[Vision2020] Robots and Robber Barons

[Art Deco]

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December 9, 2012
Robots and Robber Barons By PAUL
KRUGMAN<http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html>

The American economy is still, by most measures, deeply depressed. But
corporate profits are at a record high. How is that possible? It’s simple:
profits have surged as a share of national income, while wages and other
labor compensation <http://www.bls.gov/opub/mlr/2011/01/art3full.pdf> are
down. The pie isn’t growing the way it should — but capital is doing fine
by grabbing an ever-larger slice, at labor’s expense.

Wait — are we really back to talking about capital versus labor? Isn’t that
an old-fashioned, almost Marxist sort of discussion, out of date in our
modern information economy? Well, that’s what many people thought; for the
past generation discussions of inequality have focused overwhelmingly not
on capital versus labor but on distributional issues between workers,
either on the gap between more- and less-educated workers or on the soaring
incomes of a handful of superstars in finance and other fields. But that
may be yesterday’s story.

More specifically, while it’s true that the finance guys are still making
out like bandits — in part because, as we now know, some of them actually
are bandits — the wage
gap<http://www.clevelandfed.org/research/commentary/2012/2012-10.cfm>between
workers with a college education and those without, which grew a
lot in the 1980s and early 1990s, hasn’t changed much since
then<http://www.epi.org/press/wages-young-college-graduates-failed-grow/>.
Indeed, recent college graduates had stagnant incomes even before the
financial crisis struck. Increasingly, profits have been rising at the
expense of workers in general, including workers with the skills that were
supposed to lead to success in today’s economy.

Why is this happening? As best as I can tell, there are two plausible
explanations, both of which could be true to some extent. One is that
technology has taken a turn that places labor at a disadvantage; the other
is that we’re looking at the effects of a sharp increase in monopoly power.
Think of these two stories as emphasizing robots on one side, robber barons
on the other.

About the robots: there’s no question that in some high-profile industries,
technology is displacing workers of all, or almost all, kinds. For example,
one of the reasons some high-technology manufacturing has lately been
moving back to the United States is that these days the most valuable piece
of a computer, the motherboard, is basically made by
robots<http://economix.blogs.nytimes.com/2012/12/07/when-cheap-foreign-labor-gets-less-cheap/?partner=rss&emc=rss>,
so cheap Asian labor is no longer a reason to produce them abroad.

In a recent book, “Race Against the
Machine<http://www.theatlantic.com/business/archive/2011/10/why-workers-are-losing-the-war-against-machines/247278/?single_page=true>,”
M.I.T.’s Erik Brynjolfsson and Andrew McAfee argue that similar stories are
playing out in many fields, including services like translation and legal
research. What’s striking about their examples is that many of the jobs
being displaced are high-skill and high-wage; the downside of technology
isn’t limited to menial workers.

Still, can innovation and progress really hurt large numbers of workers,
maybe even workers in general? I often encounter assertions that this can’t
happen. But the truth is that it can, and serious economists have been
aware of this possibility for almost two centuries. The early-19th-century
economist David
Ricardo<http://www.econlib.org/library/Ricardo/ricP7.html#Ch.31,%20On%20Machinery>is
best known for the theory of comparative advantage, which makes the
case
for free trade; but the same 1817 book in which he presented that theory
also included a chapter on how the new, capital-intensive technologies of
the Industrial Revolution could actually make workers worse off, at least
for a while — which modern scholarship
suggests<http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html>may
indeed have happened for several decades.

What about robber barons? We don’t talk much about monopoly power these
days; antitrust enforcement largely collapsed during the Reagan years and
has never really recovered. Yet Barry Lynn and Phillip
Longman<http://www.washingtonmonthly.com/features/2010/1003.lynn-longman.html>of
the New America Foundation argue, persuasively in my view, that
increasing business concentration could be an important factor in
stagnating demand for labor, as corporations use their growing monopoly
power to raise prices without passing the gains on to their employees.

I don’t know how much of the devaluation of labor either technology or
monopoly explains, in part because there has been so little discussion of
what’s going on. I think it’s fair to say that the shift of income from
labor to capital has not yet made it into our national discourse.

Yet that shift is happening — and it has major implications. For example,
there is a big, lavishly financed push to reduce corporate tax rates; is
this really what we want to be doing at a time when profits are surging at
workers’ expense? Or what about the push to reduce or eliminate inheritance
taxes; if we’re moving back to a world in which financial capital, not
skill or education, determines income, do we really want to make it even
easier to inherit wealth?
As I said, this is a discussion that has barely begun — but it’s time to
get started, before the robots and the robber barons turn our society into
something unrecognizable.



-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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