Technology acceleration and new economic policies

Technological evolution and society
Paul Trehin, 2010 February 10

When dealing with social aspects of the economy it is indispensable to include the technological environment that underlies all human endeavours in our thinking. Production of goods and services, distribution of wealth and resources, relations between organisations and individuals and between individuals themselves, all are profoundly conditioned by the technology infrastructure.

While technology remained rather stable, society organisation tended to adapt to the production and exchange structures that the current technology creates. Liberal theories will attribute this equilibrium to market forces while interventionist ones will propose that such equilibrium can only be reached through state regulations.
With the acceleration of technology changes brought forward by various processes mechanisation and by automation development, in particular with the advent of information technology, neither the market dynamics nor the policies of interventionist governments can respond quickly enough to the ever changing conditions. Markets can’t reach equilibrium before a new technology crops up and policy makers are limited by their ability to understand technology evolution and predict its impact on society. As a result it is more than ever necessary to have social protection systems that can center policies back on human well being. Paraphrasing Molière “We should have economy to live, not live for economy”
But even before the “information age”, automation and mechanisation had had severe impacts in agriculture and industry. These were made possible by the generalisation of thermodynamic engines (Steam and explosion engines) availability and the development of electricity as a power resource. This technology evolution has been at the origin of several local social conflicts and contributed to the 1929 economic crisis. 
The results of technological innovation has been an ever increasing hourly productivity, at a pace that had been unknown in previous centuries and which later on was to accelerate with the advent of information technology.
“Between 1920 and 1927, productivity in American Industry rose by 40%. In manufacturing output per man-hour rose by an astounding 5.6% a year between 1919 and 1929. At the same time, more than 2.5 million jobs disappeared.” (Rifkin 1995)
Although the 1929 crisis started as a financial one, triggered by speculative investments, the deep root should be more searched in this fast technology evolution and productivity increase phenomenon.

It has been commented that the 2008-2009 crisis was of a different nature than the 1929 crisis. It seems on the contrary that a very similar technological evolution is, in very similar ways, at the origins of this crisis too…

Between 1950 and 2007 we witnessed a tremendous Increase of hourly productivity in FRANCE although, the pace slowed somewhat in the 1995 2007 period.
  CGR 1950 2007 Muliplier
Agriculture, sylviculture, pêche 6,32 32,94
Industrie ( = EB à EG) 4,89 15,17
Services principalement marchands ( = EJ à EP) 3,10 5,70
Ensemble 3,87 8,70
  Not surprisingly agriculture was hit a maximum with productivity increases leading to massive rural exodus towards cities to get manufacturing jobs.   But industrial employment too was severely hit, saved only by the need for jobs in services where in the beginning productivity wasn’t increasing much.   But that too has changed with the advent of information technologies…   So even in the service sector productivity gains are now taking their toll in job losses, except in people oriented services such as education, health, services for the elderly and people with disability and services in which technology cannot easily replace human presence.   In addition to job losses, this creates a complete qualitative shift in the employment structure.   ç Note the 1929 crisis was also preceded by a, acceleration of productivity increase.
As soon as 1964, George Friedman made the same type of comment: “The affluent society has to deal with a structural unemployment of which automation progress is one of the primary causes” (Saleron  1965) Similar phenomenon have taken place all over Europe and other OECD countries, and while Europe lead the productivity increase during the 50s and 60s the USA took again the lead in the 90s.  Nevertheless, over the past century a huge increase in labour productivity took place.  From 1820 up to 1970, part of this productivity increase resulted in a considerable weekly working hours shortening: from about 84 hours per week in 1820 to about 40 hours per week in 1970. Unfortunately from 1970 on, the average work week remained around 40 hours.
Tableau n° 1 TAUX DE CROISSANCE ANNUEL MOYEN DE PRODUCTIVITÉ HORAIRE DU TRAVAIL DANS LES PRINCIPAUX PAYS INDUSTRIALISÉS (Ensemble de l'économie en %)   Jean Fourastier, who coined the term “Les trentes glorieuses” (The magnificent thirty years :50s to early 80s) used to distinguish three economic sectors: agriculture, industry and services. He predicted the decline in agricultural employment, an increase in industrial employment until the mid fifties, followed by a decline in industrial employment and the replacement of jobs by employment in services, since at that time productivity increase in the third sector was not yet to be expected. Information technology is doing to services what mechanisation and automation did to industry.   The overall result of this evolution has been a constant decrease in the part of labour income in all OECD countries, which in turn lead to lower consumption, partly compensated by drastic interest rates reductions in several countries which resulted in dramatic financial situations as we have seen them in 2008-2009, and will keep seeing more, with personal debts reaching catastrophic levels that finally made the financial system collapse. This technology evolution is not about to stop and will have further social impacts on employment structures  as well as on social policies linked to
higher unemployment, ageing population difficulties. Vulnerable populations will be hit harder by this evolution.
    All this requires a new economic vision for Europe (and probably the world given the intricate world economy dynamics)   On the short term the idea of “job sharing” through shorter weekly hours has had some supporters? The French 35 hours week failed primarily because it was too modest. The idea of a 4 day week is one that would have more economic and human meaning, people like Michel Barnier and other personalities outside the left wing movement or the trade unions have advocated for that solution. (Quoted in Larrouturou 2009)   On the long term; the main problem will be one of graceful wealth repartition on the one side and the development of various “activities” that will contribute to overall welfare of the society at large. Note that such a new vision could very well be the only way out of the structural crisis and may have very positive impacts on the general economy. The necessary creativity involved to solve social problems may prove quite productive in general. (Stiglitz et al 2009)
Finally, it is also necessary to envision the direct impact of advanced technologies on individuals and groups of individuals. This is particularly key for people who are already partially excluded from the society by their present condition… How many more individuals feel excluded when confronted to some of the most successful artefacts of modern technologies? Social impact of advanced technologies goes far beyond the employment problem, although this remains a major one of course. “As exponential growth continues to accelerate into the first half of the twenty-first century, it will appear to explode into infinity, at least from the limited and linear perspective of contemporary humans. The progress will ultimately become so fast that it will rupture our ability to follow it. It will literally get out of our control. The illusion that we have our hand "on the plug," will be dispelled”. (Kurtzweil 2001) Of course other factors are at play in the situation, the world economy without serious regulation is but another key problem, however, that would require another specific paper on the subject, the present one only addressing technology impact on the social environment. Let me end this text by a quote whose source I can’t remember but that is relevant to my former job in technology economic forecasting: “When an economic forecaster predicts doom, the worst thing that can happen to him is that his prediction become reality” More information: La baisse tendancielle de la part salariale Michel Husson, 23 septembre 2007 http://hussonet.free.fr/parvabis.pdf En Europe, la part des revenus du travail dans le PIB a perdu 12% depuis 1975 (Quoting a EU commission report see summary bellow) http://www.contreinfo.info/article.php3?id_article=1487 La part des revenus du travail (texte extrait du rapport de la Commission EU) « La part de valeur ajoutée attribuée au travail a atteint un niveau historiquement bas en 2006. Cette tendance résulte notamment des progrès technologiques et de l’ouverture commerciale mondiale. Elle peut avoir un impact négatif sur l’équité sociale, l’efficacité économique et la stabilité macro-économique. C’est pourquoi, l’évolution vers une économie de la connaissance doit s’accompagner de politiques de l’emploi et de flexicurité, destinées en particulier aux travailleurs les moins qualifiés. » http://europa.eu/legislation_summaries/employment_and_social_policy/situation_in_europe/em0017_fr.htm

