Effects of New Technologies on Labor

January 4, 2019

Previous | Next

David Autor and Anna Salomons, “Is automation labor share-displacing? Productivity growth, employment, and the labor share.” Brookings Papers on Economic Activity, Spring 2018.

Daron Acemoglu and Pascual Restrepo, “Robots and jobs: Evidence from US Labor Markets.” National Bureau of Economic Research, March 2017.

I have been interested in automation’s effects on the labor force for a long time, especially since reading Martin Ford’s Rise of the Robots. Ford raises the specter of a “jobless future” and a massive welfare system to support the unemployed.

Here I discuss two papers representing some of the most serious economic research on this topic.

The questions

To what extent do new technologies really displace human labor and reduce employment? The potential for them to do so is obvious. The mechanization of farming dramatically reduced the number of farm workers. But we can generalize only with caution. In theory, a particular innovation could either produce the same amount with less labor (as when the demand for a product is inelastic, often the case for agricultural products), or produce a larger amount with the same labor (when demand expands along with lower cost, as with many manufactured goods). An innovation can also save labor on one task, but reallocate that labor to a different task in the same industry.

Even if technological advances reduce the labor needed in one industry, that labor can flow into other industries. Economists have suggested several reasons that could happen. One involves the linkages between industries, as one industry’s productivity affects the economic activity of its suppliers and customers. If the computer industry is turning out millions of low-cost computers, that can create jobs in industries that use computers or supply parts for them. Another reason is that a productive industry affects national output, income and aggregate demand. The wealth created in one industry translates into spending on all sorts of goods and services that require human labor.

The point is that technological innovations have both direct effects on local or industry-specific employment, and also indirect effects on aggregate employment in the economy as a whole. The direct effects are more obvious, which may explain why the general public is more aware of job losses than job gains.

A related question is the effect of technology on wages, and therefore on labor’s share of the economic value added by technological change. Do employers reap most of the benefits of innovation, or are workers able to maintain their share of the rewards as productivity rises? Here too, aggregate results could differ from results in the particular industries or localities experiencing the most innovation.

The historical experience

American history tells a story of painful labor displacement in certain times, places and industries; but also a story of new job creation and widely shared benefits of rising productivity. Looking back on a century of technological change from the vantage point of the mid-20th century, economists did not find negative aggregate effects of technology on employment or on labor’s share of the national income. According to Autor and Salomons:

A long-standing body of literature, starting with research by William Baumol (1967), has considered reallocation mechanisms for employment, showing that labor moves from technologically advancing to technologically lagging sectors if the outputs of these sectors are not close substitutes. Further,…such unbalanced productivity growth across sectors can nevertheless yield a balanced growth path for labor and capital shares. Indeed, one of the central stylized facts of modern macroeconomics, immortalized by Nicholas Kaldor (1961), is that during a century of unprecedented technological advancement in transportation, production, and communication, labor’s share of national income remained roughly constant.

Such findings need to be continually replicated, since they might hold only for an economy in a particular place or time. In the 20th century, the success of labor unions in bargaining for higher wages and shorter work weeks was one thing that protected workers from the possible ill effects of labor-saving technologies.

Recent effects of technological change

Autor and Salomons analyze data for OECD countries for the period 1970-2007. As a measure of technological progress, they use the growth in total factor productivity (TFP) over that period.

They find a direct negative impact of productivity growth on employment within the most affected industries. However, they find two main indirect effects that offset the negative impact for the economy as a whole:

First, rising TFP within supplier industries catalyzes strong, offsetting employment gains among their downstream customer industries; and second, TFP growth in each sector contributes to aggregate growth in real value added and hence rising final demand, which in turn spurs further employment growth across all sectors.

To put it most simply, one industry’s productivity may limit its own demand for labor, but its contribution to the national output and income creates employment opportunities elsewhere.

With regard to labor’s share of the economic benefits, the findings are a little different. Here again, the researchers find a direct negative effect within the industries most affected by technological innovation. But in this case, that effect is not offset, for the most part, by more widespread positive effects.

The association between technological change and labor’s declining share varied by decade. Labor’s share actually rose during the 1970s, declined in the 1980s and 90s, and then fell more sharply in the 2000s. The authors mention the possibility that the newest technologies are especially labor-displacing, but reach no definite conclusion. Another possibility is that non-technological factors such as the political weakness of organized labor are more to blame.

