Robo-Owning System: How We Will Live Under Supercapitalism

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

If the economy does not stray from its current path, it is possible that we will face supercapitalism with superequality. The share of labor income will tend to zero, while the share of income from capital, on the contrary, will approach 100%. Robots will do all the work, and most people will have to sit on benefits.

What is capitalism, humanity has more or less figured out. One option is an economy in which a significant proportion of income comes from capital (equity dividends, coupon payments on bonds, rental income, etc.), as opposed to income from labor (wages). What, then, is supercapitalism? This is an economy in which capital generates all income, and labor - almost none, it is practically not needed at all.

The classics of Marxism did not reach such a theoretical construction in their works: as you know, for Lenin the highest degree of capitalism was imperialism, for Kautsky it was ultra-imperialism.

Meanwhile, the future, quite possibly, lies precisely with supercapitalism, a technological dystopia, in which the exploitation of man by man will be abolished not because of the victory of the oppressed classes, but simply because labor as such is unnecessary.

Hard lot

Labor is gradually becoming less and less in demand. American economists Lucas Karabarbounis and Brent Neumann in the NBER study "The Global Decline of the Labor Share" traced the evolution of the share of labor in income from 1975 to 2013. This share was gradually but steadily declining all over the world - in 1975 it was about 57%, and in 2013 it dropped to 52%.

The decline in the share of labor income in developed countries is partly due to outsourcing to countries with cheaper labor force. Closing a refrigerator factory in Illinois and moving it to Mexico or China - the salary savings for relatively expensive American workers are immediately reflected as a decrease in the share of labor in income and an increase in the share of capital, which is now employed by less fastidious Mexicans or Chinese.

Another factor in favor of capital: the labor force remaining in the developed countries is losing support from the trade unions due to the fact that in the new conditions they have few bargaining chips: “Do you want to raise wages? Then we will close you and transfer the enterprise to China (Mexico, Indonesia, Vietnam, Cambodia - underline the necessary)”.

Blue collar labor costs less and less, which forces them to take to the streets

However, in developing countries, the share of labor is also declining, which does not fit well with the classical theory of international trade (the development of trade, in theory, should reduce the share of labor in countries with a surplus of capital and increase it in countries with a surplus of labor).

The explanation is most likely in labor-saving technological breakthroughs in certain industries. And sectoral changes are translated into changes at the country level (the exception is China, where the dynamics is explained by the relocation of the labor force from the labor-intensive agricultural sector to the industrial sector). In addition to this tricky explanation, there is a simpler one: in China, from migrant workers from rural regions, in accordance with the policy of internal colonization, they squeeze everything that can be squeezed out. Although their earnings are growing, their share in income is decreasing.

Brazil and Russia are among the few exceptions: in these countries, the share of labor against the global trend is insignificant, but increased

IMF economists suggest that in some developing countries the lack of a decrease in the share of labor is explained by the insufficient use of labor-saving technologies: initially there is little routine work in industry - there is nothing to automate. Although for Russia, with its historically distorted labor market (a mass of low-paid and inefficient jobs, in fact "hidden unemployment"), this can hardly serve as the only explanation.

Skinny middle class

What does the macroeconomic abstraction of reducing the share of labor for a particular person turn into? A higher chance of falling out of the middle class into poverty: the importance of his work is gradually devaluing, and for the middle class, wages are the basis of everything (in high-income groups, everything is not so bad). A particularly strong drop in the share of labor in income is noted for low- and medium-skilled personnel, among high-paid professions, on the contrary, growth is observed in both developed and developing economies. According to the IMF for 1995-2009, the total share of labor income decreased by 7 percentage points, while the share of highly paid labor income increased by 5 percentage points.

The middle class is slowly but surely disappearing

A recent IMF study "Income Polarization in the United States" notes that from 1970 to 2014, the share of middle-income households (50–150% of the median: half less, half more) decreased by 11 percentage points (from 58% to 47%) of the total number of US households. Polarization is taking place, that is, the washing out of the middle class with the transition to low and high income groups.

So, maybe the middle class is shrinking due to its enrichment and transition to the upper class? No. From 1970 to 2000, the polarization was uniform - almost the same number of "middle peasants" rose to the upper class and descended to the lower (in terms of income). But since 2000, the trend has been reversed - the middle class is rapidly sinking into the low-income group.

