Capitalism, Employment and Technology.

[Oswy]

I don’t think there’s any argument against the statement that the objective of the capitalist is to maximise profit, not to employ labour. Indeed labour costs will, like any other costs which eat into potential profit, always be scrutinised for reduction at the earliest opportunity. I think it’s fair to say that, all other things being equal, the capitalist wants as few employees as possible. As I see it, the most obvious ways that the capitalist can reduce their labour costs are (1) replacement or reduction of labour by technology/automation, (2) reduction of labour by re-organisation of activities (3) suppression of wages and, (4) relocation of labour to geographies where costs are cheaper. I would argue that all of these four ways to reduce labour costs fit the central logic of capitalism – maximise profits, minimise costs.

Do you think my above characterisation is correct? Is there any hard data avaiable which shows, nationally or globally, that employment opportunities are shrinking, either in real terms or relative to production levels? Is there any way out of this apparent cycle in which capitalists are engaged in repeated 'advances' which shed jobs for profitability? Should we expect to see unemployment levels steadily rising as a result of this process now or will it take decades, even centuries, for serious 'hyper-unemployment' to be realised?

[Armchair War Criminal]

All the labor-saving incentives you mention exist and are important aspects of capitalism. However, they do not lead to a general upward trend in unemployment, because every dollar that capitalists shed from their labor expenses is another dollar they can use to expand investment or to engage in personal consumption - and the enterprises in which they invest, and the commodities they consume, ultimately must be produced by labor. (There's a famous claim in economics known as Say's Law which says that demand must, by definition, always equal supply, because every dollar spent by someone is a dollar earned by someone else (and thus there can be no "general glut.") Marx among others argued against it because it doesn't work the way it's claimed to in the short term, but it is true in the long term, so we might say that labor-saving measures don't lead to continually increasing unemployment because of Say's Friendly Suggestion.) This "churning" process, by which labor is being continually shed from existing industries and reassigned to more profitable ones, is what makes capitalism so novel and dynamic compared to previous social systems.

Because Say's Law doesn't hold in the short term, however, you're correct to note that unemployment does tend to follow a cyclic pattern. This space is too small for an adequate overview of Marxian crisis theory, much less theories of the business cycle in general, and in any event I'm not the one to give it, but suffice to say that everyone recognizes that the cycles are there.

You may also note that capitalism is technically capable of achieving long-term full employment but is politically incapable of doing so because of the need for a reserve army of the unemployed. Any economic history of the 1970s will illustrate this.

[Oswy]

All the labor-saving incentives you mention exist and are important aspects of capitalism. However, they do not lead to a general upward trend in unemployment, because every dollar that capitalists shed from their labor expenses is another dollar they can use to expand investment or to engage in personal consumption - and the enterprises in which they invest, and the commodities they consume, ultimately must be produced by labor. (There's a famous claim in economics known as Say's Law which says that demand must, by definition, always equal supply, because every dollar spent by someone is a dollar earned by someone else (and thus there can be no "general glut.") Marx among others argued against it because it doesn't work the way it's claimed to in the short term, but it is true in the long term, so we might say that labor-saving measures don't lead to continually increasing unemployment because of Say's Friendly Suggestion.) This "churning" process, by which labor is being continually shed from existing industries and reassigned to more profitable ones, is what makes capitalism so novel and dynamic compared to previous social systems.

Because Say's Law doesn't hold in the short term, however, you're correct to note that unemployment does tend to follow a cyclic pattern. This space is too small for an adequate overview of Marxian crisis theory, much less theories of the business cycle in general, and in any event I'm not the one to give it, but suffice to say that everyone recognizes that the cycles are there.

You may also note that capitalism is technically capable of achieving long-term full employment but is politically incapable of doing so because of the need for a reserve army of the unemployed. Any economic history of the 1970s will illustrate this.

Thank you very much for that, but, if labour-reducing 'advances' are spread across all sectors (more or less) doesn't this still mean that there will be fewer employment opportunities overall?

Take an extreme (maybe not that extreme) case in which cheap general-purpose robots are manufactured and able to do almost all conventional physical work otherwise done by humans. It would make sense that all capitalists, in every sector, would replace real people with these robots, even in those sectors where the increased profits are spent in personal consumption. In this scenario the additional profits generated by such technology and then used in personal consumption doesn't solve the work-shedding consequences of that advance because that technology infiltrates the personal consumption sectors too. All sectors reduce their needs for labour. I know this is a simplification but I still can't see labour-shedding advances as doing anything but, ultimately, making more and more people surplus to capitalist needs.

