We Need to Talk About This Whole Capitalism Thing.
Albert Einstein is purported to have said “Insanity is doing the same thing over and over expecting different results.” Of course, Einstein never met my mother during the holiday season. On one hand, I appreciate her persistence in wanting to get things just right to have a near perfect family Thanksgiving and/or Christmas. Her tenacity knows no bounds. But at some point, it just became way too much pressure despite the fact that it felt like something was always going wrong, like that one time during the holidays where literally everyone got sick except for my paternal step-grandfather.
Now that I think about it, my father is also essentially an optimist, especially when speaking about United States. I can’t fathom how many times he’s said something about the United States being the greatest country in the world and there are freedoms the United States offers that one cannot find anywhere else. I heard this a lot in 2013, mostly after informing my parents I was going to live in Egypt for a bit after getting laid off from my advertising job.
The point I’m trying to make is that in this instance, the United States is like my parents; always trying to make the same thing work despite something always going wrong. This is especially true when it comes to the United States’s relationship status with capitalism, which I think many would agree be best described as “it’s complicated.” In case you’re wondering, the part of the metaphor that is “the same thing over again” in relation to the United States is the stagnation of wages despite productivity growth. But we’ll get into the productivity pay gap soon.
For the moment, it’s important to understand that this rocky relationship is about to get a lot more complicated, especially as more and more jobs are over taken by automation (i.e. machines/robots), not to mention whatever new technologies emerge in the future that usurp other areas of our lives, like what Netflix and streaming websites did to Blockbuster Videos. Luckily, not all of us are trained for the vigor's of VHS and DVD rental service. But, there are several occupations many of us have trained in that could potentially see some dramatic downsizing, which is a problem for people in those professions.
On the other hand, this is considered a blessing in certain economic circles due to the supposed increase in production, which capitalism tends to emphasize.
See what I mean? It’s complicated.
However, before getting too far ahead, it’s only fair that I take a moment to acknowledge something important. By no means am I an economic guru or scholar. Also, I feel the need to point out that there are many, much more eloquent critiques of capitalism by much more learned people than I. Just look at Wikipedia’s page for a cursory overview.
My interest and the reason to write on this subject was inspired by the continuous parade of articles popping up on a variety of news feeds detailing how, over the next 6–11 years, the workforce is going to be decimated by automation, potentially torpedoing 800 million human people jobs across a variety of occupations.
But before diving into all that, it’s important to start from the beginning. You can’t figure out someone’s sickness without retracing their steps. You probably can actually, but I feel like many have such a warped view of Capitalism, especially in conservative circles, that it necessitates going back to at least get a cursory overview of what Capitalism means in order to understand why the potential automation explosion is going to force us to rethink this whole capitalism thing at some point.
With that in mind, there’s no better place to start than the Merriam Webster Dictionary definition of Capitalism, defined as
“An economic system characterized by private or corporate ownership of capital good, by investments determined by private decision, and by prices, production and the distribution of goods that are determined mainly by competition in the free market.”
But again though, if only it were that simple. I understand studying the machinations of any economic philosophy takes years, and like religion, said philosophy can evolve over time, thus creating various subsets and groups emphasizing different parts of said philosophy. Just scrolling through the Wikipedia page on The History of Capitalist Theory illustrates how several prominent thinkers, from Adam Smith to Ayn Rand, have emphasized different parts of Capitalism’s definition.
It’s also important to note, as danah boyd in her Medium story on journalism points out,
“There are many types of capitalism. After all, the only thing that defines capitalism is the private control of industry (as opposed to government control). Most Americans have been socialized into believing that all forms of capitalism are inherently good (which, by the way, was a propaganda project). But few are encouraged to untangle the different types of capitalism and different dynamics that unfold depending on which structure is operating.”
However, for the purposes of this article, I am focusing on the philosophical thinking within Capitalism that considers production and labor as one of the main forces behind capitalism. This is, in part, due to my belief that one needs goods and services (i.e. production) in order to participate in any form of economics and/or free trade. It’s also due to research that has pointed me to believe that production is one of the fundamental tenants of Capitalism.
