Posts Tagged ‘technology’

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Special mention

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Back in June, Neil Irwin wrote that he couldn’t find enough synonyms for “good”  to adequately describe the jobs numbers.

I have the opposite problem. I’ve tried every word I could come up with—including “lopsided,” “highly skewed,” and “grotesquely unequal“—to describe how “bad” this recovery has been, especially for workers.

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Maybe readers can come up with better adjectives to illustrate the sorry plight of Americans workers since the Second Great Depression began—something that captures, for example, the precipitous decline in the labor share during the past decade (from 103.3 in the first quarter of 2008 to 97.1 in the first quarter of 2018, with 2009 equal to 100).*

But perhaps there’s a different approach. Just run the numbers and report the results. That’s what the Directorate for Employment, Labour, and Social Affairs seem to have done in compiling the latest OECD Employment Outlook 2018. Here’s their summary:

For the first time since the onset of the global financial crisis in 2008, there are more people with a job in the OECD area than before the crisis. Unemployment rates are below, or close to, pre-crisis levels in almost all countries. . .

Yet, wage growth is still missing in action. . .

Even more worrisome, this unprecedented wage stagnation is not evenly distributed across workers. Real labour incomes of the top 1% of income earners have increased much faster than those of median full-time workers in recent years, reinforcing a long-standing trend. This, in turn, is contributing to a growing dissatisfaction by many about the nature, if not the strength, of the recovery: while jobs are finally back, only some fortunate few at the top are also enjoying improvements in earnings and job quality.

Exactly! The number of jobs has gone up and unemployment rates have fallen—and workers are still being left behind. That’s because wage growth “is still missing in action.”

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Workers’ wages have been stagnant for the past decade across the 36 countries that make up the Organisation for Economic Cooperation and Development. But the problem has been particularly acute in the United States, where the “low-income rate” is high (only surpassed by two countries, Greece and Spain) and “income inequality” even worse (following only Israel).

The causes are clear: workers suffer when many of the new jobs they’re forced to have the freedom to take are on the low end of the wage scale, unemployed and at-risk workers are getting very little support from the government, and employed workers are impeded by a weak collective-bargaining system.

That’s exactly what we’ve seen in the United State ever since the crisis broke out—which has continued during the entire recovery.

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But we also have to look at the opposite pole: the growth of corporate profits is both a condition and consequence of the stagnation of workers’ wages. Employers have been able to use those profits not to increase worker pay (except for CEOs and other corporate executives whose pay is actually a distribution of those profits), but to purchase new technologies and take advantage of national and global patterns of production and trade to keep both unemployed and employed workers in a precarious position.

That precarity, even as employment has expanded, serves to keep wages low—and profits growing.

What we’re seeing then, especially in the United States, is a self-reinforcing cycle of high profits, low wages, and even higher profits.

That’s why the labor share of business income has been falling throughout the so-called recovery. And why, in the end, Eric Levitz was forced to find the right words:

American Workers Are Getting Ripped Off

 

*And, of course, even longer: from 114 in 1960 or 112 in 1970 or even 110.2 in 2001.

Block chain network concept on technology background

Forget Bitcoin. It’s the underlying technology, blockchain, that is generating the most excitement. Even utopia!

Bitcoin is a digital currency that was invented in 2009 by a person (or group) who called himself Satoshi Nakamoto. His stated goal was to create “a new electronic cash system” that was “completely decentralized with no server or central authority.” After cultivating the concept and technology, in 2011, Nakamoto turned over the source code and domains to others in the bitcoin community, and subsequently vanished.

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While Bitcoin (and other so-called cryptocurrencies, such as Ethereum, Ripple, and the other 1500 or so other such currencies) have generated a great deal of media attention (for their novelty, their ability to permit transactions beyond government surveillance and control, and their wild gyrations in price), it’s blockchain, the technology behind Bitcoin, that carries the utopian promise of remaking the economy and society.

At its most basic, blockchain provides a decentralized database, or “distributed digital ledger,” of transactions that everyone on the network can see. This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded.* The technology can work for almost every type of transaction involving exchange-value, including money, goods, and property. It can also serve as the basis for a variety of other functions, from distributed cloud storage and the recording of property titles to authenticated voting and decentralized social media platforms.

For some (such as Brendan Markey-Towler), blockchain technology makes it possible not only to envision, but to establish a viable pathway toward, a utopian alternative to contemporary society.

