Continuing the discussion of a previous post, "What is Left for Humans? Part 1", we ask whether the human race will be able to maintain its accelerating progress without self-destructing for lack of a means of making a living. Realizing that progress is accelerating toward the "Singularity" forces us to re-think how people will make a living in the near future. This is part of the theme of an interesting talk by Gerd Leonhard, "on digital transformation, automation, robotics". Also see, "Digital transformation of business".
The Effect of the Singularity on Future Planning
The rapid change in pace caused by the singularity will affect the average person's ability to plan for the future—a severe challenge to young people, who are mapping out their careers. A major crunch has already emerged: while higher education has become too expensive, job prospects for the college educated have all but vanished. The result: too many college graduates are paying off big student loans, not from higher paying jobs, but from minimum wage jobs fro the only jobs that they could find. The failure to find appropriate jobs, and the inability to pay off student loans, has become a nightmare for many college graduates. This situation has developed because a rapid restructuring in doing business happen when the kids were in college.
The way human activities are structured, progress can seem more like a curse, if comes too fast. The last post, "How can We Handle the Singularity?" discusses some of the problems associated with what will be a tsunami of change and information overload that is immanent.
The New Economy
Life is a complex web of relationships that is often put under stress by progress. The more rapid that progress, the greater the stress. Computers, the internet, Automation, and robotization are rapidly changing the way we live. We are approaching the future along a double exponential curve of progress: if you cannot stand the heat, you will not have time enough to get out of the kitchen.
The stress of progress comes from the way we have evolved our interdependency through the economy. Modern society works as a system of interdependent processes that accommodate to support each other. Think about the ways that wood gets from the forest trees to you as furniture. Here is an example of one aspect.
Just as a person become jet lagged by a sudden change in the length of the day: many well oiled economic processes are upset by sudden change. When one process suddenly becomes obsolete, the people who worked in that area are out of a job, which for them was their means of survival. (In the past, such changes took decades; but now they happen in a short time.) A person out of a job must then scramble to find a new way of making a living. Sometimes an entire community can be left economically stranded by technological progress, leaving them protesting against the change that took away their livelihood. Gone are the days when someone could find just the right job and settle into it for life. Then, the cost of finding just the right job, and that of weathering a period of unemployment, were acceptable costs; but now, if the breaks in employment come too often, and pay is too small, these gaps in employment are heavy burdens. The quickening pace of change, therefore threatens to impose intolerable burdens on the working classes.
English textile workers around 1811 protested that their jobs had become obsolete as a result of improvements in using power and automation in looms (See the portion on Jacquard looms in the previous post, "A History of Digital Computers"). This group of textile workers, called Luddites, smashed the new looms and power equipment. The name luddite has come to mean anyone who is opposed to technological change. Modern progress may fill society with potential Luddites. Where will they come from? Look for the large masses of people rendered unemployed by technological progress as one source. Another source are industries themselves that may become rapidly obsolete. The worse form of Luddites are those who want to manage the human race to death through an international system of controls. Large organizations such as major banks may be such Luddites: they are too big to fail, and demand compensation from governments.
There has been a lot of talk lately about raising the minimum wage. The illusion of doing something for the masses by raising the minimum wage is fostered by the average worker's wages falling toward that minimum in modern times. So many people have incomes at the minimum wage that raising that minimum lifts the income of a large segment of voters, and therefore becomes a politically productive gambit. This move is tantamount to a bailout of the working classes; but it may not be a sustainable.
Even big businesses that oppose the idea of a minimum wage for the lowly public, believe that they are entitled to a guaranteed profit. They lobby government to supply them with bailouts. So the idea of either a minimum in wage, or in profit, exists on both sides of the political spectrum. A large segment of the population is calling for government guarantees. But what guarantees can government do without hitting a major snag?
Who are the Owners of the Future
Jaron Lanier recently wrote a book called, "Who Owns the Future?", in which he confronts various issues related to the loss in the economic position of the common citizen. He takes the view that people own their own information, and currently big business are making a lot of money by outright stealing it. If the courts would take this position, then private property laws would not only protect peoples privacy, but would provide individuals with a means of livelihood even in the approach of the singularity. People could authorize the use of some of their own private information for a fee. One important piece of intellectual property that we are born with is our own DNA, which is unique, except for twins. Automatically, an individual's DNA code should be recognised as private property. No one else would be free to patent it, and if it contained something unique of economic value, then that individual could license its use. Other examples of private information are everything that we post on social media, which now most people give away for free, but some industries find profitable to use.
