The fight against the machine

Dr Patrick Carvalho
National Business Review
20 September, 2019

Artificial intelligence will soon steal all our jobs, subjecting humans to the whims of a small and privileged capital-owner elite. At least, that is a recurring conspiracy in apocalyptical sci-fi movies or in the minds of modern luddites.

Fortunately, there is little evidence to support that plot in real life, the draft report of the Productivity Commission’s inquiry into technological change and the future of work released last week says.

For New Zealand, in particular, the inquiry asserts the “problem is not that there is too much technological change and adoption, there is too little.” If anything, “New Zealand needs to embrace technology, not treat it as a threat.”

Technological progress is largely responsible for the dramatic growth in wellbeing over the past 250 years. And there is no reason to believe the opposite would happen in the near future.

Ban it, burn it, stop it!

The plot against technological innovation is not novel. In the late 1500s, Queen Elizabeth I (in)famously refused to issue a patent to William Lee’s stocking frame knitting machine for its potential impact on manual labour.

The Queen allegedly told the inventor, “Consider thou what the invention could do to my poor subjects. It would assuredly bring to them ruin by depriving them of employment, thus making them beggars.”

Undeterred, Lee moved to France where he was granted the patent that would change forever, and for the better, the knitting industry.

The episode provides two important lessons. First, it is hard – nigh impossible – to stop technological progress by decree. Once the genie is out of the bottle, no ruler has the power to put it back.

Second, despite the legitimate concerns about the immediate effect of new technology on labour, innovative tools ultimately benefit the productivity and income of themselves. (Lee’s knitting machine eventually became a celebrated symbol on the coat of arms of London’s Worshipful Company of Framework Knitters.)

Lee’s story is hardly an isolated episode in the fight against the machine. In 19th century England, for instance, the Luddite movement burned mills and factory equipment in protest against the “fraudulent and deceitful” use of machinery to the detriment of workers.

In New Zealand, the Margarine Act of 1895 tried in vain to block competition to the local production and sale of butter. Even cars were banned in the early 1900s in favour of horses in parts of South Island, as motor vehicles were deemed “one of the noisiest and most objectionable [??] that has ever been invented.”

More recently, reactionary forces opposing technological innovation might exert their wrath against ridesharing services and chatbots – or even against self-checkout machines that “come at the expense of valuable everyday human contact,” as noted in a formal proposal by a cross-party group of British MPs earlier this year.

Taking the blue pill

In the 1999 blockbuster movie, The Matrix, the hero chooses to take the red pill absorbing the harsh knowledge about a dystopic world where machines have turned against their creators. Outside the Hollywood narrative, however, we would be better off biting the blue pill, leaving us in ignorance, instead.

Automation, from the early Industrial Revolution to the latest artificial intelligence, has given us healthier, longer and richer lives. If history is our guide, every job destruction has led to a cornucopia of new careers and employment growth.

Research shows, for instance, that despite automating 98% of the labour needed to produce a yard of cloth, advancements in weaving technology during the Industrial Revolution soon resulted in net job growth – and higher wages – as more skilled jobs were filled.

Similarly, a recent study on the impact of routine-replacing technology in 27 European countries from 1999 to 2010 shows every job displaced by automation was matched by more than two new jobs created elsewhere “through reductions in the costs of goods and services and the resulting growth in disposable incomes.”

So, for all the sensational headlines about negative labour-market effects of automation, they have time and again failed to materialise in the data. For one, jobs tend to be redesigned rather than replaced by technology.

As occupations, skills and jobs disappear, new ones emerge: professional drivers and retail salespeople might one day lose their jobs to autonomous vehicles and online shopping but a plethora of until-recently unimaginable job positions are sure to open in the process (for example, the new millennial jobs popping up in recent years: ‘influencer,’ ‘happiness manager,’ ‘data storyteller,’ ‘life coach,’ ‘personal stylist guru’).

And here is where good policy can make a real, positive difference.

Time to prepare

As the saying goes, if you can’t beat them, join them. Attempts to thwart technological advancements for fear of its disruptive effects have generally been futile at best and disastrous at worst.

The Productivity Commission rightly asserts “protectionist policies [against technology innovations] delay rather than eliminate adjustment costs. Such policies create additional costs due to investment misallocation, placing an even higher burden on the generation in which adjustment occurs.”

A better alternative is to embrace technology as the single most effective way to lift workers’ productivity, and thus attain higher living standards, while supporting those adversely affected by disruptive innovation. That means, for example, reducing policy uncertainty toward firms’ innovation investments as well as boosting measures to upskill displaced workers.

As the Productivity Commission notes, it is counterproductive for New Zealand to have by far the most restrictive foreign direct investment regime among OECD countries.

Similarly, fixing our nonsensical housing supply regulations would improve labour market access and reduce rental costs for lower-income workers, who might be at most risk of being displaced by automation.

The latest data from the Ministry of Social Development tells us almost 40% of our poorest renting households are now spending more than 50% of their income on housing costs. That leaves them little room to invest in the human capital necessary to thrive in a more technological, and thus more productive, labour market.

The commission’s draft report on technological change and the future of work concludes by noting that if we are to fix our low labour productivity malaise, we should embrace technology, not fight it.

So, for those interested in sci-fi plots, Isaac Asimov has a refreshing message: “in a properly automated and educated world, then, machines may prove to be the true humanising influence.”

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