NEW TECHNOLOGIES AND SOLUTIONS TO THE ARTIFICIAL DEADLOCKS OF THE WORLD AND EUROPEAN ECONOMY
NEW TECHNOLOGIES AND SOLUTIONS
TO THE ARTIFICIAL DEADLOCKS OF THE WORLD AND EUROPEAN ECONOMY
By Maria Negreponti Delivanis
Plan:
Introduction
Ι. Technical progress
in the post-industrial stage
Α. Characteristics of the post-industrial stage of development
a) Unemployment
β) Distribution inequalities
γ) The quintessence of technical progress in the post-industrial stage
Β. The new robotic or
digital stage
ΙΙ. Dealing with the
problems of the post-industrial stage
Conclusions
Modernisation, Development and Innovation of
Economic Systems. Problems, Strategies, Structural Changes
Moscow Russian Federation
30-31 October 2014
Introduction
In
my opinion, the main and contemporary question raised in the present Moscow conference is whether innovations and / or new technologies will be able to give a satisfactory solution to the
sharp, long-lasting and worsening
problems of the world economy, the EU
economy, and specifically Russia Russia
Almost all of the world economies are facing difficulties
as a result of the crisis of 2007 which is ongoing, as well as due to the instability caused by
changes occurring in the capitalist system, as it moves to
a later stage of its
development. The EU, on one hand,
appears heavily burdened due to
the fanaticism with
which it has adopted the neoliberal policies. On the other hand,
a number of emerging economies, led by China
Regarding the creation of new
technologies, the U.S. are still the
leaders, followed by China, Germany,
Great Britain, Japan, Russia, India and France. The stagnation prevailing in the global
economy, which already
carries the risk of
deflation, is a
serious obstacle that hinders the faster growth of emerging and less developed
economies and regions of the
globe. The powerful weapon available to emerging
economies is none other than their economic backwardness which may be
turned into an engine of growth, provided already known technologies are
effectively implemented. This is how numerous economies have developed
in the past, managing to reduce or even
eliminate the initial development
gap with the most
advanced ones. This model is based on one hand in the theory of economic maturity of the advanced economies and, on the other hand, on the ability of
developing countries to accelerate their development rates by using already known
innovations. Based on the theory of economic maturity[2], the advanced economies are subject to lower growth rates beyond a certain critical threshold of development. In contrast, new entrants to development and already known innovations may, under
certain circumstances, achieve
high growth rates and being on a faster track in relation to mature
economies, may come level with them or even outrace them, based on the
per capita income indicator. There is a
multitude of features, announcing the
entrance of a particular economy to maturity. However, an
irrefutable sign of maturity is considered the existence of high and long-term unemployment,
which marks the impossibility for
any further enlargement of the
importance of traditional industry[3], thus initiating the phase of de-industrialization. The advent of this
stage of development of
capitalism is a consequence
of the reduction of demand for traditional industrial products, due to their relative saturation and
the increase of the percentage of idle production plants, which excludes the further application of technical progress[4]. This "maturity" of advanced economies enables those economies whose stage of
development presents a development gap compared with mature
economies to take advantage of the
already known technology and
rapidly reduce this development lag. Among the
conditions[5], under which economic
backwardness can be converted into an engine of
growth, is the existence of excess agricultural employment and self-employment,
the increase of the marginal capital
returns ratio[6] etc[7]. At this point we should definitely
mention the exceptional consequences which usually result from the transfer of surplus labor
from agriculture to the secondary
sector of production. By this, I mean a particular form
of innovation, in the sense that it provides a better and more productive use of
that portion of the rural population,
which was essentially underemployed before
this transfer. According to relevant estimations, this transfer increases
productivity per employee by
45-70%[8]. It has been supported that the fast growth rates of the small Asian tigers, during the
past decades, was not the result of
revolutionary innovations, but
simply of mobilizing key factors of production[9]. Technical progress increases
the productivity of both basic factors of production, namely labor and capital, either to the
same extent, in the case of neutral technical progress, or to a greater degree for
labor, in the case of labor-saving methods, or to a greater degree for capital, in
the case of capital saving methods. In any case, however,
it results in a reduction of the quantity of production factors necessary for
the production of one unit of output. This is known as “intensive development". It is generally accepted that, thanks to technical progress,
and provided the latter has significant effects in terms
of productivity, the economies in question may transition from recession to recovery, as well as from underdevelopment
to development.
Although there is a direct relationship between new technologies and the
volume of employment[10], the direction
of this relationship is not always clear, nor one-way.