The impact of robotics

Autor and Salomons acknowledge that because they used such a general measure of technological change, they couldn’t assess the impact of robotics specifically. They do cite work by Georg Graetz and Guy Michaels that did not find general negative effects of robots on employment or labor share in countries of the European Union. That’s important, since many European countries have gone farther than we have in adopting robots.

The paper by Acemoglu and Restrepo focuses on the United States for the period 1990-2007. (They deliberately ended in 2007 so that the impact of the Great Recession wouldn’t muddy the waters.)

The authors used the definition of robot from the International Federation of Robotics, “an automatically controlled, reprogrammable, and multipurpose [machine].” Over the period in question, robot usage increased from 0.4 to 1.4 per thousand workers. “The automotive industry employs 38 percent of existing industrial robots, followed by the electronics industry (15 percent), plastic and chemicals (10 percent), and metal products (7 percent).”

Adoption of industrial robots has been especially common in Kentucky, Louisiana, Missouri, Tennessee, Texas, Virginia and West Virginia. As Thomas B. Edsall titled his recent New York Times column, “The Robots Have Descended on Trump Country.”

Acemoglu and Restrepo classified localities–technically “commuter zones”–according to their “exposure” to robotics, based on their levels of employment in types of jobs most conducive to robotization.

Their first main finding was a direct negative effect of robotics on employment and wages within commuting zones:

Our estimates imply that between 1990 and 2007 the increase in the stock of robots…reduced the employment to population ratio in a commuting zone with the average US change in robots by 0.38 percentage points, and average wages by 0.71 percent (relative to a commuting zone with no exposure to robots). These numbers…imply that one more robot in a commuting zone reduces employment by about 6 workers.

The workers most likely to be affected are male workers in routine manual occupations, with wages in the lower-to-middle range of the wage distribution

In the aggregate, these local effects are partly offset by “positive spillovers across commuting zones”–positive effects on employment and wages throughout the economy. With these spillovers taken into account, the estimated effects of robotics on employment and on wages are cut almost in half, dropping to 0.20 percent and 0.37 percent respectively.

The authors state their conclusion cautiously, as “the possibility that industrial robots might have a very different impact on labor demand than other (non-automation) technologies.”

Summary

While there is little doubt that new technologies often displace labor in particular industries and localities, the aggregate effects on employment and wages are less consistent.  Historically (late 19th and early 20th centuries), employment and labor share of income held up very well. For developed countries in the period 1970-2007, Autor and Salomons found a mixed picture, with robust employment but declining labor share after 1980. With respect to robotics specifically, Graetz and Michaels did not find declines in employment or labor share in the European Union, but Acemoglu and Restrepo found some decline in both employment and wages in the U.S.

It seems fair to say that the jury is still out on the effects of automation on the labor force. It may be that automation has no inevitable effect, but that it depends on how we as a society choose to deal with it. We shouldn’t assume a world of mass unemployment and widespread government dependency on the basis of recent, preliminary results from one country. Authors such as Thomas Friedman, who are more optimistic than Martin Ford about the long-run effects of new technologies, have yet to be proved wrong.


National Climate Assessment

December 3, 2018

Previous | Next

U.S. Global Change Research Program. Impacts, Risks, and Adaptation in the United States: Fourth National Climate Assessment, Volume II [Reidmiller, D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. Maycock, and B.C. Stewart (eds.)]. Washington, DC, 2018.

Federal law requires the government to issue a new climate assessment every four years. Thirteen government agencies participated in the current assessment, including the Departments of State, Commerce, Interior, Transportation, Health and Human Services, Defense, Agriculture, and Energy; along with the National Science Foundation, Smithsonian Institution, U.S. Agency for International Development, National Aeronautics and Space Administration, and Environmental Protection Agency.

This year’s report is Volume II of the fourth National Climate Assessment. Volume I, issued last year, provided a comprehensive summary of climate changes themselves, based on the best science available. Findings from Volume I are incorporated into the impact assessment in Volume II.

Full disclosure: I haven’t read all 1,656 pages of this report. What I am summarizing is the 40-page overview in Chapter 1, supplemented by a brief look at selected other chapters.

