The coming revolution

People need to accept the fact that we are moving into a new era in which the majority of people no longer need to work in order to produce food, clothing, shelter and entertainment for everyone. Today more than 81% of the workforce works in what are called “service industries” while agriculture, manufacturing, mining, and construction, the industries that actually make stuff and build stuff, comprise less than 19% (source). And if trends continue, this might even decline further. And these industries actually produce more than we already need. Even poor Americans are fat because food is so cheap. People live in McMansions when they don’t really need that much space. People own multiple cars, which they use to drive to their mostly unnecessary jobs in the service industry.

What will happen when we are able to produce robots that can do even more jobs currently done by humans?

The prevailing wisdom is that people will move on to higher level work, like robot engineering and programming or creating art and literature. But that ignores the truth of HBD. Most people aren’t smart enough to do any of these things. And as far as robot engineering goes, I suspect that smart Chinese engineers will do this for a lot less money than smart Americans.

The standard libertarian response is “don’t worry, the free market will take care of everything,” but believing that the free market can take care of everything is almost like believing that God will take care of everything. Libertarians already vastly overestimate the efficiency as well as the actual freeness of the market, and we are moving into uncharted territories here.

I think that with the libertarian model, as the majority of humans become useless, we will, quite ironically, be afflicted with mass poverty even though we have moved into an era in which vast amounts of goods can be produced with hardly any labor. What incentive will there be to give the poor people even a fraction of this bounty if their labor contributions are worthless compared to more efficient robots?

This is a system that will never work in a democracy, because eventually the poor people will vote for someone who promises to fix the system and redistribute the wealth.

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Commenter “Rob” recommends an online book by Dwight Murphey. I read the first chapter, and it’s pretty good. He explains that demand for work is diminishing in advanced economies because of cheap foreign labor, but se we are also on the verge of it diminishing because of automation, robotics, and other futuristic technologies. Here’s a sample:

As the demand for work diminishes, remuneration will spring more and more not mainly from “work,” but from “capital.” This will make it essential that, to live, people in general will need to be plugged into the vast flow of wealth that can be created by the technology. They will need to be plugged in especially if they are no longer able to sustain themselves through jobs. This second phase of reducing the need for work is already long underway, even though it is nevertheless accurate of think of it as still in its incipient stages.
. . .
Although large international companies will reap enormous benefit from the new labor-saving technology, the displacement of many millions of people will create a crisis of legitimacy for the global market system – and for the entire classical liberal theory of a market-centered free society – unless a society becomes structured in a way that will allow everyone to share in the productivity of the economy.

Even though I enjoy thinking and writing about this problem and possible solutions, I am pessimistic that world governments will be able identify the problem and then work out a solution. Government couldn’t even prevent the housing crisis, which should have been pretty obvious.

We also need to examine what “capital” means today and in the future. I would define “capital” as being anything that enables you to make money in excess of one’s value-creating work. This is a much broader definition than defining capital as ownership of shares in public companies, I mistake I think that Dwight might be making (although I have to read more into the book). While theoretically, the profits of companies are supposed to go the shareholders, we have been seeing a transformation in which more of the profits go to stakeholders such as C-suite executives and financial industry bigwigs rather than the people who own stock in the company, and we should assume this trend will continue until it stops doing so. Insulating yourself from the coming changes to society is not as simple as saving your money and investing it in the stock market. The companies you invest in could go bankrupt while other stakeholders associated with the bankrupt company mysteriously walk away rich.