The Long Term Unemployment Problem

Humans are clever. Sometimes, they’re maybe a little too clever for their own good. Here’s a case in point:

Since Milton Friedman’s essay in the 1970’s, business schools all over the world teach that the primary function of the corporation is to maximize shareholder value. Anything else is seen as a distraction.

The result of this kind of thinking has been a greater focus on the short term, to externalize every cost possible (let someone else clean it up or deal with it), and of course, to keep all the productivity gains, rather than share them with the workers who actually make the business function in the first place.

Of course, it took some time for that line of thinking to work its way firmly into the corporate consciousness, and this chart illustrates the results of that:

wagesvsproductivity

Human workers are any given company’s biggest expense. Any corporation that finds a way to minimize the dollar value of their single biggest expense category will achieve their primary mission of maximizing shareholder value and enhance their profits. That’s good, right? (note: 60% of Fortune 500 Companies are Delaware corporations, and the notion that a corporation is primarily beholden to its shareholders is actually written into Delaware Corporate Law, and borne out by the recent Ebay v. Craigslist court case, on that very matter).

Thus, in the decades that followed this new paradigm, we saw wage stagnation, an orchestrated campaign to destroy labor unions, offshoring, right-sizing, and all manner of other buzzwords that all amount to the same thing: Squeezing the life out of the American worker (not that this phenomenon is limited to US shores by any means).

And then, there’s robotics.

Robots don’t need to take breaks. They don’t get sick. They don’t need time off or take maternity leave. They just do what they do…endlessly.

Some savvy Captains of Industry immediately jumped onto the robotics bandwagon, and replaced their expensive human workers with more cost effective robots.

Predictably, they saw their costs decrease and their profits increase.

Sure, the new advances create new job opportunities, but clearly, as the number of long term under and unemployed figures indicate, not at the same rate that jobs are destroyed. This is the main mechanism by which we’re seeing the growth of a permanent underclass, but here’s the problem with that approach:

Let’s say you own a factory making a popular consumer product…we’ll call it the Swizzbanger, because it sounds like a word Dr. Seuss would use.

You employ lots of humans, and they take part of their paychecks and go buy Swizzbangers.

One day, you decide to automate your factory. When you do, you fire 98 of your 100 employees. Sixty of them go on to get employment in other industries…about half of them part time, and about half full time. Those sixty-two (the two you keep, and the sixty re-employed) still buy swizzbangers, and honestly, the fact that your market share shrank by 40 people is such a tiny thing you don’t even feel it. It’s too small to register.

One day, while vacationing in Aruba with your fellow Captains of Industry, you regale your friends with tales of your profit maximizing exploits.

When everyone returns home, they follow your lead, and now, everybody is making lots more money. Factories are more productive than ever and profits are way up! Getting rid of those pesky human expenses was a good move. The board couldn’t be happier.

But…robots don’t buy Swizzbangers, and with each new company that fully automates, the size of your market shrinks imperceptibly. In the aggregate though, and over time, as more and more companies in more and more industries continue to automate, there are fewer and fewer people who can afford to buy Swizzbangers, because of course, the folks who aren’t working any more don’t have the income to do so, and the robots don’t care either way.

Thus, ever greater levels of automation collectively destroy the very markets they were designed to serve, because employees are not JUST a ledger expense…they’re also the customers.

But it doesn’t matter. The drive to maximize shareholder value INSISTS on this course of action, and since an individual company’s contribution to the destruction of the market is imperceptibly small, and the immediate financial gains so notable, this is the course of action that gets selected.

End result? More and more people out of work or underemployed, which is, in fact, what we’re seeing today.

Play the Planet fills the gap created by this phenomenon, because humans discarded by the profit maximizing, cost externalizing corporate system can find plenty of work in the PtP Network, in service to their fellow man. Even better, those works are compensated via trade credits that enable them to provide for their families.

There will be three basic attitudes toward PtP, broadly speaking:

1) Those who fear or mistrust it, and want nothing to do with it (this also includes people who simply don’t know about it at all)
2) Those who are underemployed, and live with a foot in both systems (the dollar economy and PtP’s companion system)
3) The long term unemployed who use PtP as their primary means of providing for themselves and their families

Understand that we absolutely will make full use of every technological trick in the book, including robotics. The difference, however, is that we are beholden to each other in service – not to maximizing profits for the board. We won’t have any shareholders…just community members.

Leave a Reply

Your email address will not be published. Required fields are marked *