Labor unions have a general propensity against its adoption due to the fear that this will
cause unemployment. This fear generally proves justified over time, at least for the
short period following the implementation of technical progress. However, the views
expressed on this point differ
from the classical era, which suggested that technical progress is always progressive, in the sense that it creates
more jobs than those
abolished, contrary to K.Marx who claimed that it is always regressive,
ie the number of jobs eliminated is
greater than the number of new jobs created[11]. The relevant previsions
by K.Marx proved absolutely true, even in the relatively recent period 1970-1980, where robotism caused a significant level of "technological
unemployment", due to the substitution of labor by capital in the industrial sector. Moreover,
in the current period the rapid development and
expansion of the use of robots,
seem to corroborate K.Marx’s view,
given that according to a number of serious forecasts,
47% of employment in America 7 in America
Based on
what was already argued above
about late comer economies
and regions to economic development,
the importance of new technologies is crucial,
as long as their application is the starting point of their rapid development. One should
also emphasize that, although the
adoption of technological progress is
in principle desirable, its form and characteristics are crucial in terms of the allocation of increased productivity between the two production factors and
its impact on employment.
This distribution,
with reference-even if not
absolutely rigorous-to the productivity of
the two key factors of production, was quite feasible in
the advanced economies of the past, where the dominant activity was traditional industry, or
in other words, during the stage that precedes the post-industrial stage of development,
which made its appearance in the ’70s. These economies were generally characterized by the prevalence of
incorporated technical progress,
the implementation of which was not
possible without the previous implementation of fixed capital investment. This
form of technical progress ensured constant returns despite the reduction of
marginal capital returns[15]. At this point, we should note that the general acceptance
of the assumption concerning the stability of the shares of
labor and capital in the GDP
of advanced economies, according
to the famous Cobb-Douglas production function, greatly
contributed to the solution of the prickly problem of distribution. This
function, as we know, consistently
attributes one third to capital and
two thirds to labor[16]. This traditional calculation
of labor and capital productivity
- quite satisfactory,
although heavily criticized, which simultaneously
determines the distribution of output between them, gave way to a real
chaos, with the advent of the postindustrial stage
of development, also known as intangible, or information stage. These
new conditions caused by the advent of the post-industrial
stage of development, and their impact on modern global economies, both advanced and emerging, will form the content of the first paragraph of this paper, while the second will focus
on proposing solutions to address them.
I.
Technical progress in the post-industrial stage
The structural features of the
postindustrial development stage, which we are currently witnessing, make obsolete
almost the totality of knowledge, beliefs and assumptions acquired up to the ‘70s.
In fact, an important part of the classic content of Political Economy, as
taught then and is still largely taught in the universities of the world, is no
longer able to interpret the new reality, and offer solutions to thorny
problems. We therefore need new interpretive tools, which are unfortunately not
available at present. We should also note that the contribution of technical
progress, to creating total disorganization within this new stage of
development, seems to be catalytic.
The difficulties begin with
the prevalence of unincorporated technical progress within the production pr2ocess of the postindustrial stage, contrary to built-in
technical progress, which prevailed in the previous industrial stage and mainly
contributed to increase capital productivity[17]. This is the kind of technical
progress, the implementation of which does not require previous fixed capital
investment[18], but rather appears in the form of
improved human knowledge. In contrast to built-in technical progress, which
mainly increases the productivity of capital, unincorporated technical progress
ensures increased productivity of both key factors of production, but not
necessarily at the same rate. This means that unincorporated technical progress
implies a simultaneous decrease of the Capital/Output and Labor/Output ratios[19]. The decrease of these two ratios
is self-evident, taking in the first case account of industrialization, in the
second case account of increasing unemployment worldwide. De-industrialization is
further confirmed by the drop of investment in
EU GDP[20]. The very important difference
between these two forms of technical progress, which is indeed at the root of
the difficulties of the new development stage, is the fact that unincorporated
technical progress creates qualitative and no longer quantitative productivity growth, which is very hard to
measure. We shall now proceed to analyze the main characteristics and consequences
of the postindustrial development phase and the expected impact of the emerging
robotic or digital stage.
A. The characteristics of the post-industrial stage of development, in
conjunction with the new technology, globalization, extreme neoliberalism and a
network of perverse state interventions
In this new postindustrial
stage of development, there is every reason to believe that, in time, the law
of the jungle becomes all the more prevalent, mainly in two crucial, key
sectors of the economy: the labor market and the mode of income distribution.
This is because the post-industrial economic stage was accompanied by the
post-social[21], which seems to have relinquished
all the basic values of life that made societies human, since approximately
300 years. The sole objective of this stage is profit and money. The globalized
economy, along with unbridled liberalism, has essentially deleted the moral aspect
of human nature, leading to the collapse of society and corruption. One can
only hope that such a society cannot survive for long[22]. Τhe problem is however how to overthrow it. The
banner of the post-social stage is competitiveness,
which, unlike competition, is clearly aggressive in content, towards everyone
and everything, given the fact that it is implemented by the increasing share
of exports of an economy in international trade, which is necessarily removed
from another or other economies. Therefore, it is not a model that can be
applied if all countries pursue this form of competitiveness. Moreover, this scheme is totally unsuitable for an
economic union like the EU, because it eliminates the foundations on which it
ought to be based, namely cohesion, solidarity, cooperation, high-growth, full
employment and reducing inequalities between members.