Computers have progressed to a point where small fractions of a cent can be paid for the use of licensed material to individuals. From the totality of transactions, an active person could derive a substantial income by selling private data. The more active a person would be in generating private information, the larger would be his income.
Instead of benefiting the individual, the advance of technology has concentrated wealth in the hands of progressively fewer individuals. As mankind has progressed and become wealthier, individuals separated progressively from their own means of survival are becoming poorer. Individuals owning less of the means of production, can lead to the impoverishment of the masses of humanity.
The question, which naturally comes up, is who should own future technology? Here we recognize that a great deal of current wealth of individuals has been amassed by the harnessing of the efforts of many people, only a few of which have would up as beneficiaries of those efforts.
A second question is, "where has the great increase in the wealth of mankind come from, and where is it going?" In other words, who are the major contributors, and who are the major beneficiaries of those efforts?
Investment of Public Money
Historically, wealth in the U S came from a lot of private initiative. The wealthy were known as highly successful, self-made men of substance who generated commerce and wealth that benefited a large number of people. This idea, perhaps historically true, may not apply to the post WWII period of rapid technological development when the capture of wealth became more important than its generation.
At the end of the Second World War, the United States spent many tax-payer dollars on research and development (R&D), which had received a strong starting push from captured German scientists and technology. That R&D resulted in great developments, such as rockets, satellites, computer applications, and a variety of electronic devices, which motivated a lively growth in the American economy. Further developments resulted in the Internet. The initial push for the great post-war development came from captured technology.
Possession and Ownership
The wealth generated by the post WWII economy was twofold: (1) workers enjoyed a high income and business owners, high profits; (2) but patents developed by government funding went into private hands. The latter group represented to long term beneficiaries of government funded R&D and captured technology. The beneficiaries may not have been very technically astute, nor particularly hard-working. Actually, this latter group consisted of people who were clever at appropriating the new technology generated by government research. They now live on as a class of owners of "intellectual property".
Intellectual Wealth Gained by invested Public Money, owned by a Few, was transferred Overseas.
In the United States the private ownership of wealth gained by the investment of public money has proved to be a source of long term hardship. This is especially true when the nation's well-being is sold out to foreign countries for private gain.
The great technological advantage that the United States developed from government-sponsored R&D, represented a great heirloom for future generations of Americans, which would continue to generate income for our children and grandchildren. But that technological advantage was given away to those who sold it abroad for personal gain at a price that is much less than its actual value to the homeland.
Outsourcing and Disintermediation
Advances in digital and communication technology have, in a short span of time, reduced the cost of long-distance communication by several orders of magnitude. It has also cut the costs of data processing. This has revolutionized the way business is handled. The result has been a vast ongoing disintermediation.
In the quest for higher profits, which drive CEO salaries higher, companies have found it advantageous to offload as much work offshore where if can be done cheaper, simultaneously avoiding the complexities and restrictions of local laws. As result, a few mega corporations have increased their profits to fantastic levels, but at a great cost to people back home, who served them loyally in the past.
People are laid off over here, so that their work can be done for peanuts over there. Soon, all we have over here is a virtual company that manufactures nothing, but gets all its stuff from factories over there. The benefits of industrial activities are transferred off shore to "absentee landowners" who still live among us.
Gone are the lines of lunchbox carrying workers entering the factory gates. Outsourcing has created a big dislocation in our society that has resulted in mass unemployment. But that creates the big problem over here that all of a sudden there is no way to make a living. Soon many of us will not be able to buy stuff from over there, no matter how cheap it is. And since trading has to happen in a circle, eventually hard times will hit over there as well as here. Meanwhile, the corporate engineers of this financial mess will have made tons of money.
We were told not to worry about outsourcing because it just leaves us freer to train ourselves for higher paying work, which will be more satisfying and profitable anyway. Many unemployed people have retrained themselves for technical work. But it turns out that a lot of technical work can be outsourced as well.
