[This article appeared in the Journal of Social, Political and Economic Studies, Fall 1999, pp. 349-371. It is based on one of the chapters in the on economic displacement which Murphey wrote in the mid-1990s. In in 2009, it became The Shared Market Economy: A Classical Liberal Rethinks the Market System, which is published on this Web site as book number 12 (i.e., B12) .]
AN ECONOMIC PARADOX?
DISPLACEMENT AND POLARIZATION WITHIN A BOOMING ECONOMY
Dwight D. Murphey
Wichita State University
During much of the 1990s, the United States economy has experienced a boom, with rising productivity and employment. Since mid-decade, moreover, the American public has lost much of its apprehension about "downsizing" and its devastating effects on people whose jobs are displaced. Nevertheless, in the midst of it all, the downsizing has not only continued, but has increased, with companies constantly announcing reductions in workforce. What is underway is an interesting combination of forces: increasing productivity due to advancing computerized technology; a vast expansion of service employment in an economy that as yet remains labor-intensive in those areas; the continuing reduction of manufacturing and agricultural employment - all with an underlying development of a technology that offers to become non-labor-intensive in all areas, including the service sector. This is leading to an increasing polarization of incomes and of wealth, raising substantial questions that even the most devoted follower of a market system must ultimately address.
Key Words: United States economy, polarization of income and wealth, non-labor-intensive technology, downsizing, computerization, market system, inequality, displacement of workers, disintermediation, de-skilling.
It may seem a paradox, but in fact it is the new economic paradigm (at least for the medium-term) for such an advanced economy as the United States': a sustained economic boom with increasing productivity and the addition of millions of jobs, while at the same time vast underlying forces continue unabated, and are even accelerated, that point toward the displacement and marginalization of workers, firms and even industries, and to a polarization of incomes and wealth. These "underlying forces" are the rapid movement into non-labor-intensive technology, immigration, and global competition with low-pay workers, both unskilled and skilled, in the less developed economies.
The boom masks those underlying trends, and in the United States the public anxiety over "downsizing" has greatly diminished since it was at its height in the mid-1990s. Employment continues to grow despite job displacement and marginalization. Why? Because there is such great demand for skilled labor as the new technologies are being developed and implemented, and because 98 percent of the economy (to make up a fanciful percentage that will suggest the extent of the changes that are to come) continues along the lines of the "old (labor-intensive) economy." Construction employment, for example, continues to grow in an industry that is still largely devoted to traditional stick-by-stick methods; the impact of robotics, in-factory construction and the new "materials sciences" has so far hardly been felt.
This is not to suggest that the business cycle has necessarily been repealed. A "boom economy" is dependent upon many variables. So a "boom" and a masking of the displacement may at times not seem paradigmatic. Nevertheless, the impact of the scientific, technical and competitive revolution underway will be such that, subject to some vicissitudes, productivity can be expected to climb prodigiously over the long run, and that in virtually all sectors of the economy the trend will be toward non-labor-intensivity.
Despite all the turmoil created over the past 20 years by "downsizing," displacement has been slight compared to that which will occur during the next few years. What we need to grasp is that the downsizings, layoffs and "early retirements" of recent years are not passing phenomena, despite the boom. They are just early examples of a massive long-term secular tendency.
The extent to which the world is just barely into the scientific-technical revolution that is occurring was brought home to this author recently when he was talking with a surgeon about removing a melanoma from his left ear. At first, it seemed that the whole ear would have to be taken off, then just the top third, and finally just a large square out of the top third. As it has turned out, a skin graft is restoring the ear, after surgery, to some semblance of normality. I mentioned to the surgeon that I had seen on television an actual case of a human ear being grown out of the back of a mouse. "Would it be possible just to take some of my DNA and grow me a new ear of my own that could then be attached?" This drew a laugh from the surgeon, to whom the question no doubt sounded naive. He explained that the clinical application of the body-parts-growing DNA technology is still years away. Outside the laboratory, we are still with the old surgery, albeit that has improved greatly from the surgery of just a few decades ago.