Let us now look into more detail at the individual characteristics of the postindustrial stage:
Let us now look into more detail at the individual characteristics of the postindustrial stage:
a )Unemployment
Unemployment is
constantly rising worldwide. 2013 witnessed an addition of 4 million
unemployed, raising the total number to 199.8 million[23]. It is evident that the European
economy is operating within a frame of mature capitalism, as analyzed by Marx
and Keynes, in the sense that it is suffering from insufficient effective
demand and deflationary trends that feed a constantly rising level of unemployment. Unemployment within the EU, is
up to 25.7 million, corresponding to 10.5% of the labor force in March 2014[24]. The search for the dominant causes
of this deterioration, combined with new forms of technical progress uncovers culprits
who engage in conscious choices and denies the existence of deadlocks[25], although these are constantly
mentioned by the EU officials.
The new technology of the postindustrial
development stage mainly decreases the amount of labor required to produce one
unit of output. This applies mainly to unskilled labor, which contrary to skilled
labor is unable to form a substitute for capital. Although, a sufficient time
lapse is necessary before we may draw conclusions as to the form of dominant technical
progress being applied, all indications seem to suggest that the technology of
the postindustrial stage is labor saving and concerns unskilled labor, which thus
faces a serious risk of unemployment. At
the same time, however, this new developmental stage witnesses an abundance of
capital, indicated among other factors by the low interest rates prevailing in
recent decades in the global market, which discourages one to interpret the
existence of very low wages solely on the relative abundance of labor compared
to capital. At this point, I must hasten to argue that even if the new liberal
theory of laissez-faire, laissez-passer was
faithfully applied in the workplace, the latter’s position would be infinitely
better compared to that reserved now, both in terms of the unemployment rate, as
well as in terms of income distribution. This is because there is evidence to believe
that there were conscious choices leading to interventions which caused an artificial
scarcity of capital and an overabundance of labor in relation to capital, resulting
in undesirable consequences not only socially, but also in terms of stability and
proper functioning of economies. These dangerous choices of global and European
macroeconomic policy seem to complement each other and are recycled over time
in numerous vicious circles.
The first perverse choice
refers to the principles of globalization which were introduced in full
conscience with the fateful distinction between capital and labor. This gave
the first between the two key production factors full freedom in its quest for
maximum profit, while riveting the second one, i.e. labor, to its place of
origin. The tragic consequences of this distinction were then completed thanks to
the EU's refusal to adopt an immigration law, as well as to the tolerance, and
in several cases the encouragement of uncontrolled illegal immigration, which
acts as a permanent lever for the reduction of wages and not only, as well as
to the constant shrinking of labor rights. This distinction originally set the
foundations for peaking unemployment and inequalities of distribution. The
justification for the above interventions, put forward in a rather vague
manner, is the need to achieve the greatest possible competitiveness by means
of an unlimited reduction of labor costs, which inevitably entails the
impoverishment of wage-earners[26]. This objective to intensify competitiveness
is pursued by adopting a restrictive policy-or austerity- as a permanent and no
longer transitional policy as its nature should advocate. The fallacy of this austerity
policy, when applied on a permanent basis, is that it perceives labor only as
an element of the cost of production, while ignoring that it simultaneously represents
a source of demand for products. The deadly combination of globalization,
neoliberalism, a macroeconomic policy which seeks to exclude inflation, but does not
deal with the risk of deflation and ongoing interventions in favor of capital
and against labor, especially as the tax burden is concerned, resulted in an
absolute deadlock. The global economy, especially the European economy, is unable
to overcome the second severe economic crisis of 2007-just as I predicted in
2010[27]- many of the symptoms of which are
still ongoing in 2014, spearheaded by the non-existent or very weak growth
rates.