When examining the varying views of Capitalism that many of these prominent thinkers held, it becomes evident that, while they may emphasize different facets of Capitalism, production is still heavily emphasized.
One of the first to theorize on the virtues of Capitalism, Adam Smith emphasized the role of the “invisible hand” and “the role of specialization in promoting the efficiency of capital accumulation,” meaning specializing in particular niche jobs in order to make money.
Robert LeFerve, one of the founders of Autarchism defined capitalism “…as savings made by men, which are then invested in the tools of production.”
Some theorists of capitalism, like Milton Friedman, emphasize the role of free markets. However, others like Murry Rothbard, economist and author of Making Economic Sense have helped evolve those theories over time to include production, along with a stock market, as integrally tied to the idea of Capitalism, explaining that
“A stock market is crucial to the existence of capitalism and private property. For it means that there is a functioning market in the exchange of private titles to the means of production.”
Naturally, with many philosophies in general, there is some debate about when the idea of Capitalism began. As stated earlier, certain researchers and scholars in this area have differing views on certain aspects of Capitalism, not to mention it’s history.
Harvard Business School Professor Thomas K. McCraw, author of the book Creating Modern Capitalism argues that American Capitalism began earlier, before America was founded, and then later evolved after the first settlers arrived in “The New World” at Jamestown in 1607,
“…Capitalism did come in the first ships, and in many different forms: legitimate commerce, legal cover for religious freedom, the slave trade, and individuals' exchange of labor for a ticket to America.”
Some scholars point to England at various times between what they call Elizabethan (or Mercantilism) Capitalism in the 1500’s, when England and other countries were creating trading doctrines and trading companies all the way through to the start of the Industrial Revolution around 1760 when England was
“…[transitioning] to new manufacturing processes in a variety of industries, including going from hand production methods to machine production…”
Considered one of the most influential economists of his time, David Ricardo created several economic theories that have influenced many economies and economists to this day. Granted, many of his theories have been and continue to be challenged, due to the ever-evolving nature and modernization of Capitalism. However, there is no denying the legacy he left behind when it comes to economics, especially Capitalism. Specifically, his theory on Free Trade in 1817, while considered counter-intuitive, still continues to impact Capitalism, especially since it emphasizes production,
“When an inefficient producer sends the merchandise it produces best to a country able to produce it more efficiently, both countries benefit.”
Again, my reason for sharing some of the history and theories of Capitalism is to convey how strongly Capitalism relies on production. It’s important to understand this in order to fully grasp what it means when various media outlets throw up warning lights and sirens about automation. To make things potentially more intense, there’s been no shortage of sirens.
But, if it seems like many are not listening, there’s a potential reason why. A New York Times OP-ED by David Brooks explains why many are possibly ignoring the working class and what potentially drove some of these people to vote the 45th president into office.
“Part of the problem is misplaced priorities. For the last several decades, American economic policy has been pinioned on one goal: expanding G.D.P. We measure G.D.P. We talk incessantly about economic growth. Between 1975 and 2015, American G.D.P. increased threefold. But what good is that growth if it means that a thick slice of America is discarded for efficiency reasons?”
Another reason why it may not seem like many people are paying attention is because others (rightly or not) promote a sunnier disposition in regards to automation. Noah Smith’s piece in Bloomberg points to two reasons why some economists and others don’t see automation as much of a threat, at least not yet. The first being that there’s no concrete definition of what automation is. The second, and one of the more common optimistic arguments that Bloomberg’s Noah Smith makes is that automation will create new jobs for people. In Smith’s OP-ED, he cites the growth of local employment, pointing out how “…automation patents routinely led to an increase in total employment as a percent of population.” He goes on to further explain the reason for this potentially being that “…humans continue to find new tasks to perform in order to complement new machines, or it could be because automation leads to a boom that increases local labor demand.”