The polarization of incomes and the washing out of the middle class are poorly reflected in the statistics of inequality, which are used to operating with the Gini coefficient. When Gini is 0, all households have the same income; when Gini is 1, one household receives all income. The polarization index is zero when the incomes of all households are the same. It rises when the incomes of a larger number of households approach the two extreme values of the income distribution, and reaches 1, when some households have no income, and the incomes of others are the same (not equal to zero). That is, two poles with no middle between them. "Hourglass" with a small top cup instead of the typical welfare-state "pear" (thick, or rather numerous, middle between the few rich and poor).

If the Gini coefficient in the United States from 1970 to 2014 increased rather smoothly (from 0.35 to 0.44), then the polarization index just skyrocketed (from 0.24 to 0.5), which indicates a powerful washout of the middle class. A similar picture is observed in other developed economies, although not so clearly.

Automate it

The reasons for the washout of the middle class are similar to the reasons for the fall in the share of labor in income: the transfer of industry to countries with cheaper labor. However, outsourcing is already largely history. A new trend is robotization.

Recent examples. In late July, Taiwan's Foxconn (Apple's main supplier) announced plans to invest $ 10 billion in an LCD panel factory in Wisconsin, USA. The economist will be struck by one detail - despite the colossal volume of declared investments, only 3 thousand people will be employed at the factory (albeit with the prospect of expansion, since the state authorities insist on creating as many jobs as possible).

Foxconn is one of the pioneers of the current wave of robotics. In China, the company is the largest employer, employing more than 1 million workers in its factories. Since 2007, the company has been producing Foxbots robots capable of performing up to 20 production functions and replacing workers. Foxconn plans to bring the level of robotization to 30% by 2020. The longer term plan is fully self-contained separate factories.

Another example. The Austrian steel company Voestalpine AG recently invested € 100 million in the construction of a steel wire plant in Donavice with an annual output of 500,000 tonnes.

The previous production of the company with the same output, built in the 1960s, employed about 1000 workers, but now there are … 14 workers

In total, according to the World Steel Association, from 2008 to 2015, the number of jobs in the steel industry in Europe fell by almost 20%.

Manufacturing needs less and less human presence

Investments in modern manufacturing are likely to go hand in hand with job creation to a lesser extent (and blue-collar jobs will become a rarity). The examples given, where one job is created for $ 3-7 million of investment, are in sharp contrast to the figures typical for the end of the twentieth century (for example, the database on foreign direct investment in the northeast of Great Britain from 1985 to 1998 gives an average of nine jobs for £ 1 million in investment).

Fully autonomous factories (lights out factories) are still exotic, although some companies already operate with zero labor factories (Phillips, Fanuc). However, the general trend is clear: in some enterprises, and then, possibly, in entire industries, the share of labor income will decline even more rapidly than it has declined over the past two decades. Not only do industrial workers have no future - they no longer have a present either.

Impoverished but still employed

Kicked out of industry, the ex-middle class is forced to adapt. At the very least, he finds a new job, which is confirmed by the current low unemployment rate, especially in the United States. But with rare exceptions, this work with a lower income and in low-productivity sectors of the economy (unskilled medical care, social security, HoReCa, fast food, retail, security, cleaning, etc.) and usually does not require serious education.

The future of the current middle class is unskilled labor

As MIT economist David Outa notes in Polanyi's Paradox and the Shape of Employment Growth, the dynamics of the labor market in developed countries in recent decades is a manifestation of the Polanyi paradox. The famous economist Karl Polanyi pointed out back in the 1960s that a lot of human activity is based on "tacit knowledge", that is, it is poorly described using algorithms (visual and auditory recognition, bodily skills like riding a bicycle, car, hairstyle, etc.). P.). These are areas of activity that require "simple" skills from a human point of view, but difficult for traditional artificial intelligence of the twentieth century.

Top 10 Professions with Projected Maximum Growth in US Jobs (2014-2024)

These are the spheres of employment that the ex-middle class, being freed from industry, headed (which partly explains the paradox of slow labor productivity growth in the United States and other developed economies).

Eight of the top 10 fastest growing professions in the United States over the past few years are low-paid, poorly algorithmic "manual" work (nurses, nannies, waiters, cooks, cleaners, truck drivers, etc.)

However, now the Polanyi paradox has apparently been resolved. Machine learning-based robotization copes with previously unsolvable problems (based on visual and auditory recognition, complex motor skills), so the pressure on the middle class should continue, and the growth in employment in these areas may turn out to be temporary. The polarization and further decline in the share of labor in income, too, seems to continue.