Here is a statement of the report’s general conclusions:

This report draws a direct connection between the warming atmosphere and the resulting changes that affect Americans’ lives, communities, and livelihoods, now and in the future….It concludes that the evidence of human-caused climate change is overwhelming and continues to strengthen, that the impacts of climate change are intensifying across the country, and that climate-related threats to Americans’ physical, social, and economic well-being are rising.

The climate changes

The most obvious change is that the country is getting warmer along with the rest of the planet. On the average, temperatures have increased by 1.8 degrees Fahrenheit across the contiguous United States since around 1900. The warming in Alaska has been even greater. Since the 1980s, arctic sea ice has been decreasing by 11-16% per decade. (Here in the Southeast, the rise in temperature is expected to be smaller than in most of the northern United States, and the main effect will be warmer nights rather than hotter days.)

The median sea level along our coasts has risen about 9 inches since the early 20th century, due to ocean warming and melting land ice. The oceans have also become more acidic as they have absorbed more carbon dioxide.

Although these changes may sound small, they are enough to produce large changes in the weather. Extreme climate-related weather events are becoming more common, and when they occur they often last longer and cause more damage. We are experiencing more frequent and longer heat waves, especially in urban areas. More of our annual rainfall is coming in the form of intense, one-day rainfalls that cause more flooding, especially in coastal areas affected by higher sea levels and tides. Recent hurricanes have been especially severe. Hot, dry conditions have contributed to unusually large wildfires in the western states.

Scientists have known for a long time that naturally occurring greenhouse gases in the atmosphere trap some of the heat radiating from the Earth’s surface. That keeps the planet surface warm enough to be habitable for living things. But in the industrial era, human activity has added dramatically to these gases, especially through emissions of carbon dioxide.  Carbon dioxide in the atmosphere has increased by about 40%. Burning fossil fuels accounts for about 85% of all greenhouse gas emissions by humans.

Scientists have concluded that non-human factors alone cannot account for climate change. In fact, “Without human activities, the influence of natural factors alone would actually have had a slight cooling effect on global climate over the last 50 years.” Scientists have found no credible alternative to the consensus view that human activity, especially the burning of fossil fuels, is responsible for global warming.

Scenarios for future change

Science is often in the position of being unable to predict the future with certainty, but being able to project possible futures based on reasonable assumptions. For example, financial planners cannot predict a couple’s future retirement income without making assumptions about how much they will save, how they will invest it, and how closely market performance will conform to historical averages. So they often construct multiple scenarios based on a reasonable range of assumptions.

Climate scientists do not know how much global temperatures will increase or how much sea levels will rise, mainly because they don’t know how much humans will curb their emissions of greenhouse gases. So the National Climate Assessment relies on a “suite of possible scenarios” based on “Representative Concentration Pathways”–that is, different concentrations of carbon dioxide in the atmosphere later this century.

Some additional rise in temperature is inevitable over the next few decades, even if we start reducing carbon emissions now. That’s because the climate system responds slowly to changes in greenhouse gas levels. Even in the lowest scenario considered, “additional increases in temperatures across the contiguous United States of at least 2.3ºF (1.3ºC) relative to 1986-2015 are expected by the middle of this century.” Around mid-century, the various scenarios diverge dramatically. In a “very low” scenario, which assumes that emissions are peaking now, temperatures level off after 2050. In a “low” scenario, which assumes that emissions peak around 2050, temperatures rise another 2.3-6.7ºF (1.3-3.7ºC) by the end of the century. In a “higher” scenario, which assumes that emissions keep rising, temperatures rise another 5.4-11.0ºF (3.0-6.1ºC) by the end of the century, resulting in the most catastrophic effects. “Coastal flood heights that today cause major damages to infrastructure would become common during high tides nationwide.”

Perhaps the most sobering finding is that current global trends in annual greenhouse gas emissions are most consistent with the highest scenario considered. The evidence so far does not inspire confidence that global emissions are peaking now or will do so in the near future. But business as usual is not a viable option, and serious emission reductions are required soon to avoid catastrophic outcomes before the end of the century.

