There are some cultural references that don’t work anymore – the scene in some sentimental old black-and-white movie – the retirement party. The beaming boss presents the pleasant old fellow, retiring after a lifetime of good work in the company – the guy started as a teenager in the mail room – with a gold watch. That’s for loyalty. That’s also a matter of thanks and respect, and that’s mutual. The pleasant old fellow had been treated well, and fairly, and prospered – he’d been respected and loved, and of course he’d never been laid off. This and that had been automated over the years, but there was always a place for him – doing something new and even better. Some of the work, over the years had been subcontracted – outsourced as we say now – but they had always found something even more useful for that pleasant old fellow to do. They stuck by him. He stuck by them. And the watch was real gold. And it wasn’t made in China. It’s a wonderful life. Fade to black. Roll the credits.
This is a bit quaint now, like a Norman Rockwell painting of an America long ago. Something changed, perhaps in the seventies. Many of us lived through it. There were the seventeen years at the aerospace corporation out here, much of it spent in Human Resources Systems, but there was no gold watch. After seventeen years we were all outsourced to Computer Sciences Corporation – the job was the same but we were now outsiders – and sooner or later we were sent to other accounts, to get things humming somewhere else. We were fungible.
The two years at the locomotive factory in Canada was interesting in its way – learning manufacturing systems on the fly. NAFTA made that possible, but there were hints at what was to come. The expert who knew everything there was to know about the Manufacturing Resources Planning system running on the mainframe was even more of an outsider. He was a freelancer, an independent contractor from India. He was in business for himself – a hired gun. And then it was stay in Canada or resign, and California called. It was good to get back home, and the new job at the hospital chain in Pasadena was cool – but a year later we were all outsourced to Perot Systems. The hospital chain wasn’t in the systems business after all, and Perot System ended up running a lot of the work from Texas. They simply let a lot of folks go and sent the rest of us to other accounts – a few months here, a few months there, a lot of frequent-flyer miles, and no gold watch. And of course Perot Systems soon discovered that much of their work could be done cheaper in India or some such place – systems analysis and coding don’t have to be done on site, nor does managing that stuff, and the quality of the work isn’t all that bad – so the rest of us were just cut loose. Even Texas wasn’t safe. The answer was to become an independent contractor yourself, or get out. Many of us just got out. Everyone in systems has lived through this sort of thing.
Everyone else has lived through something like that too. It’s depressing, but maybe Donald Trump will fix it. Steven Pearlstein suggests that:
Determined not to let any Trump action go unchallenged, the media has been full of comments from economists (including Larry Summers and Justin Wolfers) that Donald Trump’s intervention to save jobs at Carrier’s Indiana facility is just a showman’s one-off – that it can’t be easily replicated and will be ultimately ineffective in changing the job prospects in a country that creates and destroys a couple of million jobs every month. This is simply not the way things are done in a country that values free markets and the rule of law.
Pearlstein doesn’t buy it:
One of the blind spots economists have is around norms of behavior – the unwritten rules that are the guiderails for how people act. There was a time in America when there was an unwritten pact in the business world – workers were loyal to their companies and successful companies returned that loyalty by sharing some of their profits with their workers in the form of higher wages, job security and support for the local community. In some cases, this social contract was reinforced by a union contract, but it was also embraced even in non-union situations because there was a broad public consensus that it was the right thing to do. Business leaders conformed to the norm not only because it helped them attract good workers and customers and have clout in dealing with governmental leaders, but also because it made them feel good about themselves.
Pearlstein has seen that old movie, but he also knows what happened in the late sixties:
American industry began to falter because of foreign competition. Consumers decide they cared more about cheaper products than socially conscious corporate behavior. And just as significantly, investors, after years of lousy returns, decided they cared more about maximizing shareholder value than they did about maximizing the social value of the enterprise they owned.
So the social norm changed. A new breed of corporate executive, incented with boatloads of stock options, decided that the right thing to do was to cut costs at any price, including the economic health of their workers or their communities. Indeed, for a while, if a corporate executive didn’t have an aggressive plan to shift production overseas, they were criticized by Wall Street and the business press and threatened with takeovers by what we now call “activist investors.” Although the public never much liked the idea of closing plants and shipping jobs overseas, it no longer was socially unacceptable.