The existence of both high and persistent unemployment leads to a lower
GDP than what could potentially be achieved, coexists with a significant amount
of poverty and encourages crime. In particular, regarding the propensity for innovation,
this is discouraged by the existence of high unemployment and low wages, as
long as high profits – or rather speculation- may still be secured in its
absence. The reduction of the labor cost has reached its limit and is already
reviving the wage level of the classical era, which simply aims to ensure the
survival of workers and their families. Naturally, at the same time, these
conditions generally reduce the propensity to invest, as a result of low
effective demand. In many of my writings I have supported that this is in fact
a deliberate maintenance of high unemployment, at least in the case of the EU,
which aims to achieve an increasingly unequal income distribution. It is,
indeed, unrealistic to argue that economic science has no means or combinations
of means for combating unemployment. From this perspective, however, high
unemployment and a rising inequality of distribution, is one and only problem,
or more correctly unemployment is nothing more than a “pseudo-problem”[28]. These options, in the post-industrial stage witnessed by humanity are
inevitably extended to the preferences of those deciding about the fate of
mankind. There is, in principle, a clear preference for economic stability-even
when it threatens to evolve into stagnation-over rapid growth, so that capital
mobility may be as safe as possible. Let us note that the preference for this
policy, which ultimately proves unable to absorb unemployment, is not
particularly dangerous in the case of already advanced or mature economies, but
shifts vertically against the possibility of emerging and developing economies
to exploit their significant growth potential.
b)Unequal Income distribution
In the post-industrial stage, the
remuneration of the two basic factors of production based on their productivity
is no longer possible, as long as the latter is qualitative and very hard or
even impossible to estimate. Their output is mainly services whose costs of
production and supply, as well as their value, is not directly linked to the
profits of the business, nor to the level of investment which created it. From
this perspective it can be argued that the post-industrial stage involves
intense speculative characteristics[29], resulting from the reversal of the stable
relations between labor and capital according to the Cobb-Douglas function. Permanent
and rising unemployment, coupled with the decline of material production to the
benefit of immaterial production, has resulted in an impossibility to estimate
the contribution of labor and capital to output, not only in the case of simple
production functions but also when taking technical progress into account.The result of this weakness is unfortunately well known and is the uncontrollable invasion of the laws of the jungle, where the strong oppress and devour the weakest. In particular, in the field of income distribution, the jungle is expressed
by the crowding-out of wages by profits, at a rate nearing paroxysm, so much so
that the annual meeting at Davos, which took place in the beginning of 2014,
considered this evolution so dangerous that it decided to designate it as the
first topic for discussion. I am referring to the constant, uncontrolled and
unjustified increase in the share of profits-capital-inevitably achieved at the
expense of wages in the global and European GDP, as well as that of individual
economies. More specifically and according to IMF estimations[30], the
share of wages in the G7 economies fell by 5.8 percentage points during the
period 1983-2006, namely by 8.8 points in the EU member states[31]. Moreover, in 51 of the 73 countries of
the world, for which statistics were available, the wage
share has declined steadily over the last 20 years. And to add recent findings
on the evolution of functional distribution[32], validating the above. Accordingly, the
share of labor was, on average, 64.3% over the period 1947-2000, and two
decades before the current one dropped to 57.8%. The above results are consistent
with the fact that the productivity of workers is not projected into wages.
According to estimates for the period 1999-2007, labor productivity on the
global level increased by 30%, while real wages by only 18%[33]. The fact that productivity is not taken
into account as a measure for determining the shares of labor and capital, is
also evident in the abysmal differences prevailing among wages. In 1989, the
difference between the highest salary earned by the managers of large
companies, and the average wage of workers in the same company was 45 times[34], while in 1999 it reached 475 times
respectively[35]. The uncontrolled growth of the wages earned
by the Golden Boys[36] continues after the collapse of the new economy, in 2001, given the fact
that a 27% rise was recorded in their earnings for 2005, not related to the
price of the shares of specific companies or their performance. It is obvious that these high
earnings cannot possibly be justified by differences in worker productivity. On the contrary, they result from a jumble of speculation, corruption, lobbying,
exploitation, the weakening of labor unions and the alleged neutrality of the
state, which, however, consistently favors capital over labor. The inequalities
in the functional distribution of income are supplemented by the indeed
inconceivably high inequalities in personal income distribution recently
uncovered thanks to the monumental work of Thomas Picketty[37]. The general interpretation of these
unprecedented inequalities is the finding that the rate of capital returns in
recent decades, and especially after the ‘70s, was higher than the
corresponding rate of GDP growth. Let me add that the peaking of disparities
after 1970 and the prevalence of neoliberalism is largely due to the reduction of
progressive taxation.
Let me mention indicatively some aspects of modern and absolutely
extreme distribution inequalities, in contemporary economies: Starting with the
totally utopian situation where an absolutely equal distribution of global GDP
would prevail -which is certainly impossible-every citizen of the world would acquire
for 2011 an income equal to $ 10.000. But
reality is quite different, since out of 7 billion people representing the world
population, 1.2 billion survive in abject poverty, allocated $ 1.25 a day, while 1% of the
richest inhabitants of Earth controls 45% of global wealth, and 50% of the
poorest people in the world must share 1% of global wealth.
