[This book review was published in The Journal
of Social, Political and Economic Studies, Fall
1996, pp. 307-342.]
The 'Warp-Speed" Transformation of the
World Economy: A Discussion of Ten (of the Many) Recent Books
Dwight
D. Murphey
Government
commission reports in the
The
point will be that at the close of the twentieth century we live in the period
of the most rapid scientific and economic -- and, therefore, we must
understand, social, political, ideological and institutional -- change in human
history. Change is taking place on a scale heretofore unimaginable and is
accelerating at what science fiction calls "warp speed."
This
is change full of the most astonishing promise, with goods and services soon to
become available of a type and on a scale never before dreamed of. The hopeful
implications of the promise are by themselves enormous. Bill Gates' book, one
of those reviewed here, shows a whole new world of possibility. Simultaneously, however, the change is
chewing up and spitting out much that is central to the lives of individuals
and of peoples as they now exist. Despite much anxiety about layoffs and
"downsizing," Americans have just begun to feel its effects.
This
radical change marks a sharply accelerated advance of a process underway for
centuries. With the Industrial Revolution, hundreds of millions of people
worldwide migrated from agriculture into industry (without, by the way, any
slackening of the increase in agricultural productivity). As recently as the
past half-century, advanced economies have seen a migration from industry
(which also has nevertheless continued to grow in productivity) into service
occupations. And now science and computerization are quickly accomplishing a revolutionary final step: through robotization, biotechnology and such things as the
"paperless office," they are supplanting human effort in virtually
every area..
The world is only at the beginning of this displacement, but it is everywhere to be seen and felt. The "downsizing," "restructuring" (which is largely a modification of organizations to match the new technology) and displacement of workers1 that are now seizing the American middle class do not mark a passing phase; although the process will no doubt be subject to many temporary offsets and may even be delayed considerably by the inertia created by existing lines of effort and of capital investment, it will continue as a powerful secular trend.
In this context, we will need to distinguish between the displacement of individuals, firms and industries that causes millions of people to search for new ways to make a living, which is a temporary or "frictional" form of displacement that is most certainly going to be a major phenomenon throughout the world in the decades ahead; and the more "ultimate" displacement that will occur because very little production of goods and even services will, as the process plays itself out, come to require any substantial amount of human effort.
If hundreds of millions, indeed
billions, of people are to be displaced, in the second of these senses, from
the income-earning process by a technology that is capable of vast productivity
and wind up with no other route by which they share in the productivity through
a contractual nexus, the wishful thinking of countless socialist authors over
the past two centuries will largely come to fruition. It is they who have
downplayed the need for productivity while stressing the centrality of
distribution, have thought more in terms of abundance than of scarcity, have
denigrated the self-executing processes of the market economy in their
preference for "rational" systems, and have generated a moral outlook
that has emphasized "entitlement" over the work-ethic and personal
responsibility. As a "classical liberal" (i.e., a supporter of
limited government, a market economy, and a whole
complex of ideas and institutions that go with "individual liberty"),
I have detested the entire syndrome of socialist thought as a threat to much
that I think imperative, so it is with deep reluctance rather than alacrity
that I see economic realities moving even potentially in its direction. Either
vast temporary displacement or an ultimate permanent supplanting of people
poses a radical new challenge to all non-socialists and, as with this reviewer,
enemies of socialism. If it is true, as Jeremy Rifkin (one of the authors
discussed here) argues with great plausibility, that the market paradigm for
the organization of economic and social life will soon cease to provide
rewarding roles (and a living) for all who seek to participate, how then are
economies, and even societies, to be organized? Any supporter of a market
economy who fails to think this through, and think it through quickly, will within
a very short time find himself talking to a world that was, not to the
one that is or, most especially, to the one that very soon will be. Without
unprecedentedly rapid intellectual adaptation and
appropriate policy suggestions, the supporters of a market economy will come to
look ridiculous – most probably even despicable -- to those who suffer during
the immense displacement. That, if it occurs, will be a tragedy of Wagnerian proportions, since it is precisely the values traditionally
associated with a "free society" predicated economically on the
market that the world will desperately need at the heart of any redrawn social
organization. Those values will be vital, also, during the period of
transition; without them, the transition offers to become catastrophically
explosive.
A growing literature addresses
the economic and technological issues (and even some of the larger social
issues, although most of the present writers address them from a socialist
point of view, since such subjects have been fully in line with socialist
aspirations). The ten books discussed here are just part of that literature,
which I am studying in preparation for a planned book. Other than to acquaint
the reader with these books, all of them valuable, and some of their implications,
I won't presume at this time to offer a full analysis or solutions. Instead, it
will be well to consider this discussion an invitation for more thought, and
not as a commentary set in stone; if my fellow "conservatives" (in
the popular American sense) and classical liberals can show that a fully
market-oriented system can continue to function well (which they will
predictably be more than anxious to do), they are
most welcome to do so. It will be foolish of them to attempt that, however,
unless they have fully considered these issues.
When things are changing at
warp speed, different authors will inevitably peg their discussion to different
points along the arc of change. Some look ahead a few years to its full
fruition;2 others hardly seem aware of the changing paradigm, and
talk in terms of the market economy as we are accustomed to thinking of it;
others are somewhere in between. It will be important to notice where each
author places his focus if we are to understand the context in which he is speaking.
Simultaneously, it will be
important to realize that economic " proposals that might be
forward-looking in terms of the problems under one state of conditions may not
be at all appropriate for the conditions that will come to exist within even so
few as five or ten years. Accordingly, the acceleration of change is itself one
of the central points that any economic and social analyst must keep in mind.
This review will start with the
recent books by Jeremy Rifkin, Paul Kennedy and Bill Gates because they look
farthest ahead (although it may surprise the reader to know that, because the
change portends to come upon us so rapidly, even that would seem to involve
looking only two or three decades into the future). This will give them
desirable emphasis, since in my opinion they are the most important of the ten.
Moreover, it will serve to identify the "end-point" of the change so
that the other books can be understood as occupying intermediate ground along
the continuum.
It is Rifkin's book that most graphically tells the story of what is happening to work through the technological revolution. He predicts that work (human effort) will virtually disappear from manufacturing "by the early decades of the coming century" and from the service professions within a half-century. (We will see that Bill Gates thinks otherwise.) Agriculture, in which at one time virtually all Americans were employed, already occupies only about three percent of the U .S. population, and worldwide the developments in biotechnology will displace hundreds of millions of farmers. Rifkin tells us that the first fully automated farm will be underway in about twenty years.
Much of the book's strength
comes from its specificity. Rifkin isn't afraid to generalize, but he gives
countless specifics, with analysis of why they are occurring. Here are just a
few, which I cite to acquaint the reader with the practical substance of what
is happening:
·
He tells how the
mechanical cotton picker came into use in the mid-1940s, resulting in a rapid
displacement of labor, mostly black.. Six percent of the American South's cotton
was harvested by the new machine in 1949; 78 percent by 1964; and 100
percent by 1972. Further displacement came through the introduction of
chemical defoliants to control weeds. The social effects were enormous, with
this displacement being one of the main causes of the migration of five million
blacks to the cities of the north and west. But the need for employees in heavy
industry began its own decline, with the number of jobs eventually being cut
drastically. As a result of these factors (and others that Rifkin doesn't
mention), a permanent underclass came to exist in the inner cities.
