How Computers Are Creating a Second Economy Without Workers

[jdhoch]

The Second Economy -- a term the economist Brian Arthur uses to describe the computer-intensive portion of the economy -- is, quite simply, the virtual economy. One of its main byproducts is the replacement of low-productivity workers with computers. It's growing by leaps and bounds, brimming with optimistic entrepreneurs, and spawning a new generation of billionaires. In fact, the booming Second Economy will probably drive much of the economic growth in the coming decades.

Unfortunately, the Second Economy will not create many jobs.

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Let's do some arithmetic.

The Gross Domestic Product for the United States in 2011 was around $15 trillion. There are a little over 130 million non-farm employees. So each worker adds a little over $100,000 to the domestic output. The numbers are quite different for a Google employee. Google has a little more than 32,000 employees and its $38 billion in revenues means it generates about $1.2 million per employee. The numbers are similar for Facebook.

Walmart has some two million employees, and annual sales of around $200 billion. Given that many work part-time, I figure that the company has sales of around $100,000 per employee. With 56,000 employees in 2011, Amazon generated a little over $800,000 per employee.

Here's the challenge: In the past, every million-dollar increase in economic output generated on the order of ten jobs. In the future, in the productive Second Economy, it may generate only one or two.

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http://www.systemiccapital.com/how-computers-are-creating-a-second-economy-without-workers/

[Rafiq]

Except the so called second economy is just another middle man, a means of serving capital in the sale of commodities actually produced in Real Life. Amazon, Ebay, Google, etc.

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[Book O'Dead]

But, on the bright side, the advent of personal computers, inter-connectivity, cyberspace, etc., has made it possible to dispense with administrative and executive bureaucracies as well as providing an adequate tool to manage the workplace and the economy democratically.

Think about it: Through internet video-conferencing, all managerial issues, large and small, can be instantly dealt with by everyone concerned even when similar workplaces are geographically far apart.

In the right hands, all this technology in communication can facilitate direct democracy in matters of regional and world-wide economic issues.

The only obstacle that prevents technology from serving all of humanity in a positive way is capitalism, with its holy institutions of private property and profit.

[Luís Henrique]

The Second Economy -- a term the economist Brian Arthur uses to describe the computer-intensive portion of the economy -- is, quite simply, the virtual economy. One of its main byproducts is the replacement of low-productivity workers with computers. It's growing by leaps and bounds, brimming with optimistic entrepreneurs, and spawning a new generation of billionaires. In fact, the booming Second Economy will probably drive much of the economic growth in the coming decades.

Unfortunately, the Second Economy will not create many jobs.

In which case, to whom are those second economy corporations going to sell the trinkets and gadgets they produce, in order to drive economic growth during "decades"?

Seriously, those arguments were all around the market in the 90's. The recent developments have just shown that they are completely false.


Let's do some arithmetic.

The Gross Domestic Product for the United States in 2011 was around $15 trillion. There are a little over 130 million non-farm employees. So each worker adds a little over $100,000 to the domestic output. The numbers are quite different for a Google employee. Google has a little more than 32,000 employees and its $38 billion in revenues means it generates about $1.2 million per employee. The numbers are similar for Facebook.

The confusion here is more "Gross" than the Domestic Product... The US GDP measures (approximately, at least) the total value created in the the United States. Google's revenues do not measure the total value created by Google. Indeed, they are not even Google's profits, which are given by the simple formula revenue - expenses. But even Google's profits do not necessarily equate its value generation, since Google - especially if it does provide non-productive services such as, for instance, commercial propaganda, which it does - may well be sharing the value produced by other companies.

Luís Henrique

[Luís Henrique]

Google's revenues do not measure the total value created by Google. Indeed, they are not even Google's profits, which are given by the simple formula revenue - expenses.

According to Google itself (http://investor.google.com/financial/tables.html), their profits are 26% of their revenues. So they make about 300,000 dollars per employee, not 1.2 million dollars.


But even Google's profits do not necessarily equate its value generation, since Google - especially if it does provide non-productive services such as, for instance, commercial propaganda, which it does - may well be sharing the value produced by other companies.Again according to themselves, of their 37.9 billion revenues, 36.5 billion are "advertising revenues". So, if all the rest of their revenues were productive revenues, and if they had no costs, so that their profits were equal to their revenue, their "GDP" would be 1.4 billion dollars. Which would mean 43,750 dollars per employee - well below the US GDP per capita.

Luís Henrique

[Paul Cockshott]

You have to take into account the labour that goes into making the computers, providing the electric power, printing the books that Amazon sells etc.

[Left Leanings]

Technology and mechanization has the potential to make workers redundant. Take the manufacturing of motor vehicles, for example. At one time, the production line was staffed purely by human wokers. Now there are these sophisticated robotic devices, that put cars together, and add components etc.

If industry is the hands of capital, then technology and mechanization can be used to lay workers off, which means less money spent on wages, and more profit for the bosses.

But in a socialist society, the same developments will be used to make life easier for the workers, with no detriment to their material circumstances.

[Sten]

Actually, the automation of the productive process can only hurt capitalism.
According to the materialist conception of history, revolutions have happened whenever the existing relations of production couldn't adapt to the new developments in the productive forces.

Same thing here.
When capitalists invest in automation (to increase profits) they cause the profit rate to decline. Capitalism needs to exploit proletarian labour to survive as a social system.

Luis Henrique is right. If they keep impoverishing the working class, who are they going to sell their products to?