A Centuries-long Shift
A centuries-long shift of human effort has taken place from agriculture into manufacturing and more recently into services. Most of the world's population worked in agriculture until well into the Industrial Revolution; in fact, the recently deceased Sir James Goldsmith said that, worldwide, 3.1 billion people still work on farms. (1) With the rise of industry, people left the country and flooded into the newly emerging factory towns. Where this occurred, the result was astonishing: by 1994 only 2.5 percent of Americans remained in agriculture while at the same time farm output exceeded all prior records. (2) (A larger percentage are involved if "agriculture-related industries" are considered, but those who point to that as a seeming rebuttal appear to be evading the central fact.) Now Paul Strassman tells of yet another astonishing development: that "with robots, factories can operate with less than 15% of the workforce." This, in turn, has led to "an enormous expansion of employment in the service sector." (3)
The move from manufacturing to services (while there has been a continuing increase, also, in manufacturing output) is demonstrated by Cohen and Zysman: "The data show a relentless decline in manufacturing employment, from about 50 percent of all jobs in 1950 down to about 20 percent now , and an irresistible increase in service jobs, up to about 70 percent of all jobs." Manufacturing in the United States hadn't increased its net employment since 1973. (4) Business Week reported in 1994 that during the 1980s "the service sector accounted for practically all of the growth in jobs and corporate profits." (5) In July 1999, the Federal Reserve reported that manufacturing output has continued to rise while at the same time "the manufacturing sector continued to lose jobs," including 488,000 between March 1998 and July 1999. The Associated Press tells how "economists said productivity gains - largely through computers and other technological improvements in the workplace - help explain why output rose even as jobs were shed." (6)
The other advanced economies have experienced much the same. Jaroslaw Wieczorek reports that "in the United Kingdom, the share of manufacturing employment was 33 percent in 1900 and remained at more or less the same level until 1960... [but] by 1990, the share of manufacturing employment in the United Kingdom was barely half its 1956 level." In Germany, "its share of 30 percent in 1990 seems relatively low compared with the 1969 peak of about 45 percent." (7)
The Specifics of Displacement
About agricultural displacement, Jeremy Rifkin, author of The End of Work, says that "new breakthroughs in the information and life sciences threaten to end much of outdoor farming by the middle decades of the coming century... leading to a world without farmers." (8) Even before the indoor, factory-like farm comes to predominate, fields will be farmed by "sophisticated computerized robots." (9) As Third World farmers become more efficient, farm production will multiply while at the same time hundreds of millions of people who now rely upon it for their income will be displaced. Paul Kennedy tells how genetically engineered soybean or rapeseed threatens to replace coconut oil, "upon [the export of] which one-quarter of the Philippine population is at least partially dependent." He says the laboratory production of rubber could put some 16 million workers out of work in such rubber-producing countries as Indonesia and Malaysia. (10) In Europe, according to Edward Yoxen and Vittorio Di Martino, the pressures from biotechnology are such that some farmers fear extinction. Those authors say that accelerating farm technology is making productivity grow faster than demand, leading in Europe to falling land prices and ever fewer farms and farmers. (11)
The displacement makes the small farm particularly obsolete. An example came during the 1998 controversy in Kansas over the introduction of "hog megafarms." A company was given permission to establish two farms that together would have 40,000 sows (which could have as many as 500,000 piglets per year). This led to a movement of western Kansas farmers known as Families Against Corporate Takeover. (12) The number of hog farms in Kansas fell from 22,000 in 1965 to 3,600 in 1997, and the number continues to fall. (13)
An analysis of trends within American agriculture in the Wichita Eagle in late June 1999 indicates that "the number of full-time farmers is falling fast... As new technologies displace people, farms keep consolidating into fewer and larger enterprises... And yet there's no food crisis in America... Farmers continue to produce mountains of food." (14)
A news report on dairy farming in late 1996 spoke of a nationwide trend that "has been reducing dairies all over the country at a fairly steady rate for the last two decades." It said "in 1995 and 1996 the trend has escalated steeply. Nationally, there were 647,000 farms with milk cows in 1970, according to the Agriculture Statistics Service. There were only 140,000 in 1995." It speaks of "mega-dairy operations" that have taken the place of the small farm. (15) In light of the new mass production and applications of biotechnology, it is hard to imagine that the individual farmer will continue, within a few years, to have any appreciable place, except on a hobbyist basis.
Economic theory says that if wages are flexible there will, subject to some frictional disconnections, always be demand for as many people as want to work. The stagnation of incomes and a polarization of wealth can serve as alternatives to unemployment. In this article, it is enough to see the impact of the new technology on the jobs that have existed. That impact has already been enormous even in its incipient stages.
Tevi Troy at the Hudson Institute reported in May 1996 that "forty-three million jobs have been eliminated in the United States since 1979. Many of these downsized workers cannot find other jobs and, when they do, find them at lower wages...." (16) Wallace Peterson cites a study telling how in the United States between 1973 and 1986 a great many young males left the workforce altogether, disappearing from unemployment statistics. (17)
As we have noted, the displacement of workers has been masked in the late 1990s by the economic boom. A May 1999 news report says that "in April, the national economy added, on a net basis, nearly a quarter of a million new jobs despite continued losses in manufacturing and farming." (18) Just the same, a news account a year earlier (in April 1998) said that "corporate layoff announcements [are] up 38% over year-ago levels"; (19) and a news report in June 1998 said "the total number of cuts for this year is surpassing that of last year and could reach 500,000." (20) In fact, a later news report showed layoffs exceeded even that prediction: 575,000 just through November; (21) and a recap in January 1999 said that there were an additional 103,166 in December. (22)
Although "anecdotal," specifics help to flesh out the statistics:
Press clippings for 1999 and late 1998 show new hiring (as by Ameritech Corp.-SBC Communications, Unisys and Intek Information Inc.), but also show many companies cutting their workforces: Raytheon Co, 14,000 (16%) over two years, even though "business is good"; Merrill Lynch & Co., 3,400 (5.2%); J. P. Morgan, 700 (5%); Heinz, 400; Amway, 542 (10%); Eastman Kodak, 20,000 (20%); Boeing, 48,000 after June 1998; Kellogg Co., 525 salaried workers (21% of North America office force); AB Volvo, 5,300 worldwide, plus 700 consultant positions; Chesapeake Corp., 250 (5%); Levitz Furniture Corp., 1,000 (25%); Citigroup Inc., 10,400 (6.5%). Levi Strauss is moving its jean production overseas, and closing 24 plants in the United States and Canada in 1998 and 1999, with a 30 percent cut in its workforce in those countries. (23) In June 1999, Procter & Gamble announced it "will eliminate 15,000 jobs [including 4,300 in North America] and close 10 plants over the next six years in a move designed to cut costs, introduce new products faster, and boost sales." (24) Notice that reducing the workforce is not considered inconsistent with, but is rather conducive to, increased profits and competitiveness.
