Every recession, people write essays about how this is “the end of work”

(written by Lawrence Krubner, however indented passages are often quotes)

Since the 1800s people have been writing about how increasing productivity would eventually cause everyone to become unemployed. The most famous writer to make this argument was Karl Marx. He argued that the one thing that the capitalists were good at producing was their own grave diggers — that is, they were hiring workers to build machines that would eventually lead to everyone being unemployed which would lead to world revolution which would lead to a world where the wealth created by the machines was shared by all.

I recall a lot of these essays in the early 90s, and again in the early 2000s — every time there is a recession. What grates on my nerves is the lack of history that pervades these essays. For instance:

One implication is that productivity gains are now outstripping consumption by a large margin.

Yes, but that argument has been made thousands of times since the early 1800s. And it hasn’t yet been true.

The other thing about these essays is the way they confuse 2 issues: worldwide trends and trends in the USA. For instance, the essay mentions outsourcing, yet outsourcing often leads to a worldwide increase in jobs — just not in the USA. Then the essay turns around and talks about how automation is killing jobs in the USA. And yet, by definition, such automation is making the USA more competitive against other countries, and therefore that automation should come at the expense of jobs in other countries, so the real issue is the lack of demand in those other countries. Since some of those countries are low-tech, the lack of demand in those countries can not be explained by automation. Therefore the lack of jobs in the USA cannot be explained by automation.

My point is, if there is a lack of demand, it has other sources than automation. Possibly there are imbalances in income that stifle certain kinds of consumption, or some countries manipulate their currencies in ways that explicitly surpress consumption, or some countries have fiscal or monetary policies that deliberately surpress consumption. But it’s not automation that is suppressing consumption.

For my part, for me to buy all the stuff that I want to buy, including a human research colony on Mars, I would need about $80 trillion dollars, which is more than the current world GDP. If anyone is in doubt about how to stimulate consumption, just give me money and I’ll do it.

Some day we will read this and laugh:

This is unlike the job destruction and creation that has taken place continuously since the beginning of the Industrial Revolution, as machines gradually replaced the muscle-power of human labourers and horses. Today, automation is having an impact not just on routine work, but on cognitive and even creative tasks as well. A tipping point seems to have been reached, at which AI-based automation threatens to supplant the brain-power of large swathes of middle-income employees.

That makes a huge, disruptive difference. Not only is AI software much cheaper than mechanical automation to install and operate, there is a far greater incentive to adopt it—given the significantly higher cost of knowledge workers compared with their blue-collar brothers and sisters in the workshop, on the production line, at the check-out and in the field.

In many ways, the white-collar employees who man the cubicles of business today share the plight of agricultural workers a century ago. In 1900, nearly half of the adult population worked on the land. Thanks to tractors, combine harvesters, crop-picking machines and other forms of mechanisation, agriculture now accounts for little more than 2% of the working population.

Displaced agricultural workers then, though, could migrate from fields to factories and earn higher wages in the process. What is in store for the Dilberts of today? Media theorist Douglas Rushkoff (“Program or Be Programmed” and “Life Inc”) would argue “nothing in particular.” Put bluntly, few new white-collar jobs, as people know them, are going to be created to replace those now being lost—despite the hopes many place in technology, innovation and better education.

The argument against the Luddite Fallacy rests on two assumptions: one is that machines are tools used by workers to increase their productivity; the other is that the majority of workers are capable of becoming machine operators. What happens when these assumptions cease to apply—when machines are smart enough to become workers? In other words, when capital becomes labour. At that point, the Luddite Fallacy looks rather less fallacious.

This is what Jeremy Rifkin, a social critic, was driving at in his book, “The End of Work”, published in 1995. Though not the first to do so, Mr Rifkin argued prophetically that society was entering a new phase—one in which fewer and fewer workers would be needed to produce all the goods and services consumed. “In the years ahead,” he wrote, “more sophisticated software technologies are going to bring civilisation ever closer to a near-workerless world.”

The process has clearly begun. And it is not just white-collar knowledge workers and middle managers who are being automated out of existence. As data-analytics, business-intelligence and decision-making software do a better and cheaper job, even professionals are not immune to the job-destruction trend now underway. Pattern-recognition technologies are making numerous highly paid skills redundant.

Radiologists, who can earn over $300,000 a year in America, after 13 years of college education and internship, are among the first to feel the heat. It is not just that the task of scanning tumour slides and X-ray pictures is being outsourced to Indian laboratories, where the job is done for a tenth of the cost. The real threat is that the latest automated pattern-recognition software can do much of the work for less than a hundredth of it.

Lawyers are in a similar boat now that smart algorithms can search case law, evaluate the issues at hand and summarise the results. Machines have already shown they can perform legal discovery for a fraction of the cost of human professionals—and do so with far greater thoroughness than lawyers and paralegals usually manage.

In 2009, Martin Ford, a software entrepreneur from Silicon Valley, noted in “The Lights in the Tunnel” that new occupations created by technology—web coders, mobile-phone salesmen, wind-turbine technicians and so on—represent a tiny fraction of employment. And while it is true that technology creates jobs, history shows that it can vaporise them pretty quickly, too. “The IT jobs that are now being off-shored and automated are brand new jobs that were largely created in the tech boom of the 1990s,” says Mr Ford.

In his analysis, Mr Ford noted how technology and innovation improve productivity exponentially, while human consumption increases in a more linear fashion. In his view, Luddism was, indeed, a fallacy when productivity improvements were still on the relatively flat, or slowly rising, part of the exponential curve. But after two centuries of technological improvements, productivity has “turned the corner” and is now moving rapidly up the more vertical part of the exponential curve. One implication is that productivity gains are now outstripping consumption by a large margin.

Another implication is that technology is no longer creating new jobs at a rate that replaces old ones made obsolete elsewhere in the economy. All told, Mr Ford has identified over 50m jobs in America—nearly 40% of all employment—which, to a greater or lesser extent, could be performed by a piece of software running on a computer. Within a decade, many of them are likely to vanish. “The bar which technology needs to hurdle in order to displace many of us in the workplace,” the author notes, “is much lower than we really imagine.”

In their recent book, “Race Against the Machine”, Erik Brynjolfsson and Andrew McAfee from the Massachusetts Institute of Technology agree with Mr Ford’s analysis—namely, that the jobs lost since the Great Recession are unlikely to return. They agree, too, that the brunt of the shake-out will be borne by middle-income knowledge workers, including those in the retail, legal and information industries. But the authors’ perspective is from an ivory tower rather than from the hands-on world of creating start-ups in Silicon Valley. Their proposals for reform, while spot on in principle, expect rather a lot from the political system and other vested interests.

Unlike Mr Ford, Dr Brynjolfsson and Dr McAfee are more sanguine about the impact smart technology is having on the job market. As they see it, those threatened the most by technology should learn to work with machines, rather than against them. Do that, they suggest, and the shake-out among knowledge workers becomes less of a threat and more of an opportunity.