Internet-driven unemployment and the future of capitalism

sid waddell

Throughout modern economic history, certainly since the industrial revolution, automation has increased the efficiency of manufacturing processes by getting a machine to do the job of a human. This has enabled our modern way of life to develop. I don’t think anybody would seriously argue that this was anything other than a good thing.

As automation kept developing, people gradually began to move out of agriculture and manufacturing as their jobs became obsolete. Modern economies became more and more service based.

The internet has effectively ushered in the next stage in the automation process – the drive to automate the service industry. Whole sectors face a bleak future, none more so than the bricks and mortar retail shop. Record shops, bookshops, clothes shops and lots besides are being made effectively redundant because people choose to do their business via computer than have to travel and use up their time. Every kind of service industry seems to be applying a cut, cut, cut philosophy. Much of this is undoubtedly due to jobs being made obsolete due to technology, namely internet-based technology.

The logical goal of capitalism is to cut costs as much as possible by eliminating as many jobs as possible. Why pay for workers you don’t need?

But what is the logical conclusion of this? How much unemployment will this create in the long run? Will internet-driven unemployment be a contributor to capitalism effectively eating itself? Capitalism requires consumers. But if more and more people are being made unemployed, how can they be consumers? Is there a post-tertiary economy for masses of people in a world with an exploding population to move into? Because if there isn’t, the only conclusion I can come to is that capitalism is fecked.

Thoughts?

Mance Rayder

I think the internet ushers in globalization. I cant say specifically where it comes in but I think capitalism for the most part (with modern technology being the driving force) has largely shaped up like the following:

It used to be that society was made up of a 'class' system. You had the working classes farming and doing menial but necessary jobs , and the upper classes running the businesses and engaging in higher levels of decision making and more specialized work.

Now a lot of the jobs traditionally held by the 'working' class have been shipped off to developing countries. Farming and manufacturing are taking place there leaving the developed West with a healthy upper class of business men/women, specialist workers (Engineers, doctors etc), diplomats etc etc.

The working class however, become economically displaced, many ending up on welfare. So we have this trickle down effect. The rich run empires of cheap foreign labor, the middle class work for them and the working class work in peripheral services like retail etc. Only there isn't enough peripheral jobs so the surplus working class live on welfare payed for by taxpayers.

Well that's one version of things. Personally I think some nations are beginning to cop on and are beginning to try to readdress this balance.

RichardAnd

Well, the argument often given when this topic is raised is that new technology creates new jobs to replace the ones rendered obsolete. This is, in my opinion at least, inaccurate and deceptively simple. If a person looses their job, I doubt that they will take much comfort that another job (for which they are probably unfit for) has been created. Of course, that's assuming another job is created, let me give an example.

Until recently, I worked for a small software company. One of the company's new products was an administration program that was aimed at drastically reducing paper work needed for transactions in the pharma industry. It was deployed in a company who were delighted at the results because it allowed them to make three administrators redundant, saving them more money then the cost of the application. Our company didn't hire anyone else as part of that project and the company we sold it to let three people go, where are the new jobs?

Well, the answer is that the money freed up by letting the admin workers go could be used to hire people in other areas. However, it could equally be used for any number of things that wouldn't create a single job so regardless of any theoretical jobs, the hard fact is that three people lost their job and no one gained one directly.

To me, it seems that technology is advancing very quickly and many, many jobs are being put at risk. Companies are obsessed with reducing staff costs and automation is a huge industry in itself. It just seems that this is totally the wrong outcome. Technology should be making life easier and happier for everyone.

longhalloween

I think retail is on a slippery slope. Although the effects of the recession played a major part in closures in the last few years a significant amount of business was lost to online retailers.

I'd say that in 10 years the average main street in many Irish towns is going to be a lot smaller. The only shops that will survive are those who sell products that consumers either need immediately, need to try-before-you-buy or large, bulky items that are expensive or impractical to post.

jimmycrackcorm

Many, if not most, of today's jobs did not exist 100 years ago. It's fair to say that job diversification will occur, especially in service areas. Capitalism will survive as it is able to rapidly adapt to opportunities.

Suryavarman

People have infinite wants and desires. Labour is a finite resource. As long as workers are willing to adapt to new circumstances in the labour market then high unemployment is impossible in the long run.

sid waddell

jimmycrackcorm wrote: »

Many, if not most, of today's jobs did not exist 100 years ago. It's fair to say that job diversification will occur, especially in service areas. Capitalism will survive as it is able to rapidly adapt to opportunities.

