The self destruction of the 1% October 22, 2012 at 6:57 am

I’m late to this, and out of the office today, so let me leave you with Chrystia Freeland’s fascinating New York Times opinion piece from a week ago, The Self-Destruction of the 1 Percent. Happy creeping Serrata.

4 Responses to “The self destruction of the 1%”

  1. Ms. Freeland fails to consider one of the most important exogenous factors that may be driving the shifting distributions in wealth. To borrow a phrase from Marc Andreesen “software is eating the world.” I suspect that this phenomenon is hurting the laboring classes more than every tax cut, bailout and de-unionization combined.

    How many jobs have already been lost by deep shifts caused by dirt cheap computing power. Amazon with its human-less website and increasingly human-less warehouses is destroying the millions of low-skilled jobs in big box retailers like Borders, Best Buy and Sears.

    Search engines and automated sites are decimating the millions of call center jobs that were one of the few footholds uneducated workers had to an office job (IBM’s Watson technology will take out the remaining). Factories are now being run in the dark because they have no human workers, and 3D printers will inevitably kill the last trickle of good-paying manufacturing jobs that propped up the working-middle class of the 1950s.

    Google, Apple, Facebook, Twitter, Groupon, Zynga, VMWare. Do any of these hyper-growth stories from the past decade, with nearly $1 trillion of market cap created, offer anything but a handful of jobs to high school graduates?

    I predict the next bombshell will be self-driving cars. It will contribute incredibly to economic growth and living standards (less congestion, faster travel times, much lower accident rates, cheaper transport, etc.). But it will also wipe out truck drivers, taxis, deliverymen, mechanics, body shop workers, many of the car manufacturers, much of the car insurance industry, road construction workers, and many emergency responders.

    Frankly it really shifts the demands across the skill spectrum for workers. Those who can contribute to the continuing march of software eating the world, either directly as programmers and systems designers or indirectly through handling the business side, are and will reap very large gains.

    Meanwhile the unskilled and low skilled will find themselves desperately trying to keep their heads above the rising tide of computers’ abilities. Bouncing from one job to the next only to find it shortly thereafter consumed by automation.

    The solution historically has been a combination of increased education and re-training for the new jobs, and redistribution to support the displaced during their shift. But at some point between now and the far future of super-human AI this formula breaks down.

    At some point machines get smart enough that they can do nearly every job that the bottom X percentile (in terms of cognitive ability) of humans can do. Then that X keeps rising year after year, and if you fall below it your economic wage basically goes to zero. Not every sheet metal worker can retrain to be a research scientist.

    I think before we think too deeply about what’s causing inequality it’s worth thinking about how close we are to that inevitable world.

  2. True Words and a bad promise with a lot of chances in it: 99% will be out of work. Who’ll buy all the products sold by the 1%? The result will be revolutions and political unrest. Sooner or later more and more wages will fall right and also the prices of all consumer products. The rift between poor and rich will grow. What will be the result of so many jobless people who don’t know what to do with their time? Maybe they’ll be all artists somehow… It’ll everything focused on the question “ars vivendi”. We’ll see some crazy and true individuals in the future out there I think. They’ll laugh about us as “individuals”.
    :-) Thanks for this wonderful opinion/article!

  3. Capitalism without morals is just a system for enriching the oligarchy. In a few years my kids will ask me how my generation let this happen.

  4. Doug

    Thank you for a long and insightful comment. I will blog about this tomorrow, I hope.

    QM

    Agreed. Or, at least, I hope that you are right because it would mean that your kid’s generation had rediscovered the morals that we seem to have put aside in the 80s.