The United States economy has been growing more slowly than it used to. By itself, this wouldn’t be such a big deal — for many decades our economy has been doing well enough that, if we chose to, everybody could be pretty well off.
Unfortunately, we have massive spending obligations from our ill-designed, pyramid-scheme-esque Medicare program (which very clearly cannot be sustainable in a society that keeps investing in costly biomedical innovations — as time goes on we’ll have the ability to keep people alive longer and longer, at higher and higher cost — and refuses to discuss how long people should expect to live). And we have dramatically unequal income distribution, such that many people are struggling to survive amidst abject poverty.
My description probably makes clear that I think the underlying problem is philosophical, and that the optimal solution is a change in policy. But, ha, fat chance! It’s hard to make changes if you need a senatorial supermajority for any meaningful decision.
So economists are betting on technological change to save us. The underlying idea here is sound: new technologies can make the world better. Modern city dwellers would be horrified to wake up to the sights and smells of the 1800s. Particularly relevant to the problems described above is the fact that new technologies often increase productivity. Here’s a passage from Steven Rattner’s article in the New York Times Sunday Book Review:
Without increases in efficiency, workers can’t get paid more and the economy can’t expand. And of late, productivity growth has been woefully light.
But achieving reasonable growth is well within our grasp. Not everything that can be invented has been invented. The countless hours that would be saved by a single, now imaginable idea — driverless cars and trucks — could alone reverse disappointing productivity figures.
In the United States, there are something like 3.5 million truck drivers. Shipping costs are currently higher than they would be if all those truck drivers were replaced by robots. Robots work more cheaply than humans.
In addition to lowering shipping costs, though, a switch from human to robot truck drivers would make the world worse. Maybe this is somewhat counterintuitive. Everyone who buys things on the internet would have to pay less money! How could that possibly be worse??
Consumers would pay slightly less money. But truck drivers would earn much less money, and the owners of shipping companies would earn much more money. Currently the shipping company has to share revenue between its owners and the humans employed to drive trucks, but robots don’t ask for a cut.
Same with many other industries. News organizations will become more productive as more articles are written by algorithms instead of humans. Even an algorithm that can’t pass the Turing test could conduct a reasonable telephone interview. After this shift, consumers will have access to news more cheaply, the owners of major news organizations will earn more money, and journalists will get canned.
Legal work, software development, entry-level bench jobs at pharmaceutical companies — robots can (& soon will) be able to do all of that. Which is great news for potential productivity. Robots, I’ve heard, are hard workers.
All those changes will coincide with a shift in earnings away from the people doing that work, toward the people who own robots. An unfortunate consequence of this shift will be to drive net spending down. Capital owners are wealthier than their employees. They spend a smaller fraction of their income.
I do think that a lot of people in the U.S. spend too much money. I think it wouldn’t be so bad if fewer snazzy gadgets were bought and sold. But it’d take a pretty mean-spirited Luddite to think that the best way to accomplish this is for everybody’s income to dry up. I’d much rather see people want to look at & listen to the world around them instead of staring at tiny screens with plastic beads shoved in their ears. Choosing not to buy a gadget is empowering. Being broke feels crummy.
Driverless cars & trucks, article-writing algorithms, pipetting robots… all these technologies will increase potential productivity. But by exacerbating the income equality between workers (now unemployed) and capital owners (earning even more money now that they’ve bought a legion of robots), demand will fall. The net outcome of new productivity-enhancing technologies could very well be even slower growth.