In 1989, the Arizona Republic reported that "it takes 50 percent fewer man-hours to produce a ton of steel today than it did at the beginning of the 1980s." That same year, the Sacramento Bee said the number of U.S. steelworkers had dropped from 400,000 in 1980 to 155,000 in 1989 - even as production increased. (25)
William Greider wrote in 1997 that "General Electric tripled its revenues and profits during the last fifteen years, while it shrank its worldwide workforce from 435,000 to 220,000." (26)
Kevin Phillips tells how "General Motors announced that 15,000 of its 99,000 salaried positions would be eliminated between 1991 and 1993," and says that a million and a half American white-collar workers lost their jobs in the 1980s, a trend that would accelerate in the 1990s. (27) The 1998 General Motors strike was largely over "job security" as GM sought to expand production in new factories overseas and to reduce its American workforce. The strike ended without assurances on that major issue. (28)
In February 1998, a news report told of AT&T's plan to cut 18,000 more jobs, and said that "since 1993, AT&T has announced job cuts five times, introducing plans to eliminate a total of 85,500 positions." This has all been part of a "struggle to remake itself" in which the company has continued "to find that thousands of its employees are superfluous." (29)
When the 1998 merger of BankAmerica and NationsBank was announced, the plan was to cut 8,000 jobs (4.4% of the workforce) to help produce a $10 billion annual profit. (30)
The frequency of such reports is well illustrated by there having been a report two days later, on February 10, 1998, that Paging Network, Inc., was about to "cut 1,800 jobs, or 30 percent of its U.S. workers." (31)
Alfred Balk says that "in mining, since World War II employment has fallen by 300,000 while production has risen by half. In textiles, yardage has remained constant despite cutting 550,000 jobs." "In 1987, Ford made 10 percent more cars than nine years earlier - with 47 percent fewer production workers." In the mid-1980s, "GM, in one restructuring, announced a cutback of 29,000 workers." (32
Greider tells how in the two decades between 1971 and 1991 the worldwide employment by "the world's 500 largest multinational corporations" remained flat at "around 26 million people" while their sales multiplied sevenfold. (33) David Boaz of the Cato Institute says that during the 1980s "employment in the Fortune 500 fell by three-and-a-half million." (34) In early 1996, Business Week reported a study by Harvard business school professor Nitin Nohria of 100 of the United States' largest companies; Nohria found that from 1978 to 1996 they laid off three million workers, 77 percent of them white-collar. It was a net 22 percent of the companies' total workforce. (35)
Fortune magazine cited the Hudson Institute in April 1996 as projecting a loss of 160,000 jobs in utilities during the next few years because of consolidations and restructurings. The same article said "Deloitte & Touche's financial services consulting group estimates that 450,000 banking jobs will vanish over the next five to ten years," with the most vulnerable employees being "tellers, clerks, and their supervisors." (36)
"U.S. flag merchant vessels employ[ed] 110,800 seamen" in 1947, but this diminished to only 18,300 in 1981, according to Jay Olnek. (37)
As to office work, Fred Block tells how "the initial period of computerization created large numbers of low-skilled data-entry jobs - many of which have subsequently been eliminated with more sophisticated data-entry systems... Entering information with an optical scanner is already cheaper than hiring keypunchers in the Third World." (38)
The Economist says "telephone operators are being replaced by voice-recognising computers, postal workers by address-reading machines, bank tellers by cash-dispensing machines that can handle ten times as many transactions in a day." (39)
"Electronic synthesizers have markedly reduced employment possibilities for studio musicians," according to an ILO symposium. (40)
The Clinton administration in the United States instituted a "national performance review" with the announced goal of cutting 252,000 government jobs, a goal that was later raised to 272,900. (41) This has had a major impact on all federal government departments during the 1990s.
Librarianship, according to an article in Mother Jones in October 1995, is among the "professions facing extinction at the hands of machines over the next 20 years." (42)
Even so obscure a profession as braille translator is disappearing. A news report in July 1997 said "the demand for braille translation has declined... now that computer programs can translate mass publications. The braille language for reading has been besieged by audio tapes, voice-recognition computers and other devices." (43)
In early 1997, it was reported that the unemployment rate in France had reached 12.6 percent. "More than 1 million people have been out of work longer than a year, a number that is rising... Young people especially are hard hit... Nearly 25 percent of those between 18 and 25 are officially unemployed but the real figure is considered much higher. Young people routinely are shunted into one training program after another, interspersed with short-term or part-time jobs. The majority of them live with their families... Fear of unemployment also permeates France's management class...." (44) In late January 1998, Business Week said that "overnight, France's silent masses of unemployed have become a powerful political force. Rallying outside public offices by day and setting bonfires in front of benefits offices by night, they are riveting international attention on the growing gap between France's rich and poor. The stark reality of 1 million long-term jobless getting a paltry $350 a month in benefits has jolted a nation that prides itself on compassion." The article spoke of "a broad sense of betrayal" and of "evidence of rents in France's social fabric." (45)
The next month, in February 1998, The Economist said "the German jobless total is edging inexorably up." Unemployment there is "nearly five times higher than two decades ago." (46)
A vast churning is occurring among business firms, where the struggle to survive amid lowest-cost world competition leads to much desperate activity. Larger-scale enterprises such as Wal-Mart, which has displaced countless small-town retailers, have succeeded, although they themselves will soon be threatened by direct consumer-factory transactions through the Internet. At the same time, the new technology lends itself to tiny business units serving unique niche-markets.
