to how much artificial scarcity private organisations can impose to counteract deflationary forces of abundance, without experiencing diminishing returns.

In our first installment we explained (in fuzzy felt) why an abundance of goods is naturally deflationary unless accompanied by equal or greater credit expansion. Furthermore, we explained why the process can eventually lead to the decay of money itself.

In our second installment we looked at why the private sector has an incentive to counteract such forces — which ultimately threaten profit itself by compromising monetary stores of value — by making things artificially scarce. Such measures can include everything from destocking, unemployment, and capacity shutdown to the accumulation of dark inventory.

Now we look at what technologically-induced abundance does to our understanding and treatment of productivity and labour in its own right.

We go straight to anthropologist and author David Graeber who conveniently penned "Of Flying Cars and the Declining Rate of Profit" this week, a fascinating analysis of why much of the technological innovation we imagined when we were young is still not here.

His point, very generally, is that technological progress is not on track — despite a mass perception that it is accelerating. That somewhere along the way it was sabotaged by those who had an interest in slowing it down.

Graeber notes, for example, the awkward relationship between technology, profitability and human labour:

Marx argued that, for certain technical reasons, value—and therefore profits—can be extracted only from human labor. Competition forces factory owners to mechanize production, to reduce labor costs, but while this is to the short-term advantage of the firm, mechanization's effect is to drive down the general rate of profit.

For 150 years, economists have debated whether all this is true. But if it is true, then the decision by industrialists not to pour research funds into the invention of the robot factories that everyone was anticipating in the sixties, and instead to relocate their factories to labor-intensive, low-tech facilities in China or the Global South makes a great deal of sense.

As I've noted, there's reason to believe the pace of technological innovation in productive processes—the factories themselves—began to slow in the fifties and sixties, but the side effects of America's rivalry with the Soviet Union made innovation appear to accelerate. There was the awesome space race, alongside frenetic efforts by U.S. industrial planners to apply existing technologies to consumer purposes, to create an optimistic sense of burgeoning prosperity and guaranteed progress that would undercut the appeal of working-class politics.

So while much of the West was fooled into thinking that technology was progressing more and more quickly — due to unfair comparisons with Soviet Union — in reality, the private sector was investing in outdated (but cheap) human labour abroad rather than improving mechanical industrial processes.

With the private sector failing to support technology — if not sabotaging it outright — it's no surprise then that real innovation was left to government entites, who were much less concerned about profitability.

Indeed as Graeber notes:

One reason we don't have robot factories is because roughly 95 percent of robotics research funding has been channeled through the Pentagon, which is more interested in developing unmanned drones than in automating paper mills.

This, Graeber argues, explains the type of technologies we've seen developed: technologies focused on surveillance, work discipline and social control rather than medical or humanitarian advances.

Graeber goes on to have some strong opinions about why technology, even now, is failing to advance as quickly as it should. He posits that neo-liberal and capitalist forces may be misdirecting innovation into bureacratic technologies, which awkwardly offset efficiencies, rather than focusing on the sort of grandiose poetic projects that could serve humanity (Mars missions etc), which we could have expected of the Soviets.

Nevertheless, one thing is clear. For the first time in decades, those in the know say private sector technology is outpacing government technology. Meanwhile, no matter how much of an incentive corporations may have to sabotage such efforts, technology appears increasingly to be slipping out of their control. This is thanks largely to open source initiatives and a system which increasingly provides for people at a base level. Once base needs are met — due to a general abundance of goods — however they may be funded, people are free to dedicate themselves, if they wish, to the pursuit of nobler goals, technologies and academia. On the academic front, despite the increasing trend towards tuition fees, access to knowledge has ironically never been cheaper.

True, internet tutorials are no replacement for a medical degree, but there are ever more fields in which an internet connection and a (good) will (hunting) to learn is all that's needed to achieve the same academic grounding as a college degree.

Peter Thiel, meanwhile, is even famously paying students to drop out of university altogether.

All these developments suggest that technological advances could soon start flowing back into production and manufacturing circles compromising the current corporate grip which is restraining abundance even further.

When human labour is almost completely replaced my mechanised robotics, even on the services front, it's fair to assume the cost of labour, production and profitability may have to be re-evaluated completely.

