Promise of capitalism

By Alex Gratzek – Originally published in The Korea Times

Today, the world is suffering from the impacts of the Third Industrial Revolution as it stands on the cusp of the so-called Fourth Industrial Revolution. The question of our lifetimes is whether the world stands ready for such a drastic transformation when the ability to digest the impact of the third is proving to be a difficult task.

The Third Industrial Revolution saw the incorporation of robots and the automation of assembly lines. The result was a steady decrease in the number of workers needed in these factory jobs. These jobs were well-paying enough to give those working them a middle-class life.

However, the percentage of workers engaged in factory work has declined steadily as robots and other labor-saving devices become more prevalent. The Fourth Industrial Revolution stands to propel this replacement of workers at an accelerating pace. In essence, this revolution will see the marriage of human and machine capabilities in the form of artificial intelligence (AI) and an accompanying surge in productivity and a diminishing demand for labor.

The Fourth Industrial Revolution will likely see the rise of autonomous forms of transportation for taxis and long-distance trucking along with the replacement of cashiers, clerks and more by robots, computers or AI. Around Seoul, it is not uncommon to find McDonald’s restaurants which allow you to place your order at kiosks, entirely bypassing the cashier. How far away can burgers or coffees made to order by robot be?

However, the loss of jobs will not be limited to simply those with lower skilled jobs. Lawyers, accountants, financial analysts, insurance underwriters and more will also have their professions threatened by AI.

In such a scenario, who stands to benefit the most? Increasingly, capitalism has found all the profits generated by companies or corporations making their way into the pockets of shareholders. In previous decades, it wasn’t uncommon for companies to have profit-sharing programs with their workers.

This is not the case anymore as rising inequality attests to. Increasingly the rich are become richer because of investments, not through labor. The replacement of people with robots and AI will only encourage this trend of widening inequality as capital holders stand to gain at the expense of labor.

The average worker, along with increasing numbers of skilled workers, will find themselves out of work. The question of the Fourth Industrial Revolution is what to do with them? Capitalism has seemingly always promised that the economic pie will eventually get big enough for everyone to have a satisfactory piece of it. However, it always seems that such a time is just around the corner.

In 1988, U.S. real GDP amounted to just over $9 trillion. Thirty years later, it had doubled to over $18 trillion. Meanwhile in Korea, 1988 saw its coming out to the world with the Seoul Olympics and soon thereafter reaching the status of a high-income country. Despite the economic growth, large numbers of people are suffering from economic anxieties such as worrying where their next meal comes from. For a true flowering of society and culture, these fears need to be allayed.

For a historical perspective, one needs to go back to medieval Europe and the Black Death which ravaged the continent in the 1300s. During that time, 30 percent to 60 percent of Europe’s population died.

This drastic reduction in Europe’s population spelled the death knell of feudalism in Western Europe. Peasants were no longer tied to the land as the shortage of workers allowed for peasants to travel in pursuit of paid wages. The resulting shortage of labor helped to curtail inequality in Europe as labor became more valuable than land itself which was owned by the aristocracy. Today the opposite holds true: the haves stand to gain even more.

The lack of labor in late medieval Europe entailed a shrinkage of cultivated land and an increase in the land devoted to livestock. The result was an increase in meat and cheese consumption and standards of living which helped to set Europe on the course to the Renaissance and the Enlightenment.

The connection between the two is that in the past, the narrowing of inequality helped the general population allowing for society to move forward. In today’s world of unfettered capitalism, the benefits of AI stand to flow to an ever-narrowing elite.

Accommodations need to be made for the people who find themselves out of jobs or forced to work reduced hours instead of fending for themselves as best they can. The rumblings of discontent that are being heard around the world presently will dwarf in comparison in the future if no accommodation is made for such an eventuality.

The decrease in inequality led to a rise in opportunities in medieval Europe for the general population. These opportunities helped propel Europe toward the creation of the scientific and industrial revolutions.

In modern times, the goal should be to ensure that the average person is able to live life free of worrying about food and shelter. The pie is big enough. Instead of individuals’ energies being focused on meeting their basic survival, they should instead be redirected to focus on areas that can allow for human creativity to flourish and for society to thrive.

Such a scenario of massive job losses to AI is not guaranteed to play out. New industries may arise in response to AI as new industries have arisen in the past as old industries died away. However, preparations should be made for such an eventuality as a lack of preparations could lead to a dystopian future.