Why progress always ‘puts people out of work’

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Dr. John Psarouthakis, Executive Editor of www.BusinessThinker.com, Founder and former CEO, JP Industries, Inc., a Fortune 500 industrial corporation, Adjunct Professor(ret.), Ross School of Business, University of Michigan.


Let’s refine our definition of “the employment problem” by understanding that the biggest, most labor-intensive companies—the kind that absorbed all those farm laborers and created the 20th-Century middle-class—were inevitably destined to become not “centers of employment,” but centers of unemployment.

Here we begin by recounting my Grand Rapids speech and go on to explain the Vector One and Vector Two phenomenon, the entire phenomenon of ever-more-efficient companies and organizations (or entire sectors, like our friends the farmers) becoming smaller and smaller in terms of employment. Meanwhile, new technologies and new products and new market forces breed “job creation” elsewhere in the economy. A company or even an entire sector must do things better and more efficiently, or die. They eventually will die anyway unless they reinvent themselves as producers of new goods and services rather than inevitably obsolete goods and services.

Government-dominated economies in the developed world are laden with examples of turgid industries that, because of nationalization or semi-nationalization, cannot change fast enough, or even in the right direction. We should respect the craft of the harness maker, and the hard work of the harness salesman, but we need to get aboard conveyances that will carry us best through a new century (or, more likely in today’s fast-changing world, the next decade).

The scary (and therefore widely ignored) question about today’s change-driven “joblessness” is this: Will the new, automated, computer-driven, global economy generate American livelihoods at a level we used to regard as “full employment”—even if perfectly executed? It’s an honest question. And the honest answer, obviously, is “no, it won’t.” At least not if we keep defining “job” the way we defined it in the 20th Century. You might be surprised to hear a free-market guy answer the question that way. You shouldn’t be. As machines and robots and software systems become more and more able to do work humans used to do, and do it more efficiently, it is clearly impossible to imagine every American picking up a lunch bucket and “heading off to work.” It is an absolute certainty that, unlike the transition away from farm labor to urban factories, middle-class employment for the unskilled is becoming more and more of a pipedream rather than a reality. This is not a temporary business cycle, and it is irreversible. Any solution must acknowledge that fact.

What this free-market guy wants to tell you is that when we emerge on the other side of these troubles, America must still be a free-market society. Otherwise we will not be, at our core, anything resembling the innovative, free, aspiring people that has always, well, defined us. At the end of these articles you’ll find me agreeing that our economic engine needs some fine-tuning. You might even view my thoughts as radical. But first, let’s keep wrapping our arms around the nature of our difficulties.

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