The trouble with tech is wealth destruction

By Neil Patrick

I love tech. But I hate what it is doing to jobs and wealth creation. Any voice of concern on this subject risks being shouted down as Luddite. But being branded a Luddite is not the worst thing that can happen; a whole society sleepwalking over a cliff is a far greater worry.

Robert Ludd: NOT my role model

There's a great deal of corporate and government spin about the impact of technology on jobs. If I didn’t default to the notion that cock-ups, not conspiracies, are man’s most common failing, I’d be signing up for the Loony Tunes’ New World Order Conspiracy news feeds.

At first, it was argued that technology would just enable higher quality and less costly goods. Then, when the first layoffs due to automation started happening, it was argued that only tedious and repetitive jobs would be displaced. As disruptive business models, artificial intelligence and robotics become increasingly advanced, both these defences have crumbled.

Then the really big changes started. Whole industries began to be disrupted by new tech-enabled business models. Travel agents are being disrupted by Trip Advisor and Airbnb. Cab drivers by Uber. Retailing by Amazon. Banking by PayPal. And worse, every successful disruptive business replaces a job heavy industry sector with a jobs-lite one.

The last remaining argument for tolerance of the jobs carnage created by the tech tsunami is that the Wikipedia version of history tells us technological progress is inevitable, and has only ever resulted in greater wealth and a better society. But this assertion doesn’t bear much scrutiny if you have even a basic knowledge of economic history.

The latest piece of expert group think I stumbled upon comes from none other than Deloitte. They published a paper in December 2014 entitled, ‘Technology and people: The great job-creating machine’ by Ian Stewart, Debapratim De and Alex Cole - all economists working at Deloitte; experts by most people’s definition.

An interesting footnote is that whilst the document is branded as Deloitte’s, it contains a disclaimer that the report is merely the personal views of its authors…do Deloitte’s legal team sense these views could be a bit controversial? Why would Deloitte wish to distance themselves in this way?

Anyway, the document makes the same old arguments that there is no historical situation which has shown that technology has done anything other than create more jobs and greater wealth. And by inference, anyone who argues that this time it’s different is a Luddite.

History can be an unreliable teacher. Is it really a good idea to place our faith in an argument, just because something has never happened before? That this ship is so vast and splendid it is unsinkable?

And just as a little reminder, the first industrial revolution in Britain didn’t actually create more jobs. It merely absorbed the millions of unemployed agricultural workers put out of work by Jethro Tull’s seed drill and other agricultural innovations.

When I looked at the evidence based on UK data presented by Deloitte, they helpfully show us how whilst some jobs are disappearing fast, others are growing rapidly. But looking at this data I also spotted a massively frightening detail. Here’s the table in question:

Notice anything about the nature of the jobs gained versus the ones lost?

It’s this. Almost all the new jobs are low pay and/or mostly in the public sector.

And most of the shrinking occupations are in the private sector.

By far the largest growth sector for jobs between 1992 and 2014 was nursing auxiliaries and assistants. The reason is simple and we all know that the aging population is driving this. Over this period, more than 270,000 new jobs materialised in this field. The second biggest growth sector added almost 420,000 extra jobs. Too bad then that these jobs were for educational assistants i.e. people who earn even less than teachers.

Low pay is bad enough, but public sector jobs pose an even bigger economic problem. They are paid for not by sales to domestic and overseas customers, but from taxes collected into the treasury. Public sector jobs support our society but are simply terrible as engines of economic growth. And growth is the one thing that economies worldwide are desperate to find these days.

Public sector jobs do not create economic growth and sustainable household wealth, they merely spend government (and our) money. Money taken from us and businesses in tax (unless you are Google or Amazon). It is then spent for us by the government on the things they decide we want and need. Sure some of this government spending trickles through to the private sector, but  there's a dreadfully expensive and inefficient pile of government bureaucracy acting as the middleman in this business model.

What is worse is that public sector jobs don’t make the nation richer. They are not exported. They are horribly complex to manage and operate not because the people are dumb, but because all large organisations struggle with efficiency. And more of them add to an already swollen and debt-burdened state which must borrow endlessly to sustain its spending.

You may well disagree with me. You may well trust that the experts in our governments and corporations have our best interests at heart. That the frequent cases of greed and exploitation by ruthless capitalist businesses are a more than adequate reason to reject my argument.

So in the interests of presenting a balanced view, here’s a quotation from the Deloitte report:

Change is the prerequisite for improving welfare. Until the eighteenth century the organisation of work was largely fixed and the material condition of the masses was miserable. It was the wrenching change of the industrial revolution, the application of steam power to production, urbanisation and the rise of manufacturing that brought improvements in material conditions and life expectancy for working people. Technology has transformed productivity and living standards, and, in the process, created new employment in new sectors. Machines will continue to reduce prices, democratising what was once the preserve of the affluent and furnishing the income for increased spending in new and existing areas.

