The cult classic, Blade Runner, was based on a novel, “Do Robots Dream of Electric Sheep”. The most human characters in the movie were the androids in revolt; individuals who looked like people but had been genetically engineered not to reproduce and to have an accelerated aging process so that they would die quickly after their productive years. The robots were not happy about that, and were looking for ways to reverse engineer their DNA.
Rutger Hauer and Darryl Hannah
Androids from the original movie
Yesterday, Gary Cohn, formerly with Goldman-Sachs, and more recently Donald Trump’s economic advisor resigned. Mr. Cohn had considered resignation after the president said that there were good people among the anti-Semitic, white supremacists who marched in Charlottesville, VA. Mr. Trump’s latest announcement that he was going to institute tariffs on steel and aluminum, and his intransigence in his position was apparently the last straw.
Cohn has been seen as one of the few sane people on the White House staff by Wall Street investors and international bankers. His resignation will come as a blow to those who hoped that he would be able to convince President Trump to steer clear of tariffs.
Wilbur Ross, Secretary of Commerce, made his millions (700) as the “King of Bankruptcy” restructuring companies in bankruptcy. Secretary Ross has a BA from Harvard, but seems not to know much about commerce.
Ross was, apparently, completely caught off-guard by Trump’s tariff decision. When asked about the president’s announcement he said something like, “whatever he said is what he said, and whatever he says tomorrow will be whatever he says.” Although he has tried to parrot Trump’s party line, Ross can’t seem to figure out what party he is parroting. That’s easy to understand; Ross was a Democrat until 2016.
George Will doesn’t think that Ross knows much about commerce, and he called tariffs a “sneaky tax” on consumers.
Tariffs are nothing new. In fact, tariffs were imposed by George Washington at the request of Alexander Hamilton. The effect was complicated. While the tariffs were imposed to protect nascent American businesses in the Northeast from European competition, they created disruption within the American economy. Southern planters who depended on a European market for cotton, molasses and other agricultural products lost their European market, and means of transportation to domestic markets. The money raised by Hamilton’s tariffs went to create roadways and rail to the Midwest to increase markets and further industrialization.
This economic divide only served to strengthen an idealistic divide between those who believed in a strong central government and a planned economy, like Hamilton, and those who believed in a decentralized government and a free market economy, like Thomas Jefferson.
Throughout the 1800s, depending on which party was elected to power, tariffs were reduced or increased, and the target of the tariffs changed.
By the beginning of the 20th century it was generally agreed that tariffs served no good purpose because, even if they accomplished their goal of protecting American businesses, consumers paid the price as the cost of both domestic goods went up because of lack of competition, and the cost of foreign imports went up as a result of increased prices.
Trump promised tariffs to punish China for dumping cheap steel on the U.S. market. The problem is that China is not even in the top ten countries from which we import steel. In fact the leading producer is our neighbor to the north, Canada.
Trump is putting up a straw man, claiming that unfair competition is to blame for the decline in U.S. steel production. Domestic steel producers like Nucor are recycling steel from scrap. What disappeared was production from iron ore, and those were the jobs which disappeared from Pennsylvania and Ohio.
Tariffs have a ripple effect. If I make “blivits” from steel I pay more for the steel. My customers who make machines from the blivits absorb the cost of my pricier steel. The company that buys the machines with my blivits then sell them to a customer who pays the increased price. In the short run, if the company making my blivits or the company making machines from them hired more workers those workers would experience a temporary benefit in employment and wages that disappeared once they bought a machine made from steel.
The important “if” is the one about hiring more workers. This is where we talk about the real competition to labor; American and foreign.
The degree to which computerization and robotics has destroyed jobs is debated among economists, but the fact that it has happened is not under question.
Robohub which seems to be a site discussing issues and changes within the industry takes a fairly conservative view of the change.
“We found that industrial robots increase labour productivity, total factor productivity and wages. While they don’t significantly change total hours worked, they may be a threat to low- and middle-skilled workers.”
An article from MIT Technology Review, titled, How Technology is Destroying Jobs, reviews the work and conclusions of economists at MIT. .
Professor, Erik Brynjolfsson of the MIT Sloan School of Management, and his collaborator and coauthor Andrew McAfee argue that sluggish employment is the result of 10-15 years of increasing computer technology and industrial robotics.
They see this process as an ongoing force that will transform many other processes from clerical work and retail sales, to professions like law, medicine, financial services and education. Their view is that, “rapid technological change has been destroying jobs faster than it is creating them.” In graphic form, the decoupling of productivity from employment:
Graphic Summary of "How Technology is Destroying Jobs".
Within the economist community of MIT there are differences of opinion.
“David Autor, (another) economist at MIT who has extensively studied the connections between jobs and technology, also doubts that technology could account for such an abrupt change in total employment.”
Autor calculates the impact differently and his conclusion is that a shift in the types of jobs has occurred with an increase in high paying analytical jobs – often aided by computers - and an increase in demand for low paying jobs such as restaurant workers, janitors and other service jobs that are nearly impossible to automate. What has disappeared is the middle income sector that included bookkeepers, auto workers, and other rule driven jobs that are easily automated. It is the opinion of many economists that these mid-level rule driven jobs are never coming back.
My own experience working in hospital laboratories for 35 years was that computerization and robotics made analyzers more efficient in terms of the sample of blood required, were smaller in size and more powerful in terms of the number of tests that could be done in an ever shorter period of time.
Analyzers that could run 12 tests simultaneously in 1975 were replaced by computerized machines that could run 18 at once. Those were the size of a minivan, and required their own air conditioned room to take care of the heat generated by the computer. By 2006 when I retired dozens of tests could be done on a machine the size of a desk top computer and monitor with a robotic arm that sampled not milliliters, but microliters of blood, and sent the results directly to the patient’s bedside as soon as the technologist verified and released the results. Additionally, because of computerization and selective robotic sampling, panels of tests could change from patient to patient within a run.
There were benefits of speed and reproducibility of results, but the effect on laboratory techs was stultifying.
Productivity went up while the numbers of employees and the wages of the employees were static. The advantage of speed made clinicians and patients expect instant results so that the phone rang incessantly for results. This disrupted the flow of work in such a way that an automated phone messaging machine was installed. No one was happy.
The techs asked for input from the “time and motion” people. They got it. The conclusion was that there were too many employees and they recommended cutting several positions. Employees should have known that the consultants were hired by the hospital to cut costs, not make their jobs easier.
As bad as things are in manufacturing they are also bad in the service industry. The difference is that it is difficult to outsource lab tests on sick hospitalized patients to the Far East.
Robots in industry aren’t like androids or humans; they don’t dream, take time off, get pregnant, require a lunch break, or save for retirement. Retirement for them is the scrap heap.
They don’t have the looks or personality of the Blade Runner androids, but are a greater threat.
Robots are the enemy of middle skill labor. Fighting foreign competition with tariffs is like tilting at windmills.