Ah, but that could change:
Now comes Donald Trump – in the public mind, a successful businessman – who as the new president, suddenly declares that the new norm is no longer acceptable, and he intends to do whatever he can to shame and punish companies that abandon their workers. It’s one thing for a company to sustain a few days of bad headlines in the local newspaper when it decides to close a facility. It’s quite another when the president of the United States is not only willing, but from a political point eager, to make a federal case out of it. Suddenly, maximizing shareholder value no longer provides the political and social inoculation that it used to…
Donald Trump understands better. He knows that he and his new commerce secretary will have to engage in a few more bouts of well-publicized arm twisting before the message finally sinks in in the C-Suite. He may even have to make an example of a runaway company by sending in the tax auditors or the OSHA inspectors or cancelling a big government contract. It won’t matter that, two years later, these highly publicized retaliations are thrown out by a federal judge somewhere. Most companies won’t want to risk such threats to their “brands.” They will find a way to conform to the new norm, somewhat comforted by the fact that their American competitors have been forced to do the same.
And it will be 1953 again, as everyone knows it should be:
Privately, many of the executives will welcome the change. They chafe under the tyranny of maximizing shareholder value and they don’t like being widely viewed as ruthless and selfish. In his bombastic, narcissistic, self-serving way, Donald Trump may have actually done them a favor.
Those guys will hand out gold watches again! All it takes is the proper use of public shaming, but Kevin Drum doesn’t think so:
I think the “norm” Pearlstein is talking about here is actually just ordinary economic reality. During the postwar economic boom, American companies didn’t need to offshore jobs, so they didn’t. Nor did they need to lay off workers or downsize their companies frequently. America was the most efficient manufacturer around and there was plenty of money sloshing around for everybody. So why invite trouble?
When the postwar boom came to an end, businesses changed. We learned that what we thought had been a permanent new norm, was no such thing. It was just a temporary, three-decade blip. Starting in the 80s, as economic growth leveled off, the business community returned to operating the same way businesses had operated ever since the beginning of the Industrial Revolution.
Trump may not be able to restore that anomaly:
He’ll engage in some naming and shaming, and on a few occasions he’ll try to set an example by going after companies in semi-legal or outright illegal ways. It might even work a little bit, and it will almost certainly work in a PR sense. But more generally, Trump can’t keep the tide from coming in any more than any other president. It’s not as if the offshoring phenomenon is peculiar to America, after all.
That’s a losing battle, but there’s a second factor here:
Within a decade or so, most manufacturing work will be so highly automated that it won’t matter much where it’s made. We’re already starting to see signs of this. That will put an end to large-scale offshoring, but unfortunately, it will be even worse for blue-collar workers. We’re on the cusp of an era when tens of millions of workers will be put out of jobs by automation, and we’d better figure out what we’re going to do about that. But one thing is certain: whatever the answer is, it’s not naming and shaming.
Actually it is about more than naming and shaming, as Trump just tweeted this:
The U.S. is going to substantialy [sic] reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. without retribution or consequence, is WRONG! There will be a tax on our soon to be strong border of 35% for these companies wanting to sell their product, cars, AC units etc., back across the border. This tax will make leaving financially difficult, but these companies are able to move between all 50 states, with no tax or tariff being charged. Please be forewarned prior to making a very expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS.
Drum is not impressed:
At the risk of taking Trump literally, rather than seriously, I wonder if he actually thinks he can do this. It’s not as if the president is allowed to unilaterally slap a 35 percent tariff on Carrier air conditioners or Ford Fiestas, after all. If Trump invokes the appropriate “national emergency” authority, he could impose a tariff on all air conditioners or all cars. Or he could impose a tariff on all goods from Mexico or all goods from China. But I think that’s as far as his authority goes. He can’t simply decide to punish one particular company.
In the case of Mexico, of course, he can’t do even this much unless he persuades Congress to exit NAFTA – and that has a snowball’s chance of happening. He could, in theory, impose a 35 percent tariff on, say, telecom equipment made in China, but that would send up howls of protest from American businesses and almost certain retribution from China.