·
In mining, more coal is
removed from the ground now than in 1925, but with far fewer workers. In 1925
almost 600,000 were needed to mine 520 million tons; in 1982, only slightly
more than 200,000 for 774 million tons; and in ten years this will fall to not
much more than 100,000.
·
In the advanced economies that belong to the
Organization for Economic Cooperation and Development (OECD), the production of
finished steel declined by just six percent between 1974 and 1989, but jobs
were reduced by 50 percent, with a cut of more than 1,000,000 jobs.
·
The world demand for
skilled machinists is dropping. "Powderized
metals are merely poured from bags into pressurized molds" and
"lightweight ceramics and plastics" are taking the place of metal
products.
·
Science is affecting not
just industry, but is about to subject agriculture to yet another revolution,
this one going far beyond anything the world has seen so far. The
"biotechnical revolution" has begun.. Pest-resistant genes are "engineered
directly into the biological codes of plants." Plants are restructured
genetically "to tolerate drought or extreme heat and cold." Growth
hormones have led to a "milk glut." "Genetically engineered
hens" lay more eggs. The result? "Technological forces are fast
replacing outdoor farming with manipulation of molecules in the
laboratory." Rifkin tells how 70,000 farmers on
·
If those who are
displaced in industry or agriculture think, as they have in the recent past,
that they will be able to find employment or new business opportunities in the
service sector, they will find that there, too, the displacement is progressing
rapidly. At AT&T, a voice-recognition system has taken the place of 6,000
long-distance operators. Modular preassembled equipment has cut back on the
need for installers and repairers. At the post office, sight-recognition
machines recently displaced 47,000 workers. More than 20 percent of bank
employees will be "riffed" (ousted by "reductions in
force") within the next five years, and this is on top of the elimination
of 179,000 tellers during the ten years preceding 1993. Still further,
"the paperless electronic office has now become a goal of modern
business." Business still stores 90 percent of its data on paper, but soon
the printed page will virtually be eliminated "in favor of electronically
stored information." In this context, "the number of secretaries has
been steadily declining."
·
Wholesaling and retailing, with all that they
involve by way of malls, stores and sales employees, are for the most part on
their way out. "In 1992 the wholesale trade industry lost 60,000 jobs...By
early in the next century most wholesaling, as we have come to know it, will
have been eliminated" as producers interact directly with consumers by
direct mail, catalogs, and increasingly through the Internet.3 Electronic shopping will make retail shops
and malls obsolete. Rifkin tells us that "since 1989, more than 411,000
retail jobs have been eliminated." And the process has barely begun. Nor
should it be thought that the food service industry will pick up the employment
slack. In restaurants, orders are increasingly sent to the chef by computer,
the customer's check is prepared electronically, and inventory is monitored by
computer. Soon, patrons will order by "touch-sensitive screens that list
the items on the menu." Even the cooking is becoming automated.
These
mark only a few of the illustrations in The End of Work. They and
many others make the book a fascinating compendium of events around us. They
point toward both frictional and ultimate displacement.
After all this, it may be
surprising for me to say that Rifkin is not primarily a "futurist."
He doesn't speak just of what will occur; he also recounts the history
of what has already happened. And he discusses the broader social issues.
Contrary to wishful thinking,
he says (in contradiction to Gates) a permanent displacement can be foreseen.
The advancing technology will not for the most part create new jobs for those
who are displaced, since the new technologies, when they are fully
implemented, will not themselves require many workers. (We can imagine,
though, major demand for certain types of workers as human effort is used in
the highly creative process of inventing and then installing the new
technologies.) Retraining may for at least the lifetimes of many now living be
the answer for a large number of people in the world as it still is, which is a world where rich opportunities remain for
those who hustle, as Bill Gates makes clear. But
as the displacement continues into its farthest reaches, the question becomes
"retraining for what?" Even temporary ("frictional")
displacement as people retool for new careers will be tenuous, as one firm or
even industry after another fails, taking down the people who have trained
themselves for it.
Two issues will loom ever
larger: how to handle the social cataclysm and personal hardships arising out
of vast frictional displacement; and how ultimately to organize an economy (and
a society) that is no longer centered on work.. A
market economy may be able to continue as central if it eventuates that there
are a large number of highly-paid jobs and business opportunities and if there
are a great many people who are stockholders who thus share in the income from
the immense productivity, with all of these people in turn spending in a way
that provides employments, on at least a part-time or short-workweek basis, for
the millions of others. But surely this
is problematic, and for many societies, such as perhaps Madagascar in the
example Rifkin cited, it will not describe the situation. Nobody knows with
certainty where the whole process will lead and how any given country, people,
industry, firm or individual will be impacted upon.
For anyone other than a
traditional socialist, these things raise profound ideological and moral
issues, since the market will include growing numbers of people about whom it
will no longer be accurate to say that "they are not doing well because
they lack the work ethic." (There is an ideological tendency on the part
of those like myself who embrace the work ethic to write off people who fail as
"just being lazy" even though the failure is attributable to vast
forces beyond the control of the individual. My parents used to point to
members of WPA work crews in the 1930s as slackers, totally overlooking the
fact that there was a depression on. For conservatives, classical liberals and
libertarians to think through the new realities, they will have to become much
more sophisticated in their judgment about when failure is the individual's
fault and when it must be laid to the door of systemic problems. This is
exceedingly important, because history tells us that the extent of people's
willingness to "write off' even millions of other people out of a lack of
sympathy knows no bounds).
Inherent in my comment about
this is the fact that I see the theory of a free society in terms of a “systems
analysis,” and not as simply a series of deductions from a few over-simplified
premises. Those who hold to the latter, which is a very common way of thinking,
will find themselves rooted in modes of thought that the world will find more
and more unrealistic. Forty years ago, I took time off before going to law
school to attend Ludwig von Mises' classes and
seminar at New York University, precisely because I was concerned about whether
economists had really found the answer to the trade cycle and such crises as
the Great Depression. It seemed to me then, and continues to seem apparent to
me now, that a market economy will forfeit the allegiance of people in general
if it is structurally deficient and is subject to any major inability to serve
the needs of all who are willing to work. Looking on it as a system is
essential.
Taken just by themselves
without projecting an ultimate displacement, the problems of frictional
displacement will need to be addressed as society experiences the process
of change. But the manner of meeting those problems at any given time may take
us far afield if we don't, all the while, have some
idea of what the problems will be in even so short a time as five, ten or
fifteen more years. A longer view will be needed to inform the shorter-term
understanding. Here, I am thinking of Ravi Batra's book, one of the ten under review, which proposes a high tariff wall while we
break all large firms into many small ones. For reasons we will discuss, his
"competitive protectionism" is intended to address the deterioration
of American income as we've experienced it; but may be ill-suited, at least in
part, to meet changes that will come quite soon.
In common with the majority of
authors writing on the subject so far, Rifkin's own orientation is socialist,
although that seems to have played a negligible role because he is recounting
facts (although necessarily with considerable speculation about the speed and
ultimate thoroughness of change), not ideology. The Foreword is by Robert Heilbroner and there are several references to the likes of
Marx, Engels, Marcuse, Theobald, Sismondi and Bellamy
(along with one to Milton Friedman, who is of course a champion of the market).
