“In a chronically leaking boat, energy devoted to changing vessels is more productive than energy devoted to patching leaks.” -Warren Buffett
The Evolution of Labor and Society
Human labor is the effort that a person puts into some process or product that enhances value. The employment of human labor is a principle contributor to the very fabric of human culture and society for as long as known human history. For much of our history labor was not much more than walking around and picking up food off the ground, or hunting animals for meat. Life was simple, and so too, were our social structures and culture. People were nomadic, meaning they did not maintain permanent homes. They were always on the move, and their culture reflected values that enhanced their survival in that environment. Little value was placed on material possessions that could not be carried for extended distances. The concept of ownership, especially of the land, was as foreign to them as being able to fly.
A technological innovation known as agriculture came along about 10,000 years ago, and changed all of that. The nature of labor shifted from walking around picking things up off the ground, to actually having to work the soil to get editable plants to grow. For the first time, we see the modern concept of labor applied. After all, while agriculture had its benefits, it was a lot more hard work than just walking around. People developed the notion that if they put in the effort to get plants to grow then they should reap the benefits of that work. The concept of ‘my work, therefore my reward’, was introduced to the culture. In addition, agriculture permitted people to establish permanence by staying in one place. For the first time in history, they could accumulate stuff. With the accumulation of stuff, people began developing the notion of mine vs. yours, of ownership instead of community property.
Later, the invention of money brought change that permitted people to convert their effort into a transferable medium to facilitated the exchange of goods. With trade made easier, people could specialize in certain types of labor in exchange for money. They no longer had to be a jack-of-all-trades and produce everything they needed. They were able to master a specific skill, convert that skill into money that they then used to obtain the things they needed.
For almost 1,000 years until the 18th century, a socio-economic structure called Feudalism dominated Europe. This system consisted of legal and military obligations between nobility; the kings, lords and vassals. This was a hierarchical system with a King at the head, Dukes, Barons and Knights as vassals; each of them were considered the lord over their own fiefdom (lands). At the very bottom of the social structure were the peasants, and just barely below them were the slaves. A peasant was an indentured servant who worked a lord’s lands in return for just enough food (hopefully) to avoid starvation. Peasants were not the lord’s personal property, as a slave was. Their indentured service tied them to the land. A Lord could grant the land to a new vassal, and the peasants on that land went with it. Once a family indentured themselves to a lord, their indentured service passed from generation to generation; so that it became a multi-generational form of quasi-slavery.
The rise of international trade fueled by an increasing desire for exotic goods, and enabled by a new class of merchants that traveled the world, evolved into what we now call Mercantilism. The theory of Mercantilism was one of protected trade through high tariffs and laws that restricted trade to protect local production. This practice was the source of many conflicts across Europe. With the onset of industrialism, and the ability for a factory to produce large quantities of goods, Mercantilism started to fall apart as a sound economic theory. An alternative was needed that could explain increasingly complex financial interactions.
In the 18th century, David Hume and then later Adam Smith challenged the conventional economic theory of Mercantilism with a radical new idea. Lift trade barriers, and let free trade and competition determine the price of goods. They created the theory of ‘means of production’, profit, wage labor and the accumulation of Capital. Of course, this radical new theory would be called Capitalism. It was all based on the notion of the owner of capital being able to add labor to that capital to convert it into something of higher value. The sale of that capital would take place on an open market, where free competition would create the optimal price for both seller and buyer.
From the perspective of the Capitalist, two factors affect their ability to compete in the market; the cost of capital, and the cost of labor. The cost of capital was considered fixed, since in a free market all competitors could purchase capital at the same price. Therefore, labor was the only factor they had to work with where they could exorcise any control. Coincidently improvements in farming technology meant that fewer farmers were needed to tend the land, creating a huge surplus of ready labor to use in new factories being built. Since most laborers were former peasant farmers (barely better than slaves in social status), they were easily exploited and abused by the first industrialists. In fact, this exploitation and abuse, so reviled a young German philosopher that he took up their cause and attempted to envision a better way to run the world, were workers could not be exploited by the elite class. His solution was drafted in 1848, called The Communist Manifesto. He was Carl Marx.
