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March 7, 2004 - The Sky is Falling! The Sky is Falling!

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Yep, this below seems bad news for anyone who thinks we can do something about the outsourcing of American jobs to other parts of the world.  They will lose their jobs too. 

See Return of a conundrum: As technology devours jobs at an increasing rate, the conflict at the heart of the market economy is becoming irreconcilable
Jeremy Rifkin, The Guardian UK, Tuesday March 2, 2004

And who is this fellow?  Jeremy Rifkin is the author of The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era.  Geez!  And he is president of the Foundation on Economic Trends in Washington. 

What’s his point? 


We are losing jobs all over the world.  It has reached crisis proportions.  In 1995, 800 million people were unemployed or underemployed.  Today, more than a billion fall into one of these categories. 

Even in America and Europe, millions of workers find themselves under- employed or without jobs and with little hope of obtaining full-time employment. 

… Where have all the factory jobs gone?  It has become fashionable, of late, to blame the high unemployment on companies relocating their production facilities to China.  It is true that China is producing and exporting a far greater percentage of manufacturing goods, but a new study by Alliance Capital Management has found that manufacturing jobs are being eliminated even faster in China than in any other country.  Between 1995 and 2002, China lost more than 15m factory jobs, 15% of its total manufacturing workforce. 

There's more bad news.  According to Alliance Capital, 31m manufacturing jobs were eliminated between 1995 and 2002 in the world's 20 largest economies.  Manufacturing employment has declined every year in the past seven years and in every region of the world.  The employment decline occurred during a period when global industrial production rose by more than 30%. 

If the current rate of decline continues - and it is more than likely to accelerate - manufacturing employment will dwindle from the current 164m jobs to just a few million by 2040, virtually ending the era of mass factory labour.


Oh.  That!

Well that’s technology for you.  Making things in factories with people, not computer driven machines, is so, so retro.  It had to happen. 

But then Rifkin says that everyone else’s job will eventually disappear too, as the white-collar and services industries are experiencing similar job losses – because, after all, intelligent technologies will replace more and more workers.  Indeed he is right - banking, insurance, and the wholesale and retail sectors are all introducing “smart technologies”  into every aspect of their business operations, and this is, indeed, quickly eliminating support personnel in the process.  Rifkin points out that the US internet banking company Netbank has $2.4 billion in deposits and, while a typical bank that size employs 2,000 people, Netbank runs its entire operation with just 180 employees.  And I guess they work hard.  Or their systems do. 

And all those call centers that have moved offshore?  All those American jobs gone?  This “pales in significance compared with jobs lost every day to voice recognition technology.  Consider the US phone company Sprint, which has been steadily replacing human operators with this technology.  In the year 2002, Sprint's productivity jumped 15% and revenue increased by 4.3%, while the company reduced its payroll by 11,500.” 

Well, this increases productivity, and profits, and reliability for the consumer – and makes shareholder value jump.  Isn’t that of more importance than the 11,500 losers in the transformation? 

You see, here’s the point:


Economists have long argued that productivity allows firms to produce more goods and services at cheaper costs.  Cheaper goods and services, in turn, stimulate demand.  The increase in demand leads to more production and services and greater productivity, which, in turn, increases demand even more, in a never-ending cycle.  So even if technological innovations throw some people out of work in the short term, the spike in demand for the cheaper products and services will assure additional hiring down the line to meet expanded production runs. 


Cool.  It all works out. 

The problem, Rifkin is claiming, is that this theory appears to be no longer applicable. 

Why?  He cites the US steel industry as typical of the transition taking place. 


In the past 20 years, steel production rose from 75m tonnes to 102m tonnes.  In the same period, from 1982 to 2002, the number of steelworkers in the US declined from 289,000 to 74,000.  "Even if manufacturing holds on to its share of GDP,”  says University of Michigan economist Donald Grimes, "we are likely to continue to lose jobs because of productivity growth.”  He laments that there is little we can do about it.  "It's like fighting a huge headwind.” 


Well, the problem is pretty obvious. 

If giant and widespread advances in productivity can replace more and more human labor, resulting in more workers being let go from the workforce, where will the consumer demand come from to buy all the potential new products and services?  Well, yes.  Rifkin says we are being forced to face up to “an inherent contradiction at the heart of our market economy” that has been present since the very beginning, but is only now becoming irreconcilable. 

Yep, you get your greatly increased productivity… and more workers are marginalized into part-time employment or just fired.  And those who remain get paid less, because the flooded labor market makes each of them quite replaceable by someone less greedy for salary and benefits – someone out of work and desperate.  So what do you get?  You get a shrinking workforce - and those with jobs with less income - and thus reduced consumer demand - and then...?  You get economy unable to grow.  QED. 

Rifkin claims that this is the “new structural reality that government and business leaders and so many economists are reluctant to acknowledge.” 

And he offers no solutions.  A problem without a solution?  Perhaps so. 
It seems to me this puts unions, or even individual workers, in an awkward position.  What can they demand these days?  A raise?  That’s a joke with ten unemployed Americans with their noses pressed to the window willing to work for a lot less – and a thousand good workers are available for even less in the Far East.  Get real! And who can demand healthcare coverage or any other benefits?  What would be the point is even asking? 

And as for the Christian conservative Republican view that those out of work are out of work because God does not favor them or their values or their attitude… well, that may be so, but it would be nice if these losers who God has abandoned had at least a little cash to buy goods and services to create some demand for goods and services.  Oh well. 

We face, perhaps, a zero sum game here.  The number jobs of any sort is becoming more and more limited, worldwide, and thus the number of people with money to buy anything much will similarly shrink.  Will we each fight tooth and claw in some sort of worldwide game – musical chairs?  – king of the mountain?  – to be one of the few left with a real job and enough money for food and shelter, accepting what we must? 
Well, perhaps that's the way it has always been, really. 

But this is what Rifkin is explaining.  The problem was always implicit in the market system.  We should have seen it coming. 

There will be no job growth much from here on out, in North America, or anywhere else.  Such is the situation. 

Thomas Hobbes meets Karl Marx, I guess. 


Copyright 2003, 2004, 2005, 2006 - Alan M. Pavlik
The inclusion of any text from others is quotation
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