Naming and shaming might have been a better idea, and this fire-no-one-ever tariff thing may be just hot air:
The American business community, which would go ballistic over something like this, has been pretty quiet, which suggests they think it’s just blather. That’s my guess too. But I guess you never know. We overeducated elites like to say that stuff like this is just affinity politics – aka red meat for the rubes – but perhaps eventually we’ll learn that we should have taken Trump literally after all.
So, if Trump means this, we’re in trouble, but probably not. The Trump presidency will be an adventure, and it really won’t address the problem, as David Atkins explains here:
There is a growing consensus among futurists and visionaries of various backgrounds that the challenges of an automated economy will require implementing a universal basic income. These thinkers range from former SEIU president Andy Stern to Robert Reich to a wide range of entrepreneurs in Silicon Valley. Martin Luther King, Jr. advocated for it, as did conservative Milton Friedman.
For all the hoopla over china, trade and immigration, 85% of the manufacturing losses in the United States were due to automation, not trade. And it’s not just manufacturing. Automation imperils huge swaths of employment, from the medical profession to the finance industry. Drivers of all kinds, from truckers to cabbies to worksite drivers, are all on the chopping block. Big data threatens to slash middle level managers and analysts of all kinds. Something will have to be done.
But most people aren’t ready for a universal basic income.
Of course they’re not:
People aren’t comfortable with the idea yet – they worry about creating a class of layabouts, and about removing the dignity that comes with a job, and about losing the leverage workers have had against capital since the dawn of the labor movement. Most of these are cultural fears that will dissipate over time, but they are very real.
Because of that, reducing structural underemployment and unemployment due to automation is going to require a large push for government sector employment first.
Sure, get people building roads and bridges and whatnot, but then realize something else:
To get even that far will require an acknowledgment that retraining for the “jobs of the future” is not a satisfactory answer. Former factory workers in places like Muncie, IN, either cannot or will not learn to code and develop apps. Job retraining programs have not been very successful in part because of cultural challenges, and in part because there isn’t actually a skills gap between American workers and unfilled jobs. The “jobs of the future” are rapidly changing as well. Ten to fifteen years ago the “cool” job was web design, and everyone was supposed to learn HTML. Now those skills are nearly useless, as automated tools make it easy to create a website without any coding knowledge whatsoever. Today’s hot job is making apps, but that labor market is already saturated and globalized, with ever more democratized tools. Tomorrow’s hot job will be in 3-D printers with their own language and requirements, but then that too will be rapidly simplified on the front end. The back ends of all these technologies will require fewer and fewer back-end creators, even as machine learning for back end applications improves.
The free market won’t solve this problem on its own – not even with retraining and intervention. It wouldn’t be able to do it even if human beings were movable automatons themselves, willing to sit behind a desk in a city when they would rather be working in the sun in the towns they grew up in. Culture gets in the way, as do basic human needs. As well they should. People don’t exist to do jobs; jobs exist to serve people.
Politicians will need to acknowledge that the modern late-stage capitalist economy is fundamentally broken. America isn’t great now. It cannot be made great again.
Atkins sees only one solution to this, government guarantees of employment and well-being:
It must begin with a pledge to make it affordable to attain the education to get what few good-paying jobs will remain. It must continue with a commitment by the government to employ those who have been left behind in doing the much-needed work that the free market will not pay for. And it must ultimately include a commitment to use the dividends of increased productivity via automation and globalization that have been going to line the pockets of shareholders in the top .1% of income, to make the citizens who produced that wealth whole again with a guaranteed income productivity dividend.
That might be better than a gold watch, although Trump, and all Republicans, would never consider such a thing. Still, at CNBC – America’s business channel – Catherine Clifford explores why universal basic income may be necessary:
A 2013 study by Oxford University’s Carl Frey and Michael Osborne estimates that 47 percent of U.S. jobs will potentially be replaced by robots and automated technology in the next 10 to 20 years. Those individuals working in transportation, logistics, office management and production are likely to be the first to lose their jobs to robots, according to the report.
