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What's Causing the Growing Income Gap That's Gradually Undermining Our Democracy & Economy? And What Can We Do About It

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The symbiotic relationship between increasing productivity and rising wages began to dissolve in the 1970s. As of 2013, a typical production worker earned about 13% less than in 1973 (after adjusting for inflation), even as worker productivity more than doubled, over that same 40-year span. In short, wages went down as worker productivity and the cost of basics rose! But why would the cost of basics rise if worker productivity doubled?! Somewhere in the system there must be a whole lot of wasted effort, wasted production, or theft, or some combination of all of those, if this puzzle is to be explained.

Obviously too much labor was being spent on the production of superfluous goods and services and not enough was being spent on the production of basics. But why was that choice made, and by whom? Answer: It happened because there were and are great profits to be made, by the owners of capital, from the production and sale of ever increasing amounts of luxuries and the superfluous -- especially if they can keep finding clever ways to keep driving wages down at the same time.

What most people don't yet realize is that these facts and statistics represent an enormous theft from America's working class, as perpetrated by our financial elite, who regularly purchase members of congress for the purpose of continuing this ongoing and systematic theft. With a compliant congress, union activity can be minimized, the minimum wage can be kept down, programs like the CCC and WPA can be prevented from reoccurring, a reduced workweek can be prevented, and wages & educational opportunities can be minimized for most people. (As long as enough voters can be dumbed down, in 3rd-rate schools, staffed by 3rd-rate teachers, Republican TV advertising still has a chance of winning elections.)

Hard evidence of this theft

On January 2, 2010, the Washington Post reported that the first decade of the twenty-first century resulted in the creation of "no new jobs." This hasn't been true for any decade since the Great Depression; indeed there has never been a postwar decade that produced less than a 20% increase in the number of available jobs. Even the 1970s, a decade associated with stagflation and an energy crisis, generated a 27% increase in jobs, as Robert Reich points out.

The lost decade of the 2000s is especially astonishing when you consider that the US economy needs to create roughly a million jobs each year just to keep up with the automatic growth in the size of the workforce. (Noneconomics-types should understand that the 'workforce' consists of all those people who are ready and able to work, including all those currently employed.) In other words, during those first ten years of this century, there were about 10 million missing jobs that would normally have been created, but weren't, largely because advanced robots and new computer applications were doing ever more of the available work.

Because of this huge and growing amount of (real) unemployment, income inequality has soared to levels not seen since 1929. Why, exactly, did income inequality soar? It's because the more people who must compete for a limited and ever smaller number of jobs, the more that wages are driven downward by way of the increased competition for jobs -- one more example of the old law of supply and demand.

By this means, the share of profits from rising productivity increases, which went into workers' pockets back in the 1950s, . . began being retained almost entirely by business owners and investors. And, make no mistake, this is a form of theft. So, as a result of this ongoing theft, the share of overall national income going to labor [as opposed to capital(ists)], has fallen precipitously, as Reich points out, and appears to be in continuing free fall. Our Goldilocks period is over, and the American economy is moving into a new era -- the era of the steadily disappearing middle class. Meanwhile, big corporations have accumulated $2 trillion in cash that they really don't know what to do with, other than hide it offshore to avoid paying their fair share of taxes -- also using some of it to buy back shares in their companies, so as to keep their respective stock prices up.

This will be an era defined by a fundamental shift in the relationship between workers and machines

And this shift will ultimately challenge one of our most basic assumptions about technology, i.e. that machines are tools that increase the productivity (and incomes) of workers. Instead, the machines themselves are in a very real sense turning into workers, i.e. 'workers' who replace human workers. As robots and computer applications do ever more of the work, the dividing line between the capability of labor and the capability of capital is blurring as never before. Why? Because, to the extent that labor is done by machines and computer programs, this kind of capital becomes a form of labor, as it replaces ever more human labor.

All this progress is, of course, being driven by the relentless acceleration in the sophistication and power of computer&information technology. While many people are by now familiar with Moore's Law (i.e. the well-established and empirically based rule of thumb that says computing power roughly doubles every eighteen to twenty-four months), . . not everyone has fully grasped or assimilated the political-economic implications of this unprecedented, extraordinary, and exponential progress, . . which is this:

We either need a shorter workweek, OR a whole lot more employment in the public sector of our economy, so as to put to work all those folks whose jobs are gradually being replaced by robots, automation and new computer applications -- or we need some combination of the two.

So, without a whole lot more public sector employment and/or a shorter workweek (so as to redistribute the shrinking amount of work among the ever growing number of people needing decently paid work), what will happen to American jobs, incomes, and wealth over the coming decade or two?"

Reich answers by amplifying and expanding on, and driving home, the answers and explanations just provided, using examples like those that follow here. Human workers will, to an ever larger extent, be competing with, and be replaced by, a great multiplicity of things, like those that follow here, the prototypes of which we are already familiar with, all of which will be greatly improved and made more efficient and less costly as time goes on: automated tellers, computerized cashiers, automatic car washes, and robotized vending machines -- as well as personal computers linked to television screens through which tomorrow's consumers will be able to buy furniture, appliances, and all sorts of consumer electronics from their living rooms, . . ever more easily examining the merchandise from all angles, ever more easily selecting whatever color, size, special features, and price seem most appealing, and then transmitting the order instantly to warehouses, from which their selections will be shipped directly to their homes. In other words, Amazon will replace ever more department stores, shops, clerks and trips to the mall. So, too, with financial transactions, airline and hotel reservations, rental car agreements, and similar contracts, which will all be executed between consumers in their homes, and computer banks somewhere else on the globe, connected to us by satellite.

Perhaps as soon as ten years from now, Reich says, Amazon will have wiped out most of today's retail jobs, while self-driving cars, buses and trucks will eliminate the need for a great many bus drivers, truck drivers, sanitation workers, and even Uber drivers.

Even more alarming, we are now faced not just with labor-replacing technologies but with knowledge-replacing technologies. The combination of advanced sensors, voice recognition, artificial intelligence, big data, text-mining, and pattern-recognition algorithms, is beginning to generate super-smart robots capable of quickly learning human actions, and even learning from one another.

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

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