On the face of it a mundane and boring technology for bookkeeping, blockchain is actually revolutionary because it makes the anarchist utopia a more realisable dream than has ever before been possible. At the very least it provides the strongest challenge ever posed to the monopoly of the state over the promulgation, formation, keeping and verification of institutions and the public record. The purpose of this essay is to investigate the conditions under which this might occur, and the dynamics of a society organised using blockchain technologies.

According to Markey-Towler, blockchain can serve as the basis for organizing an anarchist utopia—”a society which is composed of groups formed entirely by mutual association and absent violence and coercion.” The idea is that the keeping of verifiable records via blockchain technology allows for the creation of a public record that is kept by everyone and updated by collective consent, which means there is no nexus of power (such as the state or monopoly corporations) that can be exercised to corrupt or use the public record as a tool of extortion.** Even more, the existence of blockchain technology makes it possible to exit from existing economic and social relations and to practice, if only in a selected domain, a different way of organizing economic and social transactions. Thus, it permits a “sort of competition” for adherents between the two systems—one organized in and by the state, the other via decentralized distributed ledgers—and creates the possibility for individuals to choose the set of institutions associated with the alternative, blockchain technology.

I have no interest here in exploring either the feasibility or desirability of such a blockchain utopia (although I have elsewhere, e.g., here and here). My focus for the moment is otherwise—on the fact that the claims about blockchain from the latest example of a long series of “technological utopianisms.”

Many will remember this 2012 iPhone commercial claiming the device is the most used camera in the world. Light piano music twinkles and images of people living their best lives flit past. It is utopic desire, crystallized: the ad says that the gadget will make us happy, and that, through its lens, we’ll all evolve into a better version of ourselves. Facebook (like other social media) promised to give “people the power to share and make the world more open and connected.” And there’s Uber, which pledges “to make transportation safer and more accessible, helping people order food quickly and affordably, reducing congestion in cities by getting more people into fewer cars, and creating opportunities for people to work on their own terms.”

Many will recognize these as pledges that technology will usher in the new utopian society. But, as Howard P. Segal reminds us,

few if any of the high-tech zealots of our own day have even considered the possibility that, far from being original, their crusades fit squarely within a rich Western tradition of technological utopianism. It is not likely that very many of them realize how old-fashioned they really are when celebrating technology’s prospects for transforming the nation and, in due course, the world.***

They are merely the latest in a long line—starting with the late-sixteenth- and early-seventeenth-century Pansophists (such as Tomasso Campanella, Johann Valentin Andreae, and Francis Bacon) through the utopian socialists of the early nineteenth century (especially Henri de Saint-Simon) through the numerous technological utopians of the late-nineteenth- and early-twentieth centuries (including Edward Bellamy, Henry Olerich, Edgar Chambliss)—of prophets of progress and the possibility of achieving utopia through the introduction and expansion of new technologies.

Technological utopianism, as I am using it here, refers to one or more of the following three claims:

  1. Technology is the means for creating a perfect society.
  2. The perfect society itself is modeled on technology.
  3. The perfect society is one that promotes the development of new, better technologies.

Clearly, Markey-Towler’s enthusiastic claims for blockchain technology meets the definition. So, as it turns out, does contemporary mainstream economics.

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Mainstream economists treat technological innovation as the sine qua non of economic and social progress—the key to economic growth and the achievement of global prosperity. It is introduced in the production function as y, the “recipe,” whereby capital (K) and labor (L) can be combined to produce output (Y). Thus, even without changes in the amount of capital and labor, output will be increased as new technologies are introduced. Thus, when they move from an individual firm’s production function to economy-wide economic growth, mainstream economists claim that the key is the increase in productivity due to technological change, which is generally referred to as the “Solow residual” (named after Nobel laureate Robert Solow).****

The mainstream argument is that the level of production and the rate of economic growth can be increased by the introduction of new technologies, which lead to higher levels of productivity. More goods and services are thus made available to satisfy human wants, thus solving the problem of scarcity.*****

Moreover, mainstream economists claim, an economic system based on free markets is the best way of encouraging the development and application of new technologies. At a microeconomic level, profit-maximizing firms have an incentive choose the best, more efficient technologies, for themselves and for the economy as a whole. And free international trade is the best way of increasing the pool of research and development experiments, from which the best technology is chosen. Thus, technology trade increases national income in each country and raises the total gains from trade.

