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The Great Divergence?

Photo by Gwydion M. Williams | CC BY 2.0

The long-term growth of an advanced economy is dominated by the behavior of technical progress

–Martin Weitzman

Innovation is the outstanding fact in the economic history of capitalist society

— Joseph Schumpeter

The role of humans as the most important factor of production is bound to diminish in the same way that the role of horses in agricultural production was first diminished and then eliminated by the introduction of tractors.

— Wassily Leontief

Imagine a world where androids exist. Would they replace humans as workers? According to the authors (Erik Brynjolfsson and Andrew McAfee) of The Second Machine Age humans wouldn’t even stand a chance. They would be priced out of the labor market for good.

This clever thought experiment, even if not particularly imminent, underlies a crucial observation: that technical innovation in the last 30 years or so while increasing productivity and the overall size of GDP is at the same time causing structural unemployment for millions.

According to these same authors, this was not always the case.

Ever since the invention of the steam engine, so the authors and their respectable academic sources, mankind has been on an entwined upward trajectory of technological innovation resulting in higher standards of living through increasing productivity.

Yet, according to carefully researched statistics, in the last thirty years this unique historical benefit has apparently begun to change.

While the world has arguably undergone almost exponential technological change related especially to information and communication technologies; the displacement of labor has also sped up throughout the world (including China).

Thus, a great new divergence has apparently opened up where technology is able to provide increases in productivity and GDP but not able to sustain the same levels of well being throughout labor as it had been doing, at least in the west, for the past two hundred years.

The threat of massive levels of redundancy is real and recalls Marx’s vision of machines replacing men:

Once adopted into the production process of capital, the means of labor passes through different metamorphoses, whose culmination is the… automatic system of machinery… set in motion by an automaton, a moving power that moves itself; this automaton consisting of numerous mechanical and intellectual organs, so that the workers themselves are cast merely as its conscious linkages.

Unsurprisingly, the most hard hit section of labor are the workers who perform repetitive type work whether classified as cognitive or manual. The repetitive nature of their work lends itself easily to automation.

Yet, unlike the dire predictions of Marx our authors offer a glimmer of hope.

According to them, labor can save itself, at least for the near future, by partnering with the new technologies through the use of unique human capabilities such as “ideation”. In short, humans will still be more creative than any robot and/or AI and will be just great at “coming up with stuff”. Ideas, thoughts, visions that is where the “human comparative advantage” lies.

Undergirding this optimistic idea are a series of policy recommendations. Firstly, a very American idea is proffered: “an excellent education”. The current and future workforce should be skilled in “pattern recognition, ideation, and complex communication”. To this end, the use of Massive Online Open Courses (MOOCs) should be encouraged and supported by higher education and if necessary the government.

Furthermore, the federal government should resume its leadership role in research and development particularly as regards basic research. Another role for the government is the repair and upgrade of infrastructure. Other policy areas are the increase and support of immigration and the rationalization of the tax code which would include a negative income tax which would help to encourage people to keep working.

Interestingly, while discussed, a guaranteed income is not recommended by the authors who view work as not just a means of subsistence but as a moral psychological necessity for individual and community well being.

In and of themselves, the authors’ policy recommendations are good ones.

Yet from a NeoMarxist perspective one might, at this point in history, raise ones eyebrows and think how curious it is that at almost exactly the same time that capitalism has reached every corner of the earth; the leading capitalist nations are apparently threatened by their own technological innovations. Will labor be able to adapt, as they have done in the past, and tame the new technologies to their benefit? Will a new partnership between man and machine emerge leading to untold opportunities for well-being and human development? Or will the Great Divergence prove to be the beginning of the final epoch of capitalism’s inner Great Transformation?

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