Firms and production facilities flee to the places of lowest-cost labor, only to move again when a still-lower-cost location is found; by 1992, there were 1800 U.S. manufacturing facilities, with half a million workers, across the border in Mexico as part of Mexico's Maquiladora program. MagneTek set up a 150,000-square-foot factory across the Rio Grande from Brownsville, Texas. It is not simply that American companies are moving south; Asian companies are also moving to northern Mexico. Some of the production is high-skilled, since Mexican engineers make just half as much as American engineers. (47)
By 1992, no television sets were made in America; Zenith Corporation had just "turned out the lights" by moving the final production facility from Springfield, Missouri, to Reynosa, Mexico. (48) By the end of 1998, two-thirds of all television sets sold in North America were manufactured in Baja California. (49) In June 1998 it was reported that Motorola cut 15,000 jobs worldwide while it planned to increase its investment in China from $1.1 to $2.5 billion during the following two years. Its employment is going up there, and in Sichuan province "Chinese workers already manufacture 1.4 billion semiconductor components a year." (50)
The Kansas town of Winfield was hard-hit in January 1997 when crayon-maker Binney & Smith closed its plant after 44 years, abolishing 345 of the city's highest-paying jobs. The company's CEO explained that "improvements in automated machines had tripled production at the company's plant in Easton, Pa." The Wichita Eagle said "the closing is the latest in a series of shutdowns that have devastated Cowley County in recent years." (51)
IBM's policy was one of employee-retention until competition forced the company to abandon it in the mid-1980s, after which the firm cut its workforce from 405,000 employees to 225,000 by early 1996. (52)
Sears "has shed 50,000 people during the 1990s," according to Fortune in the same 1996 article.
AT&T, Fortune said, "employs roughly 300,000 - and plans on reducing that number by two-thirds by 1998."
In November 1997, Eastman Kodak announced it was cutting 10,000 jobs in the latest of a half-dozen restructurings that began in 1983. (53)
The same day, Fruit of the Loom, Inc., told the press it would discard 2,900 workers in the United States, which is 19 percent of its workforce in the U.S., after already cutting 4,200 jobs in the preceding three months. It would close its plant in Louisiana and move to lower-cost plants in other countries. The news report said "Fruit of the Loom contended it has been forced by the North American Free Trade Agreement and a global trade accord to look for cheaper labor. Workers at its American plants earn an average of $10 an hour; those overseas fetch as little as 35 cents an hour." (54)
Whole industries are churning. There is a struggle to survive similar to that of individuals and firms.
Business Week in late 1995 told about deep-water oil and gas production. Large platforms costing almost $1 billion are giving way to automated production technology located on the ocean floor. Pumps will get the oil and gas to shore. (55)
In the steel industry, minimills that melt steel scrap have become major competitors with the big steel companies. "Their secret," according to Business Week, is "state-of-the-art technology, nonunion labor, and flexible mills near their markets." At the same time, the large steel companies, after being protected by the Reagan administration's "voluntary restraint arrangements" limiting imports, have become competitive again by invested many billions of dollars in modernization and drastically cutting their workforce. (56)
William Davidow refers to a "process of disintermediation - getting rid of services that are in the middle." This will go far toward eliminating wholesalers, retail stores, publications carrying advertising, travel agents, automobile dealers, stockbrokers, and even educational institutions. (57) This is illustrated by a news report in February 1998 that "online stock trading... is changing the way stocks are bought and sold. More than 3 million Americans have active online stock accounts, and they're saving hundreds of millions of dollars using them... They formerly used a broker who charged $100 or so per trade - but now use an online broker that charges $12." Even the cost of online trading is falling: "In 1996, an average online trade cost about $30. The average today is less than $15. And the cost is likely to continue to go down." (58) As "disintermediation" occurs in one area after another, the present economy will change beyond recognition.
Historian-businessman Otto Scott says "U.S. shipyards are gone: vanished into the mist of 'free trade' that has turned so many U.S. heavy industries over to other countries and peoples. The vessels that arrive in our ports are virtually all foreign-owned, built in foreign shipyards." (59)
Although The Economist says "technology will never replace teachers," (60) the continued existence of universities is problematical. "Distance-learning" is coming in rapidly, with a great many educational suppliers beginning to compete through the Internet and interactive video. They will offer students accredited courses, degrees and various credentials at a fraction of the present cost. If, to speak hypothetically, a student can take a for-credit course on the "History of Western Civilization" from an Oxford professor for $11 instead of a similar course from a local university for $300, who's to say that the latter won't be under threat of extinction? Parker Rossman says "millions of students take courses electronically, many scholars use electronic networks for global-scale research projects, and other signs point to the emergence of a worldwide electronic university." The National University Teleconferencing Network was established as early as 1982 to offer programs by satellite. Two years later the National Technological University was formed as a consortium of engineering departments, and offers degrees. The "Mind Extension University" awards MBA degrees through cable television. Rossman tells of research showing that distance-learning students do as well as students in classrooms. He mentions that Herbert London of New York University predicts "the end of the university as most Americans picture it." (61) In mid-1998, Oxford University announced that it would begin offering Internet courses, using "special tutors [to] supervise studies, using e-mail, Internet discussions and voice-based conferencing." (62)
The impact on university personnel is already apparent. Business Week has reported a nationwide move to weaken tenure, saying it "is being driven as universities struggle with high costs." Here is a fact worth noting: "Some 47% of university faculty now are part-timers, vs. 32% in 1980, according to the AAUP." (63)
The challenge to public universities becomes especially clear when we consider that their funding has been based on "credit-hour production"; i.e., the number of students taught. The funding of teaching has then carried with it, as if it were an incidental, the "community of scholars" that make up the heart and soul of a true university. The professors do some teaching but mainly pursue a life of the mind. If the teaching function disappears in a welter of electronic competition, will state legislatures make the leap from the old funding method to one that will simply pay to maintain the community of scholars as such? Will contributors to private university endowments make the leap, either? It is doubtful in both instances, since continued funding will require a higher level of appreciation of the scholarly function per se than probably exists. My experience as a professor is that most friends think I am enjoying time off while I am home writing a book or an article.
