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Why Outsourcing and De-Skilling are the Real Culprits (Not Technology)

A Robot Didn’t Steal Your Job

by ROB URIE

When Barack Obama first entered office the financial crisis created by Wall Street banks was at its peak and hundreds of thousands of people per week were losing their jobs. As writer Ron Suskind reported, at that time Mr. Obama presented his thesis to his economics team, such as it was, that the reason for the job losses was ‘productivity gains.’ That is, in the midst of the largest economic calamity since the 1930s, the reason for massive job losses was that technological innovation had instantaneously rendered millions of formerly employed persons ‘redundant.’

As uninformed as this view may seem, and it reportedly seemed so even to the head of Mr. Obama’s economics team, Larry Summers, the premises behind it are conventional wisdom in the economics departments of prestigious universities and amongst ‘professional’ economists occupying chairs and proffering investment advice on Wall Street.

The reason for revisiting the issue is the paradigmatic form is once again making the official rounds, most recently in an NPR (National Public Radio) piece by degree even more idiotic than their usual economics reporting. Elsewhere, Harvard’s ‘boy genius’ Greg Mankiw, now no longer a boy in the chronological sense, and even the occasionally esteemed Paul Krugman, have offered up technology ‘models’ that are the veritable duct tape of the economics profession—the multi-purpose tool with which virtually any group of items, related or not, can be bound together to form a grouping. And as with Mr. Obama’s spectacularly implausible conceit regarding ‘productivity,’ the discourse on technology, income and employment will inform real economic policies.

‘Technology’ is today the joint explanation for high unemployment, weak job growth, highly concentrated income and wealth distribution and high corporate profits in a period of broad economic weakness. Technology in theory ties to productivity—the amount of economic output given what went into producing it, as the ‘efficient’ transfer mechanism, the machine that produces more with less. Banks formerly had large rooms filled with accountants and paper processors to do what a few people with computers can now do. And automakers now have robots that don’t need bathroom breaks and have no inclination toward collective bargaining to build cars. What ties technology, in these theories, to income and wealth concentration are the brave entrepreneurs who risk it all to build modern efficient companies and who so justly deserve the rewards. On their face, the attributes assigned to technology appear plausible.

By analogy: unbeknownst to many, there are hundreds of functional airplanes parked in the desert of the Southwestern U.S. As these unused airplanes suggest, technology is more than just machines. Many of these airplanes, those of more recent vintage that have been well maintained, could be put back into service. But a broad set of circumstances ranging from the history of aeronautics to labor relations in the airline ‘industry’ to ‘deregulation’ that changed existing institutional arrangements to the price of fuel to the financing arrangements for these specific airplanes together contributed to their current circumstance. Outside of their use value in the existing economy, the airplanes are technology in the sense of being machines, but those parked in the desert neither reduce the need for human labor nor serve to concentrate wealth.

The point here is that technology is a cog in a much larger economic wheel, not an end in itself. Economists like to imagine it is self-generated, that it comes from nowhere and nothing, appearing as Cartesian mental object dissociated from, and disinterested in, the historical struggle from whence it sprang. The airplanes themselves have imperial roots dating back several centuries for the raw materials that went into their construction. The parts were made in factories that benefited from fat contracts from governments and were carried over roads financed by citizenries. The engineers who designed them were educated at universities that receive government funding and their designs derived from aeronautical science created by the military. The price of their fuel is a function of standing militaries, past wars, threats, and alliances and comes at the cost of millions of dead, maimed and displaced persons. The American invasion, occupation and near total destruction of Iraq to secure cheap oil are but one example.

