One the one hand, UC Davis economist Gregory Clark says that growth in the future will continue unabated. On the other hand, he claims most Americans will be left behind. I detect in the piece the pernicious Dystopian Myth mentioned in the last post. Some quotes:
No, the economic problems of the future will not be about growth but about something more nettlesome: the ineluctable increase in the number of people with no marketable skills, and technology's role not as the antidote to social conflict, but as its instigator. The battle will be over how to get the economy's winners to pay for an increasingly costly poor.
Winners compensate losers, an old standby in economic analysis. But what if w refuse to acknowledge that growth causes "losers," what then? In the long term, were buggy-whip makers net losers after the automobile was invented? I don't buy it.
I think the bigger assumption Clark is making is that demand for low-skill labor will dry up, but I would counter that an infinite demand for labor. Infinite. Now I don't know what the equilibrium price will be, but the experience of the last few thousand years suggests it will be higher than it is now. OK, here comes the dystopian myth (and Clark actually does use the word 'dystopia' in the essay!) ...
But in more recent decades, when average U.S. incomes roughly doubled, there has been little gain in the real earnings of the unskilled. And, more darkly, computer advances suggest these redoubts of human skill will sooner or later fall to machines. We may have already reached the historical peak in the earning power of low-skilled workers, and may look back on the mid-20th century as the great era of the common man.
Clark says that machines complemented workers and led to higher wages for basically all of modern history, but that trend is going to abruptly and coincidentally stop right now. Why is this pessimism so easy to believe? His rhetoric goes over the top here:
And as machines expand their domain, basic wages could easily fall so low that families cannot support themselves without public assistance.
He paints a mental picture of 1/3 of the population becoming "socially needy but economically redundant" and uses the example of France as proof that this can actually happen. Is there no sense of misplaced blame in ignoring French labor laws, the global standard for extreme protectionism?
Clark points to California as a harbinger of the U.S. situation, but frames the state's bankruptcy as hurting the "poorest children." He is skeptical that education can lift up the poor, or in his words can, "give the poorest the tools to resist the march of the machines" because most of the higher graduation rates are thanks to lower standards. Then he closes by warning that America will either become Marxist in effect if it does not confront poverty.
Weird. But maybe he's right.
Has Ricardo been discredited, and I haven't heard?
Posted by: caveat bettor | August 20, 2009 at 11:13 AM
My greatest fear is not that government will fail to solve income inequality but that government will cause it to get worse. I’m sure France had the greatest intentions in enacting labor laws which make it difficult to fire anyone but does creating an inflexible labor market make matters better or worse?
Posted by: kingstu | August 20, 2009 at 11:23 AM