Monday, 18 June 2012

Cheap labor is not an endless commodity.

In a recent reply to a post of mine, an anonymous commenter has managed to take the evils of trade”argument and stated that “Cheap labour is not an endless comidity”.

We will forget the spelling as I also make egregious errors here when talking passionately.

What we should look at are the facts of the reply. I will start at the end and work my way though in reverse.

First, we have the notion that “Cheap labor is not an endless commodity”. How far from the truth this is. It is the classical Malthusian argument. It is one of pessimism and not of optimism. We as humans cannot maintain growth and will fail as the population explodes as would a population of rabbits. The difference and distinction being that we can control our destiny and nature cannot being lost of those proposing this. Even Malthus himself abandoned this line of thought. A shame it still haunts us today.

So, let us address this supposition in full. We will investigate the touted claim that labor must inevitably rise in cost.

The death of manufacturing

FANUC Corporation has been running “light’s out” manufacturing plants since 2001.

Nike has plans for some of these. In fact, the future is one of automation. With 3d printing technologies advancing at an increasing pace, it is not too long before we see the vast majority of manufacturing move to a design phase. Many objects we see now will become an online purchase within the next decade. In 20 years, there will be little that is not automated.

This means, if you have little to offer other than your brawn, then you are not even in the position of the fabled John Henry. In this story, John Henry managed to beat the machine (in principle), just, but died at the end from the exertion.

The trouble with this is that John gave more than his all and died. The machine continued. More, the next generation of machine would have been faster and thus John died for nothing as the next generation would have beaten him outright. The truth is that manufacturing is the same as the machine that John Henry opposed. It is one that will come to replace any role we have in physical labor.

When we can select an item (and there are even clothing items now being printed online) and have it as we wish, with a better quality than even the best bespoke, then there remains little place for human labor other than the intellect

So, as the cost of systems decreases exponentially, the growth in population is lower than the growth in capacity. The Malthusian fallacy is not justified. We can create more and faster and cheaper.

So, the reality is that cheap labor is sustainable for at least as long as any of us can forecast and that goes well into the next century. More, it will become less and less expensive as technology also decreases in cost and rises in power. If you are in manufacturing, it is time to start re-skilling.

Providing more for the downtrodden

The argument , “A civilisation is measured by its ability to protect the vulnerable and sooner all later every developing nation comes to this same conclusion” is always interesting.

Other than the fallacy that all nations come to this conclusion (which is not supported in fact), what we neglect is that it is the rise of technology that has created a world of far more than we could have imagined only a century hence.

We look to the past with rose colored glasses and do not see the reality of the poverty that we have removed. The world a century ago was one that was bathed in poverty to a scale we cannot imagine. That of the 1700’s, well that was a world that mired even the “middle-class” rich to a standard that the majority of the poor in Africa today would find abhorrent.

The past was not one of plenty. It was desperate, hard and dirty.

Does capitalism pollute more

Please, I really wish people would actually open their minds and stop thinking that rhetoric from a few with politically engendered motives is a scientific answer to anything.

The statement, “What happens when the excesses of technology and free trade have polluted the seas to such an extent that fish are no longer of nourishment?”

First, it is technology that has enabled us to pollute less. It is technology that has moved us from using whale oil as a source of lighting to LED lamps. Each jump in technology has become less polluting, not more.

The Roman’s deforested most of Europe. In coking steel, they cleared vast stretches of that continent. Much of the forest returned later, but it was removed for an earlier technology

We have more free and accessible oil reserves now than we did in the 1970’s and we produce far less pollution though we use more.

Maybe we should return to the Soviet ideal, help a few, harm many?

Ostrom showed that localized free decision making can actually have better results than a Hobbesian state based model. This is of course backed by the evidence with the failures in the many controlled economies (such as the variety of Russian attempts, China, and other socialist regimes).


Then there is the cry of despair from those without the understanding of what economics really measures, “Economic decisions should not just be computed using algorithms with money as the only factor.”

Taking what you see as a measure is inadequate, the world is large and one’s choices never suit another completely. A market allows us to choose. It is a form of freedom and at the end of the day, the alternative is a selection (as we saw in socialism and still do now) of a set of choices that nobody wants.

The value of agriculture

We should relearn to value the fundamentals- agriculture and manufacturing of essentials being among these and not just place monetary significance on the sea sharks.”

Again, manufacturing is a dying industry, we cling too fast to that we wish to maintain in a world of change. The fact is, the world will change whether we like it or not. Economics means that we have more with each advance than less, it means we spend less for the same thing and those luxuries that we could not have imagined as a Prince in a world two centuries hence have become the staples of the poor today.

It is technology that allows us to correct the mistakes of a less advanced culture of the past. It was the drive for lamp oil and not food that has driven the whales to near extinction, it will be technology that can save them as the few remaining whale fleets are rightly tracked and hounded.

Economic value has a significance. It is when the scales are tilted though government intervention that troubles occur. When food is subsidized, we buy more of that which is provided at a lowered cost.

When something becomes scarce, the cost naturally increases. It is intervention, especially that of socialist government that distorts this process.

If we placed the real cost of marketing goods to the consumer and stopped allowing tariffs and subsidies, we would find more and better controls, not as this line of thought proposes less. 

To conclude

It is technology that has reduced disease allowing us to embrace and love our children in a manner that could not have been imagined two centuries hence when families had 18 children so 3-4 would survive to have their own families. Where disease would kill many before their 40th birthday. Where a small cut could be an entry point for a bacterial infection that claimed many through blood poisoning.

It is technology that allows us to obtain more and better food stuffs from the same plot of land, to have it to market sooner, to have fresh produce year around.

It is technology that keeps the elderly alive longer than we could have imagined 50 years ago.

It is technology that allows us to determine what we are doing and to repair it, something our forbearers would not have even considered.

What we need is for people to think more. This requires more education, more awareness and more thought. In time, there will be no manufacturing jobs, but this will also come with cheaper labor.  What will be of value is thought.

How about we start showing the value of thinking things though and start learning now. It is really all we can offer in a future world and all we will have of value

1 comment:

Craig Wright said...

I have made the argument in response to a comment today that automation expands the division of labour, increases the number of jobs and wealth over the long term.

On balance, the alternatives are without technology and automation are far worse.

Technology is simply a form of leverage. It is a means and not an end and it remains to people to solve our issues. Technology CAN make social problems more solvable. That stated, it remains up to PEOPLE to solve their own problems.

The character of automation reflects the character of the underlying society.

It is not technology that is the source of our ills, but ourselves. How we use technology matters.