Fears that robots will take jobs are hardly new. Robot panic was a thing forty years ago, and if you expand your definition of “robot,” centuries ago. Machines have been replacing human effort since someone invented the wheel.
Robot panic ignores the fact that whole categories of jobs have been eliminated by robots in the past and yet the economy is not dripping with unemployed people. Have you ever seen an old film of women working telephone switchboards? That used to be a really big job that employed a lot of people. Basically all those jobs are gone, replaced by robots. They don’t look like robots; they look like computers, because that’s basically what a telephony or IP switch is. But it’s a robot all the same. Cisco Systems has literally put tens of thousands of people out of work. But now you can buy a telephone switch that’ll run a small business for less than a thousand bucks. That’s pretty sweet for the business and frees up a lot of money to be spent elsewhere.
One could cite examples all day. Being a domestic servant used to be a pretty common, and fairly stable, job for a very large percentage of the population; far less so today because now people have robots (washing machines, dryers, etc.) to do a lot of domestic work. The percentage of people employed in agriculture is a fraction of what it once was because of technological innovation, much of its machines, and yet people found jobs.
This is a bad argument. It’s sort of an appeal to emotion, and sort of an ad-hominem.
Certainly, it might be hard to understand the emotional impact of losing one’s job if your job is not really at risk from the same market forces. But the validity of the results of studying trade is totally unrelated to whether the studiers are at risk.
If you look back to my post originally answering Isosleepy, I pointed out the other big fallacy in trade discussions, besides the fluffy and political concept of ‘fair’. Which is the big violation of real world conditions is to assume currency values won’t be affected by what you assume about trade flows. In fact there’s no reason to suppose that ‘unfair’ or simply different policies by trading partners determine the trade balance. The trade flow in one industry, yes it might, or even a bilateral balance, but balance for trade comprehensively: no.
The reason the US has a consistent current account deficit is a surplus demand for $'s as reserves, not the fact that some countries have much lower wage levels than the US, which anyway posts deficits with plenty of countries with comparable labor and environmental standards, which tends to lead to a search for other things (‘oh their bureaucracy discriminates against imports’, etc) to try to explain it under the basically flawed assumption that foreign trade barriers are what create a trade deficit.
And anyway I said if there was an even flow, not that there is or would be. But to avoid confusion, I’ll restate: there’s no economic validity to the idea ‘unfair’ trade practices lead to a trade deficit. And the correct hierarchy of overall $ benefit, as a rule is 1) both sides practice free trade 2. we practice free trade and others don’t and 3. nobody does. A lot of political discussion incorrectly ranks it as if 1,3,2 is the rule. Only really exceptional cases could make that ordering correct, not just the fact other countries have different wage levels, labor laws and so forth. Or external moral considerations might (products of child labor etc, though that’s often way overblown in the political fray), as again might the desire to have less economic dislocation at home but in either case at the cost of lower living standards here on average.
It’s key IMO to understand that reality so that if the polity chooses lower overall efficiency to protect certain people, it focuses on the least inefficient ways to do it…which probably isn’t trade restriction, seldom would be.
Corry El,
Just because something is difficult to measure or even define, doesn’t make it irrelevant. I posit that if certain “unfair” practices can affect trade as much as a tariff can, and therefore have a place in the discussion on free trade. And while you are correct that trade imbalances affect currency valuation, this is true regardless of the source of the imbalance. Yet, unilateral tariffs are often held to be detrimental (exempting possibly cases where a nascent industry, a militarily important one or one with emotional or jingoistic appeal is protected). I argue that if this is the case, it is consistent that certain obstructionist practices should be viewed in the same way. Further, I believe that trade cannot be free unless consideration has been given to these factors.
The Niply Elder
I visit a lot of manufacturing plants. I have been told that the decision to replace a worker with an automated system has a simple rule of thumb - if the system costs less than x times the worker’s annual salary, automation will be introduced. X ranges from 1 to 2 and seems to cluster just below 1.5 . I have no cite (ugh, my post is my cite…) but this is from at least a dozen remarks in different plants over the last few years.
I have no problem believing that especially going forward, automation will affect how many and what kind of jobs are available way more than any trade consideration will.
Many who lost other jobs may be now working as Uber drivers (displacing professional taxi drivers). What will they do when driverless cars replace them again? What will *you *do if robots come for your job and also for the jobs you think you can already do or retrain for? We can’t all write novels; even if everyone has gobs of time to read them, the average Joe won’t be able to afford them (or at least enough of them to keep the human economy going). And that assumes robots can’t write novels- robots are already making inroads into journalism.
Selfishly, I think I’ll be able to do my job until I want to retire, probably for less than I’d like to be paid. I do worry about my kids, though.
