Second Machine Age

March/April 2015, Volume VII, No. 1

Every so often, a new book raises a major issue that none of us can afford to ignore. The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies deserves that kind of signs of the times attention. This issue of Open Space considers the ideas in the book through the lens of issues raised at recent meetings of the World Economic Forum in Davos, Switzerland, and economic analyses published in The Economist. Some questions are also raised in line with the thought of Pope Francis about the technology-driven transformations that are now upon us.

In the past few years NGOs and the media have brought the issues of unemployment and inequality to the fore as more people experience the fallout from rapid technological innovation.

Eric Brynjolfsson and Andrew McAfee, authors of The Second Machine Age: Work, Progress, and Prosperity in a time of Brilliant Technologies (1), ask whether the Second Machine Age, no matter how brilliant at generating new modes of production, provides broad-based employment and distributes income to avoid even greater inequality.

The argument they make is straightforward. In the industrial age (the first “machine age”), humans built technologies to overcome the limitations of their muscle power. This resulted in unprecedented economic productivity and, eventually, widespread increases in income and living standards. In the last 30 years, computers and digital technology have striven to overcome human mental limitations – with significant increase in GDP and profits.

The resulting technological innovations surround us everywhere, especially in the form of digital communication – cellphones, internet, and hundreds of other sophisticated products. No one is unaware that a new era is upon us: “…Computers started diagnosing diseases, listening and speaking to us, and writing high-quality prose, while robots started scurrying around warehouses and driving cars with minimal or no guidance.”(2)

But serious problems come with this new bounty. We are already watching the benefits of this new productivity going in huge part to the rich and privileged few. And this is not by accident. Computer technology promotes unequal distribution of wealth – by favouring capital over labour, skilled labour over unskilled labour and multinational corporations and banks that are able to corner the entire global market. It all helps to shape a world where the winner takes all and number two is left far behind.

The new technology erodes human employment in favour of robots. Computers can do an estimated 47% of the jobs that presently exist – more efficiently and at less cost. What will happen to the economy when these displaced workers no longer go out and spend their incomes as consumers?

The authors are deeply preoccupied by these major concerns, but they do not favour impeding technological innovation or rethinking capitalism itself. They continue to assume that humans will find ways to accommodate technological change. They do suggest some ways to mitigate the size of the problem: for example, by adopting a negative income
tax and guaranteed minimum income.
Their basic principle is that we must encourage technology to race ahead while ensuring that as few people as possible are left behind.

The social change that Brynjolfsson and McAfee promote most confidently is to focus public education to prioritize the digital skills needed for this Second Machine Age.

They point out that the Montessori educational approach of “following your curiosity” has produced many members of our creative elite. They want managers to think in terms of teaming workers with computers rather than competing with them. Such innovations will come, they predict, more from new start-up enterprises than from huge corporations. More broadly, the authors argue for non-profit enterprises to produce social benefits and provide some jobs by, for example, working to clean up the environment.

In spite of their fundamental optimism about the longer-term social effects of unbridled technological innovation, the two professors see an indispensable role for the state and for public authority. It will be up to the state, through promoting economic growth and strategic use of the tax system, to keep people in the economy as consumers – and encouraging as many as possible to stay in the work force.

However, when all is said and done “the best solutions – probably the only real solutions – to the labour force challenges that will arise in the future will come from markets and capitalism, and from the technology-enabled creations of innovators and entrepreneurs.” [245]

The Second Machine Age was published in January 2014. In the same month, 2,500 members of the world’s economic elite attended the annual meeting of the World Economic Forum in Davos, Switzerland. They were the invited rich and influential – heads of states and corporations, bankers, economists, plus a few academics, journalists and leaders of NGOs. With organizations such as the UN, the G8 and the G20 weakened, organizers of the Davos Forum no doubt savoured their own motto “Committed to Improving the State of the World.”

The discussion at Davos in 2014 centred on the new industrial revolution based primarily on innovative technology – with endless applications including ingenious robots and 3D printers which may soon replicate houses for habitation. In the foreseeable future, the potential value of only a dozen of these new technologies was estimated to be $33 trillion.