Another brilliant piece, an article in Wired by James Suroweicki explains how many people, including myself, might be getting a little too hype about automation advancements, pointing out how
“…those predictions tend to assume that if a job can be automated, it will be fully automated soon—which overestimates both the pace and the completeness of how automation actually gets adopted in the wild. History suggests that the process is much more uneven than that.”
Within that Wired article, as well as other pieces, like one in MSN by Andrew Krok repeat another common argument meant to lessen the blow of automation. This argument revolves around the fact that, while automation is definitely happening, it’s not happening right away, there’s still time to figure stuff out. It’s essentially kicking the the can down the road, or playing hot potato with dynamite. I could create 10 more metaphors, but then nothing would make any sense.
Remember that metaphor about wage stagnation at the beginning of the article? Of course not, but it’s ok, I don’t either. However, it’s there and was mentioned for a good reason. Time for a call back.
One of the best pieces I’ve read about the impact of automation was from a Medium article by Scott Santens. The entire article is a must read. However, if one doesn’t feel like reading it, I’ll do my best to provide a snapshot.
Santens article examines the oil industry’s automated "Iron Roughneck" machines to illustrate the impact of automation in the oil industry, and how this might be a perfect, microcosmic snapshot of a much larger problem. (Spoiler Alert: it doesn’t work out well for the physical oil workers.) In one part of his article, he explains why that same type of “magical/optimistic thinking” doesn’t really hold true.
"A landmark 2017 study even looked at the impact of just industrial robots on jobs from 1993 to 2007 and found that every new robot replaced around 5.6 workers, and every additional robot per 1,000 workers reduced the percentage of the total population employed by 0.34% and also reduced wages by 0.5%. During that 14-year period of time, the number of industrial robots quadrupled and between 360,000 and 670,000 jobs were erased. And as the authors noted, “Interestingly, and perhaps surprisingly, we do not find positive and offsetting employment gains in any occupation or education groups.” In other words, the jobs were not replaced with new jobs."
Even if the arguments about why people should not worry about automation make valid point, wage stagnation and increasing debt continue to make matters even worse for many who do have a job as an article on CNBC reveals that 78% of US workers are living paycheck to paycheck! How’s that going to work out when unemployment rises due to automation?
In a VOX interview, Malcolm Harris, author of Kids These Days: Human Capital and the Making of Millennials, explains this key component of Capitalisms current itaration as a divergence between productivity and compensation. However, there is another term he uses that perhaps more accurately reflects this divergence, explaining that,
“Marxists would refer to this as an increase in the rate of exploitation, meaning workers are working longer, harder, and more efficiently but are receiving less and less in return. I reference Marxism here (even though his name never appears in [my] book) because conventional American economists don’t really have a term for this — it’s not something they like to talk about because they don’t recognize that capitalism is built on exploitation.”
There is no shortage of examples that shows how, despite a strong economy, American workers are still getting screwed. How’s Capitalism working out for them? It becomes increasingly clear why one of the most intelligent human beings of his time, Steven Hawking even voiced his concerns about automation, explaining how
"…the automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining."
This isn’t just something people in the states are worried about. The fears of automation have traveled worldwide too.
And it’s not just the fears of automation that are traveling over the world, but also the skepticism of capitalism as well. An article by the very capitalistic leaning (and usually more conservative as well) Fast Company describes just how pervasive the distrust of Capitalism around the world has become. According to Jason Hickle and Martin Kirk, the authors of the article,
“It’s not only young voters who feel this way [about Capitalism]. A YouGov poll in 2015 found that 64% of Britons believe that capitalism is unfair, that it makes inequality worse. Even in the U.S., it’s as high as 55%. In Germany, a solid 77% are skeptical of capitalism. Meanwhile, a full three-quarters of people in major capitalist economies believe that big businesses are basically corrupt.”
