Grasping at Luddite Straws

King Luddite has a straw in his hand

The current issue of the New York Review of Books features an article by Harvard economist Benjamin Friedman, “Brave New Capitalists’ Paradise’: The Jobs?” which is yet another reminder why we should not let economists make economic policy.

Freidman starts off by rightly pointing to the period from after WWII to the early 1970s as a golden era of low unemployment and high median income growth. He then rightly points to slower income growth over the last 20 years. His solution: less technology and lower productivity.

For Freidman has joined the ever growing neo-Luddite movement in America that mistakenly attributes our economic problems to too much technology and automation. He writes, “New technology that enhances the productivity of labor… means less labor input is needed to produce what was made before.” So far so good. But he goes on to write that “increasingly over the last quarter century, the balance [of less labor for existing goods plus more labor for new goods] indeed appears to have shifted [toward less labor].”

Why? Because “the pace of labor saving technological change has accelerated.”  Okay, let’s stop here. First, of all productivity growth rates were much higher in the post-war period to the early 1970s than they have been in the last two decades.  So clearly the pace of labor saving technological change has decelerated, not accelerated.  Second, if it had accelerated then incomes would have gone up more.   You can’t blame technology for taking away jobs and at the same time complain that productivity growth rates are too low.

Friedman then goes on to argue that even if consumer demand returns we won’t create jobs, not just because of technology, but because of globalization. But there is nothing inherent about more trade  meaning fewer jobs.  We may offshore call centers, but we export jet airplanes and software. All that trade does, especially if the US economy is competitive (more on this in a minute) is to change the types of jobs and industries – for the better.

Next up, blame immigrants. Friedman says that even for the jobs that are not offshored, low wage immigrants do them, driving down wages of Americans. But he forgets  that low wage immigrants actually spend the money the make as “janitors, gardeners and hospital orderlies” employing non-immigrant Americans in the industries the immigrants spend their money on.

At this point Friedman is simply grasping at straws trying to explain why unemployment rates are higher and income growth low.

So what is his answer? The one he clearly prefers, he acknowledges is hard to do. “Appealing as the Luddite’s motivation may be to at least some among the myriad ‘losers’ in this process, no one is going to halt the advance of technology.” Let’s pause here a second. Since when do we not take every opportunity to acknowledge that Luddites are the antithesis of progress and improvement in mankind’s condition?  Clearly not now, when neo-Ludditism is seen as being compassionate and progressive. Moreover, yes while you can’t halt the advance of technology, you can and are severely slowing it down. Every day in America pundits, so-called “pubic interest” advocates, affected industries, unions and policy makers take steps to stop innovation: whether it’s fighting against biotechnology, nanotechnology, Internet innovations, or simply automation. Technological progress has never before faced such an uphill slog in America. And one reason is economists like Friedman who give comfort to the Luddite cause.

After rejecting other solutions (restricting immigration, more education, just waiting it out, more income sharing from the wealthy to the poor and the working to the non-working) as unworkable politically, Friedman throws up his hands in desperation.

Nowhere in the article did he talk about the two most important things U.S. economic policy can do to restore widely shared, rapid growth: restoring U.S. economic competiveness and boosting  innovation and productivity. This is because conventional economists either deny that competitiveness is real and that there is anything government can do to spur innovation or simply don’t know anything about these matters. They don’t teach innovation and competitiveness in Harvard’s Ph.D economics program. Fixing America’s problems requires a national competitiveness strategy and a national productivity and innovation strategy. These are not hard to conceive of. Indeed, ITIF has written extensively on this. They are, rather, hard to get support for, first and foremost because economics knows little about either subject.

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About the author

Dr. Robert D. Atkinson is one of the country’s foremost thinkers on innovation economics. With has an extensive background in technology policy, he has conducted ground-breaking research projects on technology and innovation, is a valued adviser to state and national policy makers, and a popular speaker on innovation policy nationally and internationally. He is the author of "Innovation Economics: The Race for Global Advantage" (Yale, forthcoming) and "The Past and Future of America’s Economy: Long Waves of Innovation That Power Cycles of Growth" (Edward Elgar, 2005). Before coming to ITIF, Atkinson was Vice President of the Progressive Policy Institute and Director of PPI’s Technology & New Economy Project. Ars Technica listed Atkinson as one of 2009’s Tech Policy People to Watch. He has testified before a number of committees in Congress and has appeared in various media outlets including CNN, Fox News, MSNBC, NPR, and NBC Nightly News. He received his Ph.D. in City and Regional Planning from the University of North Carolina at Chapel Hill in 1989.
  • http://www.perelman.net/ Lewis J. Perelman

    Friedman’s assessment may well be flawed. But Atkinson’s critique is too.