Before we leave The End of
Work, three additional implications should be discussed in some detail:
First, the scenario of near-total displacement of workers in an
economy of hyperproductivity will tend rapidly to put
into question almost all features of current economic and fiscal discussion.
This is a point that will come up in varying degrees in our review of the other
books.
Concern over growth of a
nation's Gross National Product, say, might well become meaningless (although
military preparedness will always have to be looked to) in a situation where
the world is awash in goods and services. Sometimes we read that the growth of
U.S. GNP has been "sluggish." There is much, however, that GNP
doesn't take into account, and there is little question but that productivity
in all advanced countries will skyrocket once organizations, infrastructure and
capital investment have more completely made the transition to the new
technology.
A smaller point is equally
illustrative. We hear much concern about how the Social Security System in the
United States will come under impossible pressure when there are only three
workers for every retired person. Our need to redirect our thinking, often to
the diametric opposite of our current opinion, is brought home if we realize that, in light of the rapidly
advancing near-workerless economy, three workers may be too many.
The concept of
"comparative advantage" has been central to thinking about
international trade since Ricardo. But the new developments suggest that it
will cease to apply, since it will no longer be a matter of everyone's finding
a niche to produce any one part of the goods and services that are possible.
The big issue might well become the sharing, or non-sharing, of technology, far
more than of trade. The importance of resources and their geographical
distribution will also be accentuated.
Even the concern over
Americans' inability to compete with subsistence-wage foreign labor, much of it
highly skilled, in a milieu of free trade may soon be bypassed, since it
appears that nobody, not even the 30-cents-an-hour foreign worker, will
be able to compete with the new workerless technology. As odd as it may seem,
the concern over international competition and the movement of jobs abroad is
in this context only an intermediate concern, soon to be outdated.
But that concern is itself
"further along the curve" of such projected change than the position
taken today by pro-market thinkers who say that "the market can provide
good jobs for everyone if only we get the regulatory and tax load off the backs
of entrepreneurs." This view, a central point in the libertarian and
classical liberal view of what will be best for a market economy (and the focus
of Bob Dole's 1996 presidential campaign), has no doubt been valuable right up
to the present and may even continue to have considerable validity for a few
years. But it is imperative to notice that it doesn't even take into account
the flight of jobs to low-wage locales in the global market, much less look
ahead to the rapid advance, first, of frictional displacement and, eventually,
to the supplanting of most work. The pro-market concern about impediments to
productivity can certainly produce results in the short-term as an offset to
the longer-term secular trends, because there are a great many such impediments
giving us, relatively speaking, lead feet today -- but it fails to address the
secular tendencies, which are hitting advanced economies at incredible speed.
In a near-workerless economy,
it will no longer be possible to center personal life around work (unless, as
Rifkin suggests, volunteer work, valuable but unable to command a price, comes
to be a general substitute ), a fact that forces a rethinking of human
relations in every aspect.. (It has been
suggested to me that "Parkinson's Law" might come into play with
people becoming "busy" with
much that appears productive but is not, with this perhaps being governmentally imposed. It is difficult to
know what direction things may go in any given society.) The implications,
moral, social and institutional, touch upon virtually all subjects.
Second, there is an aspect that Rifkin doesn't mention. The
technological revolution will not continue, but will grind to a much slower
pace or even a halt, if the displacement of hundreds of millions of workers
makes those people unable to buy the products flowing from the hyperproductivity and if they are in a state of revolution
(and perhaps of an understandable, though destructive, Luddite-like
opposition to new technology) because of their plight. The market will not
produce more than can be sold at a profit. There is enough demand arising out
of today's world to carry the technology and displacement quite far, and Bill
Gates believes this will continue for some considerable time; but, to the
extent that millions of people fall out of the income stream, the problem
described as "a lack of purchasing power" and "underconsumption" ceases to be a socialist pipedream
and becomes a central inhibitor of further technological progress. The only way
the arc of change can reach its culmination is if those hundreds of millions of
people come to be included through a system of distribution to them that is not
based on their having worked (or, at the
very least, worked very much) for what they receive.
There
are various ways a broad-based distribution may come about. It is possible that
a market might evolve in which young people start work later and later, the
elderly become an ever-larger portion of the population (as they are) and
retire at ever-younger ages, the workweek is shortened dramatically, and much
of the work consists of serving those who do make incomes from the
computer-integrated technology or whose stock ownership in that technology
gives them a flow of income. Whether that, or something adapted from it, will
be the most desirable organization of the economy for a free society will be
problematical, however. The criticism that a successful market involves
"trickle down" from the rich to those who are less successful has
been perverse in the broadly participative economy we have known, but it would
be a serious criticism of an economy in which the rewards of immense productivity
go to a relatively small number of highly skilled individuals and to a limited
number of stockholders, leaving the income of hundreds of millions of others to
depend upon the expenditures these people make for services. Under such
circumstances, the further criticism that those who reap the rewards "have
not truly earned them" will also carry considerable validity, since the
technology won't have been the creation of those people, however skilled, but
will consist more than ever of the accumulated knowledge of world science..
Of course, much of this is
obviated if the broad mass of the population consists of stockholders who share
in the productivity as investors. Today, many people in the United States have
major holdings through their retirement savings. Anything that will increase
the breadth of ownership will help provide the basis for a future market
economy. Louis Kelso wrote a book a few years ago calling for an enhancement of
"free enterprise" by government's giving everybody an equal share in
all property, from which each person would then reap income as dividends. This
was, of course, nothing more than a disguised form of socialism, giving
everybody an entitlement. Although I considered his book intellectually
dishonest, those who want to retain the semblance of a "market" while
addressing distributive needs, and the need for a continuing demand for the
products, may find themselves forced to go to some such expedient.
Third, it
will be essential quite soon for supporters of the market, who see the market
(as this reviewer has) as a primary guarantor of a free society, to come to
grips with the issues and to decide what is best for a free society. This will involve the question of whether
they are willing to oversee the implementation of a massive reorganization of
society toward “entitlements” (something they have despised because of the
moral and social, and erstwhile economic, consequences; and something that, as
we have just seen, can be accomplished in several different ways). If they are forced to choose this route, it
will be for them to design a society in which living-through-entitlements does not create the state Leviathan they fear
and does not corrupt and debase the
population. If this is the direction
taken, they will do well to point to a new concept: one of “Separation of
Economy and State.” They will want the
mechanism for production and massive free distribution to be divorced from the
state (which, because of its own inherent functions relating to justice and
national defense, must possess a monopoly over the use of force.). They will not want their adaptation to the
new realities to be a selling out to socialism.
To play a role, however, and even the central role, they may have to
move toward ideas and policies that their outlook (which reflects the world as
they have known it) has rightly recognized as socialist. With these things in mind, can we imagine
what the Republican platform might well look like even so soon as 2004?
Preparing for the
Twenty-First Century
Random
House, New York, 1993
Hardback,
429 pages, $14
ISBN
0-394-58443-0
Kennedy
does not pursue nearly so inexorably the consequences of worker displacement,
though he gives it more than a passing nod. For that, Rifkin's book is much
superior. But Preparing for the Twenty-First Century has the merit of
casting a broader net, pointing to a wide range of important secular trends.
