New technologies = new wealth; or the rich get richer, but the poor don’t get poorer *UPDATED*
Bookworm on Sep 03 2010 at 10:26 am | Filed under: Economics
One of the great Marxist fallacies is that there is only so much pie to go around. We know that changing human efficiencies put the lie to this, but the liberals still live in a small pie world. That’s why you end up with Robert Reich, who ought to know better, trying to compare today’s economy to that in the 1970s. John Steele Gordon puts him firmly in his place:
Reich simply ignores the fact that whenever there has been a major technological development, from the full-rigged ship in the 15th century to the microprocessor in the 20th, there has always quickly followed an inflorescence of fortunes based on the new technology. This, inevitably, causes income inequality to widen. The poor don’t get poorer, the rich just get suddenly much richer. The more fundamental the new technology is, the more the gap will widen, and the microprocessor is the most fundamental new technology since agriculture 10,000 years ago.
Read the rest here.
UPDATE: This very silly video, of a woman returning to the workforce after 30 years, nicely illustrates Gordon’s point:
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13 Responses to “New technologies = new wealth; or the rich get richer, but the poor don’t get poorer *UPDATED*”
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The video didn’t involve an up-to-date LCD monitor, but a CRT that was most likely going to be junked, if it hadn’t already been recovered from storage or the junk heap. Good economics. No point in ruining what you are using to make a video.
Some new technologies are disruptive to the poor and leave some of them worse off. The cotton gin, for example, displaced cotton pickers, who surely did not make very much money.
I am NOT advocating that we constrain new technology, nor efficiencies. I’m also convinced that in the long term, and on the larger scale, the introduction of new technologies and efficiencies makes us all better off. And that over time, those who are displaced (most of them) find better opportunities, precisely because we are all better off in the long run. But in the short-term, and locally, or within the market sector, there is the pain of dislocation and people’s lives thrown out of whack. Some who lose their jobs really do suffer.
Broadening the argument a little: The same is certainly true, however, for EVERYONE who loses their job as a result of competition within the marketplace. Their business model isn’t good enough, or they’ve gotten lazy or fat-and-happy and another, hungrier company, has just eaten their market share and they have to close down. Certainly for their workers it is a painful thing as well. But that is no reason to change our system of free economics and its “creative destruction”. It works, and again in the long term, it works out very, very well for the vast majority of us.
It’s useful to remember that there IS pain associated with change, though. But the pain is a necessary part of moving forward, of changing. Most of us agree that some form of safety net is a good thing for those of us who fail for whatever reason or another, and the safety net arrests their fall and gives them a chance to recover. That may be a necessary part of our social fabric when we allow for “creative destruction” in the free economic system to run its course. But it should never serve as a reason to destroy the very system that once made us the envy of the world.
By the way… My concept of “the safety net” has NOTHING in common with our ultra-bloated, monstrous national government and its octopus-tentacle intrusion into every aspect of our daily lives.
If a safety net is a vitamin-rich modest meal, what we have today, in our government, is a buffet serving for every person, of one hundred plates each heaped high with mountains of food dripping every imaginable liquid and gravy, spilling over onto the carpet… a grotesque excess in every way imaginable. Our current national programs have nothing in common with “the safety net” that catches the unfortunate in their fall down, giving them a chance to recover.
Heh. I called two co-workers over to watch that video. One is 65, and has worked as a bookkeeper all her working years. She cracked up…I don’t think I’ve ever seen her laugh so hard.
The other is 28. She didn’t think it was very funny. She assured me she understood it – she just didn’t think it was very funny.
She didn’t _really_ understand it…!!
Mike: the mechanical cotton picker got farm laborers off the farm and to the North, which was an improvement over the Jim Crow conditions of the South at the time. Times have changed, and many blacks have returned to the South, reversing the great migration North, for a variety of reasons: family ties, better economic conditions, and an improved racial climate in the South. For about 20 years there has been a net migration of blacks to the South.
BTW, what many people don’t realize is that a lot of poor whites also picked cotton, some of my mother’s elder cousins included.
suek, I liked the anecdote about the twenty-something who “understood” the video but didn’t find it funny. Shows once again that much humor is topical. I’m trying to remember the last time I used a manual typewriter. Been a while. I definitely prefer the spell checking and such in current systems. I once asked a professor if she thought that student writing had improved with the use of computers. Her reply was that it hadn’t. Those who were careful remained careful, and those who were careless remained careless. As for myself, the computer has much improved my writing. It is easier to write quickly, and easier to proofread and correct. You don’t have to begin over again three times.