Le poids des salaires dans le PIB européen à son plus bas 26/11/2007 17:50

http://levif.rnews.be/belga/economie/78-2-27225/le-poids-des-salaires-dans-le-pib-europeen-a-son-plus-bas.html "Did you Know?" is a very clear presentation about various potential impacts of technology evolution. There is a brief history of technology changes and their societal effects as well as some questions which future technological evolution might have in store. For some history see: http://shifthappens.wikispaces.com/History+of+the+Presentation If you haven't seen this presentation I highly recommend that you take a tour: http://www.youtube.com/watch?v=4Q75KhAeqJg&feature=related   R. Kurzweil, "The Law of Accelerating Returns". KurzweilAI.net. (2001) http://www.kurzweilai.net/articles/art0134.html?printable=1

 

New Economy Needs a New Deal, Says Sociologist and Author

Source: Ithaca College   21-Jan-2009 http://www.newswise.com/articles/view/548270/?sc=dwhn Croissance: Stiglitz veut mesurer le «bien-être», Libération”, 14/09/2009 http://www.liberation.fr/economie/0101590861-stiglitz-veut-mesurer-le-bien-etre-pour-calculer-la-croissance Rapport Stiglitz : mesurer la croissance autrement, Le Figaro”, 11/09/2009 http://www.lefigaro.fr/economie/2009/09/11/04001-20090911ARTFIG00304-stiglitz-met-l-individu-au-centre-de-l-economie-.php   Bibliography: L. Salleron, "L'automation", PUF, Paris, 1965                                                   Hiltz and Turoff, "The Network Nation", Addison Wesley, 1978                                                                            H. Laborit, "Société Informationnelle, Idées pour l'autogestion", Editions du CERF, Paris, 1973                                                    A. De Beer et al, "Le travail, au XXIe Siècle. Les mutations de l’économie et de la société à l’ère des autoroutes de l’information", Dunod, Paris 1995  D. Tapscott,, "Digital Economy, Promise and Peril in the Age of Networked Intelligence", Mc Graw-Hill, N.Y.  1996 J. Rifkin, "The End of Work, the Decline of the Global Labor Force and the Dawn of the Post-Market Era", G. P. Putnam's Sons, New York 1995                                              D. Méda,  "Le travail, une valeur en voie de disparition", Flamarion, Paris 1995 P. Larrouturou, Crise, La solution interdite”, Desclée de Brouwer, Paris 2009 Y.  Lasfargue, "Techno mordus Techno  Exclus ? Vivre et travailler à l'ère du numérique", Edition d'Organisation, Paris 2000  N. Wiener, "The Human Use of Human beings, Cybernetics and society", Doubleday Anchor Books, NY 1956, Edition Française : "Cybernétique et société", Union Générale d’édition, collection "10/18", Paris, 1971 M. Ford,“The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future” , Acculant™ Publishing, 2009, ISBN-10 1-4486-5981-7 -- ISBN-13 978-1-4486-5981-4       J. Stiglitz, A. Sen, J-P Fitoussi (Auteurs), N. Sarkozy (Préface), "Richesse des nations et bien-être des individus : performances économiques et progrès social" , Odile Jacob Paris 2009 Additional references available on my website: P  Trehin, “The Move from Data Processing to Information Processing” 12-1985, Unpublished research http://trehinp.dyndns.org/prehistautistic/from_data_processing_to_informat.htm

P  Trehin, “La Nouvelle Economie, Cybermythe ou Hyper réalité ?” Unpublished research 2001

http://trehinp.dyndns.org/prehistautistic/la_nouvelle_economie.htm   P  Trehin, Tentative de Théorie Informationnelle de la valeur”, Unpublished research 2001 http://trehinp.dyndns.org/prehistautistic/tentative_de_theorie_information.htm
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