While Santens article focuses on the Iron Roughnecks in the oil industry, he makes it clear that that is merely a microcosmic snapshot of a larger issue, explaining how
"It’s expected that our industrial robot workforce will quadruple again by 2025 to 7 robots per 1,000 workers. (In Toledo and Detroit it’s already 9 robots per 1,000 workers) Using Acemoglu’s and Restropo’s findings, that translates to a loss of up to 3.4 million jobs by 2025, alongside depressed wage growth of up to 2.6%, and a drop in the employment-to-population ratio of up to 1.76 percentage points. Remember, we’re talking about industrial robots only, not all robots, and not any software, especially not AI. So what we can expect from all technology combined is undoubtedly larger than the above estimates."
I actually appreciate comedian John Oliver and the writers of Last Week Tonight for also putting this issue under their microscope. The segment on automation, in my opinion, takes a slightly more middle of the road approach. Oliver reassures viewers how things are not as dire because, he concedes that, while certain jobs are most definitely going to be affected by this; we will need to start essentially thinking of new jobs that don’t exist yet (like a crypto-baker or investment harpist) due to automation replacing certain tasks, not actual jobs.
(AKA: The Hard Stuff)
While it’s great that new jobs will potentially be created through this age of automation, there are certain things that, in the interim need to be addressed fairly soon. The purpose of this piece is merely to illustrate how, in my opinion, Capitalism is going to be facing some major tribulations in the coming years. You know Capitalism might be in trouble when in 2018, Americans spent more on taxes then food, clothing and and healthcare combined!
The last thing I want to do is come off as an alarmist fear-monger. However, it would also be helpful if many of us were ready and open to talk about these things instead of doing nothing.
As John Oliver also explained in his segment on automation,
“The new jobs automation creates won’t necessarily pay the same as the ones it takes away. And it might not be easy for displaced workers to transition into them.”
However, if I’m being honest, I don’t know what a proper and healthy solution to a problem like this would be. Some prominent thinkers, politicians and podcasters champion universal basic income, others propose ideas like wage insurance while some are simply calling for a more socialized approach to certain aspects of life, like housing, education and medicine.
The trouble is I don’t know enough about how that might work or even look in the United States. Also, it doesn’t help when there is immediate push back from many who demonize any suggestion about modifying aspects of the Capitalistic economy or when there are certain people that believe capitalism is more important than democracy. Naturally, this has a tendency to create a conversation that is less than thoughtful.
But what makes the whole discussion even stranger is the fact that several states (mainly Republican Alaska) have created some social programs that benefit everyone in their state, not to mention the programs of Social Security and Fire and Rescue that were born out of ideas that lean more towards Socialism. But again, since social programs still conjure fear in the hearts of some, the few shouting voices drown out the murmurings of many more.
Granted, this isn’t to say that going “full socialism” is the answer either. Anyone who has even a cursory understanding of why the Soviet Union collapsed in the 1980’s knows the dangers of full on Socialism. Maybe we need some kind of hybrid system; a democratic-socialist system? Could we try talking about that idea?
We are not helping ourselves when we don’t talk about or avoid talking about the problem. When we continue these familiar actions, we are enabling the now broken systems that have created this mess in the first place. Those actions are not solving anything. Soon, this problem will come to a boiling point that could potentially cause a reckoning for generations to come. To make matters more pressing, some generations may already be feeling the heat. David Leonhardt’s NYT editorial details how the lack of, what he calls “economic dynamism” is hurting younger generations,
“This loss of dynamism hurts millennials and the younger Generation Z, even as baby boomers are often doing O.K. Because the layoff rate has declined since 2000, most older workers have been able to hold on to their jobs. For those who are retired, their income — through a combination of Social Security and 401(k)’s — still outpaces inflation on average. But many younger workers are struggling to launch themselves into good-paying careers. They then lack the money to buy a first home or begin investing in the stock market.”
As it turns out, those weirdo millennials, my generation, might not be “killing certain industries” because we’re disrupting conventions. Rather, millennials might be “killing certain industries” because we’re just too poor. Wah wahhh. You know your economy might be on shaky ground when the lack of wealth of a specific generation upends once stable industries.