It, too, looks ahead, albeit again just a few years, to a vastly different
world. Virtually all of these trends are well known to intelligent readers, and
"politically
correct" and therefore deracinated and pedestrian; but there is value,
especially for our purposes of putting all ten books into context, in seeing
the developments enumerated together .
Here
are trends he sees:
(a)
The technical revolution
displacing workers. Looking not quite so far as Rifkin, who sees virtually
everybody's displacement, Kennedy thinks the new technology will primarily
cause displacement in the lesser-developed nations. He speaks of "biotech
farming" and says it "may be beneficial to a high-tech,
food-importing country like Japan but potentially disastrous to developing
nations like Ghana or Costa Rica that rely upon crop exports." He sees
that even if African farmers, say, were to become as productive as American
farmers "there would be a massive displacement of labor, with little
prospect of employment by industry or services [in Africa]." As to an
advanced economy such as that in the United States, Kennedy ponders "the
fate of the four-fifths of Americans who are not in such international
demand." Not seeing that it may ultimately be the new technology, and only
temporarily the flight to low-cost foreign labor," that will produce
displacement, he points to the impact of international competition and the
relocation of manufacturing abroad (which are genuine concerns of the present).
(b)
The accelerating growth of world population. Kennedy reminds us that
"in the eighteenth century, the global population was adding another
quarter of a billion people every seventy-five years; today, such an increase
occurs every three years." In 1990, there were 5.3 billion people on
earth. By 2025, there will be 8.5 billion. Some demographers expect world
population eventually to stabilize at about ten or eleven billion, but some
predict as high as 14.5 billion (and they can't be sure it won't go much
higher). Some observers believe, hopefully, that affluent peoples tend to have
fewer babies; if this proves true under the impending circumstances, it
suggests that the new worldwide hyperproductivity,
which is just taking hold, may create a standard of living that will bring
about, through such choice, just such a lowering of birth rates, thereby
mitigating the projected increases. (We must, however, entertain the opposite
possibility, which is that relatively affluent and yet idle millions may have
more rather than few children. We simply don't know).
(c) Mass migration of peoples. Under
pressure from the population explosion and the changing economic conditions, Kennedy
says that "it seems unlikely that there will not be great waves of
migration in the twenty-first century," a migration that he thinks is
"unlikely to be deterred.."
(d)
Internal ethnic changes. Even within existing societies, not counting
the flow from outside, the demographic constitution of the society points
toward change. Kennedy observes that in the United States Caucasians will
"become a minority" by 2050. In Russia, the Muslim population is
increasing much faster than the
Russian. Russians are already
less than half the population, and "the Russian share" will
"fall relentlessly throughout the twenty-first century."
(e)
The supplanting of Euro-American
civilization. It is an indication of Kennedy's own deracinated
"political correctness" in light of the current intellectual vogue of
"multiculturalism" that he considers it merely an "interesting
question" "whether 'Western values' -- a liberal social culture,
human rights, religious tolerance, democracy, market forces -- will maintain
their prevailing position in a world overwhelmingly peopled by societies which
did not experience the rational scientific and liberal assumptions of the
Enlightenment." This is, of course, an issue of fundamental, not merely of
"interesting," importance.
(f)
The aging of the population in all
advanced countries. 16.6 million Americans, he says, were 65 or over in
1960. By 1990, it was 31 million; by 2020, it will be 52 million; and by 2030,
65.5 million.
(g)
The "revolution in world communications." Cultures are being
brought into intimate contact through "computers, computer software,
satellites, fiber-optic cables" -- to which today (even so soon as three
or four years after he was writing) he would no doubt add the Internet (which
is just the beginning form of the "information superhighway").
(h)
The globalization of business through multinational companies and world
capital flows. Many larger firms are no longer identifiable as a
given country's, and webs of "out-sourcing" bring clusters of
internationally diverse firms together. "The real 'logic' of the
borderless world is that nobody is in control -- except, perhaps, the managers
of multinational corporations, whose responsibility is to their
shareholders." In international finance, "vast sums...move in and out
of a country or a stock according to perceptions of that entity's
prospects."
(i) Diminishing national sovereignty. "These
global changes call into question the usefulness of the nation-state
itself." In this context, Kennedy sees it as retrogressive for
"nationalist and antiforeign political movements
[to] gain ground."
(j)
A widening rift between rich and poor countries. He sees the technically
advanced nations becoming ever more affluent, while poverty will stalk the less
developed peoples. He points to one billion people now in poverty.
(k)
Kennedy devotes a chapter to the degradation of the environment. He attributes
an improvement in some aspects of this to the Green movements in advanced
economies. We have reason to hope, however, that the new
laboratory-computer-robotic technology will do much to reverse the
environmental trends (just as the city of Indianapolis, say, is a delight today
compared to its smoky past).
Kennedy's
own analysis of "what is to be done" is shallow and conventionally
"liberal" in the twentieth century American sense of that term. On
the one hand, he repeats shibboleths uncritically, such as when he says that
the 1991 attempted coup by Communists in the USSR was "right
wing." On the other hand, he does
not think radically in keeping with the magnitude of the changes. Economically,
he favors "industrial policy" such as has been used in Japan and East
Asian countries. He says we should "brace ourselves" for the changes,
but doesn't spell out what that must consist of. He is strongly
internationalist, and decries any people's concern over the continuity of race
or culture (this, despite the fact that he credits Japan's "social and
racial coherence" as a factor in its success).
For
ourselves, we can look at the trends Kennedy has identified, keeping Rifkin's
"end of work" projections in mind, and see that they point in a very
different direction than he prefers. What will be needed for managing the
displacement, and for survival in a world of upheaval, will be a
reaffirmation by each people of its own responsibility to itself and its own. Even
in a world of intimate contact, economic nationalism will become essential
(assuming that there is no world organization fitted to take up the task of
production and distribution, which seems a reasonable assumption not only in
terms of practicality in today's world but also in terms of what is acceptable
to the world's free societies). If 70,000 vanilla farmers are to be stripped of
their livelihoods on Madagascar and can find nothing else the world needs of
them, they will be impelled to think the world market no longer applies to them
and that Madagascar must see to their well-being itself, using technology for
production and distribution. They will see Madagascar's great need under these circumstances as (a) a reordering of its own
institutions, (b) access to technical knowledge (and to some capital, which it
may or may not already have), and (c) the maintenance of order and of
civilization within itself.
The
"economic nationalism" to which I refer is consistent with a rich
cultivation of local culture and tradition, something for which a market
economy, demanding mobility and constant adaptation, has for several centuries
been criticized for uprooting. Not only are the imperatives of the new
technology toward economic nationalism, but a heightened world affluence will
accommodate people's fashioning their lives, as cultures and as individuals, as
they wish. Even if outdoor farming becomes obsolete, for example, millions may
choose to live as hobbyist farmers out of sheer preference for that way of
life.
It
may be consistent, not at variance, with this to say that there, is plenty of
need for "international" policies in the form of technical
information transfer and capital assistance (which will become easier for the
advanced countries to provide as they unleash the new technology to its
utmost). It may be in the vital interest of advanced countries such as in
Europe and America to provide technical and capital assistance, not just out of
fellow-feeling for billions of other human beings but because only in that way
can they prevent the migratory flows that otherwise will swamp them and
obliterate their existence. Whether such assistance will help stop the human
migration is hard to say; the answer may need to come through experimentation.