This is probably what the White House was referring to when it dismissed the report as being “largely based on the most extreme scenario,” as if the researchers deliberately chose the most pessimistic assessment in order to upset people. What they actually did was project a reasonable range of scenarios, but then come to the scientific conclusion that allowing carbon emissions to rise would result in the least desirable outcome. What the Trump administration is doing is rejecting the report as too dire, and then insisting on continuing the policies that are most likely to produce the most dire results!

The risks

The report discusses three kinds of risks arising from climate change: risks to economy and infrastructure, risks to the natural environment and “ecosystem services,” and risks to human health and well-being.

Climate change could cause substantial damage to infrastructure and private property. Regional economies and industries that depend on favorable climate conditions, such as agriculture, tourism and fisheries, will be especially vulnerable. The researchers tried to quantify many of these effects throughout the report, but the overview included only a few general references to dollar amounts: “The potential for losses in some sectors could reach hundreds of billions of dollars per year by the end of this century.”

Climate change produces economic losses in many different ways. Extreme heat waves and more powerful storms put stress on energy systems and create widespread power outages. Much of the infrastructure for producing energy is located along ocean and gulf coasts that are vulnerable to strong hurricanes and increased flooding. Although the warming climate lengthens the growing season, yields for many major crops are expected to decline because of excessive heat and greater pest activity. Bad weather around the world also impacts on the U.S. economy by disrupting international supply chains, as happened with hard-drive imports from Thailand in 2011.

An example of what the report calls “ecosystem services” is the availability of water or snow for drinking and recreation. In the Southwest, “intensifying droughts, heavier downpours, and reduced snowpack are combining with other stressors such as groundwater depletion to reduce the future reliability of water supplies in the region.”

Heat waves are associated with higher death rates, especially for older adults, pregnant women, and children. Climate change will also increase exposure to pollen allergens associated with allergic illnesses such as asthma and hay fever. And as North America warms, disease-carrying insects from Southern climates are migrating northward.

Since low-income communities are especially vulnerable to many of these risks, “climate change threatens to exacerbate existing social and economic inequalities….”

Reducing the risks

Many states, cities and businesses have taken some measures to reduce greenhouse gas emissions or to adapt to climate changes. However, the report states that “these efforts do not yet approach the scale needed to avoid substantial damages to the economy, environment, and human health expected over the coming decades.” Time is of the essence, since some effects of climate change will be difficult or impossible to reverse if they are allowed to occur. Once ice sheets melt enough to make sea levels higher and coastal cities uninhabitable, those conditions may persist for thousands of years.

The report makes a distinction between mitigation, which reduces risks by limiting further climate change, and adaptation, which reduces risks by softening the impact of the climate changes that do occur.

With regard to mitigation, one area where some progress has been made is the power sector of the economy. Greenhouse gas emissions from power generation dropped 25% from 2005 to 2016, the greatest decline for any sector. As a result, the sector with the largest emissions is now transportation.

Last week’s announcement of automobile plant closings by GM is very much related to our emissions problems. By increasing domestic gasoline production, we have lowered the price of gas, but that encourages consumers to buy larger, less fuel-efficient vehicles. The plants to be closed are producing smaller, more fuel-efficient cars for which there is currently less demand. Gas prices are artificially low, since they don’t include the ultimate cost to society of environmental damage. A carbon tax would be a rational way of discouraging our short-sighted reliance on fossil fuels, but that requires courageous leadership and a better-informed public.

With regard to adaptation, some communities have taken measures like strengthening buildings to withstand extreme weather events. They tend, however, to prepare only for the range of events that are familiar to them, rather than the even wider range that scientists anticipate. They are more likely to raise construction standards than to block construction altogether in high-risk locations.

In many areas, the costs that can be avoided through advance planning and investment are substantial. For example, “More than half of damages to coastal property are estimated to be avoidable through adaptation measures such as shoreline protection and beach replenishment.” Nevertheless, the researchers believe that moving populations away from the most threatened coastlines will become unavoidable.

Crisis, what crisis?

With the issuance of this report, the American people have just experienced a remarkable spectacle. On the one hand, thirteen federal agencies have collaborated to produce the most scientific report they can assemble on climate change, as mandated by federal law. On the other hand, the Trump administration has tried to bury it by releasing it on Black Friday and encouraging people not to believe it. “Whatever happened to Global Warming?” the president tweeted during a recent cold snap.