Suryavarman wrote: »

People have infinite wants and desires. Labour is a finite resource. As long as workers are willing to adapt to new circumstances in the labour market then high unemployment is impossible in the long run.

Certainly I think it's fair to say that new jobs that we haven't even imagined will be developed.

But is it fair to say that as automation keeps developing, there will be enough jobs to go round for the labour force? I don't know. It isn't the case now, so with ever increasing automation which will do away with the need for many of the jobs there is still a need for today, why would it be the case in the future?

Labour isn't finite in regard to jobs available now. It is in surplus. Keynes showed that markets don't reach equilibrium at full employment.

There is mass unemployment in many places around the world. Certainly I think 50% youth unemployment in Spain and Greece deserves to be called mass unemployment. Worldwide, population is increasing exponentially. It reached 6 billion in 1986, 8 billion last October. Even if the rate of worldwide unemployment stayed the same, the actual number gets ever greater. And the resources of the planet are finite.

We need automation, the logical goal of which is to eliminate jobs, to in fact increase them, or for new kinds of jobs to take up the slack, and for that cycle to happen in perpetuity. Will that happen? Who knows, maybe it will, but I'm not so sure.

SupaNova

RichardAnd wrote: »

Well, the argument often given when this topic is raised is that new technology creates new jobs to replace the ones rendered obsolete. This is, in my opinion at least, inaccurate and deceptively simple. If a person looses their job, I doubt that they will take much comfort that another job (for which they are probably unfit for) has been created. Of course, that's assuming another job is created, let me give an example.

It's not about the person losing their job taking comfort in the fact that another may be created. I'm not even sure why this gets raised as a point. The candlestick makers may not have taken comfort when they were put out of business by the light-bulb, or the cart maker by the automobile industry, but that is not much of an argument against those advances.

Until recently, I worked for a small software company. One of the company's new products was an administration program that was aimed at drastically reducing paper work needed for transactions in the pharma industry. It was deployed in a company who were delighted at the results because it allowed them to make three administrators redundant, saving them more money then the cost of the application. Our company didn't hire anyone else as part of that project and the company we sold it to let three people go, where are the new jobs?

No new job has to be created directly. If companies make larger profits because of savings through automation and don't pass on the benefits to their customers(who would then have more to spend elsewhere driving employment elsewhere), attracted by the large profits more people will look to provide that service and out-compete them, and then the benefits eventually are passed on to the consumers.

Black Swan

MOD COMMENT:
This OP appeared to have more content that pertained to economics than politics, consequently, it has been moved to the Economics forum. It has been moved LOCKED, so that the destination mods may review it for appropriateness.

andrew

Black Swan wrote: »

MOD COMMENT:
This OP appeared to have more content that pertained to economics than politics, consequently, it has been moved to the Economics forum. It has been moved LOCKED, so that the destination mods may review it for appropriateness.

Thread Unlocked

CillianL

Manufacturing may actually come back to the west, but there'll be few to no jobs for the poor Joe Soap.

See 'Lights out Manufacturing'.

The ideal now in automation is to make a factory so efficient that the lights can be turned off as the robots and lines are perfectly synchronised and set up such that no-one needs to be on the floor to keep it all together.
Why would you need to pay the electricity bill for lights then?
No staff overheads?
The élites strike again!

krd

SupaNova wrote: »

The candlestick makers may not have taken comfort when they were put out of business by the light-bulb, or the cart maker by the automobile industry, but that is not much of an argument against those advances.

But the cart makers were not put out of business by the automobile industry.

The first cars, were just horse carts with petrol engines added - look at the old photographs. Then as time moved on, cars were more mass produced. The cart maker became a car dealer. The guy using a horse and cart for deliveries bought a petrol engine truck.

So no one, apart from the horses, was really displaced. The car is the perfect example of a technological advancement that improved everyone's lives and caused little displacement. People were able to transport things and people much faster, more efficiently and the extra productivity translated into real well being.

Automation, or using machines doesn't necessarily displace people negatively. Before modern agriculture it took virtually the entire labour of one person to feed one person. The numbers of people needed in agriculture is shrinking all the time. Whereas in the past a farmer may have only been able to look after a dozen chickens, now one person can over see 100,000 chickens from the egg to the supermarket shelf. But this has only been possible through modern technology. Transport, refrigeration etc And that's what the displaced people worked on transport, refrigeration etc. And many were happy to be displaced from the land.

There's a joke:the factory of the future will only employ one man, and one dog. And the dogs job will be to make sure the man doesn't touch any of the machinery.

It's not really true. You'll always need at least one person to press a button. Automation generally means one person can do more things - can produce more. And many products can only be produced by machine.