Needless to say, any such efforts will not be a. substitute for a given
government's carrying out its obligation to its own people to protect the
country's borders.
The Road Ahead
Bill Gates (with Nathan Myhrvold
and Peter Rinearson)
Viking
Penguin, New York, 1995
Hardback,
286 pages, $29.95
ISBN
0-670- 77289-5
Bill
Gates, as everyone knows, is Chairman and Chief Executive Officer of Microsoft
Corporation, of which he was a founder. The
Road Ahead is both a history of computers and a look into the future of
"the information superhighway." Easily readable and fascinating in
its detail, it has much to commend it as required reading in colleges of
business for years to come.
It
is important to note that Gates' discussion, as broad and as important as it
is, covers only part of the current technological revolution. It does not
discuss robotization in detail, or the biotechnical
revolution, or even the vast displacement of service personnel. His book expresses
ebullient optimism, but cannot be taken as a total discussion.
I
was delighted to see a certain comment he makes early on, because it describes
well the situation of anyone who writes about a process of profound change.
"This is meant to be a serious book," he says, "although ten
years from now it may not appear that way. What I've said that turned out right
will be considered obvious and what was wrong will be humorous." That
applies, as well, to articles like the present one, which "goes out on a
limb" much more than he does.
One
of the main values of the book is Gates' look ahead to the " immensity of
the change that is coming. Before much longer, he says, people will be able to carry on many of the
activities of their lives from their armchairs. Monetary transactions will be
handled by computer. Entire libraries will on CD-ROM (which for future readers
I will explain is one of today's ways of storing information on computer). Even
today's fiber-optic cable is astonishing: it "is made of glass or plastic
so smooth and pure that if you looked through a wall of it 70 miles thick,
you'd be able to see a candle burning on the other side." Laboratories are
already working with transistors that are 10 million times faster than
those in computers now in general use. Gates looks forward to the day, not very
far off, when everybody will have a wallet-sized PC (personal computer) to
serve countless purposes. Electronic books will take the place of printed
books.
As to the timing of the change, he believes that
the hardware will be in and everything he is talking about will be broadly
available within 20 years, even though it will take longer for it to become
universal. The impact won't be fully felt until various interconnections are
made. The process of change will be held back, too, by the fact that many
people are comfortable with what they already know. We could add that it takes time to replace
the entire capital stock of the world.
He
sees the fact of frictional displacement. Some major accounting firms are
already using far less office space, simply maintaining a generic office for
accountants who pop in temporarily. Management hierarchies will be flattened
(as is already occurring) by direct communication between top management and
those performing tasks. In fact, all "middleman" professions, such as
real estate agents, will have to find ways to "add value" or will be
washed away. Many stores will disappear, with only those remaining that people
want to patronize out of the sheer desire to shop in person. Banks and
stockbrokerage houses will cease to exist physically, but will become
electronic clearinghouses. Knowledge workers in all countries will compete,
because of instant worldwide communications, with knowledge workers of every
other country. Just the same, despite all this, Gates is found to understate
the extent of displacement, such as when he says that "there will be
dislocations in some business sectors that will create a need for worker
retraining." Instead of seeing an urgent social necessity, he says
"we've got a good number of years to observe the course of the coming
revolution. . . .”
He
doesn't, however, believe there will be what I've called "ultimate
displacement," which is what Rifkin predicts so strongly. "Entire
professions and industries will fade. But new ones will flourish." Seeming
to relate only to the development of personal
computers, he says that "outside the computer industry it is also
hard to find a complete business sector hurt by the PC." "Whole new
markets will emerge, and a myriad new opportunities for employment will be
created." He is disposed to see the computer revolution in terms similar
to the automobile's having taken the place of the horse: one vast industry
replacing a more primitive one. At no time does Gates discuss the tendency of
computers, biotech and robotization radically to
reduce, as to all tasks, the sum of human effort needed. This means that he
never considers, either, the fact that there are billions of people on this
earth who lack the intelligence ever to become employable among the
"knowledge workers."
The Competitive
Advantage of Nations
The
Free Press, New York, 1990
Hardback,
855 pages, $37.50
ISBN
0-02-925361-6
The
preceding books have stated some of the outer reaches of impending change. That
allows us to understand the scope of the challenges (subject to the fact that
there is much more to be said). Now it will be helpful to take the other seven
books in the order that seems most natural, which is to consider them in the
order of their awareness of the change, starting with the one that seems least
aware and working back toward Rifkin, Kennedy and Gates. I will evaluate them
in light of the extent of their meeting the new exigencies (but this
perspective must be understood as tentative on my part until I have finished my
study.)
Porter,
who served on President Reagan's Commission on Industrial Competitiveness and
has conducted a four-year study of ten major trading nations, will no doubt be
surprised that I consider The Competitive
Advantage of Nations as the least aware. His book is emphatic about the
need to be on the cutting edge, and this gives every impression of his being
ahead of the curve. This impression would be correct if the issue were simply
"how can a nation's firms keep up in today's global market?"
He
addresses that issue energetically by embracing a full free-trade position in
which he sees the competitive rivalry of firms that shift constantly to
higher-productivity niches, with either ever-lower costs or differentiated
products, as the key. Successful competition in the world market, he says, must
be based on quality, rapid product development, and advanced features other
than price. Hardly anyone has a meaningful "comparative advantage"
anymore, when compared to the need to keep running to stay at least a
half-stride ahead. The point is to hold a lead by constant innovation.
Government can help by providing information, education and training, but
otherwise governmental intervention, including protectionism and
redistribution, will lessen innovation and the needed rivalry. Anti-trust
policy should insist on sharply competitive markets, assuring vigorous domestic
rivalry; and firms are even aided in their cutting-edge competitiveness by laws
in their home country that set high standards, such as on environmental impact,
that other countries will eventually find it necessary to demand of their own
firms. The book includes a number of policy suggestions, such as regarding
taxation, that would help competitiveness. In all, Porter's is an excellent
book for businesses competing in today's market and for its statement of an
outlook that will allow them to compete.
The
supreme weakness is that all of this says nothing about an economic system as a
means of mass participation and mass wealth-creation. It speaks in a rarefied
atmosphere of always-higher skill and quality. It makes no effort to define a
role for the average fellow with a high school education and two years of
college. Porter never considers displacement, either that comes from low-paid
foreign workers or that will very soon come from near-workerless technology.
Speaking passingly of social legislation that seeks
to address workers' needs, he argues that "such restrictions erode the
underpinnings of sustained national advantage" and says that "other
and better approaches must be found to address the social concerns that such
policies reflect." He leaves it
at that, not making it his business to think about the whole universe that
those "social concerns" entail. His emphasis is on the firm and what
a nation must do to provide the milieu for success on the part of its firms;
this does not involve him in making an effort to see an economy as an economic
and social system serving many millions of people.
