Ronojoy Banerjee
Former US President Barack Obama’s final presidential address to the nation in Chicago recently drew reams of expert columns and outpouring of emotions. Little under one hour, the speech was laced with optimism and hope, to embalm a country bruised and deeply polarised after a bitter and an acrimonious electoral battle. Though the former President laid out many short- to long-term challenges facing American society and democracy, it’s his words on the economy, especially the threat of automation to jobs, and the government’s response to it, that needs serious introspection. Responding to trade sceptics, Obama warned that "economic dislocation won’t come from overseas. It will come from the relentless pace of automation that makes many good, middle-class jobs obsolete."
The prospect of technology making human labour redundant is neither new nor is Obama the first US President to echo those concerns. The question of whether 'humans will go the horse way' has agitated some of the greatest minds since the dawn of industrial revolution, according to Erik Brynjolfsson and Andrew McAfee. Karl Marx, for instance, felt automation was a necessary feature of capitalism as it improved efficiencies and boosted profits. John Maynard Keynes, writing in the inter-war period, too, worried about a future where material prosperity would increase, but at the cost of ‘technological unemployment’. Into the 1960s, US President Lyndon Johnson called for 'proper planning for the future' to understand 'what is to come' with automation. He, in fact, set up the National Commission on Technology, Automation and Economic Progress after a group of noted academics, journalists and scientists warned of a ‘triple revolution’ of nuclear weapons, civil rights and cybernation or automation. The group said that automation had the power to usher an economy with 'potentially unlimited output' but which would be achieved by 'systems of machines with little cooperation from human beings.' Gunnar Myrdal, who won the Nobel Prize in Economics along with Friedrich Hayek in 1974, was also part of this group that sent the memo to the President.
But curiously, despite concerns and demands for intervention from the government that was building up for many years, starting the mid 1960s the issue slowly faded away from public consciousness. Martin Ford, the author of the powerful book ‘The Rise of the Robots’, reckons that perhaps the roboscpetics rang the alarm bells too soon since the US economy ‘offered very little in the way of evidence to support such concerns.’ The unemployment rate fell to a benign 3.5 percent by 1969 as the world’s largest economy made productivity gains and generated prosperity unmatched in history; and by the 1970s the focus had shifted to oil cartel OPEC’s practices. Further, it is also possible that the rise of the Chicago School of Economics led by the veritable Milton Friedman in the early 1970s built the intellectual foundation upon which the ‘business of business is business’ idea prospered, and technology was seen as an essential ally of humans and not an adversary.
Though that was the overwhelming view coming into the new millennium, the global financial crisis changed it. Concerns over income stagnancy of the middle class in the developed markets, widening income gap between the ultra-rich and rest of the population and the rise of the tech giants led by Google, Apple and Facebook once again brought the issue to the fore. Since his second term, Obama has consistently spoken about the downsides to technological leaps like artificial intelligence and 3D printing. But it was in his farewell Chicago address he proposed something no sitting US president had done before in their final address: giving workers the power to unionize for better wages. And it’s not just Obama but other sitting heads of states, too, who have begun wondering aloud whether the fourth industrial revolution will turn out to be a bane or a boon for countries.Government anxiety over job creation in the technology age stems from a peculiar scenario. Though elections can be won or lost on the issue of jobs, there is very little the governments can do directly to increase hiring. For instance, the government can tackle the menace of detereorating law and order directly, by expanding the police force or tightening surveillance. But in privatized economies of today, policymakers can at best use a mix of monetary and fiscal measures, or cut taxes to boost investments in the hope of creating jobs. But, whether a private company would find these incentives lucrative enough to step up hiring, especially when a robot’s marginal cost of labour is negligible, is at best tenuous and hard to establish. Further, in the information age where there is little co-relation between company networth and the strength of the workforce, the problem for governments have become that much more confounding. In 1979 when General Motors reported profits of USD 11 billion, it was on the back of its largest ever workforce of 840,000. But in 2012 when Google’s profits hit USD 14 billion, it needed less than 5 percent of GM’s staff of 1979 or about 38,000 to do it! And, even some of the remaining jobs could disappear over the next two decades. The Economist magazine reckons 47 percent of all jobs can get automated by 2034, and concludes that governments are ill-prepared to deal with this.
Though the overwhelming research on the impact of automation on jobs has come from the developed world, India is equally vulnerable. In a recent visit to the office of Genpact, the country’s leading outsourcing firms that employs over 75,000 people, the CEO told me that many low-skilled call centre jobs stand the risk of getting automated. He said that the underlying structure of the industry is rapidly changing, and jobs could become more specialised and scarce. Almost on cue, Infosys said last week that in in the past year it had automated 9,000 low-end jobs and the pace would only quicken in the coming years. Nasscom, the apex body for the IT sector, has forecast that by 2024 the industry would lose up to 640,000 jobs due to automation. Even in large manufacturing companies the trend towards robotics is clear as many assembly jobs don’t need human labour anymore. And in a country where 1 million are added to the workforce every month, the writing is on the wall.
Hence, what can realistically be done? Clearly, turning back the wheels of technological innovation is no option. And it would be churlish to even suggest that. But, a good starting point would be to have a more open conversation about the course technology is likely to take in the coming years, without being labeled a ‘neo-luddite’. Governments need to form discussion forms, with representation from the private sector, academia, scientists, labour unions to better understand manufacturing trends and the long-term technological evolution in sectors that are particularly labour-intensive. Simultaneously, the need for upgrading skills and improving vocational training has become so critical and obvious that they need no further mention.
Even though, this article has only highlighted the views of the Robosceptics, there are many on the other side of the divide who have dismissed the arguments as misleading, bordering on fear-mongering. The principal logic of the technocrats stems from the view that technology drives down costs of goods and services, making them more affordable to a wider section. This means demand goes up, translating into more production and the need for additional labour. But the counter view is compelling. If the potential risks of automation are real, there would be downward pressure on wages pulling down demand of these very goods and services, since after all ‘workers are also consumers’ and thereby, hitting long-term economic growth. In short, is a more automated economy inadvertently cutting the tree branch on which it is sitting?
Obama used the platform of his farewell address to raise the pitch of the debate, and wherever the truth may eventually lie, let's hope the issue, unlike in the past, does not get pushed to the fringes of public discourse.
(Ronojoy is the Assistant Corporate Editor of CNBC TV18)
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