A parallel aspect of the
unbelievable inequalities mentioned above, may be expressed in the fact that
the 400 richest Americans are wealthier than the poorest, amounting to 150
million. The 15% poorest population segment, equal to approximately 46 million,
live in households earning less than $ 22,050 a year.
It is estimated that after the crisis,
the GDP share controlled by the global oligarchy will further increase. This unchecked
increasing wealth of the oligarchs of the world, which is naturally reflected
in the bankruptcy or impoverishment of large socio-economic groups, mainly
results from the financial sector, which was threatened with destruction and
was acquired by taxpayers.
This very dangerous situation,
however, both socially and economically, is unfortunately, the result not only
of the indifference and unwillingness of world leaders to take timely action to
avert it, but also, I believe, of a conscious decision to bring things to this
extreme point. There is actually no other way to explain the guilty tolerance
of modern governments towards tax evasion, which would have been eliminated a
long time ago if there was a real desire to do so. Let me indicatively mention
that the high-sky earnings of the Golden Boys in the U.S are taxed at just 15%
for the most part. The same refers to the indifference of modern
governments-especially European ones- towards long-term unemployment, which is the
main factor leading to the worsening income distribution.
The coup de grace, which allowed and encouraged the seizure of the increasing
productivity of labor by capital, is the decline and gradual abolition of full
employment, which gave way to new and exploitation prone forms of employment,
such as rented workers, "time
zero" workers, i.e. workers who are required to be constantly available to
the employer and laid off with no formalities[38],
at the discretion of employers, impoverished workers due to their very low
wages and various other devices, which flourish in an environment of high
unemployment. The innovations of the postindustrial stage of development
flourish in such an environment, leading to uncertain consequences and are certainly
not in a position to ensure full employment[39].
c)
The quintessence of technical progress in the postindustrial
stage
"Improved knowledge", which is
the form of innovation in the postindustrial stage, results in the reduction of
the necessary quantity of labor and capital in the modern production process,
and represents the culmination of human labor: mental labor. It is therefore
absurd and unfair that its application leads to a reduction in the share of
labor in GDP and that the overall increased productivity increases the share of
capital. Apart,
however, from the social form of this injustice, there is the purely economic
aspect, which strangles all decisive for
development and progress trends of the economy: The propensity to
consume, the propensity to save, the propensity to invest, as well as the propensity
for innovation. In a globalized economy, production, under the influence of the
extreme inequalities prevailing in it, is greater than the ability for consumption,
leading to reduced demand for commodities. This low effective demand fails to
supply productive investment, while saving is abundant and obviously higher
than investment. Profits, however, are not directed to
the uses predicted in capitalism, i.e. towards productive investment, as well
as speculative activities or even hoarding. The real economy is crowded out,
giving way to the extreme growth of the virtual economy, while the
communication between them has been interrupted long ago. Suffice it to say
that between the years 1992-2007 an increase in the size of the stock market has
been registered by 150 times[40].
Stock market
titles became the yardstick for
everything, and the
transformation of economies into casinos is almost regarded as a normal development
no longer troubling. The
permanent state of underemployment equilibrium of modern economie is considered
almost normal, provided stock market indicators are rising, while the problems of
rising unemployment and the huge inequalities in income distribution are degraded. Under these extreme conditions, how is it possible not to raise the
question as to what exactly is pursued through the frantic race to conquer
competitiveness and who are the beneficiaries? It is clear that this competitiveness is flatly directed against labor,
sucking away from it both the level of employment as well as its remuneration.
Let me remind that wage earners represent over 80% of the active population in
advanced economies..
Β. The new robotic or digital stage
Within the postindustrial stage a
newer one is emerging already, representing its evolution, which as can be
predicted, accentuates still further the economic chaos prevailing in modern
economies. At this more specific stage, the importance of both basic production
factors, labor and capital, subsides and a third factor of production[41], if one may say so, makes its
appearance. This is automation, which represents the latest form of innovation
and promises high future profits. It is no longer
predicted that these profits will benefit capital in its classic form,
or labor. Instead, a small group, realizing a series of innovations and creating
new products, new services and new business models is now emerging and imposing
itself as the beneficiary of these significant profits[42]. The model thus defined for the
future is the well known Pareto curve, in which a small number of players earns
a disproportionately large part of the profits. This third production factor,
namely innovative ideas, is less affluent than both labor and traditional
capital which it gradually replaces, somehow justifying its high share in total
productivity. Robots
have already started to replace workers, with the consequence that emerging
economies are losing their privileges resulting from low labor costs, and that
the phenomenon of business relocation which has recently alarmed the advanced
economies is thus discouraged. It is in fact estimated that China
Changes of catalytic importance are also
predicted in the wider field of education[44], where the new digital technology is
already increasingly replacing traditional teaching, within the university premises
by online teaching. The contribution of this form of instruction is accelerated
due to two main reasons. The first one is associated with the decline of the
welfare state, even in the field of education, under the pressure of an increasingly
tougher implementation of neoliberal prescriptions. The universities of the
world are forced to rely increasingly on student tuition fees, thus turning
studies into an extremely costly prospect, as state subsidies are being reduced.