Ordinarily,
this would be no basis for criticism. An author may write about a selected
slice of life if he wishes. But in the present context, his emphasis misses the
point of the changing economic reality. Accordingly, the book's 855 pages have
little to tell us. Porter is one author who is not a socialist, and his
thinking fits splendidly into that of free-market theorists of this reviewer's
own persuasion. With them, he faces the prospect of suffering profound
disrepute very rapidly if he doesn't do some radical rethinking to meet the
fact of worker displacement.
Manufacturing Matters: The Myth of the
Post-Industrial Economy
Basic
Books, Inc., New York, 1987
Hardback,
297 pages, $9.95
ISBN
0-465-04384-4
The
sub-title speaking of "the myth" of a "post-industrial
economy" is talking about something other than a near-workerless economy, so we run the risk
here of some confusion of language. By "post-industrial," Cohen and Zysman mean an economy centered heavily on services as
distinct from manufacturing. They point to the dramatic move that has occurred
in the United States from industry into the service sector. "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." They add that
"since 1973 manufacturing has not added any jobs at all."
In
response to this decline, they argue that "manufacturing matters" and
that, for the nation's well-being, there must be a "national
agreement" for a re-emphasis on manufacturing. They see manufacturing as
the ultimate source of high technology, of military capability, and even of the
health of the service sector. Their concern is broader than Porter's, since
they focus on the economy as a whole, not just on cutting-edge firms. We
notice, too, that they do not see, or perhaps simply are not convinced by, the
prospect of vast displacement either by low-cost foreign labor or workerless
technology. (It is not apparent to this reviewer why they do not see ahead to
massive worker displacement, since, as we will see, they urge the United
States' industrial salvation as coming from high-skilled automation.) In their
opinion, if the United States develops a new consensus about the importance of
manufacturing and implements a series of policies to undergird
manufacturing competitiveness, the country will be back on a tenable footing.
A
number of elements go into Cohen and Zysman's suggested
policy of industrial competitiveness. Comparing the United States with its
competitors, they speak of the United States' "radical inability, relative
to them, to apply high technology to the production of traditional goods and to
maintain our competitive position by diffusing technology and know-how widely
throughout the manufacturing economy." The convergence of computers and
telecommunications should be creating a new infrastructure for industry; and
Cohen and Zysman are concerned that in the United
States, unlike in Japan where it is a matter of conscious policy rather than
market dynamics, this infrastructure is developing primarily to meet the needs
of large firms. Just the same, despite the breadth of their concern, they say
that if the United States is to maintain the high wages its people expect, it
will have to center its efforts on "high value added" products.
Regretfully, "there are no automatic or clear-cut answers to where high
value added is to be found." They envision industry's moving to "a
fully integrated system linking design to manufacturing, permitting an
automatic shift from one product to the next," a system called
"computer integrated manufacturing (CIM)." What will be decisive will
be "the development of manufacturing skills based on the introduction of
programmable automation and skilled labor."
To
help with all this, government, they say, has several things it can do,
although they oppose a strategy of state-led development. Government can
stimulate research into generic applied science, providing technical
information to industry; and "it can upgrade the quality of what goes into
production, the factors of production -- raw materials, capital, labor -- and
the networks and rules that affect how those factors are combined." Moreover,
its policies can greatly affect the level of saving and can even lead to an
opening of international capital flows (which they see as presently somewhat
closed into the United States) so that it won't make any difference where the
capital comes from.
They
oppose what they call "defensive trade protection," thinking that
American firms would thus be made less innovative and competitive. But the
United States, they say, shouldn't open American markets to others without
reciprocity.
If
we place Cohen and Zysman's book along the “curve of
change," we see that their horizons are short. They call for the automated
economy without grappling with its implications.
The Myth of Free Trade: The Pooring of America
Touchstone
Books, New York, 1993
Paperback,
274 pages, $12
ISBN
0-684-83355-7
Batra agrees with Cohen and Zysman that manufacturing is the key to a people's
prosperity, since it pays much higher wages than other sectors. And in this
connection he believes that a disaster has befallen the United States. Citing
Bluestone and Harrison's phrase "the de industrialization of
America," he points to the fact that industry now employs only 17 percent
of the workforce. "Since the 1970s, cheap imports produced by foreign
workers, sometimes laboring on pennies per day, have destroyed and even
exterminated industry after industry in the United States." American firms
have responded by shifting high-wage manufacturing jobs abroad so that they,
too, can produce cheaply. He tells us how, even before the North American Free
Trade Agreement (NAFTA), 1800 industrial plants had since 1965 relocated to
Mexico. Those firms might well prosper, but American jobs would be lost and
wages would fall.
While
economic indicators such as GNP have continued to go up, the best indicator of
well-being, he argues, is inflation-adjusted average weekly earnings for
non-supervisory personnel, a statistic that tells how the average person is
doing. This is a better measure than per capita income or average family
income, mainly because the latter fail to take into account the movement of
millions of women into the workforce, a movement that has masked the decline in
prosperity.
Those
who have lost jobs in industry have shifted to the much lower-wage service
sector, and this means Americans have experienced an overall loss of personal
income.
Why
have these things occurred? Here, Batra proves
ambivalent. The first two-thirds of his book ascribes it, as just stated, to
low-wage foreign competition. He tells how, with agriculture, productivity kept
going up historically but the inelasticity of demand meant that the return to
the farmer, for each unit of production, became ever lower. The same thing has
happened to American industry (and to that of other major industrial countries),
not because of inelasticity of demand, but because competition from low-cost
foreign goods caused a low "industrial relative price." This, he
says, has been happening ever since the United States ceased in the 1970s being
a closed economy and shifted to a high ratio of international trade.
What
seems a coherent explanation of the falling wages becomes confused, however,
when Batra's argument later shifts to emphasizing
that American industry is highly concentrated and that "monopolies"
aren't very good about sharing their earnings with their workers. One is
tempted to rationalize these two explanations by thinking that Batra believes them both to be operating simultaneously,
but this is belied by the fact that he eventually recommends a high tariff level
(40 percent) for industry where the firms have been concentrated, but no
protection at all for industries where small-firm competition has prevailed. If
undercutting by low-cost foreign labor were to him the crux of the matter, the
low-price foreign competition would defeat the less concentrated American
industries right along with the others, and they would need protection, too.
One
gets the impression that Batra migrated
intellectually as he wrote the book, and that he went from quite a sound body
of analysis (about foreign competition lowering the relative price of
industrial goods) to one that was willing simply to invoke whatever arguments
would support his thesis. His proposed policy is that the United States should
go to "competitive protectionism" -- the breaking up of large firms
to allow a sharply competitive domestic market behind a high tariff wall. The
"monopolists don't pay well" argument seems to have been added as
extra support for the view that large firms should undergo divestiture.. My impression along these lines is reenforced by the fact that Batra
concludes his book with an element he hardly considers until the end: that
international trade is destructive because the transport of goods involves
using large amounts of energy, which is bad because energy-use is the main
polluter of the environment. If he had rewritten the book to integrate these
points, their relationship might have seemed
harmonious. As it is, we have been enabled to gain the insight that one
thing is simply stuck onto another.
