Robots Won't Kill Capitalism, They'll Rev It Up
Yanis Varoufakis resigned as finance minister of Greece after only six months on the job, following what he described as his own “complete failure” to negotiate a resolution of his country’s debts. A little over two years later, he has restored sufficient confidence in his views to predict the end of capitalism.
Varoufakis told an audience at University College London a few days ago that large technology corporations and artificial intelligence will cause capitalism to undermine itself, with technology eliminating more jobs than it creates. As an example, he cited Google, the search engine giant that after less than 20 years in business employs over 60,000 people, up more than 10 percent from 2015.
The growth of Google’s workforce seems to undermine the notion that technology is actually eliminating more jobs than it creates. What we are seeing is not so much job reduction as job churn. As new technologies eliminate jobs, they create opportunities for new ones to be created. When automation eliminates jobs, it brings down costs and thus prices. By increasing the real wages of consumers, it frees up cash to be spent on other goods and services – creating new jobs, often in new industries. Rather than go idle, labor is employed to provide goods and services consumers never had access to before.
New technologies often create entire new categories of jobs. Without computers, there would be no computer programmers. For that matter, without modern plumbing, there would be no plumbers. Has this process of job churn ground to a halt? It certainly doesn’t seem so. A Deloitte study found that new technologies eliminated 800,000 low-skilled jobs in the United Kingdom. But they also led to the creation of 3.5 million new jobs – jobs that paid on average nearly $13,000 more per year than the ones that were shed.
Varoufakis argues that capitalism will undermine itself by producing technologies that make private-sector production obsolete. But in fact, technologies can never make human beings and their talents obsolete. When technologies take care of some of our needs, they just give us the opportunity to pursue others. Only human beings can conceptualize and develop most of them, because only human beings understand human desires and needs.
For hundreds of years now, we have been eliminating jobs and utilizing the freed-up human capital to create others. One hundred and fifty years ago, about half of all Americans worked the farms. But there were no oncologists. Today, only about 2 percent of Americans make their living farming, but there are over 10,000 oncologists. There were lots more people working for the railroads a century ago, but there were also no software engineers, special education teachers, or aerobics instructors. The jobs individuals perform reflect the tasks a society wishes to see pursued. That in turn reflects the resources available to pursue them, including physical and human capital.
Every job that exists today was at one time entirely new, and we created all of them for the same reason – to meet needs that were heretofore unmet, or to meet them in different ways. We have been able to mine new sources of wealth only because we found new ways of tapping existing ones. Does technology modernize the production methodology sufficiently to reduce the number of people needed to make a car? Yes, but none of the jobs in the auto industry existed at all until a little more than a century ago. When the motorized vehicle was invented, it displaced the jobs of people making horseless carriages. It also made us far more mobile. The jobs that were generated on auto assembly lines were not created to give workers a chance to earn a living. They were created to make the cars that give us mobility. The jobs were a by-product.
Asked what will replace capitalism as a result of the elimination of jobs, Varoufakis is quite honest, saying simply: “I have no idea.”
And no one has any idea what jobs tomorrow will replace those that we perform today. Who would have forecast new jobs like website designers, apps developers and Uber drivers 25 years ago, when most of us had not heard of the internet and smart phones had yet to be developed? As long as we have needs to meet, people will find new ways of meeting them. And that’s what jobs are – ways of meeting needs.