But the haunting questions about employment and wealth distribution have to be asked, even of our present economy. Why is the economic growth from new technology not producing more jobs? The estimate for today’s global unemployment is about 200 million, which is expected to rise. This figure does not include the millions of under-employed, and the tens of millions who are unrecorded.

Why do the 85 richest people possess as much wealth as the poorer half of the world’s entire population – according to an Oxfam study shared with the Davos participants?

The participants also received a carefully drafted Global Risks 2014 Report. The risks of highest concern were the fiscal crises in key economies, structurally high unemployment and under-employment, and water crises. In the somewhat longer term, the global risks of highest impact were mostly environmental – greater frequency of extreme weather events, failure of climate mitigation and adaptation, and more widespread water crises. Other risks of high concern were global governance failure, food crises, failure of major financial institutions, and profound political and social instability.

While these threats were named at Davos, it is not clear that participants discussed them in any depth due to the usual ideological divide. There were those who were gung-ho for “creative destruction”(3) led by technological inno-vation and business enterprise, with government on the sideline, believing that successful production creates its own demand, its own consumers. Others believed that government intervention is still essential to keep economic patterns tolerable for the majority of people.

The Economist’s January 18 2014 editorial Coming to an Office Near You, was more nuanced, as were two accompanying articles. A call-out for the first article reads “The effect of today’s technology on tomorrow’s jobs will be immense – and no country is ready for it.”

The second article posits: “Previous technological innovation has always delivered more long-run employment, not less. But things change.” The authors state bluntly that many economists are not taking unemployment seriously enough – we really do have reason to worry. They see that the prosperity unleashed by the digital revolution has gone overwhelmingly to the owners of capital and that this wave of technological disruption has only started.

Citing The Second Machine Age (which claims that 47% of today’s jobs could be automated in the next two decades), they use the example of Instagram’s impact on Kodak. When the popular photo-sharing site was sold to Facebook for $1 billion in 2012, it had 30 million customers but only 13 employees. Kodak filed for bankruptcy a few months later. In its heyday, it had employed 145,000 people.

The Economist admits that the social effects of this revolution will be huge. Yet it claims that, “Shunning progress would be as futile now as the Luddites’ protests against mechanized looms were in the 1840s. As with the authors of The Second Machine Age, its solution falls back on adapting education to emphasize digital skills.

The Economist accepts that it is up to governments to ensure that anyone who works has a reasonable income and that the benefits of the technical revolution are spread sufficiently widely to keep the people’s anger under control. Nevertheless, they allow that in the future (as in the past)public anger is likely to be the force that pushes governments to act to protect the common good.

What are we to make of these views on excessive unemployment and inequality? What are we to think of the belief that tinkering with capitalism and progressive technology is probably futile while at the same time accepting that ultimately it is the government’s responsibility to find a way to keep the economy going? How do we weigh the assurance that, since technological innovations have provided jobs and increased wellbeing in the past, we can now count on a repeat performance in today’s high-tech, environmentally threatened global situation?

The authors quoted do not recognize that what is now referred to as “the first industrial revolution” took almost two centuries to achieve – and then for only half the world – while the less privileged continue to wait.

It is strange is that only at Davos were serious environmental concerns highlighted including the risk that measures to mitigate climate change and water crises might fail. Environmental concerns, if present at all, were subordinate to the hope of future economic growth and the role of government in keeping the economy going.

It is equally strange that - except for one unusual outburst at the recent Davos meeting - these authors do not place more direct social responsibility in the new era squarely on the technicians, entrepreneurs and capitalists who are reshaping the economy. It is evident that we need adapted education, but even more we need to develop new business models, new technologies and new policies to enhance our human capacities so that every person can stay economically viable in an age of automation.

