Will the 2nd Great Machine Age be a frightening jobless dystopia?

Will the 2nd Great Machine Age be a frightening jobless dystopia?

Machines have been displacing jobs for years and the rate is accelerating

By Ambrose Evans-Pritchard

12:11PM GMT 25 Jan 2014

Thanks to lightning-speed advances in hi-tech, humanity (or part of it) is close to achieving its dream of prosperity without toil. We are already starting glimpse the awful consequences. As Voltaire said, work is the triple tonic for needs, vice, and boredom.

A Davos vote split 51:49 on whether “technological innovation” will keep displacing jobs – and at an accelerating rate – leaving us with a deformed world where hundreds of millions are left on the unemployment scrap-heap (205m so far).

The waters have been so muddied by the global financial crisis – and the 1930s response to it in some quarters – that it is hard to separate the chronic job wastage caused by “robots” (to use a metaphor) from the temporary effects of scarce global demand.

Phillip Jennings, head of the UNI global labour federation, said it would be a “miscarriage of justice” to blame the 32 million job losses since the Lehman-EMU crisis on the iPad or the driverless car.

“You can’t put technology in the dock for 50pc youth unemployment in Greece or Spain. I blame the EU Troika. It was the economic and political decisions taken that have led to the collapse of jobs. In Greece it has gone beyond depression into a humanitarian crisis,” he said at theWorld Economic Forum.

He said some $2 trillion of corporate cash is on the sidelines in the US, $700bn in the UK, and another $2 trillion in the rest of the world. “There is an investors strike. This is a problem of demand in our economies, they are comatose,” he said.

This has a kernel of truth. The current policy settings are pushing the global savings rate to a record 25.5pc of GDP, creating a chronic surfeit of capital over labour. It is a Marxian world.

You can blame this on the “savings glut” in Asia and Northern Europe, or Chinese industrial policy, or regressive tax systems, or labour arbitrage that lets multinationals play off cheap labour in the East against the West, or growing inequality on the GINI index (all linked). As Mr Jennings says, “the social contract has been ruptured.” I would go further. We risk losing social/liberal democracy altogether.

And yet, there is a deeper story. Larry Summers, the former US Treasury Secretary, told the same panel that the post-Lehman jobless spike is of course due to a failure to take “economics seriously” – though he mercifully spared us the names of his “avatars of austerity”, the guilty men. We know who they are. It is a crisis caused by lack of global aggregate demand.

But he also said machines have been displacing jobs for almost half a century. The proportion of those aged 25-54 (the relevant cohort) that is not working in the US has tripled since 1965. This cannot be blamed on globalisation alone. “It predates meaningful trade with China. It is a long-term trend and it is accelerating.”

For those tempted by cry Luddism, hold your thought. This is nothing like the switch from agricultural revolution to the first machine age. The new displaced cannot migrate into textiles mills and great manufacturing hubs on the 19th Century. Labour-saving technology is now sweeping all sectors, including services. “The challenge is that much more immense now,” he said.

A single professor can teach 150,000 students the same academic course through digital lessons. While it still takes the irreplaceable creativity of human beings to play a Haydn Quartet, the same disc can be sold to millions, he said.

This is not a counsel of utter despair. Governments can rewrite the rule book, though that is a tall order in our global race to the bottom, with footloose capital. As Mr Summers says, the abuses did not self-correct even in the late 19th Century and early 20th Century. “It required a Gladstone, a Bismarck, a Roosevelt to make it work,” he said.

Prof Erik Brynjolfsson, a tech guru at MIT, said tax policies can change the game. Some 80pc of US taxation is now on labour. But how do you shift this burden to wealth taxes in a world of open capital flows and competing national tax jurisdictions? (Protectionism perhaps, but I wash my mouth out with soap for even muttering it)

Nor will the emerging economies escape this curse. Indeed, they are in the “bulls eye”, said Prof Brynjolfsson.

Apple’s new Mac Pro will be made in Austin, Texas. Robots have rendered the labour cost irrelevant. The BRICS and mini-BRICS can longer under cut on price.

“Wages don’t matter any longer. Off-shoring was just a way station.” We are back to reshoring, but without jobs. Welcome to our brave new world