The airplanes are labor saving in the sense they can transport people and goods from New York to Los Angeles in five hours whereas driving takes a week and horseback takes months. Since air travel was developed people travel places they never would have traveled without it. Tourist economies dependent on it have developed and the rapid distribution of goods and services over long distances has been facilitated where it was previously unimagined. Business practices have developed around air travel and business people regularly travel for purposes that wouldn’t be without it. And while stagecoach drivers lost jobs with the development of automobiles and railroad conductors lost jobs with the growth of air travel, these technologies and others are broadly credited with increasing, or at least co-existing with growing, total employment. And jobs are but one aspect of the economic context of technology.

An airplane, as with computers and robotics, is in theory a productivity-enhancing device–technology. But outside a far-reaching economic context, it is a large paperweight parked in the desert. Technology is in fact social practice, ways of doing things, not inanimate machines. Antique economist Adam Smith developed his ‘division of labor’ theory of breaking complex economic production into constituent parts and having experts in each constituent come together to jointly create the whole.

There are no machines necessary to the theory—it works in the sense it does because the division of labor, where it exists, is social practice promoted with theories of economic efficiency, not a fact of nature. The division of labor is technology in the same sense the term is today being attributed to machines. To those to whom this narrow idea of economic efficiency is attractive, the division of labor is one plausible mode of social organization to achieve it. But there exist both broader concepts of economic efficiency and entirely unrelated modes of social organization. In this sense, technology in its current meaning is ideology.

Robotics, computers and other energy consuming machines are part of the broader technology of energy extraction, conversion, distribution and consumption. To the extent this energy complex produces externalities, costs of extraction, conversion, distribution and consumption not borne by energy ‘producers,’ technologies tied to it produce them as well (there would be no energy industry without customers for the energy). Add in the ancillary costs, broadly considered, of the standing armies, wars, occupations, murders, maiming and destruction that go into energy extraction and consider that parties who do not benefit from cheap energy largely pay them. Further add in the environmental destruction now aggregating to global warming. These are all part of the technology of robotics and computerization.

Wall Street economists endorse the argument technology is the sole explanation for the current malaise amongst we humans and for cheer in the plutocracy because the financing of machines is the only plausibly useful thing modern finance does. The financial system is in this sense also part of the technology of robotics and computerization. Machines bought with the ‘savings’ of capitalists, the mythology behind the ‘Ivy League’ economic models, raise the question of where these savings came from? To the extent they result from positive or negative externalities not of the capitalist’s making, the savings are social savings—benefits produced or costs borne by others that rightfully belong to these others, not the capitalist. These find themselves embodied in plants and equipment and through negative externalities from the financial system itself. One can imagine a financial system not fully existent from public welfare receipts and ongoing guarantees, but that is not the system that exists. Both the savings of capitalists deposited with banks and embodied in factories and equipment and the money created by banks by degree exist as embodied externalities, the detritus in capitalist theory that constitutes its core in capitalist fact.

The airline industry, from whence the airplanes parked in the desert arose, itself arose through historical development. The airplanes didn’t one day appear from nowhere so some capitalist could fire the railroads because airplanes were more ‘efficient.’ The business of the airlines came from social practice—travel in the context of the industrial move toward increased mechanization. As outlined above, tourist businesses dependent on air travel and the modern practice of business travel grew from its development—they didn’t exist before the creation of the air travel industry, of which the airplane—the machine, is but a constituent. And the railroads that arose from land grants backed by military force shifted from transporting people to transporting commodities, many of which were taken through imperial force and which left behind costs in terms of social and environmental destruction that are still being borne today. The point here is technology narrowly considered—the idiot object if you will, exists within historical development, not tucked inside the anti-history of Western economists.

When Mitt Romney, or any other pirate financier, buys a company to ‘harvest’ its value by replacing human labor with machines, where does the harvested value come from? Put another way, I can shoot you and your family and move all of your stuff into my house, but what then makes it ‘mine?’ Just because Mr. Romney and his compatriots have masses of social wealth in their pockets doesn’t make it theirs. The companies from which value is harvested are the product of a wide array of social inputs. Test pilots for the military gave their lives to develop the safety devices and protocols used in modern commercial aviation. How much business would an airline have if every third airplane crashed in a fiery ball? Tech and pharma likewise came into being through public, and only later and occasional ‘private,’ investment. Pirate financiers build nothing; their claim is to have made what already existed more efficient. But as with the airplanes parked in the desert, technology is part of a broad context of social relations, not inanimate machines. How efficient is a computer if there is no energy to run it and no broader set of economic relations that make it ‘useful?’– Again, it in nothing but an expensive paperweight.