To
weigh the significance of his book, it is best to give him the benefit of his
main analysis, which is quite impressive. This is the part that looks to the
impact of foreign competition and calls for protectionism, but of an
internally-competitive type. He skewers effectively the clichés of the laissez-faire
free trade school (now reigning supreme in American ideology both Right and
Left). Those clichés have always been simplistic, but their shallowness hasn't
until recently caused the United States much harm (mainly because they were
ignored during much of American history as the United States followed a
protectionist policy). One of these is that trade is made up of contractual
relations in which both parties necessarily see themselves as benefited
(otherwise, they wouldn't enter into any given transaction), with the effect
that in buying foreign products Americans are seeing their welfare served as
consumers. The fallacy in this, Batra observes, is
that "it assumes that consumers are different from workers, so that while
workers suffer, at least consumers benefit." The preoccupation with
consumers ignores the duality that "what matters is not just prices but
wages as well." And "80 percent of Americans have seen a dramatic
drop in their earnings." Another of the clichés is that, pursuant to the
doctrine of "comparative cost," each country will be better off from
producing what it produces best, trading for the remainder. Batra,
in response, notes that "this logic does not even depend on what wage
rates prevail in various nations." A country might produce more, as the
United States has, because of the division of labor that international trade
brings about, but the overall wages paid to its workers may fall. "Free
trade may have helped Americans produce more per hour, but because of falling
world demand for their products they are earning less than their 1973 salaries,
and some even less than their 1950 salaries." The reason that "U.S.
economists have failed to see the depredations of free trade" is that
"they focus only on productivity and ignore earnings." Batra's observations are in line with this reviewer's own
thinking over the years that the "theory of the transaction"
contained in standard market analysis has been incredibly shallow, almost certainly
out of a desire by neo-classical economists to serve ideological purposes in a
much-needed defense of a market economy against its many opponents.4
Batra believes that a
protectionism that allows internal monopolies to become fat and lazy is a terrible
policy, but that one that assures a market to a large number of hotly-competing
firms in the domestic market has much to commend it. He would cut the import
share of the American economy more than in half by raising tariffs from the
present average of about 5 percent to 40 percent (although, oddly, not on goods
where the domestic firms have not been concentrated). It makes no difference
whether firms within the United States are funded by American or foreign
capital, since what counts is their employment of American workers (a view that
underscores his focus on wages as a source of income for Americans, which here
becomes a preoccupation that makes him forget the importance of income-flow to
investors and lenders as a way to distribute the productivity to many
people). In comparison with his
"competitive protectionism," Batra sees
"industrial policy," where government picks winners and losers and
then sponsors firms in
international
competition, as "an impotent response" because it doesn't address the
drop in the industrial relative price.
Our
critique? A "competitive
protectionist" policy in response to a secular fall in American wages
places Batra's analysis much further "along the
curve," to continue the metaphor I have been using, than Porter's or Cohen
and Zysman's. It has the advantage of shifting
attention to the need for economic nationalism, reducing the role of
international trade, under current and impending conditions. Nevertheless, it
fails to come to grips with the phenomenon of technological displacement. The
protectionism may be a valuable intermediate step, but the breaking up of firms
may simply add much distress without arriving at an economy best suited to meet
the needs flowing from the displacement of work. In addition, some products
such as aircraft require massive capital investment and large firms.
The Political Economy of Industrial Policy
St. Martin's Press, New York, 1994
Hardback,
184 pages, $65
ISBN
0-312-10294-1
Chang
arrives at a policy of "competitive protection" by analyzing the
mostly-successful "industrial policy" of South Korea. Under the
influence of such thinkers as List, Schumpeter and Marx rather than of free
market economists, the government there has since the early 1960s been actively
involved in managing the economy, seeking to build an "independent
economy" that will create an acceptable standard of living for South
Koreans. Effort has been shifted from agriculture to industry, and within the
latter to heavy industry. Prices have been set by law; there has been
controlled entry into, and capacity of, firms within given industries;
consumption has been repressed to provide saving; foreign majority ownership
has been banned, except in free trade zones; quality has been closely
monitored; and tariffs have been kept low on raw materials. While such
interventionist policies could create a deadly sluggishness, what has made
South Korea's industrial policy successful has been the willingness of
government to "withdraw support whenever performance lagged.” Chang sees the advantage of “industrial
policy” over central planning as that the former uses the profit motive, which
he sees as the key to innovation.
Chang does not undertake to analyze
world trends or to address the issue of technological displacement. His book does point, however, to the fact
that South Korea’s recent success has centered on its own self-regarding sense
of what has been necessary for itself.
In a world founded on the new realities, South Korea will have a far
less wide-reaching adaptation to make then will economies whose opinion-makers
have foresworn economic nationalism and have embraced as unquestionable the
concepts of laissez-faire global competition.
Postindustrial Possibilities: A Critique of
Economic Discourse
University
of California Press, Berkeley, 1990
Paperback,
227 pages, $15
ISBN
0-520-06988-9
Block's
book is based on research done during the 1986-7 academic year, and hence is a
decade old. Just the same, he was able to foresee much of the 1990's radical
economic change, except that he did not foresee, as Rifkin does, the impending
cuts in the number of workers needed in the service economy, which Block relies
upon to absorb those who have been displaced from agriculture and industry.
With that ingredient missing, Block is essentially grappling with the
traditional economic and social issues. He is a socialist of the nineteenth
century decentralist school, adopting the frame of reference of the Left on a
number of conceptual issues and referring frequently to such thinkers as Marx,
Comte and Jencks. He points toward "the democratization of work" and
a guaranteed minimum income. For a non-socialist or even anti-socialist, his
book would seem like "more of the same," unless it is correct
to think that there is an impending disappearance of work and this forces us
all to consider a national economy from a pooling standpoint.
What
were the changes he foresaw? "As technology displaces human labor..., the
size of the factory labor force shrinks ...and computerization can also reduce
the amount of labor devoted to process-control operations." Although the
use of robots was already far advanced, Block foresaw that, with greater
capital investment, industry could go, as the Japanese already had in many areas,
to "flexible manufacturing systems," where the entire manufacturing
process is "under the control of a central computer." In clerical
tasks, he looked ahead to "trends in office automation" and the
elimination of data-entry personnel by "more sophisticated data-entry
systems" such as the optical scanner. The movement toward temporary
workers and part-time employment was already apparent. Despite these factors,
he thought "service-sector employment seems likely to continue to
expand."
Addressing
the issue of employment, Block says "the most basic prerequisite
is...[individuals' development of] their intellectual skills." By way of
criticism, we can't help but notice that gearing up to be "knowledge
workers" cannot fit an entire population, in which the median I.Q.
is 100, not 130.
This
fails to take into consideration large numbers of people's needs, even without
taking into account Rifkin's projection that work will tend to vanish in the
service sector. But if such a diminution occurs, there will be a lot of
educated, highly skilled people, who relied on his (and others' such as Robert
Reich's) advice about what to do to prepare themselves, with little
income-producing potential. Perhaps Block feels, from his own point of view,
that his call for an increased government provision of collective goods (not
through a central mechanism but through multiple centers and through business
firms that have been made instruments of public purpose) already anticipates
the response that is needed, so that it doesn't matter greatly whether, from
ten years back, he foresaw as much as might be foreseeable today.