Contemporary mainstream economics thus combines market utopianism with technological utopianism.

As I see it, the biggest problem with technological utopianism is that it takes politics out of the equation—whether in imagining solutions to economic and social problems or envisioning the role of technology in a radically different kind of economy and society. Technology thus becomes a substitute for politics. As Aleszu Bajak has recently explained with respect to finding a solution to climate change,

Relying on a technological fix that’s just over the horizon avoids the mountain moving required to wean ourselves off fossil fuels, bring hundreds of countries into agreement on how to limit and clean up emissions, and alter the consumption habits of an entire civilization. Those are systemic complexities ingrained in our economies and cultures. Propping up glaciers to limit sea level rise, sprinkling iron dust into the oceans to encourage plankton growth to absorb carbon, or spraying the skies to reflect the sun’s heat just seems simpler.

Much the same can be said of obscene inequalities in the distribution of income and wealth, the “diseases of despair” that now afflict a large portion of the U.S. population, or the prospect that new forms of automation will eliminate jobs and make workers redundant. In each case, a technological fix is promised—tax-rate changes for inequality, the expansion of healthcare insurance for increasing levels of addiction, a universal basic income for labor-substituting robots—when the problem itself is political, not technical.

And that means the solution has to be political—organizing people to criticize the existing set of institutions, in order to imagine and create new ways of organizing the economy and society. New technologies may even have a role to play in enabling people to see such a “virtual reality.”

Tackling problems as deeply ingrained as the ones humanity faces right now will require facing a question that technology alone cannot address: are we willing to band together to criticize and change the existing set of economic and social institutions?

 

*To carry out a transaction a party needs two things: a wallet (public key) and a private key. A wallet is a string of digits and letters, also called a public key. It is an address that appears each time a transaction is done. The private key is a string of random digits that should be kept in secret. When someone enables a transaction it is signed with a private key, which is only visible to a sender. Then a network of nodes carries that transaction making sure that it is valid. Once it confirms its validity the transaction is put into a block where, because it has been “hashed,” it is virtually impossible to change without being detected.

**Technically, blockchain fulfills three requirements: (a) it guarantees a certain degree of reciprocity and security with respect to exchange and property; (b) it is sufficiently easy to interact with and to keep records; and (c) it permits a certain degree of freedom to use one’s property, that is, it is secure from theft, corruption, and manipulation.

***Howard P. Segal, Technology and Utopia (American Historical Association, 2006), p. 66.

****Solow (1957) started with a neoclassical production function where Yt = At•F(Kt, Lt), where Yt is aggregate output in time period t, Kt is the stock of physical capital, Lt is the labor force and At represents productivity growth due to technology. Solow then estimated the variables for the U.S. economy for the period 1909-49, where output per labor hour approximately doubled. According to his estimates, about one-eighth of the increment in labor productivity could be attributed to increased capital per person hour, and the remaining seven-eighths to the residual.

*****This is one of the reasons why Robert Gordon’s work on the slowing-down of U.S. productivity growth has been met with such concern.

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Special mention

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Cumil

Students are much too busy to think these days. So, when a junior comes to talk with me about the possibility of my directing their senior thesis, I ask them about their topic—and then their schedule. I explain to them that, if they really want to do a good project, they’re going to have to quit half the things they’re involved in.

They look at me as if I’m crazy. “Really?! But I’ve signed up for all these interesting clubs and volunteer projects and intramural sports and. . .” I then patiently explain that, to have the real learning experience of a semester or year of independent study, they need time, a surplus of time. They need to have the extra time in their lives to get lost in the library or to take a break with a friend, to read and to daydream. In other words, they need to have the right to be lazy.

So does everyone else.

As it turns out, that’s exactly what Paul LaFargue argued, in a scathing attack on the capitalist work ethic, “The Right To Be Lazy,” back in 1883.

Capitalist ethics, a pitiful parody on Christian ethics, strikes with its anathema the flesh of the laborer; its ideal is to reduce the producer to the smallest number of needs, to suppress his joys and his passions and to condemn him to play the part of a machine turning out work without respite and without thanks.

And LaFargue criticized both economists (who “preach to us the Malthusian theory, the religion of abstinence and the dogma of work”) and workers themselves (who invited the “miseries of compulsory work and the tortures of hunger” and need instead to forge a brazen law forbidding any man to work more than three hours a day, the earth, the old earth, trembling with joy would feel a new universe leaping within her”).