Of National Economies
Rifkin says that "vanilla is the most popular flavor in America" and that "in Madagascar alone, which produces more than 70 percent of the world's harvest [of vanilla], 70,000 peasant farmers rely on this single crop for their livelihood." It has been discovered, however, that the expensive hand-pollination that goes into raising a vanilla orchard can be replaced by inexpensive gene-splicing techniques. Vanilla can be made in large laboratory vats "by isolating the gene that codes for the vanilla protein and cloning it in a bacterial bath." This makes the Madagascar farmers obsolete. (64) In this we see a prototype of what is going to face the countries and peoples who are not high-tech. A harbinger of the future appears in the September 1998 news report that "tens of thousands of Brazilians marched to demand relief from poverty and neglect on Monday, the country's Independence Day. In dozens of cities, the fourth annual 'Cry of the Excluded' rallies drew the landless and the jobless...." (65)
Will Skilled and Service Jobs Fill the Void?
When both high-skill tasks and services become non-labor-intensive, and that change has been fully absorbed into the economy, the displacement that has been underway for centuries will have reached a culmination. To those who fail to see this, high-tech and services are often looked to together as an inexhaustible frontier to absorb labor. This reflects the faith of the free marketer, whose philosophy tells him that in a market economy there will always be endless things to do, since scarcity is a given and human wants are infinite. Today, we hear this optimism expressed as the conventional wisdom. In the movie "You've Got Mail," a small bookstore goes out of business when a giant store opens around the corner, but it is presented as a blessing-in-disguise because the small store's owner (played by Meg Ryan) goes on pluckily to become a writer of children's books. For many, there is a factual basis for the optimism. Scott Adams, the creator of the satirical comic strip "Dilbert," says that he hears from many readers who have been laid off - and who have gone on to better jobs.
But the optimism can hardly be the whole story. If the principal services come to be performable with only minor, rather than mass, human effort, we get to what Rifkin calls "the end of work." Edward Chase's review of Stanley Aronowitz and William DiFazio's The Jobless Future: Sci-Tech and the Dogma of Work says those authors "dismiss the lingering expectation that the high-tech era will ultimately provide more employment. 'The new technology has fewer parts and fewer workers and produces more product. This is true not only in traditional production industries but for all workers, including managers and technical workers.'" (66)
Even Services Will Require Less Human Input
Many services are coming to require less human input, as our review of the displacement has shown. A scan of the following developments will underscore that many services are becoming unneeded and that whatever takes their place is not likely to require mass human effort either:
Fred Block points out that "the initial period of computerization created large numbers of low-skilled data-entry jobs," but that many "have subsequently been eliminated with more sophisticated data-entry systems."
He cites J. David Roessner's The Impact of Office Automation in Clerical Employment, 1985-2000 to the effect that clerical jobs in the banking industry are declining by 30 percent between 1985 and 2000.
Keypunch jobs might for a while be exported to low-wage countries, but this won't last long. He says that "entering information with an optical scanner is already cheaper than hiring keypunchers in the Third World." (67)
Matzner and Wagner say that in the manufacture of an aircraft wing "software gauges, computer-controlled coordinate measuring machine [sic] may cut hundreds or thousands of hours from inspection tasks...." (68) [This is an example that illustrates, too, the gray area that has come into being between services and manufacture. How do you count "inspection"?]
The same authors talk about computer-aided drafting's replacing manual drawing in architectural firms. Productivity rises sharply, "sometimes by factors of ten or more." (69)
Middle-management and staff positions are disappearing. Writing in 1994, Wallace Peterson says that "since mid-1980, over two million middle-management jobs have been permanently eliminated." (70) Murray Weidenbaum tells how "when senior executives can receive up-to-the-minute information on a computer screen on their desks, a cadre of middle managers and corporate staffers is no longer needed to collect and interpret that information." (71)
Because firms are becoming able to interface with their customers by online telecommunications, Harald Malmgren foresees a drastic reduction in the sales forces of large businesses. (72) The skills needed in retailing "are being reduced as a result of the computer-mediated centralization of the information process," according to Ken Ducatel. (73) Wholesalers, too, "are becoming redundant" as large marketing firms and even consumers deal directly with the factory. (74)
Americans are regaled with reports of the number of new jobs created. In January 1999, the press told of a net gain of 2.9 million jobs in 1998. (75) A year earlier, Business Week told how "in the decade from 1986 to 1996, the U.S. economy... [added] 21 million jobs." The occupations that will add the most positions in the decade between 1996 and 2006 are cashiers, systems analysts, general managers and top executives, registered nurses, retail salespersons, truck drivers, home health aides, and teacher aides. "Service," the article said, "will account for almost all the job growth. Manufacturing is expected to shed some 35,000 jobs a year, with only construction boosting employment." (76) Notice that several of the service occupations that are expected to add jobs will eventually be displaced by technology: cashiers, retail salespersons, perhaps truck drivers, and construction workers.