My youngest son was in 5th grade when we got our first computer. Getting my boys to write their papers was always a struggle, so I hoped the computer would make things easier. For us both. I still remember the first paper I arm-twisted him into doing… I think it was a 100 word requirement. He did the essay, then printed it on the printer. It was maybe 5 lines or so long. Definitely short, even when I suggested that he double space it. I think the expected length for a handwritten one was 1and a half pages. He was a little afraid to turn it in, so I suggested he ask the teacher if it was ok – and that he’d hand write it if it wasn’t. She, of course, was delighted with it (presentation, at least). So he started doing his papers on the computer. And because the 100 – 150 word requirement made them look so _short_, they started getting longer. And longer. And longer. Pretty soon, a two page printed out double spaced paper was “no big deal”. For all the reasons Gringo mentions.
By the way…did I mention that he’s now going back to school to get a law degree??? (married now, with two kids. He didn’t ask our advice. Still, if he was going to pick a time to go back to school, this is probably a good time. His prior job would probably have disappeared anyway)
Greetings:
I spent most of my work life in the printing industry. Back in the early ’80s, the desktop computers started showing up, both Macs for the craft work, and IBM PCs for the admin. One evening, my then sweetheart and I went to a cocktail party where we, and two other couples, got cornered by what was then referred to as a “yuppie” who could not restrain his enthusiasm for his recently acquired work PC. I politely let him run on a bit, but then reached the point where I was sure the other couples would be of more interest. I guess he detected my attention shifting, because he turned directly to me and put his rhetorical finger in my chest by asking, “Do YOU have your own PC at work?” To which I replied, with all the Christian forbearance I could muster, “No, I don’t, but the people I hire do.”
Now that’s muscle memory
from the video
http://www.youtube.com/watch?v=t_Pa30Sp_sw&feature=related
Americans liked that, probably because they felt the touch of prophecy in it.
Another wealth creator has been the salary and benefits incentives boards used for the CxOs of Fortune 1000 Companies to encourage automation of information and the shift of sometimes as much as 90% of their headquarters’ staff from below-the-line costs to the profit-making parts of the company (usually out in the divisions). In the 70s-80s, info-tech was able to do most of the accounting and process-management, workflow required at headquarters. Boards often held out the sharing of these savings/productivity changes with the remaining management team (resulting in 10x+ benefits improvements – which was just a small fraction of headquarters’ cost reductions). Tom Malone and co. at MIT Sloan documented this macro-economic effect of IT on companies (in papers published in the late 80s). The typical conversation a CEO/CFO had with their (industrial-age process-oriented – Carnegie/Sloan-style centralized command-and-control organization) staffs amounted to “if the divisions don’t have a use for you, I don’t either, good luck on your job search.”
Consider that one of the reasons the Navy has carriers requiring ~5,000 sailors is that the number of admirals is (still) determined by headcount, rather than a measure of force projected. If they were as automated as, say, super-cruise-liners, they’d have 1/4th or less the headcount (of a much higher trained & technical staff – e.g. tool shops that could build of anything from near-raw materials), and not need to stay in port half-the-time for servicing and stocking. Imagine how quickly this would happen if the services were allowed to use, say, “you’ll get 10% of the dollars saved when you copy the cruise-liners and improve automation, time-at-sea, and salaries paid by 75% – or more.” It’s not that private companies had better people, just that the market provided better incentives.
I saw a large sign along 580/80 some years ago: the rich get richer and the poor get credit cards. True that.
Another bumper sticker (since we are on the topic of money) tells why California is out of money. I think it is a state motto “I can’t be out of money, I still have checks!
“Imagine how quickly this would happen if the services were allowed to use, say, “you’ll get 10% of the dollars saved when you copy the cruise-liners and improve automation, time-at-sea, and salaries paid by 75% – or more.” It’s not that private companies had better people, just that the market provided better incentives.”
Automation is good, but the Navy needs those bodies for damage control, redundancy, and to repel boarders.
They also need those bodies because the shifts are rotated somewhere around three times, thus the ship is crewed at ALL times of the day, regardless of the time. A cruiser liner need not be so meticulous.