The Industrial Revolution…is Still Underway
The advent of steam made possible large-scale mining that made iron cheap. Peasant farmers, displaced by improved iron plows found themselves migrating to the city to run the new machines of industry. Thus began the Industrial Revolution. Many will argue that the Industrial Revolution based primarily on steam power, extended mid-way through the 19th century, followed by another Industrial Revolution with the invention of better fuels, and steel. I prefer to think of the Industrial Revolution as one continual period of redefining the meaning of labor that is still taking place today. The Industrial Revolution is about the discovery that machines can be used to harness energy to do work that used to be the sole domain of biologic muscle. Initially these machines needed human operators to run them, and so there was a temporary transition from farmer to machine operator, however it did not take long to discover ways to automate the machines so that less and less work was required from a human operator.
In the early 19th century, many people in England became very successful as highly skilled textile workers, weaving the fabrics that the world needed to make clothing. It was a trade that took a lifetime to master, and could provide a nice lifestyle to those who did. Then along came progress, new technology in the form of a wide frame loom than could be operated by unskilled labor. This was very profitable and a huge boon for the textile mills. As you can probably imagine, those weavers who spent a lifetime learning their trade and who had families to support were suddenly being replaced by technology, were not very happy. They revolted by attacking textile mills and smashing the new looms. They would come to be called the Luddites, after General Ned Ludd. People do not like change, especially when it upsets their established way of life. The term Luddite, or Neo-Luddite is still used today to refer to anyone that objects to the progress of technology.
Since the industrial revolution began several hundred years ago, the transition period where people were required to help run the machines eventually resulted in the workers ability to use that requirement as bargaining leverage to demand that they participate in the profits realized from improving productivity. The owners of capital had no choice, since the machines could not yet run themselves. For the first time in world history, the average citizen was elevated to a lifestyle that would have been the envy of kings in the previous century.
The capitalists were determined though to improve profits any way they could. If they could not control the workers wage, then they would have to discover ways to eliminate the worker, thus reducing the labor component of production. Discovering ways to automate the machine to do work with less input of human labor became a primary goal of the capitalist. Over time, most people came to accept automation as the price of progress. It seemed that every time machine productivity increased, and workers were displaced, that there was enough demand in new markets to employ the displaced workers. At least that is how it seemed while the United States enjoyed being the worlds primary manufacturer of goods after World War II.
Disappearing Labor and the Death of the Middle Class
With the rise of the industrial revolution came the rise of the laborer. The laborer is the person who ran the machines, who through sweat and hard work made things, and greased the wheels of industry. Human labor was indispensable and a valuable commodity. In fact human labor was inextricably linked to production. Every economic theory whether it is classical, neo-classical, Keynesian, or Marxism all rely heavily on linking labor directly to production.
Early in the history of Capitalism, the laborer was little more than an indentured servant. It was never envisioned that they would someday actually be able to buy the goods they produced. Their role was clearly defined as simply a means to an end, a necessary ingredient in the production of goods. Following the Great Depression, an interesting phenomenon was discovered. The average laborer could actually contribute to the economy as a consumer of goods, thereby creating demand for more production. More production required more labor, which became more consumption and a golden age of increasing consumption and growth was born. For most of the mid-section of the 20th century the demand for labor remained high, therefore, the laborer was able to demand that companies share most of the productivity gains realized from automation.
For the past 30 years, the United States has seen a huge shift in the labor market. The manufacturing sector has continued its push to find new ways to automate the machines. This was fine following WWII, as the United States was the words manufacturer, and had enough growth to offset gains in automation. This began to change however as other nations recovered from the war and rebuilt new factories that were capable of competing with the best factories in the United States. In the U.S. this translated into slower growth beginning in the 60’s. However, automation continued to take its toll on the workforce. This effectively meant that there was a growing surplus of labor. As any economics student knows, whenever there is a surplus of something in the market, prices drop. However, many wages could not fluctuate with the real market demand because of Union contracts that were established while the laborer was in high demand. What resulted was a war on labor unions to disband wage contracts. In addition, where possible, companies slowed down wage growth. They continued to innovate and automate, but wages no longer shared in the growing productivity. The capitalists for the most part were not conspiring to destroy the middle-class, those productivity gains were needed to continue competing with foreign producers who often had very low labor cost.
