<br><br clear="all"><hr align="left" size="1">
<div class="">December 9, 2012</div>
<h1>Robots and Robber Barons</h1>
<h6 class="">By
<span>
<a href="http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html" rel="author" title="More Articles by PAUL KRUGMAN"><span>PAUL KRUGMAN</span></a></span></h6>
<p>
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 <a title="See figure 5 (PDF)" href="http://www.bls.gov/opub/mlr/2011/01/art3full.pdf">wages and other labor compensation</a>
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. </p>
<p>
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that an old-fashioned, almost Marxist sort of discussion, out of date in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. </p>
<p>
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 <a title=""The College Wage Premium," Federal Reserve Bank of Cleveland" href="http://www.clevelandfed.org/research/commentary/2012/2012-10.cfm">wage gap</a> between workers with a college education and those without, which grew a lot in the 1980s and early 1990s, <a title="Economic Policy Institute" href="http://www.epi.org/press/wages-young-college-graduates-failed-grow/">hasn’t changed much since then</a>.
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. </p>
<p>
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. </p>
<p>
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, <a title="Economix blog" href="http://economix.blogs.nytimes.com/2012/12/07/when-cheap-foreign-labor-gets-less-cheap/?partner=rss&emc=rss">the motherboard, is basically made by robots</a>, so cheap Asian labor is no longer a reason to produce them abroad. </p>
<p>
In a recent book, “<a title="Excerpt in The Atlantic" href="http://www.theatlantic.com/business/archive/2011/10/why-workers-are-losing-the-war-against-machines/247278/?single_page=true">Race Against the Machine</a>,”
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. </p>
<p>
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 <a href="http://www.econlib.org/library/Ricardo/ricP7.html#Ch.31,%20On%20Machinery">David Ricardo</a>
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<a href="http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html"> modern scholarship suggests</a> may indeed have happened for several decades. </p>
<p>
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 <a title="Washington Monthly" href="http://www.washingtonmonthly.com/features/2010/1003.lynn-longman.html">Barry Lynn and Phillip Longman</a>
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.
</p>
<p>
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.
</p>
<p>
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? </p>
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.<br><br><br clear="all"><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br><br><img src="http://users.moscow.com/waf/WP%20Fox%2001.jpg"><br>
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