The NPR story of how ‘technology’ is behind high unemployment is worth another mention. The story is based on a homebuilder who has an office that combines basic administrative functions with architectural design and that has construction workers building houses in the field. The owner of the company replaced several office personnel with computers and now outsources the building of constituent house parts to an outside company leaving only one company employee at each of the houses being built. Computerization of the office comes about twenty years later than most of the homebuilder’s competitors and modular construction of houses dates to the 1940s. (Were these explanations for high unemployment, they would have been so twenty years ago, not today).  Modular construction reifies Adam Smith’s ‘division of labor’ and adds larger scale input pricing. The division of labor in this case ‘de-skills’ the construction process that typically requires skilled labor (or else what has been changed is the geographic location of production, not the number of people needed to produce it). To be clear, the ‘technology’ purported to be behind the NPR story is a web of social practices including outsourcing and de-skilling, not replacing humans with machines.

De-skilling is only efficient to the extent skilled workers find other employment for which they are compensated for their skill. By analogy, airplanes parked in the desert can, depending on context, raise incomes for airlines through the elimination of ‘unprofitable’ routes, but that depends both on the shift in the airlines’ function from utility serving the public to profit seeking corporation and on the paradox that waste is efficient. Prior to the 1970s serving unprofitable routes was a requirement for the right to fly commercial aircraft in the U.S. The change in ‘technology’ that made the airlines occasionally profitable was the elimination of the public service requirement. And to the extent waste is ‘efficient,’ this finds its breadth in the observation that the most ‘efficient’ countries on the planet are the most wasteful. De-skilling presupposes both an absence of skill when entering a job and upon leaving it, however many years later that might be. As even an investment banker or an economist could learn a bit about refrigerators by selling them for thirty years, de-skilling is the ultimate waste of human potential.

The ‘bugaboo’ in the room for mainstream economists is China with modern factories, some of which have been designed to build goods using robots. From the several advisors to the Chinese government with whom I’ve spoken, the factories are part of a financial technology that has the government providing advantageous financing to build export based factories and is part of export technology premised on cheap fuel and a particular arrangement of currency exchange rates. Put another way, were the value of the U.S. dollar to fall enough relative to the Chinese Renminbi and / or the cost of shipping these goods to rise enough the production cost advantage enjoyed by the automated Chinese factories would disappear.

The Western economists’ practice is to hold these variables—the price of fuel, currency exchange rates, industrial policy etc. ‘constant’ to assess particular effect, but particular effect will never and has never occurred outside the context of the actual world. This practice of suspending time and context leads to the bottomless pit of nonsense where economists are never wrong because they would have been right if only the world had behaved itself.

As I’ve argued above, technology in the modern mythology requires complete de-contextualization to serve as an explanation for skewed income distribution and weak labor ‘markets.’ Even within the narrow confines of economists’ models there is no definition of ‘efficiency,’ the magical attribute awarded technology, that withstands either competing definitions or the point that basing social organization on such a constrained concept is both ideologically driven and stunningly, emphatically unimaginative.

To the first, as global warming and widespread economic dislocations demonstrate, the local rationalities where technology plays a crucial role don’t necessarily aggregate to global rationalities. To the latter, all economic technologies are social in the sense they only exist socially. With ‘de-skilling’ as a defining technology of our age, there exist few such dismal views of human existence, and therefore the possibilities for social organization, possible.

Rob Urie is an artist and political economist in New York.