There was a nice Planet Money episode about the Luddites (I’ll try to post it soon). These were guys facing the first advances in technology in cloth manufacturing. They lost their battle, and are now considered a joke (“What, you can’t figure out texting? What are you, a Luddite?”). Except they and their families endured economic dislocation for generations before they experienced the benefits of mechanization.
The most single impressive figure from the T-shirt project was the final cost breakdown, and especially how little of the cost came from overseas shipping.
Costs of the t-shirt- $12.42
overseas shipping- $0.10
Fulfillment and local (in the US) shipping was $3.05!
That just serves to demonstrate how much containerized shipping has reduced the cost of sending stuff (raw materials to finished goods) from one country to another.
Trade barriers are indeed irrelevant to the overall trade balance. As I said, they are relevant to a particular industry, as is the industry’s basic ability or inability to compete. So it’s no surprise the two things get muddled and conflated. Again I’ll repeat the question, who ever says ‘I’m fine with losing my job to competing foreign industry as long as the competition is fair’ ? Obvious answer: nobody. So it really isn’t a matter of people objectively searching for something difficult to measure or define. If an industry is being beaten by a foreign competitor it and its workers say it’s ‘unfair’, pretty much by definition, and understandably. So ‘unfairness’ has no real economic meaning separate from other reasons a foreign industry wins out over a domestic one, and by first principles no effect on the overall trade or current account balance which is by definition the difference between domestic investment and domestic savings.
And unilateral tariffs by ‘us’ (whichever country that may be but here generally assumed to be the US) are detrimental because they make us less efficient and therefore less prosperous overall, so there’s no direct analogy saying other countries’ trade barriers necessarily harm us, in the aggregate.
Once again, in political reality the system has to respond to the squeakiest wheels, in this case harm from trade that’s concentrated even though outweighed in $ terms by benefit which is more diffused. Likewise there’s an international politics game theory aspect. If country A wants to its Y industry against retaliation from country B because B says A is ‘unfairly’ favoring its X industry over B’s, B might have to stop doing that for its own domestic political reasons depending the relative clout of X and Y. But to believe that kind of thing determines the overall trade deficit, assuming free flow of capital, is fundamentally mistaken.
And it’s IMO an important misunderstanding because it leads to the idea that there is actual potential for wealth building in aggregate from restricting trade, as long as it’s caused by ‘unfairness’ somewhere else, but that’s almost never true in fact. There is potential for protecting particular people at everyone else’s expense, which is something societies often decide to do and is a value judgement. But there are often less inefficient ways to do so than trade restriction, ones which reduce prosperity less. The mirage of wealth building trade restriction, as long as it’s in response to ‘unfairness’, is therefore positively detrimental.
Can you and others who have put forward cogent arguments in favor of free trade no matter how others behave parse Milton Friedman’s comments about dumping for me?
IIRC, Friedman stated that if country B is ‘dumping’ a product (that is, selling below cost, his specific example was steel), country A should by all means buy it- it’s a bargain! I don’t recall how he says country A should cope if it finds its (steel) industry has withered away and the price goes up. Also, by this logic, a country might never ‘break’ into a new industry- surely its startup costs will make its product more expensive than that of other countries, especially in the first few years.
This disregards the makeup of the actual trade balance, which is in fact important. Specifically, if you have industry from abroad which outcompetes your domestic industries broadly enough, that balance then looks like this: raw marerials sourced from your country, value added elsewhere, finished goods sold to your country. This in turn means that not many blue collar or even white collar jobs remain, beyond logging, mining, shipping etc. This is bad enough in a truly competitive environment, but there at least the argument of survival of the fittest, or the best competitor, means that for the system of the 2 countries as a whole, it is arguably the most efficient situation. But when the competitive advantage of the foreign industries comes from unequal regulation, rules or tariffs, that is no longer the case.
When one industry moves its jobs overseas, the workers may find work in another industry for a net gain in efficiency. Overall, objections may arise if (1) unemployment rises, or (2) employed workers are getting a smaller share of the pie.
How to measure employment? What percentage of Americans 16 years or older are employed according to the Bureau of Labor Statistics (LNS12300000)? From the post-war recession until 1977, that percent almost never exceeded 58%. From 1978 until the present that percent almost never got below 58%. It soared to its record high of 64.7% in April, 2000 six years after the North American Free Trade Agreement came into force. This fact suggests that free-trade agreements increase (on balance), rather than decrease American employment.
It is true that some $20 workers are now earning $10. Where is the “lost money” going? If it were going, on balance, to foreign countries like Mexico and China, we’d expect to see a reduction in U.S. GDP. But instead Real gross domestic product per capita (St. Louis Fed A939RX0Q048SBEA) is at a record level, and has been rising steadily except for the Great Recession of 2008-2009.
So Americans are working nearly as much as ever, and producing more than ever. Their “lost earnings” are, on balance, NOT going overseas. To learn where the money IS going, try another St. Louis Fed statistic. Corporate profits after taxes have more than tripled since 2000.