The second reason is related to the new digital / robotic technical progress which
dramatically reduces the cost of studies, provides almost unlimited economies of scale, and makes education
accessible to everyone. This new technologic era is normally expected to have
long term re-distributional consequences on extreme distribution disparities. It
will also increase unemployment however, this time in the educational field, as
it is in fact estimated that in 15 years from now 50% of American universities will have gone bankrupt[45].
However, capital still remains the big winner
in this new model of recent developments, despite losing its traditional form.
The reason is that even robots and computers substituting for labor, are
capital-robotic and digital capital. Insofar as it is possible to predict the
future, a small oligarchic group of innovators will not even begin to face the
problem of sharing their profits with unskilled labor and traditional capital
which will be surviving with extreme difficulty with an income below average,
while the bearers of new ideas will be those almost exclusively rewarded.
Unskilled labor is essentially useless in this phase of capitalist development
and the usefulness of traditional/physical capital is also greatly undermined. A
few years ago there were references to a Society of two thirds and the healthy
reaction was that it should be avoided at all cost. The society, however, now
expected to prevail risks being one of one tenth, certainly representing hell
for many.
ΙΙ. Dealing with the problems of the
post-industrial stage
The need for a strong reaction of humanity,
which should not in no way endorse the economy and the society imposed by
robotism, is a matter of life or death. It is imperative to find immediate solutions
so that the new technology evolves into a blessing and not a curse for future
generations.
Although the problem here examined is a complex
and very difficult one, the solution would be easy in theory, if the political
will was present. If individualism, the lack of solidarity, the elimination of
core values and corruption, which are the consequences of the growing insecurity
characterizing modern economies, had not fully prevailed, eliminating the natural
hierarchy of specific problems, a solution would have been found. This is because unemployment is a
consequence of the absurd mode of distribution, and the latter is fueled by
unemployment. These two core problems of mature capitalism are one and only
problem, and the solution to one could lead to successful treatment for the
second.
Referring to unemployment, we have totally, overlooked the fact that
there is a successful precedent for dealing with it. Undoubtedly, in the modern economic
environment, such a proposal seems highly utopian, especially given the
reasonable, I believe, assumption that deliberate preservation of unemployment
aims at a seamless continuation of the destructive redistribution of income
from labor to capital[46]. In the
postindustrial stage of development there is unemployment because with fewer
working hours is possible to obtain the same level of output and the view that
labor requirements will further decrease in the future as the demand for new
products and services will probably double every two years according to Moore’s
law[47],
seems well founded. Meanwhile, robotism / automation will be replacing
thousands of workers. For example, in France
And, yet, the problem is not entirely new. Mutatis mutandis, a similar
problem emerged and was successfully treated after World War II, due to the
massive influx of women into the labor market. The problem of unemployment was
dealt with then in the only rational way which should be adopted in modern
times. That is, by drastically reducing the official working week by 35%, at
the time,, compared to the corresponding pre-war number of working hours.
It is clear that the major
changes in the field of labor between the end of the 20th and the
beginning of the 21st century require greater rather than lesser government
intervention, so that unemployment is no longer used as the vehicle to achieve an
ever more unequal distribution, and that the equation of the labor market to an
ever more savage jungle is curbed. Adam
Smith’s[48] theory on the division of labor is no longer
applicable in the postindustrial economy, and even less in the robotic
era, given that output is a service and incorporates high technology and
long-term education, but cannot be distinguished into internal or external[49]. Even the reference to the classical theory as
a whole, especially the part referring to the three traditional factors of
production, is no longer relevant in the postindustrial economy as labor, capital
and technical progress are intertwined in the final product which is, in
itself, a combination of material goods and services. The fact that knowledge
was the means, and not one of the means, is the hallmark of the postindustrial[50], as well as the robotics/digital
economy. Moreover, the
fact that output, in the postindustrial economy, is produced by three sectors
of production, is of only marginal importance, because it is imperative to add a fourth one, the quaternary sector. Furthermore, it is difficult if not impossible
to maintain the old hierarchy between employer and employee, capital and labor,
in the status of labor prevailing in the post-industrial stage. Precisely because this new type of labor incorporates
technical progress, in the form of education and training, without which capital
can no longer be possibly profitable. The nature of
investment is also different compared to what was considered the norm some time
ago, because a significant part of it is no longer invested in fixed capital
assets, but in the quality of the labor force, in whose education it is
invested. It is thus expected that labor will be increasingly related to success in life and that employees will
endeavor to satisfy through their labor efforts their inner self, in the first
place, and their employer in the second. The problem is obviously not to exclude
large masses from the education process, which could lead to a dualism in the
workplace: the educated / skilled workers and the unskilled. Immigration, of
course, facilitates and accelerates this dualism.