As many laborers found their jobs disappearing, they increasingly had to face the prospect of changing careers and making less money. American families learned to cope with a declining wage. They found extra members of the family able to go to work and add to the family income. The long-term effect of this copping mechanism however did not solve the problem, in fact in many ways the problem started getting worse. There were now more workers in the marketplace, putting further downward pressure on wages. Many families developed a new copping mechanism. If they could not make enough money to live the lifestyle that they had expected to have, they could borrow money to buy that lifestyle. More and more families started to rely on debt as a way to keep up with the Jones.
What became of the laborer? Increasingly the laborer became rare, just as the farmer became rare in the previous century. The transition in labor never came to completion during the first Industrial Revolution that ended around 1850; it never found a state of equilibrium and stabilized. That is why I think we are still in the midst of the revolution.
There is one factor involved with the advancement of technology that goes unseen by most, because we see thing in the present; the here and now. As good as our minds are at analysis, we have a difficult time putting things into the proper context, or seeing anything other than simple trends:
If I am a fisherman, and I catch a fish, I can sell you that fish for a sum of money. Then you have a fish and I have some money. We both still have the same value. I can now go catch another fish and repeat that process. However, technology is not based on labor, as catching a fish is. Technology represents information. If I know something, I can sell you that knowledge for some money. Now you have knowledge, and I have money, but I still have the knowledge also.
While fishing is a zero sum game, technology is a plus sum game. More value exists after every transaction. This results not in the linier growth we would see from an industrious fisherman, but in an exponential growth curve. Previous gains are added back on top of future gains like compound interest. They build on each other. If you look at a small section of an exponential curve it does resemble a linear curve, which is why so many people are caught unaware of the change when that curve starts to accelerate.
One of my favorite stories is the Human Genome project. After the first seven years, they had only completed decoding one percent of the human genome. Many scientists grew frustrated at the prospect and cost of taking another 700 years to complete the project. Ray Kurzweil told them they were on track to complete the project in another seven years. Of course, no one believed him. How could they finish in the next 7 years when the first seven years only saw one percent of the project finished. He explained that the technology was doubling every year. They were only seven doublings away from turning one percent into one hundred percent. As it turned out Ray was not only correct, but the project finished a little ahead of that seven-year prediction. The same kind of exponential growth is behind the computer chip with the now famous Moors’ Law.
Technologic innovation and machine automation is now happening at a pace that is becoming hard to ignore. At first, the job market was able to keep up by creating high tech jobs and expanding the service industry to replace lost manufacturing jobs. Recently, the pace with which jobs are being replaced by machines has accelerated as the pressures of global competition and recession have required improvements in production efficiency to keep cost down. Many companies have a hard time knowingly replacing worker with automation outright, especially smaller companies where the owner may be closer to the workers and actually feel bad about laying people off. However, an economic downturn creates opportunity for those companies. They are relieved from guilt because the blame for layoffs is the fault of the recession. As the economy picks back up, and demand returns, they have a choice; rehire employees, or upgrade their machines and processes to automate the job. At this stage, it is much easier to invest in automation, especially since interest rates are at an all-time low. As far as losing the purchasing power of the American consumer, foreign emerging markets have stepped up to create the demand. The American consumer is not required to provide a demand as they once were; International markets have diversified consumption.
There is a problem though that few people are willing to address. The problem is that many of the dynamics of the American laborer are on the fast track in developing countries. Eventually these countries will start having the same problem the U.S. started experiencing. More developed countries in Europe and Japan already are experiencing problems. The only way to sustain perpetual growth is through increasing debt. The creation of debt however has an end game. There comes a time when the accumulation of debt cannot be sustained, as we saw in 2008 when the debt laden real estate market crashed. America absorbed the bail out of banks by printing more money. However, this was not an option in Europe with everyone tied to the Euro. Each country had to borrow a lot of money to bail out their banks to prevent them from failing. Now, that huge government debt has grown to the point that those countries are struggling with being able to make the payments. The very same banks that the governments bailed out for making bad investments are now refusing to lend those governments more money. This debt trend will spread to developing countries as the global market for labor starts to feel the pinch created by technology.
The Industrial Revolution…where will the wheel stop.