Even at the height of the economic boom in the United States in 1998, there were few jobs for the unskilled. A survey released at the U.S. Conference of Mayors' national convention in June 1998 indicated, according to a news report, that "nationally, there are twice as many unskilled job-seekers as there are jobs available that require few or no skills." (77)
Even High-Tech Tasks Will Become Less Labor-Intensive
What about high-tech? It will continue to employ a rush of new talent to feed its rapid development and implementation. This need will be so great that for many years there will be vast opportunity there for those with the intelligence and aptitude. Because rapid innovation will remain a feature of society unless we allow our civilization to tear apart under the pressure of displacement and polarization, new opportunities will continue to arise in perpetuity for such people. But high technology's long-term tendency is to make its own workforce redundant. The present technology will be non-labor-intensive itself once it reaches maturity, and later innovations are likely to be non-labor-intensive as well. As the technology becomes self-automated and "user friendly," fewer skills are needed to run it, so that less high-skilled labor is required. This is referred to in the literature as "de-skilling." Harald Malmgren says that "production systems that become possible with CIM [computer integrated manufacturing] (such as robotics, automated transfer, laser processing, and new techniques for precision forming and shaping) will tend to reduce the significance of labor...." (78)
The Economist says that "even the skilled are at risk. Already, clever computer programs can diagnose some illnesses as well as doctors can. A robot that will perform hip replacements is under development in California. Some American companies are using Resumix, a computerised hiring system, to screen job applicants. In 1993, a 'computer-generated' novel was deemed no worse than hundreds of humanly crafted love stories published each year." (79)
The worldwide flight to low-pay labor affects the high-skilled as well as the low-skilled (but it will not be long before even the low-pay workforces of either type are eclipsed by even-lower-cost technology). Otto Scott confirms this when he says "the industrial migration that began with steel and the garment industries, automotives, aeronautics, shipbuilding and mining among others is now moving to computer chips, computer programming and equipment design centers in China, India, Singapore, Hong Kong, Taiwan and Australia - and South America." (80)
Will There Be Work for All?
It would seem from all of this that there is a strong empirical case, under impending circumstances, against the faith of those who hold that there will always be inexhaustible sources of work. The ready rebuttal is that "no one has ever been able to foresee what will occupy people in future generations." Along these lines, Peter Huber argues that "technology does indeed transform the nature of work... But it doesn't end it... Rifkin ... allows for no happy surprises, no unexpectedly favorable developments, no unanticipated opportunities for new kinds of workers." (81) John Nelson, now an emeritus professor of philosophy at the University of Colorado, expresses a similar expectation: "The bottomlessness of men's appetites, their technological inventiveness, their past accumulations of wealth or capital, the same effects can plausibly be maintained to hold good now as in the past... Inventors producing, through further innovations in technology and design, new goods and thus new appetites and their satisfaction." (82)
What this rebuttal misses is that we have never before seen a situation in which every field of endeavor will potentially be met by a technology that minimizes work. The situation is sui generis. One does not have to engage in the "lump of labor fallacy" (the simplistic view that there is just a fixed amount of work to be done in the world) to realize this. Human beings no doubt have vast future undertakings to adventure upon, including space and perhaps oceanic colonization. There is no end to the things that need doing just to bring everybody in the world up to the existing standard of living in the developed countries, much less to the potential standard that is visible on the horizon even today. So there is no thought of having a fixed amount of tasks to undertake. The question is whether they will employ hundreds of millions, even billions, of people. The president of one of Europe's conglomerates was on the mark recently when he asked, "Tell me where? In what jobs? In what cities? Which companies?" (83)
Will Training for High Skills Be the Answer?
The easiest and most common recourse is to say that "people must train themselves to be highly skilled, to work flexibly and to be comfortable with considerable insecurity." Today's literature is filled with this prescription. But it is wishful thinking, engaged in by commentators who are willing to grasp at any straw or to think only incompletely about a problem. They are excellent people, but they forget two fundamentals: (a) First, that half the members of the human race are below 100 in I.Q. and have always found employment in repetitive tasks. These are people who have little aptitude for flexibility and little tolerance for ambiguity. It is no slur against them to point this out; it does not reflect upon their character or worth as human beings. But it does negate the expectation that they can en masse "turn to high-skill training" and take jobs where they are counted on to make complex decisions as masters of advanced technology. (b) Second, that there just will not be enough high-skilled work, under any conceivable scenario, for billions of people to perform. There will not be that much to occupy the citizenry even in one of the advanced economies, much less in the less developed countries.
