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PREPARATION FOR THE WRONG ECONOMIC WARS?

June 24, 2015

PREPARATION FOR THE WRONG ECONOMIC WARS?

I distinctly recall reading years afterwards the words of a Nazi general on the eve of WW II who correctly noted that the French in 1914 on the eve of WW I were perfectly prepared for the Franco-Prussian War of 1870-1871, and that the French in 1939 on the eve of WW II were perfectly prepared for WW I. Thought to be invulnerable behind the Maginot Line, the French did not adequately fortify their Belgian border and the Nazi Panzer divisions came through Belgium, attacked the Maginot Line from the rear, and were soon goose-stepping down the streets of Paris.

The Germans committed a similar blunder with their failure to totally fortify the continental shores of Europe against invasion by leaving holes in their defenses, one at Omaha Beach which, along with Allied paratroopers, aerial bombardments and Hitler’s inexplicable reticence in sending his tanks to the Omaha Beach breach, allowed invading Allied troops later opportunities to attack Nazi fortifications from the rear. General Rommel, Hitler’s chief in charge of coastal fortifications, committed suicide as a result (some say at the insistence of Hitler). He probably would not have fared better later at Nuremburg.

The point in the two preceding paragraphs that I hope to make is that we can make economic policy decisions that attack yesterday’s problems while our attention is diverted from attacking the real problems at hand (whose solution goes unattended). There are no Maginot Lines in the brutal world of economics in a globalized setting, and even if there were, such defenses could be easily outflanked by our international competitors via currency games, export subsidies, dumping, customs duties etc.

For instance, we see the TPP going through a rough political stretch because Democrats want to protect domestic labor with subsidies for expected losses to cheaper labor in cheap labor venues in affected industries. It won’t work but it makes good political talk for the folks back home who will be displaced. Even if we pay the affected people who are out of a job because labor costs are so much higher here than in poverty-stricken venues in Southeast Asia, we are doing nothing to reduce unemployment – we are merely subsidizing it. This is at bottom corporate welfare; it allows the taxpayers to pay for the dislocation of production while the multinational corporations who are sponsoring the TPP cash in on their planned dislocation of production. A fairer plan would be to have the multinational corporations pay such dislocated workers’ losses of income due to such dislocation since they and not taxpayers profit so greatly from the arrangement proposed in the TPP.

Perhaps more worrisome is something I wrote about some time ago and one that is a problem desperately in need of solution or at least emergency planning, a problem that has to do with production of goods and services and one that enjoys no consideration in the TPP (the Maginot Line of yesterday) and little in contemporary economic discussion even though the problem is growing by leaps and bounds. It is so serious that it may be time to reconsider the Huddites’ position, among others. I refer to robotics. I wrote some time ago that one industrialist in China was complaining about the rising cost of labor (in China!) and was replacing human labor in his factories with robots. We have already subsumed the first waves of robotics here but are adding new job designs suitable for robots daily.

Radiologists in India are already performing the duties of American radiologists at a fraction of the cost and we are told now that surgeons in India and elsewhere will soon be able to perform surgery in American operating rooms via remote control robots. Silicon Valley reports that their algorithm whizzes are teaching emotional intelligence to robots, so I suppose that means that human therapists will soon be competing with robotic therapists for business who can operate at far less cost. My point in bringing up these examples is that robots are not going to be confined to rote and repetitive task assignments in the very near future if not already and that protecting labor’s paycheck as a response to yesterday’s economic war is Maginot Line thinking (which also does nothing for domestic human unemployment mitigated at taxpayers’ expense rather than at the expense of those who greatly profit from such an arrangement – the rich and corporate class, their banks and multinational corporations).

I was prompted to write this piece from reading a note by Martin Ford of the New York Times. We are not the only country facing a robotic crisis. It is an international matter. He reports that China’s tens of millions of factory workers are being increasingly displaced by machines with “significant consequences for China’s economy – and the world’s.” China’s factories in 2014 used 25 percent of the world’s industrial robots, up 54 percent from 2013. In Guangdong, an appliance manufacturer is replacing 6,000 employees, a fifth of its workforce, with robots by the end of the year. Foxconn, which makes products for Apple, Sony, and Microsoft, will automate 70 percent of its factory work within three years.

Like here, China is not creating new jobs to handle the newly-unemployed workers displaced by robots. I think this is the economic challenge for the foreseeable future. The TPP is presumably designed to smooth out yesterday’s problems (depending on whose propaganda you embrace), but yesterday’s problems and today’s and tomorrow’s economic and political problems are two different animals. The “old-time” game of American multinational corporations in seeking out the cheapest labor on the globe may be over, like, who needs cheap human labor when the cheapest labor on earth is available via robotics wherever located (with no strikes, no unions, twenty four hour a day work shifts etc.)?

As I wrote many months ago, one golden lining on this transition occurring before our very eyes is that robots operate at the same costs here as in China or anywhere else and that since their production would be nearer our market, we could expect to see much of such production return here. That is a relative statement, of course, since the return of production to our shores will be accompanied by only negligible increases in human employment, if new robots have not replaced such increases by then.

This raises the ultimate issue (as I have blogged before). How do we compensate tens of millions of unemployed Americans who are not working and cannot work because there are no jobs? Increased education? As robots perform more and more complicated tasks, more education will be of little help.

We also have the time-tested Protestant ethic of “no work – no eat” drilled into our collective psyches. How do we handle that? One can guess on how this will turn out ranging from famine for unnecessary hordes of humankind to some massive redistribution of the wealth to people so they can survive. Neither bodes well for capitalism as we know it, social cohesion, or freedom from civil commotion.

There is an 800-pound economic gorilla in our front room, and it’s not TPP (which deals with yesterday and whose signatories will also be subject to robotic production). It is rather how we redistribute wealth and refashion our mores and folkways to accommodate new modes of production and consumption, answers to which belong to moral as well as economic philosophy.   GERALD     E

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