The next several decades should see the Industrial Revolution finally come to an end. In that period we will see the introduction of new technologies that are so revolutionary, that they will alter the very fabric of our society in ways that are hard to grasp. Even if I am off on the periods listed below, these statements will all be true in the very near future. Three technologies will cause the majority of job losses; 3D printers, Robotics and Artificial General Intelligence.
The invention of 3D printers will redefine the manufacturing and Construction industry. Initially we will see resurgence in local manufacturing with small fabrication shops. These will not be traditional manufacturing jobs however. There will be some growth in technology jobs and 3D design jobs, especially artists. We will see the biggest decline in foreign manufacturing markets, and continued local decline in traditional manufacturing jobs. Expect to see almost all remaining manufacturing jobs disappear with 10 to 15 years.
Most 3D printers today work with only one material, plastic, metal, glass or ceramic, even wood. However, that limitation will be overcome in the very near future, as newer printers will be able to incorporate multiple materials into a single product. When that is achieved, we will have the equivalent of the ‘Star Trek’ replicator, able to produce anything on demand. The impact on manufacturing will be huge. With the complete elimination of labor, manufacturing will once again transition to a local possibly even personal endeavor.
We still need people to assemble larger and more complex manufactured items for a short time; such as appliances and aircraft. However, it will not take long with the new robotics systems under development, to replace all manufacturing labor.
OK, we have been bleeding manufacturing jobs for years now, but at least we still have a strong service sector…right? Wrong! The development of more intelligent Interactive Voice Response (IVR), Intelligent Agent systems in the next few years will make a big dent in administrative, secretarial, and customer service jobs. Apples’ Siri is a sign of things to come. Expect a 50% reduction of these jobs the next ten years; by twenty years, we could see almost all service jobs disappear.
Service jobs are being hit just as manufacturing was around 30 to 40 years ago, but they will catch up rapidly. Do you use an ATM, on line banking or a drive-up automated teller instead of a live bank teller? Have you ever been to a grocery store with automated checkout lines instead of a live checkout person? Have ever called a company and had a computer answer the phone. If you answered yes, then you have witnessed the beginning-of-the-end of our service industry.
In the last few years, voice response systems have improved to the point that they can understand anyone’s voice, even with different accents and languages. Instead of the rather dumb list of “Press 1 for…” options, they are starting to ask verbal questions that require answers that are more complex. In just a few more years, these systems will all have what are called intelligent agents. These are not truly smart Artificial Intelligence (AI) yet, but they know how to have a conversation, they will be experts in a specific area and be able ask and answer questions, and even look up information from a database. Instead of giving a menu list of options, the new system will simply say; “Hello, XYZ Company, How may I help you.” I would not count on Customer Service as a long-term profession.
In the near future, when someone calls your office, your phone will answer itself; it will ask who is calling and what the call is regarding. If it is from someone that you have told the phone you want to speak to, it will contact you wherever you happen to be and ask you if you would like to accept the call. When your phone is not busy answering incoming calls, it may be making outgoing sales calls for you, sending email reminders to people about their appointment, ordering flowers for you wife’s birthday, or searching the web for news on a topic of interest to you. If your occupation is a receptionist, call center operator, or administrative office assistant I would be worried.
We talked about the 3D printer being used to manufacture products; however, it is also being developed for construction. That is right. The first commercial unit able to construct an entire small building is expected to be ready by 2013. Taking exponential growth into consideration you can probably expect to see these systems used on large industrial and commercial projects such as skyscrapers by the end of this decade.
Robots built today have the manual dexterity to do general repair work. In fact, there is one called Robonaut, already on the job at the International Space Station. Robonaut can do repairs in the vacuum of space without putting an astronaut at risk. Other robots are performing delicate surgery that is physically impossible for a surgeon alone to do. Of course, a skilled person operates these systems by remote control. The only element keeping these systems from being fully autonomous is a highly skilled brain telling it what to do. Those brains are coming. Before 2020 gets here, a super computer will exist that contains computational power equal to the human brain. Within seven to eight years after that, a typical desktop computer will be just as powerful. The software of Artificial General Intelligence will not be far behind.
These types of devices will come down in cost as there use is accelerated until they are filling every type of repair position; automotive, HVAC, general office and home maintenance, and everything in between.