Polarization, Not Unemployment, is the Likely Result in the More Laissez-faire Economies
In the advanced economies, the engine of science, high technology and global competition will cause the market economy to so greatly enrich a portion of the population that their wealth may well provide the needed demand for services from the others. Riches will go to leading-edge entrepreneurs, that fraction of the population that is employed in operating existing or in creating new technology, people who provide something marketable that mass markets can disseminate to tens of millions or even billions of others, and investors who own part of the productive mechanism. If there are enough of these, they will provide demand for a multitude of subsidiary services to be performed by others.
The wages for the millions who will provide ancillary services will be pressed down, to be sure, by the limitations of demand, the introduction of non-labor intensive ways of providing them, and the enormous supply of people anxious to offer them. In theory, those wages could fall to the subsistence level, but in fact they will not unless the cultural factors that have repealed Malthus's dire predictions are also repealed, such as by mass immigration. In fact, the "rising tide" of potential well-being caused by science and technology may even lift everyone to a level that in absolute terms is higher than the present one. But the wages will be very low relative to the riches of the groups of people who are able effectually to draw income from the productive mechanism.
Although we are still just in the incipient stages, and the process has much further to go, this polarization of income and of wealth is precisely what the United States has been experiencing. The Federal Reserve Bank symposium at Jackson Hole in August 1998 had income inequality as its subject. Alan Greenspan, the Federal Reserve's chairman, observed that "in recent years... several countries have experienced a widening in earnings and income inequality... There has been general agreement that technological change has been a key contributing factor...." One speaker, according to the summary, "noted that the rising wage inequality in the United States is a pervasive phenomenon, running throughout income and educational groups." Another speaker indicated that "high-income individuals have experienced relatively larger gains in income than low-income individuals in recent years...." (84) These observations are borne out by the ever-widening difference, say, between executive compensation and the compensation of the average employee of an American firm; in mid-1999, an AFL-CIO study reported that "the average CEO of a major corporation in 1997 made $7.8 million, or 326 times more than the $24,000 earned by a typical American factory worker." By comparison, the multiple in Germany is 25 times the average worker's wage. (85)
Implications for Supporters of a Market Economy
There is some possibility that the supporters of a market economy will extrapolate their market ideology (which has in the past welcomed, as a hallmark of freedom and incentive, the inequalities of the old economy) to provide a normative rationale for the developing polarization. But such a rationale will not be true to the values of classical liberalism, when those values are understood as a whole. To classical liberalism the market economy is not just an essential alternative to a command economy, but is a way to realize the benefits of the vital energies of millions of people pursuing their own ends. The aspiration has been for a vast middle class, with the entire population producing and benefitting. Classical liberals have believed in an aristocracy of merit, not culturally (or technologically) hardened aristocracy. They saw the Old Regime of medievalist Europe as antithetical to their "republican" aspirations, not as an expression of them. Classical liberals will need to examine fresh the fundamental conceptual basis for earnings and property, revisiting John Locke to raise again the questions of legitimacy and entitlement. The Lockean concept has been that "somebody mixes his labor with something and thereby becomes the owner of it," creating property; and that all earnings and wealth are then derived from freely-contracted-for transactions dealing with that property or the property each person has in his own services. The classical liberal economist Frederic Bastiat centered his classic little book The Law on the premise that any deviation from this property-and-contract nexus is theft. This has long provided a compelling rationale against socialist attacks on the market. The question will be to what extent it continues to do so under conditions that defeat much of what classical liberalism has long sought.
1. Sir James Goldsmith, The Trap (New York: Carroll & Graf Publishers, Inc., 1995), p. 106.
2. Wallace C. Peterson, Silent Depression (New York: W. W. Norton & Company, 1994), p. 193.
3. Paul A. Strassman, Information Payoff: The Transformation of Work in the Electronic Age (New York: The Free Press, 1985), p. 215.
4. Stephen S. Cohen and John Zysman, Manufacturing Matters: The Myth of the Post-Industrial Economy (New York: Basic Books, Inc., Publishers, 1987), p. 54. See p. 13 for their statement that agricultural production has increased immensely.
5. Business Week, "The Information Revolution 1994," p. 22.
6. Denver Rocky Mountain News, July 17, 1999, Associate Press report by Jeannine Aversa.
7. Jaroslaw Wieczorek, "Sectoral Trends in World Employment and the Shift Toward Services," International Labour Review, Vol. 134, 1995, No. 2, p. 216.
8. Rifkin, End of Work, p. 109.
9. Rifkin, End of Work, p. 110.
10. Kennedy, Preparing for..., p. 80.
11. Edward Yoxen and Vittorio Di Martino, ed.s, Biotechnology in Future Society: Scenarios and Options for Europe (Luxembourg: Office for Official Publications of the European Communities, 1989), pp. 6, 11.
12. Wichita Eagle, June 19, 1998.
13. Wichita Eagle, November 22, 1998.
14. Wichita Eagle, June 27, 1999.
15. Wichita Eagle, November 3, 1996, report by Phyllis Jacobs Griekspoor.
16. Tevi Troy, "U.S. job options still exist," Wichita Eagle, May 20, 1996.
17. Peterson, Silent Depression, p. 82.
18. Wichita Eagle, May 8, 1999, referring to a Labor Department report.
19. Business Week, April 13, 1998, column by Gene Koretz.
20. Wichita Eagle, June 5, 1998. Notice the favorable economic hype, though, when the news item is headed "Job cuts down 76 percent from April."
21. Wichita Eagle, December 16, 1998.
22. Wichita Eagle, January 8, 1999.
23. Wichita Eagle, February 23, 1999.
24. Wichita Eagle, June 10, 1999.
25. Both articles appear on p. 40 of Oliver Trager, ed., Can America Compete? (New York: Facts on File, no publication year given).