[Ovi]

I think the Jevons paradox (http://en.wikipedia.org/wiki/Jevons_paradox) is relevant here.

In economics, the Jevons paradox, sometimes called the Jevons effect, is the proposition that technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource.
If it applies to labor, the more productive we are (by technological development for instance), the more we work. If we look at the past, we see that people today actually work more than farmers or even hunter-gatherers in the past, even though we are hundreds of times more productive. The reason for that is that with a lower cost of labor, other economic areas now become possible, thus increasing the demand beyond what it was before. And no, the boss has no reason to employ less people, but to increase productivity. If productivity in the entire economy would double tomorrow, capitalists would not fire half of their workforce or halve the working day of their employees; instead, they would produce more (according to the Jevons paradox, probably more than double, making workers work even more than before).

[Oswy]

I think the Jevons paradox (http://en.wikipedia.org/wiki/Jevons_paradox) is relevant here.

If it applies to labor, the more productive we are (by technological development for instance), the more we work. If we look at the past, we see that people today actually work more than farmers or even hunter-gatherers in the past, even though we are hundreds of times more productive. The reason for that is that with a lower cost of labor, other economic areas now become possible, thus increasing the demand beyond what it was before. And no, the boss has no reason to employ less people, but to increase productivity. If productivity in the entire economy would double tomorrow, capitalists would not fire half of their workforce or halve the working day of their employees; instead, they would produce more (according to the Jevons paradox, probably more than double, making workers work even more than before).

Thanks! Ok, but is that idea then premised upon growth? What we might call the structural unemployment of capitalism doesn't grow upwards because the capitalist will always prefer to have more people working for him if it means greater productivity? If growth is thus an essential element in the capitalist system so as to retain (even increase) employment, then I guess that brings its own crisis implications - growth cannot go on indefinately in relation to a finite planet with finite resources.

[Armchair War Criminal]

In your general-purpose robot example, wages would (in the long term) fall until the marginal cost of hiring a worker reached the marginal cost of buying and maintaining a robot. This would be counterbalanced, from the workers' perspective, by cheaper goods, and whether they benefit on the whole depends a lot on fuzzy specifics. (In order to prevent deflation, which has very bad effects for a capitalist economy, and in order to prevent the short-term unemployment from reaching crisis levels, the government would probably print money, so you probably wouldn't see wages and prices go down nominally, but that's unimportant to the topic at hand.)

You can see something similar in American history, when there was slave labor in the South and free labor in the North. Slaves are, aside from the whole "are people" thing, like robots - the cost of securing their labor-power is measured in price of purchase and maintenance, rather than in wages. Rather than completely replacing proletarians, however, slaves were used in their areas of comparative advantage - primarily, labor-intensive resource extraction. (The classical view is that white laborers were on net worse off because of bonded African labor, although J. Sakai's "Settlers" argues otherwise.)

[Ovi]

Thanks! Ok, but is that idea then premised upon growth? What we might call the structural unemployment of capitalism doesn't grow upwards because the capitalist will always prefer to have more people working for him if it means greater productivity? If growth is thus an essential element in the capitalist system so as to retain (even increase) employment, then I guess that brings its own crisis implications - growth cannot go on indefinately in relation to a finite planet with finite resources.
That's true, but most capitalists don't recognize that resources are finite. According to them, there is no peak anything, since technological progress will increase the material reserves, not diminish them. It's flawed, but it doesn't matter. Even if we ran out of something, people will be employed in other areas. Even if the entire industrial production would be completely automated, instead of having released humankind from the activities that take away much of our lives, we'll be employed in other ares, such as services. We won't produce anything, but we'll work even more than today in insurance, banking, law activities (must catch those illegal drug users and throw them to jail), advertising, keeping other people glued to the tv and convincing each other what to buy. Also known as consumer capitalism.