Machines will take on more repetitive and laborious tasks, but seem no closer to eliminating the need for human labour than at any time in the last 150 years. It is not hard to think of pressing, unmet needs even in the rich world: the care of the elderly and the frail, lifetime education and retraining, health care, physical and mental well-being. The stock of work in the economy is not fixed; the last 200 years demonstrates that when a machine replaces a human, the result, paradoxically, is faster growth and, in time, rising employment. The work of the future is likely to be varied and have a bigger share of social interaction and empathy, thought, creativity and skill. We cannot forecast the jobs of the future, but we believe that jobs will continue to be created, enhanced and destroyed much as they have in the last 150 years.

The trouble with this opinion is that the first technological revolution merely transferred labour from the agricultural and subsistence existence of the rural poor, to the impoverished drudgery of urban manufacturing centres. The owners of capital flourished and became wealthy. Cities expanded and became wealthy. Central and local government expanded and became wealthy. Workers did not. Urban slums and squalor replaced rural shacks and poverty.

So the first industrial revolution, didn’t actually create more jobs or better standards of living for workers. However, the second industrial revolution did. This was when mass communication in the form of TV, radio and the telephone enabled the rise of truly global businesses. These businesses coupled mass production economies of scale with vast global markets.

They needed huge numbers of middle managers to support and supervise their activities. And these are today the vast global corporations that are slowly but surely being disrupted to death by thousands of niche start-ups and new business models. In the US and Europe in particular, this is why the middle class is becoming an endangered species.

The key difference between this historical perspective and the reality of today is that the monetary basis on which society is built is different. And the biggest and most critical difference is debt. The debt of businesses. The debt of citizens and governments.

A debt burdened society can only survive when it has a stable and growing income. Stable to ensure debt repayments cans always be met. And growing to help lessen the total burden of debt as a proportion of income. Just like when we take out a mortgage to buy a house, we are gambling that our future income will be stable and reliable enough to meet the repayments for the next 25 years.

But today’s incomes are less stable and secure than ever before. A cotton mill worker might have endured terrible working conditions and low pay, but at least their work was relatively secure and they were not crippled with debt. Today, the combination of housing undersupply (not helped by the debt burden of house builders) and prices inflated by overseas speculators keeps young people out of home ownership. Student loans mean young people are hobbled by debt before they even land a job.

This financial dimension is inextricably linked to the nature of the threat of technology. And it’s something that cannot be unknown to anyone with even a basic grasp of financial and economic matters. Let alone someone working at Deloitte.

Which begs the question, ‘Why might the experts want to persuade us otherwise?’

That’s a question I am not going to attempt to answer. You can call me a Luddite if you wish. That I can live with. But I really have no wish to be classed a conspiracy theorist. For now at least.


  1. Neil: You and I know that I am not a Luddite either. But I would argue on the emotional side: People need to see change as a positive step in their lives. And I would argue that, on a whole, technology has done that even with some disruptions.

    BUT... as I argued in some of my articles on the subject, it's the PACE and SCOPE of these new changes. When the mills in the UK were automated, it affected a tiny sliver of the society-at-large, and took decades. When farming became automated, again, the same thing.

    NOW? We're looking at eliminating 20%, 30%, even 50% of jobs within two decades and possibly less. There is not the capacity in the system - unlike the first two Industrial Revolutions - to absorb this massive tsunami of people needing to work.

    The second downside is that as automation (and to a lesser extent, offshoring) proceed, the profit benefits "the 1%". Now most people don't, I believe, mind that others have more than they do per se; they mind when they perceive that said differential has come unethically, and especially if they perceive that those persons have done so at the perceiver's expense.

    It's one thing for Bill Gates to have amassed enormous wealth: he created a product (DOS, and then Windows) used by untold millions and the waterfall of other products have been very useful. But when someone lays off an entire factory in favor of a few robots, people get upset.

    Up to 50% of the world, unemployed, angry, and resentful at those who are seen to have profited at their expense? This has never ended well in human history.

    1. Thank you for these thoughts David. You're right I think - the big difference here is scope and speed. For us to keep pace, employers, institutions, education and legal professionals all need to keep up. And they are losing the race...

  2. We're playing with fire here (then again, when has the human race NOT done that?). We are emotional beasts, after all. When someone is told, hammered, that tech is good-good-good but all they see are their friends, families, and communities devastated by automation-driven job losses, and the "Well, this is PROGRESS so play along, peons!" dismissals by the Elites - anger at the dismissals of the loss of their livelihood, anger at the clear dichotomy between what is promised "technology-driven fields of flowers, rainbows, and unicorns" and their gritty reality.

    Again, a recipe for disaster.