26. Greider, One World, Ready or Not, p. 216.
27. Kevin Phillips, Boiling Point (New York: Random House, 1993), p. 11.
28. Wichita Eagle, July 29, 1998, report by Keith Bradsher of the New York Times News Service.
29. Wichita Eagle, February 8, 1998, New York Times News Service report by Seth Schiesel.
30. Wichita Eagle, August 18, 1998.
31. Wichita Eagle, February 10, 1998.
32. Alfred Balk, The Myth of American Eclipse (New Brunswick: Transaction Publishers, 1990), p. 45.
33. Greider, One World, Ready or Not, p. 21.
34. David Boaz, "Industrial Policy Marches On, Despite a History of Failure," Human Events.
35. Business Week, March 11, 1996, p. 50.
36. Fortune, April 1, 1996, p. 76.
37. Jay I. Olnek, The Invisible Hand (New York: North Stonington Press, 2nd ed. 1984), p. 81.
38. Block, Postindustrial Possibilities: A Critique of Economic Discourse: (Berkeley: University of California Press, 1990), pp. 104, 106.
39. The Economist, February 11, 1995.
40. World of Work, No. 19, 1997, p. 11.
41. Jobs & Capital, Vol. V, Spring 1996, p. 38.
42. The Mother Jones article is commented upon in the Library Journal, October 1, 1995, p. 13.
43. Wichita Eagle, July 1, 1997.
44. Insight, January 20, 1997, pp. 45-6.
45. Business Week, January 26, 1998, p. 44.
46. The Economist, February 7, 1998, p. 52.
47. Washington Times' National Weekly Edition, November 30-December 6, 1998.
48. Donald L. Barlett and James B. Steele, America: What Went Wrong (Kansas City: Andrews and McMeel, 1992), pp. 34, 35.
50. Wichita Eagle, June 21, 1998, Cox News Service report.
51. Wichita Eagle, January 14, 1997.
52. Joseph Nocera, "Living With Layoffs," Fortune, April 1, 1996, p. 69.
53. Wichita Eagle, November 12, 1997.
54. Wichita Eagle, November 12, 1997, report by Associated Press.
55. Business Week, October 30, 1995, p. 74.
56. Business Week, August 22, 1994, p. 25.
57. William Davidow, "The Buck No Longer Stops Here," Forbes ASAP, February 24, 1997, p. 24.
58. Wichita Eagle, February 1, 1998, Knight Ridder News Service report by David Hayes.
59. Otto Scott's Compass, December 1, 1996, p. 8.
60. The Economist, September 28, 1996, p. 45.
61. Parker Rossman, The Emerging Worldwide Electronic University: Information Age Global Higher Education (Westport, CT: Greenwood Press), pp. 3, 6, 7, 11.
62. Wichita Eagle, July 21, 1998.
63. Business Week, June 10, 1996, p. 40.
64. Rifkin, End of Work, p. 124.
65. Wichita Eagle, September 8, 1998.
66. Review by Edward T. Chase in New Leader, March 13, 1995.
67. Block, Postindustrial Possibilities, pp. 103-105.
68. Egon Matzner and Michael Wagner, ed.s, The Employment Impact of New Technology: The Case of West Germany (Aldershot: Gower Publishing Company Limited, 1990), pp. 44-5.
69. Matzner and Wagner, Employment Impact, p. 46.
70. Peterson, Silent Depression, p. 23.
71. Murray Weidenbaum, "Outline of a New Social Contract," Challenge, January/February 1995.
72. Harald B. Malmgren, "Technology and the Economy," in The Global Economy, William E. Brock and Robert D. Hormats, ed.s (New York: W. W. Norton & Company, 1990), pp. 105-6.
73. Ken Ducatel, ed., Employment and Technical Change in Europe (Brookfield, VT: Edward Elgar Publishing Company, 1994), p. 4.
74. Rifkin, End of Work, p. 151.
75. Wichita Eagle, January 9, 1999.
76. Business Week, January 26, 1998, p. 22.
77. Wichita Eagle, June 20, 1998. Despite the content of the report indicating a lack of jobs nationally for the unskilled, the news item is given a favorable twist by emphasizing the local situation in Wichita; the headline reads "More unskilled jobs in Wichita than workers." It is understandable that the Wichita paper believes its readers are most interested in the local situation, but the result is, just the same, an example of the "good news" economic hype that has helped mask the displacement of workers and small businesses even during the boom.
78. Malmgren in The Global Economy, p. 98.
79. The Economist, February 11, 1995, a review of Rifkin's The End of Work entitled "A World Without Jobs?."
80. Otto Scott's Compass, October 1, 1995, p. 8.
81. Peter Huber, "Orwell, Rifkin and silicon," Forbes, October 23, 1995, p. 330.
82. Letter from John Nelson, retired professor of philosophy at the University of Colorado, to Dwight Murphey dated October 25, 1996.
83. Quoted in the Atlanta Business Chronicle, April 21, 1995, in its review of Rifkin's The End of Work.
84. Federal Reserve Bank of Kansas City Economic Review, Fourth Quarter 1998, Vol. 83, No. 4, pp. 1, 5, 8.
85. Wichita Eagle, Associate Press report by Maggie Jackson, May or June 1999.