In less developed countries, the potential for job loss is more severe. A 2016 analysis from the World Bank estimated that roughly two-thirds of all jobs in developing nations around the globe are susceptible to replacement by automation.
The writing is on the wall:
As the global workforce modernizes and low-skilled workers lose their jobs, momentum builds around the idea of a universal basic income, or a fixed, regular payment that all residents, no matter their employment status or wealth, would receive from the government…
Elon Musk, the founder and CEO of SolarCity, Tesla, and SpaceX, recently declared that a universal basic income was a reasonable next step for the U.S. “There is a pretty good chance we end up with a universal basic income, or something like that, due to automation,” Musk told CNBC. “Yeah, I am not sure what else one would do. I think that is what would happen.”
He’s not alone in thinking that:
While no country has fully implemented a universal basic income yet, individuals are experimenting with a version of the idea, as are several Scandinavian nations.
Finland is preparing to test out a universal basic income. Currently, the country is soliciting feedback, and the actual test is expected to be carried out in 2017 and 2018 with results available by 2019, according to a written statement from the country’s Ministry of Social Affairs and Health. As part of the study, 2,000 individuals will receive a payment of 560 euros ($598) per month, according to a press release.
Activists in the Netherlands collected 60,000 signatures requesting that the government consider a referendum on a universal basic income. The Dutch group, which calls itself Basisinkomen 2018, promotes the idea of a basic income of 1000 euros ($1067) per adult and 200 euros ($213) per child.
“We are in favor of a basic income because everybody has enough security to feel free and to make own choices. To care or to have an own business. To work or to volunteer,” writes Johan Luijendijk, the leader of the Basisinkomen 2018 movement, in an email with CNBC. “When someone can live starting from own talents and callings, it’s better for everyone. With basic income we can cut social security and huge bureaucracy.”
Meanwhile, Switzerland considered instituting a universal basic income of 2,500 Swiss francs ($2578) a month this summer. Voters ultimately rejected the plan.
The next time they may not, but we’re not Swiss:
In the United States, universal basic income remains a long shot.
“Obviously, it’s politically not feasible. It’s not something that is going to happen in the near future here in the United States,” says Martin Ford, the author of the New York Times bestselling novel, Rise of the Robots: Technology and the Threat of a Jobless Future, in a phone conversation with CNBC.
“When it comes to building social safety net programs we are not on the forefront – that is for sure. We are the worst of any industrialized country. I am pretty sure we are not going to lead the way,” says Ford. While President Obama was able to push through a version of universal health care, it is likely to be repealed under President-elect Trump.
Countries like Finland, Switzerland, and the Netherlands are more likely to see a universal basic income before the United States, the author says, because they are smaller and more homogeneous. They are also already more supportive of government services.
“When you have more racial divisions and so forth, politically it will be harder to pass strong safety net measures,” says Ford.
Still, we may have no choice:
“What we are seeing is that technology is driving inequality. A few people, very wealthy people, especially people who own lots of capital will do extraordinarily well because robots and technology are capital, right? A few people are going to own most of that. We are going to have to tax those people more,” says Ford. Other potential sources of tax revenue could be tax on capital wealth, consumption, or carbon, he suggests.
Regardless, says Ford, “At some point we will get to a point where the cost of not doing this is greater than the cost of doing it. And at that point maybe it becomes easier.”
What would be the cost of not don’t this? Stop. Do NOT think of Marie Antoinette at the guillotine. Oh hell, go right ahead. What else would anyone expect? Steven Pearlstein is happy that Donald Trump, though naming and shaming one company after another, every day or so, will bring back the cultural norms of some Frank Capra movie and we’ll all live in some Norman Rockwell painting – perhaps featuring some pleasant old man receiving his gold watch. Trump promises retribution. Fire folks and you’ll pay – big time – the new tariffs will ruin you.
Neither is going to happen. Businesses around the world seek the lowest costs, for the highest profits. That’s what they do. That’s what they’re supposed to do. They outsource. They automate everything they can for the same reason. There might have been a time when that wasn’t so, but that time was brief and a structural anomaly. This is here and now. There will be no gold watches. But there could be something else.