The President of the United States has considerable power both to define issues and to address them. This president is doing what he can to ridicule the whole idea of controlling emissions and undermine existing efforts to do so. He has blocked the previous administration’s clean energy initiative, lowered standards for vehicle fuel efficiency, taken the U.S. out of the Paris Agreement, and encouraged more fossil fuel production. I am tempted to use a term like “criminal negligence” to refer to his leadership in this area, except that ignorance is not a crime.

President Trump’s idea of a real crisis is illegal immigration. But according to The Economist, total apprehensions at the border were already way down before he even took office. “Not only have the migration numbers tumbled and the share of Mexicans among them dwindled. More Mexicans are now returning to Mexico than are coming to the United States illegally.” Central American migrants have increased in the past decade, but their numbers are still too small to change the overall story. By trying to close the border to asylum seekers, Trump provokes border confrontations that seem to confirm his largely phony crisis.

Given Donald Trump’s hyper-nationalist worldview and distorted priorities, it’s no wonder that immigration far surpasses climate change as a hot political topic and campaign issue. Too many Americans seem willing to follow this president wherever he leads, even if it’s over a climate-change cliff. Isn’t it time for the country to come to its senses and demand realistic, fact-based leadership?


Thank You for Being Late (part 3)

November 26, 2018

Previous | Next

A “moral fork in the road”

Another thing I liked about Friedman’s book was his willingness to talk about morality. Many liberals seem to shy away from the subject, perhaps because they don’t want to be confused with moral traditionalists. Personally, I think that liberals are in a good position to seize the moral high ground on many issues. After all, they are committed to such worthy values as social justice, equal opportunity, freedom of expression, scientific inquiry, nonviolent conflict resolution, and oh yes, democracy.

Friedman says that in the age of accelerations he describes, “leadership is going to require the ability to come to grips with values and ethics.” In particular, new technologies have empowered people to contribute more than ever to the solution of social problems, but also to disrupt social order on a more destructive scale. “As a species, we have never stood at this moral fork in the road–where one of us could kill all of us and all of us could fix everything if we really decided to do so.”

Friedman describes cyberspace as a lawless, amoral sphere badly in need of normative guidance. We are turning over too many decisions to impersonal algorithms that lack any moral compass. We thought that we could just connect everybody through social media and good things would happen. Now we realize that communities of users need some way of establishing moral norms, so that technically-empowered bad actors don’t destroy cyberspace for everyone.

Character and community

Friedman agrees with David Brooks that “most of the time character is not an individual accomplishment. It emerges through joined hearts and souls, and in groups.”

But what groups? The federal government is too big, too bureaucratic, and too slow to respond to emerging needs. On the other hand, families are too small and fragile to provide their members with the necessary supports. (He doesn’t elaborate on the second point, which would get into the debate over whether it “takes a village” or just a family to develop a good citizen.) Friedman looks to the local level beyond the family, asserting that “the healthy city, town or community is going to be the most important governing building block in the twenty-first century.” He quotes Gidi Grinstein as saying that such a model community would be “focused on supporting the employability, productivity, inclusion, and quality of life of its members.”

Here Friedman draws on his own experience of St. Louis Park, the suburb of Minneapolis where he grew up. There in the 1950s, American Jews escaped their urban ghetto and coexisted primarily with “a bunch of progressive Scandinavians.” Social harmony was helped along by what the White House Council of Advisers called the “Age of Shared Growth” (1948-1973) characterized by high productivity, economic expansion and broad distribution of the benefits. The result was an “imbedded habit of inclusion,” a tradition carried on today in efforts to assimilate today’s minorities. Friedman says that the jury is still out on whether the community can truly overcome today’s social divisions, but at least it is trying.

I think his point is well taken that pluralism and inclusion are keys to moral as well as economic progress.

How optimistic?

The subtitle of the book is “An Optimist’s Guide to Thriving in the Age of Accelerations.” To a degree, I share the author’s optimism. New technologies eliminate some jobs, but they can also increase productivity, lower costs for consumers, and create new jobs in expanding industries for those who acquire the appropriate skills. Globalization can expand the pool of human knowledge and generate more solutions to human problems. Even climate change has an upside, in that it should lead us to develop clean energy industries on a grand scale.

