The Fifty Years of Misery
how machines became our enemies
Chaos reigned daily on the No. 6 school bus, with working-class boys and girls flirting and gossiping and dreaming, brimming with mischief, bravado and optimism. Nick rode it every day in the 1970s with neighbors here in rural Oregon, neighbors like Farlan, Zealan, Rogena, Nathan and Keylan Knapp.
They were bright, rambunctious, upwardly mobile youngsters whose father had a good job installing pipes. The Knapps were thrilled to have just bought their own home, and everyone oohed and aahed when Farlan received a Ford Mustang for his 16th birthday.
Yet today about one-quarter of the children on that No. 6 bus are dead, mostly from drugs, suicide, alcohol or reckless accidents. Of the five Knapp kids who had once been so cheery, Farlan died of liver failure from drink and drugs, Zealan burned to death in a house fire while passed out drunk, Rogena died from hepatitis linked to drug use and Nathan blew himself up cooking meth. Keylan survived partly because he spent 13 years in a state penitentiary.
— Nicholas Kristof and Sheryl WuDunn, Who Killed the Knapp Family?
Something big, something sinister happened in the US economy during the 1970s. For a century before that time capitalism worked for everyone. It pulled millions out of poverty. The real median income was doubling every 25 years on average and by the 1970s it was the American Dream come true. Anyone could become comfortably middle class — just finish your high school, get a job at a factory, and you’re golden. You could afford your own home, your spouse wouldn’t have to work, two cars, all that jazz.1
And then that thing happened. Almost overnight the good old capitalism turned evil and started serving the richest of the rich at the expense of everyone else.
(and if it’s all news to you, maybe ask yourself why you only learning it now)
We can clearly see this watershed moment on the chart below:
Simply put, the chart shows how the income inequality trended over the past one hundred years in the “Anglo-saxon” countries (which, I suppose, include the US, the UK, Canada, and Australia — though all developed economies went through the same transformation). Up until the late 1970s the inequality has been declining steadily, the capitalists ceding an ever bigger share of their profits to the workers. Then the trend reversed and the worker salaries stopped growing, while the capitalist profits skyrocketed.2
What happened? Well, for one thing, it wasn’t the capitalists. They were as surprised as everyone else (except pleasantly — unlike everyone else).
The real reason, long story short, was automation. Computers. Robots. The smart machines — they took over the jobs at the factories, leaving scores of used-to-be-middle-class workers unemployed, in search for the decent jobs that simply weren’t there.3 What followed was the fifty years of misery — wages stagnating across the board, middle-class eating through their savings, the opioid epidemic, the rust belt delivering the White House to Donald Trump (after voting Dems for generations)… And no end in sight — although after fifty years we can’t even imagine how things could have been different.
Maybe this is what this story is ultimately about — the lack of imagination? But then again, who has the time for that.
Machinery that gives us abundance has left us in want. — Charlie Chaplin, The Great Dictator
What’s funny is that no one thought that things would turn out like this. Until the smart machines became reality, everyone expected, quite naturally, that with their arrival we will either start working less, or our productivity (and the living standards) will skyrocket, or both. Only it didn’t happen that way — when the machines were finally invented, we found ourselves working more for less money.4
So the question is, again, how come? Bear with me as we keep unraveling this mystery (though, trust me, it’s no rocket science).
Let’s do a thought experiment. Imagine our little car factory, with 10 workers churning them little cars. Now, imagine that 9 out of 10 workers were replaced with robots. Now, let’s see how that would affect everyone’s incomes.
The nine laid off workers are now unemployed, or working jobs that are paying next to nothing. But the factory is still running, still selling cars (for now at least). Before the layoffs most of its revenue would be used to pay the workers’ wages. Now with nine of them gone, where does the money go? Does the last worker start making ten times more? — hell no! The poor fella is lucky to keep his job, why would you give him a raise :) Did the robots get the dough? No, don’t be silly, those guys work for free. Instead, the nine used-to-be-worker wages become the income of the guy who owns the robots — the owner of the factory. The goddamn capitalist, that is, the soon-to-be-very-rich guy.
This brings us to the obvious solution — something that we should have been doing since the economy turned in the 1970s. See, if the machines caused the incomes getting redistributed from bottom to top — from the well-off (and soon to be poor) to the better-off (and soon to be ultra-rich) — then it would only be natural to counteract this development by doing the opposite. By redistributing incomes from top to bottom.
Doing that would indeed allow everyone to actually benefit from robots — because people would have the cash to buy what the robots produce! And many other things too, stimulating the small business and the economy across the board, creating more meaningful and high-paying jobs. Replacing the vicious cycle that the automation had started with the virtuous one.
