A week or so back we were discussing the implications of America’s declining birth rate. Amongst other points, I wrote this in response to Ross Douthat’s argument that we needed relatively youthful, growing populations to keep the show on the road:
We live in an age in which production relies ever more on technology and ever less on a large workforce. And when it does still need the latter those factories have a nasty habit of migrating abroad.
The traditional idea that (per capita) economic growth relied on population growth has been looking a little tired for quite some time, and the increase in the numbers of the elderly depending on social security does not alter that fact: the unemployed are not going to be able to pay for the pensions of the retired.
Given that, these comments from Paul Krugman (I know, I know) and the Daily Telegraph’s Jeremy Warner are worth noting.
Consider for a moment a sort of fantasy technology scenario, in which we could produce intelligent robots able to do everything a person can do. Clearly, such a technology would remove all limits on per capita GDP, as long as you don’t count robots among the capitas. All you need to do is keep raising the ratio of robots to humans, and you get whatever GDP you want.
Now, that’s not happening — and in fact, as I understand it, not that much progress has been made in producing machines that think the way we do. But it turns out that there are other ways of producing very smart machines. In particular, Big Data — the use of huge databases of things like spoken conversations — apparently makes it possible for machines to perform tasks that even a few years ago were really only possible for people…
And this means that in a sense we are moving toward something like my intelligent-robots world; many, many tasks are becoming machine-friendly. This in turn means that Gordon is probably wrong about diminishing returns to technology.
Ah, you ask, but what about the people? Very good question. Smart machines may make higher GDP possible, but also reduce the demand for people — including smart people. So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots.
On the positive side, robots ought to progressively free people from the need for human labour. They also have the potential to create unlimited economic growth, since the more robots you have, the more they can produce. On the negative side, they also have the potential to create massive unemployment. We've already seen this in action across a wide range of industries as they move from labour to capital intensive. For instance, it no longer takes nearly as many people to make a car as it used to. Vast numbers of white collar jobs have already been disintermediated by the IT revolution. Eventually this will spread to basic manual and service work as the robots move progressively into the workforce.
Again, this doesn't necessarily matter if the rewards of this revolution are spread equitably through society, but it obviously matters a lot if the owners of the robots – or the capital – monopolise all the wealth that they create.
Indeed, it can reasonably be argued that this is already happening, with inequality steeply on the rise in both advanced and developing economies.
And if you think about it, that's actually what did occur in the early stages of the industrial revolution, when an extreme divide developed between capital and labour.
None the less, society eventually managed to get through it, and the spoils of these productivity revolutions became more widely shared. Capitalism has repeatedly adapted to survive, and it will do so again. When societies don't, their leaders tend to be quite swiftly dispatched to the guillotine.
From the Luddites onwards, every technological breakthrough has always produced the same hand-wringing about the effect on jobs and wealth distribution, but in the end, each one creating far more jobs than it has destroyed – generally in more rewarding and less health hazardous forms of work – and greatly raised living standards in the round.
True, so far. And even if history does repeat itself in that happy way, are we going to have to go through a 1917 or two before we get there?
Remind me again why we still need rising populations. I must be missing something.