However, the slightly ironic part of this whole situation is that it might not just be younger generations affected by this. My optimistic parents, especially my father who proudly spoke of America and all its glorious pros are probably going to end up discovering that things aren’t looking good when they retire. After looking at the data on people 65 and older when it comes to savings and retirement plans, the Saint Louis Fed, in a CNBC article concluded that "It could be worrisome that, for many American households, the total balances of their retirement accounts may not be sufficient to ensure a solid life in retirement."
An article by Business Insider essentially examines how many millennials, Gen Xers and some Baby Boomers would like to retire as homeowners, but are in no way making steps or saving to do so.
This is on top of the fact that, as Presidential candidate Andrew Yang has pointed out at a rally in Seattle reported by Geekwire,
“We must’ve messed up if we’ve designed a system where a trillion-dollar tech company can pay less in federal taxes than everyone here in this park tonight.”
I highlight the wealth, or lack thereof in regards to the weirdo millennial generation and my parent’s generation because, once automation becomes ingratiated within many areas of the workforce, many people will either be forced to retired or just find themselves out of a job. And, should the current price and wage trends continue, at some point in the next 20–30 years shit is going to hit the fan.
But it feels like many don’t want to talk about how we can fix this through adopting certain machinations within an economy geared slightly toward socialism. However, there is also a small and relatively new group emphasizing “Conscious Capitalism.” In his opinion piece for The Hill, author and co-CEO Andrew Faas describes the importance of acknowledging that there are wealth gaps (not to mention gender pay gaps too). However, Faas argues (rightly or not) that Capitalists are best suited to lead the charge of reform, and by adopting this “conscious capitalistic” approach, i.e.
“…building on the foundations of capitalism - voluntary exchange, freedom of trade and the rule of law. These are essential to a healthy functioning economy as are other elements including trust, compassion and value creation."
Regardless of how we the people decide to deal with the problem, we at least have to start talking about it if there’s any chance of even salvaging an economy that works for everyone. You know Capitalism might soon have a rough go of things when even conservative websites like Axios publish articles with headlines like “The Coming Reckoning for Capitalism,” which highlights how younger generations, at least for the time being, gravitate to economic ideas that tend to take a socialistic bent. Axios even acknowledges when it comes to automation, “The likelihood is that government will have to take the lead” in another article titled “Slowing the Robot Apocalypse.”
All of this has led me to believe that Capitalism, at least in this current form is not working. I think the trouble with Capitalism is it makes people focus on getting the best deals instead of who’s getting the raw deal. It values hard work for little profit and can be easily manipulated by political parties and industries. Because Capitalism values productivity more than the profit of workers, over time it creates a lack of economic dynamism while wealth gaps grow wider. Both younger and older generations are being hurt by this lack of empathy and stagnancy of evolution.
It’s no wonder then that others, particularly younger generations might at least entertain certain “socialist" sounding ideas, because at least it’s not the continued pattern of doing the same thing (continuing with a broken economic system) expecting different results (little to no wage gaps and economic dynamism).
In an article written by The Hill, South Bend Indiana Mayor Pete Buttigieg explains why Capitalism needs to evolve,
“When you have capitalism capturing democracy, when you have the kind of regulatory capture where powerful corporations are able to arrange the rules for their benefit, that’s not real capitalism. If you want to see what happens when you have capitalism without democracy, you can see it very clearly in Russia. It turns into crony capitalism. And that turns into oligarchy.”
If you enjoyed this deep dive, maybe you might enjoy another one of Brycical’s earlier pieces.
Brycical is by no means an economist. He doesn’t even hold a degree in finance. But still, like many people, Brycical isn’t immune to noticing certain patterns about how the world apparently “works” for some. So Brycical writes about it, hoping more will notice these patterns and feel inclined to also speak up and let their voice be heard. Feel free to read more of the patterns Brycical notices on here or check out his website to learn more about him.
****This story has been updated to include a link and excerpt from a Fast Company article.
********This story has been further updated to include an expert from another Medium story by Dana Boyd, another link about robots making pizza, and a link to a CNS news story about taxes in American.