Plus, if running out of resources means people starving to death (such as running out of phosphorus, which will happen in the end), that's even better. You'll have a bunch of people willing to work basically just for food. Capitalists aren't affected by unsustainable development since they'll always afford what they want; we are

[Oswy]

That's true, but most capitalists don't recognize that resources are finite. According to them, there is no peak anything, since technological progress will increase the material reserves, not diminish them. It's flawed, but it doesn't matter. Even if we ran out of something, people will be employed in other areas. Even if the entire industrial production would be completely automated, instead of having released humankind from the activities that take away much of our lives, we'll be employed in other ares, such as services. We won't produce anything, but we'll work even more than today in insurance, banking, law activities (must catch those illegal drug users and throw them to jail), advertising, keeping other people glued to the tv and convincing each other what to buy. Also known as consumer capitalism.

Plus, if running out of resources means people starving to death (such as running out of phosphorus, which will happen in the end), that's even better. You'll have a bunch of people willing to work basically just for food. Capitalists aren't affected by unsustainable development since they'll always afford what they want; we are

But what if virtually all productive and service sectors could rely on technologies rather than humans more profitably? I appreciate that thusfar it is in manufacturing and assembly that technologies have most obviously replaced humans but there's no reason to assume sectors traditionally needing human input, like law, banking and insurance, won't also succumb - after all the profit motive is powerful driving force. Maybe technology will never get that far, of course, but if it does won't this cause a breakdown in capitalism because there really will be higher and higher percentages of surplus human labour, draining capitalism through welfare and unable to meaningfully participate in consumer capitalism either.

[Victus Mortuum]

You seem to be effectively referring to full autonomization. If there is no need for labor, then capitalism ceases to exist as a productive system. If ALL positions are automated, there is no need to work. Assuming capitalism hasn't yet given way, you have a small segment of owners and controllers, and a large segment of needers who must do whatever the owners and controllers say.

[Oswy]

You seem to be effectively referring to full autonomization. If there is no need for labor, then capitalism ceases to exist as a productive system. If ALL positions are automated, there is no need to work. Assuming capitalism hasn't yet given way, you have a small segment of owners and controllers, and a large segment of needers who must do whatever the owners and controllers say.

Thanks. I fully accept that we haven't seen 'full autonomization' yet in advanced capitalism and maybe we never will, who knows? However, it is fair to suggest, I think, that the trajectory of capitalist advance is at least in that direction - ever more automation in every sector wherever savings can be made or profits increased. So, even if we never reach full 'automization' there surely is a point towards it where surplus human labour becomes a serious structural problem for the capitalists. Let's imagine 100 years into the future, technology has advanced to the point where unemployment levels have started to creep up globally, 15%, 20%, 25%, 30% and so on. Even before full 'automization' occurs there will be a steepening unemployment curve which generates such a burden on capitalist states (in welfare and social unrest) that capitalism fails. At least that's my thinking.

[Ovi]

But what if virtually all productive and service sectors could rely on technologies rather than humans more profitably? I appreciate that thusfar it is in manufacturing and assembly that technologies have most obviously replaced humans but there's no reason to assume sectors traditionally needing human input, like law, banking and insurance, won't also succumb - after all the profit motive is powerful driving force. Maybe technology will never get that far, of course, but if it does won't this cause a breakdown in capitalism because there really will be higher and higher percentages of surplus human labour, draining capitalism through welfare and unable to meaningfully participate in consumer capitalism either.
Robots replacing human labor? That's something beyond the simple automation of today. To replace all human labor, it would require robots at least as intelligent as humans. The impact on society would be far beyond the economic situation between rich and poor, such as private armies of robots and whether robots would obey their masters or not. I don't think this is what Marx had in mind when he talked about the failure of capitalism.

[Oswy]

Robots replacing human labor? That's something beyond the simple automation of today. To replace all human labor, it would require robots at least as intelligent as humans. The impact on society would be far beyond the economic situation between rich and poor, such as private armies of robots and whether robots would obey their masters or not. I don't think this is what Marx had in mind when he talked about the failure of capitalism.

We don't have to induce 'robots' specifically though. Let me try to explain what I mean another way.