An article in The International New York Times illustrates the dilemma for China. In local car manufacturing, the Ford Motor Company is quickly adopting the latest robots to save labour costs, while the Chinese public enterprises are struggling to combine robots with saving workers’ jobs.(4) In a more recent article(5), The Economist allows for a greater concern for the growing earning gap between skilled and unskilled workers and suggests that poorer developing countries may need “a new development model” since many are foregoing the manufacturing/industrial stage that provided massive employment for workers for Western development. But this suggestion did not make it into their editorial!

What would Pope Francis make of this thinking about unemployment and inequality? His approach is straightforward – how will this new era affect the poor on a global level? He says it is not his job to give a detailed analysis of contemporary reality but rather to help people read the signs of the times and to discover where justice and injustice, truth and distortions, are to be found.

He sees the problems of unemployment and inequality as “very often caused by a purely economic view of society, which seeks self-centred profit, outside the bounds of social justice.”(6)

In The Joy of the Gospel(7), we read: “Just as the commandment ‘Thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘Thou shalt not’ to an economy of exclusion and inequality. Such an economy kills. (20)

And again: “We can no longer trust in the unseen forces and the invisible hand of the market. Growth in justice requires more than economic growth …it requires decisions, mechanisms and processes specifically geared to a better distribution of income, the creation of sources of employment and an integral promotion of the poor which goes beyond a simple welfare mentality. ...The economy can no longer turn to remedies that are a new poison, such as attempting to increase profits by reducing the workforce and thereby adding to the ranks of the excluded.”(204)

Pope Francis is not a socialist as some people have labelled him. In fact, he sees government-sponsored welfare projects—though they meet certain urgent needs—as temporary measures (202). Like Pope Benedict before him, Francis is not opposed to markets and different brands of capitalism. In healthy cultural and legal circumstances, diversity of markets and enterprises can enhance not only social justice but can contribute to solidarity in our common life. Already today there are cooperatives and worker-owned businesses, which put social values before profit—even if they have a hard time surviving in current conditions. These “social enterprises” point us in the direction of thinking through economic initiatives as a way of growing the common good. Contrary to Margaret Thatcher – there are alternatives!

Pope Francis’ concern is with the creation of a true solidarity: a vivid, value-laden sense of the common good that will be present in everyone’s mind when business decisions, or public policy decisions, or church decisions are made. The dignity of each human person and the pursuit of the common good are concerns which ought to shape all economic policies (203).

For Francis, a just society guarantees “education, access to health and above all employment, for it is through creative, participatory and mutually supportive work that human beings express and enhance the dignity of their lives.” (192) Reducing people to mere ‘consumers’ to keep the economy working aims far too low to reflect the truth about human dignity. People become “left-overs” from an economic system which doesn’t employ them or feel any responsibility for their full human development.

Our time—the era of The Second Machine Age—faces the prospect of massive, stubborn unemployment, especially among youth. At the same time, we face the unprecedented and planetary urgency of the questions that circle around climate change. Who could still imagine that the old calculus about growth and profits could be a broad enough framework for our search for solutions? We need so much more than that.

We need a mighty and inter-connected flowering of philosophy, public policy, science, and entrepreneurial thinking. We need the spirituality and the poetry that can inspire new sensitivities in everyone. We need serious community, large and small. Best of all, we need faith in a Creator and Redeemer whose Spirit, given and received generously, can free, reshape and transform anyone’s habit-encrusted will and imagination.

And to this great flowering, every one of us is invited to contribute. 

Bill Ryan sj

1. Eric Brynjolfsson and Andrew McAfee. The Second Machine Age: Work, Progress and Prosperity in a Time of Brilliant Technologies, New York, New York: W.W. Norton & Co, January 2013
2. Ibid. Page 8
3. Keith Bradsher, “China is embracing auto brands from abroad.” The International New York Times, April 10 2014.
4. Ryan Avent, The Third Great Wave.” The Economist, October 4 2014
5. Pope Francis. Homily given on the Feast of St. Joseph the Worker, May 1 2015.
6. Pope Francis, Apostolic Exhortation, Evangelii Gaudium (The Joy of the Gospel)