Postindustrial Possibilities, then,
was fairly far advanced in anticipating the curve of change. Its prescription
of "more training" makes sense in the short term, but isn't adequate
ultimately. Neither is his call for "workplace democracy," since that
may quickly become outdated if a near-workless society eventuates. He sees the
failure of centralized socialism, however, and is not a totalitarian. We can
well imagine that, from the Left, he will have something to contribute to the
dialogue that must now begin to include conservatives and ' classical liberals.
Before
we leave him, it is worth mentioning that he points to some important
insufficiencies in much economic data as it is compiled today. Capital
accounting, he says, becomes problematical when it doesn't take into
consideration such things as organizational factors, the money spent on human
capital, and such "intangible expenditures" as spending on research.
If capital is valued at its original cost, "there has to be some kind of
adjustment for changes in price levels and procedures for assessing the value
of older capital relative to newer capital in light of technological
advances." An example that comes to
mind is that I paid $2600 for a computer in the early 1980s and another
$2600 in 1996. The price was the same, but the one in 1996 is immeasurably
better. This is the phenomenon that Block calls "capital savings."
The increase in productivity and well-being is there, but doesn't show up in
statistics measured in dollars.
Another
statistic he questions is that of GNP, which no longer tells us much about the
economy: it doesn't show capital saving, how property or income is distributed,
impacts on the environment or on life expectancy, work done at home, the value
of leisure, and such "externalities" as peoples' sense of economic
security or insecurity. These criticisms show that an assessment of relative
economic well-being requires more than accepting customary data at face value.
In addition, it will be important to look at a number of elements and to be
wary of arguments based on selected factors.
The Work of Nations: Preparing Ourselves
for 21st Century Capitalism
Vintage
Books, New York, 1992
Paperback,
340 pages, $12
ISBN
0-679-73615-8
Reich
has much in common with Block, in that The Work of Nations is strong on
what has happened and will be happening economically, but makes policy
suggestions that bear little relation to the problems. He, too, stresses skills
training as though that will fit the needs of the great mass of the population.
More than any of the other books discussed here, Reich emphasizes how business
firms are losing their national identity. "There will be no national
products or technologies, no national corporations, no national
industries." The reality is that "the core corporation is no longer
even American. It is, increasingly, a facade, behind which teems an array of
decentralized groups and subgroups continuously contracting with similarly
diffuse working units all over the world." Capital flows to whoever can
make something at the least cost. And "foreigners are coming to own an
ever greater proportion of America's productive assets," while
"American corporations are investing abroad at a furious pace." It is
a global market, with global firms and a global workforce. His analysis is
valuable because it makes us think twice about references to a nation's
"firms" or "industries" or even "economy."
Without looking underneath to the reality, nothing is certain to be what it
seems.
Reich
reenforces the other authors in pointing to a major
impact on jobs in the United States. He says the top 500 industrial firms
"failed to add any American jobs between 1975 and 1990." As factories
became automated, jobs disappeared (in steelmaking, for example, through a
reduction from 480,000 to 260,000 employees between 1974 and 1988). Lower- and
middle-management production jobs were cut back sharply: "Between 1981 and
1986, more than 780,000 foremen, supervisors, and section chiefs lost their
jobs through plant closings and layoffs."
He
classifies workers today into three categories: "routine producers,"
"symbolic analysts," and "in-person servers." The routine
producers are directly in competition both with robotization
and low-paid workers all over the world, with nothing to insulate them. Their
employment will continue to decline. Those who run the robots are well paid,
but only a few people are needed for that. Reich considers even data processors
and computer programmers as among the "routine producers." In data
processing, wages have been depressed and jobs have evaporated, since it can be
done much more cheaply in, say, the Philippines or the Dominican Republic.
Computer programmers are in competition with programmers in Bangalore and
everywhere else.
The
symbolic analysts (Block's "knowledge workers") constitute about 15
to 20 percent of the workforce. They have thrived and have for the most
part received high compensation, working in high-skill areas such as science
and research and design engineering. There is a worldwide market for their
services as communications and transportation have improved. But even here the
exposure to competition from the over-five-billion people around the world is
making their situation precarious. "The worldwide supply of symbolic
analysts is growing ...Millions of people across the globe are trying to learn
symbolic-analytic skills." Reich believes Americans will keep the advantage
for this type of worker because of the United States' system of higher
education and the critical-mass of symbolic workers already present. An
"advantage," though, doesn't mean that compensation won't be undercut
or that as many will be employed. It is worth remembering in any case that we
are not talking about mass employment at high wages when we're discussing
"symbolic analysts." Many of their jobs are threatened by
computerization, as much engineering, design, artwork and other mindwork comes to be done electronically.
Because
"routine producers" are in "a sinking boat" and
"symbolic analysts" make up a small fraction of the public, millions
of people are flooding into the "in-person server" category, becoming
such things as aerobic instructors and nurses' aides. But the income of even
this group "is sinking as well, but somewhat more slowly and
unevenly." The supply of people seeking such work is so great that wages
are sent downward, in keeping with what Batra tells
us about wages in the service sector. Moreover, as technology advances,
"the fiercest competition that in-person servers face comes from
labor-saving machinery...automated tellers, computerized cashiers, automatic
car washes, robotized vending machines, self-service gasoline pumps…."
Keep in mind that we are talking about the great bulk of the public here.
What
does Reich propose? He is an "economic nationalist" only in a limited
sense. He wants government to spend on a number of things such as
infrastructure, childcare, education, and job training; but he also wants no
barriers to free trade. Foreign ownership of business is all right, provided
the nation's citizens are employed in skill-enhancing functions. There should
be subsidies to firms, foreign or domestic, that undertake to train or provide
skilled job experience to American employees. Taxation should become more
redistributionist. And the advanced countries should make a worldwide redistribution
of wealth, although this bombshell [because of the enormity of the task] is
brought in only passingly and without Reich's even
discussing its implications. He looks askance at a federalist decentralization,
since redistribution is best accomplished through central power.
But
Reich's paramount emphasis is on the need for people to gain skills, retool, retrain
and stay mobile. With Porter, he stresses the need to remain at least a half a
stride ahead of foreign competitors, moving to ever-higher levels of technical
skill mainly in areas of customized services that can't be quickly replicated
by others in the world market. Again, we see proposals that fail to address the
question of how to employ millions of people. Oddly, however, Reich voices at
least guarded optimism about putting the poor to work through remedial courses
and job training, as though there were no problem about what work awaits them.
(The same doubts must be applied to the welfare reform passed by Congress and
signed by the president in the United States in August 1996, since that reform
is geared toward work.. The measure is an excellent example of a policy that is
most welcome in terms of society as we have known it, but that is rapidly being
made obsolete by the changing realities.)
The Work of Nations, then,
is yet another of the books that see part of the problems but are primarily rooted
in things as they are (or still seem to be). The longer-term situation is not
thought out adequately.
A Restatement of Economic Liberalism
Humanities
Press International, Atlantic Highlands, NJ, 1988
Hardback,
346 pages, $39.95
ISBN
0-391-03577-0
Brittan's book is an ideological anomaly: it invokes a certain theme in classical liberal thought to arrive at suggested policies that virtually all classical liberals would abhor, but which, as a classical liberal myself, I have said might need to be resorted to because of the impending near-workerless economy. He makes these suggestions, which are traditionally socialist, not because he sees them forced by the new realities but because he desires them for their own sake. Influenced by classical liberalism, t