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Robot economy – growth and progress is not a one way street

Over the past two centuries, human ingenuity has produced groundbreaking innovations that have reshaped industries and improved the quality of life for people around the world. The Industrial Revolution, which is said to have reached its peak in 1840, heralded a time of ‘great optimism,’ of talks about ‘full employment,’ longer life-expectancy and technological advances. A few decades later the developed world entered a downward swing in industrial capitalism and a long period of social and economic depression lasting from 1873 to 1879, followed by a period of very low growth and deflation until 1896.

This period coincided with the emergence of the Age of Steel and Heavy Engineering, generally known as the Third Technological Transformation, or the second industrial revolution, which began around 1870 until the late 1920s and was far more complex than the Industrial Revolution.[1] The main technological advances were the substitution of steel for iron as an engineering material, the start of the petroleum and electric-power industries, and the development of the internal-combustion engine. Steel, gasoline, and the internal-combustion engine made the automobile possible. Technological spin-offs from these advances resulted in the creation of a number of new industries such as the telephone networks and road networks which heralded a need for new skills and vast investments in infrastructure.

In the 1950s onwards more new industries arose such as air transportation, consumer electronics, computers, pharmaceuticals and plastics, and in the last twenty to fifty years the computer and Internet sectors have once again led to the creation of new industries and skill sets.

The world economy is six times larger than it was fifty years ago. New technologies have promoted economic growth, and have paved the way for more efficient production systems in a wide range of industries.

During each technological development or breakthrough, whole industries have been demolished and new ones created – resulting in long depressions and redundancies followed by the need for new job skills, and ultimately leading to an improved quality of life.[2]

History may not be a great predictor of the future, but the technological transformations of the last 250 years or more give a good indication of the long waves of economic development that the world has passed through, and may provide us with a better understanding of where we are going in the future. Technology may be speeding up, but economic growth has always been uneven rather than continuous. Technological progress has always resulted in both job destruction and job creation.

Robots fastest growing industries?

Arguably one of the most important growth industries today, with a steady rise in jobs, is within robotics and associated technologies, such as Artificial Intelligence and Machine Learning. Indeed one report titled The Transformation of the Workplace Though Robotics, Artificial Intelligence (AI), and Automation by Littler Mendelson indicates: “Robotics is the fastest growing industry in the world, poised to become the largest in the next decade.”[3] Whilst Forbes Political Editor and a Senior Economic Adviser, John Tamny has indicated: “Robots will be the biggest job creators in history.”[4]

Theory, claims, and data

Economists and general observers have been discussing the effects of technological innovations on the job market for a long time. The repeated complaint is that technical progress hurts labor whilst at the same time it helps the owners of the capital profit more; through increased productivity with fewer jobs and therefore larger profits, these larger profits are however needed to invest in the machines. Mario Draghi chairman of the European Central Bank suggested the opposite may be true when it comes to investment in technology: “Even before the crisis, many companies were no longer productive partly because they had not invested in new technology.”[5]

Which raises the question should robots be seen as a positive thing, rather than the “dystopian world” some fear?

Notes:

[1] Carlota Perez, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages

[2] There are several notable studies which use formal modeling to conclude that technical progress reduces employment in the short run, but not the long run, see for example those by Gali (1999), Basu, Fernald, and Kimball (1998), and Francis and Ramey (2002). These studies indicate that job loss is transitory (and not without pain), but not permanent.

[3] Littler Mendelson (the world’s largest labor and employment law firm): The Transformation of the Workplace Though Robotics, Artificial Intelligence (AI), and Automation (http://www.jdsupra.com/legalnews/the-transformation-of-the-workplace-thro-67856/).

[4] Forbes, Why Robots will be the biggest job creator in world history (http://www.forbes.com/sites/johntamny/2015/03/01/why-robots-will-be-the-biggest-job-creators-in-history/?utm_campaign=yahootix&partner=yahootix)

[5] Interview with Mario Draghi, President of the ECB, conducted by Giovanni di Lorenzo on 17 December 2014, published on 15 January 2015 (https://www.ecb.europa.eu/press/inter/date/2015/html/sp150115.en.html)

See also Technology has created more jobs than it has destroyed, says 140 years of data (H/T)  


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