Sunday , January 21 2018
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Where are the robots?

Image: Ludie Cochrane

Peak oil demand was the big story last year – at least until the oil price rose above $60 a barrel and we all woke up.  The idea was that a brave new world of automated technologies powered by renewable energy was just around the corner.  There was even concern that like Skynet in the Terminator films, robots would render humans surplus to requirement.

The problem is that this isn’t the world outside your or my window.  Instead of robots displacing workers, the very opposite appears to be true.  A new army of cheap gig-economy workers driving for Uber and Amazon or cycling for Deliveroo have obviated the need for an automated alternative.

We have full-employment, do we not?  But increasingly this employment is in less-than-minimum wage gig work, unreliable self-employment and zero hours contracting; and mostly in the labour-intensive sectors of the economy.  Even in transport – the poster child for automation – we have witnessed an army self-employed humans finding employment as Uber drivers or sub-contract delivery drivers.  Meanwhile, self-driving cars have barely made it out of the science lab.

This is not to suggest that the technologies for automation do not exist.  It is just that like so many technological stories, the economics have been ignored.  In fact, and contrary to popular opinion, labour is a bigger driver of mechanisation/automation than technology.

To understand this, consider something unique that happened in the 1750s – Britain industrialised.  But why Britain?  Why not France, which had a sizable maritime empire of its own?  Why not Spain or Portugal, which had both returned with a fortune in plundered gold and silver from the Americas?  One reason, of course, was that Britain had the means – large deposits of coal, iron ore and other minerals.  But so, too did France.  In any case, steam power was nothing new – the automatic doors of the great library in Alexandria were powered by steam.  According to archaeologist and historian Ian Morris, the key difference between Britain and the rest was that Britain had high wages (in part due to Britain’s  share of the wealth returned from the Americas).  Crucially, wages were high because labour was in short supply.

High wages made mechanisation attractive – coal powered machinery could produce far more goods at a much cheaper price than labour alone.  But this was only half the story.  High wages also meant that there was growing demand for the goods that were being produced.  Not only that, but a growing “triangular (slave) trade” was pushing up demand for finished industrial goods around the world.

Now consider the situation today.  In 2017 we have a surplus of labour and declining wages.  As Political economist Mark Blyth points out, this more or less rules out investment in a new round of automation.  It is not that the technology doesn’t exist.  The problem is that nobody wants to risk being the first to invest in it.  After all, a new fleet of self-driving electric taxis (not to mention Elon Musk’s physics-defying electric trucks) is going to be eye-wateringly expensive and unlikely to compete with a second-hand petrol banger driven by an impoverished gig worker.  And even that is assuming that the economy will be strong enough to provide the new charging and communications infrastructure to enable the technology to work.

The one area where we are seeing automation replace workers is in the higher echelons of the economy.  Modern stock markets are dominated by algorithmic trading.  Vast sums were spent in the USA to shave a few seconds off the speed of communications between the Chicago and New York exchanges.  Infrastructure has been installed at exchanges around the world to ensure that the AI is unable to “cheat” by gaining a communication speed advantage.  Banks, too, are laying off thousands of well-paid employees whose jobs can now be done by machine learning algorithms.  Artificial Intelligence can now compose music and write magazine articles.  In the near future, the repetitive and memory-dependent functions of lawyers and medical practitioners will also be replaced by algorithms.

The point is that these are among the remaining high-paid sectors of the economy where replacing workers with relatively cheap AI still makes sense.  But even this gain is temporary, since it has a huge demand downside.  The people who used to be bankers, stockbrokers, lawyers and composers will have to join the growing pool of low-paid labour that stands in the way of the broader technological change that so many in the mainstream media believe to be inevitable.

One reason why tech godzillionaires like Bill Gates and Mark Zuckerberg have been touting the benefits of a universal basic income is that they are aware that without high wages demand for their products will inevitably decline.

Their understanding of the threat, however, is wrong.  Low wages have not been caused by technologies that, in most cases, have yet to be deployed.  In part they are to do with the neoliberal austerity policies that rest on the insane belief that we can cut our way to growth.  The deeper malaise, though, is that the true driver of the economic engine is not labour power, but energy in general.  The reality is that since 2005 the cost of the energy used in the economy has increased dramatically.  The result – both through prices and taxes – is that an increasing proportion of our shrinking incomes is going to meet these increased energy costs.  And on the other side of this is a massive decline in discretionary spending that is causing a retail apocalypse on both sides of the Atlantic.

It is no accident that private corporations are currently sat on mountains of cash that they refuse to spend on anything beyond buying back their own shares.  There is nowhere else to invest it.  Quite simply, nobody is about to invest the billions of dollars, euros, pounds and yen that would be needed to kickstart the so-called “fourth industrial revolution” without a mass market willing and able to buy its products.

Unless something changes, and fast, we are more likely to see a low-tech, low-paid future than the techno-utopia we were promised.

As you made it to the end…

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