When motorcars were first being manufactured they were, to all intents and purposes, 100% built by human labour, 'hand built' we might say. Today in the motorcar manufacturing industry there is a noticeable presence of non-human, i.e. technological, activity which has replaced some of the labour. We might reasonably suggest that labour in the motocar manufacturing sector is now something less than 100% human. Are you with me at least on this? A detailed technical assessment might find that in the motorcar industry human labour is now 80% of the manufacturing process, or maybe 70% Ok, so far so good. We've established that in a particular sector there has been a relative reduction in the reliance on human labour through the use of technology and automation. Now, I think it is reasonable to suggest that all sectors in which capitalist activity is undertaken will be interested in shifting the ratio of human to non-human labour where this is profitable or, at least, cost cutting. We might say that all productione and service activity under capitalism will by some degree or other seek out ways to reduce labour and replace it with technology, provided there is a savings/profit motive. No sector will remain uninterested because no sector can be uninterested in savings/profit results. Even if we never have technological advance which introduces robots we can reasonably expect (1) every sector to want to replace human labour with technology and automation and (2) technological advance to facilitate that replacement at some speed or other. Like I've said, the historical trajectory of capitalism is definately one in which technology and automation is always taken up if it facilitates savings and/or profit increases. Technological advance may slow down, it may even come to a stop (the laws of physics place an ultimate limit on technological advance somewhere down the line). But if it continues even at a steady pace for some time we may just see such a widespread abandonment of human labour for machine that it becomes a structural problem.

[Armchair War Criminal]

But it's simply not true that an increasing organic composition of capital has led, historically, to a secular increase in unemployment rates across capitalism. Different capitalist models between era and countries have had different levels of structural unemployment, but the tendency hasn't been to increase monotonically over time (as it has for the organic composition of capital, or, in neoclassical jargon, capital intensity.)

The only way firms would always prefer robots to humans would be if 1) robots were superior to humans in every sector, and 2) the value of robots (that is, their cost of production and maintenance) were absolutely less than the value of human labor (that is, the cost of the means subsistence.) But any general rise in productivity will decrease the value of human labor in the form of cheaper-to-produce food, housing, medical care, &c.

[Oswy]

But it's simply not true that an increasing organic composition of capital has led, historically, to a secular increase in unemployment rates across capitalism. Different capitalist models between era and countries have had different levels of structural unemployment, but the tendency hasn't been to increase monotonically over time (as it has for the organic composition of capital, or, in neoclassical jargon, capital intensity.)

The only way firms would always prefer robots to humans would be if 1) robots were superior to humans in every sector, and 2) the value of robots (that is, their cost of production and maintenance) were absolutely less than the value of human labor (that is, the cost of the means subsistence.) But any general rise in productivity will decrease the value of human labor in the form of cheaper-to-produce food, housing, medical care, &c.

Ok, I'm new to this subject so please forgive me if I'm not grasping your points as I should.

Is it not at least fair to say that in the historical trajectory of industrial capitalism the ratio of non-human labour to human labour has generally gone up? In other words have we not seen, over time, more and more things which might have been done by humans in the past, subsequently being done by technological advances and automation? If you answer in the affirmative can we not at least then speculate that this increasing ratio of non-human to human activity in capitalist endeavour will continue provided there is sufficient technological advance and provided that it is cost-effective to make use of for the capitalist?

[Armchair War Criminal]

Ok, I'm new to this subject so please forgive me if I'm not grasping your points as I should.

Is it not at least fair to say that in the historical trajectory of industrial capitalism the ratio of non-human labour to human labour has generally gone up? In other words have we not seen, over time, more and more things which might have been done by humans in the past, subsequently being done by technological advances and automation? If you answer in the affirmative can we not at least then speculate that this increasing ratio of non-human to human activity in capitalist endeavour will continue provided there is sufficient technological advance and provided that it is cost-effective to make use of for the capitalist?
Yup, that's absolutely true! We should expect many things that are done by humans now to be automated in the future.

(A quick jargon lesson, and as the notes at the top of the forum say, don't apologize for not knowing things: "organic composition of capital" is the Marxist term, and "capital intensity" the neoclassical term, for the ratio of machines to people. They're not precisely the same concept, but at this level of abstraction, there's not much difference.)

But you'll note that this ever-smaller ratio of direct human labor hasn't resulted in a continual rise in unemployment. Instead, specializations are further subdivided, output is expanded, and new industries come into creation when old ones are extinguished. Humans get put to new uses, just like any other resource.