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Today, nothing seems to have changed. Workers (or at least those who claim to champion the cause of workers) demand high-paying jobs and full employment, while mainstream economists (from Casey Mulligan, John Taylor, and Greg Mankiw to Dani Rodrick and Brad DeLong) promote what they consider to be the dignity of work and worry that, even as the official unemployment rate has declined in recent years, the labor-force participation rate in the United States has fallen dramatically and remains much too low.

Mainstream economists and their counterparts in the world of politics and policymaking—both liberals and conservatives—never cease to preach the virtues of work and in every domain, from minimum-wage legislation to economic growth, seek to promote more people getting more jobs to perform more work.

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This is particularly true in the United States and the United Kingdom, where the “work ethic” remains particularly strong. The number of hours worked per year has fallen in all advanced countries since the middle of the twentieth century but, as is clear from the chart above, in comparison with France and Germany, the average has declined by much less in America and Britain.

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Today, according to the OECD, American and British workers spend much more time working per year (1765 and 1675 hours, respectively) than their French and German counterparts (1474 and 1371 hours, respectively).

But in all four countries—and, really, across the entire world—the capitalist work ethic prevails. Workers are exhorted to search for or keep their jobs, even as wage increases fall far short of productivity growth, inequality (already obscene) continues to rise, new forms of automation threaten to displace or destroy a wage range of occupations, unions and other types of worker representation have been undermined, and digital work increasingly permeates workers’ leisure hours.

The world of work, already satirized by LaFargue and others in the nineteenth century, clearly no longer works.

Not surprisingly, the idea of a world without work has returned. According to Andy Beckett, a new generation of utopian academics and activists are imagining a “post-work” future.

Post-work may be a rather grey and academic-sounding phrase, but it offers enormous, alluring promises: that life with much less work, or no work at all, would be calmer, more equal, more communal, more pleasurable, more thoughtful, more politically engaged, more fulfilled – in short, that much of human experience would be transformed.

To many people, this will probably sound outlandish, foolishly optimistic – and quite possibly immoral. But the post-workists insist they are the realists now. “Either automation or the environment, or both, will force the way society thinks about work to change,” says David Frayne, a radical young Welsh academic whose 2015 book The Refusal of Work is one of the most persuasive post-work volumes. “So are we the utopians? Or are the utopians the people who think work is going to carry on as it is?”

I’m willing to keep the utopian label for the post-work thinkers precisely because they criticize the world of work—as neither natural nor particularly old—and extend that critique to the dictatorial powers and assumptions of modern employers, thus opening a path to consider other ways of organizing the world of work. Most importantly, post-work thinking creates the possibility of criticizing the labor involved in exploitation and thus of creating the conditions whereby workers no longer need to succumb to or adhere to the distinction between necessary and surplus labor.

In this sense, the folks working toward a post-work future are the contemporary equivalent of the “communist physiologists, hygienists and economists” LaFargue hoped would be able to

convince the proletariat that the ethics inoculated into it is wicked, that the unbridled work to which it has given itself up for the last hundred years is the most terrible scourge that has ever struck humanity, that work will become a mere condiment to the pleasures of idleness, a beneficial exercise to the human organism, a passion useful to the social organism only when wisely regulated and limited to a maximum of three hours a day; this is an arduous task beyond my strength.

That’s the utopian impulse inherent in the right to be lazy.

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Special mention

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Mainstream economics lies in tatters. Certainly, the crash of 2007-08 and the Second Great Depression called into question mainstream macroeconomics, which has failed to provide a convincing explanation of either the causes or consequences of the most severe crisis of capitalism since the Great Depression of the 1930s.

But mainstream microeconomics, too, increasingly appears to be a fantasy—especially when it comes to issues of corporate power.

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Neoclassical microeconomics is based on a set of models that assume perfect competition. What that means, as my students learned the other day, is that, while in the short run firms may capture super-profits (because price is greater than average total cost, at P1 in the chart above), in the “long run,” with free entry and exit, all those extra-normal profits are competed away (since price is driven down to P2, equal to minimum average total cost). That’s why the long run is such an important concept in neoclassical economic theory. The idea is that, starting with perfect competition, neoclassical economists always end up with. . .perfect competition.*

Except, of course, in the real world, where exactly the opposite has been occurring for the past few decades. Thus, as the authors of the new report from the United Nations Conference on Trade and Development have explained, there is a growing concern that

increasing market concentration in leading sectors of the global economy and the growing market and lobbying powers of dominant corporations are creating a new form of global rentier capitalism to the detriment of balanced and inclusive growth for the many.