At times, however, I thought that Friedman underestimated the obstacles to be overcome, especially because of today’s economic inequality. I agree that technological change and rising productivity could be helpful in raising wages, as they were in the “Age of Shared Growth.” But even then, workers didn’t get their share of the benefits without a power struggle between business and labor, one in which government also weighed in. I agree that globalization expands the pool of human knowledge, but it can also result in a race to the bottom, where countries compete by cutting wages and skimping on environmental protection.

Friedman’s book helps convince me that massive investments in human capital are needed to qualify people for the jobs and lifestyles of the future. But his eighteen specific recommendations seem to fall a bit short, especially in the area of education. He wants to make postsecondary education tax deductible, but the people who find college least affordable are in such low tax brackets that the deduction has little value for them. He wants to eliminate corporate taxes, which would produce a windfall primarily for the richest tenth of the population who own over 80% of the stock.

The general premise of the book remains sound, however. It is that we shouldn’t panic or withdraw from the emerging world, but embrace the future with serious reflection and a positive attitude.


Thank You for Being Late (part 2)

November 15, 2018

Previous | Next

Today I’ll discuss two chapters of Thomas Friedman’s Thank You for Being Late that I found especially insightful: Ch. 8 on the implications of new technologies for employment, and Ch. 9 on the problem of global order.

The future of work

Friedman begins his discussion of work with a bold pronouncement: “Let’s get one thing straight: The robots are not destined to take all the jobs. That happens only if we let them–if we don’t accelerate innovation in the labor/education/start-up realms, if we don’t reimagine the whole conveyer belt from primary education to work and lifelong learning.”

I was pleased to find that Friedman’s position is similar to the one I laid out in my critique of Martin Ford’s The Rise of the Robots Ford predicted a future of massive unemployment, with millions of displaced workers relying on government for a minimal income. We could get a taste of that during a transitional period, but I don’t think that’s a very good description of where we are ultimately headed.

Friedman doesn’t deny that smart machines can now perform many tasks currently or formerly performed by humans. But he makes a sharp distinction between automating tasks and automating whole jobs so as to eliminate the human contribution altogether. The upside of automation is increased productivity. Workers aided by new technologies can produce more per hour, reducing the unit cost of what they produce. That can create a larger market for the product, increasing the demand for labor in a given occupation. A car was an expensive luxury item before the assembly line cut costs to create a mass market and a booming industry. Friedman reports that “employment grows significantly faster in occupations that use computers more,” as in banking and paralegal work.

To give an example from my own experience, financial planning software has automated many of the most tedious tasks involved in preparing a retirement plan, such as mathematically projecting future income from savings rates and asset allocation choices. But that hasn’t resulted in a reduced need for financial planners. On the contrary, it has made the services of a planner affordable for more people. Planners can spend less time doing calculations but more time relating to their clients.

Friedman says, “Jobs are not going away, but the needed skills for good jobs are going up.” What are disappearing are well-paid jobs with only modest skill requirements, like twentieth-century manufacturing jobs.

Retooling education

In general, today’s good jobs require more education; yet it does not follow that a college education necessarily qualifies a person for a good job. That’s not because a liberal education is a waste of time, but because it is only a foundation that must be built upon with lifelong job-relevant learning.

Friedman quotes MIT economist David Autor, who stresses the need for more than one kind of learning: “If it’s just technical skill, there’s a reasonable chance it can be automated, and if it’s just being empathetic or flexible, there’s an infinite supply of people, so a job won’t be well paid. It’s the interaction of both that is virtuous.”

Friedman is a strong believer in a broad, basic education that includes “strong fundamentals in writing, reading, coding, and math; creativity, critical thinking, communication, and collaboration; grit, self-motivation, and lifelong learning habits; and entrepreneurship and improvisation….” Even a robotics enthusiast like Martin Ford acknowledges that humans surpass robots in general intelligence, as opposed to specialized task capabilities.

