Friday, 25 May 2012

Second Economy, decline of Democracy?



I've been reading about the growth of the 'Second Economy' a term which is doing the rounds after an article put out in the McKinsey Quarterly, which talks about the jobless growth that has been occurring and how technology is responsible. I think the growth of labour outsourcing in conjunction with robotising our militaries could endanger our basic human rights and democratic institutions which I'll cover later on, first a few articles on labour outsourcing to technology and the impact it is going to have on society.
Digitized Decision Making and the Hidden Second Economy - Arthur argues that this second economy, which author Nick Carr in turn dubs the age of “deep automation,” may represent the biggest shift since the Industrial Revolution, and lead to increases in productivity output as well as decreases in physical jobs. According to Arthur’s back-of-the-envelope calculations, the second economy could surpass the physical economy in less than three decades. The nature of work will change, jobs will change, organizational structures will change, institutions will change, and economies will change.
A lot of the economic problems the world is experiencing right now stems from this. Technology is deflationary, you do the same job as before for cheaper. And while the economy grows, people aren't needed as their jobs can be outsourced to machines, while the entrepreneurs and investors driving the progress get richer.
The Next President Will Be the Worst in a Century - The problem, of course, is all that uninstalled productivity enhancing technology. Over the next four years, a lot of it [technology] is going to get installed. It will stimulate the economy, create deflationary pressure and induce substantial technological unemployment. Because the initial result of productivity enhancing technology is to decrease jobs and increase profits, it will exacerbate the already significant tension between the classes. The '1%' will continue to get all the goodies.
And how bad could this unemployment get? According to some punters, very bad.
Robots taking Human Jobs may Require a New Kind of Capitalism - When this writer grew up during The Great Depression, unemployment reached 25%, which caused soup lines, riots, and turmoil throughout the country. In our robotic future, 50% of workers will become jobless, which could bring about an economic disaster unlike anything the world has ever experienced.
Sounds pretty doom and gloom.. so what's the answer? According to the same article, more welfare.
Brain believes that America should create a $25,000 annual stipend for every U.S. adult. These payments would be paid for through a variety of possibilities. The government could allow ads on currency and public properties, rebates on natural resources, create a national lottery, launch a consumption tax, and levy taxes on robots, automated systems, travel, and emails.
Sounds great right, our technology does all the heavy lifting while we get to turn a gap year into a gap life. The thing is, I don't know if nature, progress, the cold calculating logic of the universe or whatever you want to call it, is that keen on providing something for nothing. It's never happened before and I can't see it happening now.


There's a belief that things are only getting better in terms of human rights, more leisure time, more possessions, greater freedom,  more democracy etc. It's almost the religion of our times. The thing is all of this is due to greater labour productivity improving the standard of living along with more complex social and political structures to maintain this more productive society. People have more rights because they are worth it.


Once things start getting outsourced and your average worker isn't worth as much to society any more, don't think for a second the world we live in will just be all nice and let it slide, it will marginalise these people.. it's nature. See most people have this warm, fuzzy view about nature, but nature is nothing like that, it's cruel, barbaric and efficient. We want to stop people from beating their dogs or killing cows in a painful way while turning a blind eye the fact that animals inflict pain and suffering on each other on a massive scale in the wild.


In order to marginalise the non-working, first you would have to weaken democracy. As a rule, people vote based on who's going to give them the most stuff. So 30-50% unemployment means lots of votes for the redistribution of wealth from rich to poor (which fits with the $25,000 stipend suggestion). And even if the rich try and control the political process people can always take to the streets and protest. In order to prevent people rioting, you'd need an army, a robot army!


When we talk about progress in human rights and democracy what is often forgotten is that during the 20th century, the working class had never been more powerful in the history of civilization. This power was linked to two things, the industrial revolution which required an educated workforce to work in the factories and the working class mass-conscripted infantrymen which became the backbone of military power. When you look at history you see a correlation between those who hold the military power and economic in a society and those who have political rights, so there is no reason why if the working class lost military and economic power that they also wouldn't lose political rights.


The Greeks are regarded as the farther's of democracy, all free men could run for office and elect a leader. All free men also served in the phalanx, a shield and spear formation which relied on massed infantry. Later during the medieval period, the dominant military unit was now the mounted knight. A knight required a horse and armour, a much much greater economic investment, only men who owned a large amount of land could afford to maintain one, and these were the nobility, the men with political rights. So the proportion of men who had rights decreased, due to changes in military technology.


When you look further still at the granting of suffrage to all men, it really only gains momentum during and immediately after world war one. Why? The mass-conscript infantry armies of Europe held the military power and were accommodated by being given the right to vote. Check out this table of when countries granted voting rights here, sort the table ascending. You will see a big bunch of countries in the 1917-1920 period (due to WWI) and then another clump around WWII. The point I am making is in the early 20th century workers kept the factories running and held a monopoly on state violence, and their political rights were increased to reflect this.


These days there is a large amount being invested by the military industrial complex in order to reduce the human involvement in war.  Drones are here now but jet fighters, tanks and even soldiers are just around the corner.  Once the working class lose their monopoly on state violence and additionally aren't required as a factor of production then they may also lose political rights such as the right to vote, freedom of expression and so on. Military dictatorships with no popular support would be sustainable, a regression on what we think of as progress and basic human rights. Nature is cold and calculating.


I like Michael Ferguson's rebuttal to my argument, here it is:
The seeds of a dystopian future are always present and there are always those who believe that they will overwhelm the more virtuous human impulses. H.G. Wells wrote a couple of utopian novels in the early 20th Century, "A Modern Utopia" (1905)and "Men Like Gods" (1923). Alduous Huxley (1931) countered with "A Brave New World" and George Orwell(1934) with "1984". In hindsight, we see that the utopian was too optimistic and the dsytopian was too pessimistic. That is not surprising since both represent the tails of a Gaussian like probability distribution.



The volunteer Army of the U.S. is built primarily on Reserve forces supported by a relatively small professional army. Because of the liberal educational benefits, both during and after service, the Reserves has been an opportunity for people of any socio-economic background to receive the middle class enabling University education. 


The net result, however, is that the professional army is far from 'working class' and the Reservists are just passing through on their way to upward social mobility. The robotization of the armed forces, and I do agree with the 'your sons and daughters versus our machines' scenario, will have a primary effect of taking away one of the most important routes to upward mobility. We need to consider what will replace it.


Since The Enlightenment, the genearl trend has been toward more democratic social institutions and greater freedoms and rights. I would agree that the mature societies of Western Europe and North America have reached a point where increasing controls are abridging freedoms. It is a millennial long history of entrenched governments adding regulations and proscriptions faster than they remove them. However, governments come and go; Western civilization continues. The Transformation will hit the reset button and freedoms and rights will again ascend.