To avoid turning the 21st century into hell, we
should proceed to an immediate understanding and realisation that improved human
knowledge is inherited from the past and belongs to the whole of mankind. This
is why it is inconceivable that it is monopolized by capital / or small group
of innovators under the sole excuse of a lack of laws and rules on income
distribution, in this new development stage, now witnessed by humanity. It is
therefore imperative to attempt to achieve full employment through the drastic
reduction of working hours, as in the postwar economy. Actually, while the
average working week was approximately 70-80 hours in 1840, after World War II
and until today, the latter has been reduced to around 40 or even fewer hours.
There was full employment in both cases while the major postwar reduction of
working hours did not prevent the achievement of very rapid growth rates in the
advanced economies of that period, and thanks to them the emergence of the 30
glorious years.
A similar bold decision would be absolutely
imperative today, in order to avoid the worst. This initiative should be taken
globally, to avoid jeopardizing the few economies adopting it by reducing their
competitiveness. The working hours should be reduced to the point of restoring
the shares of labor and capital in GDP according to the Cobb-Douglas function,
which is a sine-qua-non condition for maintaining a relative macroeconomic
balance and ensuring adequate effective demand for new products / services, in
the aim of encouraging the realization and adoption of innovations.
Conclusion
It is inconceivable to refuse the application of
innovations and new technologies provided they lead to progress, stipulating
the achievement of a higher point of macroeconomic equilibrium. Because,
however, there is dramatic evidence of mass unemployment as a consequence of
innovations in the past, there is an urgent need to adopt effective measures in
the aim of minimizing the adverse effects of new technologies. Besides the
evident need to adapt new technologies to the specific circumstances of
individual economies, with an emphasis on the emerging ones, one should also
note the great difficulty or impossibility to apply new technologies in an
environment of austerity, or, even worse, deflation. This is because new
technologies are a vehicle for accelerated growth, which requires adequate
liquidity, and not only, as well as an improved / fairer income distribution, in
order to ensure sufficient demand for the products and services produced through
these new forms of technical progress. The, undated, EU austerity, not only is
not suitable for the adoption of new technologies, it
also further incites individual economies, particularly emerging ones, to choose
their independence and freedom of choice tailored to their specific needs of
macroeconomic policy, over adhering to an economic union.
The above analysis leads to the conclusion that new
technology is more important for emerging economies, which include Russia,
because it can contribute to a faster rate of development, thus closing the
development gap separating them from more advanced economies. Russia EU average- to the secondary
sector, with direct and probably spectacular effects on productivity.
The adoption of new technologies, moreover, should
be done at a moderate pace. The adoption of some form of protective measures,
so that the economy is able to exploit the new technologies gradually, and not be
crushed by them, is considered as a sine-qua-non choice of their economic
policy.
State intervention in the economy will also be of
major importance in this difficult stage of development, with the goal of
reducing inequalities caused by technical progress. In addition to the drastic
reduction of working hours, which is considered as the most important measure
to prevent the adverse effects of new technologies, the state should engage in
large-scale investments to ensure high quality education for all. It is well known that Russia Europe , the state should ensure adequate
hospitals for free medical care, set limits on privatisation, particularly concerning
utilities, and proceed to an intensification of structural changes, mainly in
the area of employment, to ensure an
improved and more efficient use of all employees. The climaxing of distribution
inequalities, functional, and personal is a powerful factor discouraging the
adoption of new technologies. Russia
The tolerance of high levels of unemployment, in
modern economies, combined with the practical refusal to adopt the only
appropriate action to deal with it -that is, the drastic reduction of working
hours-is an irrefutable testimony that,
in spite of the revolutionary advances in the technological field,
humanity has unfortunately not improved simultaneously the ethics of existence.
The flip side of unemployment is the refusal to award the effects of increased
productivity achieved thanks to new technologies to the whole of humanity, to
which they rightfully belongs. Mutatis mutandis, the laws of the jungle still
apply in the financial kingdom of the economies of the 21st century.