However, recipients of this basic education will also have to cope with rapidly changing workplace requirements. Technology will play a central role here, both in creating the automated systems with which workers interact, and in enhancing learning processes themselves. Friedman wants to “turn AI into IA,” by which he means turning artificial intelligence into intelligent assistance to support lifelong learning. “Intelligent assistance involves leveraging artificial intelligence to enable the government, individual companies, and the nonprofit social sector to develop more sophisticated online and mobile platforms that can empower every worker to engage in lifelong learning on their own time, and to have their learning recognized and rewarded with advancement.” When the time comes to pick up a new skill, you can probably find an app to help you learn it.

Friedman describes AT&T as one company that is demanding more lifelong learning of its employees, but supporting it with measures like tuition reimbursements, online courses developed in collaboration with online providers, and promotions for those who acquire new skills. This represents a new social contract between employer and employee–“You can be a lifelong employee if you are ready to be a lifelong learner.”

Every major economic shift has involved the rise of a new asset class, such as land in the agrarian economy and physical capital in the industrial economy. The rising asset class today is human capital, and that is where society’s investments must be increasingly concentrated.

The threat of global disorder

In the immediate aftermath of the Cold War, after the collapse of the Soviet Union, The U.S. remained the only superpower and the most obvious model for other countries to emulate. Many thinkers expressed the hope that the world could move faster in the direction of American-style democracy and capitalism. But then the interventions in such places as Iraq and Afghanistan failed to produce stable democracies, the Great Recession called into question capitalist progress, and Americans lowered their expectations for world leadership.

What Friedman calls the post-post-Cold War world is characterized by shrinking American power, especially in the Middle East, and new challenges arising from the accelerations in technological change, globalization and environmental degradation.  In large areas of the less developed world, the danger is that states will fail and societies will sink into disorder, dragging the global political order and economy down. Environmental disasters like deforestation in Central America or drought and desertification in sub-Sahara Africa are uprooting people from their traditional relationship to the land. And while some poorer countries are advancing by providing cheap labor to the global economy, the future may belong to those who can provide smarter labor, and that requires greater investments in human capital.

Friedman says that during the Cold War, superpower competition gave America a reason to assist developing countries, in order to keep them in our camp. The mid-twentieth century economic boom also gave us the means to do so. While many Americans are now inclined to turn their back on the rest of the world, Friedman makes a case for renewed global involvement: “While we cannot repair the wide World of Disorder on our own, we also cannot just ignore it. It metastasizes in an interdependent world. If we don’t visit the World of Disorder in the age of accelerations, it will visit us.” The dislocated people in failed states can become refugees or terrorists. The same technologies that can empower people to learn and produce more can empower them to build improvised explosive devices triggered by cell phones, or perhaps a weapon of mass destruction.

In Friedman’s view, the best thing the U.S. could do to “help stabilize the World of Disorder and widen the islands of decency” would be to help fund schools and universities. He would also like to see us help the poorest people make a living in their own villages by assisting them with their environmental problems. He points out that it costs only 100-300 dollars to restore a hectare of degraded land.

In a world of enhanced interdependence, the haves would do well to invest in the development of the have-nots, domestically and globally. If we do not rise together, we will very likely fall together.

Continued


Thank You for Being Late

November 13, 2018

Previous | Next

Thomas L. Friedman. Thank You for Being Late: An Optimist’s Guide to Thriving in the Age of Accelerations. New York: Farrar, Straus and Giroux, 2016.

This book is New York Times columnist Thomas Friedman’s latest reflection on social change–technological, global and environmental. The title refers to his experience of having someone show up late for an appointment, and then realizing that the extra few minutes provide a time for reflection in an otherwise busy day.

Friedman’s basic premise is that “the three largest forces on the planet–technology, globalization, and climate change–are all accelerating at once. As a result, so many aspects of our societies, workplaces, and geopolitics are being reshaped and need to be reimagined….In such a time, opting to pause and reflect, rather than panic and withdraw, is a necessity.”

Technological acceleration

In chapters 2 through 4, Friedman pulls together a wealth of examples to provide a fine overview of developments in digital technology. I can’t do justice to all the detail, but here are a few highlights.

Remarkable breakthroughs have affected all five of the basic components of computing:

(1) the integrated circuits that do the computing; (2) the memory units that store and retrieve information; (3) the networking systems that enable communications within and across computers; (4) the software applications that enable different computers to perform myriad tasks individually and collectively; and (5) the sensors—cameras and other miniature devices that can detect movement, language, light, heat, moisture, and sound and transform any of them into digitized data that can be mined for insights.