The figure is not helpful

But maybe the middle class will be saved by the new economy? “In the next 50-60 years, 60 million small and medium-sized businesses will emerge that will operate via the Internet, and the leading place in world trade will go to them. Anyone with a mobile phone and their own ideas will be able to create their own business - such a prediction was made recently by the president of the Chinese leader of online commerce Alibaba Group Michael Evans at the World Festival of Youth and Students in Sochi. - This is how we see the future: every small the company and business will participate in world trade."

Alibaba owner Jack Ma was also optimistic at the Open Innovations forum in Skolkovo: “You don't need to worry about robots replacing humans. This problem will resolve itself. People are worried about the future because they are not sure of themselves, they do not have enough imagination. We do not have these solutions now, but they will appear in the future. " True, Ma noticed that people are already losing to artificial intelligence: “You can't compete with machines with intelligence - they will still be smarter than us. It's like competing with cars in speed."

Jack Ma (left) believes in robots more than in humans.

Evans did not bother to confirm his prediction with any calculations. Do smartphones, mobile apps and various other information technologies promise us such a wonderful future, already achieved by Evans and Ma? Maybe. And you probably shouldn't worry that robots will replace someone - if your fortune is estimated at $ 39 billion and the mass of these robots belongs and will belong to you.

But for the rest it makes sense to think. An analysis of how mobile applications and Internet technologies actually work and what impact they have on the labor market suggests a somewhat less rosy picture of the future. In China, despite the dominance of Alibaba's B2B applications, inequality is only growing, and it is becoming more and more difficult for small private companies to break through under the conditions of state capitalism under the supervision of the CCP. On the other hand, if you believe the reporting figures (the key word here is "if"), Alibaba has taken over almost all Internet commerce in the PRC.

In any case, Alibaba is not a democratizer or an incubator of future millionaires, but rather a winner-take-all-company example in the new digital winner-take-all economy

Or take another pioneer of the new economy, Uber, the app that revolutionized the taxi industry. The advantages of Uber are obvious (especially from the point of view of customers), and there is no point in listing them.

Uber has several thousand employees, and about 2 million drivers around the world work under contracts for the company. Few Uber employees receive decent salaries, although their wealth is incomparable with the owners of the company, whose capitalization is approaching $ 70 billion (the structure is non-public and does not disclose either the exact number of employees or their salaries, and capitalization is estimated based on offers of shares in property to private investors). But 2 million drivers have, according to Earnest, a median income of just over $ 150 per month. Uber does not consider drivers to be its employees and does not provide them with any kind of social package: it simply takes 25-40% commission for the driver's contact with the client.

Already, Uber is a classic example of a “winner-take-all-company” in the new “winner-take-all-economy” (the richest companies in the digital economy, the so-called FANG - Facebook, Amazon, Netflix, Google - are the same). But Uber is not going to stop at this: the goal is to completely get rid of the weak link, 2 million drivers. Without a doubt, driverless cars are a matter of the next few years, and Uber shareholders will not need people at all: they will have capital, which is enough to replace a person.

The latest IEA report "The Future of Trucks" assesses the potential for autonomous trucking. They are the first to undergo automation. The transition to autonomous road transportation of goods can free up to 3.5 million jobs in the United States alone. At the same time, truck drivers in the States are one of the few professions with salaries significantly higher than the median and at the same time not requiring a university degree. But the new economy does not need them.

And then other professions, traditionally considered creative and indispensable, will not be needed - engineers, lawyers, journalists, programmers, financial analysts. Neural networks are in no way inferior to humans in so-called creativity - they can write a picture and compose music (in the specified style). The mastering of fine motor skills by robots will kill both surgeons (work in this direction is already underway: remember, for example, da Vinci, a half-robot surgeon), and hairdressers and cooks. The fate of athletes, showmen and politicians is interesting - it is technically possible to replace them with robots, but the attachment to the human in these areas seems to be quite tough.

The erosion of white-collar employment is not yet so noticeable, but it is already underway in latent form. Bloomberg columnist Matt Levin describes the work of pidgewater, one of the world's largest hedge funds, with $ 200 billion in assets: “pidgewater co-founder Ray Dalio mostly writes books, Twitter posts, and interviews.1,500 employees don't invest. They have a computer for all this! pidgewater invests according to algorithms, and very few of the employees have even a rough understanding of how these algorithms work. Employees are involved in marketing the firm, investor relations (IR), and, most importantly, criticizing and evaluating each other. The main problem of the computer in this model is to keep 1500 people busy in such a way that it does not interfere with its super-rational work."