Moreover, this change would be easy to implement. We have the system in place doing just that, taking from the rich and giving to the poor — a.k.a. the income tax. This way we just needed to do more of what we had already been doing.
Literally, all we had to do to keep the inequality from rising — to avert this disaster, this shame, this tragedy — was to adjust the income tax brackets.
Literally.
Okay, maybe there is a bit more to that. I mean it is true that adjusting the income tax brackets would have solved the problem. However, doing so would take a bit of imagination, a bit of unconventional thinking. Perhaps even a bit of courage to use said imagination?
See, while raising taxes on the rich would be a pretty straightforward affair, lowering them at the bottom wouldn’t. That’s because the tax rates at the bottom were already close to zero, and bringing them further down would have pushed them into the negative territory. That’s the unconventional part. Otherwise, however, it would work just the same! Everyone would get their tax refunds as they normally do — only it would be a bigger refund for low income earners. Even if you didn’t work at all, you would still get your refund — which today, if we were to keep the inequality at its 1970s levels, would amount to some $2,000 per month (yay robots).5
And yes, that would solve the problem. The middle-class would still be there, people would not be forced to work two jobs to survive, more disposable income would stimulate businesses and the economy across the board, the GDP growth would accelerate — in short, this would allow us to actually benefit from inventing the smart machines, rather than suffer for it… Imagine that!
Only we don’t imagine that — and I maintain that this lack of imagination remains the only reason why we keep missing the turn. As another great economist, John Maynard Keynes, once said, “In our society it is better to fail conventionally than to succeed unconventionally.” And this is exactly what we do. We fail conventionally, destroying lives, bringing unimaginable suffering on millions — unimaginable not as in we don’t feel it, but because, again, we can’t imagine not having to suffer like this.
This is the reason why Plato was so skeptical of democracy. He already saw this problem — the average citizen not having the time, the resources, the knowledge to understand the complex socio-economic issues that society would face. And, as history proved it time and again, Plato had every right to be skeptical.
The real problem, as you see, is not about the economy. It’s about us, our ability to understand the lives we live. Or, specifically, it is about awaking and nurturing that capacity in everyone — and we are yet to find a way to do that. All we know — since Plato, since Jesus, since forever — is that it is not easy. As the Gospel puts it, “And the light in the darkness shined; and the darkness comprehended it not.”
Maybe it is so hard is because understanding is, essentially, the work of a detective. So the first step would be discovering your inner Sherlock Holmes.6 Then you’d have to master the art — the art of unraveling mysteries, of piecing puzzles together, the art of understanding. And then you’d have to do the actual work, to solve the actual “crime” — which, in our present circumstances, is so difficult because when you start, you don’t know any of that. You don’t know that there is a “crime” to solve. You don’t know that this — all this — is a “crime” scene and should be treated as such…
Maybe we can make this journey actually manageable once we start telling kids (everyone?) that this is what they are supposed to do. That this is what education was meant to do, to help them unlock and master their brains. Who knows?
All I know is that, one way or another, the day will come when we will figure it out. When we will finally crack this puzzle and end this thousand-year-old predicament. Until then, however, we will have to live with its consequences.
In 1980, GM and Ford paid their employees an hourly rate between $18.44 - $19.99 on average — this is more than $70/hour in today’s dollars. I mean of course your working-class parents could afford to buy you a Mustang for your 16th birthday! Right after moving into their own home…
This effect can also be seen on the chart below. It shows how wage growth stagnated after computers/robots started taking away manufacturing jobs:
The economy would still create some good-paying jobs, just not nearly enough of them. And no, sending everyone to college is not a solution either—if everyone gets their PhD we would have PhDs working at McDonalds. The economy won’t create a vacancy simply because you earned a degree.
As a celebrated economist remarked sometime later, “Robots are everywhere except the productivity statistics.” Which means that, paradoxically, with computers the overall productivity started growing slower, not faster.
(And the reason, again, was simple. The machines took over the high-paying, high-productivity jobs, leaving more humans laboring for pennies. On the whole, this development stunned the productivity growth.)
That $2,000/month refund will start getting smaller when you begin declaring income until you will break even when your annual income reaches around $80,000 — earning that much you will be paying no income tax. At $150,000 you will be paying the same amount as you do now, and everyone earning more would start picking up the bill. The figures are guesstimate, of course, but they are in the ballpark.
This system is also known as Unconditional Basic Income. Interestingly, when the whole automation thing started in the 1970s, we seriously considered it — the bill introducing UBI even reached the Senate floor, but… oh well.
Or Copernicus, or Galileo, Newton, Einstein — because this “detective” work is also what real science has been about. And, yes, imagination is key — that’s how we discover the missing piece to the puzzle, the story behind the observable outcomes.
Automation was no part of the problem. Greed was the entire problem, and remains so.