Computer programmers and designers have been laid off here and hired over there. The aerospace industry was practically transferred to China as out-of-work aerospace engineers here drove cabs and airport shuttles. Even fundamental science was sent offshore by the cancellation of the Superconducting Super Collider particle accelerator in Texas, which was replaced by the smaller, Large Hadron Collider under Lake Geneva in France and Switzerland. Now, physicists from the United States commute to Switzerland to participate in particle experiments and analysis over there.
Medical technicians and doctors overseas are even servicing health services over here. Digital technology makes it possible to send x-ray images and a variety of other patient data abroad, where it can be analysed promptly, the results being sent back here overnight. That high level activity benefits the economy over there much more than it does over here. In fact, the economy over here is choking.
This development is having a deep effect on the United States. Sure, we get things cheaper, but we cannot afford to do things differently, because workers here are making less money. They are forced to buy cheap imported goods. This is a huge deflationary force, which the Federal Reserve is quixotically fighting through fiat-money efforts. Meanwhile, the dream is stolen from youth. College is proving to be a poor economic investment, especially for those who borrow money to go for a degree under the expectation of high earnings.
The downside of disintermediation is that companies that own brands no longer make what they peddle. The nameless products are made in some far-off factory in China, and the products are marketed over here under a particular brand. But at the factory, any brand can be placed on items coming off the production line. A manufacturer over there sees that the product made for pennies there gives marketers large profits in dollars under known brand names over here. Further disintermediation is waiting to happen when Chinese manufacturers bypass brands and begin marketing their goods directly over here.
The next step of the process will have producers short circuit current marketing by offering products very similar in quality of known brands directly over the Internet at cheaper prices. The result is that name brands will be undercut. The big box stores will go out of business, as Internet sites in the Far East offer very good stuff at super bargain prices, which are delivered in a very short time by some express, package-delivery services.
The potential for marketing disintermediation, however, does not end here. There is still another way of getting goods to customers faster and cheaper. It is by 3D printing. The plans for the goods are sent electronically to your computer, and the objects are assembled on a 3D printer. The economy of the future promises to be an information driven economy, rather than one driven by the exchange of things.
In an information economy, material goods lose their importance. There will be a dematerialization of products in the future. This will give neoplatonic an added meaning.
Robotics and Automation Destroy Jobs as a Means of Living
In the past, after a financial reverse a person could always work at a menial job. The pay might not have been good, the hours lousy, but it kept the wolf away from the door. Today, when most of our population relies on jobs (many of them menial) to make a living, there are disturbing signs that the low-level job market is about to collapse. A well know fast-food, hamburger chain is experimenting with automating sales, delivery, and preparation of their of sandwiches. You no longer give your order to a pimply faced kid. You punch it into a vending machine, and a whole automated process begins that delivers your orders untouched by human hands. In this way, the fast food restaurant avoids paying even the minimum wage. Technology, in effect, drives the minimum wage to zero.
Robots of course, are another source of dislocation for skilled workers. Where some manufacturing remains, the factories can be made faster, more efficient, and cheaper by using robots. In that case, fewer workers are needed on the assembly line. They are replaced by a few engineers that look over the whole process to make sure that everything runs smoothly. When a glitch appears in the production line, stop the whole system is stopped to give a small crew of engineers access to trouble shoot the problem. Eventually, even this process may become automated, and the software for it written in the Far East.
Off-shoring and Automating Everything
The big question is: "If the high level jobs are off-shored and the low-level jobs replaced by machines, what are people going to do to make a living?" The standard answer given is that the various advancements in technology will create a demand for high-level, technical jobs. A good educational background is required for such work. But you have to ask yourself, how can people train for these jobs if their families are already stretched to the limit working low-level jobs just to get by? Further, the pace of technological advance is accelerating. It takes a clairvoyant, or at least a very lucky person to spend a lot of time, money and energy to train appropriately for some job that may or may not materialize in the future. Look around, the road to technological advance is littered with technological road-kill.
We had many students who were very optimistic about the future. The financed their eduction by using credit. When they graduated, they found that they could not get high-level jobs to pay off college-loans. Although some students have begun to get wise to the situation, too many, like lemmings are marching in the same disastrous direction. There are too many young people in our society paying off expensive college loans by working low-paying jobs. It does not take a college eduction to wait on tables or wash dishes.