Some of the "white collars" may end up on the street - their work will not be in demand

However, the new economy certainly does not threaten the really highly paid "white collars". Sitting on the bloated board of directors of a large company often requires no physical or mental work at all (other than, perhaps, the ability to plot). However, being at the top of the hierarchy means that it is at this level that all or almost all personnel decisions are made, so the corporate and top bureaucratic elite cannot replace themselves with computers and robots. More precisely, he will replace him, but he will keep the position and raise his salary. The elite, again, combine labor incomes with ever-increasing capital gains, so even the unlikely destruction of labor income will not particularly affect them.

Who will be saved by education

The American Pew Research Center published a detailed report on the future of education and work, "The Future of Jobs and Jobs Training" in May. The survey methodology was a survey of 1408 IT professionals, economists and innovative businesses, of whom 684 provided detailed comments.

The main conclusions are pessimistic: the value of education will devalue in the same way as the return on human labor - these are interrelated processes.

If a person is inferior in everything to artificial intelligence, then his education will cease to be of special value. To understand this, a simple analogy, once proposed by the futurist Nick Bostrom, the author of the book "Superintelligence", is enough. Suppose that the smartest person on Earth is twice as smart as the stupidest (conventionally). And artificial intelligence will develop exponentially: now it is at the level of a chimpanzee (again, conditionally), but in a few years it will surpass humans by a factor of thousands, and then millions of times. At the level of this height, both today's genius and today's dumbass will be equally insignificant.

Robots learn faster than humans, and in the field of knowledge, humans will soon lag behind artificial intelligence.

What should education do in this context, what to prepare for? Workplaces? What other jobs? “After the artificial intelligence revolution has already started, it will be impossible to maintain the post-industrial level of employment. Worst-case estimates assume 50 percent global unemployment as early as this century. This is not a problem of education - it is now easier than ever to be engaged in self-education. This is an inevitable stage in human civilization, which must be dealt with with the help of a large-scale increase in state social security (for example, universal unconditional income),”the report says.

Experts interviewed in the course of the study point to the pointlessness of changes in teaching. “I doubt that people can be trained for the work of the future. It will be performed by robots. The question is not about preparing people for work that will not exist, but about distributing wealth in a world in which work will become unnecessary,”notes Nathaniel Borenstein, Research Fellow at Mimecast.

Algorithms, automation and robotics will lead to the fact that capital does not need physical labor. Education will also be unnecessary (artificial intelligence is self-learning). Or, more precisely, it will lose the function of a social elevator, which, although very poorly, nevertheless performed. As a rule, education only legitimized inequality along the chain - decent parents, decent areas, high-status schools, high-status universities, high-status jobs. Education can be preserved only as a marker of social status for capital owners. Universities in this case, perhaps, will turn into analogs of guards schools under monarchies until the twentieth century, but for the children of the elite, the new “owner of capital gets everything from the economy”. What regiment did you serve in?

From communism to the ghetto

Inequality in the world of supercapitalism will be incomparably higher than it is now. Huge return on capital can be accompanied by zero return on labor. How do you prepare for such a future? Most likely, not at all, but perhaps this kind of techno-utopia is a rather unexpected motivation to enter the stock market.

If income from labor gradually disappears, the only hope is for income from capital: you can stay in business in the world of supercapitalism only by owning these very robots and artificial intelligence.

Financier Joshua Brown cites the example of an acquaintance of his who owns a small chain of grocery stores in New Jersey. A few years ago, he noticed that Amazon.com was starting to squeeze small retailers out of business. The shopkeeper started buying Amazon.com shares. This was not a traditional retirement investment - more insurance against total ruin. After the bankruptcy of his own network, the businessman at least compensated for his losses with multiplied “winner-take-all-companies” shares.

The fate of those who do not have capital is vague in the world of supercapitalism: everything will depend on the ethics of those who, on the contrary, have an abundance of capital. It can be either a variation on the theme of communism for everyone at best (super-inequality levels itself out - the productive forces of society will be infinitely great); or universal unconditional income in the average case (if the tax redistribution of surplus incomes, which has been slowing down recently, is triggered); or segregation and the creation of social ghetto sanctuaries in the worst case.