Surely doctors, lawyers and the computer specialists who will create the robots and artificial Intelligence will be safe…right? For a little while yes, but in the end no, even these jobs are on the block. This will take a little longer because these highly trained professionals rely much more on what we call general intelligence. They quite often have to pull in knowledge and understanding from multiple areas and disciplines that are each very complex. A true Artificial General Intelligence (AGI) that can reason at the level of a person probably will not emerge for another twenty to twenty-five years.
An AI however, does not have to be conscious and intelligent at the human level before it starts making an impact on labor. Semi-intelligent systems are being developed today that will be able to diagnose a patients illness, in many cases more accurately than a human doctor could. Even before reaching full human intelligence, AI systems will be used to make human professionals more productive by taking over some of their workload. That increased productivity equates to a need for fewer professionals.
What is a Person to do?
Wow, so does that mean that we are all out of a job in 30 years? How can that be, there must be work so that we can earn a living, to pay our bills and debts and buy stuff. How will our society function? What good will all that technology be if we are all out of work? We will all be living in the land of plenty, but no one will be able get any of it…or will they?
Current Capitalist economic theory accounts for a balance being achieved between supply and demand. It would appear that with all this technology we might have an abundance of supply. In fact a number of well know scientists and experts are calling for just that. In Feruary of 2012 Peter Diamandis and Steven Kotler published ‘Abundance: The future is better than you think’. Another book by famed scientist and professor at the Oxford Martin School, Eric Drexler has announced a book due out later in 2012 which will be called ‘Radical Abundance’. Both books speak about the ability for technology in the very near future, being able to increase productivity so much that we will be able to create an abundance of anything we could ever want; the age of scarcity is almost over they claim.
I cannot speak about Dr. Drexler book yet because it has not been published. The first book though, by Diamandis and Kotler, expects new technology to usher in a golden age of innovation and economic growth. Unfortunately, they are not schooled in historical socio-economics and have a naïve attitude about how all this will play out. The potential for abundance of resources will be there, of that I am certain. What I do not have faith in, is our current socio-economic institutions; banks, corporations, the Federal Reserve and the government to enable that abundance to be shared with all of humanity. If current trends are any indication, wealth will continue to pool at the top crating new age of Feudalism. The bulk of humanity indentured to a few elite families.
Dropping employment will lead to declining demand. Declining demand can be made up in developing countries for a little while, but they too will go bust eventually, especially after they start to loose manufacturing to 3D printer technology. Expect increased civil unrest around the world as unemployment continues to climb, even in the U.S. At some time, we will reach a tipping point. I cannot say when that will happen, but the population after tasting freedom is not going to go easily back in the cage. Either the government will have to get extremely repressive and brutal (most likely scenario), or they will have to concede that the system is failing and be open to change (do not hold your breath). Either way, it will probably end up in a violent transformation. But what should we do then on the other side of that transformation. If we must endure a lot of pain to gain something, we want to make sure that it is worth it.
The Great Reformation
When society no longer has any money, just create a new society that does not need any. – Me
When whole institutions go through radical change we refer to that change as a reformation; meaning the old institution is reformed into something new. Reformations can be bloody or peaceful; they can occur because of a revolution, or out of a gradually changing culture and needs of a society. A famous reformation occurred when a group of people broke from the Catholic Church and formed their own religion. It became known as the Protestant Reformation.
As you read above, it is obvious that our capitalist society depends on laborers to supply a middle class of consumers and money to buy the goods being produced. It has lead Capitalism to be a great success in the last few hundred years. However, if you remove the middle class as a consumer, then there will be no support for production; there will be no one to buy the goods being produced. We have all watched the news in awe, as the reports about unemployment are bleak, while at the same time companies are reporting record profits. This is because they have improved productivity with automation. They do not need as many workers to make the same amount of goods or provide the same services. The catch phrase of this recession has been, “learning to do more with less.”
Declining wages though, means decreasing revenue from taxes and more dependence on public assistance. Public debt will then keep growing out of control, quickly becoming unsustainable. As witnessed in Europe, austerity (cutting back on government spending for social programs) has a disastrous negative effect. Nevertheless, people get desperate at times like these, and cling to their old institutions out of fear. At that point, nothing short of a very large reset button can correct the course. It is as if we are all ridding on the Titanic. There is a very large ice burg dead ahead, and there is no time to change course. It is going to crash. We have a choice: we can grit our teeth, hold on and pray for salvation, or we get out the lifeboats and abandon this sinking ship of Capitalism. However, where would we go? What could possibly work better than Capitalism, especially since we will all be out of work and have no money or power? Certainly, not Soviet Communism or Fascism; they both have serious flaws and would be problematic.