And they’re not just talking about financial rentier incomes, which has been the focus of attention since the global meltdown provoked by Wall Street nine years ago. Their argument is that a defining feature of “hyperglobalization” is the proliferation of rent-seeking strategies, from technological innovations to mergers and acquisitions, within the non-financial corporate sector. The result is the growth of corporate rents or “surplus profits.”**

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As Figure 6.1 shows, the share of surplus profits in total profits grew significantly for all firms both before and after the global financial crisis—from 4 percent during the 1995-2000 period to 19 percent in 2001-2008 and even higher, to 23 percent, in 2009-2015. The top 100 firms (ranked by market capitalization) also saw the growth of their surplus profits, from 16 percent to 30 percent and then, most recently, to 40 percent.***

The analysis suggests both that surplus profits for all firms have grown over time and that there is an ongoing process of bipolarization, with a growing gap between a few high-performing firms and a growing number of low-performing firms.

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That conclusion is confirmed by their analysis of market concentration, which is presented in Figure 6.2 in terms of the market capitalization of the top 100 nonfinancial firms between 1995 and 2015. The red line shows the actual share of the top 100 firms relative to their hypothetical equal share, assuming that total market capitalization was distributed equally over all firms. The blue line shows the observed share of the top 100 firms relative to the observed share of the bottom 2,000 firms in the sample.

Both measures indicate that the market power of the top companies increased substantially over the 1995-2015 period. For example, the combined share of market capitalization of the top 100 firms was 23 times higher than the share these firms would have held had market capitalization been distributed equally across all firms. By 2015, this gap had increased nearly fourfold, to 84 times. This overall upward surge in concentration, measured by market capitalization since 1995, experienced brief interruptions in 2002−03 after the bursting of the dotcom bubble, and in 2009−2010 in the aftermath of the global financial crisis, and it stabilized at high levels thereafter.****

So, what is causing this growth in market concentration? One reason is because of the nature of the underlying technologies, which involve costs of production that do not rise proportionally to the quantities produced. Instead, after initial high sunk costs (e.g., in the form of expenditures on research and development), the variable costs of producing additional units of output are negligible.***** And then, of course, growing firms can use intellectual property rights and lobbying powers to protect themselves against actual or potential competitors.

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Giant firms can also use their super-profits to merge with and to acquire other firms, a process that has accelerated because—as both a consequence and cause—of the weakening of antitrust legislation and enforcement.

What we’re seeing, then, is a “vicious cycle of underregulation and regulatory capture, on the one hand, and further rampant growth of corporate market power on the other.”

The models of mainstream economics turn out to be a shield, hiding and protecting this strengthening of corporate rule.

What the rest of us, including the folks at UNCTAD, have been witnessing in the real world is the emergence and consolidation of global rentier capitalism.

 

*There’s another reason why the long run is so important for neoclassical economists. All incomes are presumed to be returns to “factors of production” (e.g., land, labor, and capital), equal to their “marginal products.” But short-run super-profits are a theoretical embarrassment. They represent a return not to any factor of production but to something else: serendipity or Fortuna. Oops! That’s another reason it’s important, within a neoclassical world, for short-run super-profits to be competed away in the long run—to eliminate the existence of returns to the decidedly non-productive factor of luck.

**UNCTAD defines surplus profits as the difference between the estimate of total typical profits and the total of actually observed profits of all firms in the sample in that year. Thus, they end up with a lower estimate of surplus or super-profits than if they’d used a strictly neoclassical definition, which would compare actual profits to a zero-rent (or long-run equilibrium) benchmark.

***The authors note that

these results need to be interpreted with caution. More important than the absolute size of surplus profits for firms in the database in any given sub-period, is their increase over time, in particular the surplus profits of the top 100 firms.

****The authors of the study focus particular attention on the so-called high-tech sector, in which they show “a growing predominance of ‘winner takes most’ superstar firms.”

*****Thus, as Piero Sraffa argued long ago, the standard neoclassical model of perfect competition, with U-shaped marginal and average cost curves (i.e., “diminishing returns”), is called into question by increasing returns, with declining marginal and average cost curves.