After all, if robots are doing most of our work, a high employment rate becomes illogical in society. In fact, it even makes sense for some portion of civilisation not to work at all or shift their productivity into different areas. Meanwhile, how can corporations justifiably continue to charge for goods and/or continue to waste products (or withhold products from the market) just in order to squeeze out profits?

Is this not the crisis of capitalism envisioned by both Keynes and Marx?

If the system is capable of free production — constrained only by energy costs and resources — a base level of existence can be increasingly provided free of charge to an ever growing amount of people.

Some will utilise this new-found freedom from labour –  and their ability to enjoy a growing abundance of goods — to pursue nobler goals (possibly ones which allow society to advance even further) which will allow the individual to achieve a greater than base existence. Others, meanwhile, will be able to just enjoy what the system provides (albeit at a base level), though at no cost or disadvantage to those who contribute to it. Some others, meanwhile, might instead be able to dedicate themselves to voluntary pursuits they could never have done before.

Many will be tempted to identify these developments as Marxist. We'd argue this is not the case. Rather, we'd say, this is the inevitable consequence of outsourcing labour to a body of non-sentient robotised slaves.

On the subject of the robotisation of the American workforce, Parag and Ayesha Khanna, co-directors of the Hybrid Reality Institute, who have a new book out this week entitled Hybrid Reality – a look ahead to a future where humans might even merge with technology — made the following observation in a Forbes editorial this month:

America's transition away from manufacturing was supposed to mean that we all move into a higher-value service economy – jobs which couldn't be lost to outsourcing. Technology was considered only an asset to productivity, not a liability to employment. Yet the most recent Q1 data reveals that unemployment is steady at around 8.1% not because workers have found jobs, but because hundreds of thousands of people – 342,000 in April alone – have left the workforce altogether. Retirees and those returning to school provide at best a partial accounting. Automation is a major factor. Today America needs 5 million less workers to produce a greater value of goods and services than it did in December 2007 when the recession began.

We think these are important trends.

Importantly, they support the theory that abundance is now a key driver of an irreversible and global deflationary spiral that few economists and investors have yet to account for. A deflation which ironically leads only to further technological process and abundance — and thus a future where the need for savings, and stores of value, is increasingly diminished.

One just needs to look at the example of Japan's economic malaise in the context of the technological, savings and monetary trends which have accompanied it.

What's more, as the Khannas also observe, in an environment where robotised labour leads to an ever greater abundance of goods quality products and services, those services which can filter through abundance or personalise it will remain the last remaining profit zones.

This not only explains the strength of the luxury goods sector throughout the crisis but the move towards increased self-incorporation in areas where a vendor or service provider's quality, personalised skill and reputation is increasingly appreciated over what corporates can offer (note the power of reputation on Ebay, the power of personalisation and craft on Etsy, and so on).

As the Khannas note:

More fundamentally, we can transition to an economy where we work more for ourselves, each other, and in teams. A logical consequence of the financial crisis but also one that could be construed as a silver lining is the rapidly growing rate of self-incorporation. Over one-third of Americans are now registered as self-employed, becoming small businesses in a P2P economy of professional services and retail, or sub-contractors in growing sectors such as healthcare and data collection and analysis.

Our last observations are these:

If it is true that the system can increasingly provide a base level of existence for ever more people for almost no cost, should we be surprised that those western countries where a base level of existence is adequate — because of weather, surroundings and general environment — are the first to opt out of unnecessary human productivity?

Could the remarkable comeback of economies like Iceland post-bankruptcy be testament to the innate productivity of the system? Iceland's credit has already started to recover, a trend which suggests default stigma is much less important than you'd expect it to be.

Does bankruptcy even matter in an age of real abundance?

Might bankruptcy help to quash artificial scarcity, encouraging greater abundance and efficiencies, as people begin to see the merits of working for free?

Detractors of the theory will point to energy and resource constraints. But it's arguable that as more and more states are frozen out of global commerce they will increasingly look to each other to create their own barter-focused supply chains servicing their needs.

Meanwhile, there is some evidence to suggest that today's energy constraints are already not what they used to be. This is in part thanks to technological advances in such things as shale gas and is clearly demonstrated by the explosion of the natgas to oil ratio, the difference in the price of an energy resource which is routinely manipulated by a cartel around an artificial scarcity agenda and one which cannot be as easily bound in the same way.

We'll leave the discussion open.

We are keen, as ever, to hear your thoughts.

Sent from my iPad

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