The sixty four million dollar question then is ‘If not Capitalism, what?’ I have pondered that question for years. In previous articles, I have proposed changes such as reforming the banks and health care institutions into non-profit or state run businesses, and a new democratized global government. However, those solutions are simply Band-Aids covering deep lacerations in a very sick patient. The problem is that even with those changes we will be unable to account for the mass and rapid transition to an economy that requires no input of labor, no wages, and no taxes. Something more must be done.
What a conundrum we find ourselves in; the ability for society to produce unlimited goods with no input of labor results in the mass starvation of most of the world’s population, when the opposite should have been true. We should be reaping the rewards of increased productivity and an overabundance of the material goods that we equate with a high quality of life.
Recently I watched a video produced by a 95-year-old inventor/futurist/social engineer by the name of Jacque Fresco. Jacque has been thinking about this problem far longer than I have; long before anyone else even saw the problem on the horizon. He has come up with a solution that is very elegant, though radical.
Jacque Fresco and the Venus Project
Build it and they will come.
As part inventor, designer, architect and futurist Jacque Fresco has spent his life solving difficult problems by thinking outside the box. Most notably, he has been able to transcend culture and existing dogma to offer novel and often revolutionary ways to solve some very old problems. In 1975 he created the Venus Project with the lofty goal of completely redesigning our society in such a way as to maximize the use of technology to eliminate hunger, poverty, corruption, abuse of power, and war.
Jacque’s vision is to create a classless society where technology serves all humankind. The plan would be to eliminate money, and replace it instead with an economy based on resources. All resources would be the shared property of every person on Earth. Computers and automation that have no desire for profit or power would replace our market economy and provide for a new abundance to everyone. Since there is no money, people do not get paid for any work they do, nor do they need to pay for the things they use or do. Everything is free. People will not be wage slaves to an economy that chews them up and spits them out. People will be free from drudgery, and able to pursue whatever they find rewarding. You might decide to become a scientist and do research, or express yourself with art, or music, or simply travel the world and learn about its wonderful people. Alternatively, you could spend your years in school satisfying your thirst for knowledge, or perhaps you enjoy spending your time in spiritual meditation, convening with God. It is your life, you choose; anything you want to do.
Wait just a minute; I have heard this before; they try to do that with Communism. No, it is not even similar. Communism was a currency-based economy where people were exploited for their labor. Power was concentrated in the hands of a few elite, and therefore it maintained the class divisions that Marx sought to eradicate, and was custom built for the worst kind of totalitarian corruption. Marx would have turned over in his grave if he had witnessed how is ideas were perverted. If you remove money from the equation, and place no people in a position of power where they might be tempted to become corrupt, then no person can amass enough power to exert their will over the population. This new world will be free of money that corrupts, free of people who would enslave you, and perhaps best of all, free of Politian’s who would tell you how to live.
Most crime will disappear; why would anyone steal, when they can obtain anything they want at no cost. If we further decriminalize those crimes that do not cause harm, that exist only as a means of forcing people to conform to a social norm, then there would be very few criminals, and no prisons. We will probably also find that when people are raised in an environment free from stress and all the factors that have created dysfunctional families, that children will grow up with fewer psychological disorders that may lead to unacceptable, antisocial behavior as an adult. After all, we are all products of our environment.
There will be no need for war when everyone has what they need. No need for police when there is no crime, or prisons when there are no criminals. Instead of laws that try to enforce a certain behavior, the structure of society will bring that behavior out in a natural way. No one is born evil; for someone to become evil, they first have to live in a dysfunctional society.
I do a disservice the Jacque’s vision by trying to describe every aspect in this short article. Much more information is available on The Venus Project web site located here: http://www.thevenusproject.com/
I’m not the only person that sees this comming; other highly respected people are starting to join the fray; like Thomas Frey:
2 Billion Jobs to Disappear by 2030
In the next article, I will go into much more detail about how a Resource Based Economy would actually function.
Keep reading: Change is the Future – Part II