Selective
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[1] The unemployment rates in the EC and EU later on, are
as follows: 1960-69: 2.1, 1970-79: 3.8, 1982: 8.5, 2013: 12. Source: European Economy,
ISSN 0379-0991, No 10, Nov.1981 and Eurostat
[3] Which was the engine of growth of capitalist development and started shrinking
after 1973
[4] W.W. Rostow (1960) The Stages of Economic Growth: A
Non-Communist Manifesto (Cambridge: Cambridge University Press), W.W. Kaldor (1978), Growth in Different Stages, p. 65, N. Kaldor (1975), Economic Growth
and the Verdroon Law, a Comment on Mr Rowthorn Article, Economic Journal, Dec. 1975, pp.894-895, A . Maddison (1980), Growth and
Structural Change in the Advanced
Economies, in Western Economies in Transition, ed by I. Levenson and J.W.
Wheeler, Hudson Institute, p.56.
[5] M. Negreponti-Delivanis (1990), Europe ’s life-buoy:
its less developed regions, ed. Paratiritis, pp.306
[6] ICOR
[7] There are many and unambiguous historical examples of acceleration
of the development process: Great
Britain USA ,
France , Sweden , Germany ,
Canada and Australia
The USA remained in the $1000-1750 income bracket
for 80 years, while Japan
In
1850, Japan USA
did, while Japan Japan
has already largely closed its gap with the USA
[8] A. Maddison
(1980), Economic Growth and Structural Change in
the Advanced countries in Transition, ed. I. Levenson and J. W . Weeler , Hudson
Institute , pp. 41-64
[9] E.F. Denis on
(1967), Why Growth Rates Differ, Brooking
Institute pp. 377ss, R.M. Solow (1987).
“Unemployment:Getting the Question Right” in the Rise of Unemployment, ed by
Charles Bean, Richard Layard and Stephen Nickel, Basil Blackwell, pp. 23-34
[10] Explaning workers’ reactions against its applications
[11] A. Sauvy
(1952), “Théorie générale de la population », Population No 1, Janviers-Mars
[13] A view expressed in a recent speech of his
[15] R.M.Solow
(1960), “Investment and Technical Progress in Mathematical Methods in the
Social Sciences, K.J.Arrow ed., Stanford, pp 89-104
[16] According to the estimation method of the Cobb-Douglas
function
[17] R.M. Solow,
op.cit.
[18]D. Dewey (1965), Modern Capital Theory, New
York
[19] M. Negreponti-Delivanis (1974), “Réflexions sur
le rendement du progrès technique », Mélanges en l’Honneur du Professeur
Emile James, pp. 293-302.
[20] 21.5% in 2000 and 17.2% in 2013
[21]Α. Touraine (2013), La fin des sociétés,Paris, Seuil
[23]According to the
annual Labor Report published by the ILO.
[24] According to Eurostat estimatest
[26] Let it be noted that low labor costs are by no means
synonymous to competitiveness. Alternatives Economiques, no 337, juillet-août
1944,p.10 ss
[27] M.Negreponti-Delivanis
(2010), The lethal crisis (in greek and
in english in electronic edition),
[28] M. Negreponti-Delivanis (1995), Unemployment: A pseudoproblem? Sakkoulas (in Greek)
[32] S. Fleck.J. Glacer and S.Sprague (2011), US Bureau of Labor
Statistics. Monthly Labor Statistics
[33] P.Artus/M.P. Virard (2008), Globalisation, le pire est à venir, La Découverte, Paris, p. 33
[35] A. Bianco and L. Lavelle (2000), « The CEO Trapp », Business Week, 11/12
[36] E. Dash (2006),
“”Pay of US chief executive of 27% , International
Herald Tribune,11/4
[38] «Des salariés corvéables à merci”, (2013), Alternatives Economiques, no 327, septembre. Note: Buckingham Palace recently hired 350
such workers according to The Guardian
[39] J. Finkelstein (1992), “Capitalism and
technology” Dialogue 4, p.17
[41] Fourth if land is taken into account
[42] E. Brynjolfsson, A. McAfee and M. Spence (2014),
“New
World
Order, Labor, Capital and Ideas in the Power Law Economy”, Foreign Affairs, July/August, pp. 44-53
[43] Ibidem, p. 46
[46] This was suggested as early as 1995, by M.
Negreponti-Delivani (1995) ,op.cit, as well as 1993 by the founder of Danone, Antoine
Riboud, and now by Alternatives Economiques “Chômage : les solutions au banc d’essai” no333, march 2014. Also, many economists argue that
the only way to deal with unemployment is the reduction of working hours, among
others Jean-Marie Harribey, Jean Gadrey and Michel Husson
[47]Moore
[49] Internal division refers to internal specialization and only applies to
the secondary sector of production. It is defined as specialization in the
production of a part of the production process. External division refers to the
production of a product or service and is applicable to the primary and
tertiary sectors
NEW TECHNOLOGIES AND SOLUTIONS TO THE ARTIFICIAL DEADLOCKS OF THE WORLD AND EUROPEAN ECONOMY
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