[Ovi]

Then we're back at the argument of partial automation. First of all, assessing that human labor is 80% of the x industry is a bit odd. It depends to what you're comparing it to. Even a hand built car which you say is 100% built by human labor has some productivity improvement over the past. A power tool, a welding torch or even a steel hammer is an improvement over stone age technology. It's a matter of productivity. 80% human labor would mean 25% increase in productivity. In the end everything is built with labor, including power tools and industrial robots, even if the only labor is that of the engineer. It is theoretically possible that increasing productivity further will lead to huge unemployment and the collapse of capitalism, but I have doubts.

Unemployment will only cause new industries to appear on the new cheap labor, thus increasing consumption levels. Some sectors of the economy are still better suited for humans and cheap labor might prevent automation since well...human labor is cheap. Without strong AI, there will probably still be plenty of work to do for humans, especially in a capitalist society. Some jobs can't be automated by much without strong AI, so I don't think hyper-unemployment will happen any time soon due to technological development. Even if progress will reduce the need of human labor, the state will probably prevent a collapse of the status quo by reducing working hours or maintaining the unemployment in a peaceful manner with unemployment benefits. That would also keep the labor cheap and even turn people against each other since some people will live off the hard work of others (while ignoring the capitalists).

It's only an opinion, so take it as that. It has been claimed for centuries that mechanization and automation will create hyper-unemployment and collapse of society, but I don't see it. We're hundred of times more productive today than 200 years ago and there's no sign of reduction in working time or employment, so there's little reason to believe it will happen without a major breakthrough which would have an enormous impact on society in any case (such as a technological singularity). We'll have to see how productivity enhancements will change capitalism, but I doubt that technological progress on its own will create the conditions for capitalism's self destruction any time soon. There might be another great depression which will sow the seed for socialism (even though economic hardship seems to prevent radicalization), maybe fueled by progress or not. But it will probably take a long time until progress will make capitalism unstable if ever.

[Oswy]

Yup, that's absolutely true! We should expect many things that are done by humans now to be automated in the future.

(A quick jargon lesson, and as the notes at the top of the forum say, don't apologize for not knowing things: "organic composition of capital" is the Marxist term, and "capital intensity" the neoclassical term, for the ratio of machines to people. They're not precisely the same concept, but at this level of abstraction, there's not much difference.)

But you'll note that this ever-smaller ratio of direct human labor hasn't resulted in a continual rise in unemployment. Instead, specializations are further subdivided, output is expanded, and new industries come into creation when old ones are extinguished. Humans get put to new uses, just like any other resource.

Thanks, I think I see your point better now.

But :lol: I still don't see why those 'specializations' and 'new industries' you suggest would take up the slack of surplus labour wouldn't themselves emerge making use of the very same technological advances and automations, i.e. spreading human labour across other or new sectors doesn't of itself diminish the impetus to use technology and automation instead. Also, the expansion of output seems moot because if there's only a finite number of humans on the earth, setting aside what they can afford to consume, that fact will mean surplus production, sooner or later.

[Armchair War Criminal]

I still don't see why those 'specializations' and 'new industries' you suggest would take up the slack of surplus labour wouldn't themselves emerge making use of the very same technological advances and automations, i.e. spreading human labour across other or new sectors doesn't of itself diminish the impetus to use technology and automation instead. Also, the expansion of output seems moot because if there's only a finite number of humans on the earth, setting aside what they can afford to consume, that fact will mean surplus production, sooner or later.
What do you mean by "surplus production?" The desire of humans for more and more stuff knows no limit. What is limited is particular humans' claim on the social product, that is, the money they have to spend on new commodities; and it's this fact that Marxists and Keynesians use to explain the existence of business cycles. But you're talking about long-term unemployment. Capitalist firms will not simply keep producing more commodities than the market will bear; if there are more products on shelves than money in wallets, so to speak, they will cut back on production, increasing unemployment. This increase in the ranks of the unemployed - which, in modern times, is smoothed out by fiscal and monetary policy - which bids down the price of labor until firms are willing to hire again and the excess number of unemployed returns to the politically acceptable minimum. Lather, rinse, repeat.

As long as labor is scarce, useful for something, and the majority of people have no means of securing what they need other than selling it, they'll find some price at which to sell it. Only if the means producible by human labor were exceeded by the cost of subsistence would it be of no use, but in that case, humanity would be physically incapable of surviving. But in fact, the ability of human labor to produce use-values - precisely because of the rising organic composition of capital - has continually increased, including the ability to produce goods necessary for the means of subsistence (meaning their cost continually goes down.)