    Consider: “First, of all productivity growth rates were much higher in the post-war period to the early 1970s than they have been in the last two decades. So clearly the pace of labor saving technological change has decelerated, not accelerated. Second, if it had accelerated then incomes would have gone up more. You can’t blame technology for taking away jobs and at the same time complain that productivity growth rates are too low.”

    First, the economic conditions immediately following WWII are hardly a guide to the present or future. Urgent wartime mobilization drove rapid technical innovations and immense expansion of productive capacity that were then available to be absorbed in the civilian economy afterwards. Nominal US labor productivity grew during the early post-war years in part because of several unique factors: Women workers were ‘de-mobilized’; low birthrates during the Depression years yielded a relatively smaller working-age cohort; and the US had virtually no competition in global markets because of the broad destruction of other industrial countries and immense export demand for reconstruction. This is not a formula that can or should be replicated.

    Second, incomes have risen significantly — for the technical and financial elite at the top of the income scale. Increased productivity also has permitted corporate profits to grow even as unemployment and median incomes have stagnated. The result has been increasing inequality in the distribution of income and wealth (and not just in the US but elsewhere as well). See: http://j.mp/1aKqh9p

    Generic innovation is no panacea. Dismissing all critics of innovation as Luddites is no more useful than being one. Some innovations enhance the quality of life; others may undermine it. And the same innovation may be used for either constructive or destructive purposes. See: http://j.mp/1aKpGEG

  • Richard J. Garfunkel

    Another issue that is constantly ignored by many self-appointed pundits and pseudo-economic theorists is the fact that the job market has grown dramatically in the last 70 years and it now includes a majority of working women, which never existed in the early years after 1945. If half the women in the workforce were at home playing canasta or minding their children or going to matinees, there would be an incredible shortage of workers. But, women don’t want to be at home, are independent because of the pill, have developed great skills because of Title 9 and frankly don’t want to be slaves of their husbands nor the home. In fact, they want to work and they have a right to.

    In the post WWII period, there was great fear that the conditions of the late Depression would return. Millions of workers were hired and trained in CCC camps and with the assistance of the WPA and the large projects of the PWA, they became the backbone of the merging US Armed Forces which helped defeat Nazism in Europe and defeated Japanese aggression in the Pacific. With demobilization coming this fear was not unwarranted. The establishment of GI Bill enabled these men and some women to not flood the work force, attain new educational and work skills in a myriad of fields and later served to man the work force that would supply the pent up 16 year demand for housing, five year demand for cars and multi-year demand for consumer goods.

    Today, the need for hundreds of actuaries, along with other paper-pushing functionaries to be housed in skyscraper floors in Manhattan has ended. The computer did in the typewriter and scores of other age old tools.

    The problem therefore is facing a potential world without age old needs which require a person. We are finding out that space travel hardly needs humans, at least at this period of time. What happens when women do no need men?

    Dr. Perelman’s end game analysis is spot on. No period is exactly like anyone in the past. Conditions change, new realities emerge, and in the words of the late historian Arthur Schlesinger Jr, “America is a different country every generation.” Our hegemony regarding the post WWII world has basically ended. The peace dividend allows and fosters world-wide competition for ideas and innovation. All one has to do is look at our athletic teams and their fall from domination. We no longer dominate track and field or basketball which we owned. We cannot develop tennis champions, though we have more courts than the whole world combined. Even our hegemony in swimming and golf, which are nurtured in our country clubs and fabulous high school and college facilities , has waned a bit.

    Our baseball teams are dominated by Latinos, supplemented by Asians and are no longer the dominating province of white Eurocentrics. In fact, basketball and football are almost completely dominated by African-Americans, which represent no more than 11-12% of our population. What happened to all the white Eurocentrics that play sports in schools? How come they can’t compete with minorities?

    That reality should be wake-up call to all the neo-conservatives who worship at the alter of American Exceptionalism. After the last baby-boomers, who were born in 1964, are gone, America will be a lot different, the population will be a lot lower, immigration, illegal or not may still be a political issue, but for sure golden ages of America in the post Civil War, WWI and WWII and Cold War eras will be long forgotten.

    Richard J. Garfunkel
    former host of The Advocates
    http://www.advocates-wvox.com