The result is “one of the greatest leaps forward in history.”

All this computing power is not just on a desktop or a laptop, but in the “cloud”, or what Friedman calls the computing “supernova”. The ability to tap into this universal information-processing capacity is deeply empowering to individuals, groups and organizations. The challenge is to use that power constructively and not destructively, for collective liberation and not just for domination or other selfish purposes. One downside is that technological innovation is occurring faster than “the average rate at which most people can absorb all these changes.” For example, we are not yet accustomed to the kind of lifelong learning that the information age will require.

Friedman also asks why it’s taking so long for technological change to raise economic productivity. In The Rise and Fall of American Growth, Robert Gordon argued that the extraordinary productivity gains of the “special century” from 1870 to 1970 are unlikely to be repeated. Friedman is more optimistic, pointing out that productivity gains from electrification took several decades to materialize. New factories and business processes had to be designed, and a new generation of managers and workers had to emerge. Many technological breakthroughs are far too new–a number of them emerged in 2007–to assess their effects on social institutions. I find it exciting to imagine a new era of rising productivity and wage gains, which might go a long way to alleviate class, race and gender tensions.

Global acceleration

Electronic connectivity is one of the main factors accelerating human interactions across vast distances. The total value of global flows of goods, services, and finance increased from 24 percent to 39 percent of world GDP between 1990 and 2014.

William H. McNeill, the historian noted for The Rise of the West, argues that “the principal factor promoting historically significant social change is contact with strangers possessing new and unfamiliar skills.” People may perceive such contacts as either a threat or an opportunity, but in the long run they provide societies with more solutions to human problems. Friedman believes that “those societies that are most open to flows of trade, information, finance, culture, or education, and those most willing to learn from them and contribute to them, are the ones most likely to thrive in the age of accelerations.” Although Friedman has little to say about the Trump presidency in this book, we know from his columns that he has little use for nationalism or isolationism.

Friedman does recognize that people whose lives are vulnerable to disruption by globalization will need help coping with this new world. “If a society doesn’t build floors under people, many will reach for a wall–no matter how self-defeating that would be.” Nevertheless, his chapter on globalization contains his most optimistic statement:

[I]f there is one overarching reason to be optimistic about the future, and to keep trying to get the best out of digital globalization and cushion the worst, it is surely the fact that this mobile-broadband-supernova is creating so many flows and thus enabling so many more people to lift themselves out of poverty and participate in solving the world’s biggest problems. We are tapping into many more brains, and bringing them into the global neural network to become “makers.” This is surely the most positive—but least discussed or appreciated—trend in the world today, when “globalization” is becoming a dirty word because it is entirely associated in the West with dislocations from trade.

Environmental/demographic acceleration

The human impact on the planet is increasing, as a result of both our dramatic population growth and our intensive use of the Earth’s resources.

Here Friedman is most concerned with global climate change, and he does not explain demographic trends as much as I would like. Human population growth accelerated especially in the twentieth century because of progress in reducing mortality rates, especially for infants and children. Just between 1900 and 2000, world population increased from 1.65 billion to 6 billion. Smaller families and declining birth rates have reduced the rate of growth somewhat, but the world population is now 7.7 billion and expected to add a couple billion more before leveling off.

A team of scientists specializing in Earth systems identified “nine key planetary boundaries we humans must make sure we do not breach.” Unfortunately, we have already breached four of them. We have put more carbon dioxide into the atmosphere than we should, if we want to hold average global temperature rise since the Industrial Revolution to 2 degrees Celsius. In some places, biodiversity is already below 90 percent of preindustrial levels. The portion of the earth’s original forests that remain has fallen below 75%. And we have been poisoning the earth by adding far too much phosphorus, nitrogen and other elements.

Other boundaries that we are currently staying within, but not by much, involve how much we are acidifying oceans, using freshwater, loading the atmosphere with microscopic particles, and introducing other novel entities into nature, like plastics and nuclear wastes.  One area where we are moving in the right direction is in restoring the thickness of the ozone layer that protects us against dangerous radiation.

Technological breakthroughs–especially in clean energy–are helping. But we also need to change our behavior more rapidly, in order to apply known solutions on a large enough scale.

Continued